Mar 28 2013

401k Match Day is like a Holiday

By |March 28th, 2013|Blog, Life|8 Comments|

If I could pick one day a year to repeat over and over again it wouldn’t be Christmas. It wouldn’t be my birthday either. Nope, the best (or at least most profitable) day of the year for me is 401k match day.

My company gives a 100% 401k match for up to 6% of your contributions, and then gives an extra 2%. The only thing is I don’t get the match every paycheck. The company contribution builds up over an entire year and is deposited in my account in one lump sum at the end of March.

That day was yesterday for me, which means my net worth got a huge boost!

401k Employer Contributions are Tax Free

When you contribute to your 401k, that money goes in tax free (unless it’s a Roth 401k). You will not pay taxes on that money until you take it out for retirement or the government changes the laws.

money jar

photo credit: Tax Credits

It’s the same when your employer contributes money for you. If they want to put $5,000 in your 401k, you get all 5,000 bucks! Get out of my pocket Uncle Sam!

If I were to ever look for a new job, one of my biggest concerns would be the 401k program. I get essentially an 8% match, which as far as I’m concerned is just an 8% raise over and above my annual salary. That’s crazy good and not many companies can match it.

Employer Matching is the Only Reason I Use My 401k

While I do love the 401k matching my company offers, I don’t really love the 401k for lots of reasons.

  • My investment options are limited (not enough Australian and Asian options)
  • I’m afraid the government might raid 401ks when they really need more money
  • I hate having money tied up for so long
  • I plan to retire on income, not savings

It would probably take me until I was well into my late 50’s or 60’s to retire on savings alone. I don’t wanna wait that long.

I’ve said it many times before, but I’ll say it again. If I can create enough passive income to pay for my life, then I’m going to do it and quit my job. As long as that passive income is steady then I can use that to live and don’t have to work.

With all that being said, I still can’t pass up a 401k where I’m getting such a great match. Heck, I could withdraw all my money out of my 401k and still come out ahead after taxes and penalties thanks to my employer’s contributions.

Readers: Do you have a 401k? Does your company match? If so, do you get a match every paycheck, or once a year like me?

Mar 27 2013

Can you trust LegalZoom Reviews?

By |March 27th, 2013|General Personal Finance|Comments Off|

It’s hard to find good legal help, and even harder to find legal help that won’t charge you too much. You can look for good lawyers on the internet or through word of mouth, but if the lawyer is really good he or she may be booked or cost too much. For these reasons, many people are starting to turn to online legal services for their needs.

There are many companies out there you can choose from, but just like finding a real-life lawyer, finding the online company to go with can be difficult as well. One of the most trusted companies is LegalZoom. In fact, it was one of the first internet based legal service and documentation companies to begin helping consumers with their legal needs. They’ve been around since 2001 and have accumulated a lot of reviews for potential customers to refer to.

But how do you know you can trust the LegalZoom reviews? It’s a well-known fact that many companies purchase reviews from writers now. So how can you be sure the review you’re reading (for any company, product, or service, really) is accurate, truthful, and not purchased and churned out from someone’s basement? Following a few simple steps and looking fora few key items will help you know what to look for when reading company reviews.

How to spot a fake review

There are a few ways to spot fake reviews.

  1. Be wary of reviews that use too many exclamation points, too many positive words, and too much enthusiasm. Unless a company made these reviewers millionaires, they probably aren’t that happy about the company.
  2. If the review is written like a press release, it’s a fake.
  3. If it doesn’t sound like a native English writer, it was probably outsourced. Even foreign natives writing a real review take the time to write the review in clear English.
  4. If you’re looking at LegalZoom reviews, for example, don’t settle on just one review and be done. That’s easy to do since the company offers the same basic services throughout the site. Read multiple reviews on everything you’re looking to purchase.
  5. Check the reviewer. If this person reviews many products, they’re getting paid to do so.
  6. If a product or company is reviewed many times in the same day, or receives multiple reviews, or back-to-back reviews written in the same style, they probably pay to have reviews.

