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The no-pants guide to spending, saving, and thriving in the real world.

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Saturday Roundup – Dirty Beggar Edition

Misc

Ninjas killed my father
Image by Chris Pirillo via Flickr

I have a favor to ask.  Free Money Finance is running his annual March Money Madness blog contest.   Please drop by and vote for me. Just comment with “Game 6: Bags”.  Thank you!

Starting next week, my roundups will be happening on Sunday.   I weigh in on Saturday, and that just makes me feel rushed on Saturday mornings.

Free Money Tip

INGDirect is having a sweet promotion.  Open a checking account, use it three times in 45 days, and get $50 free.  Free money is the best kind.  I love my ING account and keep all of my savings there.  If you don’t have an account there, yet, now is a great time to open one.

30 Day Project Update

This month, I am trying to establish the Slow Carb Diet as a habit.   At the end of the month, I’ll see what the results were and decide if it’s worth continuing.   For those who don’t know, the Slow Carb Diet involves cutting out potatoes, rice, flour, sugar, and dairy in all their forms.   My meals consist of 40% proteins, 30% vegetables, and 30% legumes(beans or lentils).    There is no calorie counting, just some specific rules, accompanied by a timed supplement regimen and some timed exercises to manipulate my metabolism.   The supplements are NOT effedrin-based diet pills, or, in fact, uppers of any kind.  There is also a weekly cheat day, to cut the impulse to cheat and to avoid letting my body go into famine mode.

I’m measuring two metrics, my weight and the total inches of my waist , hips, biceps, and thighs.   Between the two, I should have an accurate assessment of my progress.

Weight: I have lost 20 pounds since January 2nd.   That’s 3 pounds since last week.

Total Inches: I have lost 10 inches in the same time frame, down 1 since last week.

That is kind of a disappointing week, after losing 17 pounds in the two previous weeks.  Still, it’s progress.   Should I blame it on getting sloppy with the supplements and timed exercise, which aren’t(technically) necessary, the vagaries of losing weight, or the fact that I(gasp) had some feta cheese on a salad yesterday(Dairy is out, but I didn’t recognize it until it was too late and I was happy.)?   I’ll go with B.  Weight loss is never completely consistent.

Best Posts

If some puny little constellation can mess up our zodiac signs, what will a second sun do?

Everyday Tips and Thoughts ran a post on cell phone etiquette.  I agree wholeheartedly with the bathroom talkers.  I’m in there trying to concentrate, and you’re yammering to your bank, or your girlfriend?  Expect me to flush every 2 minutes.

Important question: what caliber for land shark?

Do you juggle too much?   Project Happily Ever After explains the difference between balls that bounce and balls that break.

Buy Like Buffet is giving away an iPad.

LRN Timewarp

This is where I review the posts I wrote one year ago.

I wrote a post about saving money on health care.  It’s still a good post, but the HSA/FSA rules have changed.  Now, you need a  prescription to stock up on OTC meds at the end of the year to spend out your account.

When you buy something, do you ask yourself if you really need it? I wrote a post to help answer that question.

I also posted lesson 4 of my budget series.  This is where I go over my “set aside” funds, the money for bills that are not regular or for set amounts.

Carnivals I’ve Rocked and Guest Posts I’ve Rolled

5 Things to Do in the New Year was included in Crystal’s rockin’ Totally Money Carnival.  I’ll be hosting it in a couple of weeks.

Quit Smoking: My First Frugal Move…Ever was included in the Carnival of Personal Finance.

Thank you! If I missed anyone, please let me know.

Get More Out of Live Real, Now

There are so many ways you can read and interact with this site.

You can subscribe by RSS and get the posts in your favorite news reader.  I prefer Google Reader.

You can subscribe by email and get, not only the posts delivered to your inbox, but occasional giveaways and tidbits not available elsewhere.

You can ‘Like’ LRN on Facebook.   Facebook gets more use than Google.  It can’t hurt to see what you want where you want.

You can follow LRN on Twitter.   This comes with some nearly-instant interaction.

You can send me an email, telling me what you liked, what you didn’t like, or what you’d like to see more(or less) of.   I promise to reply to any email that isn’t purely spam.

Have a great weekend!

