Never Get a Refund Check, The IRS (Kind of) Looking For You

Turns out mailing address errors or incorrect addresses made approximately 383,000 of last year's refund checks undeliverable. While the IRS isn't actually actively seeking out people who's checks were returned, you can still claim your check until Nov 28, 2008. If you haven't received a check go to www.irs.gov or call 866-234-2942 or you will likely miss out on your chance.

Link: WSJ - The IRS Wants to Give You Cash

Image: sekimura @ Flickr

Obama, McCain and Your Money, The Cheat Sheet

After reading a Wall Street Journal article today about the money related positions of Barack Obama and John McCain, I figured it might be helpful to make a cheat sheet about where each candidate stands on the issues. I won't attempt to give an in depth analysis on any of the topics, this is just a very, very, brief overview.

Income Taxes:

Obama: Wants tax cuts for middle class, increases for families making $250k+ and inviduals pulling down $200k+. Wants to extend Bush tax cuts, but raise the top rates to 36% and 39.6%. Get rid of taxes on the elderly making less than $50k/yr and give people earning less than $75k/yr a credit equal to about $500 each year. The top 1% would see an approximate $19k/yr increase in taxes.

McCain: Wants to permanently extend Bush tax cuts, raise personal exemptions for each dependent from $3,500 to $7,000 over a few years. Wants to keep top tax rate at 35%. The top 1% would see a cut of $125k+/yr.

Short-Term Economic Relief:

Obama: To jump start the economy he wants to give a $1,000 rebate to each family or $500 per individual. He also would like people be able to withdraw 15% of their 401k or IRA up to $10k penalty free.

McCain: Wants to cut the capital gains tax rate for stock held more than one year to 7.5% and would increase the amount of loss that is deductible on stock sales from $3k to $15k. Would cap withdrawals by seniors from IRAs and 401(k)'s no more than 10%

Estate Taxes / AMT:

Obama: Keep 2009 estate tax rates in effect, taxing only estates worth more than $3.5 million per person at 45% per person. A $5 million dollar estate would pay approximately $675k in taxes.

McCain: Wants flat 15% estate tax (currently at 45%) on estates valued at over $5 million. A $5 million dollar estate would pay NO taxes.

Health Care:

Obama: Require employers not offering coverage to kick in a percentage of payroll towards a national plan (note small businesses are exempt). Would try to set up a national exchange for health insurance.

McCain: Would replace the income-tax exemptions for insurance paid by employers with a refundable tax credit of $5k per family or $2,500 per individual.
Investments:
Obama: Would eliminate all capital gain taxes on start-ups and small businesses, but raise top rates on securities and dividends to 20% for families making more than $250,000 per year.

McCain: Keep the max capital gain rate at 15%

Retirement / Social Security:

Obama: Wants to institute a 2 - 4% payroll tax for earners of more than $250k to be paid by employees and employers together. Would be phased in over 10 years or more. Impliment a savers credit to match 50% of the first $1,000 of savings for families earning less than $75,000.
McCain: Privitize social security and allow younger workers to place a portion of their account in the market.

Image: jvumn @ Flickr

Keys to Financial Success as Told By Mark Cuban

I personally don't have a problem with Mark Cuban, but I know he rubs many people the wrong way. For those of you who don't know, Cuban founded Broadcast.com and sold out to Yahoo at the peak of the tech bubble for about $5 billion dollars, he then went on to buy the Dallas Mavericks and dabble in some other ventures like HDNet and potentially buying the Chicago Cubs. For certain, the guy is emotional, opinionated, and undoubtedly rich by any standards... oh yeah, he likes the enjoy his money.

This week Cuban posted an article on his "blog maverick" site titled "How to Get Rich." The article raises some interesting points that run counter to conventional wisdom. In a nutshell Cuban says, 1) keep money in cash, 2) don't take shortcuts, 3) stop using credit cards, and 4) find a job you love.

I have to admit I was really skeptical when I received the link from a friend yesterday, but Cuban gives some solid advice. I whole-heartedly agree that there are no shortcuts to building wealth. It's a slow process that for most people requires sacrifices and SAVING MONEY. Bottom line, you have to put more money in the bank or securities than you blow on entertainment, luxuries or other disposable expenses. I also strongly believe that for many reasons loving your job is important. People spend more time at work than just about anywhere else. If you hate your job, chances are you are either a) not good at it, b) overqualified, or c) would be a lot better at something else. There's an untold number of people out there who made fortunes in weird niche industries and businesses. The person who created the temporary tatoo, hackey sack, or spork probably all flew under the radar -- and didn't live way beyond their means. They probably all also ended up with more money in their estate than you or I will. Even if it doesn't necessarily contribute to your bottom line right away, doing what you love will make you a lot happier.

I would disagree with Cuban on his keep your money on cash and don't use credit cards opinions. Historically the stock market is not as risky an investment as he makes it out to be. Yes, it is driven by emotion and not closely correlated to actual market conditions, but earning 3-4% in a CD won't cover inflation most of the time. You can no longer buy a stock and hold it for 30 years (if you ever could) and need to actively monitor things by diversifying your asset and portfolio allocation but averaging a conservative 6% is almost double what short term CD's pay. Having a sizable position in cash or bonds makes sense, but keeping all your money in cash is foolish. Also, although most people use credit cards irresponsibly, there are plenty of people who don't carry a balance and get some cash back rewards in the process.

Does anyone have other ideas to add to the list? I'd like to compile my own list and post it sometime in the future if anyone

Christmas Deals Come Early This Year

Consumer advocate and finance guru Clark Howard is predicting that sales for Christmas will begin mid-late October this year and run through December 10. He says that there will still be Black Thursday deals, but that consumers will have more options this year. I don't know whether that's a) good for all of us because there are more deals to be had, b) bad because we will be inundated with the Christmas trappings even earlier this year, or c) a clear picture of the sorry state of the economy.

National Debt Clock Maxes Out

Last month the national debt clock maintained by the Durst Organization in NY ran out of digits. The United States debt exceeded $10 trillion dollars and the clock's dollar sign had to be removed and replaced with another digit. The clock will soon add two more digits... here's to hoping that's something we never have to use.

