Seeman Holtz FinancialScott HudsonChief Investment Officer301 Yamato RoadSuite 2222Boca Raton, FL 33431800-325-8907shudson@seemanholtzfinancial.comwww.seemanholtzfinancial.com

Spring 2014The Frugal Habits of Millionaires

Two Popular Charitable Trusts for You toConsider

Test Your Knowledge of Financial Basics

Graph: The Best of Times, the Worst ofTimes, and 2013

SeemanHoltzFinancial QuarterlyPlanning For the Best Years of Your Life

The Frugal Habits of Millionaires

See disclaimer on final page

We have gotten off to a great start in 2014amid a "one step forward/one step back"economy and global volatility due to issuessuch as the Crimea/Russia confrontation.As we have begun to make our waythrough the first rounds of the FederalReserve's tapering program, the bondmarkets have stabilized with interest ratesactually declining from the highs. Recallthat there is a difference however between"tapering" and "tightening" and somebelieve last year's rate changesrepresented two years worth of movement.Your portfolio has continued to evolvetaking into account the recent changeswithin the current markets.

We appreciate the trust you have conveyedin choosing our investment managementservices and would like to thank you for thefriends and family that you have referred.Please let us know if we can be ofassistance in any way or if you have anyspecific questions about your portfolio.

As always, we appreciate you as a clientand value your business.

The word "millionaire"typically conjures upimages of a lavish,jet-setting lifestyle, butbehind the scenes, thatmay not always be thecase. Like Warren Buffett,who famously still lives inthe relatively modest

house in Omaha, Nebraska, that he bought in1958 for $31,500, many millionaires (andbillionaires) live a modest, if not downrightfrugal lifestyle--a lifestyle that may have helpedthem become millionaires in the first place.

We've all heard the saying "It takes money tomake money." So how can you find extradollars to save and invest? If you're looking toimprove your financial position, consider puttingsome of these habits into practice.

Cultivate a frugal mindsetMany people equate being frugal with beingcheap, but that's not really correct. Being frugalmeans carefully watching your dollars and notspending more than you need to--a trait manymillionaires employ. To help cultivate a frugalmindset, get in the habit of asking yourself thisquestion: "With a little extra effort and/orsacrifice on my part, is there any way I cansave money here?" Having a frugal mindsetcan really help when it comes time to playingthe role of American consumer, wheretemptation is everywhere.

Buy wisely and sparinglyWe all need "stuff" now and then; the key is notoverdoing it or overpaying for it. Try to buymostly what you really need, not what youreally want. Money you save can then be usedto build your savings and investment accounts.

Don't let the price tag of your car, home, ordesigner suit define your character. Forexample, a reliable car that safely gets youfrom Point A to Point B may be completelysufficient for your needs. According to the bookThe Millionaire Next Door, the top car brandamong millionaires is Toyota, not Mercedes orBMW. Even Mark Zuckerberg, the billionairefounder of Facebook, has been spotted drivingan Acura TSX, an entry-level luxury car whose

base price is about $30,000. The bottom line?As you move up the net worth ladder, avoid thetemptation to elevate your "status" byoverspending on luxury goods.

You can be smart about everyday consumerpurchases, too. You might be surprised to learnthat many millionaires clip coupons, buy in bulk,wait for sales, scour eBay and Craigslist fordeals, limit clothing purchases, fly coach, avoidcredit cards, and save half their restaurant mealfor lunch the next day--habits that can free upcash for the occasional splurge.

Shun debtDebt is bad. Well, mostly. At times taking ondebt is necessary, for example when buying ahome or attending college, because without it,many people won't have saved enough money.But generally speaking, you should be leery oftaking on debt for things that cause you to livebeyond your means. Remember, every dollaryou borrow today is a dollar you'll have to payback tomorrow, with interest.

People who turn a modest financial base intowealth often do so by living frugally, savingregularly, investing wisely, and avoiding debt.By contrast, people who end up in a perpetualcycle of debt are often those who spend andborrow excessively to support an unsustainablelifestyle.

Take actionWhat do CEOs Tim Cook (Apple), Ursula Burns(Xerox), Robert Iger (Disney), and Indra Nooyi(PepsiCo) have in common? They're all up by5:00 a.m., hitting the gym, reading, working. AsBenjamin Franklin famously quipped: "Early tobed and early to rise makes a man healthy,wealthy, and wise." And indeed, manymillionaires and leaders aren't couch potatoes.They don't sit around waiting for things tohappen; they make things happen--by gettingup early, working hard, looking foropportunities, constantly educating themselves,taking calculated risks, networking, stayingactive, and generally trying to improvethemselves day in and day out. And with theexplosion of information online 24/7, learningnew things has never been easier.