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Debt Scams

Finance

When you are up to your eyeballs in debt, praying for a step-stool, sometimes life–more accurately, con-artists–try to trip you when you are vulnerable and look for a solution.  They aren’t muggers on the street.  They come at you wearing ties, invite you to a real office, with real furniture and a real nameplate on a real desk.   They are a real company, but that doesn’t mean they aren’t trying to scam you out of the little money you have left to put towards your debt.

Yes, I am talking about debt management scams.  These scams come in 4 main varieties.

Debt Settlement companies instruct you to stop paying your bills completely and send them the money instead to be placed in a settlement fund.  When your creditors get desperate enough, they will be willing to settle for pennies on the dollar.

In theory, this can be a good strategy for some debtors.  Unfortunately, it has some drawbacks, even if the company is legitimate.   They tend to charge high fees as a percentage of your deposits.  Some take another fee when a settlement is accepted.   The entire time you are building your settlement fund, your credit rating is sinking, leaving you open to being sued or garnished.  The bad companies take the fund and run, while even the good companies can’t guarantee your creditors will play ball.

Ultimately, they aren’t doing anything you can’t easily do yourself.    If you want to go the settlement route, stop making your payments and funnel the money into a savings account that you will use to offer settlements from.  It takes discipline, but there is no upside to paying someone else for the same function.

Debt Management plans are used when you owe more than you can afford to pay. These companies work with your creditors to adjust interest rates and minimum payments and they try to get some fees waived for you.

A good company will work with you and your creditors to make sure everyone is working together towards the goal of eliminating the debt.   A bad company will tell you they are working with your creditors while ignoring any contact from the creditor.  They’ll tell you the creditor isn’t willing to negotiate while never stepping up to the negotiation table.   Another trick is to offer the creditor a set payment, with a “take it or leave it” clause.  Any input from the creditor is interpreted as a refusal to participate.   This, coupled with high fees paid by the debtor, make debt management firms a risky proposition.  Most states require the firms to be licensed.  Check to make sure they are before giving them any information.

Debt/Credit Counseling companies work with you to establish a budget and eliminate expenses; in effect, they are training you to be in control of your finances.  They are often organized as a nonprofit, but not always.

Some–the sleazy ones–lie about what they are doing, or attempt to misconstrue what you are agreeing too.   Be careful not to use your home as collateral to consolidate unsecured debt and don’t walk into a Chapter 13 bankruptcy without that being your intention.  Both of those are common debt counseling scams.  If the company isn’t able to provide all of the details of a transaction–company name, address, licensing information–or they aren’t willing to spend as much time as necessary explaining the details of the transaction, walk away.   This is your life, you are in charge of it.  Don’t let anyone bully or prod you into signing something you aren’t comfortable with.

Credit Repair is almost always a scam. There are ways to get correct bad information removed from your credit report.  If the information is correct, those methods are illegal.   There are two legal methods to repair your credit.  First, stop generating bad credit.  Make your payments on time and eventually, the bad items will fall off.   Second, write letters disputing the actual incorrect items on your credit report.  There are no quick fixes, and anybody telling you different is flirting with a jail sentence, possibly yours.

How do you avoid the scammers?

  • Be skeptical. If it looks to good to be true, it probably is.  There is no such thing as a magic wand to fix your credit and make your debt disappear.  Bankruptcy + 10 years of your life is the closest thing to magic credit repair in this world.
  • Only use a legitimate credit counselor. Verify them through the Better Business Bureau and the National Foundation for Credit Counseling (1-800-388-2227 or www.nfcc.org)
  • Check the license. Most states require credit and debt counselors to be licensed.  If they’re not, run away and report them.
  • Read the find print.   Don’t sign anything you don’t understand.  Like every other piece of your financial life, own the transaction. Know what your are doing, or don’t do it.
  • Are they willing to work with you? If they’ve got a generic plan that doesn’t account for your specific situation, they are probably a con.  At the very least, they are a worthless company and a waste of both time and money.
  • Are they willing to work with your creditors? If not, they won’t be accomplishing anything for you.
  • How much do they cost? Higher fees may not be an indicator of a scam, but call around and find out if they are in the right ballpark.  Triple or quadruple the going rate is a sign of someone who will disappear late one night, with your hopes, dreams and savings in tow.
  • Above all else, trust your gut. If it doesn’t feel right, it probably isn’t.  There is nothing a counselor can do that can’t wait a few days while you check them out.

There is no magic bullet to kill debt.   You’re not fighting a werewolf, you’re fighting a lifetime of bad or unfortunate choices and circumstances.  It’s important to keep a realistic outcome in mind.

