Tag Archives: Money

Featured, Life, Money, Technology

How to Protect Your Home from a Burglary

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I recently experienced a home burglary and through the incident I have learned a lot. Although worse things can happen, coming home to a house that has been broken into is a traumatic experience. Losing “stuff” hurts a little, but more so are the lost memories, like photos on a computer, and the lost sense of safety a home typically provides. Here are some lessons I have learned from the experience. While not exhaustive, following these tips will leave you be better prepared if your home is ever targeted. Feel free to add your tips in the comments section.

Minimizing the Risk

First off, when a home is burglarized, it is because burglars chose it over other homes for some reason. Finding ways to prevent your home from being targeted is a great place to start. Consider the following.

  • Put up signs showing you have a security system
  • Use random timers on lights when you are out of town
  • Have a garage – though not easy to change once you own a house, it’s important to understand that houses without a garage help burglars know when no one is home
  • Get a big dog that may scare away intruders (be smart – a dangerous dog that can potentially harm your family is not worth scaring off intruders)

Additionally, you can minimize the risk of harm by forcing intruders to get off the scene quickly. Here are some ideas.

  • Let trusted neighbors know when you’re not home and what cars you drive so they can keep an eye out for suspicious vehicles
  • Use an alarm system – be sure to register it with your local police precinct to prevent getting fined for false alarms
  • Install home web cams – there are a number of webcam systems that record when they detect motion or consider a fake one as a deterrant
  • Use locks on expensive equipment like TVs and computers to make stealing them more difficult
  • Use long screws into a solid frame on dead bolt locks to make it hard to kick in doors

By combining the ideas above, you will be even more safe (e.g. if your alarm is going off and a neighbor sees a suspicious car they are more likely to call the police and write down vehicle information than if there is no alarm or the neighbor thinks it is your car).

Protect Memories

Even though your home is now a less attractive target and burglars have limited time to steal stuff, you still may want to take further precautions to protect important items in your house that are harder to replace.

  • For computer files, consider an online data backup program like Mozy or Carbonite (~$50/yr). While potentially more expensive than an external hard drive, online backup is easy to set up and can’t be stolen by intruders.
  • Scan important papers and photos onto your computer too. This helps in the event of a burglary and other events like a tornado, flood, or fire.
  • Tag your pets. In case your dog or cat gets out through a door left open, make sure it has a collar with your phone number on it and a microchip that vets can use to identify your pet in an online database.

Protect Value

In addition to preserving memories, you definitely want to make sure you have taken the right steps for preserving value. Great insurance helped us quickly replace lost items.

  • Understand whether your home or renters insurance covers the purchased value or replacement value of your items.
  • Understand the deductible on your home in the case of a burglary. The deductible amount will reduce how much money insurance gives you but also reduces your annual premium.
  • Document expensive items in your home by taking pictures and savings receipts.
  • Save serial numbers to help the police identify stolen items and to prove ownership.
  • Download some tracking software to help find computers that have been stolen. Something as simple as free backup software like Dropbox will identify the IP address of a stolen computer when it is connected to the internet. You can find the internet provider of an IP address and the police can work with them to find the physical mailing address where a stolen computer is located.
  • In the event of a burglary, file a police report as soon as possible and let them know what has been stolen to the best of your knowledge. This will make the insurance process easier.

The more you do, the better your chances are at preventing a burglary or getting through one with minimal losses. You may never be perfectly protected, but it’s always helpful to be prepared.

(photo credit: Shutterstock)

Life, Money

Why and How to Buy Time

Outsourcing unnecessary tasks in your life is one strategy I believe will free you up to what you are designed to do best.  With that said, it can be hard to justify paying someone to do a task you could do pretty easily.  I’d like to present an idea on why paying for outsourced tasks is worthwhile.

Opportunity Cost and Time

Opportunity cost is a concept that generally urges someone to consider what opportunity they are giving up when doing something new. If the lost opportunity (a cost) is greater than the new opportunity (a gain), then the status quo should remain intact.

