ARM Youselves For More Foreclosures

I wrote an article yesterday about adjustable rate mortgages comparing
them to a fixed rate mortgage and the number of foreclosures.

Read More

The 3 Must Haves of Estate Planning

Last Will and Testament

A last will and testament is a document that directs where you want your assets to go and who gets to oversee the disposition of assets. A will can be as simple as a “I leave everything to so and so” to as complex as setting up various trusts.

Wills help you avoid making your private life public. If you die without a will, you are considered intestate. This means that the things you own or control at the time of death are examined and distributed by the probate court. Which also means that everything you own is made public for the world to see. There are those out there who will prey on people who just inherited a lot of money. They just look up the latest probate cases. Lets me also mention that probate court can be expensive and time consuming. Do you want your heirs fighting over who gets what? I’ve seen it destroy families.

Living Will

A living will is a will that you use when you are living. Simple enough, right? The living will issues orders to doctors or caregivers in the event that you become incapacitated. For example, you get in a car accident and go into a coma. Now, what if you’re brain dead? Doctors have an obligation to keep you alive, do you want to live and suffer or die quickly?

The living will details specifically what doctors should do in a situation like this. Instead of letting your family quarrel over whether or not you should live, you made the decision already. It is a touchy subject, especially asking yourself if you want to live or die, but it is necessary.

Health Care Power of Attorney

The HCPOA for short appoints someone to make decisions for you in the event that you become incapacitated. This person can decide the level of health care as well as, depending on the provisions, take care of your obligations such as bills. The person you appoint can make the decision whether you should live or die based on what you have in your living will or have said in the past. If Terry Schiavo’s husband had a HCPOA, he could have stopped all that legal fiasco, he would have had the power to remove her feeding tube.

There you have 3 simple documents that will protect you and your family. There are a lot of issues to consider when developing your estate plan, there are a lot of hard questions that must be answered. In the end, do you want to control your fate, or do you want the state or doctors decide it for you?

Blog Posts

Points to Consider when Hiring Roofing Contractors

Calgary roofing contractorsWhether you are having a new home built or are just in need of major repairs, roofing companies are the ones to hire when it comes roof-related work.  This is the type of work that Calgary roofing contractors are very good at which is the very reason why they are the must hire when it comes to roof installation and repairs.  They have been in this business for many years and have built a solid reputation as being very good at what they do.  They are very highly recommendable as customer satisfaction is one of the things they aim to provide.

If you are looking for a roofing contractor but do not live in the area where Calgary roofing contractors operate, here are some pointers to look for when hiring roofing contractors:

Reputation – it is important that the roofing company you hire has very good reputation.  This is a crucial matter because contractors with very good reputation mean they do their job well and will have built their good reputation through many years of good service.

Experience – another thing that is equally important with having a good reputation is experience.  After all, what good is a good reputation if they cannot provide the good service you are looking for?  Fortunately, most roofing contractors with very solid reputation will also have workers that are seasoned in doing this type of work.  Their many years of experience in this trade will allow them to tackle nearly any roofing problem very efficiently.

Price – we all know that price makes a big difference in everything these days.  Since the roof of your home is also an investment, you would not want to go with those who estimate the job at very low price.  It is either they will be cutting corners to keep a profit, or that they will be using substandard materials in some areas just to be able to make profit from their low asking price.  Getting a more reliable and trustworthy contractor will be the best.

Insurance and Bonding – a properly licensed roofer will have insurance and bonding as these are some of the things that experience or highly knowledgeable clients are looking for.  Insurance and bonding serves as your protection as a client so it is important to look for these. If a roofer is not equipped with this, it is better to simply walk away than be sorry later on.

Warranty – a new roof that gets installed or repairs that have been made should have some form of warranty.  Material flaws or faulty installation should have warranties.  Although different products and styles will have different warranties, it is important that the contractor show you the information regarding warranties.

ARM Youselves For More Foreclosures

I wrote an article yesterday about adjustable rate mortgages comparing them to a fixed rate mortgage and the number of foreclosures. CNN posted a new article today detailing the effects of what is going to happen when the ARMs reset their rates.

From the article:

The result: increased foreclosures and forced sales, flooding the market with homes and depressing prices even more.

“There will be a huge glut of houses that will be coming on to the market,” said Schiff.

The people who have ARMs are surely affected, but what about the rest of us? With a slow housing market already, a flood of new houses will again depress prices. Will we be able to get out of this hole?

