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Michael Pruser

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%.

 

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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.

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credit-karma-tax-softwareThe 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 my summer job) and Turbo Tax was of great help.  Living in Florida, I (luckily) didn’t have to worry about state filing costs… the entire experience of entering two W-2s and getting a refund took all of 10 minutes.  It was exactly as advertised, and I was 100% satisfied.

Before I knew it, however, my tax situation became more and more complicated.  I started my own business, began saving a small amount for retirement, got married, had children, bought a house, started a second business … the basic version of Turbo Tax wasn’t cutting it.  Upgraded versions started costing serious money (upwards of $100). Plus, even more money to file my state taxes, now that I live in Connecticut instead of Florida.  It has actually become better for me to have a CPA handle my taxes each year, rather than worry about screwing it up myself while still paying $150 via Turbo Tax or H&R Block.

Well, in a new and very surprising move — at least to this financial blogger– Credit Karma now offers FREE tax software for almost every American taxpayer.  And when I say FREE, I mean it costs absolutely nothing to file both your Federal and State tax returns. No matter your individual (very important) tax situation, there’s no charge when you open an account, no charge when you file, and no charge whether you’re reporting $45,000,000 or $45,000.  (**If you own a small business that files S corp, C corp, partnership, or multi-member LLC paperwork, I’m afraid you’re out of luck this year for filing your business taxes. Credit Karma cannot yet file your return — but this won’t be the case forever, says their CEO.)

Some important points to make before talking about how Credit Karma can provide such a service:

  • The software is not yet live but will be in January — you can even “get in line” now to gain access. You will absolutely be able to file your 2016 taxes next year.
  • You must have a CreditKarma.com account (it’s free) in order to utilize their tax filing platform.
  • Your 2016 Federal and State tax returns are due no later than April 18, 2017.
  • You can print and mail your return after completing it using Credit Karma, if you so desire.  You don’t have to e-file if you don’t want to.
  • Filing your return can only be done by logging into their platform; the software cannot be downloaded.

credit-karma-tax-software-image

When Did Credit Karma Become a Tax Software Company?

Earlier this year, Credit Karma purchased a North Carolina based tax preparation company named AFJC Corporation.  AFJC Corporation is a provider of online tax preparation, filing solutions, and related services for individuals, certified tax preparers, and financial institutions.  As a result of this purchase, Credit Karma is opening a new office in Charlotte, NC, entirely focused on their tax prep services.

Before this purchase, Credit Karma was known for being able to provide you with a free credit score, without even requiring a credit card.  Before them, the deal with other credit score providers was that for the first X number of days, you could see your score without charge. After that, though, your free trial period would end and you’d have to pay a monthly service.

Related: How to Get Your Credit Report for Free

Credit Karma didn’t like that system, which all of the other companies were using. They took the idea a step further and decided to make the whole damn thing free.  And as you can see from their new tax platform, it’s kind of their thing to take an existing pay-for service and make it 100% free.

How Can Credit Karma Make Tax Filing Free of Charge?

Credit Karma is likely spending millions of dollars on their new office, millions of dollars to develop the software to be able to provide 100M tax returns, millions of dollars in advertising (I just saw a TV commercial for their new software), and millions of dollars to staff it all, so that if problems arise, they have plenty of support available.  And, of course, they don’t plan to take in a single penny of revenue from tax filers.

What now? How does Credit Karma plan to make money?  Well, every piece of information you provide them when filing your taxes is going to be used to offer you services in those industries.  For example:

  • When you enter your home mortgage interest, you’ll get an email about suitable refinance options. (If you sign up for any of them, Credit Karma gets a commission.)
  • When you enter your business expense report, and show a lot of travel, you’ll get an email about potential travel reward credit cards .(If you are approved for any of them, Credit Karma gets a commission.)
  • When you enter your self employment health care costs, you’ll get an email about other medical insurance providers that might save you money. (If you apply for any of them, Credit Karma gets a commission.)

You get the idea.  Of course, this is something they’ve already been doing when you get your free credit score through CreditKarma.com. Here, though, they’ll be able to do it on a much grander scale, getting (what should be) 100% accurate information about the consumer and pinpointing offers that might suit their needs.  A lot of up front costs now and, if all goes according to plan, a lot of revenue later.

What Happens to Turbo Tax, H&R Block, TaxACT, my CPA…?

If Credit Karma is successful in offering 100% free-of-charge tax returns for tens of millions of Americans, then it’s a grim picture for the names above (and many others not mentioned).  Platforms like Turbo Tax and H&R Block make their revenues from the costs they charge to file taxes, even if some of their services are free.  Seeing as the news is pretty fresh, I would imagine many other companies are getting ready to cut prices drastically in order to keep business for 2017 and beyond.

What if Credit Karma is not successful in this venture and the revenues cannot sustain the business? Then, you’ll likely see an emboldened group of tax prep providers, strengthening their core products and platforms.

As tax season approaches, I plan to update this article with fresh screenshots and information on the Credit Karma tax prep platform. For right now, they offer no other information than to wait.  So, I wait. But be sure to check back in the coming weeks to learn more, as the Credit Karma Tax unveiling gets underway.

Oh, and don’t worry, H&R Block. My parents will still spend $300 to sit down with you for 4 hours, filing their single W-2 with no investment income. (It’s amazing I turned out so well, really.)

 

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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 not.

