Wednesday, December 28, 2011

Why I Hate Taxes

In a recent poll published by the Pew Research Center, people were asked what bothers them most about taxes. The results were not what I expected, but were interesting nonetheless. 57% of the respondents were bothered most because they felt that the rich were getting away with not “paying their fair share”.

Honestly, I don’t mind paying taxes in general because I understand that they are a necessary evil, but there are reasons why I hate them too.

Here -- in order of dislike -- are my own personal reasons why I hate paying taxes.

#1 -- Inefficient Use
As I said, I really don’t mind paying taxes. My problem is more with the way in which our government puts them to use. Having them frittered away wastefully or used in inefficient ways bothers me in the utmost.

Use them to fix our infrastructure, use them to keep us safe, use them to build new parks and educational facilities, but don’t give them to big banks, don’t use them to pay ridiculous government salaries, and don’t use them to give to foreign countries that hate and despise us. Seeing my money fruitlessly frittered away, is frustrating to say the least.

#2 -- Unfair
It’s not so much that I feel the rich don’t pay their fair share in taxes, but rather the corporations. When I read about huge companies paying less into our tax system than I do, that is extremely agitating. Companies that reap the rewards of being housed in a country protected and defended with taxpayer money should be paying their fair share just like everyone else.

#3 -- Inconsistent
I always do my own taxes, yet I’ve never encountered a tax year where I’ve been able to follow the exact same format as the previous year. While sometimes this is due to changes in filing status, change of location, job change or similar personal adjustment, it doesn’t change the fact that our tax code is constantly evolving.

From state to state and year to year, there are constant adjustments to state and federal tax codes, some of which come at the last possible moment in the year, adding a further strain to those of us who must attempt to complete our own annual taxes.

#4 -- Difficult to Understand
I heard just the other day, that the US federal tax code runs somewhere on the order of 20,000 pages. Whether this is right or wrong -- even if it’s just 1,000 pages -- in my opinion, it’s just too much.

I feel as though I am regularly trying to update and educate myself regarding tax changes and laws, and while I’m no dummy, I have to say that sometimes I find myself boggled by the series of steps I must take to come to one simple conclusion regarding a particular tax issue or calculation.

#5 -- Time Consuming
I spend hours and hours each year learning and re-educating myself to the ever-changing tax code, and completing my income taxes. This is time that I might otherwise spend in much more productive ways. I could be earning money, learning a new trade, spending time with my family, or even heaven forbid, spending some time enjoying myself away from work were it not for having to spend lengthy periods of time compiling, recording, filing, and retaining a plethora of tax documentation.

Wolk, Martin. December 20 2011.

Wednesday, December 21, 2011

My Real Estate Agent’s Recent Housing Market Explanation

I recently got one of the regular monthly newsletters that our real estate agent (the one we bought and sold our first home with) sends out to former and current clients. This month’s letter was touting the “return” of the real estate market. In the letter, it said, “…real estate has been, and will continue to be, a good long-term investment.” Her words, not mine…definitely not mine.

To prove these words, she included a short, two-page pamphlet entitled “Why Real Estate is still America’s Best Investment”. Here are a few of the things I found interesting about this pamphlet and its explanation as to why real estate is still the “best” investment.

Full of Statistics
Statistics can be valuable tools in finding trends and helping to make decisions based upon all sorts and varieties of factors and data. However, the bad thing about statistics is that that can be warped and molded by the people and organizations utilizing them to make statements, jump to conclusions, and otherwise manipulate data to fit specific outlooks and motives.

The pamphlet this included in our real estate agent’s letter was packed full of statistics touting the long-term advantage of being a homeowner. From increasing rates in homeownership trends to changing demographics, the outlook appeared to me to be saying, “Since more people have been doing it lately, it’s still a good investment,” which I don’t tend to agree with. More people are getting college educations, but that doesn’t mean the quality of the education is getting any better.

Another statistic was about the increasing amount of long-term home equity homeowners were building. Once again, I find the statistic laughable, since I can buy a new car with little money down and continue to “build equity” in that vehicle, but that doesn’t mean the vehicle will be a good “investment”.

“Irrational Exuberance”
I loved the portion of the pamphlet that reviewed home values during the last 120 years. There was a chart -- with prices adjusted for inflation -- that tracked home values from 1890 ($100,000) to 2010 ($126,000). Not all that impressive a jump in my opinion...especially for 120 years.