The 3 must haves of estate planning

Financial-Estate-Planner-Raleigh-NC-300x300Everyone needs an estate plan. I don’t care how old you are, how young you are, how rich or how poor you are. You need to protect yourself and your family. Do you want your family to be on the news like Terry Schiavo? Without some form of protection, decisions made after you’re gone or incapacitated can tear families apart.

Each of the following documents protect you in some form or another. Each one can be as equally as important. You do not have to have $10 million to find value in a couple pieces of paper. Ask yourself this, “what happens when I die or become incapacitated?” Where do your children go? Who decides whether you should remain on life support or not? Who gets the house or that prized base ball collection? Do you want your private life made public by the state?

Lets examine the 3 must haves:

Last Will and Testament
A last will and testament is a document that directs where you want your assets to go and who gets to oversee the disposition of assets. A will can be as simple as a “I leave everything to so and so” to as complex as setting up various trusts.

Wills help you avoid making your private life public. If you die without a will, you are considered intestate. This means that the things you own or control at the time of death are examined and distributed by the probate court. Which also means that everything you own is made public for the world to see. There are those out there who will prey on people who just inherited a lot of money. They just look up the latest probate cases. Lets me also mention that probate court can be expensive and time consuming.< Do you want your heirs fighting over who gets what? I’ve seen it destroy families.

Living Will
A living will is a will that you use when you are living. Simple enough, right? The living will issues orders to doctors or caregivers in the event that you become incapacitated. For example, you get in a car accident and go into a coma. Now, what if you’re brain dead? Doctors have an obligation to keep you alive, do you want to live and suffer or die quickly?

The living will details specifically what doctors should do in a situation like this. Instead of letting your family quarrel over whether or not you should live, you made the decision already. It is a touchy subject, especially asking yourself if you want to live or die, but it is necessary.

Health Care Power of Attorney
The HCPOA for short appoints someone to make decisions for you in the event that you become incapacitated. This person can decide the level of health care as well as, depending on the provisions, take care of your obligations such as bills. The person you appoint can make the decision whether you should live or die based on what you have in your living will or have said in the past. If Terry Schiavo’s husband had a HCPOA, he could have stopped all that legal fiasco, he would have had the power to remove her feeding tube.

There you have 3 simple documents that will protect you and your family. There are a lot of issues to consider when developing your estate plan, there are a lot of hard questions that must be answered. In the end, do you want to control your fate, or do you want the state or doctors decide it for you?

Have Too Much Money? ConGRATs

financeHere’s a little article for those of you with too much money. What’s my definition of too much money? Well, lets say you’re in retirement and have investment assets that will put you way over the top of the estate tax.

Lets say you want to minimize your estate tax but also want to maximize the amount of money you leave to your heirs. No matter what you do (short of putting your money in a couple of steel lined briefcases) you’re going to earn interest on your money, why not make the most of it and give it to your kids now?

Luckily for you, the IRS gives you just such a way to pass a fortune to your kids tax free! Its called a GRAT – Grantor Retained Annuity Trust. Well what does that mean and what does it do?

Here’s how it works, I’ll try to keep it simple.

You put money into this irrevocable trust (meaning you can’t take it back until its done) and select a form of annuity payments over a certain period of years (usually 1 or 2 years). The IRS has a set expected annual rate of return, what this means is that they expect your money to earn at least lets say 5% per year. That seems reasonable and easy to achieve. It is and that’s why GRATs are an excellent means of transferring wealth!

Take your money, put it in, and earn whatever you want based on your investments – 10, 11, 12%. So what happens at the end when the trust is done? Well a couple of things:

First, everything you put into the trust plus the 5% the IRS expects you to earn is transferred back to you, its back in your estate. Sorry, you can’t get rid of that so easy slick. However, the 5, 6, or even 7% extra that you earned above and beyond the 5% the IRS stipulated goes to your beneficiaries tax free! Let’s do the math.

The future value of $2,000,000 invested for 2 years with a rate of 12% will be $2,508,800. The future value of $2,000,000 invested for 2 years with a rate of 5% (the IRS assumed rate) will equal $2,205,000. Take the difference and you get $303,800. What does it mean? $303,800 just went to your heirs tax free. $303,800 of interest that you would have otherwise included in your estate is now out of it.

A couple of points to make about GRATs.