When evaluating what you are willing to pay for an outsourced task, you shouldn’t think about the difficulty of the task. Instead, you should consider what opportunity you are giving up when you do that task.

If you can be investing in skills or a hobby that could benefit you by adding a hundred dollars to your salary or giving you new income, then it may make sense to pay someone $10-$20 per hour of time saved. Even if that task is mowing your lawn and you are willing to do it yourself, the incremental value of that hour may justify finding someone else to cut the grass.

What to Outsource

When I discuss outsourcing, I’m not referring to shipping all your duties overseas (though that is a possibility). Most of the time these tasks can and will require you to invest in your local community. There are some tasks, though, that may best be served by someone around the world. Either way, you are creating jobs for others while improving your ability to contribute to and benefit from others.

Here are some simple examples tasks that anyone can outsource. Consider which ones may best help you and come up with your own that best fit your situation.

  • Home Cleaning – it may seem like something you’re supposed to do, but if that time is worth more to you then consider giving it up.
  • Lawn Care – people who live in apartments already outsource this. Consider giving it up if you don’t love getting outside every week to keep things green.
  • Personal Secretary – it’s not just for corporate managers anymore. Some people have found it worthwhile to outsource time consuming tasks like email to personal agents in India. Check out the 4-Hour Work Week blog for more crazy ideas.

Finally, don’t just weigh the amount of time a task takes you. There are always those tasks that provide us with a break from everything else in life or a chance to do something just for fun without worrying about money. Until you find the career that provides you with this enjoyment, don’t give these hobbies up.

Next week I’ll lay out some ways to use your free time as an investment in your future.  For now, I’m considering giving up home cleaning or lawn care to have more time to invest in my skills and revenue generating hobbies. What could you consider giving up?

Why and How to Buy Time is featured in the Festival of Frugality at My Personal Finance Journey.

Featured, Life, Money

Escape Financial Worries with Margin

One great solution that has helped to keep me from obsessing over my finances is the idea of margin. Surprisingly, I learned this at my church and my pastor used a great phrase to sum up the impact of margin. He said something to the extent of, “Relationships are made in the margin.” The idea at the time being all the great things we love about life – friends, hobbies, adventures, solving problems – are only possible when there is room for the unexpected.

What is Margin?

To some people, margin is the extra profit they make on a deal, but for now, think of margin as the extra room we leave ourselves for the unexpected. Here are some examples on how you can create margin financially.

  • Make sure your checking account has more money than you plan to spend each month.
  • Have a budget item called “margin” that goes towards unexpected causes.
  • Create an emergency fund (3-6 months expenses) in case you lose a job or have an emergency expense.
  • Don’t buy a big purchase on credit/debt.

How Does Margin Help?

No matter how you do it, leaving room for unexpected opportunities allows you to experience the best of life. Here are some examples on how financial margin can benefit you.

  • With a well funded checking account you no longer have to worry about over-drafting.
  • A “margin” line item in your budget frees you up for spontaneous activities like treating a friend who is in town or supporting a sudden crisis.
  • An emergency fund is like insurance for down times.
  • Avoiding debt gives you the ability to take on unexpected opportunities to invest in yourself or others.

How have you incorporated margin into your finances? Have you experience any unexpected opportunities that make you wish you had more margin?

(photo evilerin)
Life, Money

Avoid Scamming Auction Sites At All Costs

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As the internet becomes a ubiquitous information tool around the world, we all benefit with the ability to find what we want and the way we want it.

The internet has also created many services that make it easier for companies to easily bring products to market at prices we like, but this low cost of entry and information overload also makes it easy for companies to find ways to scam us.  More specifically, a number of scamming auction sites have popped up with offers too good to be true.

How to Spot a Scam

If you are viewing a financial article or maybe researching your next big purchase, you may see an ad for something amazing like an iPad for $25 or a new car for $500.  Obviously the ad is trying to catch your attention and suck you in, but remember this first rule to not get caught.

