My mother has often told me the "Squeaky Wheel Gets the Grease". I suppose that's a simplification of a rather difficult proposition at times. When buying anything -- cars, advertising, haircuts, toasters, etc. -- there is more than a decent chance of asking the business owner for a discount. Of course, the bigger the ticket item the more you want to push.
The U.S. is a bit of an odd duck in this area. Believe it or not, most countries expect you to dicker. I've learned that people from India are particularly price sensitive on the purchase of things. Those types typically just "want the job done" at the cheapest price. Unfortunately, that costs them money in many aspects. Quality many times just gets discarded. The true measure of a product IMO is value. Sure. I can buy a Chevy Cobalt, but is it going to last or will it cost me in repairs?
Value is then the driving force behind a deal. The bigger the ticket item, the more research you should put in up front. Consumer Reports is a frequent haunt when my wife and I buy. It gives great comparisons and average prices. So, when we do narrow it to the two to four models we would like, it is then we go price hunting. I think we've successfully driven this home to our daughter. She just bought her first car about a year ago and she researched and researched. She listed out the options she wanted and finally settled on about four models. When we went car shopping, we felt we had an edge in knowing the value of the cars. We didn't buy the cheapest one, we bought with value in mind. We weighed the options first, and made an informed choice.
On an every day routine purchase, get to know the discounts involved. Take pizza for instance. I always ask about the specials. I could have for instance yesterday, just went ahead and ordered a large one topping pizza for $12.49. When I asked about any specials, they had one: A large up to four toppings pizza for $11.11. I also purchase my haircuts in advance with a gift card. Why? $9.99 vs. $13.00 regular price. Once you are in a stable financial situation, pre-paying can be very powerful and save fist fulls of cash. You just need to pay attention or ask.
I recently pointed out that one advertiser's rates were nearly double their competitors. If I'm buying quality, I weight that, but rarely would a price be double even factoring that in. I could literally buy two lesser products that might last only three-quarters as long, but I'd easily be money ahead. Quality is important and goes a long way toward value pricing, but there is always a break even point. That point is the tipping point of value.
So, go out there and don't blindly buy. Think about it. Ask for discounts and most important -- pay attention. That large jar of spaghetti sauce that isn't on sale may not be the bargain. The smaller jar which is on sale is. The price per ounce or pound is the better measuring stick. The art of the deal is all well and good. But the one who prepares, pays attention, and asks for discounts is the one walking away with the best valued product.
Tuesday, January 11, 2011
Thursday, December 23, 2010
Year End Tax Planning
Do you have an unusual situation in comparison to last year? If so, please go see your tax adviser. Otherwise you could be surprised by a tax bill in April. Even if your adviser charges a little, the advice could be worth well more than what you pay. We don't charge for tax planning if they are a current client. Ask your tax professional if that's included. Paying a little more for that inclusion would be well worth the extra.
For instance, if you normally get the Earned Income Tax Credit with several kids as exemptions and the only income you have this year is unemployment, you may be in for a rude awakening, especially if you did not choose to withhold taxes on that unemployment. Under the tax code unemployment is not considered earned income and you will not be entitled to any EIC which for many is a very substantial credit and is the driver for getting a refund. Instead you may be looking at a balance due. Working even a minimum wage job is far better than staying on unemployment, even if at a glance the unemployment is more on a take home pay basis.
The EIC, the additional child tax credit, and the making work pay credit all snowball and become a dynamic threesome of refundable credits that push up a tax refund to almost absurd levels when compared to the income earned. For instance, a single person making $15,000 in unemployment would get no refund at all. The same person making $15,000 in wages would get a windfall refund of at least $7,850. You read that correctly -- at least 52% of what they made annually due to those three credits.
There are many other scenarios I could outline, but the more common ones for year end planning are: Withholding adjustments, charitable giving methods, capital gains taxation, buying or selling real estate, buying equipment (for businesses and landlords), social security impacts (getting credits or early retirement planning), paying projected state or local balances due, setting up or contributing to pension plans, and medical expense payment timing.
If you do your own taxes and your situation is different, it is well worth an afternoon to sit down and do a projection based upon last pay stubs and estimated amounts. The well of opportunity and tragic consequences run equally as deep without planning. I urge you to thwart the latter.
