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Make More Money This Year

Making more money in your job typically means making yourself more valuable to your company or finding a job that will pay you more money for your skills and knowledge.

Of course making more money isn’t just about the size of your paycheck you also have to consider your benefits and how they fit into your overall financial situation.  Not only that, you want to keep more of the money you make.  Here are nine tips from the Financial Planning Association to help you make more money this year and keep more of what you earn.

Research Career Changes

If you’re planning to stay in your field or make a complete change, one of the most detailed yet neutral resources for investigating career fields and their salary and hiring forecasts is the U.S. Bureau of Labor Statistics’ Occupational Outlook Handbook.

This extensive online resource not only lists major career groups, but the leading occupations in it, educational requirement, and most important, salary data. If you haven’t been in the job market for a while, this kind of research is a good way to reset your knowledge of your industry and whether its hiring prospects are bright.

Go Back to School

Going back to college – even community college – can be a major investment. If you’re going to have to finance your education yourself, it’s necessary to have a plan and knowledge of federal, state and local loans, grants and scholarship programs.

The Obama Administration has streamlined the Free Application for Federal Student Aid (FAFSA) form and increased Pell Grants by $500 to $5,350 for 2009-2010 and created the American Opportunity Tax Credit, a new $2,500 tax credit for four years of college tuition. Additional information on Federal Student Aid and Tax Credits is available at on the IRS website. It is important to understand the eligibility criteria and limits associated with each program.

Get Financial Advice

If you want a new job, to head back to school or plan to take a year off, it makes sense to get tax and financial advice. A financial planning professional can help you evaluate your current benefits package and retirement savings or talk through what you should be looking for at your next job if you’re unemployed.

Invest in New Equipment

We’re not talking about machine tools here. Whatever your job or interest, there’s usually equipment to support it. For example, if you’re planning to learn new skills that involve a computer or software, now may be the time to invest in those items. Think about how this equipment will boost your productivity and the time it will take to earn back what you paid. If the numbers work, go for it.

Network

It’s important to get face-to-face with people in the field. You don’t want to do a job search on your employer’s time, but if you can get away at lunch or after work to attend networking functions, it’s worth your time for two reasons. First, you might meet your next boss there. Second, simply by talking and getting to know people already doing the job you want, you’ll get a ground-level view of whether the industry is for you and which employers are the most popular. You’ll also get an idea of which companies to avoid.

Maximize Flexible Spending

If you are up for a salary review soon, it might make sense to hold off on interviews until you have a better idea of what you’re worth in the marketplace. Also, since some companies allow you to spend your flexible spending balances until March of the following year, use up any money in your flexible benefits accounts for medical appointments, glasses or dental work before you leave.

Maximize Take-Home Pay

This is where a call to your tax or financial planner comes in handy. Some fringe benefits may be taxable, which means your real take-home pay might be less than you expected. To the extent that you get to negotiate your benefits on your way into a job, do it in a tax-smart way.

401(k) Planning

You may not want to make any moves for awhile, but it’s good to talk with a financial planner about whether you’ll be moving that money to private accounts. Also, make sure you know when you can enroll in the company 401(k) and other retirement offerings at your new employer.

Secure Your Insurance

You might wait a few months to a year for new health coverage to kick in at a new job. You might need to buy private insurance until then or go onto a spouse’s health plan in the meantime. Also, consider separate disability coverage if you’ve not done so – company coverage goes only so far, and if you are laid off or leave to start a business, you should have coverage of your own that you should buy while you’re still earning a salary.

Lose Some Weight

Even if health reform makes it easier for people to become insured with preexisting conditions, increasingly insurers are taking a dim view of obesity and will still tie the cost of health insurance and other policies to your weight and overall health quality. Being healthy can help you keep more of the money you make!

Written by Ben · Filed Under Career >Comments (15) 

Lost Wedding Ring Blues

My wife lost her wedding ring recently and we’re pretty bummed out about it.  I can still remember sitting outside the jewelry store where we bought our rings, picking out the inscriptions.