Link: WSJ Blogs - Debt Clock

Worst Wall Street Months in History

Floyd Norris had an article two days ago that listed the worst months for the market in U.S. history. I'm not a believer that the stock market is a barometer for the overall health of the economy (I think the stock market operates on momentum and emotion, where the economy tends to slog forward or backward with fewer rapid ups and downs), however it is interesting to see how this crazy month has stacked up historically. It should be noted that the

1. October 1987, -21.8%
2. August 1998, -14.6%
3. September 2008, -13.8%
4. September 1974, -11.9%
5. November 1973. -11.4%
6. September 2002, -11.0%
7. November 1948, -10.6%
8. March 1980, -10.2%
9. September 1946 -10.2%
10. August 1990, -9.4%

Article @ NYTIMES

Image: ralphunden

New Video Game Simulates Starting a Business

Doctors and lawyers make good money, but it's the small business owners in this country who make serious money. In the US, even people who don't set out to become independently wealthy are drawn to entrepreneurship. It seems that being your own boss and having the ability to set your own hours is a national obsession - but if it were only that easy. The risks involved often drive many people away from hanging their own shingle. Entrepreneurship is one of those facets of life where sometimes ignorance is bliss. Today I was tinkering around with a game called "Johnny Money Online." The game is an online game that was released by the Wharton School of Business.

Johnny Money Online is free and geared at teens interested in starting their own business, but applicable to adults as well. The game gives you a crash course in all the decisions business owners make and how much uncertainty is involved. You play a retail business owner and must make purchasing, advertising, and marketing decisions. I failed miserably at this game and if there are any small business owners who have tried it out, I'd love to hear your opinions. What is representative, good, bad, otherwise?

Image: Kimberly* @ Flickr

Shocker of the Day: Bling is a Terrible Investment

File this under the "obvious" category. The WSJ Wealth Report has a post reporting that even super high end jewelry doesn't hold its value. Given the fact that the value of jewelry is a subjective thing, that's not too surprising. Additionally, buying jewlery is typically an emotional decision and doesn't involve the rational investing approach that other investments might go through. I think very few people say "at least this engagement ring will be worth twice this much if I ever get divorced and sell off assets." The only reason the story is noteworthy is that it backs up its points with figures from famous jewlery pieces that have been sold by some of the big auction houses. So, if you were planning to drop some money on a rapper chain you might want to find a better place to park all that cash.

Image: Swanksalot @ Flickr

The Student Loan Abyss

We've heard the stories about how bad the topsy-turvey student loan market has gotten for consumers, but I recently was able to witness things first hand. In an attempt to consolidate a couple private student loans to make things more convenient, I was only able to find two lenders still offering private consolidation loans (Citi and Key). To make matters worse, the lenders wanted approximately 8% and near 9% respectively for an applicant with excellent credit. The game plan now has moved to not consolidating and paying private loans off as quickly as possible.

Does anyone else have private student loans who recently graduated? What have you done with your loans?

Image: kjarrett @ Flickr

World's Highest Concentration of Millionaires

Boston Consulting has released its most recent Global Wealth Report and it has some information that is probably pretty surprising to most Americans. The report has statistics on where the highest concentrations of millionaires are located in the world. The surprising part for me was which country was on top... Singapore. In Singapore apparently 1 in 10 households have assets in excess of $1 million dollars. The list below has stats on what percentage of the population is worth more than $1 million in each of the top five countries:

1 — Singapore — 10.6%
2 — Qatar — 7.9%
3 — Switzerland — 7.3%
4 — United Arab Emirates — 6.6%
5 — Kuwait — 5.3%

If you are wondering, the U.S.A. ranks sixth at 4.3%...

Link: WSJ Wealth Report Blog
Image: DogFrog @ Flickr

Being Rich Now Apparently Is Harder Than Ever

The Wall Street Journal Wealth Report Blog is reporting that the new thing to do if you're mega wealthy is to have a "family office" to manage your investments, real estate, charitable giving, and travel.  I can't speak from experience, because I'm unfortunately no where near the $100 million dollar mark the article states is the sweet spot for this type of arrangement.  

But, aside from the cachet that having an "office" full of people who report to your every whim and desire -- does having a family office really offer much?  Sounds like this arrangement just brings all the people that average folks already use and brings them in house.  Normal people have accountants, attorneys, bankers, financial planners... and sometimes trust officers or assistants/secretaries.  Anyways, I thought the article was interesting and wanted to pass it on, you can read the entire story over at the WSJ Wealth Blog.

Photo Credit: risastla @ flickr

Link:  WSJ Wealth Blog

Oil Falls Sharply... For Once

Today a couple interesting things happened in the markets that have been rare occurrences in the markets.  For starters the NYSE rallied up more than 200 points (of course it later gave the gains back and then some which is not all that unusual of late).  Also, oil fell to $105 per barrel before settling back just under $110 per barrel.  Third, the dollar ended slightly stronger rising .8% to 1.4501 dollars per euro.  Don't get too excited about a bottom or that we're out of the woods yet.  Come next week it will probably again be "Oil rose on fears of _______ (insert war in a little known country, natural disaster somewhere without running water or any other reason you'd like).  

While the relief in oil prices is great, consumers probably won't see relief at the pump here until refiners ramp up capacity or the vertically integrated oil companies start taking a smaller cut over every step of the supply chain (unlikely to say the least).

Photo Credit: freewine @ flickr

Stats:  Oil Price Plunge @ NYTIMES

The Credit Crunch Now Effecting Individual Credit Scores

As if steadily increasing foreclosure rates and falling home values weren't enough, the subprime mess has begun to spill over into other areas of the financial sector. Credit card issuers are now starting to get their risk exposure in check (which would otherwise be a good thing), but if issuers cut down credit limits substantially consumers could be effected in an unintended way.

