I called a CSR yesterday to discuss consolidating our accounts and learned that the process is much simpler than I imagined. You can’t consolidate two separate ING Direct login accounts but you can add a joint account holder to an existing savings or checking account. This will turn an individual savings account into a joint savings account, let’s see how easy it is.

Adding a Joint Owner

If the other person is an ING Direct customer, you will need them present to login (or have that information yourself).

• Log into your account.
• Click on the name of the account you want to add someone else to.
• Click on the Account Maintenance link above the list of transactions.
• Under Account Ownership you should one spot available for a Joint Account Holder, click on the big blue Add button to the right.
• If the person you want to add is an existing customer, it’s a cakewalk from here. Choose the primary account holder (you or the new person), and then select “Yes” for the second question. The person being added will be instructed to login. Once they login, they should be added within a few minutes.
• If the person isn’t a customer, they will basically instruct them to open an account and link that new account. You will have to confirm the person who joins is the person you want. My recommendation is that you have the second person open an account using a ING Direct referral code so they can get the $25 bonus, and then add them.

Wasn’t that simpler then you would’ve guessed? Both you and the person you’ve added will receive an email (subject “Account Ownership Update”) in a few days notifying them that they’ve been added as an account holder.

Both individual account holders keep their respective logins and the joint account appears the list of accounts they own. For all intents and purposes, the account appears the same, there are just now two ways to access it (the primary account holder and the joint). If there are any differences, I haven’t been able to tell.

What about FDIC insurance? Making a joint account doesn’t give you more FDIC insurance. According to the FDIC:

…each co-owner’s shares of every joint account that he or she owns at the same insured bank are added together with his or her other joint account shares at the same bank, and the total is insured up to the SMDIA, currently $250,000.

So while you don’t get more FDIC insurance, you do get to cross off a few accounts on your list and make for a simpler system!

How to Combine ING Direct Accounts from personal finance blog Bargaineering.com.

This offer is attractive if you don’t already have an online savings account and you are already Costco member.

The negatives? (I always like the bad news first)

• The fairly steep $5,000 minimum deposit, when most online savings accounts have much lower minimums.
• The bonus is not enough of an incentive to open this account, $60 on a $5,000 deposit is 1.2%. With an ING Direct referral, you can open an ING Direct Orange Savings account with $250 and get $25.
• Capital One’s other deposit products aren’t special. Compare their CD rates to the best CD rates we maintain and you’ll see they aren’t that competitive.

The positives?

• If you don’t have an online savings account and you can handle the $5,000 minimum, this isn’t a bad one to use. if you have a Capital One account you can link directly to this InterestPlus account, that makes it an even better deal for you since you can transfer funds instantly.
• $60 bonus for Costco Executive Members, $20 for Gold and Business Members; when you deposit $5,000 into the account within 30 days of opening ($5,000 is the minimum deposit to open).
• 10% quarterly bonus on interest earned for the previous month if you maintain at least a $15,000 balance in the account. It makes the APY, assuming the 10% bonus is paid out at exactly 4 weeks, a little less than 1.62%.
• No fees, $5,000 is the minimum needed to earn interest but you aren’t charged a fee if your balance falls below that.

What do you think of this offer?

(Photo: greenwenvy)

Costco/Capital One InterestPlus Online Savings Account from personal finance blog Bargaineering.com.

The book starts with a must read introduction to Quinn and her experience with money. It goes back to her childhood days as a page at a local public library, her paycheck to paycheck lifestyle when she first started working, her first experience with stockbrokers and mutual fund mistakes, all the while picking up personal finance insights that will be expanded upon later in the book. Reading this introduction, a prologue of sorts, gives you an understanding of why Quinn is qualified to write such a book. She’s lived and learned a tremendous amount, even when the book was first released in 1991, and she’s captured it in a mere 1,200 pages.

Don’t let the size of the book intimidate you. It’s organized in a logical and compartmentalized way that you only need to read the sections that apply to you now. The “steps” act as chapter buckets and they are:

• Step 1. Building Your Base – covers the basics such as general personal finance, banking, wills & trusts, and milestones in your life.
• Step 2. Finding the Money – covers how to spend and save money intelligently, including how to use credit cards responsible.
• Step 3. Your Safety Net – covers insurances such as life insurance, health insurance, disability, auto, and everything else (fire, theft, wind, flood!)
• Step 4. Your Own Home
• Step 5. Paying for College
• Step 6. Understanding Investing – covers the basics and the specifics from how investing works, how to pick a mutual fund, working with brokers, stocks vs. bonds, emerging markets and even real estate.
• Step 7. Retirement Planning
• Step 8. Making it Work – covers financial planning, whether it’s being your own planner or hiring one.

