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!