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Two Popular Charitable Trusts for You to ConsiderA couple of charitable trusts are very popularwith people making significant gifts to charity:the charitable lead annuity trust (CLAT) and thecharitable remainder unitrust (CRUT). Theyeach allow income, gift, and estate taxcharitable deductions for a trust with bothcharitable and noncharitable beneficiaries. ACLAT leads off with a stream of annuitypayments for the charity, while the CRUTprovides a remainder interest for the charitywhen the trust ends.

Charitable lead annuity trust (CLAT)With a charitable lead annuity trust, the charitygenerally receives the right to a fixed annuityamount each year (or at more frequentintervals). The annuity payments are generallymade for a fixed term of years, or for one ormore lives. After the specified term, theremaining trust property passes to you oranother noncharitable beneficiary youdesignate.

An income tax charitable deduction is availableto you at the time you create and fund theCLAT if the trust is structured so that you (asthe grantor or creator of the trust) will be taxedon trust income each year. The up-frontcharitable deduction can be especially useful ifyou have a large amount of taxable income inthe year the trust is created. If you take theup-front charitable deduction and cease to betaxed on trust income during the trust term(e.g., you die before the trust term ends), youmay have to recapture part of the charitablededuction by adding the recaptured amount toyour taxable income. For years in which youare not taxable on trust income, the trust maygenerally take charitable deductions againsttrust taxable income for distributions to charity.

The value of the up-front charitable deduction isbased on the amount of the annuity going to thecharity each year, how long the payments willbe made to charity, and the appropriate interestrate used by the IRS to value the futurepayments.

A gift or estate tax charitable deduction is alsoavailable for the present value of the annuityinterest the charity receives. Any remainderinterest passing to a noncharitable beneficiarywill be subject to gift or estate tax when theCLAT is created and will not qualify for theannual gift tax exclusion. The value of theremainder interest will be discounted to reflectthat it will be received in the future. If theremainder interest passes to a person two ormore generations younger than you, thegeneration-skipping transfer (GST) tax mayapply.

Charitable remainder unitrust (CRUT)With a charitable remainder unitrust, thenoncharitable beneficiary receives a payment(the unitrust amount) from the trust propertyevery year (or at more frequent intervals),which is based on the value of the trust assetseach year. The unitrust payments are generallymade for a fixed term of years, or for one ormore lives. At the end of the trust term, theremaining property passes to the charity.

One CRUT variation permits payment of thelower of the unitrust amount or trust income fora period of years. Another CRUT variation thenallows makeup distributions of the forgoneunitrust payments at a later time. Thesevariations may allow payments to be delayeduntil a later time, when the trust has income orthe noncharitable beneficiary is in a lowerincome tax bracket.

An income tax, and gift or estate tax, charitablededuction is available to you at the time youfund the CRUT. The value of the up-frontcharitable deduction is based on the unitrustpayout rate, how long the charity will have towait to receive the remainder interest, and theappropriate interest rate used by the IRS tovalue the future interest. Any unitrust interestpassing to a noncharitable beneficiary may besubject to gift or estate tax, as well as GST tax,when the CRUT is funded. The unitrust interestmay qualify for the annual exclusion forpurposes of the gift tax, but not for GST tax.

A CRUT is generally not subject to income tax.Instead, CRUT beneficiaries are taxable onunitrust payments as received. Distributions aretreated as drawing out taxable income, capitalgain, tax-exempt income, and trust corpus fromthe trust, in that order. In other words,distributions are generally treated as drawingout amounts taxable worst first. However, oneadvantage of a CRUT is that a CRUT can sellproperty and the beneficiary will not be taxedon capital gain from the sale until thebeneficiary receives a distribution that is treatedas capital gain.

Charitable deduction limitsThe amount of your income tax charitabledeductions are generally limited to 50% (or30% or 20%) of your adjusted gross income(AGI), depending on the type of charity and theproperty transferred to the charity or charitabletrust. Charitable deductions disallowed becauseof the percentage of AGI limits may be carriedover and taken during the next five years,subject to the percentage of AGI limits in thoseyears. Gift and estate tax charitable deductionsare not subject to any percentage of AGI limit.

Trusts with both charitableand noncharitablebeneficiaries must followspecial rules if you wish toreceive income, gift, andestate tax charitabledeductions for the amountsgoing to charity. Consult atax or estate planningattorney familiar withcharitable trusts.

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Test Your Knowledge of Financial BasicsWorking with a trusted financial professional isone of the best ways to help improve youroverall financial situation, but it's not the onlything you can do. Educating yourself aboutpersonal finance concepts can help you betterunderstand your advisor's recommendations,and result in more productive and potentiallymore prosperous financial planningdiscussions. Take this brief quiz to see howwell you understand a few of the basics.

