People from all over the Small Business Community have been reaching out to us asking for some help in interpreting the news of the last week. I love that y’all trust Ascend Financials on money stuff; you made me blush with delight! Alright all you savvy business owners, let’s dig in.

The hoopla that went down around Washington DC will affect you both directly and indirectly. Here are the highlights in plain English:

· The Debt Deal: Congress and the President reached an agreement to RAISE the debt ceiling so that we didn’t default on our debt. (Need the 5 min crash course on the debt ceiling? Click here) This allows the government to borrow more money to make minimum payments on past loans. Double ugh.

· Strings Attached: The Debt Deal has strings attached. The government promises that it will cut spending over 10 years—the spending cuts will be will be felt in places that are considered “negotiable” (like Defense and Education) because that no politician is willing to go elbow deep in REFORM in the months leading up to an election year.

· Time for Vacation: Once the Debt Deal was brokered, and a congressional committee was appointed to figure out how exactly to exercise the Plan, they decided they needed a vacation. Off they went on “recess” against the express wishes of the President. Needless to say, the President isn’t keen on their choice and has asked them to come back to Washington.

· Kicked While Down: Days later, the sovereign USA got kicked in the gut while it was down: credit rating hit and the stock markets fell.

· AA+ Isn’t Good? Even though we met our deadline to pay the creditors, the rating agencies downgraded USA’s credit score. (more on why below) The credit score for government and business is based on how many big A’s you have next to your name. AAA is the best.

· Before You Say Who Cares: A worse credit score means the government will need more money for the same bills! That affects everything. Remember, your Income is the collateral the Government put up to borrow (more) money.

· The Double Whammy: The GDP (gross domestic product) and Unemployment/Jobs Report came out the day after the Debt Deal was brokered. It looked and smelled rotten. So Wall Street freaked out and dropped 10.8% late last week! Imagine 10.8% of the money in your checking account just disappearing. That’s exactly what happened to most of our IRAs and investments.

Holy Stinky Election Year

Look, there’s no pretty way to say it. As the world watched our government play politics until 11:59p something became very clear: The United States of America cannot make a decision to save its economic life… especially not with the 2012 elections just around the corner. Republicans are standing firm on not raising taxes, so they won’t vote on anything that smells of tax increase. Democrats are standing firmly on their commitment to not touching Social Security, Medicare as a way to decrease government spending. Impasse.

Be careful dear entrepreneur that you don’t bury your head in the sand, or throw up your hands in the air. Nothing is more important to our economy than the work you do in your business. You still have a fantastic business model to work with—so do the best you can with what you’ve got. Don’t wait for things to happen around you or for reform, do it yourself. You are in control of your Income and Expenses. Nobody is going to do it for you. And with high levels of unemployment, many people need leaders they can follow into starting their own business. Are you that leader?

If you want your voice heard in Washington use your liberty to make phone calls. Tell your Senators and Congressmen to go back to work and to courageously embrace reform. Tell them how you feel about the things you learned here today. If you have investments (or your spouse does) that are in the stock market, call your financial advisor with questions and ask if changes need to be done to your portfolio.

Most of all be diligent, work hard, be a good steward of your finances, and keep on keeping on!

LeAnne

PS: For the record I’m not an economist… I’m a professional financial advisor who just happens to own Ascend Financials, which helps the small business professionals keep more of what they makes. Sign up for Prosperity at Spendonpurpose.com

** writtten July 21st, 2011

I was meeting with a successful Executive Sales Director; she and I were discussing her investments and changes I was recommending. She said, “LeAnne, can you explain to me what’s going on with this whole Debt Ceiling thing? My brother was telling me to pull all my money out of the stock market before August 2nd. I don’t understand how any of this applies to me, or my business. Help!”

You’re a smart business person. So it behooves you to learn just a bit about this whole debt ceiling thing. Here are the basics (in real English):

1. The Government’s Line of Credit -Government asks for credit by issuing bonds (named Treasuries) and Investors buy them up like crazy. The bond buyer is actually “loaning” money to the Government, and it contractually agrees to pay interest on debt, and pay the principal back in x # of years.

2. The Government’s Credit Score - I know it’s hard to imagine, but even the US Government has a credit score. Just like you and me, if they fall behind in payments or can’t pay, then their credit score is affected.

3. The Ceiling is a Self Imposed Credit Limit - In simplest terms, the “Ceiling” in question is a credit limit the government has imposed on itself.

4. What’s the Big Deal about August 2nd? August 2^nd is the day that the US Treasury says it officially doesn’t have enough money to make minimum payments on its Bonds. Yikes! So what they’re trying to do is borrow more money so they can make loan payments. Think of it as using one credit card to make the minimum payment on another.

5. Political Tug of War: The House has a Republican majority, and they’re demanding that if the credit limit is raised, that it be tied to budget cuts. Additionally Republicans are demanding a Constitutional amendment that requires the Government to operate with a balanced budget. The President and Senate are saying no way, because such budget cuts would likely hurt Social Security and Medicare. Everyone knows that messing with Social Security and Medicare is essentially suicide for the Official.