Checking LegalZoom

LegalZoom reviews seem to be truthful. The company has a solid reputation and has been around for years. Lawyers are even using the site to file legal documents online, now, so that says something about the company’s reliability. If you go to the site, there are several reviews listed, and all seem to be honest, accurate, and positive. Using the above guidelines, none stuck out as being fake.

When buying anything these days it’s hard to know if you’re making a sound purchasing decision. This is not something you want to doubt when using something as important as legal services. Go with a well-reviewed lawyer or company you can trust and you can’t go wrong.

Mar 27 2013

Last Minute Tricks to Save on Taxes

By |March 27th, 2013|General Personal Finance|Comments Off|

With April 15th right around the corner, you might find yourself with a big tax bill staring you in the face. If you have completed your taxes and you are required to send the government a big check, there are two things you may be able to do to change that tax bill into a tax refund.

Contribute to an IRA

If you did not max out your IRA contributions last year, you have until April 15th to make contributions. Yes, you can make 2012 IRA contributions on April 14th, 2013.

If you are contributing to to a traditional IRA, it will lower your tax bill. This is a very important distinction, because any contributions to a Roth IRA will not have any impact on your taxes. Remember if you are looking to save on taxes right now, you need to use a traditional IRA, not a Roth IRA.

Talk to an Accountant or Tax Preparer

If you have already maxed out your IRA contributions for last year, or you just don’t have any money to put into an IRA account, there is still one thing left to try: you can have your tax return reviewed by a professional.

You may have done your taxes on your own, or maybe even used a piece of tax preparation software to help you. But unless you are a tax expert, you may be leaving some tax credits off the table.

There is an entire industry of wealth management services and tax preparation that can help ensure you pay the smallest amount of taxes as possible. There is a good chance they can lower your tax bill.

Many of these companies are willing to look at your return for free. If they can’t save you any money, many won’t charge you anything. However, if they can save you money on your taxes then you will have to pay them a fee for their work.

These companies are useful around the tax deadline, but certain types of companies that provide wealth management services can be useful throughout the year. If you have a large net worth, you may find it beneficial to use a company to help manage your assets.

Mar 26 2013

Wine is a Better Investment than Stocks

By |March 26th, 2013|Blog, Personal Finance Tips|7 Comments|

Have you ever been invited to a dinner party? No, I’m not talking about a booze fest at your college’s frat house. I mean a party where you are going to a friend’s house and they are going to feed you while you socialize.

If you’ve ever been to one of those parties, I hope you didn’t show up empty handed. It’s always nice to bring a small gift, and a bottle of wine is usually appropriate (assuming they like wine and aren’t recovering alcoholics. Definitely don’t bring booze to a recovering alcoholic).

Tag and I have a recurring weekly invite to my Aunt and Uncle’s house for dinner every Sunday. When we go, we always bring a bottle of wine as a thank you for the invite.

So if you’re like me and you bring wine as gifts, or if you’re like most people and you drink wine, I’m going to tell you why wine is a better investment than the stock market.

Buying Wine in Bulk Saves at least 10%

At almost all the grocery stores in Dallas, you can buy wine at the regular price or if you buy at least 6 bottles then you’ll save 10% on your wine purchase.

10 percent off wineFor years I would buy a bottle of wine on the way to Sunday dinner and pay full price. It finally hit me that if I put up an initial investment of six bottles then I will make less trips to the grocery store and I’ll save 10%. Then you consider my 2% cash back credit card, and I’m getting a 12% return from buying wine.

Oh, and don’t forget about inflation. If the price of wine goes up a month from now, I’ve already bought at the lower price, which means I could save even more money.

There’s also the added benefit of having a bunch of wine in your pantry. I think wine gets better as it ages (although maybe $10 bottles of wine don’t count). It’s also nice to know that if some terrible earthquake or terrorist attack hits, I can ride out the storm with some comforting drinks.

