|July 8, 2008||Posted by derek under Credit Cards|
While it is no doubt more convenient for consumers to rely on credit cards than use cash for all of their purchases, it may not be the same for those people who are in professions that rely heavily on cash tips.
In the days of old, it was possible for many waiters, cab drivers, attendants, porters, bell boys, doorman, performers, and other such “tipped” workers to live off of the cash tips they earned on the job. Many were able to keep the cash tips unreported as income as there was no paper trails to prove otherwise. Additionally, it was a nice benefit to having instant access to cash before payday rolled around.
However, there are more and more people carrying credit cards than cash for safety or convenience reasons and it is affecting the incomes of those who accept tips. There is now a very obvious paper trail when credit card tips are involved, which employees must report to the IRS as part of their income. As many patrons are now prone to paying their bills and adding the gratuity onto their total bill, waiters and other workers no longer get to keep tips outright on a daily basis.
There seems to be one advantage of customers using credit cards to pay for meals and such. It seems that consumers who add a tip to their total bill typically will give a higher tip than those laying cash directly on the table. Perhaps it is psychological: Simply writing down a number to many is different from having to count out and leave actual dollars.
Not only are waiters and other customer oriented staff effected by a so-called “cashless” society, but others who count on cash donations are also seeing a slowdown. For instance, musicians or charity groups, such as the street corner Santa’s, have in the past been able to make a decent day’s take from appearing or performing on a public street. However, since less people are carrying around actual cash in their pockets, less money is being tossed into the hats and collection baskets of those soliciting donations.
While a future life without cash is unlikely, at least in the approaching few years, it may actually become a necessity for business people such as cab drivers and yard sale entrepreneurs to be able to accept credit cards or face lost income. Many charities and groups who thrive on donations have reported to see an increase in online transactions despite the fact they are seeing less actual cash donations. Consider places you visit regularly and note that if money is changing hands there is probably a credit card sign on the door.
Overall, technology is making it easier to become a cashless society and having at least one credit card on hand can help protect you from fraud when making purchases, unlike regular bank debit cards. If you plan to use a credit card the next time you visit a hotel or dine out at a restaurant, throw a few extra bucks into your wallet for the wait staff. They’ll appreciate your effort.
Tisha Kulak is a writer for Creditorweb.com, where she writes about credit card offers, finances, credit cards, and responsible credit card use.
|June 7, 2008||Posted by derek under General|
Online shopping has revolutionized the way we shop.
We sit in the comfort of our own homes and survey different brands of the same item, check and compare prices, read user reviews and decide what it is that suits our own needs best.
There are a lot of benefits when you shop online, including:
Searching for products is easier online, you can more easily access items and while something may have run out of stock at a particular store, you can still see it online! You don’t have to wait for the store to open; you can shop on holidays too!
Another huge plus of shopping online, is not having to battle the hordes: crowds can be a real nuisance when you are out shopping, they slow you down and prevent you accessing the good deals. This is especially true when you are doing last minute holiday shopping and everyone else has the same idea!
Save Time, Save On Gas
You also save a lot of time when you shop from home, because you don’t have to waste time traveling to the store. As an added bonus, with the price of gasoline continuing to rise, you also save money on gas since you don’t have to drive to the store.
The reason that shopping online can be cheaper is because it cuts out the overhead of running a store: rent, electricity and utility bills, paychecks for employees, maintenance costs etc. The seller can therefore afford to sell you an item at a cheaper rate. Also online coupons can save you a lot of money.
Sending Gifts Is A Snap
One great advantage of shopping online is being able to send gifts to people with minimum fuss, even if they live in a different city or even a different continent!
Say you want to send a gift to your dad for Father’s day (it’s coming up on June 15th so there isn’t much time left), but he lives in a different city. Hop online and search for something he might like, once you find the right gift you can have it delivered directly to his doorstep on the correct day, without ever leaving the comfort of your computer chair!
Another huge benefit of shopping online is the access it provides to pre-owned items, both as a buyer and a seller.
As a buyer, you can often save a considerable amount of money by finding pre-owned items for sale online. Just like buying a used car, you can often find items that are still in great condition that the current owner no longer wants because something better came along.