Update:  This post has been included in the Carnival of Debt Reduction.

The Tax Man Cometh

Finance

Day 105 - Tax Day!
Image by brianjmatis via Flickr

Is the IRS after you?  Did you forget to file your tax returns for the last 10 years?  Are you worried that they are going to seize your bank accounts, leaving you broke and unable to finance your latest Pokemon acquisition?

There are many reasons people neglect to file their tax returns.  None of the reasons are good.  The usual reason is that you know you’ll owe money you can’t afford to pay, so you wrap yourself in denial and attempt to delay the inevitable.   For future reference, the government always wins.  Not filing is a temporary solution at best, and a really bad one at that.   Not paying just guarantees that you will owe more penalties than if you had filed and gotten on a repayment plan.   Avoiding your tax return will come back to haunt you eventually.

If you haven’t filed your tax returns, you need to do so as soon as possible.   The longer you wait, the fewer options you have and the more likely the account seizures.   Keep your money under your own control.  Another problem with not filing is that the IRS will estimate your tax debt.   The estimate is always in their favor.   If you file, you get to list your deductions.  If you don’t file, they give you the standard deduction and ignore almost everything in your favor.   In some cases, this can mean they think you owe $10,000 when in reality, if you file, you will only possibly owe $1500.

To get started, you need to do is call the IRS at (800) TAX-1040.   This call serves three purposes.

First, you need to confirm which years you need to file.   Simply ask for the last year in which you have filed.

Second, request a transcript of all of your 1099s and W-2s.   These are the forms that your employers, investments, and banks have sent to the IRS detailing your income.   Over the years, it’s easy to lose paperwork, so this will ensure that you’re records match theirs.  Depending on the time of the year, you should have the files in under a week.  You’ll get one per delinquent year.

Third, this call gives you a chance to get on the “good debtor” list.   You may have to get transferred to the collections department, but make sure you get someone to update your file with the fact that you are making good on your taxes.  They will probably give you 30 days to file.  Treat this as a hard deadline.

[ad name=”inlineleft”]Now that you have all of your paperwork, it’s time for the long slog.   You have to do several years worth of returns, generally in one or two sittings.   You can usually find back years of Turbo Tax on Amazon for cheap.  As of this writing, the back years are under $10 per year.   While you are filing, please keep in mind any charitable donations or business expenses you may have had.    If you are missing a receipt for a major business purchase, never fear!    The IRS does accept reasonable alternatives.   I know of one case of an individual writing a letter to the IRS that read:

To Whom it May Concern:

Please accept this letter as a receipt for the purchase of a snowplow in the amount of $3000.

If you do this, you had better be able to back it up with the existence of an actual snowplow.

After you prepare your returns, look at the amounts you owe.  You can only collect a refund for the last three years.   If you owe more than you can afford to pay, you have two option, payment plans or settlement.

Payment plans involve delayed or continual payments.  From IRS.gov:

  • Request an Extension of Time to Pay — Based on the circumstances, a taxpayer could qualify for an extension of time to pay. The IRS is willing to allow extensions of time to pay in order to assist in tax debt repayment. A taxpayer can request an extension from 30 to 120 days depending on the specific situation. Taxpayers qualifying for an extension of time to pay of 30 to 120 days generally will pay less in penalties and interest than if the debt were repaid through an installment agreement. Taxpayers can request an extension of time to pay using the Online Payment Agreement option available on thisWeb site.

  • Apply for an Installment Agreement — The IRS may allow taxpayers to pay any remaining balance in monthly installments through an installment agreement. Taxpayers who owe $25,000 or less may apply for a payment plan electronically, using the Online Payment Agreement application. Alternatively, taxpayers may attach a Form 9465, Installment Agreement Request, to the front of their tax return. Taxpayers must show the amount of their proposed monthly payment and the date they wish to make their payment each month. The IRS charges a $105 fee for setting up an installment agreement. The fee is reduced to $52 for those who establish a direct debit installment agreement and $43 for those with an income below a certain level (for more information, see Form 13844). Taxpayers are required to pay interest plus a late payment penalty on the unpaid taxes for each month or part of a month, after the due date that the tax is not paid. A taxpayer who does not file the return by the due date — including extensions — may have to pay a failure-to-file penalty.

The IRS must accept your payment plan if your tax debt is under $10,000 and your proposed plan will pay it off within three years.

