Personal Finance Week in Review – The Big Dance Edition

March Madness is upon us with more games than you can watch at once but I still found time to read some interesting personal finance articles this week.

Investing
Sun talks about using ETF’s in your investment portfolio and Jim has another Devil’s Advocate post, Invest in Your Company. Some reasons he gives for buying stock in the company you work for are that you understand your company better than others and you often get an employee discount on the stock price.

Money Stress
SVB gives us some insight on preparing for stressful financial situations in our life. If you have money woes you can always turn to my 10 Ways to Reduce Money Stress post.

Entrepreneurism
Lazy Man warns us that perfectionism can get in the way of progress when you’re an entrepreneur. I read an article the other day that said good companies or websites are “always in beta” or always trying something new. Don’t delay getting started on your idea because it’s not quite right. Throw it against the wall and see what sticks!

Social Security
Jeremy describes where our social security contributions go, other than down the toilet. He asks the important question, “Will you ever see a benefit from the money you’ve been putting into these programs?”, not likely in my opinion.

Credit Cards
Tricia reminds us to take advantage of credit card services such as email alerts and credit card usage monitoring in Use the Resources Your Credit Card Gives You.

Inheritance
Mighty Bargain Hunter brings up a sad but important subject, how to plan for an inheritance. A key point is not to count on it, don’t make decisions assuming you’ll get an inheritance. What happens if you don’t?

Consumerism
I went on a rant this week about the perils of buying too much stuff and Henry put together a clever chart depicting how the more stuff you own, the more your stuff owns you.

Free Stuff
Golbguru is having a reader appreciation contest where he’s giving 4 lucky readers “anything they wish for”. All you have to do is leave a comment to enter, there are 12 entries so far so the competition is heating up, contest ends Thursday, 29th March.

That’s a wrap for this week in personal finance, if you ever run any articles that are worth a mention just let me know. Have a happy St. Patrick’s Day!

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Are Girl Scout Cookies Tax-Deductible? It Depends.

I’ve had a lot of people asking if the purchase of girl scout cookies is a valid tax deduction. I consulted my tax friend and he pointed me the answer on the Girl Scouts website.

Basically, if you take posession of the cookies then you can’t write off the purchase because you received something in return for your money. If the Girl Scouts keep the cookies, I don’t know how often this happens, then the money you spend is tax-deductible. The information from the Girl Scout website is below.

Q: Is the purchase of Girl Scout Cookies tax-deductible?

A: No and Yes.

No
If the customer keeps the cookies. Individuals who buy Girl Scout Cookies and take the cookies home, or consume them, have purchased a product at a fair market value. For this reason, no part of the price of a box of Girl Scout Cookies used in this way is tax-deductible.

Yes
If the customer leaves the cookies with Girl Scouts. Many Girl Scouts ask customers to pay for one or more boxes of cookies for use in their community service project, for example, collecting for a food pantry. The customers not receiving any Girl Scout Cookies do not benefit directly from paying for them. Those individuals may treat the purchase price of the donated cookies as a charitable contribution.

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Personal Finance for Sports Fans – Diversification is Key

How can you have the best player in college basketball on your team and still lose your conference championship? Just ask the Texas Longhorns.

Star Power Fades
In the final game of the Big 12 tournament, Kevin Durant laid it on the Kansas Jayhawks in the first half. He shot the lights out and at one point Kansas’s 20 point deficit seemed to be insurmountable. However the tide turned for one main reason, the mighty Durant ran out of wind in the second half. Despite 37 points and 10 rebounds from their star player, the Longhorns fell to the Jayhawks and lost the championship.

Diversification Wins in the End
Why did Kansas come out on top? Diversification. The have a multitude of skilled players that all contributed in their own way to the victory. The importance of diversification is no different for your investment portfolio than it is for a sports team.

Just like the Longhorns rode Durant’s success in the first half, you can rely on the outstanding returns of a single investment to grow your holdings by 20, 30, or 60% in a year. However, the second half will inevitably come for that investment and it will stop performing at that level. History has shown that over time it’s not a matter of if but rather when an investment will turn south.

How can we win like Kansas? Invest in a balance of various industries and different assets classes. Although spreading our money out over the broader market will reduce the potential reward it will also cut down on the potential risk. Instead of one super star investment, divvy your money up among solid performers and you’re more likely to come out ahead in the long run.

