Last Minute Tax Moves for 2007/Retirement Resolutions

The year in nearly done but it isn’t too late to make several moves that can give you relief on your 2007 taxes. Leonard Wiener writes in U.S. News and World Report 6 Last-Minute Tax Moves for 2007. Most of them are doable regardless of what income bracket you fall under and all of them should at least be considered.

More New Year Resolutions

As if we didn’t have enough suggestions for New Year’s Resolutions Emily Brandon comes along with 10 Retirement Resolutions for 2008. I don’t really want to start thinking about retirement but I know that I need to plan for it. That’s why I’m so determined to have all of my debt paid off in the near future.

Make 08 Financially Great!

I came across this tidbit written by Chuck Jaffe about getting ahead financially in 2008. In it he suggests that we should set goals instead of resolutions for the New Year when it comes to managing our money. He then gives nine financial goals to aim for in 08.

Here’s why this is a great idea, because we are lazy when it comes to money. I don’t know about you but if I have cash in my pocket then it is going to be spent and not saved. If I don’t pay my bills first then I’ll spend on things that most definitely aren’t priorities. I’ve said over and over again on this site that discipline in the key requirement for being debt free and building wealth. Setting attainable goals and then making a concentrated effort to reach them is a huge step in the right direction.

Good luck in 08!

Dos and Don’ts for Budgeting

I’ve mentioned the value of budgeting a few times here in this site and I can personally testify that living on a budget has allowed me to pay off thousands of dollars in debt. People often get frustrated with their budgets just because they don’t fully understand them and the discipline it takes to live on one. Here are a few dos and don’ts of finding your financial freedom by living on a budget.

Plan your budget together – Many marriages end over financial disagreements. Budgets require discipline and planning. If you fail to work as a team, with your spouse, then it literally could turn into a nightmare.

Define your financial goals – Are you looking to get out of debt or build wealth? Being debt free is the key to being wealthy so if you have any debt budget to take care of it first. Should you already be debt free, know that I’m jealous, plan to build up your wealth. If your goals aren’t clearly defined you’ll never reach them.

Don’t rush into a budget before you know how much you now spend for what – Know your spending patterns and habits are before you start allocating money for specific budget line items. For budgets to be successful they have to be carefully planned.

Do not think up countless budget headings – Budget for entertainment but don’t put subcategories with it. When planning out your budget don’t think of all the things that you could spend money on and focus on the things you need to spend money on.

Divvy up your dollars according to your family’s needs and wants – It should go without saying that needs come before wants. Take care of financially securing your needs first before budgeting for your wants.

Think first! When allocating, trimming, or adjusting budget amounts, do not jump to conclusions – Only make informed decisions when making adjustments to your budget. Guessing will only throw you off of your budget and put you behind.

Take all credit cards – except one for emergencies – out of your wallet – Credit cards will lead you further into debt! Keep only one and use it only if there is an emergency. If you have multiple credit card balances then budget to pay off the lowest one and then work your way up from there.

Plan for big expenses – You have to understand that financing expensive purchases adds to your debt and must be absorbed into your budget. Set financial goals and reach them before taking on any new debt and save up to make a sizeable down payment.

Do not cheat your budget – If you do it once it will become easier to do it again and again. Remember budgeting requires discipline but the payoff of financial freedom is worth it.

Don’t carry around too much cash because you will tend to spend it – You can’t save or allocate your money if you are carrying it in your pockets.

PayPal’s Money Market Account

I have some business transactions that are done through PayPal and most bloggers do as well. Until recently I have withdrawn my money on a monthly basis to put it my bank’s savings account. That is until I enrolled in PayPal’s money market account! The last two months PayPal has more than doubled the interest that I am getting from my bank’s savings account and my PayPal account had less money in it.

I deposit a little money from each of my paychecks into my savings account to go towards my debt retirement and had been trying to use the money in my PayPal account to establish a savings account for emergencies, vacation or to buy something for the family later on down the road. The problem had been that when that money hit my savings account it became immediately accessible for whatever I wanted. This isn’t the case with PayPal. A withdrawal takes 3-4 days so I can’t immediately spend the PayPal money.

Currently the PayPal money market account has a 4.70% yield. My goal now is to keep that account growing by not withdrawing unless absolutely necessary. I usually have between $50 and $200 a month deposited into my PayPal account so my goal is simply to see how much money I can build up in the next sixth months. I’ll decide what to do with it over the summer.

