This week I’m busy writing my first e-book. I’m really excited about finishing it soon and sharing it with you guys. It’s going to focus around the idea of saving more of your income, so that you can do more giving. The working title is:
Saving to Give: Learn the 4 steps to improve your finances so you can improve the lives of others.
It will be geared toward those of us with an income and a desire to make a positive impact on the world. The book will hopefully be a quick, easy read full of specific action steps you can follow to help you save more and give more. It will also be free.
Get an advanced copy of Saving to Give. I recently soft-launched the PT Money Newsletter. I’m not done setting it all up, but it will one day include exclusive content and giveaways, video tutorials, access to other projects, and more. If you join the free newsletter now, you’ll be the first to check out the e-book, which I’m hoping to launch within a week.
What are your thoughts about the e-book idea? Do you have any interest in reading it? What do you think of the title? The cover art? I’d love to get your feedback this week as I’m finalizing the draft.
TradeKing is giving $50 to new account holders who open their accounts in October with at least $2,500. Are you into taxable investing? If you’ve ever thought about it, this might be an excuse to get into it.
I’m not necessarily at that point in my life. I have lot’s of tax advantaged investing to do. That being the case, I don’t spend much time researching the best brokerages. But I do see the value in it. And I’m hoping to present some of the best online brokers to you soon. TradeKing will definitely be a part of that list.
Earn the $50 Bonus
To get the $50 bonus, here are the steps you’ll need to make:
1. Open a New TradeKing Account (using the link below) by October 31st, 2009.
2. Fund the account with $2,500 within 30 days of opening.
3. Make a trade within 180 days of the account opening.
4. Get paid $50.
More About TradeKing
For four years running (2006 – 2009), SmartMoney (the Wall Street Journal Magazine) rated TradeKing one of the top brokers in its annual Broker Survey of US brokers.
TradeKing was awarded the highest ranking of 4 stars in Barron’s 12th Annual Survey of Best Browser-Based Online Brokers. The survey ranked TradeKing second (out of 15 Web-based brokers) for both “Usability” and “Cost”.
Your future self just called. They want their money back.
We all have to rely on others from time to time. What are friends and family for, right? So, is relying on your future self the same as asking for a handout from someone else?
I say there’s nothing wrong with doing that occasionally. But when you do it over and over again, you sort of wear out your welcome, don’t you?
The “future you” I’m referring to is of course your future earning capacity. When you go into debt, you are relying on future earnings to pay for things that you want now. And, because of the associated interest payments, you’re asking your future self to pay more than they should.
For things like a home, a car, an education, asking the “future you” for a little help isn’t that bad of an idea. After all, they will all either increase / maintain value or provide some other source of income over time.
Where you get into trouble is when you go into debt to pay for things that don’t maintain value or help produce income. The future you ends up paying money (in the form of high interest) for something that isn’t there anymore, or is outdated and long replaced.
I’m no credit expert, but I know there are plenty of wrong ways to go about trying to establish or rebuild your credit. We hear advertisements for these services on the radio all the time. You may even see ads for their services here on my blog (not my choice). With the help of the NFCC though, today I’d like to share some of the best (scam-free) tips for establishing or rebuilding your credit.
There are many good reasons to have a positive credit history. Scoring a good deal on a mortgage or auto loan are the first two that come to mind. Beyond that, it’s nice to have positive credit when applying for a job, an apartment, auto insurance, even cell phone service. It’s hard to escape the need for good credit in our lives. That being the case, you’ll want to put your best foot forward.
Keep in mind, the following advice isn’t meant for those who find themselves stuck making poor choices with their credit. If you are totally clueless about credit and have trouble reeling in your spending, consider reading some Dave Ramsey.
Establish or Rebuild Your Credit
Here are some things you can do to establish or rebuild your credit:
Open Checking and Savings Account – While not tracked on your credit report, lenders may ask about any checking or savings accounts you may have and use it to help your cause in lending decisions.
Aim for a Mix of Credit Account – Establishing different types of credit accounts, both installment (car loans) and revolving (credit card), can improve your credit score.
Consider Using a Co-Signer
“Obtaining a loan in the absence of any credit history can be difficult, sometimes requiring a co-signer to guarantee payment. The loan is usually structured where the primary borrower is expected to make the payment, with the pay history reported in both names. If the borrower defaults, the lender will approach the co-signer, and missed payments will be reflected on both credit files. There is somewhat of a risk to the co-signer, but if handled responsibly, co-signing can be an effective way to help another person obtain and build credit.”