The other option is a settlement, or Offer in Compromise.  Generally, only 10-15% of such offers are accepted.  The IRS will rarely accept the off if they feel they can collect the debt for less than the amount owed.  Don’t believe the guys on TV who pretend it is an effortless solution.  From IRS.gov, the three acceptable reasons for OIC are as follows:

1. Doubt as to Collectibility – Doubt exists that the taxpayer could ever pay the full amount of tax liability owed within the remainder of the statutory period for collection.

Example: A taxpayer owes $20,000 for unpaid tax liabilities and agrees that the tax she owes is correct. The taxpayer’s  monthly income does not meet her necessary living expenses. She does not own any real property and does not have the ability to fully pay the liability now or through monthly installment payments.

2. Doubt as to Liability – A legitimate doubt exists that the assessed tax liability is correct. Possible reasons to submit a doubt as to liability offer include: (1) the examiner made a mistake interpreting the law, (2) the examiner failed to consider the taxpayer’s evidence or (3) the taxpayer has new evidence.

Example: The taxpayer was vice president of a corporation from 2004-2005. In 2006, the corporation accrued unpaid payroll taxes and  the taxpayer was assessed a trust fund recovery penalty as a responsible party of the corporation. The taxpayer was no longer a corporate officer and had resigned from the corporation on 12/31/2005.  Since the taxpayer had resigned prior to the payroll taxes accruing and was not contacted prior to the assessment, there is legitimate doubt that the assessed tax liability is correct.

3. Effective Tax Administration – There is no doubt that the tax is correct and there is potential to collect the full amount of the tax owed, but an exceptional circumstance exists that would allow the IRS to consider an OIC. To be eligible for compromise on this basis, a taxpayer must demonstrate that the collection of the tax would create an economic hardship or would be unfair and inequitable.

Example: Mr. & Mrs. Taxpayer have assets sufficient to satisfy the tax liability and provide full time care and assistance to a dependent child, who has a serious long-term illness. It is expected that Mr. and Mrs. Taxpayer will need to use the equity in assets to provide for adequate basic living expenses and medical care for the child. There is no doubt that the tax is correct.

If you have a settlement accepted, you have three options for payment.  A lump-sum payment must be paid in 5 installments or less, a short-term payment plan may be paid over 2 years, and the long-term repayment option has no set payment.   Each of these options must meet differing levels of potential repayment, including figuring your real assets(your house and investments).  In addition, you must include a non-refundable first payment and a $150 application fee when you apply for the settlement.

No matter which option you take, you can’t run from government debt.  It will catch up to you and that will always be more painful that dealing with it on your own terms.

Update:  This post has been included in the Carnival of Personal Finance.

How to Live Happily Without a Budget

Finance

Three years ago, we sat down and built our budget. We spent 9 months adding the non-monthly bills that we forgot about when we created the budget.   Setbacks and shortfalls almost killed the budgeting plan completely. It took almost an entire year to get our budget right.

Unrelated Image

Now?  I refer to the budget once per month.   No more.   I don’t check it at bill-paying time. I don’t think about it daily.   It’s there as a reference when I need it, but it no longer drives our finances.  How did we get to that point?

First, we firmly established our budget.  We know exactly what we need to cover our expenses.   None of the predictable bills catch us by surprise any more.  This is important.

Once we had the budget established, the rest was easy.   I moved almost every bill to US Bank’s online bill-pay system and switched to electronic billing and automatic payments.   The automatic payments are all through US Bank.  I only allow my mortgage to be set up with the merchant. I want total, instant control over the rest.  I won’t call a merchant to ask them to change a payment if something comes up.   The bank sends me an email when a payment is automatically scheduled, and again when it is paid.

Once I got comfortable with the automatic payments, I switched to electronic billing. I don’t need to see the bill or waste the paper if I know it is being handled for me which is why I encourage you to manage all your finances online.  I do check the few bills that may change, like the credit card and cell phone.  Now, I see few of my bills.  They are all sent electronically to my bank, automatically paid, and scheduled in Quicken–all without intervention from me.

[ad name=”inlineleft”]We also use an envelope system.  I know how much we need for groceries, baby crap, clothes, etc.   At the beginning of the month, I take out all of that money in cash and put it into the appropriate envelopes.   Other than this money, almost everything else takes care of itself. I don’t need to pay attention to by bills on a day-t0-day basis.   Any extra money that comes in gets divided among our debt repayment and savings goals, which only takes a few minutes to arrange.