FICO scores - individual credit score that gives lenders a rough estimate of how much of a risk you are - are based in part on your credit utilization rate. This means, if a credit card issuer cuts your available credit in half, that will have an effect on your utilization rate -- at FICO score as a whole. For example, say you have a credit card balance of $4,000 and credit line of $10,000, if Discover drops your credit line to $5,000. Assuming you have no other cards, your utilization ratio has rose from 40% to 80% overnight. Additionally, card issuers have begun to raise interest rates from bad to ugly. You already know this -- but, there's even more incentive now to pay down credit card debt. Unless you have some payday or auto title loans floating around, the credit card debt should be priority #1. There are few other investments that you can make a 29% return on your investment, and that doesn't even include fees that card issuers tack on each month.

It should be noted, that credit utilization accounts for about 30% of your FICO score. The most important factor in your credit score remains your payment history, which makes up 35%. The rest of your score is calculated by weighting your credit history (15%), types of credit (10%), and new credit (10%).

Are CT Scans a Rip Off?

The N.Y. Times posted an interesting article yesterday about whether CT scans, the costly high tech imaging machines that let Dr's see inside your body, are worth the money -- and the risks.

As a disclaimer: I'm sure that the scans offer real benefits in certain circumstances, but I thought it was interesting to see a major daily start a discussion about their merits.

As a quick summary, the story says that more than 150,000 were given last year grossing over $100 mln for for doctors and hospitals. The problem it seems is two fold: 1) many doctors and doctor's groups are investing $1 mln dollars or more in the machines, and 2) the doctors then have a direct incentive to pay down the debt that the machine has created. The Times story also says that the tests run anywhere from $500-$1,000, don't necessarily offer any benefits over old tests, and subject the patient to large doses of radiation.

Maybe this isn't interesting to anyone else out there, but it just goes to show you have to be ready to ask questions when you go into the hospital -- something that isn't always well received depending on what level of care you are getting.

What Are You Doing To Beat Inflation?

Energy prices are skyrocketing, food prices are through the roof, seems like everything is costing more these days -- and the thing is -- you're right. Most of us have been effected in one way or another by the rising energy costs, but what about your nest egg. What approaches are you taking to make sure that inflation isn't eating away at your savings and still mitigating some of the risk in your portfolio?

Since most people underestimate the real rate of inflation (and the U.S. Government claims inflation is now at approximately 2%), this doesn't garner much attention - but it's a real concern. I typically steer clear of any type of investment advice here on this site, but want to open it up for discussion since it's something I've been thinking about lately.

Among the many options - Treasury Inflation Protected Bond Funds have become trendy of late [see ETF's: TIP, IPE ; MUTFunds: VIPSX, DIPSX, FINPX), and so have dividend weighted ETF's [see ETF's: PEY, DLS]

What do you think? Are inflation protected bonds the way to go? Dividend paying stocks? Cash?

New Grad Career Cheat Sheet

One of the great things about the internet (and Google), is that it makes it exceedingly easy to quickly find information on just about anything. The downside of this technology is that there is a lot of crummy information to sort through before you find the good stuff.

Well, if you are a new grad or know a new grad who is getting ready attack the real world the NY Times recently ran an article that you should pass along. The article entitled "A Primer for Young People Starting Their First Job" is really applicable to everyone. Let's face it - most Americans don't pay enough attention to personal finance and that's why the average savings rate is negative.

While I strongly encourage you to take a look at the article, I'll provide a quick summary below. The article does a quick and dirty summary of health benefit, tax, and retirement plan considerations for new grads. There's not a great deal of deep analysis on any of the topics, but the article serves it's purpose. It gives new grads a very bare bones outline of each and points them in the right direction and gives them the types of questions they should be asking. I think that's a noble goal in itself. You can only lead people so far after all.

If you have any good resources for new grads heading out into the world please leave them in the comments.

Number of Millionares in World Increases 600k

Recent reports now say that the world now is home to over 10 million millionaires. (note: this millionaire club doesn't include real estate worth in its calculation). The year over year total grew 600k (about 6%) from 2006 to 2007. You might say, who cares? There are oh, 6.6 billion people on the planet -- so in the grand scheme of things its still tiny (somewhere around 1/5th of 1% of the population). The interesting thing about these new statistics is what has driven the increase in millionaires.

According to the report a steady combination of inflation and booming emerging economies has fueled the boom. The millionaire club has, unsurprisingly grown fastest in India and China. Those of us in America be warned. The United States is still home to 1 out of 3 millionaires, but it remains to be seen if the emerging markets around the world will be able to spread their new found wealth around enough to change those figures when the 2008 stats come out.

Image: Justin Vining

Consolidate and Close Accounts to Keep Better Tabs on You Financial Situation

One of the great things that a steady stream of new entrants into the online brokerage arena had the effect of doing is to make companies compete harder for your business. There are now plenty of good places to hold your investments and with that said I'm a big believer of consolidating your investments and holding them at a handful on institutions rather than have assets all over the place. Below are the reasons that I think this outweighs the minimal benefits you may find from using a number of providers.

1) Reduce Fees: Many providers reduce or even eliminate fees and commissions once you hit a certain threshold of assets. Some investment houses will throw in free trades, free research, or advisory services if you increase your holdings to a higher tier.

2) Increase Your Sensitivity to Fees: With life being busy and time short, I find that I'm more likely to carefully inspect my monthly or quarterly statement if I have two or three to look at rather than 5. I also am more sensitive to being nickeled and dimmed with fees when I see multiple fees on the same statement rather than one from each investment company.

3) One statement: Many investment companies will provide you with one consolidated statement which makes record keeping a breeze and reduces hassles associated with tracking down important information.
4) Availability of Options: Nearly all the well known brokerage companies have been beefing up their no transaction fee mutual fund offerings which makes it easier for you hold a Janus fund in a Fidelity account or an Ariel fund in a Schwab account. This makes for one stop shopping and as stated earlier one statement. The rise of exchange traded funds (and more and more niche EFT's that act more like mutual funds) allows small and large individuals to level the playing field and diversify without the strings some mutual funds attach.

5) Get a Clear Picture of Your Financial Health: Pooling your investments with one provider is a quick way to see your net worth and if you are meeting your financial goals, whatever they may be.

6) Organize Your Affairs in the Event Something Should Happen to You: No one wants to think about death or serious injury, but if you were hospitalized would a family member or friend be able to track down your money to pay bills? Are your investments spread over 10 fund families held in 10 separate accounts plus your 401(k), Roth IRA, and traditional IRA? If you have a financial power of attorney in place you representative will have an easier time tapping funds that may be needed to settle your affairs or care for you.

