What Taxes Do You Have to Pay As A Graduate Student?

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An interesting question came up recently from someone I was talking to -- The question was, "What taxes, if any, do I have to pay on my graduate assistantship stipend in graduate school?"

Are assistantship stipends taxable?
The simple answer to this is YES. They are reported to the IRS as taxable income. However, depending on the state, the rules change slightly.

For example, in Virginia (see grads.vt.edu link below), federal and state withholding taxes will be taken out of each paycheck. International students are subject to different rate schedules and filing procedures unless specifically exempted by a tax treaty.

On the other hand, at the University of Pennsylvania, full time graduate students in engineering departments are considered Research Fellows. Their stipend is subject to Federal income tax, but not Pennsylvania personal income tax. One-half of the stipend is also subject to City of Philadelphia wage tax. In addition, as a full-time graduate student a Research Fellow’s stipend is exempt from FICA/Medicare tax. (see finance.upenn.edu link below)

Furthermore, in North Carolina, ful time graduate students on assistantships are subject to federal and state withholding taxes, but are exempt from FICA taxes (see acs.ncsu.edu link below).

Useful Links

http://www.grads.vt.edu/financial/faq_finances.html

http://www.finance.upenn.edu/comptroller/tax/appointments.shtml

http://biomedgrad.georgetown.edu/gdmstipends.html

http://www7.acs.ncsu.edu/hr/payroll/prtaxstudents.asp

So, as you can see, the rules vary slightly on what degree of taxes you have to pay from state to state. Now that we know that you do indeed pay taxes when receiving an assistantship, my follow up question pertains to what you can deduct on your taxes as a student.

What tax deductions can you itemize as a graduate student?

In looking at the IRS.gov website below, it is pretty definitive what the answer to this is -- You can deduct the follow things:

• Tuition and fees required for enrollment or attendance; and
• Fees, books, supplies, and equipment required for courses.

***You cannot exclude any part of a scholarship used for room and board expenses. (Dang!!!)

http://www.irs.gov/individuals/students/article/0,,id=96674,00.html
http://www.grads.vt.edu/financial/taxes.html

As you might have figured out by now, since in most engineering and science programs, almost all of your student experiences are fully taken care of by the department, it looks like there won't be much tax deducting on major expenditures. However, if you are in a program where you are paying for everything yourself, remember to deduct the items above from your income at tax time in April.

Keep on learning!

Jacob

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Review of Amazon Prime Program

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Saturday Greetings to Everyone!

I have received several requests recently to investigate and discuss Amazon.com Amazon Prime Program. To tell you the truth, before doing a detailed investigation in to what this program offers, I didn't think too much of it. I thought it was just another way for me to pay Amazon $80 all at once for a new program.

However, after looking over my current shopping pattern at Amazon and what the program offers, I immediately realized that I needed to sign up for this. There are two ways that I wanted to explain this program to everyone, so I'll detail those one at a time in a moment.

First, let's take a look at what the Amazon Prime Membership gives you.

• Unlimited FREE 2-day shipping
• The ability to upgrade to one-day shipping for only $3.99 for domestic US purchase destinations
• No minimum order size.
• You can even share your membership with someone else in your household (they just have to know your birthday).

These perks sound good right? But, you're probably wondering how much this program costs. The normal cost of the program is $79 per year. Now, let's break down the reasons that a person should sign up for this program.

Free Trial

1) At the very least, you should sign up for the 3 month FREE trial membership they offer. Just click on the link to take advantage of all these benefits without any risk to you. You can cancel at any time during the trial.

Start Your FREE Three Month Amazon Prime Trial

How Many Purchases Would I have to Make to Recover My Investment of $79?
2) As you all might have guessed, I am an avid Amazon user/buyer. You simply cannot beat the prices and the ease of finding things on the site.

So, here's the approach I took at determining if this program is right for me. I went on the Amazon website, and in my buying history, I found that I bought 20 items in the past year on Amazon.

The total I paid for shipping for all of these items was $101. Wow!! That's a lot more than I would have thought!

So, for me, the next thing I proceeded to do was start my free trial. I'm going to evaluate if I like it or not, and then decide to keep it after the 3 month period.

How should you proceed? I would do the following: 1) Sign up for the trial - there's nothing to lose 2) After that, go through your Amazon account, evaluate how many items you bought over a year's time, add up the total shipping, and see if that comes in over $79 per year.

Click Here to Start Your FREE Trial of Amazon Prime

Keep on learning!

Jacob

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Aldi vs. Wal-Mart vs. All the Rest

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As you all might know, the Northeast isn't too fond of Wal-Mart. Furthermore, they are less fond of putting Wal-Mart Supercenters every 4 miles around the neighborhoods. As a result, the nearest Wal-Mart Supercenter is 10 miles south (so about 30 min in the Northeast traffic) as opposed to in Virginia and Arkansas where I last lived, where there were two Supercenters within 3 mi of my house. Irregardless of your opinion of Wal-Mart, the store, because of its influence, can be the source of some interesting comparisons.

So, with the Wal-Mart Supercenter 30 minutes away from my house, I have been going to the local grocery stores (Genuardis, Giant, Weigmans, etc) to get my food, and just going to the local regular Wal-Mart for household items.

However, tonight, I decided to give Aldi a try. They have a store that is only 2 minutes from my house, and I hadn't been to one since sophomore year of college.

