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In addition to raising property taxes, Moon Area school directors are considering financing a portion of the districts operating costs in 2016-17 to make up for a projected $5 million deficit in the budget.
The school board Monday adopted a proposed $75.755 million budget that would raise the property tax by 0.719 mills. The board is not planning to move forward on the financing until January or February. In the meantime, the district will work to minimize the projected deficit in order to minimize the amount we have to borrow, said Charles Lanna, interim business director.
Even though we are adopting a [proposed final] budget tonight, this is really just the beginning, board president Jerry Testa said.Our goal would be to wipe out as much as possible. Would we be able to reduce it to zero? At this point, I dont see how that would work.
The question is, where do we go from here? Mr. Lanna said. And kind of reliving history a little bit, I do not believe the district has ever been in a financial situation where we had a zero fund balance or a negative fund balance. I do not believe the district has ever had to borrow money just to balance the current year budget or balance the operations.Such a loan is called an unfunded debt loan, he said later.
In April, Mr. Lanna told the board that over the past four years, the district had used its fund balance to make up a total of about $10 million in budget expenditures. The districts projected fund balance is expected to drop to $232,153 by June 30, he said.
The districts current debt service payments continue through 2040-41 and total $226.151 million.
The proposed tax increase would raise the property tax rate to 19.5576 mills. For a home in Moon with a median value of $148,300, school property taxes for 2016-17 would increase by about $105to roughly $2,900.
Before adopting the final budget June 27, officials will look at reducing spending, meeting over the next month to scrutinize individual budgets for places to cut or purchases that can be delayed.
During a presentation to the board Monday, Mr. Lanna said staff at the district rose from 478 in June 2012 to the current 510. The number of teaching positions increased from 271 to 298 over that same period.
The districts hands are tied as to what you can do, interim superintendent Donna K. Milanovich said.
In the commonwealth, you are not allowed to furlough people for economic reasons. You have to have a drop in enrollment, which we do not have a significant drop, she said.
Curtailing programming might be something the district looks at in the future.
I would hope not, because we have wonderful programs for our students, Mrs. Milanovich said.
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As if that werent enough, General Motors appears to be squandering the biggest benefit of that bankruptcy: its formerly clean balance sheet. Its total liabilities continue to climb, up to nearly $163 billion as of the end of March, from closer to $124 billion at the end of 2013. While General Motors isnt exactly in imminent danger of another bankruptcy, its current actions bear a striking resemblance to the mistakes that brought it down in the first place.
My Foolish colleague John Rosevear may very well point to General Motors low trailing P/E ratio and strong dividend yield as reasons to believe that its stock is value-priced. Remember, though, that even without being haunted by the echo of its prior misdeeds, the car industry remains a cyclical one. Buying a cyclical company when its stock looks cheap based on backward-looking metrics is often a great way to lose money.
Ultimately, its a companys future prospects, not its recent earnings, that drive its stock price. Unless General Motors proves itself capable of breaking free from the issues that caused its 2009 bankruptcy in the first place, its future simply looks too cloudy for me to justify investing my money.
Not surprisingly, as a GM shareholder and bull, I think my esteemed Foolish colleague is wrong on nearly all counts. While I do agree that the US new-vehicle market might be near its peak (and thus headed for a decline), I think that decline is already priced into the stock. I also agree that we buy stocks because of a companys future prospects -- and that makes GM a buy right now, because todays GM is a very well-managed company on a path to strong profit growth over the next several years, whether the US market dips or not.
Want proof that GM has changed? Heres a big one: The latest JD Power Vehicle Dependability Study ranks GMs quality right up there with Toyotas, and ahead of Hondas. While Chuck is correct that GM is making hay on the current strong global (not just US) demand for SUVs and trucks, CEO Mary Barra isnt ignoring the vast changes expected to come to the auto business over the next several years. Far from it: GM has surged to the forefront of self-driving research, it will beat Tesla Motors to market with an affordable long-range electric car, and its making big investments to become a major player in ridesharing and ride-hailing.
A lot of big automakers talk about becoming mobility companies in the future. GM is doing it now.