Break the Pay Check to Paycheck Slump

Holy cow! Where does the time go? I mentioned in my last post that I had been busy but I hadn’t realized that almost two full months had gone by since I posted. I’ve been working on a house that I purchased for resale and we’ve just about got it done. I’ll be posting more about it later but I thought would at least try and explain my absence.

Let’s get back to the task at hand. I read this article on the difficulty of living from paycheck to paycheck in today’s society and made me realize, even more, the importance of getting out of the paycheck to paycheck cycle.

With the rising cost of fuel leading to $80.00 tanks of gas and enormous heating bills to come this winter building a little cushion in the checkbook becomes even more crucial as we head into 2008.

While I still maintain that the key to extra cash flow is eliminating debt there are still many other things a person can do each month to reduce spending. While many of them have been discussed already on this site here are few ways you give your pocketbook some relief at the grocery store.

I’ve said it before on this site and its worth saying again. Buy your groceries for the month and not just for a week or two. Every time you go to the grocery store you are tempted to buy some things we don’t need. The fewer trips we make per month the less we spend on things that aren’t a necessity.

Make a grocery list. Go to the grocery store with a plan and stick to it! Having a list helps keep you focused and away from the impulse stuff. Also if you’ll sacrifice things like soda drinks for Kool Aid and cut back on junk food for two or three months you’ll be shocked to see the savings it brings you.

Compare and use coupons. Buying your groceries at the convenience store/gas station is a bad idea. While the local 7-11 may be “convenient” you are going to pay more for just about every food and beverage item then you would at the local supermarket.

Do your homework, find out where the deals are and shop there. Every city in America has the mega supermarket with the mega savings that pride themselves in putting the smaller stores out of business. Shop there! Take advantage of their “Rock Bottom Prices.” Sure, they’re going to put Ted’s Corner Mart out of business but Ted isn’t feeding your family and paying your bills. Always, always, always take advantage of savings.

Speaking of savings, why do so many people throw away coupons? If I walked up to you on the street and gave you a quarter or a dollar or anywhere in between you wouldn’t just throw it away would you? Clipping coupons from the newspaper or the mail leads to dollars upon dollars of savings.

Like so many other financial areas of life you can build a plan for your grocery needs that works for you and saves you money. It only requires some thought and discipline and the result will lead to extra cash left over at the end of the month.

Almost There!

Things have been so busy lately that I had actually forgotten about this little blog project. I actually am so close to being debt free that I can taste it! I even beginning to think of names to rename this blog (should I decide to do so) once I am done with debt.

Here’s where I stand. My inheritance money from my grandma came in and it was enough for me to make a down payment on a new house, payoff the loan to my 403(b) account and then payoff an 8,461.29 credit card debt.

Here’s the rest of the news and the final part of my plan. To make sure all the taxes were covered one third of my inheritance was held back and will be released to me in April of 2008. I only have one more credit card balance to payoff and will once again borrow from myself using my 403(b) retirement to pay off that balance. Once the last portion of my inheritance comes in I will then pay back the 403(b) and be debt free!

Well, ok I’ll still have a mortgage and a car payment to deal with but that is smooth sailing compared to where I’ve been. My target goal to be totally free from bad spending debt is June 2, 2008. My 34th birthday.

Thanks Grandma!

My grandmother was one of the most influential people in my life. She had strong moral convictions and guided me through several stages of life from childhood to adolescence to adulthood. In fact, the first person I was ever in debt to was my grandmother. She loaned me $500 to buy my first car, a 1981 Chevy Chevette.

In 2001 my grandma was diagnosed with Alzheimer’s and she succumbed to the disease last month at the age of 83. While saddened by her loss the fact that she had a disease that robbed her of her dignity, intelligence, and the knowledge of the great family that surrounded and loved her made her passing a little more acceptable but not necessarily easier.

Then I found out last week that I am getting a percentage of the inheritance she left behind. This totally blew my mind because I fully expected it all to go to my dad but it turns out that the small percentage that I am going to receive will be more than enough to pay off my debt.

Suddenly I find my quest to become debt free coming to an abrupt halt and my grandmother still watching out for me even in her passing.

My grandparents had a farm so while growing up I certainly learned first hand not to count my chickens before they hatch. So, I’ll continue moving on with my own personal debt reduction plan until the money arrives and then we’ll see what happens from there.

Gas Saving Myths

I gassed up my truck today at $3.28 per gallon and I really think I was fuming more that the fuel that I was pumping into my truck. My debt retirement plan is taking a serious hit because of the price gouging of the oil companies!

