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March 2009


Earlier today, the IRS officially began accepting 2008 electronic tax returns for individuals claiming the $8,000 tax credit for qualifying first time home buyers who purchased a house in 2009. If you qualify and have purchased your home this year, you can now file your taxes using TurboTax, TaxAct, H&R Block, or any other software vendor. Previously, if you attempted to claim the $8,000 tax credit on-line, the IRS would have rejected your return.

Note that if you plan on buying a house later this year before December 1, you still qualify for the tax credit, but you cannot claim it yet. Either file for an extension or claim the $8,000 credit when you file your 2009 taxes. If you’re expecting a big refund this year and you don’t want to delay that refund by filing for an extension, you can file now and file an amended return later.

The maximum credit of $8,000 ($4,000 for those who are married filing separately) is limited at 10% of the purchase price of the house, and the total credit you qualify for begins to phase out for taxpayers with a modified adjusted gross income of $75,000 or $150,000 for joint filers.

Here are the full details about claiming the $8,000 first time home buyer tax credit this year.

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A few weeks ago I wrote a short piece explaining that while even if you think the “Making Work Pay” tax credit of $400 is a bad idea, at least we’re saving money this time by not sending out two letters and a check to every household in America. In short: the stimulus process could’ve been dumber.

In the comments of that article, Laura said:

Yes but now the government will have to reprint and mail out the employee withholding schedules that small employers use to figure up those weekly paychecks. This is why it will take a few months to see that $13. It goes both ways.

I wasn’t sure if Laura was correct about that. I work for a small company, so I figured I’d wait and see.

This morning, my co-workers and I saw our Federal Withholding decrease for the first time as a result of the “Making Work Pay” tax credit. My personal take-home pay is $33 more (we get paid twice a month).

So I asked our Accounting department about the process, and I got this in reply:

It’s actually a change in the Withholding Table. The Table is downloaded from the IRS electronically and then based on your W4 elections and pay scale, the amount will automatically adjust.

Granted, there are probably some companies who don’t do everything electronically, and as a result might need a paper form to be sent, but in our case, and I suspect most other companies, this process didn’t cost anything.

So, in short: the stimulus process could’ve been even yet still dumber.

(More about the Tax Credit from the IRS.)

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Earlier this year, JP Morgan Chase surprised customers with a new fee and an increased minimum required monthly payment. For cardholders who carried large balances month to month, Chase began charging a $10 monthly fee and increasing the minimum payment from 2% to 5% of the balance. The change was announced last November for about 300,000 customers and took effect in January. (See our previous coverage and visitor comments.)

Andrew Cuomo, the New York Attorney General received so many complaints about the surprise move, he required the company to refund the income collected from these fees, totaling $4.4 million, back to customers. Even though the order came from the Attorney General’s office, the official statement from Chase cites customers’ concerns as the reasons for the policy reversal.

The idea that credit card companies can change the terms of their agreements with customers at any time and that customers do not have the same power short of canceling the card provides a strong argument for never carrying a balance from one month to the next, charging only what you can pay off with income before the payment is due. Realizing that we don’t live in a perfect world, this isn’t always possible. But watch for notices in the mail from your credit card company which sometimes these notices arrive in unlabeled envelopes. They can contain information pertaining to changes in your agreement which, if you pay attention, you may decide are not worth continuing your relationship with the company.

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A reporter from the Washington Post is looking to hear from Consumerism Commentary readers who are coping with wage deceleration or stagnation. If you have had to make changes to your lifestyle due to wages or salaries that haven’t been rising as quickly as expenses, you are a perfect candidate for this article in progress. The reporter would like to talk to you about the effect of your stagnant income on your ability to save or pay for a child’s education, or any other kind of adjustment you are experiencing.

If this description fits your experience, please leave a comment here or send me an email (flexo at Consumerism Commentary dot com), describing your situation. I will put you in touch with the reporter.

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My Pets’ Worth

by Smithee

The author of Free Money Finance pointed out a story highlighting how the recession is affecting the health of pets. He or she also linked to a helpful chart of estimated costs for owning various kinds of pets. Personally, my wife and I don’t even include pet care in our budget, because our affection for ... Continue reading this article…

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Would You Feel Confident Buying an American Car?

by Luke Landes

If you have not been aware of the recent news, General Motors and Chrysler have asked the government for more money, but the Obama administration is pushing back. The government’s task force has determined that the restructuring plans submitted by the companies in return for continued financial support are inadequate. As a result, the Chairman ... Continue reading this article…

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Passing 100,000 Miles on My Honda Civic

by Luke Landes

A few months short of five years ago, I purchased a new 2004 Honda Civic to replace a failing older model that had not been in my care. Today, this “new” car is passing 100,000 miles on the odometer, and it’s still running great. While I occasionally find my mind wandering towards the purchase of ... Continue reading this article…