You also have an opportunity to turn around and sell your own items online. Just like you might be online looking to buy someone’s pre-owned items, there are people looking to buy your old items. This can be a great source of additional income, some people have even turned it into a profession.
Consumer message boards and forums have made manufacturers more quality conscious and accountable. Being able to read user comments on any particular product comes in extremely handy when you are trying to make up your mind about what to buy. You have the benefit of other people’s experience, either good or bad with a product.
These are just some of the reasons why online shopping has become as popular as it has.
How has shopping online changed the way you shop?
|May 14, 2008||Posted by derek under General, Savings|
For those of you that are planning a getaway this spring or summer, I am going to talk a little bit about the dos and don’ts of travel to help save ourselves some money and some hassle.
Check All Options
When you do your booking, especially for air tickets, check all the possible ticketing sites and compare the offers that each one has so you can pick the lowest one or the one that suits you best in terms of travel date, time, kind of carrier etc.
A lot of you may be aware that you get better deal on weekdays rather than weekends. Also there is this site which claims to do all the hard work for you by comparing a combined total of 500 travel sites and some 600 airlines to find you the cheapest deals, so you may want to check that one out.
Having said this, don’t ignore the option of visiting a travel agent completely, because the internet may not always be the cheapest place to buy. Sometimes sitting across from someone who will plan out and book your itinerary makes more sense. What travel agents can sometimes do is give you the benefit of bulk booking.
Check Yahoo Message Boards
Message boards are a great place to find out what travel deals people are talking about, what bad experiences they have had so that you know what or where to avoid and you may find some links to pages that you may have been looking for!
Last Minute Deals
Sometimes waiting till the last moment can get you the best possible deal, because hotel rooms can go on ‘sale’ too! The only problem with waiting for the last minute deals is that you run the risk of not finding any deals and having to pay a price that might be higher than had you planned ahead.
This approach can work well if you have some flexibility in your schedule.
Flying is Cheaper Than Driving
I love driving, but on a long distance trip flying is usually cheaper and obviously a time saver as well. If you notice, fuel prices these days are just sky-rocketing so filling your tank keeps costing more and more, whereas air ticket prices have not increased that much. And if you are flying, remember a round trip is cheaper than a one-way ticket.
If you are driving and opt for a rental car, remember that most of the time you may not require travel insurance because your current car insurance policy may cover you, just be sure to check with your insurance agent. If not, you can pay by credit card as many cards now offer coverage when renting a car.
Tips Traveling With Kids
Notice how excited a kid is at the thought of taking a trip, but once you are on your way that same cheerful, excited kid becomes whiny, bad tempered and perilously close to a tantrum?
First make sure the child has plenty to keep him or herself occupied. Toys, books, puzzles, some favorite music etc. I found this very useful and comprehensive list, full of suggestions for babies and older kids.
When you sense that your child’s about to lose it, divert him or her. Distract them with a game, engage them in some activity such as looking for something that isn’t really lost, or even read out a favorite story. These are good to keep in mind because a happy child is the difference between a good holiday and awful one!
|April 30, 2008||Posted by Heather under Live Below Your Means, Savings|
If you are tallying up your expenses every month, you may be shocked at how much you are spending on groceries.
Obviously, groceries aren’t a luxury you can do without and perhaps that is why so many of us are lenient with our grocery budget.
However, there are many ways to reduce this monthly expense.
Here are 12 simple ways to save money on groceries:
- Buy a few Sunday papers each week and clip coupons. However, you should only save coupons of items you really enjoy. Never buy something solely because it is on sale.
- Before you go to the store, carefully plan a sensible list. Do not stray from the list once you are in the store, no matter what is dangled in front of you in the checkout line.
- Always buy at least a week’s worth of groceries. The more trips you take to the store, the more you risk “impulse buying.”
- Always shop on a full stomach. You will likely buy more food when you are hungry.
- Where applicable, you should opt for poultry instead of the much pricier red meat.
- If possible, go to the store without your children. They have a tendency to help you fill the shopping cart.