When I got home I decided to do an internet search on some gas saving tips and I actually came across these myths. I can remember being told some of these as a teenager by my parents.

There have been additives, special magnets and even a pill that has promised to improve a car's fuel efficiency by as much as 30 percent in some cases.

"With all the pressure car companies are under, if one of these inexpensive devices dramatically did improve fuel economy, they (automakers) would be all over it," said Rik Paul, automotive editor for Consumer Reports.

Windows, air conditioning - who cares?

In two separate studies conducted in 2005, the automotive Web site Edmunds.com and Consumer Reports compared the fuel economy of both a sedan and an SUV at highway speeds with and without air conditioning and how open windows affected gas usage.

What they found was no significant difference in fuel economy in either sedan or SUV under either condition.

Some drivers insist the best time to buy gasoline is on a Wednesday, when pump prices have cooled from the weekend run-up when oil companies typically raise prices.

That's true to a point, says Tom Kloza, chief oil analyst at the Oil Price Information Service. Gas prices tend to be higher on the weekend, but there's no ideal day of the week to purchase your gas.

It's probably a myth that goes back to the days when cars were equipped with carburetors, but many drivers believe that starting up and turning off your car repeatedly is a fast way to drain your gas tank.

Because of modern fuel-injection technology, drivers actually save gas by turning off their engine than letting their car needlessly idle, says Consumer Reports' Paul.

There are also some real and practical gas saving tips out there like making sure your tires are properly inflated, removing excess weight, using cruise control and actually driving the speed limit.

Internet Nazis – No Links for You!

I’m more into telling my story than I am into trying to make money from blogging (Not that I wouldn’t be interested if the opportunity presented itself) but I have met several people who earn a little extra scratch through their blogs. Several of us have heard the horror stories from other bloggers who have agreed to use Google Adsense only to be dropped when it was time to receive payment.

The fact that people are looking elsewhere to make money with their blogs seems to be a bit puzzling to the Evil Empire of the internet, so much so that they are now devising a way to punish bloggers and advertisers who sell and buy links.

Google Exec. Matt Cutts explains clearly on his blog that they do not want advertisers buying text links on blogs nor do they want bloggers selling the space. They’ve even gone so far as to set up a system to report when you see paid links.

It all seems hypocritical to me seeing as how Google makes a ton of money from their Adsense and Adwords programs. Both are geared towards getting your readers to click on a link. Here’s how it works. An advertiser pays Google money to place the links on your blogs and you in turn get paid, very minimally I might add, every time a person clicks on the link.

Ummm… isn’t that the very thing that the people at Google are “trying to prevent”? It seems to me that what they are really saying is that you either sell text links through them or you don’t sell them at all. Kinda like the marketing bullies of the internet.

Way to go Google! You just seem to always do your very best to make friends in the bloggiging community. The problem is that no one likes to be forced into a friendship.

Another One Bites the Dust

The loan came through from my 403(b) account and I’m proud to say that I have paid off another credit card. My remaining balance on the credit card was $1,839.70 at 28.24% interest. Paying the minimum payment due ($91.00) would have ultimately taken six years and eleven months to pay off and would have cost me an additional $1318.00 in interest according to the debt reduction calculator.

Instead I took a $1,900.00 loan from my annuity at 5% interest and if I only make the $95.00 minimum payment each month it will take me four and a half years to pay back with only an additional $145.00 in interest. Doing the quick math I just saved myself $1,173.00 in interest.

Now the great thing on top of all this is that with the 403(b) loan all the interest goes back into my account.

Pros and Cons of Investing in a CD

I’m looking at possibly saving up some money to invest into a CD so I thought I would look up a few pros and cons of the investment.

Here are the pros of investing in a CD rather than other investments.

Your money is in a safe place with higher interest than it would get in a savings account. While there isn’t much of a chance of making big money, it is a safe investment.

The FDIC (Federal Insurance Deposit Corporation) insures CDs up to $100,000 so you can be assured that you will get the money back when the CD matures.

You can take a loan out with a lower interest rate than the normal bank interest rate.

The cons of investing in a CD would be:

There is a lower risk, so therefore lower yield. While you can be assured that your initial investment is safe, you don’t have the possibility of earning greater amounts of money that you may earn with higher risk investments.

The CD is susceptible to market fluctuations. While the economy is doing well, interest rates will be higher. There isn’t a need for the government to encourage people to borrow. If the economy isn’t doing as well, interest rates will decrease, allowing people to borrow money less expensively and put that money back into the economy by shopping, adding an addition to their homes, etc.