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Eight Tips for Living Through a Recession

by Luke Landes

If you have been affected by the recession, perhaps by losing a source of income, you may not want to hear suggestions for turning a bad situation into an opportunity. In fact, the idea of turning challenges around for your own benefit is in line with the annoying soundbites that productivity gurus sell. But I ... Continue reading this article…

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Which are Reliable Indicators of a Strong Economy?

by Smithee

One of the fun things about living in an Information Age is that we not only have near-instant access to financial data, but also a multitude of data sources to look at. It seems there’s a new report every day with updated economic news and forecasts. We’d like your input about the economic indicators that ... Continue reading this article…

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How to Prepare for Inflation and Higher Prices

by Luke Landes

Yesterday, the Federal Reserve purchased $7.5 billion of debt in the form of Treasuries from the government, and plans to continue buying debt for a long time to finance the government’s spending. As the government continues selling this debt, the money supply increases. In total, the Treasury may add $3 to $4 trillion dollars to ... Continue reading this article…

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How to Deal With a Low Salary Offer

by Luke Landes

In my life so far, I’ve had three major chances to negotiate a starting salary. The first was with a cash-strapped non-profit organization that had enough problems keeping its payroll account funded every other week. The second was with a company in the financial industry, a segment of that industry that is known for being ... Continue reading this article…

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Review: I Will Teach You to Be Rich by Ramit Sethi

by Luke Landes

I’ve been in touch with Ramit Sethi since not long after he began writing on his blog, I Will Teach You to Be Rich, almost five years ago. It is no surprise to me that Ramit, after enhancing his writing with years of practice on his rapidly-growing website, has published I Will Teach You to ... Continue reading this article…

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The Carnival of Personal Finance is Up!

by Luke Landes

The Carnival of Personal Finance is a weekly collection of the best personal finance articles from across the blogosphere, usually with an entertaining or thematic presentation. This week’s Carnival was published last night by the blog Four Pillars. Check out the articles picked for Editor’s Choice but don’t miss out on The DIY Haircut and ... Continue reading this article…

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Has the Economic Collapse Changed the Rules of Investing?

by Luke Landes

Money Magazine published an article with the “7 new rules of financial security,” claiming that the recent economic collapse has changed the fundamentals that investors have relied upon for decades. The simultaneous meltdown of the stock, housing and credit markets resulted in a world in which investors must adjust their assumptions in order to succeed. ... Continue reading this article…

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ING Direct Drops Savings Interest Rate to 1.5% but Bonuses Still Available

by Luke Landes

Even though ING Direct has lowered the interest rate offered on the Orange Savings Account, one of the most popular online savings accounts. The bank is still offering $25 bonuses to new customers who open this savings account or the high-yield paperless checking account with an initial deposit of $250 or more. In addition, when ... Continue reading this article…

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How to Qualify for Vanguard Admiral Shares

by Luke Landes

Note: Vanguard has recently changed the qualification requirements for Admiral shares. Most index funds now require only a $10,000 balance while most managed funds require only $50,000. Both required minimums are down from $100,000 previously. Whether right or wrong, having more money opens more doors and opportunities. Just look at the way casino hotels operate. ... Continue reading this article…

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Am I Required to Report All Income to the IRS?

by Luke Landes

In general, if you have to ask whether you need to report certain income to the IRS, the most likely answer is, “Yes.” Here are some examples, courtesy of MSN Money. Q. I hosted a party to sell products to my friends (and use my social circle for multilevel marketing from some corporation), and the ... Continue reading this article…

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Chatted With Ramit from I Will Teach You to Be Rich

by Luke Landes

Last night, Ramit Sethi from I Will Teach You to Be Rich got together over Skype to chat about money. We spent about 90 minutes answering the questions provided by Consumerism Commentary readers last week. Ramit came up with this idea to coincide with the release of his new book, aptly named, I Will Teach ... Continue reading this article…

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8 (or More) Ways to Benefit From the ARRA

by Smithee

Our financial crisis is being combated on many sides, with a seemingly endless series of opportunities for people facing serious hardships. I thought it would be helpful to summarize all the options created as a result of the American Recovery and Reinvestment Act of 2009 and give you just the facts that you need in ... Continue reading this article…

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Three of the Largest Closed Hedge Funds are “Madoff Feeder Funds”

by Luke Landes

Last year, hundreds of hedge funds, special mutual funds generally open to wealthy investors which specialize in alternative investments like derivatives, shut down due to the economic crisis. Three of the ten largest hedge funds to close were funds that invested exclusively or almost exclusively in Bernard Madoff’s Ponzi scheme, leaving investors with nothing. While ... Continue reading this article…

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