- Don’t be a name brand snob. Generic store brands are often just as good and will save you a lot of money in the long run.
- Foods like pasta, rice and beans are filling and inexpensive. They make good staples in a frugal diet.
- Items with the highest markup are often placed at chest and eye level. Don’t forget to check out foods that are stored lower on the shelves, as they may offer the best deals.
- Shop early in the morning or late at night to avoid crowds. The faster you zip through the store, the less likely you are to stray from your list.
- Watch your cashier ring up your items and then carefully review your receipt. Mistakes are more common than you realize and they will cost you unnecessary expenses.
- Two words: ramen noodles.
One of the least flexible expenses in your household budget is the grocery bill. However, the tips above should help you be a little more diligent and creative when trying to reduce the cost.
Heather Johnson is a freelance writer as well as a feature article contributor for Reward Programs, a site which helps consumers pick the best rewards program to best meet their needs. Heather welcomes your comments and emails related to job inquiries at her email, email@example.com.
|April 15, 2008||Posted by derek under General|
Some of us are lucky – or foolish depending on how you look at it – in that we will be receiving a check in the mail from Uncle Sam bringing the glad tidings of a tax refund!
Forbes estimates that on average, tax payers will be receiving approximately $2,480 by way of a tax refund.
So “Splurge or Save?” That is the question!
Since this blog is all about becoming debt free, you won’t see me advising you to go spend every last penny of your tax refund if you do have debts to pay off. So let’s discuss some of the options for making good use of that tax refund.
Pay Towards Your Debt (Credit Cards, Mortgage, etc.)
Paying towards your debt, particularly credit card debt given the high interest rate on many credit cards, is a wise use of your tax refund. You will be able to reduce the amount of interest you are being charged on a monthly basis and will feel much better by knocking out a chunk of your debt.
If you don’t have any credit card debt, or the rates are very low, you might benefit from using your refund to make an extra principal payment on your mortgage. Given the reduction in savings rates in recent months, you may be able to do better by paying towards your mortgage rather than holding the funds in savings.
One last option related to your debt is that now might be the time to take advantage of decreasing rates and refinance your mortgage. The tax refund could be used to help cover the closing costs during a refinance.
Car Related Expenses
If you haven’t had your car serviced in awhile, there is no better time than now and you can use your tax refund to cover the expense. Perhaps the car needs new tires, or an oil change and tune-up that you have been putting it off.
Proper upkeep of your car will reduce the chance of a breakdown, while also increasing the fuel efficiency of your car. Car maintenance items are best handled early before it becomes a much more serious and costly problem to fix.
Maybe you have been thinking about selling your car in the near future, you can use your tax refund to get it detailed. This costs you approximately $175 and can boost the resale value of your car by as much as $1000+/-.
Set Up a Fund
If you don’t have one already, set up an emergency fund for those times when you are really in need of the extra cash. This is a great fall-back to have in place at all times!
Also, if you are planning for a major expense in a few months time, such house repairs, make a fund for that specific purpose and put away the money in a high yield savings account so that it is available when you need it, along with a small bonus!
If you want, you can apportion part of the refund for all of the nice, sensible expenses above and use the rest to go a little crazy. While you certainly want to be frugal with your money, you don’t have to deprive yourself of all pleasures.
So what will you spend it on, how will you treat yourself?
Perhaps a day’s spa treatment to rejuvenate and revitalize you! Or perhaps dinner at your favorite restaurant and a show you have been meaning to see for a while. Or perhaps you can go in for that Blackberry or X-Box or whatever gadget you have been lusting after. Or perhaps you can take a trip out of town for the whole family.
Last but certainly not least, you can use your tax refund to help those less fortunate by donating the funds to a worthwhile cause that you support. Having the ability to help someone in need can be very rewarding, and chances are you will remember that much longer than the dinner out at the fancy restaurant.
So…what have you planned to do with your refund?
|April 2, 2008||Posted by derek under General|
With the days before we should all have filed our income taxes dwindling away, I am about to undertake something rather ambitious: discuss some tax breaks and exemptions.