More to the point for investors, Barra has set in motion a comprehensive plan to boost GMs profit significantly by early next decade. Already, profit margins have increased in the US, and GMs long-suffering European unit is finally being transformed into a durable profit center. Meanwhile, GM once again leads Chinas new-car market, and its China unit continues to post very strong margins.
As for that total liabilities figure, many investors new to automakers make the same mistake that Chuck did. Most of that eye-popping figure isnt GM debt, its the liabilities on the balance sheet of its in-house bank. Banks borrow money from other institutions and lend it to their customers at a profit. That borrowed money shows up as liabilities, but itll be repaid as the loans made by GM Financial are repaid. Its climbing because GM is working to boost that (profitable) arm of its business. The total debt attributable to GMs auto business -- GMs real debt -- was just $10.8 billion at the end of the first quarter, well below its $18.5 billion in cash. If and when times get tough, GM has an additional $12.1 billion in available credit lines to draw on. GMs balance sheet is in terrific shape.
Despite all that, and despite still-rising sales in the US, Europe, and China, GM is priced right now at less than five times its trailing-12-month earnings, versus the 10 to 12 times wed normally expect with a big automaker. (And yes, that low price means that GMs dividend yield is right around 5%.) But I think GM is cheap right now because investors have already priced in a decline in the US new-vehicle market, as well as uncertainty in China. But given the progress that GM has already made on Barras profit growth plan, and its outstanding efforts to keep pace with (or jump ahead of) the Silicon Valley disruptors, I think all that uncertainty just means that GM is a terrific buy at current prices for a long-term-minded investor.
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By Liz Weston/NerdWallet
One-size-fits-all financial advice isnt supposed to work. Were all as unique as snowflakes, so the financial rules that guide us should be molded to our individual situations.
Except it turns out that rules of thumb can be really helpful.
A study of West Point cadets, for example, found teaching rules of thumb was at least as effective as standard personal finance training in increasing students knowledge and confidence as well as their willingness to take financial risks. Researchers found money rules of thumb actually were more effective than teaching accounting principles to small-business owners in the Dominican Republic.
Besides, we all have busy lives -- sometimes, we just want an answer. If youre tired of the on the one hand this, on the other hand that approach to financial advice, check out these guidelines Ive collected over the years. Perhaps youll find some one-size-fits-all advice that suits you.
1. Car buying: Buy used and drive it for 10 years
New cars are lovely, but theyre expensive and lose an astonishing amount of value in their first two years. Let someone else pay for that depreciation and take advantage of the fact that todays better-built cars can run well for at least a decade if properly maintained. You can save hundreds of thousands of dollars over your driving lifetime this way. (See How to Buy a Used Car.)
2. Car loans: If you have to borrow, use the 20/4/10 rule
Ideally, you wouldnt borrow money to buy an asset that loses value, but you may not always be able to pay cash for a car. If you cant, protect yourself from overspending by putting 20 percent down, limiting the loan to four years and capping your monthly payment at no more than 10 percent of your gross income. A big down payment keeps you from being underwater, or owing more on the car than its worth, as soon as you drive off the lot. Limiting the length of the loan helps you build equity faster and reduces the overall interest you pay. Finally, capping the size of the payments prevents your car from eating your budget. (See How to Build a Budget.)
3. Save for college
Retirement saving is more important, but get in the habit of putting at least $25 a month aside for college soon as your child is born. Your kids can always get student loans, but as youve probably heard, no one will lend you money for retirement. Your children will not thank you if the price for their education is your having to move in with them because youre 70 and broke. The good news is that even small contributions to a 529 college savings plan can add up over time. Starting early can mean the difference between choosing the college that is right for your child as opposed to the one that offers the best financial aid package, says Joe Hurley, founder of SavingForCollege.com.
4. Credit cards
If you carry a balance, look for a low-rate card to help you pay off your debt. If you pay in full each month (as you should), find a rewards card that returns at least 1.5 percent of what you spend. Dont mess with rewards cards if youre dragging around credit card debt. Focus on paying it off fast with a low-rate card. If you pay in full, though, you should regularly review your rewards programs to make sure youre getting enough value from them. The programs can change, as can your spending and the way you use rewards. Even if you dont want to play the game and manage a complicated wallet, theres no excuse for earning less than 1.5 percent back for all of your purchases, says NerdWallet credit card expert Sean McQuay. (For a lazy optimizer approach, check out Sean Talks Credit: How I Maximize My Rewards with Only a Few Credit Cards.)