As you can see, it’s very well laid out and you can skip whatever you aren’t ready for. If you aren’t planning on more college (or paying for your kids), then skip the 80 pages in Chapters 19 and 20. If you aren’t ready for a home, then the 60 pages of Chapter 17 and 18 are irrelevant (now). Not ready to look at your will? Then that’s 50 pages in Chapter 6 that you can save for later.

I’m hesitant to call it a reference book because it just doesn’t read like a reference book (it’s not an encyclopedia) but it’s something you can reference again and again. While I haven’t read every page, I’m pretty confident that anything you want to know about personal finance is in this book somewhere.

Making the Most of Your Money Now by Jane Bryant Quinn from personal finance blog Bargaineering.com.

That’s the marriage penalty.

In reality, it’s not that as bad as it looks. If you’re in a single income household, you generally benefit from going from a single filer to a married filing jointly. If you have a two income household, chances are you still pay a little less. The penalty only kicks when the two of you both earn over $68,000 each (where your next dollar as a MFJ puts you in the 28% bracket, whereas you would stay in the 25% as a single filer for another $14,000). Back when most households were single income, the penalty wasn’t a big deal. It’s becoming a much bigger deal now.

While this may seem like a great argument against marriage, it turns out there are significant financial benefits to tying the knot. There can be significant insurance savings when you add someone to a policy (you don’t need to be married to add someone to an auto insurance policy though), there are Social Security survivor benefits, and finally there are inheritance benefits (if you die, your spouse gets your estate tax free, yipee!).

So while the marriage penalty does stink, it’s not bad enough to use as an excuse against marriage.

(Photo: pengrin)

What is the Marriage Penalty Tax? from personal finance blog Bargaineering.com.

So if you were to rebuild your personal finances or build it from scratch, the first step is finding a checking account that fits your needs. For me, I need a checking account to be free, have plenty of ATMs, and no minimum balance. If your bank doesn’t offer that as a minimum, I’d find one that does.

So how do you find the best free checking account?

Online Checking Accounts

If you’re comfortable banking entirely online, I recommend going with an online checking account because they will offer far better yields and rewards than any brick and mortar bank. The tradeoff is that you won’t be able to visit a branch to deposit your checks but you are handsomely (relatively) rewarded for the added headache.

Reward Checking Accounts

If you aren’t or you don’t like the idea of mailing/scanning in checks, there are plenty of free checking accounts. Before you do anything, see if you can get access to a reward checking account. Reward checking accounts are those accounts that offer high yields as long as you make double digit debit card transactions each statement cycle.

Credit Union or Community Banks

If those aren’t available, check with a local credit union or community bank. There are far too many small community credit unions and community banks for me to name but they often will have the best free checking accounts. They will have low fee requirements, fair fee schedules, and the added benefit of a strong local presence.

Best Free Checking Accounts

If you don’t have that option, one of the following larger banks may be available (I looked at the ten largest US banks by deposits):

• Bank of America MyAccess Checking – No monthly maintenance fee if opened online, no minimum balance.
• BB&T Free Checking – No minimum balance requirements or a monthly maintenance fee.
• Capital One Rewards Checking – No monthly service fee or minimum balance requirements, unlimited check writing, reward miles for banking transactions (5000 for opening an account & setting up direct deposit, etc.).
• Chase Checking – No monthly service fee with direct deposit or 5+ debit card purchases within a statement period, otherwise $6.
• Citibank EZChecking – No monthly fee and unlimited check writing when you maintain a combined average balance of $1,500 across linked Citibank accounts. May also qualify for 5 free uses of non-Citibank ATMs, reimbursements of the first six ATM fees per statement period up to $5 per transaction, and fee rebates of up to $12 per year (there is a litany of explanation and fine print at the bottom, review that for state specific caveats).
• HSBC Choice Checking – Free with direct deposit, otherwise you must maintain $1,500 in deposit balances of $5,000 in combined balances in HSBC accounts or pay an $8/month fee.
• PNC Bank Free Checking – No monthly service charge or minimum balance, non-PNC ATM fees are reimbursed if you have a $2,000 average monthly balance.
• SunTrust Free Checking – No minimum balance requirement or monthly maintenance fee, free 1st order of small package of checks, NSF first item fee discount (one time discount).
• U.S. Bank Silver Package Checking – No monthly maintenance fee.