Consider a Secure Credit Card – This is a credit card that is tied to a deposit you’ve made to the bank or credit union.
Take Out a Small Personal Loan – Hook up with a local credit union and open a small personal loan. Pay it off responsibly and look for your score to improve.
What Not to Do
As a bonus, here are some credit fixes that are no-no’s according to the NFCC:
Don’t Apply for Too Much Credit
Don’t Fall for the Credit Repair Schemes – Building your credit takes time and is hard work. There are no shortcuts.
Don’t Pay to Piggyback
The information in this post was provided by the NFCC. If you need financial advice, consider reaching out to an NFCC Member Agency at www.DebtAdvice.org
A good term life insurance policy is something most people should have.
I’m sitting here writing a check for my life insurance premium. I’m so glad to have this process over with. As most of my regular readers know I’ve been talking about getting life insurance since the birth of our first child, seven months ago. The process has been a long one. But I’m finally done. The receipt of this payment will seal the deal on a $500,000 20-year term life insurance policy.
When I first started this blog I was clueless about life insurance. It’s just one of those products no one wants to talk about. I started caring about it about the time I found out we were having a baby. Over the past year or so I’ve picked up a lot of good information and formed an opinion about what type and how much life insurance product works best for me. I actually have a small policy through work, but it’s only for a small amount. I knew I needed more.
Why Term Life Insurance?
I decided term life insurance was the way to go (vs whole life insurance or some other product) for the following reasons:
1. I plan to self-insure in the future. Twenty years from now I won’t need life insurance. I’m planning on having at least $500,000 of my own at that point. I’m taking serious steps with my retirement and short-term savings so that as soon as I’m able I can drop life insurance and rely on my own stash.
2. I’m of the opinion that investing and life insurance are two separate things. Why the heck did investing and life insurance ever get involved? Insurance products that promise investing returns are just an expensive waste. Keep investing simple, inexpensive, and separate from your insurance goals.
3. It’s inexpensive now. I was able to get my term life, 20 year, $500k policy for around $45 a month. For what it’s worth, I’m in my mid 30s, a non-smoker, and in good health. My weight was the only thing that took me down from the elite to the standard rates.
4. I don’t have a special needs child. People with special needs children should consider a whole life insurance policy since they may have a dependent for the rest of their lives.
Why 20 Years?
I decided on 20 years vs 25 or 30 because, again, I plan to be self-insured in 20 years. And, I expect all my kids to be close to adulthood by that point. They are why I’m getting life insurance, so it makes sense that I drop the insurance about the time they don’t need me anymore.
Why $500k?
I decided on $500k because that would be enough to replace a good portion of my income. If I passed, my wife would still have to work (which she plans to do anyway), but the extra income would allow her to breath easy and not put our home, her retirement, or our kid’s education at risk. Life insurance is all about replacement of income. But no one says it needs to be 100%. Especially for a couple that already lives well below their means.
As you can tell from my thoughts above, I’m of the belief that purchasing life insurance is a good thing for those who need it. If you aren’t self-insured and you have someone other than yourself dependent on your income (and they will be for some time), then it’s probably wise to get yourself some life insurance. A good term policy can be had for the price of Internet service each month. So if you are reading this blog post, you can likely afford it.
Later this week I’ll share my experience with actually getting the insurance. This includes getting quotes, selecting a company, taking exams, filling out applications, and a lot of waiting…
I find myself way behind in answering comments on my recent post about the $8,000 First Time Homebuyer Tax Credit. So instead of answering them all there, I thought I’d use today’s post to share some Q&A on the $8,000 tax credit. That way, everyone learns. Let’s get it started with some basic information.
What is the first time homebuyer tax credit?
In short, it’s a US federal tax credit available to qualifying individuals who are buying their first home. The credit has been around a while, but this year’s variety does not have to be paid back, and it can be for as much as $8,000.
Who is considered a first time homebuyer?
Taxpayers who have not owned a principle residence at any time during the three years prior to the date of the purchase. These taxpayers must be buying the home, not receiving it as a gift. And they must stay in the home for three years.
What is the deadline to buy a home and qualify for the credit?
The home purchase should be made between January 1, 2009 and November 30, 2009 to be eligible for the 2009 credit of up to $8,000.
How do I get the credit?