Things to note. It should be noted that you want to consider FDIC and SIPC insurance limits that may be applicable to the funds you hold at a single institution. There are plenty of good discount brokers like Fidelity (the king of investment houses), OptionsXpress (a newer discount broker that has grown quickly and has no minimums, T.Rowe (one of the biggest discount fund shops), and Charles Schwab (the big time discount broker).

Many of these providers like Schwab and Fidelity have added high yielding checking account and other banking options to their typical securities offerings (read more here). While the new accounts have big benefits over the brick and mortar checking accounts, most people need somewhere to deposit money in person from time to time. I would suggest that if you are interested in consolidating financial holdings that you keep a completely free checking account at a bank close to your house so you can quickly deposit the occasional check (ask, because your bank will probably try to lead you to an account with minimums and/or fees). Once the money is deposited in your local bank account you can easily move the funds through the ACH system to your other account. This method is much faster than mailing a check to the financial institution.

The Economy May Be in a Funk, but Banks Keep Offering Deals

With the economy tanking it makes sense to take free money from anywhere you can get it (provided there are limited strings attached). Below are some of the offers that I saw this week while surfing around. While most require some minimal hassle, if you are in the market for a new account anyways they might be worth your while.

E*Trade Savings $25 Bonus
Details: $1 minimum to open an account. Bonus will be deposited within 30 days of opening the account. Another plus, the 3.15% APY is one of the best out there.
Direct Link

INGDirect Savings $25 Bonus
Details: $1 minimum to open account, but if you want the $25 bonus you must fund the account with at least $250. ING was paying 3% APY as of 5/28/2008. (Full Disclosure: If you sign up for an account with one of the links below I receive $10). If one of the links doesn't work try the next. In none of them work for you, send me an email and I'll get you a fresh one.
Direct Link 1; Direct Link 2; Direct Link 3; Direct Link 4; Direct Link 5

American Express Nest Credit Card $50 Bonus
Details: You receive 5,000 bonus points after your first purchase (redeemable for $50). The card also gives you 1% back in points that are redeemable for cash and an additional 10,000 points (equal to $100) for any year you charge over $15,000 on the card. You also receive a financial planning kit that is supposed to help newlyweds budget. Plus, everyone will think that you're a newlywed as you throw down the AMEX (even if you're not).
Direct Link

Easy (and Free) Ways to Go Green

Today marks the beginning of a series that I hope I will be able to keep up with in the coming weeks. I hope to do a series of short posts about ways to clean up your finances and do a sort of spring cleaning if you will. I know I have fallen behind things, so maybe this will help me get back on track.

Everyone has at least one credit card that has some sort of reward, or is at least an affinity card of one type or another. For those of you who are somewhat environmentally conscious, but can't part with your SUV or other less than environmentally friendly habit - I stumbled across something yesterday that may be of interest. It seems that some credit card issuers are looking into so called "green" causes as a way to boost membership and profits. I have listed some of these cards and their benefits below.

GE Money Earth
This MasterCard directs 1% of your purchases to causes that reduce or avoid greenhouse gases and helps to offset your personal carbon footprint.
Direct Link

Working Assets Visa
This Visa donates 10 cents to organizations like the Ocean Conservancy or Global Fund for Children every time you make a purchase. You can view of full list of the organizations supported here.
Direct Link

Bank of America Brighter Planet
This Visa credit or check card returns 1 Worldpoint for every dollar you spend on purchased. Every 1,000 points can be redeemed to offset approximately 1 ton of emissions (the equivalent of taking a car off the road for 2,000 miles). Plus, now you can get 1,000 bonus points for signing up and 1,000 bonus points for signing up for paperless statements.
Direct Link

Salmon Nation Visa
Provided by ShoreBank Pacific, this Visa donates half the income it generates to "salmon nation". Salmon Nation is a collective in the region that is home to Pacific salmon spawning grounds.
Direct Link

Affinity Cards

These cards provide donations to the not for profit organizations that are represented on the face of each piece of plastic. If you run a Google search with "your favorite not for profit org" followed by "credit card'" chances are you will be able to track down a credit card that will finance some of their good work.

** Note: I didn't do an analysis of which one of these cards is best for YOU financially. Read the fine print for each offering. Remember, if you consistently carry a balance on your credit card you are better off finding a card that has a very low interest rate and donating some money to the charity of your choosing if you have funds left over at the end of the year.

*** Note: If you have a great card that you think should be added to the list, drop me an email and I will put it up on the website and give you credit for finding it.

Stimulus Check Payment Amounts - What You Need To Know

By now most people know that Pres. Bush's economic stimulus checks are soon to be on their way. But, when -- and more importantly how much?

I did a little research on the IRS website today and it says that checks are being mailed by the final two digits of their social security number in waves. Checks will first be mailed May 2nd and the chart below shows when you can expect to receive your check.

DIRECT DEPOSIT
Last two SSN digits
Payment will be transmitted:

00 through 20
May 2

21 through 75
May 9

76 through 99
May 16

PAPER CHECK
Last two SSN digits:
Payments will be mailed by:

00 through 09
May 16

10 through 18
May 23

19 through 25
May 30

26 through 38
June 6

39 through 51
June 13

52 through 63
June 20

64 through 75
June 27

76 through 87
July 4

88 through 99
July 11

The full chart can be found here. It should be noted that the IRS also says that people who filed late will receive their stimulus check approximately two weeks after their scheduled payment date.

If you have your 2007 1040 printed and handy, you can head over to the IRS Economic Stimulus Payment Calculator to determine how much you will be receiving. Generally, the checks will be $300 for individuals and $600 for married couples jointly filing, but this can be complicated when dependents are thrown into the mix.

Bigger Monitors = Greater Productivity

File this as one of those things that seems counterintuitive at first, but make sense after thinking things through. Researchers at the University of Utah have determined* that office workers that use larger monitors are more productive. The gains seem to increase as monitor sizes gets larger -- tapping out at 24 inches. What do you think? Do you find yourself more productive when you are working at a larger workstation. I don't find myself particularly less productive when working on my laptop, but could see how a larger monitor could lead to less fatigue when working in front of the screen all day.