Most of the major banks offer a free checking account with no minimum balance and no monthly maintenance fees, which is ideal. Recently, banks have been adding minimum balance requirements (Citibank just settled with the NYS AG to extend, for a year, their free checking offer with no minimum balance to new EZChecking customers) so keep an eye out for any changes not reflected in the above list.

Finally, remember that free checking is only free in that you aren’t paying fees. None of the accounts listed offer any interest so you are really “paying” in the interest you aren’t earning. We try to keep our checking account as low as possible, putting any savings into an interest bearing savings account. Fortunately, at least right now, savings interest rates are abysmal (under 2%) so the cost is fairly low.

(Photo: heidielliott)

Best Free Checking Accounts from personal finance blog Bargaineering.com.

If you want to learn more about it, I may recommend the Federal Election Committee website where you can find all sorts of campaign finance gems.

My question to you is do you check off $3 to the Presidential Election Campaign Fund? When I first started filing my taxes, I didn’t because I erroneously thought it meant I would be personally donating $3. After I learned it wouldn’t actually cost me $3, I thought it was absurd that we would give even more money to spend on political campaigns. However, as I read more, I realized that forcing candidates to take public financing puts a cap on how much they can spend. I don’t claim to be an expert but I think that’s a good thing.

What do you think?

Your Take: Do You Check Off $3 To The Presidential Fund? from personal finance blog Bargaineering.com.

So while I can’t confirm he or she works in the pharmaceutical industry, I have no reason to believe (and I think you’ll agree) what he or she says is true.

As a person who works daily with the production of both Liquid and Solid Dose vitamins and all sorts of OTC pain relievers etc, I would almost consider myself an expert on this topic and wanted to give you the low down.

For all of the types of drugs and vitamins we make, the expiration date only holds one meaning: The date that my company will guarantee the legal claim efficacy of the drug. For example, certain vitamins degrade over time, so we put in a safe “overage” – knowing based on statistical stability data, etc, we will know that in X number of months, vitamin Y will degrade by a certain percentage. Our standard formulation process is to work backwards from 24 months and put in the correct amount of each vitamin, (or drug, same principle) so that at 24 months from the date of manufacture, all the nutrition or drug facts on the box are correct – that 24 month date is the expiration date on the box.

The only way for us to put a longer claim on the box is to have actual stability data (not statistical) – for example, if we haven’t changed the formula of the product or the bottle or tube it goes in for 3 years, and we do a bunch of testing on stuff that was made 3 years ago and it still meets the label claims, we can change the expiration date to 3 years. Unfortunately, this rarely happens because someone is always tweaking a formula or changing packaging materials for some reason or another, so its tough to do.

Oh, one other thing in response to a comment left by one of your readers – companies do not want short expiration dates – yeah, it might be nice to have someone have to go back to the store to by more drugs frequently, but there is way more risk for the company. Right now, I am managing roughly $150MM in finished product inventory, and I want as much time as I can to sell it. As it stands today, Walmart and most other retailers won’t accept product with less than 1 year of dating, so anything we can’t sell in that first 12 months after something’s made is usually destroyed.

If product is destroyed, not only is it a huge waste of money, I also have to make new product to replace what I just threw in the garbage – talk about waste.

Editor’s Note: So in summary, drugs and vitamins do work past their expiration date by quite a margin, but drug makers don’t label it as such because they aren’t able to meet the statutory requirements to prove that it does. I thought it was an interesting insider’s look, I hope you did too.

(Photo: SOCIALisBETTER)

Insider’s Look at Drug & Vitamin Expiration Dates from personal finance blog Bargaineering.com.

I spent about a good hour reading through the first few pages but now my brain is way too full of knowledge… here were a few money gems.

