May 19, 2012

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Seven Options for Your Tax Refund

Smart Money outlines six ways to spend your tax refund. All are good options indeed.

1. Create a Cash Cushion. With unemployment at a 25-year high you need at least a six to nine month emergency fund to cover living expenses until landing a new job.

2. Pay Off Debt. With credit cards charging 18-30% interest this is the best return on your investment. Just don’t charge more.

3. Fund Your Retirement. Hopefully you’re employed and contributing the maximum to your 401K at work. With any excess, fund a Roth or traditional IRA. You can borrow for almost anything in life, however NO one will loan you money to retire.

4. Save for College. If your children are still young, investing in a 529 plan can earn returns large enough to keep up with rising college costs. Consider more conservative options like FDIC insured CD’s if your kids are within a few years of attending college and will need the money sooner.

5. Invest In Yourself. Competition is stiff. Whether you are unemployed or worried about being the next to lose your job, now is the time to freshen your resume, sharpen your interviewing skills and take an extra course or two to give yourself that extra edge. Perhaps invest in a career coach to help.

6. Splurge a Little. This is usually the first place people want to spend their tax refund. The other options might pay better dividends, but if you’ve covered your emergency fund and paid down your debt, a little splurge might be in order. Retails sales are excellent now and bargain-basement travel deals abound.

However, if you’re really serious about conquering your debt and using your money wisely, why would you give anyone, much less the federal government, an interest-free loan every year?

The average tax refund so far this year is $2,740 according to the latest IRS statistics. If you are getting a refund change your W-4 today. Keep more of your own money every month. And if you really want to loan Uncle Sam some of your money, buy I BONDS instead. The bonds, which pay a combined fix rate and an inflation rate, are paying 5.64% until the end of April. The two combined rates adjust every six months, but who thinks inflation is going down? Go to www.savingsbonds.gov to see if they are right for you.

Filed Under: Debt Management, Taxes

Finding Ways To Keep Money In Your Pocket

According to The New York Times, a subset of Americans—the seriously frugal—are enjoying the current recession because it validates their beliefs and lifestyle choices.

The paper profiles a real estate investor in Cincinnati who borrows movies from the library instead of renting them, and grows her own fruits and vegetables, and avoids the cash advance. Another person profiled by the Times canceled the family’s subscription to Netflix, his premium cable package and a wine club membership.

Here’s the important news in all this:

Americans’ spending is down and their personal savings are up — sharply. The savings rate in the United States, which had fallen steadily since the early 1980s, dropped to less than 1 percent in August of 2008. It has since spiked to 5 percent.

“It’s huge,” said Martha Olney, an economics professor at the University of California, Berkeley, who specializes in the Great Depression, consumerism and indebtedness. The rapid reversal is even more remarkable, she said, because in recessions consumers usually save less money. Not this time. “It implies a re-emergence of thrift as a value,” she said.

The Times notes that there are dozens of Web sites and blogs devoted to celebrating conspicuous cutting, like Dollar Stretcher (www.stretcher.com), All Things Frugal (allthingsfrugal.com), Frugal Mom (www.frugalmom.net), and on and on. Yes, it’s a topic for our time. No doubt about that.

Filed Under: Frugality, Savings

Do More To Make More

Boosting revenue is one of the key ways to conquer your debt. This is true for individuals and also for businesses, small and large.

Today I attended a cooking class at one of my favorite restaurants. The experience was productive on several levels. The chef taught us to make four great dishes and served them to us for lunch as well. But the real lesson here is what this chef did to hone his strategies to both survive the current downturn and prosper after the recovery.

Rather than develop a lower cost menu, cut advertising, reduce staff or shorten hours, the chef did the opposite. By relying on his ingenuity and investing more of his own time, he tapped a new revenue stream from his existing customer base.

For two hours each week the chef conducts cooking classes for about 25 participants. He simply moves the tables around the perimeter of his small storefront restaurant and sets himself up in the center to demonstrate his selections for the day. While he cooks and answers questions, his staff prepare the same items in the kitchen and at the end of the demonstration they serve a beautifully presented plate for each participant to enjoy. Yummy? Yes! Smart? Very!