*It is important to note that the University of Utah study was funded by monitor maker NEC.

Image by sw_wetmonkey @ Flickr

Full Story @ WSJ Business Tech Blog.

Fidelity mySmart Cash v. Schwab High Yield Checking

I'm currently debating moving my primary checking account - the two alternatives I am deciding between are the Schwab High Yield Checking and the Fidelity mySmart Cash account. While I'm not sure which account I'm going to go with yet, I decided to post the pros and cons (as I see them) of each for other people who may be unhappy with their current checking options.

Schwab High Yield Checking

The Schwab High Yield Checking is a relatively new offering from Schwab. The account is basically a standard FDIC insured free checking account, but offers more perks than your average local bank. The account offers no fees, zero minimum balance, ATM fee refunds, a variable APY now hovering around 3.01%, free checks, a free check card, and a free brokerage account.

Fidelity mySmart Cash

The Fidelity myCash account is similarly a fairly new offering from Fidelity. mySmart Cash is a cash management account that operates as a quasi-checking account. A client opens a mySmart cash account and links it to a current Fidelity offering (like a money market fund). The mySmart cash account has no minimum balance requirement, no fees, ATM fee reimbursement, free checks, and free self-funded overdraft protection. The client is free to withdraw funds at an ATM or write a check on the account regardless of the balance, Fidelity will then move the appropriate amount from the designated account to cover the balance if the mySmart cash accounthas insufficient funds.

Comparison

Outside of a few minor differences the offerings from Fidelity and Schwab are pretty similar. However, there are a few relatively major differences that may contribute to the decision for some people. First, Schwab currently offers a higher APY on its checking account. However, this is probably offset by the fact that the mySmart cash account can be set to automatically draw from a higher yielding account (like a money market or mutual fund). A second difference is that the Schwab account comes standard with a free brokerage account. If you aren't already set up with a brokerage account then this may be an advantage to you - especially since the brokerage account has no minimum balance or opening amount. Below I have made a quick chart to show the features of both accounts, you'll see that they are pretty similar. I have a feeling that for most people the decision to chose one of these accounts would be based on whether they currently have a Fidelity or Schwab holdings already.


Do you find either of these accounts compelling? Do you already have one? Let us know how you like it.

Link: Schwab High Yield Checking

Link: Fidelity mySmart Cash

Worst Companies to Work For

To be fair - I should clarify, this list if of the worst "big" companies to work for. Edugree has a hist of the five worst companies to work for. I'm not sure if there was a particularly strong methodology for picking these, but they seem to run along the lines of businesses that I hate dealing with in my personal life. If they threw Wal-Mart and AT&T Wireless into the mix they would have hit it spot on. I have an edited list of the companies below, for a full list head over to edugree.

1) The Home Depot

2) AOL

3) Best Buy

4) McDonalds

5) Verizon

Image: triplezero @ Flickr

Deducting Tax Advice Fees

I tend to prepare my own taxes, but came across a post yesterday asking if tax advisory fees can be deducted from returns. The answer is technically yes, but the average taxpayer is unlikely to qualify.

Tax preparation fees fall under "miscellaneous itemized deductions." Other items in this category include job search fees, union, dues, legal fees related to tax advice, and even safety deposit box fees (provided that they hold investment related goods).

However, miscellaneous deductions are only deductible to the extent they exceed 2% of your adjusted gross income. So, if your income was $100k and you had $3k in miscellaneous expenses, then you would only qualify for a deduction of $1,0000. It should also be noted that while investment advice qualifies under miscellaneous itemized deductions, broker commissions don't.

You can read more about the wonderful world of miscellaneous itemized deductions in Pub 529 (note this is a pdf document) over at the IRS website.

Image: Blmurch @ Flickr

FULL DISCLOSURE, I'm not a CPA and don't pretend to be. Consult a tax attorney or CPA for your specific tax questions.

Most Overlooked Tax Credits and Deductions

It's approaching that time of the year. It's a time that no one is particularly fond of, but if you have to pay taxes -- you might as well only pay your fair share. H&R Block recently posted an article on its website about the top 10 overlooked credits and deductions. The top 10 are listed below.

1) Earned Income Credit
- Available to low-income workers.

2) Child Tax Credit
- $1,000 for each child, the amount you can claim for each child decreases once your adjusted gross income hits $75,000 as a single filer or $110,000 jointly filing.

3) Saver's Credit
- Get credit for up to half you contribute to a retirement plan. Restrictions apply.

4) Education Tax Benefits
- Hope Credit: 100% credit of first $1,100 and 50% next $1,100 per student for tuition and fees with a max of $1,650. Restricted to your first two years of college.
- Lifetime Learning Credit: Credit of 20% annual tuition and fees. Max $2,000. Unlimited number of years.
- Tuition and Fees Deduction: Allows you to deduct up to $4,000 for tuition and fees.
- Student Loan Interest Deduction: Deduct up to $2,500 per return for interest paid on student loans.

5) Medical Expenses
- Deduction available if you spend more than 7.5% of your income on medical expenses (you must itemize to claim).

6) Moving Expenses
- You can claim this even if you don't itemize so long as your move was 1) job related, 2) would have increased commute by more than 50 miles, 3) were employed full time at least 39 weeks during the 12 months after you moved, 4) your moving expenses weren't reimbursed by your employer.

7) State & Local Taxes
- If you itemize, you can claim your state and local sales tax or income tax. You will need receipts if you choose to claim the sales tax deduction.

8) Charitable Donations
- If you itemize you can deduct these, but keep your receipts for money donations, items donated, or mileage while driving for charity.

9) Out of Pocket Job Expenses
- These are deductible provided you keep records and are not reimbursed by your employer.

10) Self-employment Deductions
- Half your self-employment tax, up to $112,000 of new or used business equipment purchased this year, your home or office furniture if its used solely for your business.

You can also follow the link here to read more about each credit (but whatever you do, if you have H&R Block prepare your taxes -- please don't sign a tax refund loan).