5. Emergency savings
You need to be able to get your hands on cash or credit equal to three months worth of expenses. The classic emergency fund advice -- that you need three to six months of expenses saved -- is great, but it can take years to save that much and you have other priorities that are more important (see retirement, below). While you build up your cash stash, make sure you have a Plan B. That could be money in a Roth IRA (you can pull out your contributions at any time without paying taxes or penalties), space on your credit cards or an unused home equity line of credit.
Cover yourself for catastrophic expenses, not the stuff you can pay out of pocket. Insurance should protect you against the big things -- unexpected expenses that could wipe you out financially, such as your home burning down or a car accident that triggers a lawsuit. You want high limits on your policies, but high deductibles, too. Making a series of small claims doesnt make financial sense in the long run. You may gain some small insurance payments, but you risk a rate increase that could more than cancel out your gains, says NerdWallet insurance expert Amy Danise.
7. Mortgage amount
If you cant afford the payment on a 30-year, fixed-rate mortgage, you cant afford the house. You may be able to save money by using another kind of mortgage, such as a hybrid loan that offers a lower initial rate. But if youre using an alternative loan because thats the only way you can buy the home you want, you may have set your sights too high. A budget-busting mortgage puts you at risk of spiraling into ever-deeper debt, especially when you add in all the other costs of homeownership. (Read The Huge, Hidden Costs of Owning a Home.)
8. Mortgage rates
Fix the rate for at least as long as you plan to be in the home. Plans can change, obviously, but you dont want a big payment jump to force you out of a home you hoped to live in for years to come. If youre pretty sure youll be moving in five years, a five-year hybrid could be a good option. If you think you may stay for 10 years or more, though, consider opting for the certainty of a 30-year fixed rate. (Compare rates on different types of mortgages.)
9. Mortgage prepayments
You have better things to do with your money than prepay a low-rate, potentially tax-deductible mortgage. Shaving years off your mortgage and saving money on interest sounds great. But before you consider making extra payments to reduce your mortgage principal, make sure more important priorities are covered. You should be saving enough for retirement, for one thing, and have paid off all other debt, since most other loans have higher rates and the interest isnt deductible. It would be smart to have that emergency fund built up as well and to be adequately insured. If youve covered all of those bases and still want to pay down your mortgage, have at it.
10. Retirement: Save 15 percent
If you got a late start or want to retire early, you may need to save more. Run the numbers on your retirement plan. For most people, 15 percent including any company match is a good place to start. Even if you cant save as much as you should, start somewhere and kick up your savings rate regularly. Retirement should be your top financial priority, by the way. You cant get back lost company matches, lost tax breaks and the lost years where your money isnt earning tax-deferred returns.
11. Retirement, Part II
Leave retirement money for retirement. When your retirement fund is small, you may feel like spending it doesnt really matter. It does. Taxes and penalties will cost you at least 25 percent and likely more of what you withdraw. Plus, every $1 you take out costs you $10 to $20 in lost future retirement income. Once your retirement fund is larger, it may be easy to convince yourself there are good reasons to borrow or withdraw the money. There really arent. Leave the money alone so its there for you when you need it. (See How to Write a Retirement Plan.)
12. Student loans
Your total borrowing shouldnt exceed what you expect to make your first year out of school. At todays interest rates, this will ensure that you can pay off what you owe within 10 years while keeping payments below 10 percent of your income, which is considered an affordable repayment rate, says financial aid expert Mark Kantrowitz, author of Twisdoms about Paying for College. What if you didnt limit your borrowing and are now struggling? You have options. If you have an overwhelming federal loan balance, income-driven repayment plans are there for you, says NerdWallet student loan expert Brianna McGurran. Its tempting to want to hide from your debt or be ashamed of it, but youre better off looking into the repayment options that are out there. Youll see there are ways to find relief. (See Find the Best Student Loan Repayment Plan.)
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