Upgrade Your Life!

Thinking about “Free Money”

financeandfitness — Wed, 15 Apr 2009 23:24:50 +0000

I’ve been spending a lot of time thinking about free money lately, meaning money that I do not include in my budget. This money can come from a variety of sources, but for me the main two are annual income increases and side jobs (like blogging). As I’ve mentioned before my recommendation to you is to try to save part of your annual raise each year. If you get a 2% raise, save 1% of it. Or .5%. Or .005%. The amount doesn’t matter much, but what I’ve found is that “free-money” gives me the opportunity to grow as an individual. I use this concept to enjoy life and to grow my own skills.

What skills am I learning with the concept of free-money? I’m learning to be a long-term planner, because right now these funds are minimal at best. It would be easy to lose them entirely by eating out an extra time a month or buying me something shiny.

I’m also learning to be creative, because I want to find ways to increase this group of funds. And I want to creatively invest the funds too. Creativity takes time to develop, and it is a unbelievably helpful skill to have both in good times and difficult ones. We get so stuck in our normal everyday mode of living that we can’t even imagine doing things that would benefit us, like changing jobs, leaving work a ½ hour earlier than we currently do, or selling our home and moving across the country. Develop a little creativity and a world of options becomes available.

I’m also learning how to dream, imagine, and use the left side of my brain. I think I gave up part of my imagination skills when I had to put food on my table early in life. But dreaming is part of being happy, and I can start practicing and developing these skills now in small, less important areas of my life.

Create “Free Money” In your budget

financeandfitness — Tue, 14 Apr 2009 23:24:24 +0000

I love free money, which I can designate for use however I see fit. By my own personal definition “free money” is money that is not needed or included in my current budget. I especially like money that is earned outside of my primary income. For the most part right now this comes from blogging, and is very minimal. But even at $10 per month, I like thinking of this extra-money fund as a completely separate entity. It may never make me a millionaire, but I like to think about segregating it, perhaps in a separate ING sub-account or (eventually) mutual fund that perhaps could grow. Maybe I’ll save it for a while and do something nice for my wife or kiddos (when they arrive). Maybe I’ll use it towards the kids college fund, since I’m having a hard time finding the money to fund their college fund in their budget. The options are endless, but it gives me an opportunity to dream and plan and use my brain, which are all good things!

Save Money With Hulu

financeandfitness — Mon, 13 Apr 2009 23:23:56 +0000

I may be a bit behind the times, but did you know you can watch many of your favorite TV shows online now? There are several services available now that might allow you to cancel your cable for good (just not your cable internet). One such site is hulu.com. I haven’t used it myself yet, but it appears to have quite a few shows. I wonder if they make you watch commercials (they probably do), but it is an interesting concept.

Most major network also allow you to watch the most recent episode of shows online after the initial airing. CBS, NBC, FOX, etc all have full-length shows available on their sites.

Of course if you’re like my wife and only watch the more unique cable channels then you might be stuck with the cable bill.

“I Can’t” versus “I Don’t Want To”

financeandfitness — Sun, 12 Apr 2009 23:23:19 +0000

I can be stubborn at times, and I’m working to be more open to new ideas and to try to solve my problems creatively. And I think most people are stubborn as well, and lack the ability to creatively solve their problems.

I had a good example of this earlier in the week. My mother called and had some financial questions for me after she and my father saw their financial planner earlier this week. One thing I mentioned during the conversation was that they could move to a smaller house and perhaps fund part of their retirement that way. “But we love this house, and the kids enjoy it when they come to visit. We could never move.”

Check and mate. When you’re closed off to making changes you might as well just give up and let what happens happen. Action is required for change and improvement.

Tax Tip: don’t forget about accounts that earned less than $10 in interest

financeandfitness — Sat, 11 Apr 2009 23:22:44 +0000

I’ve mentioned this yesterday but I’d like to say it again: you must include all interest earned when you file your income taxes. That’s probably no surprise to you, but what may surprise you is that if you earned less than $10 your financial institution(s) are not required to send you a 1099-int form.