When I arrived, I quickly realized that I was totally unprepared because everything about the store translates to savings for the consumer.

First, when you park in the parking lot, you notice that there are no stray shopping baskets taking up spaces. Why is this? Because you have to place a quarter deposit in to the shopping basket in order to get a shopping cart. You get the quarter back when you return the cart, but this very act eliminates numerous jobs that are occupied at all other grocery stores and Wal-Marts across the country. Genius!

Second, at the entrance, it says in big bold print that they don't accept credit cards or checks!!! haha Amazing! However, they do accept debit cards or cash. This just further decreases their expenses.

Third, there are no shelves in the store. The goods/products are merely stacked in the boxes they arrive on. What does this mean? You got it. You don't need a Wal-Mart representative whose sole job is dedicated to negotiating where the Pringles can will sit on the shelf. Genius!

Fourth, Aldi almost absolutely (with only a few minor exceptions) sells their private label that they themselves distribute. This would be the same if you could imagine Wal-Mart only selling their Great Value label. Genius!

Fifth - the number of employees. The entire time I was there, I only saw one Aldi employee, and that was the one guy checking people out.

Sixth, Aldi doesn't refrigerate items that don't need to be refrigerated (This includes certain lettuce and other vegetables that don't need to be kept cool).

Seventh - the check out process. Like I said before, you can't use a credit card, which further cuts down Aldi's costs. Next, you have to purchase your own bags or bring your own. Finally, the cashier does not bag or containerize your items. You have to do that yourself.

So, with all these potential areas for savings, how does Aldi stack up? Well, according to the article at the link below, they are 29% cheaper than Wal-Mart and 86% cheaper than the local grocery stores. I now believe this, having taken a trip there.


Grocery Price Comparison Article

The following is an excerpt from the article - "Here is where Aldi really shines, with rock bottom prices even cheaper than Walmart's store brands. Nearly 29% cheaper than Walmart and 32.5% less than Target. The two supermarkets were 86% and 76.3% more expensive on these private label products than Aldi." 

Looking over my receipt today, here are several of the purchases that amazed me the most:

• 10 lbs of potatoes - $2.50
• Tropical Fruit Salad - $0.79 - I know this is $1.00 or more at Wal-Mart
• 5 lbs of lasagna - $2.69 - wow!
• 4 lbs of fuji apples for $3.12

Given the evidence, what's the bottom line?


Aldi definitely saves you money if you are willing to work a little extra for your groceries and pass up getting "name brand" items. However, in a tough economy, it just might be the thing to do!


Keep on learning!


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Requests for Future Blog Topics and Guest Posting

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Hello fellow readers!

I wanted to share two things with you all so that you know they are available:

Request for Topics
If anyone has a request for a topic they'd like me to research and post, please just write it on the comments area of this post or email me at irwin.jacob@gmail.com.

Guest Posting
Also, I just found out that I can assign multiple people as being able to post to this blog. So, if you have a topic that you know a lot about and would be beneficial to share with the My Money Blog family, please just let me know!

Keep on learning!

Jacob

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Promote Yourself or Your Business with FREE Business Cards

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I wanted to share a wonderful find that I discovered about 5 years ago, and have now used successfully four times!

What is it?  FREE business cards from Vistaprint.com

Business cards are truly a great thing - good for networking, retaining people's contact information, advertising your business, or making yourself stand out at an interview by being more "professional."

I have used/designed free business cards from Vistaprint for the four applications shown below over the past several years:

• Created a personal card with my contact information and a summary of my skills/qualification to be used at networking events and during interviews.
• Created a card with my web address for this blog in order to post on bulletin boards to advertise.
• Created a card for the pet waste removal service I started in 2006.
• Created a card for the eBay business I started in 2004 reselling people's items.

Quick Note: If you are thinking of starting up a website for your business or personal use, I would recommend buying the domain and hosting with GoDaddy.com. I have worked with them on all of my sites, and they are always very user friendly. The link to their special offer is shown below!

To get your own free business cards, just follow the simple steps below:

1) Click on the picture/link below to go to the Vistaprint site

2) Within in the site, go to the business card section, and select that you want to create a free business card. There are several restrictions that Vistaprint keeps you to in order to make it possible to have free business cards - you can not print on both sides of the card and the background design has to be kept as the default tree/country scene.

3) You can then click through the options and build your card line by line. Quick tip: make sure that you don't fill the card up too much so there is sufficient free space around the outside of the card.

4) When you are finished, proceed to the checkout process, opting out of any of the additional advertised products/services. The total will be around $7-$9 for shipping/handling fees.

5) The business cards will then be shipped to you within several business days!

Couldn't be easier, right?! Right!
Keep on learning!

Jacob

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Find and Eliminate Your Latte Factor - Save Big Money

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In this addition of My Money Blog (Yes - That's right, I've been watching too many episodes of MythBusters lately on my instant Netflix cue), we'll discuss a topic that I learned in the very first book I ever read about personal finance and frugal living, David Bach's "Automatic Millionaire." I would definitely recommend you order a copy of this book used from Amazon. I've provided the link below if anyone is interested! You can't beat Amazon - $0.94 for a great book! I love it.