Now, if you are just really curious and you want to see how someone could even consider offering the iPad for $25 and you click the ad, you will still see some scam indicators.  At the scam site memphisgazette.com (warning scam site), you will notice a few things that may seem odd.

First, all the buttons at the top are not actual links, the “Breaking News” is a saving trick (not something a little more breaking like a massive hurricane, a world war, or asteroid colliding with Earth), and my personal favorite, all the comments are extremely positive.  Any news site will have more negative comments than positive ones.

  • A fake news site may have fake links, overly positive comments, or a dramatized headline.
  • This does not give a product credibility.

But even if the news site is fake, it may be a legit ad. So you click a link and head over to swipebids.com.  This site along with some other scamming auction sites try real hard to take your money, but again, just resist it.

Why? First, depending on the links you clicked to get there, you may see some interesting reasons why they can offer these products at such a low price. For example, they may say a warehouse is overstocked and they don’t know what to do. Also, you will eventually find out that you have to sign up to really get anywhere and signing up requires a credit card. Since the site is a scam, they hide in fine print that you get charged $150 for signing up. Sure you can try and sue them for your money back, but that will take a lot of time and more money just to get them in trouble. Just say no.

  • There is no way to justify a $25 (or even $125) iPad unless it’s a scam.
  • Don’t give your credit card to a site if you are concerned it’s a scam.
  • Better yet, ask someone you trust if they have used the site or send me a question when you’re not sure.

How Scamming Auction Sites Work

Now, truth be told, the auction sites do have some deals on them and there’s a slight chance you get one. Understanding how they work, though, should convince you it’s not worth the effort.

For these “auctions”, each person buys a set of bids (e.g. 100 bids for $50) and places those bids on the product. Each time a set of 100 bids is placed, the winning price increases by a few cents, and after a set amount of time, the auction ends. So for a $25 iPad, there may have been 2000 bid sets placed.  Each one cost $50 for a total of $100,000. The winner (in a lucky scenario) put down $50 and then pays $25 for the ipad – a great deal, but everyone else lost out big.

What should this remind you of? This is very similar to the lottery or other forms of gambling. In this example, the average person pays $50 for a 1/2000 chance at winning a $500 iPad.  These are odds you should always avoid.

  • Avoid SwipeBids (scam!) and QuiBids (scam!) at all costs!

Have any experiences with scam auction sites? Let others know in the comments or check out these links for actual bad experiences.
http://www.sitejabber.com/reviews/www.swipebids.com
http://bloggerboon.com/2010/06/23/how-swipe-bids-scam-works/

This post is featured in the Carnival of Personal Finance at Budgeting in the Fun Stuff.

(photo from bloggerboon.com)
Life, Money

Ten Great Time, Money, and Fun Facts

Life is full of interesting facts, tricks, and shortcuts. Here are 10 of the greatest regarding time, money, and fun.

Time

Money

  • If you can get someone to agree to the following pay scheme you will have $10 million in a month. Just ask them for a penny on day 1, two cents on day two, four on day three, and so on.
  • In a Ponzi scheme like Social Security, the rate of return is equal to the growth rate of members. With the US population growth rate and Social Security returns around 1% (before considering SS money is spent for other things), you could make significantly more money investing your Social Security tax in basic mutual funds or savings accounts.
  • Assuming you are the average American, your national debt burden is greater than $43K.
  • Income mobility is better than most people think. Between 1999 and 2007, people moved up from the bottom quintile of income earners 60% of the time and down from the top quintile 40% of the time. This is partly due to the fact that the top quintile pays nearly 80% of our taxes and the bottom quintile pays roughly 1%.

Fun

  • If you have just 23 people in a room, there is more than a 50% chance that two will have the same birthday.  With just 50 people, there is a 97% chance. This is known as the birthday paradox.
  • You can count to 31 using just one hand and to 1023 using two hands. Check it out on YouTube.
  • Despite being the best selling movie of all time, Avatar doesn’t even break the top 10 when revenue is adjusted for the times. Top three are Gone with the Wind, Star Wars, and The Sound of Music.