The reason I say “ambitious” is because the income tax code is a whopping 1.3 million words long, and that makes it twice as long as Tolstoy’s massive tome “War & Peace” (just a bit of interesting trivia I thought I’d share).
Now there are literally thousands of tax breaks, so I am going to discuss a few breaks that are the most likely to apply to you and your tax situation. And it is our right – and perhaps our duty to ourselves – to do as much as possible to limit our tax liability through appropriate use of the available tax breaks and exemptions.
You can choose to pay fewer taxes by managing your finances in a way to minimize your taxes. It is possible to itemize deductions including expenses for health care, state and local taxes, personal property taxes (such as car registration fees), mortgage interest, gifts to charity, job-related expenses, tax preparation fees, and investment-related expenses. Throughout the year, keep track of all your itemized expenses so at the end of the year you have a clear idea what you can claim as exemptions.
With proper record keeping, you may find that you can take advantage of tax breaks/credits for things such as college expenses, saving for retirement, or for adopting children.
Here are 5 tax breaks that you may be able to take advantage of this year if you have not already done so:
A new tax break in 2007 allows you to deduct your mortgage insurance premiums, in addition to any mortgage interest that you pay, on your 2007 tax return – assuming of course that you itemize your deductions and that your mortgage insurance policy went into effect after December 31, 2006.
Another tax break related to mortgages is the mortgage debt forgiveness, which means that if you had mortgage debt canceled/forgiven by your lender you will no longer have to pay income taxes on that amount.
In the past few weeks we have been talking a lot about IRAs, so you may know that while you cannot claim exemption for your contributions to a Roth IRA, you can for your contributions to a Traditional IRA (up to $4000 in 2007 and an additional $1000 if you are over 50).
You have until April 15th, 2008 to fund your 2007 IRA contributions so it is not too late to take advantage of any associated exemptions when you file your taxes.
The Energy Policy Act of 2005
Consumers who purchase and install specific products, such as energy-efficient windows, insulation, doors, roofs, cooling and solar heating equipment in the home can receive a tax credit.
The amount of the credit and maximum value will depend on the energy-efficient improvement. As an example, you can receive up to $200 for installing energy-efficient windows in your home.
Dependents and Child Care
You are entitled to a $3,400 exemption per child against your taxable income for dependent children. Your child, even if he or she is over 18 and earning a pay check can entitle you to claim them as dependent, so long as you cover more than 50% of their expenses. The dependent must live in your home for more than half the year and be under the age of 19, or under 24 if a full-time student.
If you have to pay for child care or care of an elderly dependent while you are at work, you can claim deductions for payments you make beyond any amount that you already set aside in a flexible spending account. The maximum credit you may receive is a 35% credit on up to $3,000 in expenses for one dependent or $6,000 for two or more, with the amount of the credit decreasing based on your income.
You may be able to deduct certain higher education expenses even if you don’t itemize your deductions. Depending on your income, you may qualify to take a deduction on up to $4,000 in tuition and fees with the amount reducing to $2,000 as your income increases.
Be sure to evaluate all of the recent changes to the tax code as you prepare your taxes this year, as you may be able to take advantage of these tax breaks to save yourself some money.
|March 12, 2008||Posted by derek under Retirement & Investing|
IRAs in general, and the Roth IRA in particular, is a vast subject and many books have been written on it.
With these recent posts, I am trying to simplify this complicated issue and I hope that you are able to benefit from this attempt to clarify matters connected to Roth IRAs.
Since the Traditional IRA has been around for a longer time, people are more familiar with that, and a natural question would be what is the difference between a Traditional IRA and a Roth IRA?
This is what we will look at today.
The eligibility for a tax deduction is the first and most significant distinction between a Traditional IRA and a Roth IRA. Contributions made to a Traditional IRA are tax deductible while those made to a Roth IRA are not.
Thus when you are contributing to a Traditional IRA you are able to get a tax deduction which benefits you by reducing the cost of the contribution itself. By contrast, Roth IRA contributions are made from income that has already been taxed so you don’t enjoy any deductions when you make contributions.