It’s All Part of the Plan

Just a few weeks ago, the Organization of the Petroleum Exporting Countries (OPEC) — and even some countries who are not members of OPEC —  was able to create an agreement that reaches far beyond what many economists thought they could accomplish.  The goal? To reduce the supply of oil around the globe by at least 1.2 million barrels a day. Assuming the demand for oil remains unchanged (at least initially), the reduced supply will create a rise in price. This will, in turn, jump-start the oil industry.

As the price of oil continues to rise, it’s suspected that some of the countries involved will jump ship on the agreement. They may see the profits in front of them and begin pumping out more barrels than initially agree. So far, though, everyone is sticking to the arrangement and the price of oil has consistently risen since the start of the month.

No commodity is more discussed in the world of finance than oil. No commodity has more of an impact on your day-to-day personal finances than oil. Turn on any market-driven television channel, and I’m willing to wager that within 10 minutes, the analyst will have brought up oil at least five times. It’s a true driving force behind the global economy, and its shift in price can have drastic changes on you and your family.

Some economists are extremely bullish on oil predictions, saying it will reach $75/barrel before the end of the year. However, even the bears don’t see oil going anywhere but up (albeit slowly) for the next few months.

Now that the price of oil has stabilized and is steadily rising, is this good for your wallet?  Your future?

The Bad News

When the price of oil goes up, it affects the American buying consumer primarily in three negative ways:

The Price of Gasoline Rises – According to AAA, this week’s average price of unleaded regular gas is $2.21 per gallon.  This time last year, that price was $2.02. At its lowest point this year, the price was $1.62.  If you’re someone who takes an hour round-trip commute to work or drives the kids to football practice in the minivan, you will notice more money coming out of your wallet when you fill the tank.

Average Americans fill up w/ roughly 700 gallons of gas per vehicle, per year. Because of this, even a small increase of 25 cents per gallon will put you out an extra $200 or so per vehicle. You can mitigate this loss by owning a cashback credit card (some of which offer up to 5% rewards on gas purchases). Even after saving a little bit more there, though, rising gas prices are an inevitability of higher oil prices.

Price of Travel and Other Goods Rises – When the cost of gasoline goes up, the cost of goods also goes up. This is to coincide with businesses having to pay more money to get their goods to them.  And of course, that cost is passed on to you, the American consumer.

For example, a round-trip flight from LA to Chicago may be $110 today, but closer to $120 in two months when oil goes up another $5.  Truckers moving products across the country, grocery stores taking in daily shipments of produce… there is no shortage of consumer goods affected by a higher cost for oil.

Price of Heating Oil Rises – This is the one that impacts me the most, but overall impacts the fewest number of consumers.  I live in central Connecticut and every year, I buy between 700 and 800 gallons of oil to heat my home through the winter. My parents, who own a much older (and slightly smaller) home, purchase over 1,300 gallons of oil per winter. When oil prices go up, the price per gallon of heating oil also goes up.  The cost of oil is very similar to the cost of gasoline per gallon.

To combat these prices, I locked in a rate of $1.89 per gallon in July and prepaid for the winter. This should help me avoid having to pay inflated costs when the cold weather hits. However, I also lose the ability to pay lower costs should the price of oil go down.

The Good News

It’s not all bad, though, I promise.  When the price of oil goes up, there is a lot of good that comes from it, too.

Retirement Savings Accounts Increase – Because oil is a heavily traded commodity, it’s likely included in any retirement portfolio you own.  Whether it’s in a commodity mutual fund, or a direct stock ownership of Exxon Mobile, Chesapeake Oil, etc., higher prices in oil mean higher value in your portfolio.  As rising oil prices generally (and I say that loosely) means a stronger economy, it would also likely have an impact on the other investments you’ve made. So if the world is paying more for oil, and the demand for oil remains high, most investments are happy.

The Economy Grows – The oil industry is one of the largest in the world, and higher prices mean higher profits for oil companies.  These profits lead to the hiring of more employees to produce more oil (or expand the business in other ways, still hiring more employees). This means more jobs for not only American citizens but also abroad.

With more people employed, more money is spent inside the US economy. Goods that would not normally be purchased are now starting to move off the shelves.  My example is the most basic way in which the economy will see a positive effect of higher oil prices. However, there are countless other ways to quantify it as well. (For an added example of global wealth, Goldman Sachs provides perspective.)

The Government Doesn’t Get the Extra Revenue – When you see the price of $2.25 for a gallon of gas, you might assume that the money you pay the gas station stays with the gas station.  However, inside of that gallon is heavy taxes collected by both the US government and the state government.  Below is a map that shows just how much money you pay in “tax” when you buy a gallon of gasoline (as of January 2016).  The good news here is that these taxes are not based on a percentage of the gallon, but a flat amount. For example, the US government gets a flat 18.40 cents per gallon, no matter the cost of a barrel.  So, the added revenues earned by the gas station are revenues passed economically, without additional government taxes.

gas-tax-map

You’ll notice that the good news is very macro-themed while the bad news is very micro-themed.  When the cost of goods goes up, there’s just no way around having it immediately and negatively impact the day-to-day spending of the consumer.  So, whether or not the price of oil going up is good or bad for you likely depends on your current financial situation.

If you’re well-to-do with money in the bank, savings for retirement, and are secure in your employment (or your employment is oil pump-related), oil prices going up is a good thing.  It goes a long way to secure a stronger economy in the long-run and boost retirement savings.  However, if you’re currently struggling to make ends meet, and things like retirement seem like a dream versus a real goal, then higher oil only means less spending money in the near future. Either way, the rise in oil prices is likely to garner mixed emotions nationwide.

 

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