6. Your Income, Their Collateral Regardless of whether you think like the House or President, here are the facts! The Government’s ability to borrow money is backed by their sovereign power to TAX! In other words: your income, and the government’s power to tax it, is the collateral they use to secure loans. (Now I have your attention, right?)

Personally, I don’t believe that Lawmakers are willing to commit political suicide, and I do think they’ll play this out till the last moment. I think the Debt Ceiling will be raised, I think the Government is going to collateralize more of your income (and your grandchildren’s) to take on more loans. Bottom line, it affects your business because it affects the overall economy.

I think the biggest risk for your small business is taxation risk, which affects the amount of money that goes home to your family for the same amount of work and product sold. Additionally, the true risk for every American family and business is an “indirect tax” by an increase on interest rates across the board.

What should you do? You should stay focused. Make audacious goals for the rest of this year. Work your business full circle. Run it cash flow positive. Listen to your leadership on how to build your business deep and wide. Manage your money in Prosperity. Take a profit, always hire a CPA, and don’t panic. Pick up the phone and call your elected leaders (whether you like them or not) and tell them what you think they should do with your new knowledge.

At your Service,

LeAnne and the Ascend Financials Team

Two weeks ago, my husband passed away after a valiant 3 week battle to recover from cardiac arrest.  I am 34 years old, and I am now a single mom of three beautiful children.  Today I am the sole provider, working for a start-up by the name of Ascend.

The vision of Ascend is to help women achieve financial greatness.  You know this.  For years now, we have been loud mouth advocates of financial literacy and financial empowerment into the MK community.  You’ve heard us proclaim, “A Man is Not a Financial Plan!”  You’ve attended our classes where we’ve called you to bold action to be involved in the finances of your family and to take personal responsibility for creating a living wage (running a profit centered business), and you’ve walked by our booth at Seminar every year as we’ve boldly asked, “Are you profitable?  Do you want to be?”

Maybe you are among the 20,000+ who read our newsletter every month and think you always have tomorrow to get your financial house in order… let me tell you, I am living proof that you only have today, and that financial planning isn’t hokey or a man’s job.

Although LeAnne and I are best friends, we sat down as financial-planner-and-client the week before my husband passed. I had one question, “Are the kids and I really going to be ok, financially?”  This was a surreal experience for both of us, but a healthy and important one. The reassuring part was that my husband and I did plan, and we did use Ascend Live religiously; thru the years, I remained involved and aware of what was happening in our finances, our investments, our medical benefits, our life insurance, our car loans, and our credit reports. Much like you, my life, the pull of the job, and my children gave me plenty of reason to abdicate personal responsibility in the nitty-gritty details of our financial life. But I work at Ascend, and we insist that our staff practices what we preach, even when life gets crazy.  Let me tell you, the financial disciplines we all hear LeAnne teaching are the disciplines that made a difference in moments that matter.  I’m pleased to share that worrying about money was the last thing on my mind as I co-labored with my husband in ICU for three weeks. 

Our financial planning didn’t leave me and the kids rolling in the dough, but we will be fine. We will be able to stay in our house and maintain a very similar lifestyle; to say the least, this is an enormous blessing!

Nobody ever thinks that bad stuff will happen to them— none of us considers, “What if the car accident I get in doesn’t kill me, but makes it impossible for me to work for the rest of my life?”   Few think the thought, “What if mom has Alzheimer’s, and in order to care for her we will be forced to use retirement accounts and home equity to pay for her care?”   In addition to my own situation, these are two real stories of “life” happening to some of our MK clients that LeAnne is working with as a financial planner.

With financial markets and stocks tumbling, pervasive fear given recent economics, with what life potentially has to offer or take away from us—no matter what the future brings, we have two choices:  1. We can plan objectively, and actively look for potential threats, and decimate them. 2.  We can let life happen to us and pick up the pieces later.

To not have a plan for what will happen to our livelihood if the car accident we get in doesn’t kill us
To not have a have a will in written and put enforce by a legal professional
To not confirm with a professional that the amount and type of life insurance we carry is sufficient
To assume the next generation will be able to afford to care for us in our old age
To blindly save in a 401k, or not save at all,  and assume that we will have more than enough to retire on
To assume that the benefits we have at work will be there forever
To buy the max of employer’s disability and/or life insurance and think it’s enough
To pretend that we are immune, that we will be the exception, or that we’ll just figure it out when life happens…

Is simply irresponsible.

My situation hits close to home for all of us on the Ascend Team.  With all my heart I wish I could speak to each of you individually, and counter every excuse we allow ourselves (and each other) about why we’ve waited or didn’t implement financial planning and financial systems into our lives and businesses. The reality is we can’t fix things after the fact. We can’t predict what will happen to us, but we can plan.

I am asking you to please sit down with someone—a well qualified financial planner that you trust (like LeAnne) who will help ask you the right-hard questions instead of allowing the wrong-easy answers to prevail in the unknown details.  Take some time soon to discuss and formulate what exactly you (or your family) would do if your life doesn’t go as planned.

Know that I care about you immensely and wish for you nothing but prosperity and many years of joy with your family.  It is this joy that I hope to help you preserve by writing this letter.

My love to you all,

Karin Ray