What Are The Best Personal Finance Books?

As I was walking around the local Barnes & Noble over the weekend, I found myself in kind of a rut. Nothing seemed particularly interesting, but I haven't read a good book about money for quite awhile so that's what I was browsing for. Instead of searching through the Amazon reviews for a good book, I though it might be better to open it up to everyone out there.

So, what is your favorite book about money? The last money book I read was one of Jim Cramer's (the high strung Goldman trader turned hedgie-turned CNBC talking head), and can't say that it was something I'd recommend.

Image: Lin Pernille @ Flickr

Will Subprime Bite the Financials Again?

Today I saw an INGDirect ad for adjustable rate mortgages that struck a chord. A week or two ago I read an article at the WSJ Deal Journal Blog that said many of the mega banks were looking at ARM's and subprime again as a way to increase returns. While the article didn't say that the banking giants were getting bank into the fold originating subprime loans, the banks are eyeing the acquisition of "distressed mortgage assets."

I'm not an MBA or finance wiz, but I'm wondering if there aren't practical considerations the big banks are overlooking. We all know that the subprime meltdown was caused by lenders extending too much credit to borrowers that had questionable credit qualifications and with too little equity. The big mortgage lenders have paid a price taking write downs on a good chunk of those loans. Since the number of delinquent borrowers has increased, the risk and corresponding value of the loans has decreased in the secondary market.

If we take it as a fact that home values have decreased (or at least stagnated) due to demand in many areas, the amount of equity that lenders hold has stayed about the stayed about the same (or increased slightly as a percentage). That would normally be fine for lenders because even if they had to forclose on the borrower they would have sufficient collateral. However, there will almost assuredly be a backlash and tightening of lendering standards. This will likely lead to a shrinking pool of qualified buyers and demand sticks lenders with different problems. Reports have quoted Freddie Mac as stating a foreclosure costs it $60,000. While that figure seems misstated to me, banks are undoubtedly better off if foreclosures never happen.

Banks know more about the time value of money than anybody else. The last thing they want to be is in the business of managing real estate. Even if they can find someone to buy the property quickly after a foreclosure, the lender will undoubtedly rack up some fairly significant legal fees in the process of removing the borrower. I'm not sure there is an easy solution, but think that the industry is much more complex than it was in the past. This is compounded by the fact that most big traditional lenders are restricted in the types of investments they can make . Hedge funds and other alternative investment organizations are more flexible and can play both sides of the market.

In the end banks need to shore up their lending standards and re-evalute the risks each borrower poses. Many of the ARM loans already originated have murky credit standards and were securitized into the secondary market with purchasers not exactly sure what they are buying. I hope the banks now moving on the discounted subprime loans have done their research so they won't need to be bailed out down the road after writing down more loans.

Money Ning Is Giving Away Cash Money

If you're reading this post you are here because you are looking for ways to save money (or came here by mistake somehow). Well this post won't help you save money per se, but will tell you about a place giving away money. Money Ning is giving away $1,000 (in $100 daily increments) until the sum is gone -- for subscribing to his blog via his Feedburner email feed. If you're interested in getting in on the contest since it doesn't cost anything and he has some decent advice you can head over there here.

High Yield Checking Account Interest Rates Hold Up Better Than Savings

High yield savings account interest rates took a hit again this week (Feb 16) with a majority of the major players again reducing returns. However, high yield checking account returns have held up better. Bankdeals.blogspot.com reports this week that there are still plenty of good returns to be found with high yield checking accounts. Below is a list of places that you can still get a good deal from Bankdeals. The site also has a ton of information about the highest CD, savings, credit union yields, and bank account bonuses for the rate chasers out there.

• 6.01% Reward Checking at Air Academy FCU
• 6.01% Reward Checking Account at Charter Bank
• 5.51% Reward Checking Account at Provident Credit Union
• 5.09% Reward Checking Account at Consumers Credit Union
• 5.01% Reward Checking Account at State Bank of Toledo
• 5.01% Reward Checking Account at Connexus Credit Union
• 4.44% Reward Checking at First Arkansas Bank & Trust
• 4.00% Reward Checking Account at First National Bank

PS: Before you jump to a new account for what could be a teaser rate it's a good idea to crunch the numbers with a rate chaser calculator to see how long it will take for that new rate to pay off.

What Will You Do With Your Stimulus Check?

Now that it is looking more and more likely that Pres. Bush's economic stimulus package will in fact be made a reality as early as next month -- raining down checks of $300 to $1,200 per household.. What do you plan on doing with your check? I plan on investing the money (I suppose that shouldn't come as a surprise since I blog about being cheap). Sorry to those of you expecting me to do my part to get this economy back on track - hopefully other people carry my weight for me.

I'm curious to hear from other people what they plan to do with their refund. Of course, if this plan is going ot work people need to spend the money and the sooner the better. It has been reported that it takes at least six months for the spending to stimulate the economy.

Economists are notoriously poor at predicting and modeling what will happen with the economy, so what is your guess? After all, you have a better chance of being right than the weather man.


Read more about the plan @ NYT

Image: dcjohn @ Flickr

Study: Want to be rich? Be Moderately Happy

We’ve all hear that the rich are unsurprisingly more happy on the whole than typical common folk, but there is a new study that says when it comes to financial success, it’s better to be only slightly more happy than average.

Turns out that after researchers at U. Virginia, U. Illinois, and Michigan State analyzed data and published findings in Perspectives on Psychological Science. The conclusion was that people who rank themselves a 7 or 8 on a scale of 10 achieve more success than people who rate themselves a 10.

So, does this mean that someone like Richard Simmons who is an eternally perky 11 on 10-point scale would do better if he turned it down a notch? Not sure, it’s difficult to accurately quantify happiness since happiness is a subjective beast.

The study posits that people who score off the charts for happiness tend to look at the world through rose colored glasses and as such don’t learn from mistakes – making them less productive than people who are less happy.

I will throw my completely unscientific theory out there… I think that people who are really happy are less successful because they are in a word content. People who are completely content in my opinion generally have less drive – and maybe lack the Type A high achiever personality found in many people who find above average financially success. People who are super happy might fall into either people who are content with meeting an average level of success and comfortable lifestyle – or they may be entrepreneurs who continue to keep on going regardless of what life may throw at them taking bigger risks for bigger rewards. Just my two cents.