Know any cool facts or stats that didn’t make my top 10? Let us know in the comments.

(photo sam_churchill)
Featured, Life, Money

A Personal Credit Score Designed for You

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Many people rely on banks to tell them whether or not they deserve a loan to buy anything from a house to a TV. What people don’t realize is that credit scores are designed to tell banks how much money they can make off of someone.

From a bank’s perspective, credit scores tell the following.

  • Someone with a high credit score is a good guarantee of consistent profits
  • A medium score is potential for high profits through fees but with some risk
  • A low credit score is too risky to consider

We need a system for us to know when to get a loan or when to sign up for that credit card. A true Personal Credit Score will tell us (and not the banks) when a credit decision is best for us. I have started a score sheet below to help everyone out.  Let me know if you think this works for you or if something is missing.

Rules of Credit

My Personal Credit Score tool is based on some well known rules of money.

  • Managing money takes time and time is our most limited currency (not money or gold)
  • When you give money as charity, money loses its grip on your life
  • Spend less than you make (auto saving)
  • Don’t use a loan to buy something that depreciates
  • You earn the right to use a credit card
  • Credit makes it easier for people to spend beyond their means

Personal Credit Quiz

Now choose the answers below that best describes you and keep track of your points. At the end you’ll have a better idea of your true Personal Credit Score and when you should be using credit.

Do you consider managing money a fun hobby?

  • Yes, I love it and could spend hours each week! – 100 points
  • No, but I still spend a few hours monthly doing a budget – 60 points
  • No, I don’t look at bank statements ever or commonly miss bill payments – 0 points

How much money do you donate annually?

  • Greater than 10% of my salary – 100 points
  • Between 5-10% of my salary – 75 points
  • A little bit when something bad happens – 20 points
  • Sorry, I’ve got my own things to buy – 0 points

Do you spend less than you make?

  • Yes! I even have an emergency fund with 3-6 months expenses – 100 points
  • Yes. I have an automatic savings account – 60 points
  • Sometimes – 10 points
  • No, I’m living paycheck to paycheck or off my parents – 0 points

Do you currently have debts (including credit card bills not paid off monthly) ?

  • No, I don’t have any debt – 100 points
  • No, except for a house, student loans, or another appreciating asset – 50 points
  • Yes, I’m sorry but I just had to buy the car or TV via a loan/credit – 0 points

Do you have an income producing job?

  • Yes, it’s a full time job – 100 points
  • Yes, part of the time – 30 points
  • No, but I’m looking or volunteering – 5 points

Results

Great job! Now here are your results.

  • 500 – Congrats you financial all star! Feel free to use a credit card, but I’d be surprised if you really wanted one. Also, take some time to write a guest blog on Obsessed Analytic.
  • 420-499 – You’re financially sound. If you have the time, you’re allowed to get a rewards credit card, but keep looking for ways to improve.
  • 350-419 – Still hanging in there, but be careful you don’t lose track. Don’t get a credit card until your score improves.
  • 280-349 – Things are getting tense so make some time to get things in order. Don’t use any credit cards.
  • 150-279 – You’re good in some areas, but other areas can bring you down. Find the problems and do something. Obviously stay far away from any credit cards or loans.
  • 50-149 – Don’t panic. Just breathe. It could be worse, but time to sound the alarm. Start fixing one thing at a time and find someone to hold you accountable.
  • 0-49 – I’m not sure how you found this blog. Send me an email and I’ll help you get going, but this may take a while.

How’d you do? What is your first step to improving? Let me know, comment below, or tell a friend.

This post is featured on the Festival of Frugality: Time Passes Edition.

(photo credit frugallawstudent)
Life, Money

Save Money on a Car, iPhone, and TiVo with Depreciation

If you are having trouble convincing yourself or someone else that your next big purchase is really worth it, here’s a strategy to add to your arsenal – depreciation.