Check out the other articles in the series Personal Finance for Sports Fans

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Small Business Tax Tips for Rookie Entrepreneurs

I just formed my first small business at the end of last year and spent the last few days putting together my inaugural business tax return for my eBay and blogging income. Here are some things I learned:

1) Make Friends with a CPA
One of my good friends is a tax guy and he put up with several questions over the last few days. I wasn’t actually aware that 3/15 was the deadline for filing until he recently reminded me, thanks to him I won’t have a late penalty.

2) Keep Consistent Records Year-Round
It was 1 AM on 3/15 and I was digging through receipts and taking inventory. If I’d have done a better job of organizing and entering data as I went along then doing the taxes would’ve been much easier and I wouldn’t be so stinkin tired.

3) eBay Accounting Assistant Rocks
If you’re an eBay seller, use the eBay Accounting Assistant to move your data into QuickBooks. You can import your sales and fees and save tons of time.

4) Use QuickBooks Report Center
I’m just learning how to use QuickBooks. I foolishly don’t like to read manuals so I normally poke around until I find what I need. I stumbled across the report center in QuickBooks and realized it was the dashboard I was looking for.

5) Use Certified Mail
I couldn’t eFile because I did everything last minute and my electronic filing wasn’t setup. If you send your tax return through the mail, it’s worth the extra buck or two to send your return by certified mail.

6) Don’t Procrastinate
Don’t wait until the night before the tax deadline to do your taxes. I am guilty of waiting too long but since I at least had a few days there was time to research questions and bug my CPA buddy.

7) Know Your Deadlines
As I mentioned, I almost foolishly missed the deadline for my 1120S. I’m sure over time you’ll get to know the important tax dates but when you’re starting out it’s smart to keep a list. The next date I have to worry about is the payment of estimated taxes by 4/15. Hmmm, a date I can’t wait to keep!

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Personal Finance for Sports Fans – Little Things Make a Big Difference in the Big Dance

How many times have you heard an ESPN announcer make a comment about a play that won’t show up on the stats sheet? Diving on a loose ball to force a tie-up or making an extra pass that results in an easy basket are examples of little things that can make a big difference in the NCAA tournament.

Win One Possession at a Time
Every team needs skilled players to help them win games but it’s not just the NBA range three pointer or the monster blocks that bring victory during March Madness. Basics such as boxing out, making free throws, and avoiding silly fouls are all little things that add up over the course of 40 minutes. Since basketball games are won a single possession at a time, these little things are more obvious and frequently get praise from guys like Dick Vitale, Jay Bilas, or Digger Phelps.

Be Money Smart & Cut Down the Nets
Paying attention to details can bring you financial success as well. Not everyone can be a money superstar and earn an enormous salary but if you do the little things right you’ll come out ahead in the end.

Play good offense by regularly saving or investing and the power of compounding growth will work its magic over time. There are countless ways to put up a good financial defense. Follow the time-tested play of spending less than you earn and this full court press will keep your balance sheet in the black.

Think of the rush you get when your team wins a cliffhanger to advance to the Sweet Sixteen. You might not feel that way every time you save or invest a little money but I’m pretty sure you’ll celebrate down the road when your net worth gives you the freedom to make the choices you want in life.

Check out the other articles in the series Personal Finance for Sports Fans

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Defaults Rising on Subprime Loans. What did New Century and Everyone Else Expect?

When rates were low almost anyone could get a home loan with no money down. The booming real estate market flooded financial institutions with cash and companies like New Century Financial and Accredited Home Lenders Holding Co couldn’t loan money out fast enough. It was inevitable that rates would rise and that subprime lenders would eventually be unable to make their payments.

How can the following headlines of the past few days come as a shock to anyone?

• Large Subprime Lender Stops Issuing Loans
• Accredited, New Century Lead Subprime Meltdown
• Record foreclosures hit mortgage lenders
• Sub-Prime Mortgages Worry Investors

I’m not a financial expert, just a guy who digs personal finance, and I saw this coming years ago. How can anyone in the financial industry be surprised at how things have played out? What did they expect would happen?

Hard Times Ahead
The people I feel sorry for are those that borrowed at these unrealistic terms and will now lose their homes. Common sense should have told them this would happen but when you’re looking for a break and cheap money comes along I imagine it’s hard to pass up.