One of the best topics David introduces in this book is the idea of a "Latte Factor." The idea behind this is that for people that buy a latte from Starbucks everyday for $3, this compounds to a lot of money over time. The same can be said for all sorts of luxury purchases made everyday. The article from MSN below summarizes some of these additional purchases to think about.
10 Expenses that Add Up Fast - MSN Money Central

So what's the big deal? Why is spending such a little amount of money every day a bad thing? Doesn't it enhance my life? Well, the bad news is that if this money was instead saved and invested for the long-term, the miracle of compound interest will kick in, and you will have a lot of money by the time retirement comes.

The website from MSN gives 10 examples, but let's take my two favorite ones because, well, I'm writing this blog, and get to do what I want to do. :) Just kidding.

Finding Your Latte Factor - Buying Coffee and Lunch Every Workday

According to the MSN website, the average cup of brewed coffee costs $1.38 (this seems a little low, but OK). This would translate to $360 per year to buy a cup of coffee every workday. The average lunch during the workweek costs $9 (this seems a little high, but I just spent $11 on lunch today for a sandwich and salad at my company's cafeteria because I forgot to pack my lunch). This would translate to $2,340 per year to buy lunch every workday.

Adding these two numbers together results in a sum of $2,700 per year for lunch and a cup of coffee. This is getting to be a lot of money!

Applying the miracle of compound interest, let's assume you start work when you are 23 y.o, work until you are 65 y.o, and take the $2,700 you save by NOT buying coffee and lunch each day at work and invest it in a small cap value index mutual fund with a historical return of 12.4%.

Doing the math, this translates to a nest-egg of $2,930,299.20 when you retire at age 65. Wow!

What's the take-home message here? Well, first, probably you should try to bring your lunch more and brew your own coffee at home! But, honestly, it's not that you should eliminate all purchases in your life, but just to be mindful about recurring ones that you may not think are costing you that much each day.

Keep on learning!

Jacob
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Build Your Credit Score From Nothing - Part 3

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How To Build Your Credit Score from Nothing - Part 3

"Take out a small personal loan at a local bank"

In Part 1 of this series, I discussed how to begin building your child's credit score/history by getting him/her a student credit card in their name. In Part 2, I showed everyone how to use bills that you pay for your apartment or house in college to further build your history. See the links below if you missed Parts 1 or 2 of this series.

Part 1 - Build Your Credit Score From Nothing - Student Credit Cards

Part 2 - Build Your Credit Score From Nothing - Paying Bills

In the third part of this series, I'll show you a very effective and easy method that I used to build my credit history and make up for the ground I lost by not following the instructions from Part 1 and 2 of this series.

What is this method you may be asking? Good question. It is taking out a small personal loan at a local bank!

While at first this may sound hard, simply follow the steps below, and you will be on your way to building a good line of credit history!

Obtaining a Small Personal Loan with Little or No Credit History

1) Find out the names and addresses of 2-3 good local banks in your area, either by recommendations from people you know, online, or in the yellow pages. The key to this is that it has to be a smaller, local bank! It can't be a Wachovia or Bank of America, etc. Why is that? Easy! Small banks are desperate for new customers and to establish their name in the area, and they will be willing to take on the added trouble of giving you such a small loan in exchange for the potential for your business in the future.

2) Go to the bank, ask to speak to the loan officer.

3) Explain to them exactly what you are doing - you want to open up a small personal loan ($1000 is a good round number) with a one year payback period to build your credit history, and have no intention or desire to actually use or spend the money. This will make them feel all warm and fuzzy inside. They love security!

4) If they don't suggest it already, recommend that you also want to open up a CD account at that same bank for the same $$ amount of the loan and use it as collateral against the loan. See how that works? No risk for either party.

Once you have settled on an arrangement that will work for both sides, you can then delve in to figuring out the specifics of the loan (i.e. interest rate you will be charged).

5) After finding out the details of what the $1000 personal loan would entail, tell the loan officer that you want to shop around a little before making your final decision. He/she will completely understand (or should anyway). Then, go to the 1-2 other recommended local banks on your list and do a loan comparison in order to make sure you're receiving the most favorable terms.

6) After comparing the loan offers from the different banks you visited and deciding which fits your situation the best, fill out all of the loan and CD paper work, and open up a checking account at that same bank as well. The checking account will be where you place the loan money so that you can transfer it directly to pay off your loan payments each month. This can all be set up automatically too! You don't want to pay off the entire loan all at once. Distribute the payments evenly and in small increments over the entire year in order to gain more improvement to your credit score.

7) After the year passes by and the loan is paid off, discontinue the CD account, transfer the $1000 locked up in that to your normal checking account, and then close your loan and checking account for cash.

8) VIOLA! - You have just built your credit further with little to no risk! Genius!

Keep on eye out for Part 4 of this series, coming soon!

To receive future updates on similar personal finance topics as soon as they are published, subscribe to my blog by clicking on the link below!

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Keep on learning!

Jacob

Build Your Credit Score From Nothing - Part 2

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How to Build Your Credit Score/History From Nothing - Part 2

"Pay bills for your apartment or house in your name"

In Part 1 of this series, I walked everyone through how they can give their high-school age child a financial headstart in life by getting them their own student credit card at an early age and begin accumulating a credit history. See the link below to that post if you missed it.