A Normal Stock Return is 7% a Year

If you talk to any financial advisor and ask what return you should expect to get in the stock market, and they will tell you around 7%. If they are a bit more aggressive they might say up to 10% but I doubt you’ll ever see anything higher than that.

And remember that 7% is what they hope for. It could be 10-15%, but it could also be negative 20%. A 7% return is seen as a “good” year.

I just showed you that I get a 12% return on investment from buying wine. That blows even aggressive stock market investing out of the water.

Are you rethinking your investment plans yet?

Never Invest Small Amounts of Money in Stocks

It’s obvious that  a small guaranteed return on investment is much better than a small potential return on investment. If you only have a few hundred dollars to invest, you are much better off buying something you know you’ll need when it’s on sale.

Some people will say, “That’s not investing! That’s spending!” Those people would be wrong. Buying a brand new car and getting a “good deal” is spending money. Buying the necessities of life that you’ll buy anyway, but doing it at a lower price due to a large purchase, is investing a sum of money now to reap returns in the future.

In fact, I strongly recommend buying a lot any food item you eat regularly if it’s on sale. If you buy a box of Rice Krispies every week at $3.50 a box, and today they are selling for $2.50 a box, go ahead and buy 10. That’s a 28.5% guaranteed return. Heck, you might want to buy as much as you can store (and will eat before the expiration date).

I’m not saying you should avoid the stock market entirely. I’m just pointing out the indisputable truth that buying food in bulk or on sale is a guaranteed return on investment, and it gives you a little more food in your pantry in case of an emergency.

Readers: Do you save money by buying lots of food or beverages when you can get a bulk discount?

Mar 25 2013

Life Insurance: Benefits of Buying in Your 20’s

By |March 25th, 2013|General Personal Finance|3 Comments|

When asked, financial experts will generally recommend that you make a life insurance purchase when you’re gearing up to start a family. However, if it’s your intention to start a family in your 30’s there are definitely some significant play-it-smart financial advantages to purchasing earlier, in your 20’s.

After all, what are your 20’s for if not to structurally set up a foundation for your future success and limit, as much as possible, any future financial strain that will only make life that much harder down the road, not to mention far less fun!

The important thing to remember is that it’s always worthwhile taking the time to compare life insurance policies. There are a lot of subtle differences between your choices & you can end up saving a surprisable amount of money in the long run.

WHOLE TERM & TERM POLICIES

To start, it’s substantially imperative that you know the difference between the two main types of life insurance policies. Here is a short breakdown of each:

  • Whole Term: This policy is a life-long policy that provides ways for you to accumulate tax-free cash through investment incentives. Despite this, it is not a policy generally recommended by financial experts unless you have circumstances that dictate a need for a life-long policy, such as an illness or a handicapped child. This lack of recommendation comes from all of the commissions, fees, and highly expensive forfeiture costs that are associated with this type of policy.
  • Term: This policy is the preferred option and would be the policy you would buy in your 20’s, so to be able to change it up later in life, as it offers coverage for a set amount of years. While there are no investment incentives attached, you are afford a fixed-rate that with no extra fees attached—you’ll always pay the same amount, for the full duration.

Tony Streur, a life insurance consultant and author, explains the benefit of a term policy over whole here saying, “Term coverage is the appropriate coverage for most individuals, as their needs are for a certain term of years, while their other assets accumulate, such as retirement savings.”

Q&A: ANSWERS ABOUT BENEFITS & COVERAGE OPTIONS

Q: I’m in my 20’s and don’t have a lot of money; is it reasonable for me to spend money on life insurance?
A:
Yes, it’s very reasonable! Your youth provides you excellent rate options that you will not see again and you can set up an affordable policy now that will carry through for a few decades.