The IRS has created a form to be filed with your return. It’s Form 5405, and it essentially only requires that you list the date of the purchase, purchase price, and the address of the home. The 2009 credit can be taken against your 2008 return. So, if you buy a home today and qualify for this credit, you can file an amended 2008 return and receive your $8,000 credit now.
Does everyone get $8,000?
No. The credit is “up to” $8,000. It’s actually the lesser of 10% of the home price or $8,000. And the credit phases out for incomes between $75,000 to $95,000 for a single filer, and $150,000 to $170,000 for couples.
Now for some more complex questions from the readers:
Mel – Only my name that is on the deed of a house we recently purchased. To qualify for $8000 tax credit, should we have to file singularly, or as a married couple?
You will get the tax credit whether you file separately or jointly as a married couple. But married couples can only get one tax credit between them.
eric – Seller wanna rent the house for 10 days after closing. We plan and should be able to cloase on late Oct. My qestion is will the 10 day renting disqualify us to get $8000. We are otherwise qualified for that credit.
That should not disqualify you. You’re intent is to live in the house and take full responsibility for it. The 10 day rental, and you being a landlord isn’t the intent of buying the property. You intend to take possession and live in the property full-time. I think the IRS would see the 10 day period as only a temporary thing and separate it from the purchase. You might want to check with a CPA to be sure though.
abe – if i purchased a mobile home for 20000 would i get a 8000$ credit?
No. You would get a credit, but it would only be for $2,000, or 10% of the purchase price.
Cindi – We sold our home and closed Sept 2006 gave the keys to the new owner and had to be out. Well we got a call a couple of days later saying we needed to reclose due to financing. So, 2 wks later (after we’ve moved) we reclosed Oct. 12, 2006. Well we just built a new house and have moved in but will not close until Oct 1, 2009. I cannot move the Oct. 1st closing due to our construction loan has matured Will we be able to get any kind of credit?
Yes, you should get a refund. For all intents and purposes you lost possession of the house in September 2006 and didn’t have an ownership interest after that point. The 3 year clock starts ticking at that point. Therefore, you met your 3 year requirement. You may need to ask a CPA though to be sure.
Roxanne – My mother is considering buying her first home and is currently renting. She does not file a tax return each year because she falls below the income guidelines; her only income is SSI and SSD; Would she still be able to qualify since she does not file? And do you know how this would work?
As far as I can tell, she would be eligible for the credit. She would have to file a 2009 return. It’s worth visiting a CPA to get this done professionally for your Mom.
SHERRI – I MADE SETTLEMENT ON MY FIRST HOME THIS MONTH. HOWEVER, I HAVE PURCHASED THIS HOME WITH MY SON AND HE GAVE ME THE MONEY FOR THE CLOSING COSTS. HE IS MOVING IN RIGHT AWAY BUT I DO NOT INTEND TO MOVE IN FOR A FEW MONTHS AT LEAST. CAN I STILL CLAIM THE FIRST TIME BUYERS TAX CREDIT?
Yes, you should be able to get the credit as long as you havn’t owned a home in the last three years. You are taking on the benefits and burdens of ownership. And your intent is to possess the house and live in it. Check with a CPA just to be safe though.
Alex – We are US residents (not citizens) who pay US taxes and have just bought our first home in the US. I was just wondering if we would qualify?
If you pay taxes, you should qualify for the credit. (Remember that whole Boston Tea Party thing?) Only non-resident aliens are disqualified.
Sandy – I have two questions – is the $8,000 tax credit an actually check that is sent to the buyers? Also, what is the limit a person can make to qualify for the credit.
Who said you could ask 2 questions? …just kidding. Yes, you get a check if you claim it against your 2008 return. And you also get a check if you claim it in 2009, but it will come to you along with your tax return check. The credit phases out for incomes between $75,000 to $95,000 for a single filer, and $150,000 to $170,000 for couples.
Ria – I purchased a house with my dad this year however my name was not on the mortgage, only the deed of trust. My dad is not able to claim the tax credit due to his income. Would I be eligible to claim this credit if I am not on the mortgage but only the deed of trust?
I don’t think so. I believe you have to be on both documents. You should check with a CPA though to be sure.
Amanda – Is there any way that you can tell me if Contract-for-deed houses qualify for this credit as well? We have an excellent opportunity to get a new house this way and so far the legal side looks good as well as interest rate. We were a little worried about how the IRS defined home purchase. Any help would be appreciated.