Part 1 - Build Your Credit Score From Nothing


In Part 2, I'll discuss another very important and easy way to build your credit history - simply paying your for you housing in your name. It seems simple, but many things can get in the way of you doing this correctly.

So, let's take me as an example because I am someone who missed this opportunity while I was in college.

For the first year of college, I lived in the dorms on campus. Because everything is paid directly to the univerisity and included in one lump sum, there were no utility, phone, or internet bills in my name to build credit history. During the 2nd - 4th years of college, I lived in a house that one of my friend's family owned. To make things easier, I paid his family a lump payment each month that included utilities. You guessed it! No bills were in my name, and therefore, no credit history.

So, as sad as it is, I made it through college without ever paying one bill in my name. Amazing! This exact same situation can also happen to people who have their own apartment if the bills are placed in their parents name and mailed to an address half way across the state so that the college student never even sees it!

What's the moral of the story here?

Rent an apartment or house in college, get the bills placed in your name (not your roomates, not your parents, YOURS!), and accumulate a generous amount of credit history before you are even out in to the real world!

Keep an eye out for Part 3 of this series - coming soon. Click on the link below to subscribe to my blog and have it sent to you when it is posted.

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Keep on learning!

Jacob

Go To Build Your Credit Score From Nothing - Part 3 - "Take Out a Small Personal Loan"

What Moving Expenses Can I Deduct on My Taxes?

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If you've recently moved because of a job relocation (greater than the required distance by the IRS), you have no doubt wondered what expenses are eligible to deduct on your taxes associated with the move.

To answer this question question in the most straight-forward, no frills way possible, I put together the list of eligible deductions below to help you save money moving:

• Hotels/lodging en route to your new home. Save your receipts.
• Gas expenses incurred en route. Save your receipts.
• Household goods relocation services/fees associated with your move. Save your receipts.
• Mileage added to your car during the move. For 2009, the standard deduction rate was $0.24 per mile (see link below). For example, in my move from VA to PA, the distance was 293 miles. 293 mi x $0.24 per mi = $70.32 to deduct on my taxes.

2009 IRS Standard Mileage Deduction Rates

There you go! Plain and simple for you!

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Keep on learning!

Jacob

My Individual Stocks Gain or Loss Results Reported for 2009 Taxes

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One of my favorite things about tax time each year is calculating the "gain" realized on the stocks that I sold in the associated tax year. You may be asking yourself, "Why is this such a great exercise?" Truth be told, it probably is not that enjoyable for some people, but it is for me because it just further highlights/reinforces that investing in individual stocks is not a worthwhile exercise for me (and I believe for most people).

So, let's look at my gains (or losses) for the past two years tax calculations resulting from the individual stocks that I sold vs. the performance of the S&P 500 index:

Year 2008 -- $300 loss, S&P500 return = 40% loss
Year 2009 -- $592 loss, S&P500 return = 26% gain

So, in 2008, I did all right as compared to the market, but in 2009, the proceeds from the stocks sold in my accounts generated far inferior results.

Just a little background on why I have stock holdings at all:
I have stock holdings remaining still my my first couple years of investing where I dabbled around with different techniques, penny stocks, investing newsletter, etc. Now that I have seen the light and the error in my ways, I no longer actively buy individual stocks, unless it is such a small amount that it is truly just to "play around with."

What's the morale of the story here?

For me, it just indicates further the following things:

1) Stick to long-term investing in index mutual funds, preferably in tax-sheltered accounts.
2) I do not trust myself enough with my own money to invest in individual stocks, especially over the long term.

Keep on learning!

Jacob

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Stop Using Cash or Your Debit Card, Make Money

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I have a question for everyone out there reading this. Which of the following choices is better?

a) A 100% loss

b) A 99% loss

The answer is clear: a 99% loss would be better than a total/complete loss any day. Since this answer is so simple, I wanted to share something that breaks my heart every time I see it when I am out with friends so everyone can ponder it.

Scenario: I am out eating dinner or having some beer with my friends. We are having a great time - good conversation, tasty beer with lots of hops in it, and good food. Next, it comes time to pay and go home. Everyone pulls out their preferred method of payment, and what do I see?

A mixture of 1) credit cards with benefits, 2) credit cards without benefits, 3) debit cards, 4) and cash!

Choices 2, 3, and 4 give you a 100% loss on your purchase. Choice 1 gives a 99% loss or less.

So, my question then becomes, "Why bother paying with cash, debit cards, or credit cards that have no benefits or cash back?" Once they provide a sub-par answer, I the proceed to encourage them to apply for one of the many cash-back or other benefit credit cards available at one of the links listed below that will enable them to make money.

Favorite Cash Back Credit Cards

List of Credit Cards

You may be asking yourself, "What would be the reasons/circumstances when you would want to use a debit card or cash instead of a credit card with benefits?" I believe there are three situations when it is beneficial to abstain from using your favorite credit card.

1) When your purchase is less than $2, and you feel bad for making the establishment from which you are purchasing pay the credit card fee for such a small amount.

2) You are unable to control your spending if you have credit cards, and you keep getting yourself farther and farther in to debt by using your card.

3) You are in another country, and using a credit card incurs a foreign currency fee.

So, visit those websites and select a cash back (or other type of benefit) credit card that you like, and start saving money!

To be notified of updates on topics such as this one, subscribe to my blog using the link below:

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Keep on learning!