For instance, if you normally get the Earned Income Tax Credit with several kids as exemptions and the only income you have this year is unemployment, you may be in for a rude awakening, especially if you did not choose to withhold taxes on that unemployment. Under the tax code unemployment is not considered earned income and you will not be entitled to any EIC which for many is a very substantial credit and is the driver for getting a refund. Instead you may be looking at a balance due. Working even a minimum wage job is far better than staying on unemployment, even if at a glance the unemployment is more on a take home pay basis.
The EIC, the additional child tax credit, and the making work pay credit all snowball and become a dynamic threesome of refundable credits that push up a tax refund to almost absurd levels when compared to the income earned. For instance, a single person making $15,000 in unemployment would get no refund at all. The same person making $15,000 in wages would get a windfall refund of at least $7,850. You read that correctly -- at least 52% of what they made annually due to those three credits.
There are many other scenarios I could outline, but the more common ones for year end planning are: Withholding adjustments, charitable giving methods, capital gains taxation, buying or selling real estate, buying equipment (for businesses and landlords), social security impacts (getting credits or early retirement planning), paying projected state or local balances due, setting up or contributing to pension plans, and medical expense payment timing.
If you do your own taxes and your situation is different, it is well worth an afternoon to sit down and do a projection based upon last pay stubs and estimated amounts. The well of opportunity and tragic consequences run equally as deep without planning. I urge you to thwart the latter.
Friday, December 17, 2010
Kicking it Down the Road
Now there's a phrase that everyone should know. You can think of it as the anti-thesis of Truman's "The Buck Stops Here". Politics have devolved into a "not on my watch" mentality. The person at the end will be left holding the bag, when the music stops. Problem is the music hasn't stopped yet.
We elect officials that are suppose to look out for us in the long term. But unfortunately the electorate only seems to elect officials with a "what have you done for ME lately" attitude. We all need to wake up. We can not continue to pile on debt and make believe that problems will go away. We need action now. We can not kick it down the road any longer. The debt will pile up to enormous levels and the whole system will collapse. For my analogy, the music will stop.
No more government handouts -- no tax credits, education, military, police, etc. It WILL happen. It's a certainty. Just like defunct businesses, banks will only lend for so long and they'll cut their losses. They will stop giving. The government's lenders will do the same. They will stop. Interest rates will climb. We will pay more and the debt will bury us.
Congress and the President needs to stop "Kicking it Down the Road". That solves nothing. There ought to be a law.... Good luck in getting that passed.
We elect officials that are suppose to look out for us in the long term. But unfortunately the electorate only seems to elect officials with a "what have you done for ME lately" attitude. We all need to wake up. We can not continue to pile on debt and make believe that problems will go away. We need action now. We can not kick it down the road any longer. The debt will pile up to enormous levels and the whole system will collapse. For my analogy, the music will stop.
No more government handouts -- no tax credits, education, military, police, etc. It WILL happen. It's a certainty. Just like defunct businesses, banks will only lend for so long and they'll cut their losses. They will stop giving. The government's lenders will do the same. They will stop. Interest rates will climb. We will pay more and the debt will bury us.
Congress and the President needs to stop "Kicking it Down the Road". That solves nothing. There ought to be a law.... Good luck in getting that passed.
Friday, December 10, 2010
Pop Up Ads on Internet Pages
Don't get me wrong. Advertisers have to advertise to get their messages out. I understand that. But do they really have to cover up the article I'm reading to do that? Really? I'm reading an article and some ad over at the side just expands and covers up my entire article, making it impossible for me to read.
To top that off it's usually some drop-dead gorgeous model or buff dude that's pushing something that I don't want or use. If anything, I'll remember that ad negatively. You see I don't see supermodels in my daily life. Yeah, I'm like any other guy and fantasize about meeting one, but honestly, I'm not going to. So why interrupt my reading of an article that I know some writer slaved over to put together? The ads on the side get my attention enough. If I'm interested it's just a mouse click away.
The worst are the video ads that cover the article. I might have moused over something that triggered "the ad from hell". If I'm in a quiet office space, I've got to tell you... that's embarrassing. I'm quietly reading my article. Possibly doing research for work or just keeping up to date on things and bam! There's suddenly a hot chick blaring on about a $80,000 car that I can't afford, nor do I even care about. Of course the volume on the ad is about three times too loud and everyone turns their heads in your direction.
