As featured in The Wall Street Journal, Money Magazine, and more!

If you haven’t noticed, it’s tax time. I have noticed, not only because of the endless emails I receive reminding me of this grand celebration, but also because of the people with whom I interact. As those I know complete their tax returns, I observe their pure joy as they realize they’ll be receiving a refund from the IRS.

owe-more-refund

Count me in with the masses; my accountant suggested some changes to my tax returns for the past couple of years, and I received several refunds I otherwise wouldn’t have expected. I exuded an appropriate level of joyfulness, as well.

Most people’s tax situations are much simpler than mine. For example, a single guy might work for only one employer, receive one W-2 form, and won’t have much un-withheld income. He will probably receive a small refund. Or a family receives two W-2 forms and, because they didn’t calculate their withholding correctly, they’ll receive a large refund. Cue cheers of joy!

Except, the federal government should be the one celebrating. They’ve been using “our” money — money belonging to those of us who are due a refund — for free! Usually, when you lend money to someone, you charge interest to compensate yourself for its use. Why would you give the government, an organization that will use your money in ways you may not approve, a free ride?

The most common explanation — or rationalization — for not being concerned with lending money to the government for free is simple. It’s because this creates “forced savings.” By having more money than necessary withdrawn from each paycheck, you are automatically putting some money aside for later. You’re just counting on the government to pay you back on time, of course (and without interest).

It might be a good idea to note that some state governments are not issuing refunds on time. The states’ financial difficulties will become your financial difficulties when they delay sending you the “savings” you’ve been counting on.

Even if your return arrives lightning quick and without problem, it’s still a ridiculous situation. But, most of us stand for it, year after year. Why don’t we break the cycle of free loans to the government, then strange joy when our money is returned?

Let’s start with the typical rationale. Here’s why “forced savings” is a poor excuse:

  • You are not earning interest. In a high-yield bank account like Barclays, the money could earn interest. If you hand excess money to the government each pay period, the government gets to keep any interest it could be earning. You might as well throw money out the window.
  • You don’t have use of the money. The average tax refund, for those who receive one, is almost $3,000. You could have used that money to pay off your debt, repair your house, or invest for your retirement.
  • Saving yourself isn’t difficult. Don’t rely on the government for a savings plan. You can automatically transfer a portion of your paycheck into a savings account, and not even think about it (essentially, the same thing you’re already doing). When you re-calculate your withholding and change the form with your employer, set up direct deposit so you receive your pay directly in your bank account. Then, set up an automated recurring transfer to move a portion of your pay into a savings account that’s earning interest.
  • It’s easy to treat a refund wrong. Receiving a large check from the government encourages people to make unnecessary or unplanned purchases. While that might be great for the economy in general, you might be making choices you wouldn’t have been if that money was spread out over the course of the year. If it were incorporated into your weekly or biweekly income, you would be more apt to budget it wisely.

The federal government counts on millions of citizens overpaying their taxes throughout the year. In fact, if everyone optimized their withholding, the government might not be able to pay for its day-to-day operations. But you don’t need to worry about what the government will do in that situation. The best decision for your financial health is to optimize your withholding so you do not receive a substantial refund.

In fact, you should consider planning your withholding so you owe the government when you file your taxes. In this scenario, all the drawbacks mentioned above become your advantages. You’ve had access to government money throughout the year. As long as you stay within limits, you won’t owe the government any interest or fees. You can even earn interest or invest the government’s money, tucking that cash into an interest bearing account, ready to pay your tax bill when it comes due.

Of course, be sure to keep track of approximately how much you’ll owe, and never put yourself in a situation where you cannot pay your tax bill by the deadline in April. If you’re going to avoid a tax refund, you need to be smart and not create a bigger issue. But, as long as you can pay your bill by April 15 (or April 18, as it is this year), the government doesn’t care what you do.

 

{ 28 comments }

Full disclosure alert, I’m a bit of a bitcoin junkie.  Globally, access to bitcoin is much easier with dozens of funding methods for international investors. However, the US of A has yet to embrace the bitcoin, so being able to buy and sell the cryptocurrency is a lot harder than you might think.