  1. If you die before the GRAT ends, it ends up back in your estate.
  2. If you earn less than the IRS rate, GRATs aren’t useful.
  3. You can keep doing one GRAT after another.

Keeping The Rich White Man Down!

tax-moneyDid you know that certain private equity firms and hedge funds only have to pay 15% on their capital gains? Shouldn’t firms like Blackstone and Fortress Investment Group have to pay 35% like every other law abiding corporation? I think so and so does the government.

Congress is currently considering a bill that would close these loopholes and potentially increase tax revenue by $4 to $6 billion. Currently, private equity firms like Blackstone and Fortress can be organized as partnerships and thus subject to the 15% tax. The new bill would remove this privelage and bump their tax rate up to 35%. Of course, Blackstone is crying all the way to the bank citing that, “the Senate bill, which would effectively raise its tax rate to as much as 35% from 15%, would hurt profitability.”

I, for one, think duh it should hurt your profitability. That 20% should be going to the rest of us as a “tax” on allowing your company to grow and prosper because of the opportunities it has been given by the United States. It shouldn’t be going to pay that multi billion dollar reward to your boss.

What rate? OMG, I’m confused!

I am trying to set up a debt reduction plan where I pay off the account with the highest interest rate first, then move to the next highest, etc.

My question is, which interest rate on my credit card statement do I use for this prioritization? There’s an Annual Percentage Rate and an Effective Percentage Rate and then I think there was still another. On one of my cards, these range from like 8% to 29% depending on which one you look at. It’s a shame I’m such an idiot when it comes to these things ! Thanks for any help…

Good question, you shouldn’t feel so bad about not knowing what is what when it comes to credit cards. They can be a dangerous tool as I’m sure you are now finding out. You’re right on with trying to reduce debt, starting with the highest intrest rate and working yourself down.

Both rates, the annual percentage rate (APR) and the effective interest rate (EIR) are both the same rates. Confused? So is the majority of everyone else.

An APR is a way to standardize and compare interest rates among lenders. It is an annualized rate that takes into account the total cost of borrowing. It is intended to standardize rates, as stated before.

The EIR is the rate you’re paying compounded X number of times per year, usually 12. Compounding means that every month, your balance is averaged (depending on the card and terms and conditions) and that amount is used to calculate the finance charges next month.

The other interest rates are probably rates like balance transfer or cash advances, etc. Don’t worry about those when comparing the cards.

To answer your question, in terms of comparing to another card, you should use the APR. The card with the highest APR should be paid off first, repeat this until you’ve got it all paid off.

How much do you need in retirement?

Sure, you’ve heard that you need just $1 million to retire comfortably. That may be the case for many people, however, that’s a very generalized number. It doesn’t take into account your personal situation or the kind of life you want to live while in retirement. This post will try to teach and examine what you need in retirement. While I try to be as close with my numbers as possible to the average norm, they will vary based on whom you ask. Consult your financial advisor if you have any more in depth questions. This is just a simple guide to figuring out what you need.

First, lets make the assumptions:

  • You’ll live on 80% of your pre-retirement gross-income. This is a good number that is recommended by a majority of planners. Here’s the reasoning – when you retire, job related expenses decrease (food, clothing, fuel, etc). Some expenses can rise, like travelling but if you average it out, you don’t travel much when you’re 80 years old.
  • The family will make $100,000 per year combined, they are aged 30 and wish to retire at age 65. Just makin’ it easy on myself here.
  • Inflation will be 3% and you expect to get an average return of 10% from your pre-retirement investments and 7% from your post-retirement investments (I know, after re-allocation closer to retirement your return decreases).
  • You both expect to live to age 90 – it’s good to be conservative to avoid running out of money.

Let’s figure this out, I always hated these problems in my college courses. In order to figure this out, we need to use the time value of money formulas. Read up on that wikipedia article if you don’t understand what it is. I’ll use excel for the calculations, you can use a regular calculator, but why make it hard?

First step – find the present value of your retirement needs from age 65 to 90 (25 years).

PV = ?
FV = $0 (we want to spend it to 0, if you want to save money for an inheritance, it’ll cost you more)
N = 300 (That’s 25 years times 12 payments per year, we want monthly payments, not annual).
i = .33% (7% minus 3% inflation divided by 12)
PMT = -$6,666.67 (80% of $100,000 divided by 12)

Put all that in your nifty excel spreadsheet or calculator and you get a PV at age 65 of $1,267,226.61. What does that mean? It means that the $1 million generalization is pretty close for these people.