Link @ Yahoo Finance

Image: Itzafineday @ Flickr

Guest Bloggers and Article Ideas Wanted

If anyone has ideas for articles that they would like me to write about on The Golden Parachute please feel free to send me an email. Also, I’m looking for people who may be interested in writing an original article or two to be featured on this site. Although I don’t have much to offer you’d get some free publicity and a link back to your website on this blog. If anyone is interested send at email to goldenparachuteblog@gmail.com.

Post Comments & Other Odds and Ends

I apologize to everyone for not updating the site as much as I would like. I have made a goal to post at least three times a week going forward here. Grad school has caught up to me and been a huge time suck lately. On a related note, I went through and tried to strip out all the spam from the blog comments. I got hammered over the past week with about three dozen spammy comments so that should be fixed now. If you find any that I may have missed please shoot me an email. Thanks.

Free Online Financial Calculators

Most of us don't remember the first thing about present and future value calculations (especially without the help of a financial calculator). The wonder of the internet makes plenty of good tools available at your fingertips to calculate figures for your retirement, you mortgage, credit cards, investment allocation or business. But, if you use these tools somewhat frequently you may want to bookmark Dinkytown.net. The site has a bunch of easy to use free calculators on just about anything you can think of and also has special calculators for those of you in Australia and Canada.

Image: ansik @ Flickr

ATM Fee Hikes On Horizon

As consumer banks look to juice returns during a down period for new loans and mortgages be on the watch for rising ATM fees. In certain areas of the country JP Morgan, Bank of America and Wachovia have started charging $3 for non-account holders. Add that to the $1 or more that many banks like Chase already charge consumers themselves for the use of ATM’s not natively owned by the bank and consumers are getting a raw deal. You may be getting charged up to 20% of your withdrawal if you are making a withdrawal of $20 for example.

The average ATM fee today is $1.78, but five years ago it was about $1 at a bank where you didn’t have an account. My response, switch to a bank that refunds ATM fees that other institutions charge…. or if that isn’t a practical option for you use a point of sale cash back option – there are Walgreens and Wal-marts everywhere and a pack of gum costs a lot less than a $4 ATM fee.

If you are in the market for a checking account that has ATM refunds, some possibilities with decent interest are

Schwab High Yield Checking: 3.21% APY Variable with no min.

E*Trade: 3.60% APY Variable with $5,000 min.

Readers, do you have other suggestions? Comments?

Link to story @ ABC News

Image: wrestlingentropy @ Flickr

Schwab Offers High Yield Checking Account

Schwab has thrown its hat into the high interest checking ring recently. For those of you with Schwab brokerage accounts their "Schwab Bank High Yield Investor Checking" may be a convenient addition to your portfolio. A quick look at the account's stats show the following:

Rate: 4% variable APY.
Min: No account minimum.
Fees: No service charges or fees.
ATM: Unlimited ATM fee reimbursement.
FDIC: FDIC insurance up to $100,000.

I think it looks like the high-yield checking is a solid offering from Schwab. For starters, it beats the Electric Orange account from ING in terms of interest rates and features. Additionally, the Schwab money market is paying 4.32% (7-day avg as of 1-20-08), which means that if you give up .32% interest you can gain FDIC insurance and no minimum. A checking account isn't a great place to stash money in terms of investment opportunities, but if you have short term cash or carry a larger than average checking account balance it might be a good thing to look into.

Does a high yield checking account have a place in your portfolio, do you use a money market account with check writing, or just a plain old checking account?

Image: liewcf @ Flickr

Making Reward Credit Cards Work for You

I’ve been burned in the past by credit cards that offer a great deal initially only to scale back rewards or raise interest rate so that the products become less attractive. Fortunately, I don’t carry a balance and I pay my statement in full each month, so the later issue doesn’t affect me (note: if you carry a credit card balance you should worry about the interest rate you are being charged and not the 1-3% you are getting in cash back). However, I am admittedly a “reward whore” and try to reap as much cash back bonus from my credit cards that I can.

So the goal is three fold, 1) to get the greatest amount of rewards possible, 2) do so only holding a few cards and, 3) try to pick cards that won’t drop their rewards six months down the road. I attempt to hold only two credit cards at a time and not open and close accounts if I can avoid it (due to the adverse consequences it has on a credit report and the hassles associated with it).

Here are the cards that my wife and I currently hold and some others that I think are worthy additions if you are reconsidering the cards in your wallet or in the market for a new one. We try to have one card that we use for gas and one for other purchases, but there are other good cards out there that give rewards for gas, groceries and pharmacy purchases (Citi started this trend with their Dividend card and have since slashed rewards).

A GAS CARD

My current favorite is thea BP gas card that offers 5% cash back on purchases at BP locations nationwide. There is no cap to the amount of rewards you earn yearly, which is good considering the price of gas these days. If you don’t have many BP’s in your area do a Google search for the most popular station followed by credit card. In my experience most of the major companies offer similar products so it’s worth a look.

AN EVERYDAY CARD

Since the majority of reward cards offer either a) a higher cash back percentage on certain types of purchases or b) a lower cash back percentage that applies to all types of purchases – if you are looking to maximize your cash back its good to get a card that will give you more than 1% back without a cap on all other purchases.

If you have a brokerage account with them, or are looking to open one in the future the Fidelity Visa card if my current favorite. While the reward rate isn’t the highest that’s offered, I like the 1.5% cash back on all purchases with no ceiling. Every time that you accumulate 5,000 reward points (the equivalent of charging $5,000), you receive a $75 credit for your Fidelity brokerage account. (* Note: Fidelity also has a Visa card offering 2% cash back with no limit into a 529 plan for those of you who are looking to save for a child's college education).

OTHER OPTIONS

Credit card issuers are fighting tooth and nail over new clients so there are new products popping up every day. Some good resources to start your research are creditcards.com and bankrate.com. Here are some other cards that might be good fits if you are searching for a new one.