Sticker prices aren’t the only costs we need to consider when making a purchase.  Depreciation rates (not just business lingo anymore) can make the most expensive purchases look cheap and should be a driving force in your next big buy.  It doesn’t matter if you’re buying a car or DVD, understanding depreciation can save you money while getting more.

When Depreciation Works for You

Depreciation is the opposite of appreciation.  An appreciating asset can be hard to find, but is when the value of what you own increases over time.  Houses before the housing bubble burst appreciated every year and made the only real cost the interest you paid and the opportunities you gave up.  Depreciation is never an investment, but does decrease the real cost of an item from what you see on your receipt.

  • Fast Depreciation – Lots of new items like cars and top of the line electronics often lose half their value in the first year or two you own them.  If you try to resell a new car or TV a couple of years down the road for half the original cost then you effectively paid the other half for your two years of use.
  • Slow Depreciation – Used items have already seen their fast depreciation days pass by and start to depreciate more slowly.  A few years with a used item may only see a 10% drop in value meaning if you resell it then you pay only 10% of the sticker price for a few years of use.

It’s Cheaper Than You Think

If an item that you are looking to buy first seems expensive (or not), consider how it depreciates. Don’t worry, it’s not as complicated as it sounds.  Here are some examples.

  • Cars – We all hear that cars lose thousands of dollars when you drive them off the lot.  The Motley Fool suggests that new cars lose 20% or more of their value the first year followed by 15% in year 2, 13% in year 3, and 12% in year 4.  Since a newer car depreciates faster than a used car, you will end up paying more per year to drive a new car than a used car of the same price.  More importantly, if your loan only pays down principal slower than the car depreciates then you won’t be able to sell your car for enough money to cover the loan.  Avoid this by putting down at least 30-50% of the car value as a down payment.
  • iPhone – Although you may be a cheapskate, don’t think that holding off on an iPhone upgrade is a good deal.  Most iPhones sell for $200 upfront plus a service plan.  Since the service plan is used to subsidize the phone, its value is much more than $200 and after two years of depreciation the iPhone is still worth around $200 (just check out eBay for the two year old iPhone 3G).  What this means for you is that if you don’t upgrade, you are subsidizing a phone for no reason.  Instead, you should sell the old one and upgrade to a better phone for “free”.
  • TiVo – Most people complain that buying a TiVo is too expensive especially when you consider the monthly fees just to get access to the TV guide.  Worse yet, a lifetime TiVo plan costs $400. Of course, that’s unless you consider depreciation.  Some quick research on eBay reveals that while the box may depreciate as fast as any other electronic, the lifetime service depreciates slowly.  Even after three years of owning a TiVo, the lifetime service may only depreciate by $100 making the monthly cost a more realistic $3/month (and much cheaper than cable). Take it a step further by buying a used TiVo with lifetime service and when considering the resell value, the service is practically free.
  • Books & DVDs – With sites like Half.com, eBay, and Amazon, it is very easy for anyone to sell their old books and movies.  Better yet, if you don’t want to wait for all the DVDs on that boxed set television series to come in on Netflix, consider buying the whole thing on Half.com.  After a few days of non-stop 24 or Lost, you can sell them back for approximately the same price you bought them minus some fees.  This slow depreciation makes watching the used DVDs almost free.

Considering how your next purchase may depreciate can dramatically change how you perceive its value.  Taking advantage of the ease of reselling online through eBay, Amazon, or Craigslist makes reselling your used purchases more practical than ever.

This post is featured in the Festival of Frugality at SimplyForties

(photo credit maczter)
Featured, Life, Money

Billionaires Give Wealth Away in the Giving Pledge

Warren Buffett is famous for being one of the richest men in the world, but he is also known as a great example for his pledge to donate 99% of his wealth.  Over the past few years, he has been working with Bill Gates to challenge other wealthy businessmen and celebrities to relinquish the hold they have on their money for the greater good.

