Emergency Funds for the Financial Flu

An emergency fund won’t prevent unpleasant things but it can make them much easier to live through.  Warning, if you have a squeamish stomach this article isn’t for you.

Planning for Puke

For example, think back to the last time you had the stomach flu and when it first raised it’s ugly head.  If you were at home, near your bathroom and in your pajamas you still felt sick but probably weren’t as miserable as you would have been in a place like a dirty truck stop bathroom stall.

In the comfort of you home, you probably made your own emergency plan as you felt the sickness progress:

  • Carpet or towel on the floor in front of the commode so you wouldn’t have to kneel on hard bathroom floor
  • Extra bowl in case you happened to be on the toilet when the puke came
  • Long hair pulled back away from your face
  • Bathroom fan was on to clear the air
  • Glass of rinsing water within arms reach
  • Kleenex to blow your nose afterwards
  • Toothpaste already on the toothbrush

A stomach bug is an unpleasant experience, one that we don’t like to re-live, sorry if it’s kind of gross.  However, all of those things I listed make the nasty experience a little easier to live through.

Emergency Funds Ease the Pain

Obviously an emergency fund takes a little more preparation than the list above but it serves the same purpose.  Inevitably we’ll all run into an unpleasant situation that we hadn’t planned on:

  • Car breaks down
  • Being laid off
  • Unexpected medical expenses
  • Furnace breaks mid-winter

These are really nasty things but if you have some money tucked away in an emergency fund it can help take the edge off the disaster.  You still have to go through whatever crisis is unfolding but if you know that you have money to cover the cost, make a down payment, or even just get by in the mean time you’ll be much better prepared to handle the situation without having a nervous breakdown or losing your lunch.

Posted on January 11th, 2010 in Personal Finance | 4 Comments

Written by Ben Edwards · Filed Under Personal Finance 

Get a New Job or Get a Promotion?

If you’re trying to move up the career ladder, is it best to quit your job and get a new job with a new company or try and get a promotion where you work today?

A reader namd Tom left the comment below on the article about getting the promotion you deserve:

“I think this is a good article but wanted to add some experience to the table.  Me and my friend who have the same competency and work ethics graduated school at the same time.  He worked at the same company for 5 years and got promoted once; from a Tech I to a Tech II. 

 

I actually started working in the field about 2 years later than my friend did.  In 3 years I went from a Tech I (first job 6months), became a Tech II at my second job (1.5 year job), started as a Tech III and was promoted to a Engineer because my new job didn’t want to see me leave. 

 

Within 3 years of job hoping, I had moved twice as far as my friend did who worked for 5 years of dedication to one company.  To the day our competency in the field is the same.  So I’m opinion on the matter is that’s it twice as easy to get promoted by finding a higher level job than it is to get promoted in a company that already has you.  I believe it’s because companies won’t give anymore than they have to and if they know you’ll stay you’ll never get promoted.”

Tom’s experience is that you can move up the career ladder faster if you move from company to company.  I do know people that have landed pretty high profile jobs in their industry by frequently moving from company to company, always moving up in the responsibility and pay grade for each job.

On the other hand, I have a former co-worker that got a a big title by sticking with the same company.  When I first started working, she was a manager in the group I was part of.  It was a new product with a lot of growth potential in the company and the industry.  She grew along with the group and ended up landing a role with a lot of responsibility and a big fat paycheck. 

That type of position in the company was typically filled by someone who had worked there at least 10 years longer than she had.  So you could argue that she was able to get farther, faster by staying with one company and getting a huge promotion 10 years early.

I guess it really depends on your situation. Factors like what company you work for, what industry you’re in, and what skills you have all factor into which strategy is best for your career.  What have you found to be the best for you?  What strategies have worked, or failed, in your career?

Posted on January 9th, 2010 in Career | 5 Comments

Written by Ben Edwards · Filed Under Career 

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

Posted on January 6th, 2010 in Personal Finance | 3 Comments

Written by Ben Edwards · Filed Under Personal Finance 

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.

Posted on January 5th, 2010 in Taxes | 9 Comments

Written by Ben Edwards · Filed Under Taxes 

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.

Posted on January 4th, 2010 in Debt | 3 Comments

Written by Ben Edwards · Filed Under Debt 

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.

Posted on January 1st, 2010 in Other | 7 Comments

Written by Ben Edwards · Filed Under Other 

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.

Posted on December 31st, 2009 in Personal Finance | 7 Comments

Written by Ben Edwards · Filed Under Personal Finance 

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 : )

Posted on December 30th, 2009 in goals | 1 Comment

Written by Ben Edwards · Filed Under goals 

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!

Posted on December 28th, 2009 in goals | 3 Comments

Written by Ben Edwards · Filed Under goals 

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.

Posted on December 27th, 2009 in Cars | 2 Comments

Written by Ben Edwards · Filed Under Cars 


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