Thank you Chevrolet! I know the programmers that you hired to insert that ad on my web page think they're clever and all, but quite frankly you can take your car and shove it. The annoyance factor is something everyone should consider when buying. I certainly do. Perhaps we'd see less of that.
To top that off it's usually some drop-dead gorgeous model or buff dude that's pushing something that I don't want or use. If anything, I'll remember that ad negatively. You see I don't see supermodels in my daily life. Yeah, I'm like any other guy and fantasize about meeting one, but honestly, I'm not going to. So why interrupt my reading of an article that I know some writer slaved over to put together? The ads on the side get my attention enough. If I'm interested it's just a mouse click away.
The worst are the video ads that cover the article. I might have moused over something that triggered "the ad from hell". If I'm in a quiet office space, I've got to tell you... that's embarrassing. I'm quietly reading my article. Possibly doing research for work or just keeping up to date on things and bam! There's suddenly a hot chick blaring on about a $80,000 car that I can't afford, nor do I even care about. Of course the volume on the ad is about three times too loud and everyone turns their heads in your direction.
Thank you Chevrolet! I know the programmers that you hired to insert that ad on my web page think they're clever and all, but quite frankly you can take your car and shove it. The annoyance factor is something everyone should consider when buying. I certainly do. Perhaps we'd see less of that.
Thursday, December 2, 2010
Our Political System
Is it me, or is our political system spinning out of control? Our representatives seem to have lost all motive for what they are there for -- take care of the people's money. But they just can't get along. They argue. They backbite. They can't agree on anything. I swear that one political party thinks the sky is orange and the other one thinks it's yellow. In fact, it's blue!
The problem that this creates is that our country is attempting to go in two vastly different directions and we, the taxpayers, are funding BOTH. We can't seem to compromise as each party blames the other for the ills of society, and insists that their direction be chosen. It's maddening!
Of course slicing up the budget into categories and seeing what we might be able to cut is a difficult, tedious process, but it must be done (1). Here's a two part article that outlines things fairly well. We must realize that our military is too big and we give away too much to people who are act irresponsibly to begin with. I know one of those statements don't sit well with you if you are a Republican and/or Democrat. I'm sorry, but we have to cut some things. Those are areas where we can.
With the average salary of a Federal employee trumping that of the private sector by quite a margin (2), I also believe a 15% pay cut for all Federal employees is in order. Apples to apples or not, Federal employee total compensation (with benefits) is simply something we can't afford as a society given the "parasitic" nature of those employees (3). Government should not be paying this kind of compensation vs the private sector. Even taking into consideration the differences, the Federal employee's pay comes out on top.
Additionally, we need to take a good hard look at our military spending. Look at our budget: Any way you slice it, the military part is too big. We can not afford to be the world's policeman any longer. We can not afford to fund over 700 bases outside the U.S. We can't afford two wars. I'd much rather reduce our troop levels, scale back the weapons of war, and put 10% of the money we save back into prevention and intelligence. Remember the adage: A stitch in time, saves nine. It's true. It's what our forefathers subscribed to. While there was a lot of disagreement back then, common sense seemed to prevail more often than not. We need to get back to that. We need to balance our checkbook. Issues be damned. Our house needs to be in order.
(1) http://thefalconpost.com/archives/406
(2) http://mjperry.blogspot.com/2010/03/blog-post.html (yes, a blog, but see his cites)
(3) http://blogs.federaltimes.com/federal-times-blog/2010/08/19/cato-federal-employment-is-parasitism-on-private-sector/
The problem that this creates is that our country is attempting to go in two vastly different directions and we, the taxpayers, are funding BOTH. We can't seem to compromise as each party blames the other for the ills of society, and insists that their direction be chosen. It's maddening!
Of course slicing up the budget into categories and seeing what we might be able to cut is a difficult, tedious process, but it must be done (1). Here's a two part article that outlines things fairly well. We must realize that our military is too big and we give away too much to people who are act irresponsibly to begin with. I know one of those statements don't sit well with you if you are a Republican and/or Democrat. I'm sorry, but we have to cut some things. Those are areas where we can.