The Power of Giving

I have long been an advocate of giving away money and recommend it before any other financial decision including saving for retirement and establishing emergency funds.  Similar to spending money, giving supports those around us and is an investment in our community when done wisely.  Even for yourself, giving is beneficial as it allows you to prioritize more important things in life ahead of money by making you realize money is just an optional tool that we can use towards our goals.  If you really think about it, money has no direct value to you unless you are out of wood to burn and need paper to start a fire.

Joining the Giving Pledge

I remember as a kid wondering why it was so hard for rich people to give money away.  When I had $10 in a shoebox, I didn’t mind giving $1 away to help others so why couldn’t someone with $10 billion give a way $1 billion.  As I grew older and my wealth increased from $10 to $100 to $1000s, I began to realize how a modest percentage like 10% became hard to give away.  As the numbers get bigger, it’s hard for you to stomach the idea of giving that much away.  This is what makes Buffett’s ambition to get the wealthiest people in the world to give away at least 50% of their wealth so amazing.

Lately, Warren Buffett’s example and hard work has paid off (literally) as forty of the richest people in the world have joined his pledge.  The Giving Pledge list includes well known names like Ted Turner, George Lucas, and T. Boone Pickens among lesser known billionaires like Alfred E. Mann.  On NPR this week, Mann acknowledged that giving his money away is better than leaving it to his family since an inheritance often ruins people.  He also said that he hopes to give it all away before he dies so that he can see the benefit of his donation.

What’s Your Pledge

As more and more of the world’s wealthiest commit to giving away their wealth, I’m curious how much of the rest of us will follow suit.  It’s easy to say that these rich people still have plenty to live off of and that’s true, but at the same time, they may be the people most attached to their money.  If everybody who wasn’t a billionaire even pledged to give away 10% of their income, that would have a much greater impact on our world community.

So what do you think?  Do the non-billionaires have the ability to join the Giving Pledge or are we too attached ourselves.  Let me know your goals on giving and how it impacts your life in the comments below or on Facebook.

Featured, Life, Money

What to Know About the US National Debt

A reader asked recently, “What is national debt? It seems both complex and simple. How will it affect the future?”

Indeed, the US national debt is a complicated issue and this is evident in how the nations top economists continue to debate the significance of our debt and its impact on the nation.  As the US national debt continues to swell, many people are seeking to understand the issue better.  Here are some basic principles and strategies that should set your foundation for understanding the subject.

Types of US Debt

The US national debt can be looked at in two main ways.
First is the “public debt.”

  • Public debt can be viewed as the actual amount of money the US owes through loans to individuals, groups, and governments.
  • This is what the government pays interest on right now.

The second type is “gross debt.”

  • Gross debt includes future obligations like Social Security.
  • Although future obligations may be covered by future taxes, current tax rates will not bring in enough revenue to cover them.

Today’s public and gross debt levels relative to the size of the US economy (GDP) are higher than they have been since WWII.  This has happened since the Iraq invasion around 2003 and can be largely attributed to the post 9/11 economy and recent “Great Recession.”  Entitlement spending (Social Security, Welfare, Medicare) has also had a significant impact on the rising gross debt as population growth has slowed and the ratio of people on entitlement programs to those paying for it has increased.

How the US Debt Will Impact Us

As obligations increase, the US government must continue to raise interest rates so that investors are willing to loan the US money.  Alternatively, taxes must increase across the board.  Either scenario can be harmful to the economy and thus limiting job opportunities and people’s ability to spend effectively.  This creates a few potential problems.

  1. As the US government increases interest rates to raise more money, investors may move money out of corporations leading to more government power and inflation.
  2. As interest obligations to debt holders increase, taxes are no longer used to improve the country but instead go to other nations.
  3. If a decrease in infrastructure programs happens before a decrease in entitlement spending then taxes become less and less an investment in economic growth and more of a temporary solution to support those in need.
  4. American companies are considered more risky as the US debt increases causing prices to rise which creates inflation.