Q: Just how affordable is affordable?
A:
You can pick up a $500,000 30-year term policy that will cost you $350 to $400 per year and that premium is fixed for all 30 years. If you start a family in your 30’s, you won’t have to worry about paying higher rates right when you have all kinds of other expenses starting up.

Q: Do I really need $500,000-worth of life insurance at this point?
A:
Not necessarily. That example was a high-end example, which just goes to show how affordable rates are for you right now. At this point, you only need 4 to 5 multiples of your income, but if it’s your intention to plan ahead, you might want to consider including coverage for what your assets will be within the next 5 to 10 years (i.e. when you have a family). You can click here to learn more.

Mar 21 2013

How New Windows are Saving Me Money

By |March 21st, 2013|Blog, Personal Finance Tips|7 Comments|

As the Texas summer is fast approaching, one of the things I’m worried about in my home is my electricity bill. First of all, I have a 23 year old AC unit that isn’t nearly as efficient as newer models. Secondly, I have 23 year old aluminum frame windows that do very little to keep out the crazy Texas heat.

While I’m just hoping the AC units survive so I don’t have to replace them, I had a unique opportunity to do something about the windows.

I had a company knock on my door and offer discounted windows in exchange for my home being a “marketing home”. That means they are going to market their product in my neighborhood and tell people to go look at my house for an example.

I got a competitor’s quote and this program is legit; I’m definitely getting a great deal! I’d tell the price and specifics, except part of my participation in the “marketing home” deal is that I don’t disclose the price.

So how am I paying for brand new energy efficient windows when I’m trying to save up for a wedding?

I’m Using a Balance Transfer on a Credit Card

One of my credit cards that I don’t use (and haven’t used for years) offered me a balance transfer at a 0% interest rate until January 1, 2014. There is a 3% balance transfer fee and they send me a check directly.

Let’s pretend I’m spending $5,000 on new windows and will take a balance transfer for that amount. The 3% fee means I’ll owe $5,150 when I pay back the loan, and then I’ll pay 6.99% APR on any balance left over after January 1st of 2014.

I hope to have it paid off before I pay any interest, but 6.99% is a low enough rate that I’m not opposed to paying interest on a small balance, especially when you consider how much money I’m saving in energy costs (which will be way more than the interest at 6.99%).

How I’m Saving Money on This Transaction

The great thing about a balance transfer where it’s more like a cash advance (they send me a check) is that I can put the purchase on a credit card and get rewards, then just use the balance transfer to pay off my credit card. I have a card that gets 2% back on all purchases, so I’ll get $100 in rewards when I pay for these windows.

That effectively makes the balance transfer fee only 1%, or $50. So how am I going to save $50 over the next 9 months? Easy. According to a University of Minnesota study I will save at least 23% of my cooling costs with these new windows. Considering how expensive it is to cool homes in the Texas summer, I think we are talking about at least a few hundred dollars a year.

I can also get a $200 tax credit for installing new windows from the federal government according to the Energy Star government website.

Finally it’s important to consider the increase in my home’s value. Angie’s List says I should get at least a 70% return on investment for new energy efficient windows, but that’s for people who are paying full price. When you consider the fact that I’m paying much less than a non marketing home would have paid (remember I did comparison shop and this really is a killer deal), I could see a 100% or more ROI when I go to sell.

Spending Money Never Saved So Much

I’m getting 2% of the purchase price back in rewards, saving hundreds of dollars in energy every year I live in the house, getting a $200 tax credit, and raising the value of my home by about as much as the cost of the windows.

That’s what I call a darn good deal!

This definitely isn’t our forever home, so we will be looking to sell it in the next few years after all our renovations are complete. I do fully expect to get all this money back when I go to sell.

Now I just need to find someone who is willing to buy a house with a 25 year old AC unit!

The windows get installed next Monday, so I’ll post pictures when everything is finished.

Readers: Have you ever done home renovations that saved money on electricity and/or drastically increased the value of your home? How did you take out a loan to pay for them?