We sat on separate benches outside the store pondering what words would best epitomize our relationship and marriage.  Turns out we were pretty much on the same wave length.  We didn’t tell each other what the inscriptions would be, we found out on our wedding day when we swapped rings. 

She didn’t know what hers said at first because I’d used a German phrase. However, when I translated it for her she smiled because it was pretty much the same thing as the English version that she’d had inscribed in my ring.

Sadly, we’ll probably never see her ring again but what’s most important to me is what it symbolizes and that the words inside our rings still apply to our marriage.

If you’re feeling a little down like we are, here are a few things to read to take your mind off your bad day.

Frugality

Taxes & Charitable Deductions

Holidays

Investing & Retirement

Other Stuff

Written by Ben · Filed Under Personal Finance >Comments (3) 

Avoiding Tax Return Fees & Penalties

The increasing complexity of tax law each year causes creates unnecessary penalties and tax return fees for countless Americans. Having a basic understand of what the most common fees and penalties are can help raise your awareness in order to prevent them. Below is a list of the most common tax return fees and penalties and how these can be avoided.

Tax Preparation & Filing Fees

What They Are: Many tax preparers can charge some steep prices for preparing and filing your tax returns. Sometimes this can be justified if you have a complex tax return and they can help you spot deductions that you would not have noticed but many times they are not required.

How to Avoid: If you do not have a complex return and want to avoid the fees of a tax professional there are several options for you. If you made less than $56,000 in 2009 then you can file for free using the IRS’s FreeFile. Free file is a program similar to TurboTax, but allows you to file your taxes for free. If you made more than $56,000 then you can use programs offered by companies such as TurboTax or H&R Block at Home. These programs make it fairly simple to prepare your tax return, take proper deductions, and electronically file your return.

Failure to File Penalty

What Is It: The failure to file penalty can be one of the harshest tax penalties you can receive. This penalty really only applies to those individuals that owe taxes. This penalty is 5% a month on the amount of taxes you owe after the filing deadline. The maximum for this penalty is 25%, which will be reached if a return is not filed for 5 months after the due date. As you can see, this penalty adds up fairly quickly and there are also additional penalties that come along with this that will be discussed below.

How to Avoid: The easiest way to avoid this penalty is to be sure to file your taxes by the tax filing deadline. Most people fail to file because they know they will not be able to pay. One important thing to know is that the failure to pay penalty is significantly less than the failure to file penalty, so filing your taxes is the easiest way to avoid hefty penalties.

If you cannot file on time then you can also consider filing for an extension. An extension will allow you to extend the filing date from April 15th to October 15th. Tax payments are still due by April 15th, but if you file an extension and the IRS has 90% of taxes owed you will avoid the failure to file penalty and the failure to pay penalty (discussed below).

Failure to Pay Penalty

What Is It: The failure to pay penalty is 0.5% for each month that the tax goes unpaid. This total penalty cannot exceed 25% of your total tax liability. As you can see, this penalty is much lower than the failure to file penalty.

How to Avoid: The most obvious way to avoid this is to pay your taxes in full. You can also reduce this penalty by paying as much as you can (assuming you cannot pay in full). If paying your taxes in full is not an option then it is a good idea to consider an Installment Agreement.

With an Installment Agreement, you will be allowed to pay off the tax liability in monthly increments or payments just like a car loan. You will still be charged interest (discussed below), but the failure to pay penalty will be about 50% less (.25% per month) than the normal monthly failure to pay penalty (.5%). To apply for an installment agreement you can use IRS form 9465 or use the Online Payment Agreement Application.

Tax Underpayment Interest/Penalty

What Is It: When there is an underpayment of taxes owed the IRS will charge interest on this outstanding balance. This amount is determined by the short-term federal rate (currently about 1%), plus an additional 3% bringing up the total interest to around 4% for individual taxpayers. This interest in addition to any failure to file or failure to pay penalties that are incurred.