When bitcoin started making waves in 2010, I wrote a brief introduction about the cryptocurrency. At the time, the value of one BTC was just $13 (and was a mere $3 just a week before that!).  Today, the currency holds a value of $900 per bitcoin (as of 1.8.2017). Had I been a bit more clairvoyant — or maybe just less of a wuss — I could have taken my 8,000% profit and retired already.   Lucky for you, I’m still writing and am able to tell you the three most reputable websites to buy and trade Bitcoin.

bitstamp-logoBitstamp

All of my current bitcoins are held with Bitstamp, which I believe to be the greatest bitcoin exchange on the web today.  Current market price is always spot on and their blockchain tracking software is the the fastest at displaying hundreds of buy and sell orders every minute.  Bitstamp has been around for over five years and has three offices worldwide, one located in New York.   And while I love to use them to store my coins, the difficult part is being able to buy them.  Currently, the only funding method Bitstamp has available is via international wire (as they are a European-based company).  That transfer can take a few days and the volatility of bitcoin means the money I’m depositing may or may not have more “buying power” by the time I can use it.

bitstamp-trading

A view of the Bitstamp trading platform

Account verification is quick and painless with Bitstamp and their fee structure is the lowest you’ll find on any bitcoin exchange.  The most you’ll pay for a bitcoin purchase is 0.25% over spot (and that can be reduced all the way down to 0.10% if you trade more than $20M in BTC over a 30 day period).  For withdrawals, a transfer back to your bank account will only incur a 0.09% fee ($15 minimum). However, depending on your bank, you could incur additional fees (my bank, Citizens, does not impose any).

US-based customers can also request a debit card onto which the money will be loaded.  The fee for loading the card is $10 for amounts up to $1,000. Anything greater than that is a fee of 2%.  A fee structure for using the debit card can be found here.

coinbase-logoCoinbase

I do a lot of my buying of bitcoin on Coinbase because it’s the easiest of all websites to buy from. (Then, I transfer the coin to Bitstamp to hold and trade.)  Coinbase has two major selling points for any US-based customer looking to buy bitcoin:

  1. A credit/debit card can be used (with a 3.9% fee).
  2. A bank account can be connected for direct deposits and withdrawals (with a 3.9% fee). There is a four business day clearing period to buy, and a one business day clearing period to sell.
coinbase-account

Coinbase account interface

The verification process for Coinbase is a little bit more complex than that of Bitstamp.  Depending on how much of your identification they can verify immediately, your buy and sell limits may be pretty small to start (think $100 USD per week).  You simply need to go through the process of uploading documents, verifying your address with a utility statement, and waiting the initial 30 days after making your first purchase, though. Then, the limits to buy can quickly be raised to $1,500 per week via credit card or $10,000 per week via bank account transfer.

I’ve personally made 50+ purchases with Coinbase over the last couple of years and their BTC delivery has always been on time. Plus, their security is top notch.

cexio-logoCEX.IO

CEX.IO is a relatively new exchange, having been around for just under three years (and really only able to buy and sell BTC for two). I’ve recently begun to use them for trading and have dabbled in buying bitcoin through them.  Two immediate differences I have noticed in using CEX.IO to buy bitcoin recently are:

  • The amount of bitcoin I can buy in a 24-hour period is substantially more than I can buy anywhere else, when using a credit card.  After going through their verification process (which is extensive, requiring a passport among other things), I can deposit up to $3,000 per day with a credit card, up to a $10,000 per month max.  They actually have another verification step available for customers looking to increase their limits even further, but I didn’t bother to go the extra step because this is more than enough for me.
  • The fee for depositing is a reasonable 3.5% + $0.25 per credit card transaction, which is just above interchange fees (and cheaper than Coinbase).  However, what is not reasonable is that to convert your cash to bitcoin, you pay a steep ~8% fee to CEX.IO.
cexio-trading

CEX.IO Bitcoin price tracker

There are dozens of other exchanges and websites that charge even more than the 8% you see listed for CEX.IO. Some are even as high as 60%, so this is about my limit in terms of trying to purchase cryptocurrency.  That said, the trading exchange on CEX.IO is my favorite to use and they’ve now launched a margin trading platform.   If for some reason I need to buy bitcoin and cannot do so via the first two exchanges above (my limits are up, for example), CEX.IO is the way to go.