Therefore it is up to you to keep track of this and make sure you include all of the interest when you prepare your taxes. I prefer to keep a list of all of my financial institutions so that I don’t accidentally forget about an account.

Clearly this will be an issue primarily for savings accounts that pay very little interest, savings accounts that have very little money in them, and checking accounts that pay a miniscule amount of interest (these are the ones I tend to overlook).

Keep a list of accounts and tax documents to make tax season a breeze

financeandfitness — Fri, 10 Apr 2009 23:21:56 +0000

I also recommend keeping a checklist of tax-related information you expect to receive over the course of the year. For example, I keep an eye out for the following:

One-time charitable donations
Donations to goodwill
Property taxes
Receipts for very large items (like cars, boats, etc.)
A list of all bank accounts, mutual fund companies you use (if you have an account directly with the fund company), brokerage accounts, college saving plan accounts, etc. You need to know exactly where all of your money is and who is paying you interest, dividends, capital gains, etc.

Then when the forms come in you can just add them to your tax folder and check off the one’s you’ve received. Also note that you need to include banks and financial accounts that pay you less than $10 in interest a year as well, even though these institutions are not required to send you a 1099-int form.

Tax Tip: organization is the key to an easy tax season

financeandfitness — Thu, 09 Apr 2009 23:21:24 +0000

Tax season can be painful or it can be easy. It’s all up to you and how well organized you are. I used to be very disorganized, and preparing my taxes even with a professional was a nightmare.

Now I keep a folder starting at the BEGINNING of every year to hold tax documents. If any mail comes in that affect the current tax year I place it in the folder. Then when most of my forms come in early next year I place them in the folder as well.

You can even start doing your taxes in mid-january as your year-end forms start coming in. That way you won’t need to dedicate a full day around April 10th to “start” your taxes. You just start when you get the first form, and complete your taxes as the forms come in.

Tax Tip: if you have major life changes occurring next year, change your withholdings now

financeandfitness — Wed, 08 Apr 2009 23:20:50 +0000

If you have major life changes occurring this calendar year, you should adjust your withholdings appropriately now. For example, my wife and I are expecting twins this year. Although they’re not due until mid-year, they will affect my 2009 tax filing. Therefore I need to adjust my W-4 now to reflect this change rather than waiting until mid-year, because I’m currently withholding too much given these two new wonderful deductions.
Other life changes might include purchasing a home with a mortgage (interest is sometimes deductible as are real estate taxes), making a large purchase (if you deduct your sales taxes), adopting a child, etc.

Check with your tax professional or your tax software to determine if you are withholding the correct amount.

Tax Tip: reduce your withholdings if you receive a significant refund

financeandfitness — Tue, 07 Apr 2009 23:20:19 +0000

If you complete your 2008 taxes and find that the government owes you money you need to do two things. The first thing is you need to understand WHY they owe you money. Did they owe you money the last few years, or is this a new occurrence? Do they owe you money because of a one-time occurrence, like you donating a lot of items this year?

The cause is important because the second thing you should do is adjust your withholdings appropriately so that you are not over-withholding. Having too much withheld from your paycheck is essentially giving the government an interest free loan. Therefore you need to aim to neither owe nor be owed taxes at the end of the year.

Tax Tip: do your taxes yourself, even if you also plan to use a professional

financeandfitness — Mon, 06 Apr 2009 23:19:49 +0000

You should do your taxes yourself, even if you plan to use a professional for your official tax preparation. Tax prep software costs about $50 and is well worth the investment. By doing your own taxes you can learn enough to ask better questions of your tax preparer.

I’ve used both high-end and low-end tax preparers, and after doing my own taxes for just one year I realized that both made MARJOR mistakes. Not only did these “professionals” cost me lost money to the government, but I had to pay them to do it!

So here’s the deal: be an informed buyer of financial services and do your own taxes at least once every five or ten years. You’ll learn a lot about what’s important, and you’ll be able to work more efficiently with your tax preparer in the future.