How to Avoid or Reduce: This interest can be avoided if taxes are paid in full. If taxes cannot be paid in full, paying as much as you can obviously reduces your total underpayment interest.

If you were or are a victim of some of these penalties, in certain situations, these penalties can be removed. Penalties constitute a large portion of taxes owed and if you have been charged steep penalties then you should look to abate penalties often times called “Penalty Abatement.” Under the IRS penalty abatement provision, the IRS will remove some penalties if the taxpayer can prove that they had a legitimate reason for not filing or paying their taxes such as loss of a loved one, serious illness, records destroyed, or any other event that occurred without your control. 

The tips above can help prevent unnecessary charges, penalties, and interest with your annual taxes. If you know you are going to have a problem with your taxes, it is best to communicate with the IRS rather than trying to avoid them. The IRS has become more helpful at helping individuals with various tax problems; they even have an independent organization called the Taxpayers Advocate that offers free assistance to taxpayers that you should reach out to if not your tax professional.

Thanks to Manuel Davis for this contibuting this article on tax return fees & penalties. Manuel is a tax accountant who has been helping individual taxpayers with various IRS back tax related problems.

Written by Ben · Filed Under Taxes >Comments (7) 

Debt Denial Quiz

Debt reduction is a good thing to tackle at the start of the year but sometimes we’re in denial about how much debt we actually have and how much work it will be to pay off those debts.

A reader sent me the debt quiz below; you give a yes or no answer for each question.  Each yes answer is a hint that you should take a closer look at debt in your life.

1) I carry credit card balances for a long time and often pay only the minimum
amount due.

2) My credit card balances are growing each month.

3) I am at or near my borrowing limit on one or more of my credit cards.

4) I no longer have a savings account, or I am using savings to pay bills I used to pay
from my checking account.

5) I try to manage my money to a budget, but I often come up short when I sit down
to pay bills.

6) I use cash advances from credit cards or the overdraft feature on my checking
account to pay bills and basic living expenses.

7) I borrowed from friends or family when money was tight and haven’t yet paid it
all back.

8 ) I juggle payments, paying one creditor one month and another the next so that
they are both getting something.

9) I often transfer balances from one credit card to another because I can’t afford to
pay all of my monthly credit card bills.

10) I have “consolidated” my debts into a home equity loan or a single credit card more
than once.

11) I rely on overtime pay or money from a second job to pay my regular bills.

12) I don’t have the money to pay irregular bills, like real estate taxes and insurance.

13) When I come home from shopping, I sometimes hide my purchases or lie about
how much they cost.

14) I no longer pay attention to how much I owe.

15) I sometimes get notices in the mail or phone calls telling me I’m late with
a payment.

16) My heart rate increases when my credit card is run through the machine because
I never know if it will be accepted.

Written by Ben · Filed Under Debt >Comments (3) 

Read This Now, It’ll Be Worth Your Time

Your time is valuable, it’s a limited resource and I don’t want to take up your time without making it worth your while.

I am going to be making improvements to this site over the next several months that will give you more value for the time you spend reading what we publish (I’m starting off the New Year on a mission)!

I’m working with a variety of experts to make these improvements and one of the first steps we’re going through is to define the most useful things about the current site and what you think of it. You may be wondering about the article title, how will this be worth your time?  Well when you share what I ask below, it will form the basis for improvement for the site.

To help improve Money Smart Life, I need you to share in the comments below the three words that you would use to describe the site.  If that’s too general of a question, you can think about how you would describe things like the content, the tone, and the topics covered.

Another way to go about it is this.  If you were driving down the highway and saw a billboard for Money Smart Life with only three words on it, what would they be?

You can leave them in the comment section below or you can submit them via the contact form. 

Happy New Year!

Please share below the three words you would use to describe this site.

Written by Ben · Filed Under Other >Comments (6) 

Ten Simple Money Moves for 2010

1) Budget

Make a personal budget and stick to it. Track your spending for two weeks to find out what your true expenses are as well as your monthly and yearly expenses, such as rent or mortgage payments, car insurance and payments, taxes, groceries, clothing, entertainment, and child care costs.