Tax benefits in a Roth IRA accrue only when a person actually attains retirement age, as an early withdrawal of anything other than your contributions will trigger penalties and taxes.
As an example, if you make a contribution of $2000 a year to a Traditional IRA, then that two thousand is deducted from the total amount of taxable income. So if your annual income is $60,000 and you make a contribution of $2000, you then pay income tax on only $58,000. If you make that same contribution to a Roth IRA, you will pay tax on the full amount of $60,000 but when you eventually withdraw the amount and the money that principal earned in the intervening years will be yours tax free!
Taxes on IRA earnings
Whereas in a Traditional IRA, you pay taxes as and when you make withdrawals, in a Roth IRA, such withdrawals of the principal and earnings accrued thereon are wholly tax free so long as you follow the rules and regulations governing withdrawals from your Roth IRA. In fact with a Roth IRA, you can withdraw your principal contributions anytime, without any penalty.
The same is not true for the Traditional IRA because every withdrawal requires tax to be paid on it.
Mandatory Distribution / Withdrawal Age
With the Traditional IRA, mandatory withdrawals begin at age 59 and a half and these withdrawals are required to be continued until the age of 70 and a half.
The benefit of the Roth IRA is that it does not have this mandatory distribution age, and is therefore more flexible and adaptable to your own personal requirements.
There are no income limitations with a Traditional IRA, therefore anyone can make contributions. The Roth IRA requires that you fall within certain specified income brackets to make contributions.
If you plan on living a long and healthy life, and hopefully we all do, a Roth IRA seems to have several benefits so a person who actually reaches retirement age can enjoy tax free withdrawals in his or her twilight years.
What do you think? Have you given any thought to how you are going to plan for your retirement? Have you evaluated whether the Traditional IRA or the Roth IRA is best for your circumstances?
Let me know your thoughts.
|March 5, 2008||Posted by derek under Retirement & Investing|
If a 25-year-old contributes $5,000 each year until she retires and makes an average annual return of 8% on her investment, she’ll have $1.4 million saved by the time she retires at age 65. And the money is all hers — she won’t have to give the IRS a cent of it if she waits until retirement to cash out.
This sounded really good, but it is worth remembering that there are no guarantees of earning 8% annually.
I decided to do some spade work and see how the Roth IRA really works and what the rules are that govern it. There are quite a few eligibility criteria that determine whether you can or cannot enjoy the benefits of a Roth IRA. While there are a lot of upshots, there are some limitations as well.
Like I said in my earlier post, contributions made to your Roth IRA are not tax deductible and if you wait until after the date you reach the age 59 and a half, you don’t pay anything back in way of tax when you take out the money. This is also subject to your having had your savings in your Roth account for a minimum of 5 years. Early withdrawals are generally subject to a 10 % tax. There are, however several exceptions to this rule of 10% tax on withdrawal: this includes certain disabilities, higher education expenses, or if you are a first time homeowner, etc.
The Phase-Out Rule
You qualify to contribute to your Roth account if you fall within certain income brackets. If you are single, and earn less than $99,000 (the sum for married persons filing jointly is $156,000 in this instance) a year, you can make the maximum contribution. Then the amount you may contribute reduces, or is phased out as your income increases. If you earn more than $114,000 (or $166,000 if married and filing jointly) a year, then the permissible contribution becomes zero, i.e. phased out. These limits are increased by $2000 ($3000 if married and filing jointly) for the year 2008. So this is the phase out rule of the Roth IRA. If however your income rises above the amounts mentioned above, your balance in the Roth account remains sheltered from tax.
Maximum Contribution Rule
There is a ceiling on how much money you can deposit into your Roth account each year. You can deposit up to $4000 for the year 2007 and $5000 for the year 2008. If however you are above 50 years of age, then under the catch-up provision you can contribute an additional one thousand a year ($5000 and $6000 for the respective years of 2007 and 2008). Beyond 2007 this limit will be revised subject to the inflation index.
There is no age limit or minimum required age to make a Roth contribution, any child with earned income can make it and a person can do so even over the age of 70 and a half, provided they have an earned income.