0l33l:

How I gauge wether or not to buy something:
When considering a purchase, picture a stranger offering you [the cash value of the purchase] or the item in question. Which is of greater value you? Which would you choose?
Source: lifehacker

The_Klobb:

A bum once told me he secret to life was owning stocks. I thought he was going to tell me that he was really a millionaire, but it turns out he just owned lots of different stocks so he could get steak dinners at all the shareholder meetings.

lyfe_forced:

When you get a perscription from the Doctor, ask if they can script you the generic. They usually have no problems doing that , but you have to ask. This is especially great if you don’t have health insurance.

Here’s a particularly useful tip that isn’t money related…
username_attempt_999 (this is a throwaway name):

I was a lifeguard years ago, and the four P’s are always the best way to be efficient in an emergency:
Position
People
Problem
Progress
Yes, in this particular order

Eg: I’m at 223 Glenshower Rd, Arkenvale. There is an infant, a woman around mid 30’s and a male 50yrs+ that have been involved in a car accident. The infant doesn’t appear to have injuries, the woman is conscious and has sustained a severe laceration to the stomach. The male in uncounscious but breathing. No visible wounds. A person on the scene is attending to the woman by applying pressure to the wound.

The operator is typing as you are talking, and by following this protocol, it is almost on the PDA of the ambulance in real time.
If this is done, you have saved what could be crucial time by not have to screw around with the operator asking questions and you answering.
And most of all, stay calm and speak clearly.

Enjoy!

Thousands of “Insider” Tips from Reddit from personal finance blog Bargaineering.com.

Fortunately, for the 2009 tax year, not every dollar is taxed. The American Recovery and Reinvestment Act made the first $2,400 of unemployment benefits tax-free. After that, the remaining benefits is considered taxable income.

Form 1099-G

The state will mail you a Form 1099-G, sometime after January 31st, that you will need to prepare your tax return. The 1099-G is for “Certain Government Payments” and Box 1 will list how much Unemployment Compensation you received. Remember to include the benefits when you file your return.

For more information on recognizing unemployment compensation on your tax return, please review Topic 418, here’s a passage on the definition of unemployment compesation:

Unemployment compensation generally includes any amounts received under the unemployment compensation laws of the United States or of a state. It includes state unemployment insurance benefits and benefits paid to you by a state or the District of Columbia from the Federal Unemployment Trust Fund. It also includes railroad unemployment compensation benefits, disability benefits paid as a substitute for unemployment compensation, trade readjustment allowances under the Trade Act of 1974, and unemployment assistance under the Disaster Relief and Emergency Assistance Act of 1974. Unemployment compensation does not include worker’s compensation.

You May Elect Withholding

If you are currently receiving unemployment compensation, you can have taxes withheld from government payments by filing a W-4V Voluntary Withholding Request. If you don’t, you may have to make estimated tax payments every quarter to avoid a penalty.

Why would you want to elect withholding? You’ll still have to pay taxes next April on the benefits, so it might be better, from a planning perspective, to have the taxes withheld now. This way the taxes are taken care of, you won’t be sent scrambling next April to come up with money to pay income tax.

Forgot Taxes? Start Saving.

While it stinks to have to pay taxes, hopefully you knew about it. If you didn’t, now you do, almost three months before the taxes are due.

(Photo: Phillip)

Unemployment Benefits Are Taxable from personal finance blog Bargaineering.com.

For today’s Devil’s Advocate post, we’re going to break down the stock market and show why we really are just little guppies hoping not to get eaten by the sharks.

You Have No Advantage

In the stock market, the average investor has absolutely no competitive advantage over other investors. I’ve always said that you need an advantage to succeed and most of us don’t have one in the stock market. The traders on the floor have the advantage of seeing up to the second activity. The traders on Wall Street, even if they aren’t on the floor, may have a network of contacts in the media, may know other analysts in other brokers (or their own), or have good relationships with company employees so they can get a slight edge in information. Whatever the case, they have an edge you and I don’t.

Is it a make or break edge? Sometimes, yes. Most of the time, no. I liken it to playing a sport without knowing how much time is left on the clock. It won’t make or break you but in the long run, but occasionally the clock will run out on you or you’ll shoot too early. Either way, it’ll hurt and the stock market is a long run type of game.

Buy & Hold is not a Complete Strategy

If you’ve done any reading of stock market investing, you’ll know that all the introductory texts talk about the idea of buy and hold. They warn against trading and they suggest that you diversify. The basic stuff is pretty straightforward and it’s appealing to follow and write because it’s simple. However, buy and hold only gives you one direction to win and stocks move in two directions.