2) Set Financial Goals

Think long and hard about your financial goals. Do you need to save for a child’s college education? Pay off student loans? Buy a home? Would you like to decrease your debt? Increase your retirement savings? Figure out what your most important financial goals are.

3) Learn Your Financial Habits

Pay attention to your financial habits and think of ways to overcome habits that are costing you too much. Do you buy yourself treats when you’re feeling bad? Do you spend money to reward yourself?

4) Charge Less

Cut back on credit cards. Scale back to no more than two major credit cards, maybe one Visa and one American Express. Cancel accounts that don’t offer competitive interest rates or that offer perks you don’t need. If you’re really having a hard time charging too much, get rid of them all.

5) Lower Your Interest Rate

Call your credit card companies and ask for a lower interest rate. It’s harder than it used to be with the new credit card regulations but it doesn’t hurt to ask.  You can also try consolidating your credit card debt at a lower rate.

6) Avoid Late Fees

Setup your bills to pay automatically with online bill pay from your bank or with a full service option like Paytrust. Automating your bills not only saves you time, it can save on late fees.

7) Pay Less Each Month

Shop around for the best telephone, TV, and cell phone rates and programs.

8 ) Brown Bag It

Cut back on the number of times you eat out each week. Bring your lunch to work.

9) Avoid Impulse Buys

If you see something you “have to have,” wait 24 hours before buying it. You may find out that you don’t really have to have it after all. Or, avoid shopping altogether. Find other activities that you enjoy that don’t include retail stores.

10) Discuss Money

Talk openly about finances with your family. Talk about your financial goals and come up with ideas together about how you can reduce expenses and increase savings.

Written by Ben · Filed Under Personal Finance >Comments (7) 

How to Keep a New Year’s Resolution

I’ve written about how to set New Year’s Resolutions but what’s the best way to make sure you actually reach the goals that you set? Penelope Trunk of Brazen Careerist offered up some tips on the subject today that I thought were useful enough to expand on, and her title was good as well so I borrowed it for this post:

How to Keep a New Year’s Resolution?

Penelope recommends two things I’ve mentioned before:

She also suggests:

  • Starting Small – Don’t ask yourself to accomplish the change all at once.  Let yourself ease into it.
  • Focusing on the 1st Three Weeks – The first few weeks are important to establishing your actions as a habit. Penelope shares research that suggests three weeks is the magic amount of time.
  • Goal Wording – How you phrase your goal is important, you want to be specific so you know precisely what you need to do in order to reach it.  Penelope also recommends your New Year’s Resolution be explained to describe something you want, not a goal that’s only supposed to make other people happy. This makes sense, if it’s phrased to describe something you want then you’re more likely to take action.

New Year’s Resolution Tips

Here are a few other things you can do to help make sure you keep your New Year’s Resolution:

Make it Public

If you announce your goals to others in your life then you’ll be accountable to them for making your goals happen.  If other people know that you’re supposed to do things like:

  • Start bringing your lunch to work so you can save money & build an emergency fund
  • Work overtime for funds to pay off credit card debt
  • Setup an IRA, 401k, or 403b to start saving for retirement
  • Begin a college fund for your kids

then you’ll be more likely to take action.  If you’re the only one that knows about your goal, it’s easier for you to sluff off and say to yourself “I’ll start that next year”.

Track Your Progress

The simplest way is to keep a notebook where you write down each day what you did, or didn’t do, to reach your goal.  You could combine “Make it Public” with tracking your progress and start a blog where you declare your goals and then document your progress towards them.  If you’re not comfortable sharing with the world, there are ways you can limit access to specific people in your life. 

However you do it, be sure to track your progress. Goals that aren’t tracked are less likely to be achieved.