With the average salary of a Federal employee trumping that of the private sector by quite a margin (2), I also believe a 15% pay cut for all Federal employees is in order. Apples to apples or not, Federal employee total compensation (with benefits) is simply something we can't afford as a society given the "parasitic" nature of those employees (3). Government should not be paying this kind of compensation vs the private sector. Even taking into consideration the differences, the Federal employee's pay comes out on top.
Additionally, we need to take a good hard look at our military spending. Look at our budget: Any way you slice it, the military part is too big. We can not afford to be the world's policeman any longer. We can not afford to fund over 700 bases outside the U.S. We can't afford two wars. I'd much rather reduce our troop levels, scale back the weapons of war, and put 10% of the money we save back into prevention and intelligence. Remember the adage: A stitch in time, saves nine. It's true. It's what our forefathers subscribed to. While there was a lot of disagreement back then, common sense seemed to prevail more often than not. We need to get back to that. We need to balance our checkbook. Issues be damned. Our house needs to be in order.
(1) http://thefalconpost.com/archives/406
(2) http://mjperry.blogspot.com/2010/03/blog-post.html (yes, a blog, but see his cites)
(3) http://blogs.federaltimes.com/federal-times-blog/2010/08/19/cato-federal-employment-is-parasitism-on-private-sector/
Tuesday, November 23, 2010
Social Security
Social Security is a good thing. They designed this system to be a safety net for the elderly and disabled. For the most part, it's worked. The problem is that it should have been adjusted over the years to more fit the demographic changes that the U.S. has undergone. Plus, Social Security was never meant to live on. People were suppose to be responsible and plan to have a pension and investments, too. It's failed in these aspects and our children will pay a hefty toll
I've said this for many years: There's only so many things you can do to "fix it". 1) Raise taxes to offset the increasing costs associated with the baby boomers retiring. 2) Reduce benefits to those on social security 3) Increase the retirement age at which someone can retire 4) Keep the economy growing at a pace that will increase tax revenue. #4 is really unsustainable. All economies will have recessions. So, we are really talking about #1 to #3 as actionable items.
Let's throw out some stats to help people understand where we are and what needs to be done. 22% of all retirees depend solely on social security(1). That's a staggering figure to me. More than 1 out of 5 have nothing else. They didn't put back anything for retirement (or not enough and have run out). Of that 22% I'm certain the vast majority (easily 90% plus) are on medicaid as well. The average monthly check is around $1,000 currently. Further, the number of social security recipients as the baby boomers enter retirement age will rise substantially from its current level after 2014 (2).
"The share of people age 65 or older is projected to grow from 13 percent in 2010 to 20 percent in 2035, while the share of people ages 20 to 64 is expected to fall from 60 percent to 55 percent."
The rise in health care costs for the elderly will crush our country financially. The ratio of workers to retirees will fall to 2.0 (2).
"CBO projects that the number of workers per beneficiary will decline significantly over the next quarter century (from 2.9 in 2010 to 2.0 in 2035) and then will continue to drift downward."
Scary stuff indeed. That means two workers will have to support every one retiree.
What needs to be done then to fix the problem? In my opinion, it needs to be a combination of #1 to #3 above. Everyone must feel the pain in order to solve what could be the mother of all financial cesspools. The other bit of planning that must be emphasized is that every one of us younger than age 65 need to put aside investments now, so that social security is not our only income in retirement. If you've read my Roth IRA article, you know there's a smart way of approaching this. Building up your taxable buckets first, then switching to the Roth later is by far the best methodology.
We can solve this problem. I just hope that the Democrats and Republicans can come to a reasonable compromise and work together. That said, I'm not holding my breathe. I just hope my children aren't holding the bag.
(1) http://www.usatoday.com/money/perfi/general/2005-08-15-getting-by-usat_x.htm
(2) http://www.cbo.gov/ftpdocs/115xx/doc11579/06-30-LTBO.pdf
I've said this for many years: There's only so many things you can do to "fix it". 1) Raise taxes to offset the increasing costs associated with the baby boomers retiring. 2) Reduce benefits to those on social security 3) Increase the retirement age at which someone can retire 4) Keep the economy growing at a pace that will increase tax revenue. #4 is really unsustainable. All economies will have recessions. So, we are really talking about #1 to #3 as actionable items.