Chase Freedom Visa: This card gives you $50 when you make your first purchase. Additionally, you receive 3% cash back in your top three spending categories (ie: grocery, gas, etc.) which re-adjusts each month. All purchases that are not in your top three spending categories earn 1% cash back. An added bonus for this card is that you receive an extra $50 each time you earn $200 in rewards. (* Note: that the fine print for this card says that you can’t receive 3% cash back on warehouse and discount club purchases).

Blue Cash American Express: This card gives you up to 5% cash back on “everyday purchases” (including gas, groceries, and pharmacy purchases) as well as up to 1.5% cash back on other purchases with unlimited cash back rewards. However, this card is probably only particularly attractive if you charge a large volume on your credit card. [* for each calendar year, from $0-$6,500 you receive 1% cash back for “everyday purchases” and .5% on all other purchases, over $6,500 you receive 5% cash back on “everyday purchases” and 1.5% cash back on all other purchases).

The Nest American Express: This card is another that is potentially attractive if you charge a substantial amount on your credit cards. You receive 5,000 reward points when you make your first purchase (equal to $50). Then you receive 1 point for each dollar charged on the card (1%). If you charge $15,000 in a calendar year then you earn an extra 10,000 points (equal to $100 cash back), on top of the 1% you normally ear. The card is targeted toward newlyweds and couples who need a hand so new sign-ups also receive a binder and materials to help you plan a budget.

So do you have a favorite card that has stood the test of time? Let us know.

Image: szlea @ Flickr

Save Money on Phone Calls When Traveling

GSM cell phone services (ie. AT&T and T-Mobile) are great because they use the same standard many European carriers use. This means you can take your cell phone with you abroad and you can make calls -- although you will pay for them through the nose. I was reading recently about people traveling abroad with iPhones running on the AT&T network who received emails and other data transfer and had obscene bills (see here).

When I was traveling abroad last year I went old school and purchased a phone card to use at a pay phone. This year I decided to do some research, and although its not the cheapest option in the world and regular old phone cards might still be more effective another option to look into is prepaid sims like those offered by MAXroam. These companies allow you to buy a sim chip (those of you with AT&T or T-Mobile should be familiar with sims) that you can pop into your cell phone and will give you a local number wherever you are traveling. That means you can use your phone more easily abroad and get WAY cheaper calling and roaming rates.

Unfortunately these services aren't available to many people in the US for two reasons. First, most of us have a carrier other than AT&T or T-Mobile -- thus, our phones don't run on a GSM based network. Second, to use a prepaid sim service you need to own an unlocked phone. U.S. carriers sell almost exclusively phones locked or tethered to their cell phone service. To unlock your handset you need to either convince your carrier to do so or purchase/find an unlock code online. If you place a different carrier's sim in your locked phone you won't be able to make outgoing calls.

Lets get down to the dollars and cents... how much can you save? A roaming call when I was traveling abroad in Spain ran over $2 USD / min. Based on the MAXRoam website the cost of a sim is $29.99 (Euros) and that includes a 5 euro calling credit. Incoming calls run just .25 euro / min and outgoing calls .38 euro / min. That savings is substantial if you plan on placing a fair number of calls while traveling - or if you just want to have a way for people to contact you while traveling.

If you have used a similar sim service let us know which one and what kind of rates you paid.

Image: KB35 @ Flickr

Why Tax Refund Loans Make Bad Financial Sense

It's getting to be tax season which means a slew of tax preparation companies will spring into action and in the process begin to push tax refund loans on consumers. Reports state that nearly 12 million Americans take companies up on these offers -- and fatten the bottom lines for return preparation companies in the process.

There are a few factors at work here. The first is that people love receiving tax refunds. However, say you receive a $2,150 refund. The important thing to remember is the government is really just returning the excess money you paid over what you owe. It's not free money -- its your money that you just gave to the government interest free for a year. Second, what the tax preparation companies tend not to advertise is that these loans are similar to payday loans and charge APR's often in excess of 100%. A $100 finance charge on an average refund of $2,150 has an APR of 178%.

If you are receiving a large refund you've already given the IRS a good deal, don't give the tax preparation firm an even better deal. If you use a tax refund as a way to force yourself to save money open an online savings account (ING, HSBC, and E*Trade all are easy to use and allow you to link multiple accounts). Take the amount of taxes you owed the previous year, divide by 12, and set up an automatic savings plan with the online savings account to regularly deduct a portion of that amount out of your checking monthly, weekly, or bi-weekly. This way you don't make an interest free loan to Uncle Sam and you are able to actually earn some interest yourself in an FDIC insured account.

Read more about Refund Anticipation Loans @ Wikipedia

Image: RBereig @ Flickr

Sharebuilder $50 Free Offer

ING has started to market the Sharebuilder service that it acquired. This isn't terribly exciting new, but ING is currently offering a special deal where you can receive a $50 credit to your account by entering the code SHARE50 -- hey a free $50 is a free $50. As with any deal there is fine print. It looks as though you need to purchase a security and the credit will post within 4 weeks of the transaction.

For those of you not familiar with ShareBuilder, the company allows you to purchase fractional shares of securities. You can set up an automatic savings plan and have the company purchase $35 of stock each month and you will receive the applicable fraction of shares that the $35 will buy you at that time.

The company advertises that they have buy fees as low as $4, but that is for people who have an automatic savings plan set up. A full fee schedule can be found here.

Direct Link to Offer at ShareBuilder

Photo: goat_girl_photos @ Flickr

How Healthy Is Your Bank

I stumbled across an interesting page on Bankrate.com today. Using what they call their "Safe & Sound" system you can look up your bank and see generally how its financial stability is compared to its peers. If you have your money in an insured account such as a FDIC savings account or SIPC brokerage account and are under the insured limits you don't have much to worry about -- however, it's still interesting to see how your bank fares.

Ratings are broken down as follows:

Safe & Sound CAEL rating system

Safe & Sound CAEL rating Definition Star rating 1 Superior ««««« 2 Sound «««« 3 Performing ««« 4 Below peer group «« 5 Lowest rated « No Report Complete data not available No Report "U" Closed Institution is closed Closed G Designates high growth --

Image by: PixelJones @ Flickr