Poll: Which Tax Software Did You Use In 2011?
February 4th, 2012 | Posted by Global InvestorsJanuary 31st was the deadline for companies to mail out W-2 forms and 1099 forms involving other income and interest. Coming up is February 15th, the deadline for brokerages to send out 1099-B forms listing stock sale proceeds.
That means you early-birds out there (not me) are probably chomping at the bit to file your taxes! So here’s a question to you readers about last year:
A better question would be why you chose that software – price, convenience, trust, quality of product, or what? Would you have switched if a competitor was $25 cheaper?
Related posts:
Poll: Which Tax Software Did You Use In 2011? from My Money Blog.
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More Ways To Increase Your Free Dropbox Storage
February 3rd, 2012 | Posted by Global Investors
I love Dropbox. I like that it’s a real folder on my computer that is also invisibly synchronized and backed up in the cloud. The best part is that usually I forget it’s even there. Other online storage apps like Box.net or SkyDrive don’t work nearly as seamlessly for me.
The Dropbox free version offers up 2 GB of storage free to start, which you can increase to nearly 20 GB with various tasks. It may not be big enough for a full backup, but plenty for my important files. Check out this Lifehacker guide that details all the possibilities. You get 250 MB free by signing up under a referral link, and I get 250 GB extra too. I’ve only gotten 3 referrals up until now, but with other stuff was already at 4.5 GB free.
Today Lifehacker adds that right now if you install their new Beta version which lets you automatically back up photos and videos from your cameras/phones when connected to your computer, Dropbox will give you even more space – for every 500 MB of photos and videos automatically uploaded, you’ll receive another 500 MB of space permanently, up to 4.5 GB total. I synced up the photos from my iPhone and already have another free gig and counting. Sweet.
Related posts:
More Ways To Increase Your Free Dropbox Storage from My Money Blog.
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How To Retire Early and Live Well With Less Than A Million Dollars [Book Review]
February 2nd, 2012 | Posted by Global Investors
I enjoy reading older books about early retirement; I seek to learn from their experiences, but I also look for ways in that their perspective is colored by their own time period. For instance, a book written in the 80s1 – an era of high inflation – would likely assumed that interest rates would be moderately high forever, at least in the 5% range. The tendency to extend recent trends into the future is unavoidable, and something you should consider when reading or making forecasts today.
This is a review of How To Retire Early and Live Well With Less Than A Million Dollars by Gillette Edmunds, a book published in 2000 that was recommended to me by a reader. Edmunds was a former tax attorney and financial journalist who retired in 1981 at age 29.
Unreasonably High Expected Returns
Remember that for both the 1980s and the 1990s, the average annualized total return of the S&P 500 for both decades was around 18% a year. Imagine two decades of such returns, all before the dot-com bust and the housing bust. Edmunds retiring in 1981 turned out to be some of the luckiest timing possible. As a result, a major criticism of this book is the continued expectation of high stock returns going forward. The quoted excerpts below are taken verbatim from the book:
I bet these assumptions sounded reasonable, perhaps even conservative, in 2000 but they are just bad jokes today.
Owning Non-Correlated Asset Classes
Edmunds tells us not to time the markets, ride out temporary market drops, and to maintain low investment costs. He advises you to hold a variety of “non-correlated” asset classes such as:
Edmunds believes that these asset classes are on different business cycles. When one is going up, the other is going down. However, I don’t like the term “non-correlated”, as very few asset classes have negative correlations these days. Low or minimally correlated is a better term. As we saw in the recent financial crisis, when the poo hits the fan correlations can go back to 1 (everything goes down together). However, I agree with the general asset allocation advice of holding different asset classes with minimal correlations. He counts as an early proponent of not holding too much in US stocks (no more than 1/3rd of total portfolio), and an equal amount in foreign stocks (also use for 1/3rd of your portfolio).
I did have an issue with the lack of supporting evidence as to why these assets and not others, as we only get weak arguments like “after owning bonds for about five years, I realized that a portfolio of five different high-return asset classes that excluded bonds had both high predictability and high returns”. I’m sorry, but making a conclusion to stop holding bonds after 5 years of data is just plain bad advice and makes him come off as egotistical.