Okay, enough about New Year’s resolutions.  You’re probably sick of reading about them for the last few days, I won’t write about them again until next year : )

Written by Ben · Filed Under goals >Comments (1) 

A New Years Resolutions Secret

Want to know the secret to keeping your New Year’s Resolutions?  Pretend that you’ve already acheived them!

I’m not saying that if you imagine yourself as 30 pounds lighter or $5000 richer that it will automatically happen.  However, visualizing how things will be in your life once you’ve reached your goal can be the first step to making it happen.

I think I’ve already talked about it in one way or another on this site but the idea is you imagine your ideal scenario and take notes about every little detail.  Once you know what you want to acheive then you can work backwards to figure out what specific actions to take to get there.

For example, once you have your ideal image in your head, you ask yourself what would I have needed to do to make this a reality?  Once you figure that out, you ask what the preceding action would have been, what the action before that would have been, and so on.  You keep working backwards from your imagined perfect future and keep a list of the actions, until you reach your current day status.

There you have it, a list of all the actions you need to take to reach your goal.  This can be kind of tricky with more abstract goals but it works well with concrete ones, specific financial goals are a good example.  If you set a money resolution of building up a $5000 emergency fund by the end of the year, you can list out specific steps you’ll take to spend less, earn more, and save more.  If the numbers add up to $5000 over 12 months and you follow the actions you list, then you should have your money goal saved by the end of the year.

Another New Year’s Resolution tip is to work on your goals ahead of time, before the ball drops in Times Square.  A little planning ahead can help you set awesome New Year’s Resolutions!

Written by Ben · Filed Under goals >Comments (3) 

Best Car Deals Questions

Yesterday I shared my friend’s tips on how to get the best car deals when buying a new car. After reading through his description I sent him some follow up questions about the process, here they are.

How many dealers ended up bidding for your business?
I think there were 7.

What was the tone of the phone conversations?  Did you have to get pushy and demanding or were you just laid back and matter of fact?  Just asking since some people who don’t like to negotiate might be intimidated by the idea of having to call and barter with all of the sales managers.

I wasn’t pushy at all.  The original lowest bid was pretty good so if they could beat it great, if not who cares.  I also had a list of 7 dealers participating so if they said no I just planned on going down the list.  I was surprised every dealer was willing to beat the bid I had at the time I called them.

Did you have to make the list of dealers yourself or did you find that somewhere?
I just used Googled Honda dealerships and wrote down their numbers.  It took five minutes.

About how long did you spend talking with all of the dealers on your first call to them and then again on the follow up call?  Did you do this all on a Saturday or something?

Getting the right person on the phone may have been the hardest part.  I went to each dealership’s website and found out who the sales manager or internet manager was.  They are a little harder to get a hold of so that probably took me two or three days to talk to everyone.

Several I left messages for and they would call back or most likely have a sales person call back.  I was clear I didn’t want to talk to any floor sales people.  They are less likely to take a loss on a car just to move inventory…in fact they might not take a loss at all.

Were the sales managers open to the idea right away or did they take convincing?
I was surprised at how open to the idea they were.  Only one dealer said to call him after I had the lowest bid and he would beat it.  I just told him that he would have to do like everyone else or not at all.  He declined so I didn’t send him the email.

The funny thing was he called the day I was fielding all the bids, just after I had finished the process.  He said he really wanted to do business with me.  I told him I had already closed the deal.  I told him the price he said he could have beat it.  I don’t know if he could or not but I stuck with the lowest bidding Honda dealer anyway.

How much money did you save with the process?
It’s hard to say exactly how much I saved.  But I think I was able to drive the lowest bid down about $2000 dollars.

I wish I could give you a bid by bid account of the process to show how the savings progressed.   My friend had all the bids from the different dealers written down but had trashed the piece of paper by the time he shared his story with me.  Hopefully what he did provide will give you some ammunition next time you’re car shopping.

Don’t forget that you can get also get some year end car deals if you’re buying a new car at the end of the year.