Through all three exchanges listed above, you have the ability to transfer your bitcoin to and from instantly (confirmed on the blockchain generally within an hour).  So buy on one, transfer to another, trade into Ether, then into litecoin, back into bitcoin, and so forth. Just know that you can move your money around for little to no fees whatsoever (the miner fee to transfer $1,000 of bitcoin between wallets is roughly four cents).  And if you don’t understand anything I just said, I urge you to have a look.  I believe that bitcoin is here to stay, and the number of new exchanges being invested in worldwide is increasing by the hundreds.

If you’re lucky enough to live near one of the 600 US based Bitcoin ATMs, you can buy bitcoin there.  The average ATM fee is 7.9%.

 

{ 1 comment }

philadelphia-beverages-taxLast year, the city of Philadelphia decided to pass into law a “beverage tax,” which taxes the sugary drinks you consume at the rate of 1.5 cents per ounce.  At the time, there was some considerable outcry from residents of the city. Nevertheless, the government stuck to their guns.

Well, at the turn of this new year — on 1/1/2017, in fact — the tax was enacted. Consumers are quickly feeling the effects, and are none to happy about it.

What It Is

Taken directly from their city government website, Philadelphia lawmakers explain where the tax is to be levied.

The tax is not just on sodas. This tax is on any non-alcoholic beverage, syrup, or other concentrate used to prepare a beverage that lists as an ingredient any form of caloric sugar-based sweetener, including, but not limited to sucrose, glucose, or high fructose corn syrup.

Drinks considered “diet” or “zero calorie” are also taxed. Specifically, this tax is on any non-alcoholic beverage, syrup or other concentrate used to prepare a beverage that lists any form of artificial sugar substitute, including stevia, aspartame, sucralose, neotame, acesulfame potassium (Ace-K), saccharin, and advantame.

A quick look at social media shows hundreds of posts today from people taking screenshots of their receipts to show just how much this tax will actually cost you.  You hear the details of 1.5 cents per ounce and might not think much of it. When you start to buy gallons, six packs, 12 packs of your favorite soda or sports drink, though, you’re going to pay quite a bit more than you expect.  Let’s have a look at an example.

philly-soda-tax

On the receipt above, you’ll notice a consumer purchasing a 10 pack of Propel Water (w/ Berry) for a retail price of $5.99.   These are just over 20 oz. a bottle, so the pack is a little over 200 oz. of total liquid. At a tax rate of 1.5 cents per ounce, the consumer ended up paying $3.04 just in the beverage tax alone.

Then, because democracy is so awesome, the sales tax is added AFTER the beverage tax. This means that the great residents of Philadelphia are paying 8% sales tax ON their beverage tax.  A $5.99 10-pack of Propel water (which actually doesn’t have any sugar, ironically), now costs $9.75.  This particular individual was stunned to see the cost, so they voided the transaction. And I don’t blame them.

Who Loses from the Soda Tax?

When you consider what the Philadelphia soda tax is meant to accomplish, there are two clear cut losers:

  1. The Sugar / Sports Beverage Industry – With the cost of everyday drinks like Gatorade and Pepsi being increased by as much as 150% (depending on the size of the container), the beverage industry is going to see a steep decline in demand.  There’s just no way around it. When you were paying $.30 for a 12oz can of Coca Cola at the grocery store and now are paying $0.48 cents a can, there will be a group of people that say “No, thanks.”   This decline in demand will, of course, be limited to just the city of Philadelphia. If the merits of this tax are well publicized in the coming months, though, other cities could join in for the added revenue.
  2. The Wallets of the American Consumer – I wouldn’t call myself an addict when it comes to drinking soda or sports beverages. But when they go on sale at the grocery store, I’ve been known to buy them in quantity (“four 12-packs for $10” happens a few times a year, and I like to buy just that many).  If there’s 144 ounces per case of 12 cans, that’s 576 ounces of soda in my $10 purchase.  In Philadelphia, my $10 purchase is now an $18.64 purchase… and that’s not good for my wallet.  The same goes for consumers who spend $1.99 on a gallon of iced tea (now with an additional tax of $1.92) or a liter of Mountain Dew (plus the new tax of $0.51).  Consumers will lose more money for buying the same everyday items.

Who Wins from the Soda Tax?