No, how much do they need to save per month (assuming they have $0 saved right now) from age 30 to 65 (35 years)?

PV = $0 (they have nothing saved right now)
FV = $1,267,226.61 (use what you found in the first part)
N = 420 (35 years times 12 months per year)
i = .5833% (10% minus 3% inflation divided by 12)
PMT = ?

Put that in your excel sheets or calculator and you get a monthly payment of $703.60 per month. A reasonable amount if you can budget properly.

So you might be wondering to yourself, “well I guess the $1 million generalization is a good one.” Let’s see what happens if our family wants to retire at age 60 and then age 55 (I’ll spare you all the numbers).

Age 60

The present value of retirement assets needed at age 60 is now $1,401,062.96 and the payments per month needed is $1,038.74.

Age 55

The present value of retirement assets needed at age 55 is now $1,510,675.35 and the payments per month needed is $1,564.34.

So if you take everything into consideration, people with different goals and spending requirements do not always meet the $1 million generalization. Another interesting side note is that moving retirement from age 65 to 60 only requires about $300 more per month in savings while moving it from age 60 to 55 requires about $500 per month extra. This is why compounding is your friend and you should start saving early. Had we made their current ages 25, what would happen to their monthly payments?

7 tips to saving more on apartments

Ah, moving season again. It seems like every year I’m moving into a new apartment. As an avid apartment dweller since 2002 I have seen many apartments – some good, some utterly horrible. Here’s some advice on how to save some money when looking for an apartment and just some general thoughts on the issue.

  • Get your discount off of the rent. If you work for a major company (whether or not its a retail job or corporate job) any respectable apartment complex will offer a discount off your monthly rent. My fiance works for a major hospital and having told that to our new apartment managers, we’ll be getting about 5% off our monthly rent there, or about $34 per month. On top of that, we pay no deposit and no application fee – an automatic $200 savings.
  • Read the reviews that other people leave about various apartment complexes. Granted, most people who bother to write reviews are disgruntled, you can at least get some idea of what’s going on. If I had read some reviews about my last apartment, I would have figured out a.) insulation is horrible and b.) carpenter bees are everywhere. If I had known this, I could have saved myself the $200 per month I was spending on gas heat – that’s for a one bedroom apartment (average around here is about $60 per month in the winter). Two sites I like to check out before renting are ApartmentRatings.com or ApartmentReviews.net both of which have a good list of apartments in your area.
  • Newer is sometimes better, but not always. Newer complexes are generally better on the construction and the overall cost of utilities. They generally feature more energy efficient windows and appliances which can save you money on those monthly utility bills. However, not all new apartments are great. Some have very shoddy construction, poor insulation (between units mostly) and settling problems. If you visit those sites I listed above, people generally will mention something about it. Some older apartments I’ve been in were built in the days when quality was stressed over quantity – ah the good old days. Just keep your eye open when you go to look – look for cracks in the wall, baseboards that have exposed gaps (usually a sign of warped walls), bubbles in the laminate flooring, bugs (if they’re there now, they’ll be there when you move in), etc.
  • You have to spend more to get more. If you go for the bargain, expect to be living with other people who can only afford that little rent. If you move into a complex that caters to college students, expect noisy neighbors. If you move to section 8 housing, expect your car to be broken into. If you want little to no problems, you have to spend more. I have generally found that people who spend more are usually more well behaved and courteous to their neighbors. All apartments have noise problems, but you can lessen it by going with something that has better construction and courteous neighbors.
  • Look for an apartment with a decent fitness center. If you pay to go to a gym, an apartment with a fitness center is a big plus. Having it included in your rent basically saves you that monthly gym bill. Granted gyms are usually a lot better equipped than apartment fitness centers, you can still get your basic workout done. Think of the savings as another discount on your rent.
  • Mind the Sun. If you’re in the south where it’s generally warmer in the winter months, chose an apartment that faces the northeast. If you’re in the north and have predominately colder weather, choosing a southwest or south-facing apartment is better. Why? A north-facing apartment gets less sun, therefore if you’re in the south, you’ll spend less on cooling. A south-facing apartment gets more sun so it heats up better which is good if you live in a cooler climate and want to save on that heating bill.
  • Find out what utilities are before you move. Some utility companies will disclose the average utility costs for the unit or apartment complex you’re thinking of moving into. Give your local company a call and see if they can give you average rates – this helps with your budgeting for your new place.