At $45 per person, the extra $1000 a week adds nicely to the restaurant’s bottom line with very little expense other than the food and a few extra hours for the kitchen staff. For any small business, an extra $1000 a week dropping to the bottom line can make a significant difference.

Plus, nearly every participant comes back with family and friends when they are going out to dinner. Given that the restaurant industry nationwide is down 5-12% in sales, with small independents suffering the most, this restaurant’s success is inspiring.

What are you doing at home to boost revenue? Or at work? It takes creativity, skill and timet to innovate and build new revenue streams. But it’s well worth the effort.

Filed Under: Boost Revenue

I.O.U. in the U.S.A.

I.O.U.S.A. is a documentary film about our national debt. The film’s web site is kindly offering up a condensed 30-minute version of the film for free (see below).

I.O.U.S.A. uses candid interviews, archival footage, and economic data to tell the story of America’s mounting debts. Interview subjects include noted investor Warren Buffett, former Federal Reserve Chairmen Alan Greenspan and Paul Volcker, former U.S. Treasury Secretaries Paul O’Neill and Robert Rubin and many others.

The conclusion of the film offers suggestions for how best to recreate a fiscally sound nation for future generations.

Filed Under: General

How To Be Much Much Cheaper

Many people fighting to be debt free focus on getting more for less. But there’s another side of the story, and Jeff Yeager is the man telling it to America.

Visit msnbc.com for Breaking News, World News, and News about the Economy

Yeager, who is the author of the insanely popular blog Wise Bread and the new book, The Ultimate Cheapskate’s Road Map to True Riches believes happiness comes not from getting good deals, but from having less in the first place.

Fresh off his appearance on the NBC Today Show, Yeager hit the road on the Tour de Cheapskate. Traveling by bicycle, Yeager he stayed with fellow cheapskates along the way and donating his expense savings to local libraries. That’s putting your money where your book and blog is.

So, what do you think? Are you ready to Yeager Up and ditch your cell phone (among other things) to reduce expenses? It’s a common sense idea, although radical for our time. Personally, I wouldn’t miss the phone much, but the camera and hand held computing device would be a deprivation of sorts.

Filed Under: Frugality

A Music Store Where The Songs Are Free

Music fans—like everyone else—are feeling the pinch. But thanks to page after page of free MP3s from Amazon.com, it’s easy to stay current with new releases without paying a single cent to Steve Jobs, or anyone else for that matter.

free_amazon

There are currently 744 free tracks on Amazon. That’s hours and hours of free listening care of the Seattle online retailer. And the songs are not from obscure artists far down the long tail. Take a quick glance at Amazon’s free MP3 pages and you’ll find new music from Neko Case, Iron & Wine, Great Lake Swimmers, Fleet Foxes, Bob Mould, Beirut, Michael Franti and many others.

Filed Under: Free, Frugality, Saving for College Tagged With:

Twitter Your Way To Sizable Savings

CheapTweet and CouponTweet are mentioned in a SmartMoney article on companies utilizing social media to offer price incentives to customers–a very prudent use of the platform, in my opinion.

cheaptweet_logo

The article also points to Twitter accounts from the following sites:

  • Coupons.com
  • DealNews.com
  • FatWallet.com
  • TechBargains.com

Larry Chiagouris, a marketing professor at Pace University in New York City, says “It doesn’t pay for consumers to go out of their way and sign up just to look for coupons.” But if you’re already on these sites and don’t mind a few extra notifications, it can’t hurt to connect with companies you already do business with. After all, you might just find an extra discount on a purchase you would have made anyway.

I beg to differ with the good professor. Signing up for Twitter, Facebook and all the rest is free, so it’s well worth the price of admission to find the things you need to help you save money. I might add that there are also many frugal-minded people wandering through these networked communities, so the opportunity to connect with people facing the same challenges that you are is large.

To begin, you might search Twitter for “frugal” to find people to follow.

Filed Under: Coupons

April is Financial Literacy Month – Read Up!

Money Management International has created a step-by-step plan to help improve your financial life. It is a simple, well-done, 30-day plan complete with expert advice, tips, worksheets, and even budget webinars to help you achieve your goals. It covers the gamut from setting goals, to paying off debt to building your emergency fund.

Here is step 22, showing us once again that small changes can help big time.