I also loved the fact that this data was taken from the book by Robert Shiller entitled, “Irrational Exuberance.” Maybe they were hoping no one would look at the name of the source they used, list in tiny print below the statistic. But I guess the takeaway from this chart was supposed to be, (again in their words, not mine)…

“…Values Still Historically High”
Okay, given, the values are higher after adjusting for inflation, than they were 120 years ago. However, this is kind of like saying say my net worth is “historically high” compared to 10 years ago or 20 years ago. That doesn’t mean I’m wealthy or even well off, it just means I’m in slightly better financial shape than I was when I was in college or high school -- big deal! That’s not saying much…in my opinion.

“Irrational Exuberance,” 2nd Edition, 2006 by Robert J. Shiller

“Why Real Estate is still America’s Best Investment”. 2011. Buffini & Company

Monday, December 19, 2011

My Rules for Getting Through the Post-holiday Financial Doldrums

There are few times of the year that I dislike more than that month or two that follow the holiday season. October comes with Halloween. November we have Thanksgiving. December brings Christmas and New Years. Then there’s the let-down.

In January, there are W-2 forms being issued, which is about all I can look forward to, and which in turn means I get to start on the family’s income taxes. Then there is the credit card bill that comes for our holiday spending. And in February, my high-point -- if I’m on my game -- is getting our taxes mailed out.

Pretty exciting, huh?

So how do I get through the post-holiday financial doldrums? Well, it’s not always easy, but over the years, I’ve given myself a few rules to help me suffer through this period a little more successfully.

Set Up for Success
I try to set myself up for success before I ever reach the post-holiday financial doldrums. By constructing a holiday budget, breaking down that budget into how, where and upon whom I’ll be spending it, and then abiding by that budget, I can keep from overdoing it on holiday spending. This doesn’t leave me feeling so guilty after the fact and playing catch-up on my bills.

Look at the Doldrums as an Opportunity
For me, this is a great time of year in which to buckle down and really focus on my financial situation. Since we have typically lived in areas where January and February are the “hunker down” months, due to their bringing less than favorable weather for outdoor activities -- and since I’m not a big winter sports person -- there isn’t much to steal my attention away from dealing with my finances.

Not only do I find this is a great time to heighten productivity due to lack of distractions, but I have the time to do the family taxes, do some post-holiday deal shopping to look for next year’s gifts, and work on those financial New Year’s resolutions.

Incorporate Your New Year’s Resolutions
Speaking of New Year’s resolutions, this aspect of the holiday season can be a great precursor to making the transition into the post-holiday financial doldrums. By centering a few of your resolutions around financial goals, you may be able to make them a part of your financial fitness for the new year. With a few goals to help push you, there may be a bit more motivation when it comes to how and how successfully you push through the post-holiday period.

Make a List and Check it Twice
Your holiday list doesn’t have to disappear with the passing of December. In fact, a list could prove just as helpful to your finances after the holidays as before them. I find that compiling a list of holiday or holiday-related expenses that will be coming in -- before they arrive -- can help me better prepare for what could be a higher than normal billing period on the old credit card.

At least having a general idea of what sorts of bills are coming in and in what amounts can help you get the ball rolling on putting a little extra money away from that first post-holiday paycheck or two for paying down doldrums’ debt. And if nothing else, if you can’t pay off your holiday bills all at once, you can at least start coming up with a plan and timeframe for how you will do so. With no big-expense holidays lurking in the months immediately following December, and possibly little to do outdoors, I find that there is very little excuse for not sticking to your guns and getting your holiday bills paid off during the doldrums months.

Thursday, December 15, 2011

My Rules for Developing Financial New Year’s Resolutions

Overall, I’m not a big fan of New Year’s resolutions. I tend to believe that goals should be set when and where needed through the course of the year, not just at the start of a new year. However, this doesn’t mean that I’m against them completely, and can’t see the positive aspects behind such resolutions, especially when it comes to our personal finances.

Over the years, and throughout resolution successes and failures, I’ve developed certain rules that help me to develop and achieve my financial New Year’s resolutions.