That’s all the tips I can think of right now. I hope this has helped and I hope you save yourself some money and problems the next time you move.

Don’t Twist My ARM!

You know them, you’ve heard it in the news. Adjustable rate mortgages. With the rising rate of foreclosures, why would anyone want an ARM? That’s a good question with many different reasons. Personally, an ARM would be my last resort. Unfortunately, too many people are duped by lenders or their own lack of knowledge to know what is best for them.

An adustable rate mortgage, for those who don’t know, is a mortgage lending rate that is adjusted at specific intervals according to an economic index + other fees. This means that if interest rates rise, the ARM rate rises and so does your monthly payment on your home.

So why get an ARM instead of a fixed-rate mortgage? Well, ARM’s usually have lower interest rates, sometimes called “teaser” rates that appeal to many low-income people or people with low credit scores. They see it as a quick opportunity to buy a house and get that low payment.

Unfortunately what most people don’t see is that interest rates can and do rise. Below is an illustration of rates since January of 1992.

As you can see by the green line, the ARM was a good choice back in 2003. Rates were lower than fixed rate mortgages and the economy was doing well. Let’s do the math and see how much you paid for a home worth $200,000 in May of 2003 compared to a home in May of 2007.

Year and Type Rate Payment
2003 FRM 5.31% $1,112
2003 ARM 3.63% $913
2007 FRM 5.31% $1,112
2007 ARM 5.57% $1,144

If you have an ARM still, you somehow had to come up with an extra $232 per month to afford your monthly mortage payments. That’s $2,784 per year extra on your housing payments. You could therefore see why it’d be hard for low-income families to come up with the extra money to be able to make these kinds of payments.

Update on the College Cost Reduction Act

Just before I left work today I checked my RSS feeds for some updates. Being the nerd I am, I happen to subscribe to the House of Representatives Committee on Education and Labor RSS feed… (probably 1 of 2 people who do). I also got a nice email from a staff member of the committee (probably 1 of 2 readers of the blog -I’m the other one) letting me know what the vote was and that they put together some videos.

I was happy to see that the House passed the bill 273-149.If you aren’t sure what the college cost reduction act is, I put up a post a while back which highlights some key points. You can also check out the nice summary page at the committee’s website. For anyone with debt or who will be going to college, this is great news as it gives you a lot more advantages to federal loans than what I had when I entered. I also let the staff member know that he should get the representatives to forgive outstanding debt to us bloggers.

Congress did something good?

I did something I haven’t ever done before – I went to the house of representatives’ website… Yes, it is a slow and boring day today, forgive me. I did find one interesting tidbit of information that I’d like to share with you, especially those of you who are going to enter college.

A bill was recently passed by the Committee on Education and Labor called the College Cost Reduction Act. This new act has many cool features (as if laws can be cool) that will help countless number of Americans (I hope I can get some use out of it) with college loan expenses. Some notable facts from the bill and my comments:

  • Cutting interest rates in half on subsidized student loans over the next five years.

I hope this applies to those of us with outstanding loans. I could really use the interest rate help.

  • Making student loan payments more manageable for borrowers by guaranteeing that borrowers will not have to pay more than 15 percent of their discretionary income in loan repayments, and allowing borrowers to have their loans forgiven after 20 years.

This is a mixed blessing in that it can lower the monthly payment, but also increases the amount of interest paid. Students may make the minimum payments, but it may not be enough to pay off the entire loan in a reasonable amount of time. However, if rates are low, the interest accrued won’t be so bad compared to what you could get with the money invested.

  • Increasing federal loan limits to provide borrowers with additional assistance in paying for college and to help them rely less on costlier private loans.

Ah yes, the most important provision. I wish I had this when I started. Private loans are indeed costlier. If I had been able to get more out of the federal loans, I would be in much better shape today. Expect to see falling rates from private loans as well – they’ll be competing against the federal government now for your business.

  • Containing college costs.

Leave it to congress to be as vague as possible. Your guess is as good as mine.

  • Providing upfront tuition assistance to qualified undergraduate students who commit to teaching in public schools in high-poverty communities or high-need subject areas.

This seems to be always an issue. Unfortunately all it does is put new, inexperienced teachers, in the inner city schools. Thus, they fail according to the no child left behind act, and thus don’t get anymore money. See a trend?