He ends the book with a philosophical epilogue with the usual “money isn’t everything, enjoy life with family and friends” material. I don’t mean to belittle the importance of this factor, just that I didn’t really learn anything new from it. He does come off as well-intentioned and talks about the effect of his divorce. Despite its flaws, I found this book worth the read as it encompasses the overall philosophy of one person who had been successfully retired for 20 years. Just remember he had a very strong tailwind of high returns, and adjust your own expectations accordingly.
Other “early retirement” books that I’ve reviewed:
Related posts:
How To Retire Early and Live Well With Less Than A Million Dollars [Book Review] from My Money Blog.
© MyMoneyBlog.com, 2012.
View full post on My Money Blog
New Checking Account Promotions: Citibank, Chase, M&T Bank
February 1st, 2012 | Posted by Global InvestorsInterest rates looks to remain tiny for a long time, so if you want to boost your interest earned while keeping your money safe in banks, taking advantage of sign-up bonuses is one way to do it. Earning 1% APY on $10,000 is just $100 a year, and it’s even hard to get 1% APY now! Why not double or triple that with some new accounts.
Citibank $50 bonus if you open a Citibank account with $1,000 and complete 1 direct deposit and 1 electronic bill payment for 2 consecutive months. New checking account customers only. There’s no monthly service fee if you maintain a $15,000 combined average monthly balance requirement in eligible products; otherwise $20.00 monthly service fee is applied. Eligible products are linked deposits, loans, mortgages, and investment accounts. $100 bonus available with Citigold account.
Chase Bank $150 bonus when you open a Chase Total Checking account and set up direct deposit (new Chase checking customers only). This account is free if you make a $500+ direct deposit each month, or have $1,500 minimum daily balance.
M&T Bank $100 bonus when you open a MyChoice checking account and set up direct deposit within 90 days. This account is free if you maintain a direct deposit each month or have $500 minimum daily balance. $125 and $150 bonuses also available with upgraded accounts (and higher requirements).
Capital One $100 bonus when you open a Interest Online Checking account by 1/31/2012 using offer code CHEC168DF and make a direct deposit of $250 or more within 90 days. No monthly service fee, and pays 0.75% APY on balances less than $100k.
Related posts:
New Checking Account Promotions: Citibank, Chase, M&T Bank from My Money Blog.
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The Overnight Rule For Managing Your Portfolio
January 31st, 2012 | Posted by Global Investors
Recently, I came across an investment tip called the Overnight Rule from Carl Richards via the NYT Bucks Blog:
Imagine that all your investment holdings were sold overnight by accident.
You can’t undo the trades, and now all you have is cash.
Would you buy back everything you owned previously again at their current prices? If not, why are you holding them now?
I think this provides a fresh look at your portfolio, as many times we hold investments for irrational reasons. For example, there is the well-documented trait of loss aversion (even though readers of this blog may be immune), where investors really hate selling at a loss, even more than they love selling with a gain.
Perhaps you bought the stock at $20 a share, and it is now at $15 a share. You want to get rid of it “just as soon as it gets back to $20 a share”, so that so you can say you didn’t lose money on it. It’s better to admit the mistake and put your money in something better.
Then there is regret aversion. Perhaps you bought it at $50 a share and now it’s at $400 a share. You get to tell your friends how you bought Apple at $50 a share. You’re afraid it’s overpriced, but you don’t want to miss out if it rises some more. You sit on your gains and choose inaction instead of having to make a hard decision even though your money could be better deployed elsewhere.
Maybe it is company stock from your job, or shares that you inherited from a beloved family member. Whether is it some form of sentimental attachment, inertia, or plain laziness – you may want to consider your reasons for holding them.
There is a small exception to this rule if you are sitting on large capital gains in a taxable account and don’t want to realize them and get hit with the tax bill, especially if the alternative investment is also very similar (ex. mutual funds with similar holdings). However, even in this scenario you want to make sure that you’re not holding a poor investment just to put off a tax bill.
I did not come up with this myself, but read about this rule somewhere online within the last month. I’ve searched for the source but can’t find it, so please let me know if you do. Found it, thanks!
Related posts:
The Overnight Rule For Managing Your Portfolio from My Money Blog.
© MyMoneyBlog.com, 2012.
View full post on My Money Blog
Clover Pay $5 Bonus via Referral
January 30th, 2012 | Posted by Global Investors
Clover is a new person-to-person payment system for use between phone numbers. Simple fees (none for personal use), simple interface. If you sign-up via invite from a registered user, you’ll get a $5 bonus (I actually got a $5 Amazon GC + $1 credit, but the link just says $5). The referrer gets $5 too. You don’t even need a credit card or bank account to start, just a phone number (landline numbers work, but it’s optimized for Android and iPhone/iPod Touch users).
