Homebuyer Tax Credit and Jobless Benefits Extended

November 23, 2009

If you were thinking about buying your first house but then put it on hold because the first time homebuyer tax credit is expiring on November 30, it is time to reconsider.  The senate has passed a bill to extend this credit until April 30 (and giving you two months to close – by the end of June) in efforts to continue encouraging real estate growth.  Home prices are still down, but seemingly on the rise so it is still a great time to look around!

On the other side of the spectrum, those who are in the position of taking advantage of jobless benefits may be interested to hear that the senate has also chosen to extend those benefits by 14 – 20 weeks, depending on the state.  If the state unemployment rate exceeds 8.5%, then jobless benefits are extended by 20 weeks.  This is also in response to reports that unemployment is still on the rise, regardless of whether the economy is recovering (or not).

This news tip will probably be pretty obvious to some of you but maybe not for others so I thought it would be worth mentioning.  Have a great week!
– debs


California’s New Tax Withholding Scheme.. Part II.

November 6, 2009

At the heels of RT’s last post “California’s New Tax Withholding Scheme,” I wanted to chime in about a couple of other things I had learned.  I had watched a piece on it on the local news, but found the highlights I took away nicely summarized in this article from the LA times.  I’ll just mention a couple things from the article, and leave the rest of it up to you to take a look.

As RT mentioned, the withholding is basically serving as an interest free loan to the state.  As the LA Times puts it,

“Think of it as a forced, interest-free loan: You’ll be repaid any extra withholding in April. Those who would receive a refund anyway will receive a larger one, and those who owe taxes will owe less.”

While it certainly provides relief to some of us to know that we will probably get the money back in April, for others the extra withholding may be dipping into an already tight holiday budget, or extra money they were hoping to earn some interest on.  My guess is that even though RT has pointed out that the difference is probably hardly noticeable on the paycheck, people will still panic since most of the U.S. population is already actively cutting back on spending.  Knowing the state is holding onto more money probably won’t do much to encourage consumers to spend more, which is what businesses typically depend on as we approach the holiday season.  For those that, for whatever reason, would like to see their paychecks unaffected, the LA Times also suggests a workaround.

“Savvy taxpayers can get around the state’s maneuver by increasing the number of personal withholding allowances they claim on their employer tax forms, said Brenda Voet, a spokeswoman for the state’s Franchise Tax Board.

“People can get out of this,” she said, noting that most people would have to change their allowances through their employers. California’s budget leaders are banking on the hope that most won’t.”

Truth be told, I probably won’t take the time to file a new W-4 form at work but others may find this a good opportunity to hold onto more money per paycheck.  For those who tend to glaze over government related news (I’ll admit to being one of them sometimes.. trying to change that), hopefully this provided some good, easy to understand information for you!

-debs


California’s New Tax Withholding Scheme

November 1, 2009

The Governator

Effective right after Halloween, November 1st, the citizens of California will be subject to a higher income tax withholding. This will last, at least, until the end of the year. Assuming we all file our taxes correctly (ha!) this will effectively serve as an interest-free loan to the state for the rest of the year. I suppose this is the state government’s alternative to raising taxes, knowing full well that they stand to rake in some money here if/when people get confused about how to file their taxes and subsequently receive less money back. Is that too cynical?

California is raising the withholding rate by 10% on your paycheck. What does this mean for you? The truth is you’ll hardly notice it. But let’s give an example just for fun!

Let’s say you’re single (or dual income married, or married with multiple employers) with zero withholding allowances and your biweekly salary is $1000. That’s equivalent to $52,000 per year. From January 1, 2009 to October 31, 2009 your biweekly paycheck would reflect the state withholding $20.63. From November 1, 2009 through December 31, 2009 your biweekly paychecks will now show the state gouging you out of $22.69!

I guess that’s relatively harmless, right? I guess things could be worse, but let’s just hope that the tax returns we’re expecting don’t come back in the form of IOUs. More food for thought: after three months, you’re out one footlong sandwich from Subway. Think about that…

The government site has a moderately useful FAQ and general 2009 Rates and Withholding details for you to peruse including PDFs of the actual withholding rates.

I think it was a John F. Kennedy that once said: Ask not what your country can do for you, but what you can do for The Terminator.

-RT


Why I don’t like TIPS

October 21, 2009

One simple reason – when I’m buying a derivative, I don’t want the payer to be in control of the underlying.  IN ENGLISH:  The government gets to pick the formula for “inflation” when paying you for how much inflation has gone up.