Start Early and with Variety
I find that it’s a good idea to start forming my resolutions early in December and sometimes even earlier than that. Waiting until the last minute can leave me scrambling to come up with financial resolutions that might not be the most effective or pertinent to my financial lifestyle or needs.

But just starting early isn’t where I leave my New Year’s resolution preparation. Instead, I consider multiple resolutions that are both short and long-term in nature. Meeting a few resolutions shortly into the new year can provide the motivation to maintain interest and keep pushing to meet my longer-term resolutions throughout the rest of the year.

Make Resolutions Lofty, Yet Realistic
While I might use certain short-term, simpler-to-meet type resolutions to push myself to attain various goals during the year, I don’t make the majority of my resolutions too easy to achieve. Instead, I like to set certain lofty, yet realistic resolutions to push myself.

What’s the point of setting goals, if they don’t push you to achieve?

Therefore, I utilize a combination of easily met goals, paired with loftier financial expectations to drive me in meeting a tiered goal structure. For example, cutting expenses by 10% each month, could help drive me toward an overall yearly savings goal, or increasing productivity by an extra 5% each week could help me achieve a goal of producing an overall increase in profits for the year of 30%.

Make Resolutions that are Pertinent to Your Financial Life
I find that it’s important to make New Year’s resolutions that somehow affect your regular financial life, or if nothing else, build up toward large resolutions. Just saying you want to quit a job and start an independent career as a self-employed individual without doing things like investigating your career interests or forming a business plan, could leave you with a resolution that’s difficult to attain on its own.

I had leaving my job as a New Year’s Resolution once, but there were plenty of mini-resolutions that accompanied that goal. Yet, by meeting those goals, which included building a business plan, testing out my chosen occupation before leaving my job, having an exit strategy, and similar items, I was able to achieve my larger, all-encompassing resolution.

Write Resolutions Down in an Easily Visible Location
I’ve often seen this sort of rule on other New Year’s resolution related articles, but I feel it’s a good one by which to abide. Writing your resolutions down and keeping them out where they are visible and seen by you on a regular basis can be important to keeping them fresh in your mind.

This location doesn’t necessarily have to be on a calendar, but placing them in a spot where you will see them regularly like a desk, computer or even refrigerator can help you stay on top of your financial resolutions and hopefully ensure steady progress. Just bear in mind that if they are not items you’d like to share with the general public, you might want to reconsider placing them in a visible place at work or some other spot where they might be seen by others.

Wednesday, December 14, 2011

My Wallet Economics

I guess I’m just old fashioned, but I still like carrying cash in my wallet. Don’t hold it against me. Heck, I think it even helps me in a way. In fact, I think that carrying cash actually saves me money, and might even save you money if you consider a few of my theories.

What Lurks Within
I know pretty close to exactly what is in my wallet at all times. Not only the amount of cash I have on hand -- which is important for keeping an eye on how much I’ve spent and what I have left to spend -- but also the various cards inside my wallet. The knowledge of how much money I carry makes me think a little harder about my expenditures as the size of my cash laden wallet gradually shrinks to a more emaciated form, and tends to rein in my spending.

The inventory of items I carry is important to have locked inside my brain because this way, if I lose my wallet, it is stolen or if I happen to drop a card somewhere during the course of the day, I know what is missing and can take prompt action to ensure I report the loss to the proper party or parties.

Two-section Break Down
I have a front and back section to my wallet. In the front, I keep my budgeted spending money for the month. This money includes entertainment, food, and miscellaneous money -- mostly any items that aren’t things like utility bills, rent/mortgage, insurance, and regularly billed items. I know exactly how much is there -- say $300 -- so at any moment, I can pull that cash out and know exactly where I am with my “fun” money budget. And once this money is spent, it doesn’t get replaced until next month.

I was in a car accident once (before I began this wallet strategy) and the tow truck driver that came to pick us up would only take cash. We therefore had to find a place to get cash to pay him, during a time that was less than ideal. In the back section of my wallet, I now carry a reserve amount that is specifically for emergencies (such as an issue with my debit card or a situation that calls for cash) or special spending, and that I try not to touch unless I have to.

This money carrying strategy works well for me since I’m a responsible spender, but I wouldn’t necessarily recommend it for those who find that they spend cash readily if they have it on hand.