I am out of invites (thanks!), here is Mrs. MMB’s Clover $5 invite link. I think she still has 10 left or so, or feel free to randomly choose from one of the links in the comments.
Given the limited numbers and the fact that you can only join via referral, after you join go ahead and leave your own referral link in the comments. I have to approve the comments though, so please be patient as it may take a while to show up.
Related posts:
Clover Pay $5 Bonus via Referral from My Money Blog.
© MyMoneyBlog.com, 2012.
View full post on My Money Blog
0% APR Balance Transfer Promotion Updates
January 29th, 2012 | Posted by Global InvestorsIf you’ve been thinking about a 0% balance transfer, here is some news that may help you make your decisions. This is the best info that I have, you can judge me on the accuracy in the future. 
Right now both the Citi Platinum Select Mastercard and the Citi Diamond Preferred Mastercard have 0% APR on balance transfers and purchases for 21 months. Balance transfer fee is 3% with a $5 minimum. No annual fee. My unofficial sources tell me that the 21 month offers from Citi will be cut to 18 months starting on February 1st.
In addition, the Discover More Card has 0% APR for 12 months but with no balance transfer fee. No annual fee. My unofficial sources tell me that this will be extended for the rest of February, but after that it will likely end. This matches historical patterns that this is a limited-time post-holiday promotion. More details on the promo here.
As always, these cards should be used as a tool to lower the interest rate on your existing debt to accelerate payoff. If you can pay it off in the proper timeframe, some people have paid off their student loans. Consumer debt is kryptonite to financial freedom.
Related posts:
0% APR Balance Transfer Promotion Updates from My Money Blog.
© MyMoneyBlog.com, 2012.
View full post on My Money Blog
Savings Bonds vs. Bank Savings Accounts
January 28th, 2012 | Posted by Global Investors
(In this post, I’m not going to provide all the background information on savings bonds that I normally do. For that, please read the older posts in my Savings Bonds category.)
When the Treasury announced the $10,000 purchase limit for 2012, a few readers asked if you should buy savings bonds in January, or wait until later in the year. Since then, a few things have happened. For one, the Federal Reserve has basically said that they will keep their target fed funds rates at zero until late 2014, while setting a target inflation rate at 2% annually. Translation: Interest rates on savings accounts and similar products will be remain crap while the things we buy get more expensive.
Also, we have another month’s worth of Consumer Price Index (CPI) data which is how the inflation rate is defined for savings bonds. The next 6-month variable rate update will be based on the CPI-U change between September 2011 and March 2012. We are halfway there:
CPI-U
Sep 2011 226.889
Oct 2011 226.421
Nov 2011 226.230
Dec 2011 225.672
Jan 2012 ?
Feb 2012 ?
Mar 2012 ?
You can see that inflation is actually negative over these three months. However, user MoneyOCD of Bogleheads posted this informational chart showing that in recent years there have been many periods of negative inflation from September to December, only to be followed by periods of higher inflation from December to March.
Basically, making predictions now is premature. If you buy in January through April, you will get a fixed rate of 0%, and a variable rate of 3.06% for six months. Given the interest rate environment, this is pretty much one of the best options for “safe” money. If you wait all the way until May, you’ll get something new based on whatever happens to inflation the next few months along with a fixed rate that will most likely be zero again. The inflation rate resets every 6 months based on your purchase month.
In general, if you have the money and are looking to put it in shorter-term, low risk investments that are guaranteed not to lose money (in terms of face value), I would be maxing out my limit on savings bonds for 2012. Keep in mind that savings bonds can’t be cashed in for an entire year after purchase. My personal opinion on the short-term? I don’t see any benefit in waiting until May. If you have money to put aside now, buy Series I savings bonds now. If you don’t, just wait until you do. The rate is already higher than savings accounts or 1-year CDs, and by waiting around in a 0.75% savings account or 1-year CD you’ll be missing out in interest.
If you’re looking to buy in January, I’d put in your order today at TreasuryDirect. It’s better to buy near the end of the month, as you get credit for the entire month no matter if you buy at the beginning or the end.
Related posts:
Savings Bonds vs. Bank Savings Accounts from My Money Blog.