Jacob

Build Your Credit Score From Nothing - Part 1

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Build Your Credit Score/History from Nothing - Part 1

"Credit Card for Your High Schooler"

Back in 2006 while I was taking a finance class at a local community college, I was informed of the cash-back benefits of having and spending money on a credit card. Therefore, in my normal curious way, I went online and tried to apply for one of these credit cards.

The result? I found out that I had little to no credit history available (and certainly not enough for them to grant me use of a quality credit card). I then began to ask around about the reasons for this. What I found out were essentially three things that I could do (but hadn't yet at the time) to build my credit score. These three topics will be the centerpiece of the four-part blog series that will follow.

Part 1 - Help Your High-Schooler Build His/Her Credit Score by Getting Them a Credit Card in Their Name

As I mentioned previously, one of the reasons that I did not have any credit history was due to the fact that through high-school and college, I never had a credit card account that I paid off over time. 

What I did have was a credit card with my name on it that was requested as an add-on to my Dad's credit card account. Because it wasn't a separate account, it just involved HIS credit history and had nothing to do with me except for me being able to use it since my name was on it. That make sense? Good!

In my opinion, what I should have done in high-school was to apply for a separate credit card/account (in my name) for what's called a "student credit card." See the link below for a listing of student credit cards. Essentially, student credit cards are great starter credit cards because they require little to no credit history to sign up, and they start out with low credit limits to reduce the risk of overspending and accruing large amounts of credit card debt.

Student Credit Cards

It should be noted New Federal laws impose restrictions on issuing credit cards to individuals under 21 unless the applicant has the independent ability to repay debt, or has an adult co-signer who agrees to accept joint liability for the account. Having an adult co-signer on the account is OK, as long as it is a separate account, in the teen's name.


Now that you are convinced of the efficacy of this idea, what's the best way to go about setting this up for your teen?

1) Go to the link above. Select any one of the credit cards (DO NOT GET A PREPAID DEBIT CARD) that has no annual fee to apply for.

2) Fill out the application for the selected credit card, placing yourself, the parent, as a co-signer if needed.

3) Once you are approved, wait for the credit card to come in the mail.

4) When it comes in the mail, take the opportunity to sit down with your teen and set up his/her online account for them. This is also a great tool to use to teach your child all sorts of personal finance tactics! Explain that the card will not be used for everyday purchases, but instead, to build his/her credit score for the future.

5) Next, since this is a starter credit card, you have two options in my opinion: a) Set up some kind of automatic, recurring payment using the credit card each month, or b) Write yourself and your teen a reminder each month to use the credit card for one or two purchases on a set day.

6) Do not give the credit card to your teen. Place the credit card in your wallet or purse and explain that you will hold on to it for safe-keeping.

Well, that's it! Not too hard right?! This will give your child a great financial head start on life in no time!

Important Tip - closing credit card accounts hurts your credit score

After you have opened up a student credit card account for your child, used it for some time, and built up a good amount of credit history, you may be tempted to close the account, since you (or your child) really don't need it any more.

However, closing down the old credit card account will actually lower your credit score in two ways:

• First, it decreases your credit history, which accounts for 15% of your credit score.
• Second, it increases your credit utilization rate (% of the total credit available to you that you currently use).

So, the key takeaway here is that if the credit card is no longer used, lock it away in the family safe, check the balance every month or so to make sure no fraudulent activity is occuring, and go about your life!
Keep an eye out for Part 2 of this series coming soon. Please subscribe to my blog feed using the link below to have it sent to you immediately once it is published!

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Keep on learning!

Jacob

Go to - Build Your Credit Score From Nothing - Part 2 - "Pay housing bills in your name"

1000 Visitors and Domain Name Purchase

That's right folks! Grab the party supplies and get yourself in gear! 

Today, My Money Blog just passed the 1000 visitors mark! Thanks so much to all of the readers out there who have made this possible.

To celebrate, I purchased a regular domain name so that we don't have to type in such a long URL each time.

The website address is shown below to bookmark:

http://www.mypersonalfinancejourney.com/

No need to worry though! The old address, http://www.mypersonalfinancejourney.blogspot.com, still will work as well! 

Thanks again for everything!

Jacob

Ways to Maximize Benefits of Your Credit Card - Part 2

My Money Blog Homepage
In Part 1 of this series (see link below), I explained a method for getting the most from your credit card by slowly requesting increases to your available credit limit.

Ways to Maximize Credit Card Benefits - Part 1

Part 2 of this series will focus on another, and probably even more important, way to manipulate your credit card company for your financial gain.

2) Tip Number 2 - Request credit card interest rate decreases

A very beneficial lesson that one of my college professors taught me (please note that this was the one class that I took at a community college and probably learned more about personal finance than in my regular finance classes) was to call every so often to your credit card company and simply request a decrease in your credit card interest rate.

I tried this a few months ago and was able to get my interest rate decreased from 19% to 11%. Wow! That is a lot of money if you ever are someone who has to carry a balance from month to month! The steps I used that worked fairly effectively are shown below:

1) Turn your credit card over, call the 1-800 customer service number on the back of your card.
2) Press whatever button you need to in order to talk to a real live breathing person.
3) Ask for the department that handles interest rate level requests.
4) Tell the person that you are considering switching to another brand of credit card and that you would like to request a decrease in your interest rate.
5) They will process the information and give you the result!