  • Providing loan forgiveness for first responders, law enforcement officers, firefighters, nurses, public defenders, prosecutors, early childhood educators, librarians and others.

The tax system is designed to promote and deter certain activities as is the case here.

  • Revising policies to allow public servants to have their loans forgiven after 10 years.

I’m not sure if I understand this correctly, you pay down the loan for 10 years and then get the rest paid off? If you had a 10 year payment schedule, what help is this provision? Maybe if you had a 20 year schedule it’d help.

Those are some of the provisions that the bill had, I hope it gets passed and lasts longer than the 5 years they put it in effect for. If they can spend $300 billion on a war, what’s $20 billion to education going to hurt?

Taxes – The Power of our Spending

Ever wonder how much the government actually hauls in on all the things we spend our money on? How much does the government make from all of us drunkards buying alcohol? What about all that gas we guzzle, surely they want what’s best for us and make little off of it. Well, using the power of the interweb, I have compiled a list of interesting figures detailing exactly how much the government makes in tax revenue from our spend thrift ways. Thanks to the Tax Policy Center for providing me with these figures. If you want more in-depth numbers with your own state’s revenues, check out the tax facts page over at the TPC.

Now onto the list, all numbers are for the last data entry – 2005.

Excise Taxes

  • Alcohol – $5,145,120,000
  • Fuel – $35,769,931,000
  • Tobacco – $13,336,754,000
  • Telephones – $5,851,530,000

Other Taxes

  • Property Taxes – $335,678,019,000
  • Estate Taxes – $23,565,164,000
  • Gift Taxes – $2,040,367,000
  • Corporate Income Taxes – $307,094,837,000
  • Total IRS Collections – $2,268,895,122,000

Something interesting I found was the chart shown below. It details the corporate income tax as a percentage of GDP from 1946-2004. I’ve also modified it to show which president was in charge at the time. The shaded areas show recessionary periods, the red/green shows the presidential time line.

Coverdell ESA vs. 529 Plan?

My niece is turing one very soon and I was thinking of setting up an account for her for future education expenses.Here are the facts:1) I live in a different state than she does
2) My sister does not have the same last name as her (she has not changed yet, but she will eventually)
3) I do not have a lot to put down right now to open the accountThanks for your help!

This can be a common question for people wishing to save for their child’s or another child’s education. There are many similarities between the two plans as well as a few key differences.

529 plans and Coverdale ESA’s are tax-sheltered education plans that allow you to invest money and let it grow tax free. However, you must use the funds for qualified education expenses. An advantage of both include the fact that come college time, the money in these accounts do not affect the student’s financial aid.

529 plans offer a wide range of opportunities to save. Every state has them and every state is different. Some states will allow people from another state to invest, some won’t. Some have minimum startups or minimum monthly investments and various other fees. 529 plans usually do not have a maximum contribution limit, whereas Coverdell plans do ($2,000 per year per child). 529 plans allow investment in certain select investment options, ESA’s let you invest in stocks, bonds, etc. 529 plans pay for college expenses only, ESA’s let you use the money for primary and secondary school as well.

To answer your concerns:

  1. You do not have to be in the same state as the beneficiary. However, it is sometimes advantageous to invest in a 529 plan from your own state. Many states offer tax advantages (Ohio’s 529 plan lets you deduct up to $2,000 in contributions) that offer even greater savings. You can change the beneficiary at any time and you still have full control over the account as long as you are custodian.
  2. Your sister has nothing to do with the 529 plan you set up other than to say, “thanks.” You are the owner of the plan, her daughter is the beneficiary. She does not come into the equation at all.
  3. You do not need a lot to start up a plan. Ohio’s 529 plan lets you contribute as little as $15 at a time. There are a lot of investment options to help it grow for differing time periods. Since she is so young, aggressive growth is good, when she gets closer to 18, there are options to scale back growth in favor of asset protection.

Another concern I think should be answered is that your niece can go to any college in the country and still receive distributions from the plan. Some plans also are FDIC insured and can offer extremely low annual fees. The best thing to do would be to contact a financial advisor or tax professional to help you better understand the benefits that come along with each plan.

Answering Yahoo

Occasionally I go to Yahoo! Answers to read the questions that various users submit, mostly with personal finance. Unfortunately, there are a lot of dumb questions and a lot more questions about working from home (which can be as equally dumb). However, every now and then you get a gem that I like to try to answer. The following is a question that I feel many people can relate to unfortunately.