© MyMoneyBlog.com, 2012.
View full post on My Money Blog
Pay Your Kids To Fund Their Own Roth IRA?
January 27th, 2012 | Posted by Global Investors
You’re probably aware of the wonders of the Roth IRA and how it allows your money to grow completely free from taxes, even upon withdrawal. An added wrinkle is the lack of age restriction, so that even kids with earned income (wages, salaries, tips) can contribute to a Roth IRA up the lesser of their taxable income or $5,000.
Along those lines, I received a PR e-mail from a site called 1417power.com. The idea is that you pay them “tuition”, and in return they pay your kids official job income that makes them eligible to contribute to a Roth IRA. They claim to follow all applicable child labor laws for those aged 14 to 17 (thus the name). Your kids do thing like fill out marketing surveys, but you’re essentially buying them a job. Digging through their fee structure, roughly 50% of what you pay them is skimmed off to go to the site owners.
Naturally, my question was – why can’t I just do this myself? The idea of paying your kids to do things like babysitting, lawn care or landscaping work, or manual labor seems simple enough. However, this Fairmark article argues that paying your own kids for chores is usually not considered taxable income, so you can’t “switch it” to taxable income for Roth IRA purposes when it benefits you. I’m not completely convinced, but for the sake of argument let’s explore other options:
There would still be some loss, as their gross income would be subject to payroll taxes like Social Security and Medicare, as well as a small amount of federal income taxes (less than 10%). But if your child has the discipline to not touch the money for decades, the tax-free growth could be enormous. You’d have to be comfortable with the fact that they could do whatever they wanted with the money at age 18 as they can withdraw the money after taxes and penalties.
The Parental IRA Match
Another move taken from this Forbes article for those that are already parents of teenagers with part-time jobs is to match their earned income. If little Jane earns $3,000 being a lifeguard, then let her spend her all or part of her take-home pay, but help her fund a Roth IRA to the full $3,000.
Effect on College Financial Aid
From my quick research, it appears that retirement accounts like Roth IRA are not considered an asset by the generic FAFSA form, but individual universities may deem them as a student asset. This could make for example 25% of the IRA to counts toward the student’s expected contribution, which doesn’t seem too bad.
Here’s a question for the parents out there – have you done anything along these lines? What did you do and why (or why not)?
Related posts:
Pay Your Kids To Fund Their Own Roth IRA? from My Money Blog.
© MyMoneyBlog.com, 2012.
View full post on My Money Blog
Citi Dividend Platinum vs. Chase Freedom Visa: Which Is Better?
January 26th, 2012 | Posted by Global InvestorsSome of you may not like the idea of trying out a new credit card with an annual fee and possibly having to cancel the card later (even if comes with a big sign-up bonus!), though the effect on your credit score is a lot less than many media articles would lead you to believe. Here are a couple of cards with $200 sign-up bonuses and minimal requirements (indeed, they would have been rock stars in 2008 and 2009) – but are also everyday “keeper” cards with no annual fee. I’ve had both of them for years.
Chase Freedom Visa – $200 Bonus
Citi Dividend Platinum Select Visa – $200 Bonus
Which one is better?
Both offer a $200 bonus after spending $500 on the card for anything (40% back). Both offer 5% back on select categories, and the good thing is you can benefit from having both cards since their categories often don’t overlap. Both require you to “activate” the 5% online each quarter, which is a bit annoying but only takes a minute. Both cap their rewards at similar levels (5% of $1,500 is $75 per quarter = $300 per year). Both have no tiers on their 1% back on everything else. The Chase Freedom has no expiration of rewards as long as the account is open, whereas the Citi Dividend rewards do not expire as long as you have activity once every 12 months. Last I checked, the minimum redemption amount was $20 for Chase, $50 for Citi. Overall, they are both very similar in my opinion.
However… in my credit card survey a few weeks ago with over 3,000 reader responses, there was an open-ended question asking which card was the “best credit card on the market today”. The #1 most popular answer was the Chase Freedom card, beating out everyone including travel cards. Where was the Citi Dividend card? Not even in the top 20. The people have spoken, but I’m really not sure why! Better commercials?
Related posts:
Citi Dividend Platinum vs. Chase Freedom Visa: Which Is Better? from My Money Blog.
© MyMoneyBlog.com, 2012.
View full post on My Money Blog
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