It is that simple!

What's the right frequency to call and request this type of thing? For this type of request, I only call every year or so because I don't actually have any use for a lower interest rate because I pay off my credit card in full each month.

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Keep on learning!

Jacob

Ways to Maximize Benefits of Your Credit Card - Part 1

My Money Blog Homepage

This is part 1 of a series of ways in which you can maximize the benefits of the credit cards you use. It is truly amazing how you can take advantage of things you never knew just by asking! So, let's get started!

1)   Tip Number 1 - Request credit limit increases

The first way that you can maximize the benefits of the credit card you use by simply asking questions is to make sure that you currently have the maximum credit limit possible.

While I do not suggest that you use the added credit amount to make additional purchases, I believe that it is always beneficial to have extra funds available in your credit card credit limit in case of emergencies (examples include - being stuck at the airport in Argentina after a trip and having to buy an emergency ticket home, etc).

The method to request a credit limit increase is simple: 1) pick up your credit card, turn it over to the backside, and 2) call the 1-800 customer support number listed and select whatever option you need to to talk to a real, warm-blooded person. 3) Then, simply ask the customer service operator that you would like to request a credit limit increase. 4) They will then ask you the amount that you want to increase your credit limit. I have had good success with requesting a 33% increase over your current credit limit. 5) They will then ask you if it is all right to access your credit report. Tell them this is all right. The system will then process your request and tell you if you are approved or not.

A quick note here: 

Since requesting a credit limit increase requires the credit card companies to access your credit score, make sure you do not request limit increases too often or on multiple cards at once. This could possibly negatively affect your credit score.

It's that simple! I have had great success with this method. Recently, I was even able to get my credit limit increased from $8,000 to $12,000 on one of my credit cards. Not a bad jump all at once!

To summarize, I follow the several rules regarding these requests:

1) Only place requests for credit limit increases every 3 months to avoid negative effects to your credit score from frequent accessing.

2) Request credit limit increases gradually, 33% at a time is a good number.

Part 2 of this series will be coming soon! Subscribe to the blog feed using the link below to be notified when it comes out!

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Have fun and keep on learning!

Jacob

Go to Ways to Maximize Benefits of Your Credit Card - Part 2 - "Request interest rate decreases"

Frozen Vs. Fresh vs. Canned Vegetables

My Money Blog Homepage

Well, turns out you really do learn something extraordinary every day! As I was cooking beef teryaki tonight at my apartment (using a package of frozen vegetables), I wondered to myself, "Are frozen veggies as nutritious as fresh?"

I then proceeded to go online, and to my shocking dismay, I found out that FROZEN VEGETABLES ARE ACTUALLY HEALTHIER (not to mention cheaper) THAN FRESH VEGGIES. Sounds to good to be true uh? Think again!

In the articles below, it states that since frozen veggies are picked at the peak of ripeness when vitamins are the greatest, they contain much more nutritive properties than the fresh version of the same vegetable. This is due to the fact that fresh veggies are picked before they are ripe and lose a lot of their vitamins to UV exposure and heat on the way to market.

What's the morale of the story? Find ways to improve the taste of frozen veggies, save money, and be healthier!

http://www.associatedcontent.com/article/2398100/are_frozen_vegetables_healthy.html

http://www.eatingwell.com/nutrition_health/nutrition_news_information/fresh_vs_frozen_vegetables_are_we_giving_up_nutrition_fo

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Keep on learning!

Jacob

My Money Blog MySpace Page Created!

Good Sunday evening to everyone! Just wanted to let you all know that I finally broke down and created a MySpace page for the group. You can view the page by following the link below.

My Money Blog My Space Page

Inside, you will find a useful connection network as well as the following applications:

• Loan calculator
• Listings of free stuff online!
• Personal finance calculators
• Rich Man a Day Tips
• When Will You Be a Millionaire Calculator
• Tips for How to Make Money for Teenagers
• And much more!

Keep on learning!

Jacob

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Should my Mutual Fund Be Held in a Tax-Sheltered or Taxable Account?

A question that is very important and often overlooked (I know I have messed this up before big time) is, "What type of account should I place the mutual fund that I am thinking of buying in?"

Page 150 of "The Intelligent Asset Allocator" provides a very nice, succinct summary of where each type of mutual fund should go. This list is shown below for the Vanguard fund family.

For Tax-sheltered Accounts (401k or IRA) Only

In general, value funds and REITS should only be held in tax-sheltered accounts due to the following reasons:

• Value funds have high turnover (selling stocks and buying others). Turnover can kill your profits with taxable accounts.
• REITs obtain most of their long-term returns from dividends. The taxes on dividends can kill your profits in a taxable account.

-Vanguard Value Index Fund

-Vanguard Extended Market Index Fund

-Vanguard Small-Cap and Small-Cap Value Index Funds

-Vanguard REIT Index Fund

-Vanguard Short-Term Bond Index Fund

-Vanguard Total Bond Market Index Fund

These funds should only be held in tax-sheltered accounts because they have the buying and selling involved in maintaining the index representation can increase your tax risk.