I have a large debt to the irs, a garnishment on my wages and at least another 10,000 in other debt. I was just laid off of my second full time job, although I am looking for another………… what services or other options do I have to fix these issues. Between the garnishment, and the irs debt I cant make it on just one job.

Sadly, most people can be insensitive and quickly judge this person for all of the wrong reasons. Of course, getting a job or stop spending would be the easy answer. For a person in this situation, that’s not the full answer.

First, wage garnishment isn’t pretty. According to the government, garnishment is usually ordered by a court and cannot exceed 25% of a person’s disposable income (net income). My advice on this would be to talk with the IRS and see if a more agreeable settlement option can be made.

At least in the state of Ohio, where I live, they offer a program to settle debt if you face certain conditions. These conditions are economic hardship or doubt of collectability. It’s always worth a shot to try to explain things from your point of view.

As for finding someone to help you with your issues, you should contact the NFCC – The National Foundation for Credit Counseling. They can put you in touch with local companies that provide credit counseling services. They would be more experienced with such issues that you have and could offer you better and more personalized advice than I can.

Taxes – The Power of our Spending

Ever wonder how much the government actually hauls in on all the things we spend our money on? How much does the government make from all of us drunkards buying alcohol? What about all that gas we guzzle, surely they want what’s best for us and make little off of it. Well, using the power of the interweb, I have compiled a list of interesting figures detailing exactly how much the government makes in tax revenue from our spend thrift ways. Thanks to the Tax Policy Center for providing me with these figures. If you want more in-depth numbers with your own state’s revenues, check out the tax facts page over at the TPC.

Now onto the list, all numbers are for the last data entry – 2005.

Excise Taxes

  • Alcohol – $5,145,120,000
  • Fuel – $35,769,931,000
  • Tobacco – $13,336,754,000
  • Telephones – $5,851,530,000

Other Taxes

  • Property Taxes – $335,678,019,000
  • Estate Taxes – $23,565,164,000
  • Gift Taxes – $2,040,367,000
  • Corporate Income Taxes – $307,094,837,000
  • Total IRS Collections – $2,268,895,122,000

Something interesting I found was the chart shown below. It details the corporate income tax as a percentage of GDP from 1946-2004. I’ve also modified it to show which president was in charge at the time. The shaded areas show recessionary periods, the red/green shows the presidential time line.

What’s happenin’?

Here are a few stories that I thought were interesting and might be helpful to many of you out there.

  • Jim at Blueprint for Financial prosperity put up a nice summary of his Devil’s Advocate posts. Some of them are pretty interesting takes on common issues.
  • Clever Dude has some questions about the costs of adoption and whether it is worth it.
  • Flexo over at Consumerism Commentary had a reader ask whether or not clothes should be included in their net-worth.
  • Five Cent Nickel gives you five reasons you should care about your FICO credit score.
  • Free Money Finance gives some tips to those wondering when they should take their Social Security payments in retirement.
  • Jeremy at Generation X Finance gives some good advice about knowing how your credit cards charge their interest, it’s definitely worth checking out.
  • J.D. at Get Rich Slowly had a conversation with her friend about budgeting, J.D. and I both agree, there are some people you can never help.
  • Lazy Man at Lazy Man and Money has a contest going for a $200 grand prize, check it out!
  • Mapgirl at Mapgirl’s Fiscal Challenge gives some reasons why you need a personal finance software.
  • Might Bargain Hunter contends that shutting off the radio will save you gas. I’m not so sure I’d be willing to be that frugal.
  • Money, Matter, and Musings gives some other reasons why you should be frugal.
  • My Money Blog gives some tips about lending money on Prosper.
  • David at My Two Dollars gives some tips for people about to lose their home.
  • No Credit Needed gives his take on the baby steps approach to personal finance and how it’s sometimes better to crawl.
  • The Digerati Life details how your credit score can affect your loan rates.
  • Trent at The Simple Dollar gives his musings about snowballing your debt.

Frugal Beer

Yes, drinking beer is fun. The prices aren’t. If you’re like me and like to venture out into the “real world” every now and then to enjoy your libations, you want good, cheap beer. For most of us, that’s going to happy hour! It can be a tricky thing, this happy hour, every hangout’s special is different and it is held at different times. Confuse yourself no more! For I have found the light for us frugal drinkers – UbranDrinks.com.