Identify ways to reduce spending

To create a balanced budget or increase savings, most people will have to find a way to earn more or spend less. If the idea of spending less sounds challenging, try starting small.

It’s important to understand that every purchase we make—excluding such absolute necessities as food, rent, and gas for the car—is a choice. The America Saves coalition offers the following examples of how making some small changes can save you an impressive $150 per month.

Tip Monthly Saving
Save $.50 in loose change $18
Cut soda consumption by one liter a week $6
Bring lunch to work $60
Send one free eCard per month instead of buying a card $4
Buy generic grocery store brands $10
Use fewer phone features $10
Eliminate premium cable channels $20
Borrow, rather than buy, one book per month $15
Hand wash, rather than dry clean, one shirt per month $15
Comparison shop for gas (saving an estimated $.25/gallon) $4
Total Savings $150

That’s an extra $1800 in your pocket every year!

Click here to make the commitment to spend a little time each day this month improving your financial future. Remember, no one plans to fail, they simply fail to plan.

Filed Under: Debt Management, Financial Planning, Frugality

Invest Like A Second Grader

Allan Roth shatters the myth that investing is too complicated for ordinary people in his new book How a Second Grader Beats Wall Street. His common sense, easy to understand guide can save you money on your investment costs and maybe your investments.

Some quotes from the book:

“Design a portfolio composed of a few basic building blocks than can be ‘tweaked’ to fit your personal needs.”

“Reengineer your portfolio to stop needlessly paying taxes.”

“A simpler approach to today’s market can put you on the path to financial independence.”

“Morningstar’s ability to turn large amounts of data into simple, understandable information helps investors make better decisions.”

“Cut through the baloney that Wall Street wants us to believe and return to basic simplicity.”

“It is what we learn after second grade that turns out to be so destructive.”

“Kevin’s magic portfolio: Vanguard Total Stock Market Index Fund; Vanguard Total International Stock Index Fund; Vanguard Total Bond Market Index Fund.”

“By ‘Wall Street,’ I mean everybody who’s after your money, not just the large brokerage houses.”

“Our emotions consistently steer us toward the path that leads only to giving away our hard-earned nest egg.”

“I’m a strong believer in the KISS principle (keep it simple, stupid).”

“There are two types of investors when it comes to predicting next year’s stock market: 1) Those who don’t know. 2) Those who don’t know they don’t know.”

“Over a 20-year period, the stock market has always bested inflation.”

Filed Under: Financial Planning

It Pays To Shop In The Money Aisle

MoneyAisle.com is a new online service that allows small and medium size banks to compete for your business though internet auctions.

money_aisle

You enter the type of savings product you want and watch the auction unfold in real time as banks compete for your money. In about a minute you’ll have the best possible rate and can open an account online or by phone directly with the winning bank. You can even access the advanced features to ladder CDs for one of the safest ways to invest your hard earned dollars. The service is free and every participating bank is FDIC insured up to $250,000 per account.

MoneyAisle makes it easy too.

PICK YOUR PRODUCT

Select your financial product (CD or High-Yield Savings), the amount of money you wish to invest and, if you’re investing in a CD, the maturity duration.

BANKS BID LIVE

Within seconds, MoneyAisle generates a live auction among the participating banks for your business.

MoneyAisle captures the highest rate offered by these banks and then repeats the process to see if any other participating banks will beat it. Each auction round pushes the rate higher.

This process is repeated as many times as necessary until one bank is left. If two or more banks tie for the winning bid, MoneyAisle will break the tie on a random basis. The winning bank’s rate is the highest rate offered during your auction. The entire live process typically takes only a couple of minutes.

You watch the auction live and see the number of rounds, the number of bids and the increasingly higher rate appear in real-time.

GET A GREAT RATE

You get the highest rate available at the moment you apply for your CD or High-Yield Savings account.

If you are satisfied with the rate and wish to complete the transaction, provide your contact information and accept the rate.

Once you’ve entered your contact information, a representative from the winning bank will contact you about opening your CD or High-Yield Savings account.

WORKS FOR ME!
I just scored 2.87% on a one year CD! Sure beats my local BofA branch. When every dollar counts, this site sure helps find the winners.

Filed Under: General
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