For Taxable Accounts Only

-Vanguard Tax-Managed Growth and Income Fund

-Vanguard Tax-Managed Small-Cap Fund

-Vanguard Tax-Managed International Fund

For Tax-Sheltered and/or Taxable Accounts

-Vanguard 500 Index Fund

-Vanguard Total Stock Market Index Fund

-Vanguard European Stock Index Fund

-Vanguard Pacific Stock Index Fund

-Vanguard Emerging Markets Stock Index Fund

-Vanguard Total International Stock Index Fund

Keep on learning!

Jacob

Cost of Pet Products

Recently, I have decided to provide foster care for a dog that is being rescued from execution (being put to sleep) at a high-kill shelter in Ohio. The dog is a young, fluffy, golden retriever/collie mix that was picked up as a stray at the beginning of February 2010.

The reason I opted to provide foster care for a dog as opposed to adopting/buying a dog was that I didn't think I could commit at this time in my life to providing care for a dog for the long-term, especially since I do not have a private yard/house. Also, the foster program I am teamed up with is very supportive, and they actually pay all of the veterinarian bills for the dog (very nice!).

So, I decided that I needed to go to the pet store to get prepared for the new guy. When I went to the pet store (Pet's Plus) in the town I live in here on the East Coast, I was appauled at the high cost of pet products these days, and was curious to find out a little more.

The thing that suprised me the most was the range in price of the pet products. For example. you could get dog food starting at $10.99 (Gravy Train) or get organic dog food (same weight) for $70.00. Furthermore, you could get a plain metal water/food bowl for $8.99 or a fancy ceramic one for $40.00.

To further investigate, I did a quick online search, and I found the two articles below that describe in detail the full cost of owning a pet/dog.

http://www.aspca.org/adoption/pet-care-costs.html

http://www.moneyunder30.com/the-true-cost-of-pet-ownership

The total that both websites come up with is that the total cost of owning a pet for the 1st year is $1200-$1500. Wow! The key takeaways from this investigation, for me, are shown below.

Key Takeaways

1) Before buying or adopting a dog, be certain that you can financially committ to the animal for its lifetime. This could indicate that you will spend ~$10,000 total over the lifetime of the animal.

2) Determine if you are capable of getting the emotional return on investment from having a pet. Make sure that you truly will enjoy it and are not just doing it "because everyone else is," etc.

3) When buying pet products, SHOP, SHOP, SHOP, and COMPARE, COMPARE, COMPARE. There will no doubt be a wide range of product/price alternatives to consider. Also, realize that many times, products sold at discount stores such as Wal-Mart or grocery stores can cost significantly less than the same products at fancier pet stores.

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Keep on learning!

Jacob

New YouTube Channel Created for My Money Blog followers

I just created a YouTube Channel/group where I will review financial movies on YouTube that I find interesting. You can access and subscribe to the Channel at the link below.

http://www.youtube.com/BlogMyMoney

Handy Tool to Assist in Performing Phil Town Rule #1 Calculations

If anyone has given Phil Town's system of investing (from his book, Rule #1, a Simple Investing Strategy in 15 minutes per week) a signficant attempt, you have no doubt found out that running the numbers to calculate the Big 5 Numbers can be a time-consuming, cumbersome task that leaves you thinking, "There has got to be a better way!"

Well, I found out the other day that indeed THERE IS! It's called the Stock2Own website, and it is free to use (see link below).

http://www.stock2own.com/

Once you enter the site, you can enter the ticker symbol of any stock that you identify for further investigation. From there, the website then automatically generates agressive, conservative, and middle-of-the-road calculations of the Big 5 Numbers. Additionally, the 3 technical indicator charts discussed in Phil's book (MACD, Stochastic, and Moving Average) are automatically generated for you to view.

Quite a slick system!

Keep on learning!

Jacob

How do my living expenses compare after switching from living in Virginia to living in the Northeast?

Since recently moving from Virginia to the Northeast (philly suburbs), I frequently get asked how the cost of living compares between the two places. So, here ya go world! :) After all, you have to love how right now, gas in philly is $2.79 per gallon while in Virginia, it is $2.59 per gallon.


Virginia Living Expenses (per month)

A nice, spacious 1 bdrm apartment - $750
Water, trash fee, sewer - included (no extra charge)
Electricity (includes heat) -  $50
Internet - $35

VA Total = $835

Philly Suburbs Living Expenses (per month)

A nice, spacious 1 bdrm apartment - $1300
Internet - $38
PECO Electricity bill - $38
Renter's Insurance - $15
Trash fee - $5
Water service fee - $9
Sewer service fee - $11.14
Gas-cooking fee - $5
Gas Bill (heating) - $31
Electricity processing fee - $17
Gas service fee - $7

Philly total = $1476

As one of my friends would say, FANTASTIC!!!

And the kicker is...get ready for it! There is no adjustment in pay for this cost of living difference...So, by working in a cheaper place, you are basically giving yourself an automatic raise! Food for thought next time you're searching for jobs.

Ways for Parents to Give Their Kids a Financial Head-Start to Life

I want to preface this section by saying that I do not have any kids of my own and have not tried these techniques out. They are merely good advice that I have read in books over the years.

Ways to Give Your Kids a Financial Head Start in Life

In my opinion, the best way to give your kids a financial head start in life is merely to get them exposed to the general idea of finance at an early age, instead of having it be a taboo topic at home. Therefore, any effort is by nature good, but listed below are a few specific methods that I thought would be useful to share.