The point of this reason isn’t to slam the buy and hold idea, I think it’s valid as long as you have a long time to hold. The reason I bring it up is because all too often we stop here and thing we’ve accomplished the mission. Stock market investing is very involved and if you stop at buy and hold, you leave yourself open to a lot of risks.

If in the last two years you had a trailing stop loss and you were nearing retirement (or whenever you’d need the money), you could’ve saved yourself some money by selling. Buy and hold until the bitter end may seem honorable but the only person benefiting is the guy shorting your shares.

Actively Managed Funds Suck

It’s a well known fact that the majority of actively managed funds don’t beat their benchmarks but many of us are forced into actively managed funds in our retirement accounts. Why? Brokers don’t make much off index funds! Both of my former 401(k)s offered a mix of actively managed mutual funds with fairly reasonable expense ratios (they were all under the industry average). Neither, to my knowledge, offered index funds, the cheapest mutual fund options available.

Saving for your retirement is important and it’s great that vehicles such as 401(k)s and IRAs exist, but ever wonder why, in most cases, you can only invest in the stock market?

Insufficient Analysis

Finally, most of us don’t do nearly enough analysis of a stock or a mutual fund before we buy it. It’s because it’s not our passion. Do you really want to pore through income statements and discounting cash flows based on your expected return? What about calculating the return on equity for the last five years and using that to project a price target in X years given the current P/E ratio? While those were mouthfuls of sentences, they are actually quite basic calculations to do. Now imagine doing that for all the stocks you were considering investing in (after whatever filters you applied using stock screeners) as just a starting point to know how much to pay for a share.

Asleep yet? That’s because most people don’t care enough and if you don’t care, you can’t succeed. Most of us would rather pursue our hobbies or spend time with loved ones, so we put it into actively managed mutual funds that suck. Or we go into index funds (my choice) because then we get the benchmark. Either way, we don’t do even the most rudimentary analysis required so we shouldn’t be in the game at all.

I’d love to hear your thoughts on this as the stock market is one of those very polarizing topics. Many fortunes have been made and many retirements have been secured through the stock market, but I think people are thinking differently after the economy punched the market in the gut (or lower!) last year.

Please let me know what you think!

Don’t Invest In The Stock Market from personal finance blog Bargaineering.com.

But, enough about why *I* look at the list, let’s see which companies stack up where it matters most – pay.

2010 Top Ten Paying Companies

Here are the top ten paying companies of 2010:

1. Baker Donelson (Law firm) – $319,779
2. Salesforce.com (CRM software) – $249,607
3. Orrick Herrington & Sutcliffe (Law firm) – $245,206
4. Bingham McCutchen (Law firm) – $233,800
5. Devon Energy (Energy company) – $187,819
6. Alston & Bird (Law firm) – $185,938
7. Perkins Coie (Law firm) – $183,376
8. EOG Resources (Energy company) – $171,943
9. Arnold & Porter (Law firm) – $171,074
10. Brocade Communications Systems (technology company) – $170,175 (“devices that connect servers with storage centers”)

Of the top ten, six were law firms, two were software companies, and two were energy companies.

Want to see something eerie? Take a look at Fortune’s list from last year. Eight of the names from 2009 were reshuffled and retained their top ten status. Last year’s #9, Adobe Systems, slipped off the top ten and was listed as 11th this year. Lehigh Valley Hospital and Health Network (#2 in 2009) was nowhere to be found and Brocade Communication Systems moved into the 10th spot in 2010. That makes for some pretty good consistency at the top…

The lesson here is that you should become a lawyer! I’m kidding, being a lawyer is tough work and if supply and demand still work in this country, it’s an indication that the supply of lawyers isn’t meeting the demand for them. There’s a reason for that – it’s difficult work (either challenging, grueling, or just cruel) or everyone would be able to do it.

Either way… law, technology, or energy firms were your best bet last year and continue to be strong this year. I’m willing to bet that they will continue to be strong next year, unless supplanted by an even hotter industry.

(Photo: chicanerii)

2010 Fortune’s 25 Top Paying Companies from personal finance blog Bargaineering.com.

However, in writing about all these budgeting systems, many of which are very similar, the conclusion is that there is no right way to budget. There is only a way that gets you to financial independence, the way that works best for you and your situation. In reviewing all of these free budgeting tools, it all went back to the simple idea of spending less than you earn.