Once again I can find two clear cut examples of positive outcomes from the Philadelphia beverage tax:

  1. Early Childhood Education & City Programs – The city of Philadelphia anticipates that $91 million annually will be collected from this soda tax, and the majority of that money will go to fund early childhood education, parks, and libraries.  The remaining funds (roughly 20%) will target other city programs and employee benefits.  The sum raised is not as much as you might anticipate given just how much the cost of beverages will increase, but remember this is strictly for one city.
  2. The Health of the American Consumer – Allow me to speak from experience: the sheer amount of sugar in my beloved bottle of Snapple Apple is more than I should likely be consuming in a week, let alone in 15 minutes.  The reason these drinks taste as delicious as they do is because they are dripping with the sweet stuff. Philadelphia is not only looking at a new revenue source, but a way to tackle diabetes and obesity.  A “sin tax” has always been defined as a tax on things like gambling, tobacco, and alcohol, but it would appear we may be getting ready to add sugar and sports drinks to the list.  If this ever reaches Connecticut, the increased cost may just be enough to get me to start drinking water exclusively (or at least a LOT more than I do).

Grocery stores in the city are doing different things in order to inform consumers their drinks are going up in price.  Some list the full price on the sticker below the item on the shelves, some have sent out notices in their circulars, and others have decided to avoid the subject. The latter are just ringing up surprised consumers at the register, which I wouldn’t imagine going over too well for those not paying attention.

Philadelphia makes up roughly 0.5% of the entire US Population. So, while this is just one city, it’s a big one. This tax is now on the minds of 1.55 million people.

Keep an eye on this tax to see if your city adopts a similar policy and plan for a healthier lifestyle to keep your wallet and your waistline in check.

{ 0 comments }

There are so many different ways to organize, prioritize, and classify your tasks and responsibilities. You’d probably need a couple years just to sort through all of them on your own. You can have an organizer on your computer, your phone, in your pocket, or a notebook. If you’re short of paper, you can just scribble on your hand.

Even with all of the new ways to get organized, the most effective tool for me is still the simple, classic “To Do” list. My to-do list is nothing fancy, just a list of things that I need to accomplish. For some reason, though, this list motivates me to be smart with my time and get things done.

One of the reasons these lists are so effective is because they help you define what needs to be done. One of my favorite things to put at the top of a to-do list is “start a to-do list” — that way I can cross something out right away! Nothing like building momentum right off the bat.

In fact, checklists are so powerful that they inspired an excellent book, The Checklist Manifesto, by Atul Gawande.

This principle can be applied in any aspect of life. You can use a to-do list at work, at home, or even in relation to different goals you have. My wife and I even have a sort of ‘Financial To-Do List,’ covering our money goals. It has helped us get started and avoid wasting time.

A to-do list is particularly power when it comes to finances.

The Benefits of a Financial Checklist

Stay Organized

The list helps us know what bills need to be paid and when they’re due, what major tasks or purchases we might have coming up, and — perhaps most importantly — when we’re going to be paid. A well-defined to-do list answers all of the questions about what needs to be done and when. This helps you use your time more effectively.

Get More Done

Because we’re using our time more effectively, we can use time in more productive ways. For example, we might have spent hours poring over our budget or trying to find the electric bill. Instead, our newfound organization allows us to avoid these little time wasters and streamlines the process. We can get back to making money, fine-tuning our savings strategies, and looking for new ways to cut back. Or, we can quit thinking about money altogether and just go enjoy ourselves for a bit.

Meet Your Goals

We have all sorts of tasks on our list, both big and small. An easy way to design a strategy like this (if you’re using a word processing program or a notebook) is to use a list:

  • Big Goal 1
  • Little Goal A
  • Little Goal B
  • Big Goal 2

For example, if your big goal is to save $1,000 for your emergency fund, your To-Do list could look like this:

  • Save $1,000 Emergency Fund
  • Save $75 from each bi-weekly paycheck for 4 months ($600)
  • Take lunch to work 2/wk for 4 months and add savings ($25/wk) to emergency fund

See how easy that is? Now you’ve got a goal, and you know exactly what you need to do for it! Of course, you can substitute in anything you like.

The beauty of these lists is that they are completely scalable — that is, they grow with you. If you finish your emergency savings goal, you can just start your next goal: “Pay off car debt” or whatever it is on the next line. Figure out how you’re going to do it, and break the big “to-do” down into smaller tasks. Then, you’re well on your way to leveraging your simple list as an effective financial tool.