Questions1. How much should you set aside in liquid,low-risk savings in case of emergencies?

a. One to three months' worth of expenses

b. Three to six months' worth of expenses

c. Six to twelve months' worth of expenses

d. It depends

2. Diversification can eliminate risk fromyour portfolio.

a. True

b. False

3. Which of the following is a key benefit ofa 401(k) plan?

a. You can withdraw money at any time forneeds such as the purchase of a new car.

b. The plan allows you to avoid paying taxes ona portion of your compensation.

c. You may be eligible for an employer match,which is like earning a guaranteed return onyour investment dollars.

d. None of the above

4. All of the money you have in a bankaccount is protected and guaranteed.

a. True

b. False

5. Which of the following is typically thebest way to pursue your long-term goals?

a. Investing as conservatively as possible tominimize the chance of loss

b. Investing equal amounts in stocks, bonds,and cash investments

c. Investing 100% of your money in stocks

d. Not enough information to decide

Answers1. d. Conventional wisdom often recommendssetting aside three to six months' worth of livingexpenses in a liquid savings vehicle, such as abank savings account or money market mutualfund. However, the answer really depends onyour own individual situation. If your (and your

spouse's) job is fairly secure and you haveother assets, you may need as little as threemonths' worth of expenses in emergencysavings. On the other hand, if you're a businessowner in a volatile industry, you may need asmuch as a year's worth or more to carry youthrough uncertain periods.

2. b. Diversification is a smart investmentstrategy that helps you manage risk byspreading your investment dollars amongdifferent types of securities and asset classes,but it cannot eliminate risk entirely. You still runthe risk of losing money.

3. c. Many employer-sponsored 401(k) plansoffer a matching program, which is like earninga guaranteed return on your investment dollars.If your plan offers a match, you should try tocontribute at least enough to take fulladvantage of it. (Note that some matchingprograms impose a vesting schedule, whichmeans you will earn the right to the matchingcontributions over a period of time.)

Because 401(k) plans are designed to help yousave for retirement, the federal governmentimposes rules about withdrawals for otherpurposes, including the possibility of paying apenalty tax for nonqualified withdrawals. Youmay be able to borrow money from your 401(k)if your plan allows, but this is generallyrecommended as a last resort in a financialemergency. Finally, traditional 401(k) plans donot help you avoid paying taxes on your incomeentirely, but they can help you defer taxes onyour contribution dollars and investmentearnings until retirement, when you might be ina lower tax bracket. With Roth 401(k)s, you paytaxes on your contribution dollars beforeinvesting, but qualified withdrawals will be freefrom federal, and in many cases, state taxes.

4. b. Deposits in banks covered by the FederalDeposit Insurance Corporation are protected upto $250,000 per depositor, per bank. Thismeans that if a bank should fail, the federalgovernment will protect depositors againstlosses in their accounts up to that limit. TheFDIC does not protect against losses in stocks,bonds, mutual funds, life insurance policies,annuities, or municipal securities, even if thosevehicles were purchased at an insured bank. Italso does not protect items held in safe-depositboxes or investments in Treasury bills.

5. d. To adequately pursue your long-termgoals, it's best to speak with a financialprofessional before choosing a strategy. He orshe will take into consideration your goals, yourrisk tolerance, and your time horizon, amongother factors, to put together a well-diversifiedstrategy that's appropriate for your needs.

A little knowledge can go along way in pursuing yourfinancial goals. For moreinformation about the topicsin this article, or for otherpersonal finance-relatedquestions, speak with atrusted financialprofessional.

All investing involves risk,including the possible lossof principal.

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Seeman Holtz FinancialScott HudsonChief Investment Officer301 Yamato RoadSuite 2222Boca Raton, FL 33431800-325-8907shudson@seemanholtzfinancial.comwww.seemanholtzfinancial.com

Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2014

Seeman Holtz Financial is aRegistered Investment Advisoroffering "Fee Only" investmentmanagement. This announcementshall not constitute an offer to sellnor a solicitation of an offer to buysecurities of any kind.

Graph: The S&P 500 Month by Month in 2013

Past performance is no guarantee of future results, but stocks had an extraordinary run in 2013.The Standard & Poor's 500 set 45 new all-time closing records during the year and by Novemberhad surpassed 1,800 for the first time ever. Despite some stumbles during the summer, by theend of 2013 the index had nearly tripled since its March 2009 financial-crisis low. Note: Allinvesting involves risk, including the possible loss of principal.

Graph: The Best of Times, the Worst of Times, and 2013

In 2013, the Standard & Poor's 500 had its best year since 1997, while the Dow Jones IndustrialAverage set 52 new record closing highs and the Nasdaq hit a level it hadn't seen in more than13 years. Here's how 2013's price gains compare to each index's best and worst years since1926 by percentage gain as listed in the "Stock Trader's Almanac 2014." Note: All investinginvolves risk, including the possible loss of principal.

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