Unfortunately both the lenders and borrowers are now in a pickle and it doesn’t look like it’s going to get any better. I’ll take this as a lesson that common sense can go out the window when times are good and you have to rely on yourself to keep a level head.

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10 Ways College Students can Save Money on Spring Break

Before You Go

1) Get a Hotel Referral
The brochure might be nice but who knows what kind of a dump it will be when you get there; ask someone who’s been before. We decided it would be cheap and fun to camp on the beach on South Padre Island. When the seagulls woke us up at dawn, the tent filled with sand, and the girls couldn’t stand the community showers we had to find somewhere else to go. If a room hadn’t opened up at Motel 6 we would’ve had to spend big bucks for a fancy hotel room.

2) Know your Healthcare Coverage
Spring break is usually a crazy week and it’s inevitable that someone will get hurt or sick. Getting treated somewhere not covered by your insurance can cost you a ton of money. While we were in Padre, a strep throat induced delusional fever forced a late night call to a friend’s parents for insurance/hospital information. How would you like your parents getting a midnight call from the middle of Spring Break island? Figure it out before you go.

On the Way

3) Go the Speed Limit
Little towns on the route to popular spring break destinations love to setup speed traps and rake in the speeding fines from lead-footed students eager to get to the beach. Watch your speed or you could start off your trip with a big fat fine.

4) Pack the Car
Fill up your car with friends. The more, the merrier, and the cheaper the gas bill. Splitting the cost of driving to spring break can save some money. Of course, don’t exceed the legal passenger limit and make sure everyone has a seatbelt.

In Your Hotel

5) Pack the Room
Same principal as pack the car. The more people you can fit into a room, the cheaper it is per person. We could only fit 5 guys into a Cavalier on the way to Ft. Lauderdale but we met up with a few friends down there and filled our hotel room to the brim. Obviously with just two double beds there’s not enough bed space for everyone so be sure to bring a sleeping bag for nights when you get floor duty.

6) Don’t get Stuck with the Bill
Whatever you do, don’t put the room on your credit card. They’ll probably need a credit card to reserve it but get someone else in your party to use their card. It’s only a matter of time until something gets broken; if the room is in your name, guess who gets the bill.

Out on the Town

7) Check your Rearview Mirror
The first night in South Padre someone backed into my friend’s car in the parking lot. In order to avoid an insurance claim, the other driver forked over hundreds of dollars to my friend. Accidents are expensive so look where you’re going or you might blow your spring break budget on car repairs.

8) Avoid the Authorities
Put another way, don’t be stupid. Having to pay bail for a friend or some fine for yourself is a lousy way to spend your spring break cash. Steer clear of the men in blue and your wallet will thank you.

Food and Drink

9) Bring a Cooler
Wherever you go for spring break the locals will be looking to make some money off of you. Avoid the jacked up prices for food and drink by bringing along a cooler and loading it up at a local supermarket.

10) Hit the Buffet
I stuffed myself at a delicious seafood buffet in Ft. Lauderdale one night and didn’t have to eat again until the next evening. If seafood’s not your thing, find a Denny’s and graze for a few hours.

Follow these tips and you’ll hopefully have a little money left over to buy a coffee or soda to get you going the morning after you get back from your adventure!

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Personal Finance for Sports Fans – Greatness Begins & Games are Won Off the Court

What do you love most about college basketball in March? Is it the buzzer beating 3 point shot or the steal followed by the monster dunk? While we get to enjoy these displays of talent on the court in the NCAA tournament, the thing that makes them possible is untold hours of preparation off the court.

Practice Makes Perfect
Whether it’s off-season, pre-season, in season, or post-season good athletes are always on a training regimen, preparing for what comes next. We don’t see them getting up at the crack of dawn to workout or nursing an injury through a brutal pre-season but without that preparation, they wouldn’t be as good as they are. Tiger Woods is a good example of the adage practice makes perfect. His endless and intense practice gives him the edge he needs to sink that amazing putt or hit that beautiful drive.

Skills to Pay the Bills
Our personal finance skills are no different than Tiger’s golfing skills. We have to learn the fundamentals of managing our money and practice regularly to have success. Some people try to bypass this path to success by taking part in the latest get rich quick scheme. If you sit back and think about it from a sports fan point of view, you realize how ridiculous get rich quick plans can be. Expecting to start up an investing or business program today and make thousands of dollars in your first week is as silly as someone thinking they can walk onto the basketball court and play like Kevin Durant or hop behind the wheel of a car and drive like Dale Earnhardt Jr.