Yes, they do. As long as youtake on the “benefits and burdens” of home ownership, you should get the credit. No problems. See more on the IRS fact page.
Kathy – My daughter doesn’t qualify for a loan, so we are going to use the equity in our house to pay for her house, in her name. So that would be a cash purchase and she will have to pay us back. My assumption is she would get the credit, but my question is, would there be a repercussion by us giving her the loan instead of a mortgage company? Thanks!
From what I can tell, the IRS doesn’t care where you get the money to buy the home. And since you’re buying it outright, no one is going to turn your daughter down. I would see a CPA just to be sure though. And my other concern would be that you are putting your home in jeopardy by creating a HELOC or Equity Loan to fund what should be your daughter’s purchase.
Written on September 30, 2009 – 11:22 am | by PT |
During my last book giveaway, a couple of readers expressed interest in a new post on emergency funds. They wanted to know how to know when your emergency fund is big enough. I haven’t covered this specifically in detail before, but I did cover emergency fund basics and how to know when your emergency fund is too big. Both are good primers on this subject. Today I’ll try and answer the question, “how do I know if my e-fund is big enough?”
What is an Emergency Fund?
If you didn’t visit the links above, you may be clueless as to what exactly an emergency fund is. And defining it is a good place to start if we’re going to be deciding how big it should be. In my opinion, an emergency fund is money set aside to be used only in the case of a life emergency. Think of it as a small self-insurance policy.
A last minute vacation to Vegas isn’t an emergency. An emergency is an unexpected and required event / happening that you’re unable to pay for with your regular monthly income. The point of having a special fund setup to cover this expense is so that you won’t have to go into debt to cover the costs. You’ll be able to pay it off immediately, or support yourself over a few months in the case of a job loss.
So, how do you know if your emergency fund is big enough?
The first thing I’d say is, if you have to ask, odds are it isn’t big enough. I know I’m not going to get away with that easy answer though. So what I will do is try and give you some points to think about to give you confidence in your emergency funds. After all, I’m not going to be there to bail you out.
Know the Rule of Thumb – Most money experts will tell you that you need anywhere from 3 to 6 months worth of expenses in liquid savings (i.e. cash). If you’re unsure of how to calculate that number, or if you did calculate it and it didn’t give you warm and fuzzy feelings, keep reading.
The reason the 3-6 rule is used is because for the typical family that’s enough to help you get by for a bit if you lose your job. It also ends up being enough to help you cover unexpected medical bills, car repairs, etc. for the insured.
Know Your Monthly Expenses – If you’re going to use the 3-6 months expenses rule, you’ll need to determine what that is. The quickest way to do that is to get online and view the last 6 months of data from you bank. Use that data to determine the total average monthly spending over the last 6 months. Multiply that average by 3, 4, 5, and 6 months. The other factors listed below are going to help you determine which of these numbers (3x, 4x, 5x, or 6x) to use as a basis for your emergency fund.
Know Your Insurance Deductibles – A job loss isn’t the only type of emergency you could experience. Something could happen to your car, your house, or the health of someone in your family. Do you know how much your insurance company is going to cover? Are there large deductibles on your plans? Someone with a $5,000 deductible and a catastrophe health insurance plan is going to need a bigger emergency fund than someone with a premium plan who’s deductible is in the $100s. Based on what you find out here, you may be in need of a 6 months e-fund vs the 3 month variety.
Know Where You’re Not Insured – If you actually go without insurance for some area of your life, consider what an emergency in that area would cost you. Bump your emergency fund up based on what you have uninsured. Those without health insurance should really have a huge emergency fund to help cover those unexpected medical bills.
Know Your Assets – If you’re a one car family, unless you live in the city, you are highly dependent on that car (asset). If that car needed a $2,500 repair, you’d have no choice but to spend the money to repair it. Likewise with your home. If your home is old and in need of constant repair, you’re emergency fund will need to trend higher to be able to cover those repairs.
Know Your Job Market - Are you the sole bread-winner in the family? How confident are you that you could get another job a few weeks or months after you’ve been laid off? If you think it would take more than a few months, because (a) your industry is in bad shape, or (b) you aren’t that marketable (for whatever reason), then consider bumping your e-fund number up above the 6 month mark. Keep going until you feel comfortable with the number.