Stay tuned for more on the Roth IRA in upcoming posts.
|February 27, 2008||Posted by derek under Retirement & Investing|
Have you ever asked yourself the following questions:
What is a Roth IRA? How does a Roth IRA work? What are the Roth IRA rules?
If so you need to stay tuned, as over the next few weeks we will explore Roth IRAs in more depth.
Today we will begin with an overview just to get you started in the right direction.
An IRA, which stands for Individual Retirement Arrangement – although many people refer to it as an Individual Retirement Account as well – is not just about planning for your ultimate retirement in the dim and distant future. It is also about a safe and effective means of attaining financial stability and having a sound fall-back in place, should you need it in a crisis.
And remember, crisis will not wait until your retirement to strike!
If you have been keeping track of previous posts here – such as 7 Steps to Save You Money, 9 Tips to LBYM, How to Trim Your Budget, and The Right Approach to Credit Cards – you are probably on your way to being debt free or perhaps already there!
So the next step is to find a safe haven for your hard earned dollars; your income that has already been taxed – which is where the Roth IRA comes into play. It is true that contributions made to the Roth IRA are not tax-deductible, but that is pretty much the only downside. This is because what you then withdraw (of your contributions only unless it is a qualified distribution) from the account is tax free!
That is the one great plus about the Roth IRA in particular. It is flexible and far less hide-bound than Traditional IRAs.
The Roth IRA, described by many experts as a “gift from Uncle Sam” works like this: You open an account (many banks, credit unions and even mutual fund companies offer you this facility) with any institution that suits your requirements. Be sure to check for eligibility, initial minimum investment etc. as each institution may be different.
Since you have many options as to where you can invest your Roth IRA, such as stocks, bonds, mutual funds, certificates of deposit, or even real estate, you need to choose accordingly. Once you have made your initial contribution to your new Roth IRA, subject to the maximum Roth IRA contribution limits, you are ready to begin investing.
Then you watch your little nest egg grow, providing you with financial stability and a wonderful sense of security!
|February 20, 2008||Posted by derek under Identity Theft|
Are you worried about identity theft?
Have you been taking any steps to help reduce your risk of being a victim of identity theft?
Ask anyone that has been victimized by this serious crime and they will tell you the trouble it can cause. Not only can your credit be destroyed but it will likely cost you a considerable amount of time and money as you try to repair the damage.
Identity theft prevention should be on your mind and the good news is that there are very easy steps that you can take right now to safeguard your information.
- Shred financial documents and anything with personal information. You can purchase a shredder for under $100.00 at the local office supply store and shred everything before disposing of it in the garbage. Another option is to save all of these documents in a box and then take them to a company or service to shred. Your local town may offer an special event once or twice a year where you can bring your documents to be shredded for no charge.
- Don’t give out your personal information on the phone, through the mail, or over the Internet unless you know who you are talking with. One of the common scams that catch people is when someone calls and pretends to be from your bank or credit card. They sound legitimate and ask you to provide your personal information in order to verify your account. Unless you have initiated the conversation, don’t share your personal information.
- Protect your Social Security number. At one time many people had their SSN on their personal checks, which obviously is not recommended. Don’t carry your SSN card with you either, as if you lose your purse or wallet your identity will immediately be at risk.
- Never click on links in an unsolicited email. As discussed in the tips to protect yourself from phishing scams, be skeptical of any email that you receive and type in the web address directly rather than click on the link.
- Use obscure passwords. It is scary to think of how many people use passwords such as “password” or “secret”. Avoid using common information such as your birth date, name, address, or your maiden name. While it might seem inconvenient to use a password like “tD3bQ2qm28K”, it will be much harder for someone to crack.
- Keep your personal information secure, even in your home. Many people think they are safe within their home, leaving information out on the table or desk. When you think of the people that might come through your house – repairmen, cleaning people, roommates, and even neighbors or friends, you never know who might be desperate and steal your information.
As you can see, none of these tips are overly difficult to follow but can really go a long way towards helping you prevent identity theft.
Identity theft is something that you want to be proactive with preventing rather than reactive after it has happened.