1. Buy your child 1 share of a stock they would be interested in. The key here is that the stock has to be something they will be interested in following. For example, if your child really enjoys Disney/Pixar movies, buy them a share of Disney stock (DIS ticker symbol). If he or she likes board games, Barbie dolls, Fischer, or Hot Wheels, buy them a share of Mattel (MAT ticker symbol). Use that share of stock to teach them all that you can about the stock market and investing!

2. Give your child (if they are old enough) a task to do to help with doing your taxes - Be sure that the only thing they know about tax time is that YOU DON'T LIKE TO DO THEM AND THAT THE IRS IS TRYING TO TAKE YOUR MONEY. This promotes negative associations for your child around money and something as certain as doing taxes.

3. Keep finance/money an open topic around the house. So many times, the only things that children hear fro you about money is the negative things such as not being able to afford soething, etc. Keep the lines of communication open.

4. Open up college savings fund. Everyone hopes that their child will get a full scholarship to go to college, but the odds are not enough in your favor to take that chance. By opening a college savings fund through an institution like Vanguard, you can tax advantage of tax deferred growth within the account, while still having the luxury to direct the investments the way you want. Remember, you will want to match the maturity of the investment instrument with the time horizon associated with whenever you child will be going to college in order to maximize returns. The link below takes you to the section of the Vanguard site where you can obtain information about 529 education savings accounts. Open one!

https://personal.vanguard.com/us/whatweoffer/college/overview?Link=redlabel

Important Tip To Remember:

When calculating a student's need for financial aid for higher education, it benefits the student to have as little money to his/her name as possible.

In this case, it means that it is best to place the college savings fund account in you, the parents, name instead of your child's. This is due to the fact that parent's are assumed to use 5-6% of their assets to pay for a child's college education, while the student is expected to use 35% of their assets.

5. Open a Roth IRA for them whenever they first obtain earned income - See my previous posts on reasons to start investing at an early age to see the logic behind this technique. There is no minimum age limit (see article at link below) to when you can open a Tradition IRA, as long as your child has earned income. If you own your own business, even better! You can give your child earnings for jobs he or she performs for your business.

http://www.kiplinger.com/basics/archives/2002/03/story28.html

Useful tip from David Bach's Smart Couples Finish Rich book:
Tell your child that if he or she opens up a Roth IRA and contributes to it, you will match them Dollar for Dollar. This will provide an even greater incentive for them to invest.

6. Show your child the power of compound interest, using the table below. Be sure to point out how little money it takes to accumulate $1MM if you start at an early age.

7. Give your child the gift of want - Encourage your child that if he or she wants to buy something, it is necessary for them to earn the money themselves. This can be done either buy starting your own business venture or getting a job.

This topic is discussed in more detail on a recent post at the following link - My Money Blog - Is it Good to Give Your Child An Allowance?

Keep the ideas coming and good luck!

Jacob

My Current Asset Allocation and Net Worth Growth - February 2010

Twice a month, I update a spreadsheet of all my accounts that calculates 1) my net worth and 2) my current asset allocation. I figured that it might be interesting to post it on my blog once per month

In my previous blog at the link shown below, I explained the details of the mutual funds I invest in and how I figure what my allocation targets are.

http://mypersonalfinancejourney.blogspot.com/2010/01/index-mutual-funds-and-current-assett.html

On February 3rd, 2010, my asset allocation picture was as shown below.

As you can see, I have some serious work to do to get to my allocation targets. Remember, the general rule of thumb is to rebalance your allocation if it exceeds +/- 5% of the target you select.

The areas that I need to drastically improve are highlighted in red below. The reason that I am so over-allocated in domestic large cap equity is that for the past year and a half, I have been contributing 100% of the money in my 401k to buying an S&P500 index fund. I have recently been trying to exchange money out of that and in to bond and international funds (as you can see, the international equity and non-inflation bond funds %'s are more or less on target).

However, my current goal is to get more funds shifted towards investing in Emerging Market funds. Keep on learning!






Detailed Allocation Calculations









% Cash (money market target 5%)                      Currently 14%







% non-inflat Bond Funds (target 15%)                 Currently 11%







% TIPS Bonds (target 5%)                                  Currently 0%








% International Equity (Target 11%)                    Currently 12%








% International Emerging Markets (Target 11%)  Currently 5%







% Domestic Large Cap (Target 8%)                    Currently 33%








% Domestic Small Cap (Target 9%)                    Currently 6%







% Domestic Small Cap Value (Target 13%)        Currently 6%







% Domestic Large Cap Value (Target 13%)        Currently 7%







% REIT (target 10%)                                          Currently 6%

Mint.com - Budgeting / Personal Finance Tool Website - FREE!!!

This website is a great find that the newsletter that comes from my apartment complex directed me to!

First off, what is the best thing about this website? It is a FREE tool to use. Completely Free. Yes, Free.

Essentially, what you do is go to the website, and it allows you to link your credit cards, savings accounts, checking accounts, car loans, bank loans, house payments, etc all to your Mint.com account. These are secure connections that are read only, so Mint.com does not steal your information.

Once your information is entered, you can then track your spending (see categories that you spend the most in, and what percentage this occurs in), see your investment performance compared to the market averages and what your asset allocation levels are. Overall, a very useful tool! Give it a try.

Mint.com

How about you all? What's the best personal finance software out there that you've found?