Final Thoughts
So where does that put your emergency fund? I think if you start with the 3 month rule and then bump that up based on the risk involved in the other areas I listed you can get pretty close to your actual required emergency fund. When in doubt, just strive to make your emergency fund big enough to cover you for 6 months of income instead of expenses. That’s a very conservative number and would put you way ahead of most other savers.
If you’ve decided that your emergency fund could use a boost, don’t stop now. Take the next step and start saving more today. Read the Best Way I’ve Found to Truly Save Money.
Are you taking advantage of the tax incentives available to you as a result of the American Recovery and Reinvestment Act (ARRA)? Often referred to as the economic stimulus package, the ARRA was unleashed on our down economy in February of 2009. It’s been a while since the act was rolled out, so I thought I’d share some of the tax incentives that may effect some of your spending and saving this fall.
The act was a huge piece of legislation and provided tax incentives for you, the individual, in the following areas: for those paying for college, first-time homebuyers, new car owners, and those interested in making energy efficient choices for their homes.
Regardless of how you feel about the necessity of the act, it’s now there for the taking. The way I see it, you might as well make the most of it.
First-Time Homebuyer Credit
I’ve shared in length the details of the first-time homebuyer tax credit. But essentially, someone who hasn’t owned a home in the last three years can get a credit of up to $8,000 towards the purchase of a new home. This is a great win for those true first timers out there. What a windfall. The credit is taken against 2009 taxes (although you can amend your 2008 return and get the credit now) and does not have to be paid back. As you can imagine, home sales are shooting back up again (at least temporarily). The deadline to buy the home is currently set for December 1, 2009. But there’s already a bill in the House to extend the deadline to 2010. Odds are that this will pass into law.
New Vehicle Purchase Incentive
Certain taxpayers are eligible for federal tax deduction of the local taxes they pay on the purchase of a new car. It phases out at certain income levels, and only applies to cars under around$50k. See more at New Car Buyer Tax Deduction.
Making Work Pay and Withholding
The Making Work Pay credit has been providing you tax relief throughout the year, to the tune of about $13 dollars more every week. If you are self-employed, you’ll get to claim the credit at the end of the year with your 2009 return. Be sure and check your pay stub to ensure you are getting the proper tax relief.
Tax Credit for First Four Years of College
The American Opportunity Credit broadened coverage of the existing Hope Credit for years 2009 and 2010. This applies to only the first four years of college. The maximum annual credit of $2,500 is available for qualifying students. Think colleges will respond by raising fees next year? The folks at CollegeScholarships.org sure think so. I tend to agree.
Certain Computer Technology Purchases Allowed for 529 Plans
Now you can include computer equipment and Internet service in the cost of your child’s education when cashing out those 529 Plan funds for years 2009 and 2010. I wonder if Dell and Apple lobbyist had anything to do with this inclusion? Ahh, I’m a cynic.
Don’t have a 529 Plan set up for your children yet? Here’s more than $100 in 529 plan bonuses to get you started with college savings.
Energy-Efficient Home Improvements
The tax credit for energy efficient improvements to your home has been increased. Improvements that qualify include things like insulation, energy-efficient windows, and energy-efficient heating and AC units.
Have you been able to take advantage of these tax incentives? Do you think they’ve helped or hurt our economy?
I am NOT a finance professional and no content within this website should be considered financial advice. Please consult a certified financial expert before attempting any of the ideas described in this site. Please read the disclaimer for more information.
Welcome to PT Money!
Hi, I'm PT. No, I'm not a millionaire ...yet. But I have a big desire to help you learn to live a limitless financial life. more...
| Posted in » 
Yes, you get a check if you claim it against your 2008 return. And you also get a check if you claim it in 2009, but it will come to you along with your tax return check. The credit phases out for incomes between $75,000 to $95,000 for a single filer, and $150,000 to $170,000 for couples.
If you didn’t visit the links above, you may be clueless as to what exactly an emergency fund is. And defining it is a good place to start if we’re going to be deciding how big it should be. In my opinion, an emergency fund is money set aside to be used only in the case of a life emergency. Think of it as a small self-insurance policy.
I know I’m not going to get away with that easy answer though. So what I will do is try and give you some points to think about to give you confidence in your emergency funds. After all, I’m not going to be there to bail you out.
The act was a huge piece of legislation and provided tax incentives for you, the individual, in the following areas: for those paying for college, first-time homebuyers, new car owners, and those interested in making energy efficient choices for their homes.