In case you don’t know what TIPS are, in short, they’re a note or bond you buy from the US government whose payout goes up when inflation goes up.  So some advise owning some of these to protect yourself against inflation.  This sounds great in theory, except when you read about stories like the government counting the “price” of cars in the “cars for clunkers” program being $4500 less than than before. This is artificial deflation and screws over those with TIPS.

So back to the main point – no way I’m lending someone money and letting that person control the interest rate charged whenever they want.

-Tim

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Thinking of Buying a House?

August 26, 2009

blog_house

Unless you’ve been living under a rock or over a rainbow, you’ve surely noticed that the global economy has suffered a massive bout of what I like to call EPIC FAIL. But you might also have noticed that the month of July just posted a 9.7% increase in sales of new houses since June. I’m sure this is in no small because the government is giving $8,000 to first time homebuyers that I’ve heard can even be counted toward your down payment.

A lot of twentySomethings have been working for a few years and have stockpiled a good sum of money while not having enough of it in the market to be squandered. Many of us also are points in our lives where we’re looking to settle down, maybe buy a house and start a family. It’s only natural to follow the mold and think of buying a house these days if you still have a job and money in the bank. After all, housing prices haven’t looked like this in years!

If you’ve only recently begun thinking of buying a house, don’t forget that the price of the house is not the only thing that matters. HOA (Homeowners Association) fees are imposed on many condos and apartments, and some housing neighborhoods as well. In California, cities, counties and districts can impose Mello-Roos taxes on your property on top of the state property tax. Then there are maintenance fees that renters don’t have to think about, like when your toilet breaks or your shower leaks or your dishwasher breaks. Oh, and if you’re not paying monthly utilities for water and trash, those will officially become your responsibility. Those are all landlord problems, and you’re thinking of becoming a landlord! On top of all those there are the fees you’re going to pay just to buy the house, which may include closing and escrow fees (and buying fees if you eventually sell the house somewhere down the line).

In the interest of full disclosure, I do not own a house and I’ve never purchased one. That really means there may be even more costs I haven’t considered or mentioned, like costs associated with taking care of your lawn. But for many people this is a worthwhile investment, if not financially then just because people take pride in owning their home. For those of you looking to buy, I advise you to make use of this Rent vs. Buy Calculator provided by the New York Times website.

Happy Hunting!
-RT


An Even Trading Field?

August 4, 2009

The Securities and Exchange Commission, better known as the SEC, is considering a ban against so-called “flash orders.” Apparently, buy and sell information can occur in the tiny little milliseconds leading up to when information is made public. During these milliseconds, uber-computers used by certain trading platforms like Direct Edge, Nasdaq OMX and BATS can use the buy and sell information to make better trading decisions.

How does this affect you? Well, it may or may not affect you that much really. If you’re playing the markets for the long term, then it probably doesn’t matter too much. But if you’re playing for short-term gains, like options plays, then milliseconds can make a huge difference.

But isn’t it nice to know how people are trying to scam other people? And that sometimes our publicly funded regulatory bodies do, in fact, pay attention?

-RT


How The G1 Can Save You Money

June 28, 2009
T-Mobile G1

T-Mobile G1

I am in need of a new car, so I spent my Saturday out and about test driving different cars. Now this is the first time I’ve had to shop for a car myself, so I was a little naive at first, to say the least. One thing I picked up on really quickly was how the car salesmen try to categorize you from the moment they see you. The way you dress is the first indicator they get, and just the tip of the iceberg. Then they proceed to the small talk and seemingly garbage chit chat that you take for granted at social functions you desperately do not want to be a part of.

You may or may not notice, but the salesmen will start slipping small, unobtrusive questions into the conversation that seem to be in line with standard “How do you do?” etiquette. But questions along the lines of, “So, RT, I see your area code differs from mine. Where are you living now?” and “Do you want some water? How was work this week?” The answer to the latter question is usually negative, because for some reason or another there appears to me to be an unspoken social construct that all people shall say work sucks, maybe because no one wants to be that one jerk who talks about how awesome his job is. But that’s a conversation for another time.

Back to the story: At this point the salesperson has just heard you had a terrible/great/ok/baffling/ weekend, so the person replies, “Oh that sucks/is interesting/sounds about right/whatever. What exactly do you do?” That last question is one everyone asks you, so it’s pretty trivial right? Maybe… and maybe not. That salesperson is not just trying to make a new friend with small talk. He/she wants to know if you can afford to pay for the car you’re eyeing. Finding out where you live is another indicator of what you might be able to afford (or your priorities in life, I suppose). So is seeing if you’re married, if you have kids, what you currently drive, whether you rent or own, and a million other questions really. It’s not that hard for them to peg you, nor should you really try to hide it.