There is a penalty charged (unless you have a brokered CD) if removing the money earlier than the term of the CD.

The jury is still out on my decision but at least all the facts are on the table.

Empty!

I came to the realization this weekend that my banking accounts are empty. It’s not totally a bad thing because the reason that they are empty is I paid off a ton of debt last month. None the less its still a scary thought that my savings is gone and I am back to square one (the same position I was in when I started this blog) but the difference this time is that I have learned that through discipline and some common sense I can build my savings back up again just in time to make another lump payment towards my debt. So goes the cycle.

Wheels in Motion

On the heels of paying off a $1,700.00 debt a few weeks ago I applied today to take out a loan from my 403(b) account to pay off yet another $1,700.00 credit card debt. I’ll be paying myself back at 9.5% interest but it sure beats the 20% I’m paying to the credit card. Plus the interest goes back to me and I should be able to pay it off pretty quickly.

The application will go out tomorrow and I should have the money in my account within 10 business days after that. This will result in me paying off over $3,400.00 in credit card debt in about a month.

I’m still a ways off but I can almost smell freedom!

I Did It!

After a few months of saving today I was able to pay off a $1,760.00 debt. I have to admit that it was hard to part with that much cash after working to hard to save it but it also feels great to have the first phase of my plan to get debt free accomplished.

Next up is a credit card that has about the same balance on it ($1,700.00). I’m working from my smallest debts up to my largest. My goal is to have this next one paid off by the end of the summer.

Back From Nowhere!

I had to take a break from blogging because things were really getting bogged down for me. I do have some exciting news to share though. This month I am going to pay off a $1,700.00 debt which will bring the amount of debt paid off since starting this blog to $2,700.00 and when you consider my normal monthly debt payments I could easily be at $3,000 in reduced debt by the end of the month.

The other thing I’ve done over my blogging break is invest in the stock market. I’ll admit that I have absolutely no clue what I’m doing yet but I’m learning. I set up an account with OptionsXpress and invested in the cheapest stock I could find (IDSM.OB).

I’m still figuring it all out so I have a very minimal investment right now. If I decide I like it and it works for me I’ll invest more and if I don’t like it or then I haven’t lost much. Right now I’m down about six cents per share.

Your Retirement Account

There are two types of retired people in the world. There are those who planned and saved and have the ability to enjoy retired life by traveling and living comfortably and then those who didn’t.

I don’t know about you but I want to be the former not the latter. So, what needs to be done to get there? You’ve seen the commercials and have heard the terms now it’s time to select your account. Like getting out of debt building a secure retirement takes vision and discipline.

Once you determine where you want to be financially and what you are willing to sacrifice to get there the next step is deciding which type account you want.

IRA - An IRA is a tax-advantaged retirement account into which an investor may contribute a portion of his/her earned income. The "I" stands for individual, which is important in that these programs are arrangements individual investors make for themselves - not through an employer- sponsored flexible spending account or a payroll-deduct retirement plan.

A Traditional IRA is available to those under age 70 ½ who have earned income. Traditional IRA earnings grow tax-deferred until withdrawal. Withdrawals are required beginning at age 70 ½ and are taxed. Contributions made to this IRA may be deductible, depending on certain factors.

A Roth IRA is a nondeductible IRA. Depending on certain income limits, taxpayers are able to save for retirement in such a way that allows the savings to grow tax- free. Taxes are paid on contributions, but qualified withdrawals are not taxed at all.

A 403(b) retirement plan, also known as a Tax-Sheltered Account (TSA), is designed exclusively for employees of non-profit institutions such as public schools, colleges, nonprofit hospitals, and other tax-exempt 501(c) organizations.

Employees make contributions into a 403b plan by making pre-tax payroll deductions. Depending on your 403b plan, you authorize pre-tax payroll deductions to be invested in a tax-sheltered annuity (TSA) contract or in a custodial account made up of mutual funds offered by your employer. Dividends and investment earnings grow tax deferred until they are withdrawn after age 59 1/2 at which time the withdrawals will be taxed as income. Withdrawals prior to age 59 1/2 usually incur an additional 10% penalty. However, most 403b plans allow investors to take out a loan.

There you have it. Don’t wait to long either before you start saving. Remember, the longer you save the more you will be able to enjoy your retirement.

Financial Resources for Small Business Owners

Owning your own business can be daunting and sometimes down right expensive. With the need for a good credit score along with the need for start up capital outside help is often required.