All great athletes had to start somewhere. Think of the first time that Wayne Gretzky picked up a hockey stick or Michael Jordan touched a basketball. They weren’t great yet but that was the start of their journey. You may feel clueless when it comes to personal finance but if you don’t take that first step towards learning how to manage your money, you’ll never be a financial superstar.

Check out the other articles in the series Personal Finance for Sports Fans

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Personal Finance for Sports Fans – Plan for Success

Setting Goals for Success
How do basketball teams win championships? Many of them sit down together at the beginning of the season and come up with a shared goal. For some, it’s to win the conference championship. Some teams set their sites on making it to the NCAA tournament and others pick the lofty goal of winning the whole thing.

These teams use the motivation of this goal to drive them to prepare and play harder than everyone else. Some of the teams that advanced to the NCAA tournament this year did so by winning games that appeared to be lost. Even though they were exhausted or outmatched they never gave up and willed their way to victory.

Success in personal finance also begins with setting your goals. First decide what you want out of life, and then determine what your finances need to look like to get you there. Meeting your goals won’t always be easy but if you have a driving reason to achieve them you won’t give up.

Use Milestones to Your Advantage
While every basketball team would love to win a national championship any coach will tell you the first step is to win your first game. Then win your second, then your third. As a Kansas Jayhawk fan, I’ve seen the danger of looking too far down the road over the last two years as they lost to both Bradley and Bucknell in the first round of March Madness. A lack of focus on the current task can doom your future goal to failure.

The Jayhawks have done a pretty good job of taking things one step at a time this season. First they became regular season champs with the best record in the Big 12 and then they won the conference tournament. We’ll see what the remainder of March holds for them.

Whether your goal is to get out of credit card debt or to build a million dollar portfolio, you have to do it one dollar at a time. Either task can prove to be a long road. Make the journey easier by breaking it up into bite size chunks called milestones. Set small, achievable milestones with short time frames such as a day or a week. As you achieve these goals your confidence and momentum will grow. When you have a bad day, don’t be discouraged, instead look back over all of your triumphs and they will surely outweigh the recent downturn.

Think about Lance Armstrong. He didn’t ride the whole Tour de France in one day. He won it one stage at a time. Some days he wore the yellow jersey, some days he crashed and burned. If Armstrong could win the Tour de France seven different times by taking it one stage at a time, surely we can pay off our debt or build our net worth taking the same approach.

Check out the other articles in the series Personal Finance for Sports Fans

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Maximize Your Time, Money, & Opportunities. Stop Buying Stuff!

I’m never buying anything ever again! We just spent our weekend doing some spring cleaning and turned a jumbled messy room into an organized basement. This is what I learned from the experience.

Stuff Wastes Time
We spend time shopping for, buying, storing, organizing, and eventually getting rid of stuff. The more stuff we buy, the more time we spend. I have better things to do with my time than worry about stuff!

Stuff Wastes Money
I hauled multiple truck loads of stuff to Big Brothers & Big Sisters last weekend. We probably spent hundreds of dollars to buy all the stuff we gave away and what do we have to show for it? Nothing, not even the stuff! It was cluttering our basement so away it went.

Stuff Wastes Opportunities
If we can turn a little money into more money in the stock market, why would we want to turn that same money into zero dollars by buying stuff? It might seem like neat stuff now but in the end it will turn into worthless stuff to be given away. The opportunity cost of buying stuff is not worth it to me.

Stuff Wastes Momentum
Nothing slows you down like lots of stuff. When you can’t find something, it’s usually because it’s lost in a pile of too much stuff. Stuff creates clutter. Clutter creates stress. Stress drags you down and keeps you from being productive. In addition, lots and lots of stuff can create an overwhelming mess. Once the mess gets too big, you don’t know where to start and stuff takes control of your entire house or apartment. Stuff is deadweight!

No More Stuff!
Everywhere you turn people are trying to sell you stuff. They even give you free stuff to get you to buy more stuff. What’s so great about stuff? Nothing! It wastes time, money, opportunity, and momentum. Next time I feel tempted to buy stuff, I’ll remember this last weekend and the perils of buying stuff. I have decided, for me, it’s no more stuff!

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