How to Pick A Budgeting System

The first question you have to ask is why do you want to or need to budget? There are several answers but they fall into one of two buckets:

• I want to budget. If you want to budget, you are already half of the way there. You need to pick a system that matches your tendencies. If you love statistics, trying to spend 10% less or have zero spend days, then you want to pick one where you track everything to the last penny and can tweak to your hearts content.
• I have to budget. If you feel like you have to but don’t really enjoy the prospect of budgeting, then you will want a system that doesn’t jar your daily routine. Avoid systems that have you track everything expense down to the penny and instead try something like envelope budgeting. You want to ease yourself into budgeting because otherwise you will drop it.

Establishing a Baseline

In both cases, whether you want to or simply feel you must budget, you now have to establish your spending limits on categories. You can do this one of two ways – guess or measure. I recommend a compromise. Guess what you are spending in each category and adjust your budget after the fact. You will have to overcome a bit of cognitive anchoring but I feel that it’s better to guess and adjust than not budget for a couple months just to set a baseline.

Once you’ve established your baseline, pick the budgeting system that works best for you and do it “manually” at first. You can track your spending on a little notepad or enter it into spreadsheet later on. As you develop your system and firm it up, you should get a better idea of your spending habits so you can be more effective later.

Now Pick a Budgeting Tool

At this point, you will want to take a look at some tools to see which one fits your needs. You don’t want to force yourself into a tool’s system, you want to pick the tool that fits your system (which will be an amalgamation of several “basic” ideas). Unless you’ve developed the system independently, you won’t know which tool is best.

What’s your budgeting method look like today? How as it evolved?

Budgeting Is About Your System, Not Your Tools from personal finance blog Bargaineering.com.

Unfortunately, whether or not you should convert a Traditional or Rollover IRA to a Roth IRA is not as clear cut. There are a lot of important factors many people are overlooking when it comes to Roth IRA conversions. While you may gain some tax benefits in your retirement assets, it does come at a cost to your overall financial picture. To ignore those could be extremely detrimental. Let’s take a look at the four major factors to consider before you convert to a Roth IRA.

Tax Implications of More Income

When you convert your Traditional IRA to a Roth IRA, the amount you convert will be recognized as ordinary income. Think about the tax implications of your conversion because if you have a sizable nest egg, it can have a huge impact on your taxes. For example, if you earn $50,000 a year and you convert a $100,000 IRA, you will move from the 25% tax bracket all the way to near the top of the 28% tax bracket. The tax brackets don’t look quite so large when you are converting an IRA you’ve spent many many years accumulating.

There are a lot of tax deductions and credits that get phased out over you enter those higher tax brackets. For example, the student loan interest deduction starts to phase out at $55,000 ($110,000 for married filing jointly). Other services are also affected by this increase in ordinary income, such as financial aid and the tax treatment of Social Security. You will want to take these phaseouts into consideration before converting your to a Roth IRA.

Tax Profile Diversification

It’s a well known fact that tax rates have been the lowest they’ve been in quite some time but that doesn’t necessarily mean that converting today is the right move. For starters, it’s unclear how taxes may be changed going into the future. For example, should we move towards more of a Value Added Tax, which is like a sales tax at every step of the production process, you could see more of the tax revenue shift from income to VAT. As it becomes more politically dangerous to float tax increases on income, we may see more creative taxing mechanism that doesn’t rely on income tax.

The conclusion is that given future uncertainty, we may want to build some tax diversification into our retirement accounts. Just as you don’t want every dollar to be tax deferred, you don’t want every dollar tax free. Who knows what the tax structure will be in the future and to assume your tax rates will be higher may be a mistake. Having an even mix of the two might be the best plan going forward.

Think Twice If You Can’t Pay Tax

The general consensus is that you should only convert if you can pay the income tax with non-retirement funds. The reasoning is that if you pay the taxes with your retirement funds, you are setting yourself back a few years. With 401(k) contributions capped at $16,500 a year (lower the last few years) and IRA contributions capped at $5,000 (also lower the last few years), taking a big chunk out for taxes is going to hurt you more than the tax benefits will help you. So if you cannot pay for the taxes with non retirement funds, it’s recommended that you avoid converting.