That’s where companies like Premier General Finance come into play. No one likes going into debt and obviously making money is the point behind starting a business but when help is needed it’s important to find someone you can trust.

Merchant advances are sometimes needed to improving your credit score could be vital to the survival of your business. If your business is suffering debt you need help. I’m not saying that Premier General Finance is your answer because you will want to shop around and find the best solution for you but it is a start.

How Long Will It Take to Retire Your Debt?

Two things I have preached over and again on this site are budgeting and patience. How long you have to budget for your debt retirement and how long you have to be patient depends on the amount of your debt.

Most people have no idea how long it will take them to wipe out their debt at their current rate and they would be shocked if they did find out. I came across an interesting tool that will allow you to not only see how long it will take you to pay off your debt at your current payments but it also tells you how much you can save in interest by increasing your payments.

Unfortunately the majority of my debt is credit card debt so this was a very interesting tool for me. Here’s a quick example of what I am talking about. I currently have a $1,944.37 balance on one of my credit cards with a minimum payment of $63.00 at 28.24% interest. By just making the minimum payment it would take me 14 years and 4 months to pay it off and I would have paid a total of $3,583.83 in interest alone.

Now, check this out. If I up it to my current payment of $100.00 per month then it would take me 2 years and 2 months to pay it off and my total interest paid is $603.12. However, if I’m able to budget an additional $50.00 a month to allow me to make a $150.00 payment I’ll be free from this card in 1 year and 4 months only paying $337.93 in interest.

Remember you have to have a plan if you are trying to get out of debt and this is the perfect tool to help you devise that plan. Start by paying off your smallest balance first and then work to the next smallest amount until you find yourself debt-free. It’s not going to happen over night which is why patience is a must. A debt-free life is out there waiting for you but you have to be disciplined enough to attain it.

The Evil of Credit Card Interest

I shared in an earlier post my plan for getting my self out of debt by borrowing against my 403(b) a little at a time to pay off one credit card at a time and paying myself back at a lower interest rate than the credit cards.

I’ve been questioned a few times about my plan and why I would want to borrow more money to pay off my debt. Here’s the deal. If a person owed $3,500 on a credit card at the age of 30 it would take them 40 years to pay it off by just making the minimum payment each month at 18% interest.

Credit Card interest compounds so quickly that the almost all of your minimum payment goes to the interest. If you made a $300.00 purchase on your Sears credit card and paid only the minimum balance your total purchase price is going to be at least $1,200.00.

So there you have my motivation! Credit card debt is bad but the interest you build from that debt is even worse. Getting yourself out from underneath the burden of that debt can and will be liberating but you have to have a plan because you won’t get there making the minimum payment.

A Great Vacation at a Great Price without Going into Debt

It may only be January 3rd and still in the heart of winter but vacation season is only six months away. Americans will amass millions of dollars in debt this summer on vacations when they don’t need to. Yes, it is possible to enjoy a great vacation at a great price and not go into debt over it.

Like so many other things involved in getting out and staying out of debt you have to plan, save and budget for your vacations. Know where your limits are and what you can actually afford. In other words don’t try to go to Disney World on a state fair budget. If you can’t afford Disney World this year then take a smaller vacation and save for Disney next year. Trust me there is no greater feeling than treating your family to a fantastic vacation and knowing that you are not going into debt over it.

After deciding what you can afford choose your vacation destination. There are several places online where you can get great deals such as travelocity but you may not be aware of checking state tourism departments. Once I was able to book my family for a Florida vacation that included two nights in Coco Beach, a day cruise to and from the Bahamas and three nights in the Bahamas for my family of five for only $2500.00. I was able to book everything except the airfare and rental car through the Florida Tourism Department.

After you have determined your destination the only thing to do next is save, save, save! Put within your regular budget a vacation savings line item and begin now to put money away for your vacation. After doing your planning you should know about how much you need to save so make it a goal to have your vacation paid for before you even leave for it.

Keep in mind that it’s about eliminating debt not building it. Happy planning!

Need Some Cash? Find a Hobby

Sponsored Post

Everyone likes extra money right? Well what a better way to earn some than by doing something you love. I started this blog to journal my journey out of debt and to pass along some money saving tips along the way. Now thanks to Blogsvertise I could be earning a little cash in the process.

Blogsvertise allows you to earn some extra cash by reviewing and talking about websites, products and services on your blog. Advertisers pass their requests on to Blogsvertise who in turn pass the request on to you the blogger.

Registration was pretty simple and it seems harmless so I’ll try it out and let you know how it works.