The Financial Checklist

Your specific to-do list will depend on your circumstances. That said, here are some Financial Checklist ideas to get you started:

Money Management Checklist

  • Create a budget
  • Compare your budget to actual spending
  • Balance your checkbook
  • Balance your credit card account
  • Conduct a spending audit

Credit & Debt Checklist

  • Check your credit score (here’s how)
  • Check your credit report for errors
  • Refinance credit card debt to 0% (here are current 0% offers)
  • Consider refinancing school loans
  • Consider refinancing a mortgage
  • Use the debt avalanche to pay down your debt

Banking & Credit Cards

  • Eliminate checking account fees
  • Confirm that your savings account offers a high yield (here are some options)
  • Set up direct deposit
  • Make sure your credit cards pay excellent rewards (here are our favorite cash back cards)

Investing

  • Check the fees of your investments
  • Confirm your asset allocation aligns with your investment goals
  • Rebalance your portfolio
  • Max out your 401k
  • Max out your IRA
  • Consider an HSA if you have a high deductible insurance plan

Tools

You don’t need anything special to start a to-do list. You can put it on a piece of paper in your wallet, a whiteboard in your kitchen, or keep it on your phone or computer. The “Financial To-Do” list is a completely customizable, easy-to-use money (and life) tool for anyone.

That being said, there is one free tool worth considering: Asana. Asana is a free online tool that tracks tasks. It allows you to create a team and assign tasks to team members. For couples, it can be a great way to share, save, delegate, and organize information on anything.

There are several reasons why Asana is perfect for a financial checklist:

  • It’s free
  • It’s easy to use
  • Tasks can be scheduled to recur on a regular basis (e.g., rebalance your investments once a year)
  • You can attach spreadsheets and other files to a task
  • You can leave comments for each task, perfect for communicating with your significant other

However you approach a Financial Checklist, and whatever tools you use, it can be a great way to improve your finances over the next year.

{ 0 comments }

US Conforming Loan Limits (Finally) Rise for the First Time Since 2006

by Stephanie Colestock

If you are a homeowner or have looked at buying a home in the near future, you probably know all about conforming loans. While the limits for these types of loans have remained stagnant for the past decade, steady increases in the housing marking have prompted this ceiling to rise for the first time since […]

0 comments Read the full article →

Why Do I Have More Than One Credit Score?

by Stephanie Colestock
credit-score

At some point in your life, you’ve talked about your credit score. In fact, you’ve probably talked about it many, many times. What it is, how to improve it, how much you paid to get it… But what if I told you that “it” is really just one of dozens of potential scores out there, […]

1 comment Read the full article →

How to Create the Ultimate CD Ladder

by Rob Berger
cd-ladder

The low interest rates offered by even the highest-yield savings and money market accounts are disappointing for savers. Even as the Fed starts to raise rates, savings account yields haven’t budged. So, do we just give up the idea of earning anything on our savings? Well, not necessarily. One alternative is to create what’s called a CD […]

15 comments Read the full article →

Credit Karma is Offering 100% Free Tax Software – Look Out Turbo Tax

by Michael Pruser
cktax

The first time I filed my very own taxes was with Turbo Tax, back in 2003. I was 18 years old at the time, attending college, and it was the first year my parents could not claim me as a dependent. I had earned a fair amount of income from my jobs on campus (and […]

0 comments Read the full article →

Today is the Day to Finish Your Gift-Buying… It’s Free Shipping Day!

by Stephanie Colestock

Well, we’re less than two weeks from Christmas, which means the shopping pinch is upon us. If you’re like me, you’re probably nowhere near done with your Christmas shopping – still have three people to shop for, and we are coming down to the wire. This year, though, I’m avoiding that last-minute, mad dash at […]

0 comments Read the full article →

The Price of Oil is on the Rise. Is That Good for You?

by Michael Pruser
oil-rising

After a lull in the price of a barrel, we are seeing the cost of oil begin to once again increase. With it comes increased revenue and, in turn, money being pumped into both the stock market and the economy. So, is this good news for the average person? Well, the immediate answer is no, probably […]

0 comments Read the full article →
Page 1 of 32712345···50100150···Last »