If You’re Near Retirement…

It’s hard to predict what tax rates will be in thirty or forty years, but the likelihood that they will be significantly higher or lower in the next five is fairly slim. That being said, if you believe that the rates will go up before you hit retirement or if you will reach the age of required minimum distribution on your Traditional IRA (and you don’t want to take the RMD), then you’ll want to convert. If you don’t think they will go up and you’re retiring in a few years, you might want, for reasons of stability, keep things the way they are. This isn’t a big reason not to convert your Traditional IRA to a Roth IRA but it’s one you should think about (which is why it’s the last one listed). If your rates won’t change, then converting only costs you some time (and any fees).

(Photo: scottwills)

Four Factors to Consider Before Roth IRA Conversion from personal finance blog Bargaineering.com.

Benefits of Zero Based Budgets

The main benefit of creating a zero based budget is in the creation process. By forcing you to assign a dollar of income to each expense, you are taking a look at the entirety of your finances. You are forced to remember and allocate dollars to otherwise automatic expenses – such as rent, car insurance, and cable television. As you go through the budgeting process, you might consider shopping those services around to see if you can get them for less so you can spend that money on another expense.

Another big benefit is that by assigning each dollar of income to a category in your budget, you move away from a mindset of casual spending to one of deliberate spending. Unlike envelope budgeting, where you have some wiggle room, you take that wiggle room away when you zero base your budget because there’s no miscellaneous envelope.

Creating a Zero Based Budget

1. List your sources of income. Your budget starts with a list of your household income – paychecks, bank interest, investment dividends, etc.
2. List your expenses. This step is probably going to be your hardest because you have to remember all the expenses you pay for each month. Remember expenses that might be paid on a quarterly, semi-annual or annual basis like insurance. Break out aggregate payments like your mortgage – principal, interest, taxes, insurance. Then add a savings expense (or one savings expense for each savings goal you have) and a discretionary category (separate this from an entertainment). As you use the budget, add to this list so that it captures each expense you have.
3. Allocate income to fixed expenses. Fixed expenses are those that you can’t change easily – like your mortgage payment or cable bill. You can change them if you wanted to (refinance or sell your house, change cable plans) but they’re not like a “restaurant” category that you can chance very easily.
4. Try to make adjustments to fixed expenses. If you wanted to shop around for cable television or your insurance policy, I recommend doing that so you can distribute more of your income to more fluid categories. You may even decide to cut some of these fixed expenses, like a magazine subscription or Netflix.
5. Start allocating to fluid expenses based on history. If you’ve never kept a budget, make an educated guess. If you have, use what you think is a reasonable amount.
6. Zero your budget. At this point, if your income doesn’t equal your expenses, start playing around with it until it does. Add more to savings or discretionary balances (it never hurts to be ahead of schedule on savings!) or some other fluid category.
7. Stick to your budget. Now, as you go about your month, track your spending an stick to your budget. It’s difficult to go from no budget to zero based budgeting but if you can stick with it, it will pay dividends down the road.
8. Adjusting your budget. Each month, as you have your spending data, adjust your categories to fit your actual use and adjust your actual use to fit your budget. Somewhere in the middle is where you will need to be, so constant adjustment is important. Also, if you have extra slack in your budget (ie. you have $1000 in income and despite having it all budgeted out, you spent $990), take the slack and add it to your discretionary or savings category. If you’re under (spent more than your budget), you have to take a look at your categories, which you’ve now neatly laid out, and find areas to make some cuts.

As you can see, zero based budgeting is very deliberate but not unlike many other budgeting methods. It’s also a budgeting methodology that requires very little in the way of tools. While you could turn to a budgeting tool to help you out, the hard work is in the planning and adjustment of your zero based budget. All that can be done, fairly easily, using Microsoft Excel or some other spreadsheet application.

(Photo: thetruthabout)

How to Build a Zero-based Budget from personal finance blog Bargaineering.com.

Our latest favorite is Dominion, as I mentioned in that post, because it’s a different game each time. We’ve been mostly playing the “scenarios” in the instruction books, just to get a better understanding of the game; but the game lets you randomly select cards so each game is different.

What’s your favorite game lately? Favorite all time?

Your Take: Your Favorite Board Game from personal finance blog Bargaineering.com.