I glance over my budget at the beginning of every month, but I only review it when something changes. If we change our cell phone, or our budgeted gas bill changes, I make the change to our budget.  Other than that, it’s not even an afterthought.

That’s how we do it.

Another option includes the Sloppy Math System. This consists simply of rounding deposits down and rounding expenses up.  The more you round, the better the system works.    If you round every deposit down $50, and round every expense up to the next $10, you are naturally building more room for error.  Given enough time, you will have enough of a slush fund to handle emergencies and the occasional impulse purchase.

Budgeting Sucks

Finance

Image via Wikipedia

Budgeting kind of sucks.

Filling out a budgeting spreadsheet, putting in all of your expenses, listing all of your income,  tracking all of your spending.   Yuck.

Balancing the fact that you may have $200 to spare, but if your gas bill is a bit lower one month then you have a some more money, but if your electric bill’s a little bit high, then you have a little bit less.  It’s too much work.

Here’s the new plan:

I just opened up a new credit card. This credit card’s got a fairly high limit, not that I care since I’m never going to come close to the limit. It’s got an okay interest rate, not that I care–it’s going to be paid off every month.  It also has a good travel rewards plan, so our family vacations can, to a large extent, be paid for.

Now, with this card, I’m taking all of my regular bills, and setting them up to be automatically paid by the credit card.   It’ll get automatically charged every month.  I won’t have to think about it.  Once a month, I’ll just log on and pay off the card.   All I have to do is make sure the  balance stays under my monthly budgeted amount.  I already know what I have to be paying each month, so, no problem.

This will make it easier to budget and  track my actual spending.  It’ll even make it easier to balance my checkbook, since right now, I’m logging into my bank account a couple of times a month to compare it to Quicken.   Any budget helper is nice.

After this plan takes effect, my bank account will only have any ATM withdrawals that I need to make–which shouldn’t happen more than once or twice a month–and my checks to day care.  There should be just six manual transactions every month plus all of my miscellaneous transfers to and from INGDirect, which should also be minimal– there should only be two of those each month.

This will simplify everything while at the same time giving me the maximum amount of travel rewards I’ve been able to find.  Hopefully, it will work as well as I think it will.

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5 Things to Do in the New Year

Finance

Creditcard
Image via Wikipedia

CNN Money has an article up on 5 things to do this year.   After posting a similar article a couple of weeks ago, I thought it’d be interesting to post about someone else’s perspective.

1.  Shop for a no-fee checking account.

If you are paying fees for a checking account, go somewhere else.  There are so many alternatives available that you shouldn’t be throwing money away.   Ally Bank has a great no-fee checking account, as does INGDirect, though ING won’t let you write paper checks against the account.  The same principle applies to credit cards.  If you have a card with an annual fee and you aren’t getting some monster services or rewards to go with it, run away.

2.  Save your raise.

I don’t necessarily agree with this one.  If you are in debt, it’s better to use the raise to pay off that garbage, first.   When I got my last raise, I immediately boosted the automatic payment for my car to use every new penny.   I’ve never had the money available, so I haven’t missed it.  Whatever you do, fight lifestyle inflation.   Just because you have some more money doesn’t mean you need to spend it.   At my last job, I got a substantial raise, so I bought a new car, only to get laid off a few months later.

3.  Go for a checkup

Wealth doesn’t matter if you squander your health.  Go get a physical.   Every disease is easier to treat if you catch it earlier as opposed to later.   Don’t make the mistake of running your body into the ground.  You will regret it later.   Effective this year, most health plans will cover a physical with no copay, co-insurance, or deductible allowed.

4.  Score a better rewards card.

B***-****.   If you’ve still got debt, don’t concentrate on using more of it.  Get that crap paid off.    If you’re out of debt, look into getting a rewards card that aligns with your goals.   If you like to travel, get a card that gives you frequent flier miles.   Otherwise, I’d go with a cash-back rewards card.

5.  Use your vacation days.

37% of Americans don’t take all of the vacation to which they are entitled.  That’s insane!  We work harder and better when we have time to recuperate and relax.   Unfortunately, I usually fall into that unfortunate 37%.    My vacation resets on February 1st, and this will be the first year in a lot of years that I haven’t had to roll it over or even lose some.

What is your financial plan for the new year?

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