This holy site of beer drinkers uses Google Maps API to sketch out neighborhoods in your city. You can click on each neighborhood where they sidebar will update itself with local restaurants and bars, their happy hour time, and their happy hour special. The site was created by a bunch of friends in Portland, OR whose mission it is to provide the best happy hour information to the web.

Unfortunately, the site only serves Portland, OR; Seattle, WA; and Columbus, OH. Luckily, I’m in Columbus, OH so I’ll at least get some use out of it :P. However, they do plan to add more cities as time goes on. The site is a good idea and I’m sure if you send some love their way, they’ll try to hurry to add more cities. I applaud these frugal beer drinkers for helping me reduce the damage to my wallet.

Sex Up Your Finances

I apologize for the lack of updates recently, it isn’t easy looking for a new job.

Over the course of the next few days, I’ll be writing a series of articles about some basic personal finance topics and one advanced topic as well. I hope to cover the topics and explain it easily enough so that you can understand and implement some strategies of your own. I hope to include:

  • Making a budget
  • Understanding cash flow statements
  • Understanding how to calculate net worth
  • Allocating your assets in your investment accounts to meet your goals

I may add more topics as time goes on. I’m going to start with these topics first because these are the foundation of sexing up your personal finances (asset allocation is a little more advanced, but I think it is something you should know).

The dirty little secrets of Universities

If you’ve ever gone to buy a car or a house you never paid the sticker price, right? If you did, perhaps you should subscribe to my feed and learn more about personal finances, please. When you make big purchases you usually negotiate the price lower than what the sticker price is. This goes for things such as buying a car, buying a house, that big screen tv or those new cell phones. So today when I was attending a meeting at work about 529 plans and education planning, an interesting tidbit of knowledge was brought up – colleges can and do negotiate tuition.

This revelation was provided by my boss who happens to be on the board of trustees of a local university. She details how her college will in fact give you a tuition discount because you’re male. Her reason behind this was because the college is 60% female, 40% male – therefore they want to balance their demographics. This is not a grant, scholarship or some other gift – rather, the actual price of tuition is decreased.

My other boss (it’s starting to sound like Office Space here) gave an anecdote about my alma matter – Ohio State. The story could be the same for any major university. Big public schools like OSU will end up paying you to go to school there. He detailed how students who’ve been accepted to Harvard or Yale or any other well known institutions will be given major discounts and even, as is the case with some OSU students, stipends to attend their school. Regardless if your parents are billionaires and could afford it, they want you and the prestige you bring along with you.

So the moral of this post is, why pay sticker price on tuition? If you have or someone you know has the grades and is going to attend college soon, let them know to ask about tuition discounts. Here’s how you do it – go to the admissions office (get an appointment with someone first), present yourself and say, “now, about this tuition, what can you do on it?” If you’re someone the school wants, they will work with you. Of course this isn’t widely advertised as is evident of a lack of google search results on the subject but it is out there and you can get it.

Frugal Car Buying

Alright, so this won’t apply to everyone out there, but I’d like to share it anyway. Last year I was at the mid-ohio race track with my car club (Mazda 6). We had the opportunity to meet exclusively with all of the Mazda teams. It was a great experience as we were able to spend loads of time with the teams and go over almost everything on their car and what they do, etc.

What struck me as real interesting is the way they actually get their race cars. Mazda doesn’t donate them nor do they go to a dealer and buy one. Rather, they buy the cars that are damaged in shipping from overseas. According to the driver I spoke to, Mazda, and this goes for any manufacturer, receives many damaged cars from shipping which they obviously can’t sell to the consumer. Thus, they’re either sold as junk or to race teams like the one I visited. All you have to do is put in the body work (as most everything else is perfect) and it’s yours. So how do they become damaged?

  • Containers on container ships falling over or being mishandled.
  • Those semi-trucks that haul them over, cars fall off of them when loading/unloading.
  • Other general mishaps – pretty much anything that could happen to that car before it makes its way to a dealer’s lot.

Unfortunately, I don’t have an exact price on what you’d have to pay for a car, but I can say it is definitely a lot cheaper than buying it even at invoice price. So if you know someone who can do good body work cheap, you could save thousands. Maybe call up a manufacturer directly and ask them about it, I have never done it and I know these guys have direct contacts with Mazda. If anyone wants to give it a shot, let me know how it went!

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