What You Can Do

As time passes, the US will either have to cut programs or increase taxes to pay for the problems.  Simply increasing debt is not exclusive of these options since it will increase interest payments which decreases the amount of money going to programs.  Even if the government never goes bankrupt, its power on the international scale will diminish slowly over time making living in the US less of an advantage.  Here are some strategies you can consider to be prepared.

  1. Be thankful that you live in a great economy that provides you with many more advantages than other places.  How many people honestly are completely independent from everything else?  Even if our country one day fails us, we’ve been very blessed until now.  You have to appreciate the benefits along with the losses.
  2. Get financially sound in case you’re required to live on less.  Practice the basics like saving for an emergency, spending less than you make, and investing in yourself.  For more frequent advice, read some good financial blogs like MoneyCrashers.com or ChristianPF.com
  3. Vote for politicians whom you believe will best spend your taxes for the good of the country.  Tell your friends to vote for them too.
  4. Lose your dependence on money by giving some away and seeing it as a tool for other things.  When possible, find ways to enjoy life and make a difference without needing lots of money.
  5. Look outside.  Even when the stock market drops the sky is still blue (or gray but I don’t think there’s any relationship there).

Have your own question to submit?  Submit your time, money, or fun question here and get it posted on the Obsessed Analytic blog.  If you have any thoughts to add, then share with others in the comments below.

This post is featured in the Carnival of Personal Finance Edition #270.

Featured, Money

Should I Worry About The Expiring Bush Tax Cuts

It’s always funny to watch people get jumpy over a fifty-cent coupon on their next pizza purchase and then not worry about the fact that their largest expenses (taxes and healthcare) may change by thousands of dollars one year to the next.

People definitely delight in the occasional saving.  It’s a personal “win” and makes you feel like you beat the system.  However, if your goal is to use your money a little more effectively, it’s worth knowing the impact of political changes so that you can react (and vote) accordingly.

What Are the Bush Tax Cuts

For starters, the tax cuts passed in the early 2000s had a few significant impacts.  Based on 2010 brackets here are the noteworthy numbers versus pre-Bush tax levels.

  • You will save 5% on the first $8375 you make (~$419)
  • Plus 3% on income over $34,000 (another $480 for someone making $50K)
  • Plus $500 per kid (raised child credit from $500 to $1000)
  • Plus 5% on stock gains and 25% on dividends

Remember that your taxable income is far less than your salary.  Just for breathing, the government exempts $3,650 (personal exemption), and because the government knows your a generous giver they assume you have at least $5,700 in deductions (granted if you have more you can deduct that too).  So to be taxed as a $50K earner you would really need to make at least $59,350.

What You Can Do

Nothing. It’s politics. Or stop having kids just to get the child credit (I’ve heard they cost more than $1,000 per year to raise anyway).

No, actually there are some worthwhile moves.  First and foremost, be knowledgeable.  If the tax cuts don’t get extended, you (the average American) will likely bring home $400-800 less in income next year.  For those of you who simply spend the amount of money in your bank account each month, you will be fine but you will end up buying less and continuing your saving achievements of zero.  If you have a budget on the other hand, you may need to make some minor tweaks, but you should be ok.

Second, read the news.  The Democrats basically control the situation right now in D.C.  They want to raise taxes but don’t want to mess with people making under $200K.  If that’s you, then you’ll likely see no changes in taxes (healthcare is another issue).  If you make more than $200K then be afraid, kinda afraid.  Your taxes will likely increase by a few thousand dollars and your inability to lavishly spend, donate, or save like you used to may hurt the economy, but that’s up for debate.

Sigh of Relief

So it looks like the pending doom of slightly higher taxes won’t hit/hurt most of us, yet.  Larger concerns for your immediate finances are healthcare changes, but I’ll save that discussion for next week.  Do be aware that the national debt is swelling quickly and the long term impact is unknown.  Even if taxes don’t go up this year, they will go up eventually.

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