I feel like I’m straying off topic again. Maybe I’ll save the rest of the car-purchasing experiences for future posts and just get to the point now.

So I’m talking to a salesman (let’s call him Bobby) and his phone goes off, which he promptly answers, and I see that he’s got the new(ish) T-Mobile G1. Out of curiosity I ask him if he likes it. FYI, Bobby has been cold to me since he saw me. I can tell he wants to get me the hell out of the way (I do not dress up or appear wealthy for this stuff). But all of a sudden, he goes off! “Oh MY GOD I love this phone! This is the best phone ever! I used to have a PDA before this and… yea… well, this thing is great, it even saves me money!” [italics mine]

Here are the thoughts that run through my head immediately:
-Hmm, he seems receptive to this question. Maybe he’ll be nicer now and we can have an enjoyable test drive.
-Does he know anything about phones? Because I know a fair amount.
-Last time I checked, this phone still cost at least a few hundred dollars. How does he save money with this phone??

I, of course, ask Bobby how exactly he manages to save money with a very expensive piece of equipment like that. You know what he tels me? The G1 has an application (either pre-loaded or downloadable) that lets you scan the bar codes of products and then compare its price to the price listed at other stores. I’d heard of it before from the Android Developer Challenge 1. So he went to Home Depot to buy a lock and decided, “Hey let’s see what this thing costs at Ace Hardware or Lowe’s.” Lo and behold, Ace Hardware was selling it for $4 cheaper. At this point a store employee comes by and asks Bobby why he’s taking pictures of a barcode, so Bobby shows the guy and says, “So I’m going to go to Ace Hardware now.” Not wanting to lose business, the employee counters by saying he’ll take 10% off the listed price. Winner!

To make a long post short: If you have a G1 go get that app, and the next time you’re shopping at a big chain store go see how much that store’s competitors sell whatever you’re buying for. If it’s cheaper, go tell someone. They might make you a deal. That was not Bobby’s first deal.


Expanding My Social Horizons

June 26, 2009

In college I had few responsibilities. As far as my actual degree goes, my only real responsibilities were to learn and get passing grades. Socially, I pretty much just played basketball and went out with my friends. And partying in our dorms was all fine and good… until we turned 21. And then we went out to explore the bars and clubs, and we spent boatloads of moolah on drinks and covers and the like. Please, stop me if this sounds familiar. Fiscally speaking, I like to think that it was an expensive hobby of experience collecting to check out the various alcoholic establishments in my fair city (and bolster my friendships).

Now, years have passed since I was but a budding twenty-something youth and my interests have changed a bit. The Girlfriend and I have picked up a new hobby: swing dancing. We both enjoy dancing, and not just that grinding club style, although that has it’s place too. ;) A great side effect of this dancing stuff though, is just having a cheap, social hobby in which we can meet people or just go to have some drinks and have some fun.

Let me give you an example. The Girlfriend and I recently went to Seattle. I have a friend who lives up there and she took us out to dinner one night. Lo and behold, the restaurant (The Tin Table, in the Capitol Hill district, was located in an old Oddfellows building that housed various other businesses. One of those businesses was in the Century Ballroom that was used as a nightly dance floor that had different music depending on the day. I’m talking older styles of dance, like east coast swing, lindy hop, salsa, tango, etc. So of course, we had to check this place out. On Sunday night, we stepped into the ballroom for the all swing dance (east/west/lindy hop, basically) night. At $7 a head, this was neither the cheapest, nor most expensive cover I’ve ever paid. But the dance floor was alive and kickin’ from 9pm until… whenever they felt like closing it seemed.

I think many post-grad twenty-somethings hit a point where they feel like their lives have become stagnant. As a friend of mine so elegantly put it (paraphrased) with regards to having a routine of working and having a few outside hobbies that you do all the time, “You’re ok with having a day-to-day routine. The week-to-week is acceptable. Month-to-month you’re sort of iffy on, but you’ll live. Year-to-year scares the hell out of you!” The only thing I can say about this is that a) It seems to be true for many twenty-somethings. and b) You have the power to change this.

Try expanding your horizons and looking into some activities you’ve never done before but find kind of interesting. Maybe you’ll even save a buck or two when you find a new hobby and stop bar hopping every weekend. And maybe you won’t. Big deal. As another friend of mine said, “money is for having experiences anyway.”