The Secret Stash
I also keep a little secret stash that up to this point, I’ve never had to touch, but it’s there if I need it. It’s only about $15, tucked away in one of those side pockets of my wallet, but in a pinch it can be a little lifesaver. A meal, a few extra gallons of gas, a taxi ride home or whatever; it’s nice to have that little peace of mind socked away.

The Credit/Debit Card Hide
I finally got rid of my last credit card, but I still have a debit card. Even though I highly dislike debit cards, I like to have one as backup. However, even though I carry a debit card, I don’t really like to see it because it’s one of those little temptations that can get me in trouble because of its convenience. Therefore I use a little psychological trickery.

I tend to put my debit card behind other cards in my wallet. Not only does this keep it “out of sight out of mind,” but it reduces the chance that when I go to pull out cash or another card such as my driver’s license, I won’t accidently drop my debit card in the process…a potentially costly mistake.

Thursday, December 8, 2011

Simple and Affordable Home Security Options When Leaving for Vacation

For those of us without expensive security services or fancy alarm systems, it doesn’t mean we don’t like to leave our home as secure as possible when we go on vacation. And even if we have someone coming to check up on our home every couple of days or so, it doesn’t mean that there won’t be stretches with no one around to supervise the well-being of our property. Those can be some long periods of time for someone looking to break into a home, or maybe even worse, when a pipe bursts or a similar security or maintenance issue could result in an extremely costly situation.

Here are a few of the things that we do or consider when we are heading out for an extended time away from our home to decrease the chances encountering a costly issue when we come home.

Mail Hold
We always stop our mail when going out of town for an extended period, even if we have a friend or family member stopping by to check on the place. To do this, we either stop in and fill out a hold mail form or do it through the US Postal Service’s website at I will typically start the hold several days in advance, just in case there is any confusion with the mail carrier (which there has been before). I also have someone check after we’re gone to ensure no mail has been mistakenly delivered in our absence.

We do this in order to prevent stuff from piling up or getting lost or stolen after being delivered but also so we don’t have mail littering our doorstep, providing an obvious indication to would-be intruders that we are away.

A Neighborly Offering
We typically try to find family members, friends, close neighbors or some other trustworthy beings to pop in occasionally while we’re away. Even if they don’t come inside, at least having someone to pick up fliers that may be left on the front door, keep an eye open for suspicious characters, or even clear or make tracks in the snow during the winter to make it look like people are around can help keep possible intruders at bay.

We tend to keep our blinds and curtains closed for a large portion of the day -- even when we’re at home. Therefore, we feel comfortable keeping them closed when we are away in order to increase privacy and security. However, the other day when at my mothers, we were heading out and I had closed several of her window blinds. She responded by saying, “Well, you really know how to make it look like no one is home, don’t you? (she tends to keep her blinds open most of the time)

It caught me off guard, but made me realize that sometimes, changing the appearance of your home in an effort to increase security might actually be more of an indication that you aren’t present than if you had just left your home as it would normally look.

At our last home, we had an outside light that was set on a timer to come up at around dusk and turn off again around daybreak. And while I think that leaving a light on all night in normal circumstances is wasteful, when away, it might be a cheap form of extra home security.

The price of three or four extra kilowatt hours of electricity to leave a kitchen, bathroom or bedroom light on may only run 30 or 40 cents. This is far less than the costs of an insurance deductible and the time and trouble that might result from a home invasion or burglary.

Long-term Considerations
While I’ve never gone this route, I have considered it a time or two, and had I a friend or family member who I could trust not to throw a wild party or make a complete mess of my home, I might have gone the route of letting them stay there while we were away.

Allowing a trustworthy representative to stay in your home during a vacation could act as a money saver for both you and your house sitter. For them, it could be free rent, food, and utilities. For you, it could be free security, supervision, and even a pet sitter.

I never really liked trying to hide valuables when on vacation because I know that most career burglars know these hiding spaces and can find them rather easily and speedily. However, I still figure it’s worth a shot. For what valuables I can’t deposit in a safe deposit box (my favorite hiding location), I do my best to ensure that they are stashed safely when we leave for vacation. This includes storing financial paperwork properly and in areas where I hope it might be overlooked if a break-in occurs, and stashing a few small family heirlooms where I don’t think anyone might look.

While my hiding spots might not be perfect, they at least provided a little affordable peace of mind and protection against the unforeseen while we are away.