Let's throw out some stats to help people understand where we are and what needs to be done. 22% of all retirees depend solely on social security(1). That's a staggering figure to me. More than 1 out of 5 have nothing else. They didn't put back anything for retirement (or not enough and have run out). Of that 22% I'm certain the vast majority (easily 90% plus) are on medicaid as well. The average monthly check is around $1,000 currently. Further, the number of social security recipients as the baby boomers enter retirement age will rise substantially from its current level after 2014 (2).
"The share of people age 65 or older is projected to grow from 13 percent in 2010 to 20 percent in 2035, while the share of people ages 20 to 64 is expected to fall from 60 percent to 55 percent."
The rise in health care costs for the elderly will crush our country financially. The ratio of workers to retirees will fall to 2.0 (2).
"CBO projects that the number of workers per beneficiary will decline significantly over the next quarter century (from 2.9 in 2010 to 2.0 in 2035) and then will continue to drift downward."
Scary stuff indeed. That means two workers will have to support every one retiree.
What needs to be done then to fix the problem? In my opinion, it needs to be a combination of #1 to #3 above. Everyone must feel the pain in order to solve what could be the mother of all financial cesspools. The other bit of planning that must be emphasized is that every one of us younger than age 65 need to put aside investments now, so that social security is not our only income in retirement. If you've read my Roth IRA article, you know there's a smart way of approaching this. Building up your taxable buckets first, then switching to the Roth later is by far the best methodology.
We can solve this problem. I just hope that the Democrats and Republicans can come to a reasonable compromise and work together. That said, I'm not holding my breathe. I just hope my children aren't holding the bag.
(1) http://www.usatoday.com/money/perfi/general/2005-08-15-getting-by-usat_x.htm
(2) http://www.cbo.gov/ftpdocs/115xx/doc11579/06-30-LTBO.pdf
Monday, November 22, 2010
Credit Cards
I know a lot of people out there have them, and use them, and get in trouble by them. If you find yourself paying for things over and over again using credit and not paying off the balance, do yourself a favor right now -- cut them up. The banks make enough money. Pay for everything with cash. When you run out, you're done until next payday.
This teaches two lessons which are paramount to financial stability. 1) Discipline 2) Budgeting. It may be a simple approach, but it works. Pay down those high interest rate cards and never get behind again. I'm serious. Cut up the card if you are paying 14% plus interest rates. Your life in the long run will be so much better.
Discipline in finances is not an option if you ever want to "get ahead". Without discipline, there is no tomorrow. There is only today and your wants. I know. It's difficult. Sometimes, you have only needs to pay for. That's about the only time you should be considering paying by credit. So, keeping one card for emergencies (and only emergencies... nothing else) is prudent. But you should not carry it. Emergencies do not happen to you every day. So, carrying it daily should not be done.
Paying with cash has its advantages. You bide your money throughout the pay period. You should know exactly how much you have in your purse or wallet and how many days it is until the next pay day. Giving yourself an allowance at payday and the rest goes to bills is a simple -- and effective -- money management tool.
I know these sound simple, but complicated is not what most people need. They need simple and effective. Aside from sitting down and mapping out a plan, this is as good as it gets for the average American.
This teaches two lessons which are paramount to financial stability. 1) Discipline 2) Budgeting. It may be a simple approach, but it works. Pay down those high interest rate cards and never get behind again. I'm serious. Cut up the card if you are paying 14% plus interest rates. Your life in the long run will be so much better.
Discipline in finances is not an option if you ever want to "get ahead". Without discipline, there is no tomorrow. There is only today and your wants. I know. It's difficult. Sometimes, you have only needs to pay for. That's about the only time you should be considering paying by credit. So, keeping one card for emergencies (and only emergencies... nothing else) is prudent. But you should not carry it. Emergencies do not happen to you every day. So, carrying it daily should not be done.
Paying with cash has its advantages. You bide your money throughout the pay period. You should know exactly how much you have in your purse or wallet and how many days it is until the next pay day. Giving yourself an allowance at payday and the rest goes to bills is a simple -- and effective -- money management tool.
I know these sound simple, but complicated is not what most people need. They need simple and effective. Aside from sitting down and mapping out a plan, this is as good as it gets for the average American.
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