Just for fun, here’s a clip of some sweet Lindy Hoppers:


Is It Possible To Save Too Much?

June 21, 2009

Money can’t buy you happiness.
-someone long forgotten but considered wise

As a break from all the preaching we do about saving money, and watching where your dollars (or whatever currency) go, I’d like to take a moment to mention that it’s always important to actually spend your hard-earned money. Specifically, spend it on things that bring you joy. In regards to the quote atop this post, my response would be, “Yes, but money can buy you the things and pay for the experiences that bring you happiness!” I’ve held that little motto of mine for quite some time now. I mention this because I stumbled upon a study (via BadMoneyAdvice) focused on a mindset dubbed “hyperopia,” or excessive farsightedness, or more (un)commonly known as Saver’s Remorse. These are the people who penny pinch, and are frugal to an unnecessary, and indeed, irrational degree. But we can know ourselves and compensate accordingly, at least that’s what Ran Kivetz and Itamar Simonson have shown. Not including the chance that being ridiculously stingy can bring a person pleasure, I would say this is a problem just like being prodigious and whimsical with money is a problem. Clearly, this “problem” does not affect many people. But if you’re here and reading this post, you probably have a better chance of being afflicted compared to the average Joe (not the plumber).

Of course, I’m not telling you that everything you’ve ever read on this blog or other personal finance blogs about saving money is hogwash. I’m really preaching the same story I always do, which is to know where your money goes and make choices you can live (happily, I hope) with. Spend money lavishly on things you know you’ll cherish, but make your own lunches for a few days a week to save up that dough. That seems fair to me, anyway. Being financially responsible is kind of like losing weight: It’s not that hard; most people can follow a fixed set of rules and will be hunky dory. The hard part is commitment and discipline. Hmmm… like many things in life, no?


Obama’s New Credit Card Legislation

May 28, 2009

Editor’s note: This is an in-depth expansion of RT’s summary this issue.

I’ll be first to admit that when I see a headline about a new legislation being signed, or a new law in effect, I often don’t think that I will feel much change or that it won’t affect me directly.  For example, I hardly think that this new credit card legislation will make me use or pay off my credit cards any differently pre and post legislation.  In order to try and dispel that way of thinking, I’ve dug deeper and uncovered some changes that are being made which will affect you and me.  This law does a lot to protect us, but will likely introduce new credit card practices to be aware of.

First of all, what does this legislation consist of?

There are a handful of new restrictions on credit card issuers, as well as a number of things that will go in affect that I assume are aimed to protect consumers..  For example, they cannot raise interest rates in the first year (with a few exceptions – ie if the minimum payment is not received within 60 days.  However the rate must be returned to the original rate if payment is received on time for 6 months), or on existing balances (also with a few exceptions).  They cannot charge over the limit fees (again with a few exceptions).   They are also not permitted to raise interest rates just because credit scores have dropped, or bills were paid late on other accounts.  Penalty fees must be reasonable, and a credit card company must notify you about APR increases 45 days in advance.  Payments received by 5pm have to now be recognized to be on time (so credit card companies can’t make up their own deadlines).  A cosigner will be required for anyone under 21 getting a credit card.  Credit card issuers are no longer allowed to offer gifts to students in exchange for applying for a credit card.  This legislation is designed to set some boundaries to prevent card issuers from slapping consumers with last minute fees haphazardly.

How will this affect us?
While this legislation is designed to protect us, it will also likely “punish” responsible credit card holders.  If you are one that consistently carries a balance, has issues paying bills on time, and is a consistent target for companies to tack on extra fees, then this will help you.  It eliminates a lot of potential for “shady” practices by credit card companies.  However, because of this, they will also have to look in other ways to compensate for the money they will be losing since they cannot raise interest rates and apply fees as freely.  Now more than ever, the good customers who carry no balance and pay their bills on time will be seen as the ones who don’t bring business.  That means that we’ll probably have to prepare for annual fees, higher rates, and lesser rewards ( rewards are my favorite!).  It will be more difficult for people to start building credit early (because a cosigner is required to get a credit card before age 21).  If a credit card I currently own decides to require an annual fee, I will probably cancel the card and dent my credit score, which is unfortunate.  There are just as many opposed to this new legislation as there are for this legislation.  And there is a lot of information to absorb and I’ve just touched upon a small percentage on it today.  In any case, I’d pay attention to any changes in your credit card terms when they start coming in – if it means new annual fees, higher interest rates, make sure there are no surprises.  Most of the law will go in effect February 2010, however there are a couple of things that will go into effect in August 2009.

-debs.