Written by Ben · Filed Under Cars >Comments (2) 

The Best Car Deals for Your Money

The best car deals don’t come easily, they take some planning and work, but they can save you thousands of dollars off of new car prices.  A friend recently shared one of the best car deals I’ve ever run across and I asked if he could explain the process so that you could use it to save money when you buy a new car.

There are actually two components to the strategy you can use when buying a new car, auto incentives and dealer bidding.  He only used the dealer bidding approach because car values for the Honda CR-V were high enough the dealers didn’t have to offer incentives. Here is his explanation of how you can get some of the best car deals when shopping for a new car. (Note: The auto market has changed a lot since he bought his car about a year ago so the incentives strategy may no longer be effective.)

Best Car Deals – Auto Incentives

The basic premise is that dealerships often get rebates that are not advertised to the public. The way it normally works is that a dealership will get $1000 per car sold in a given month if they hit a certain sales number…say 100 cars. These incentives are not made known to the public but published in an industry newsletter called Car Buys. Knowing this as the consumer is a major advantage.

The buying process should always occur near the end of the month. As the consumer you don’t the exact number of cars that dealership has sold that month but you can tell them you know about the incentive. They will be much more willing to take a loss on your sale if that gets them closer to 100 car quota which will get them $100,000.

Best Car Deals – Dealer Bidding

In my case Honda was not offering any incentive for the CR-V because they had no problem selling them. However the other half of the process, which is key to getting the best deal, worked really well for me.

The idea is to call prospective dealers (talk only with their sales manager or Internet manager which may take a couple of phone calls) and tell them you will be buying a car in the next few days. Tell them that you do not like to haggle over price so you plan on sending them an email detailing the make, model, trim and color of car you are interested in and that you understand you’ll be dealing with their current inventory.

Explain that they will then email you back their most competitive offer. Make sure to mention that other dealerships are also involved so the most competitive offer should be submitted otherwise they run the risk of not making the sale.

Once all the offers are received (give a deadline) you will call the each dealer, starting from the highest bid, and give them one chance to beat the lowest bid. If they want to participate great. If not, no biggie they just miss out on the chance of making an easy sale.

Dealer Bidding Process

I used a list of dealers within about 150 miles of me. Most had no problem participating and only one wanted me to call him after I had all the bids so he could beat the lowest price…I just told him no thanks.

Once I received all the emails I started making calls. There was a pretty significant difference between the highest and lowest bidder but I wasn’t really pleased with the bids. The best bid was just around invoice. I fully expected the first dealer to just pass on beating the price since there was a big difference in the bids. To my surprise the highest bidder took about two seconds to match the lowest bid.

I eventually talked him into actually beating the bid. I then called the next highest bidder with my new low bid. I even took $500 dollars off that price because the dealerships didn’t want to go too low below the original lowest bid. The next dealership beat that price as well. Each time I took another $500 dollars off the new low bid which really drove down the price.

Getting the Best Deal on a Car

Eventually, I got to the last call, the original lowest bid. Once I told him the new lowest bid he said that it was a “loser deal and the dealership would not make any money on it.” I was more than satisfied with the price so I really didn’t care if he could beat it or not. He said that it was highly unlikely but he would call be back.

When he called back he beat the price by $200…I couldn’t believe how far the price had fallen from the original emails. I asked for an email to confirm the price and wanted to make sure that there would be nothing extra added to the cost when I would go in to purchase. He assured me that would be the final price (tax, destination, etc., all included).

When I arrived they had a salesman waiting for me to start the paper. I asked if we could see the car first (he was surprised by that not really knowing how we came to the price). Checked it out, loved it and spent about a total of 30 minutes in the dealership going over paper work. Easiest way to buy a car while getting the best price.

That’s the end of my buddies description of the process he used when shopping for a new car, hopefully you’ll find it useful the next time you’re in the market for a new car. I asked him some follow up questions after he emailed me the explanation, I’ll share the questions and his answers tomorrow.

Written by Ben · Filed Under Cars >Comments (6) 


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