JoNYs Financial Freedom Blog

What Tim Ferriss Wishes He Knew About Money In His 20s

2014-09-15T13:00:00.000-04:00

by Libby Kane

Tim Ferriss, entrepreneur, public speaker, angel investor and author of the #1 New York Times bestseller "The 4-Hour Workweek", has shared some important personal finance advice with us.

When he was asked about what he wishes he'd known about money in his 20s, he said:

"In your 20s, optimize for learning, not earning. Work directly under or with master deal-makers, and acquire skills. This is particularly true for negotiating and hard skills like coding."

"What would you rather have: $20,000 more per year in your 20s, leading to making $100,000 to $200,000 a year in your 30s, or a lower-paying job from 20-25 - but one like a real-world MBA you're paid for - leading to making million in your 30s?"

"It often comes down to prioritizing skill acquisition over immediate post-college earning. McKinsey or Goldman can be seductive, but it's easy to get trapped in a 20-plus-year path of paying for a bloated lifestyle that is always a bit more expensive than the year before. Serfs can become self-made kings, but consultants tend to remain consultants. The one true job security is a superior skill set."

Want to find out what other successful people wish they'd known about money in their 20s? read more

Seven Smart Investments You Can Make With Just $25 A Week

2014-06-25T22:00:00.000-04:00

by Libby Kane

Even if you only have $25 a week, you can still make your money work for you.

How? Over on Quora, a user asked the community what they would recommend he do with his limited cash, and they were full of ideas.

Here are our favorite answers:

How to Invest Like A Rich Guy

2014-06-19T11:00:00.000-04:00

by Paul Merriman

From time to time over the years I've been invited to talk to high-school students about financial matters. I always enjoy this opportunity to learn from them and - I hope - teach them some important things.

One question I often ask is:

"Would you rather invest like a rich person or a poor person?"

Of course they always choose the first option.

I use this question to introduce a couple of important concepts: Mutual funds versus individual stocks and index funds versus actively managed ones. High-school students, most of whom have little or no exposure to investments, have no trouble comprehending that a wealthy investor will own thousands of stocks, while a poor one might own only a few.

My point: Buy a handful of individual stocks, and you will be following the poor person's example. On the other hand, if you buy mutual funds - especially index funds - you will be investing like the rich investor.

As it turns out, the divide between poor investors and rich ones is deeper than I had thought.

A recent article published at TheWeek.com summed it up this way: "Rich people prefer productive companies while the poor prefer gold. That's bad news."

Five Habits of the Very Best Investors

2014-03-16T21:00:00.000-04:00

by Paul Merriman - MarketWatch

Most investors spend most of their time and energy thinking about what they can get from their investments. That makes perfect sense.

But there's more than that to investment success.

A few investors are lucky enough to be successful primarily because they were born into wealth and abundance. But the vast majority of us have to rely on hard work and … what else?

If you can put your finger on that elusive "what else" factor that leads to success, you can change your life — and your family's life — for the better. So what is it?

As I researched my 2011 book "Financial Fitness Forever," I posed exactly that question in a series of extended interviews with nine seasoned investment advisers I respect and admire.

One thing that emerged was deceptively simple. Aristotle said it this way: "We are what we repeatedly do. Excellence comes not from our actions but from our habits."

Again and again these nine advisers identified some key habits that seemed to be ingrained in the most successful people among the thousands of clients they have worked with. Pretty soon we realized that successful investors' most effective "secrets of success" were neither secret nor mysterious.

How to Get Bitcoins for Free

2014-01-04T00:00:00.000-05:00

If you're looking to earn some free bitcoins, you came to the right place.

STEP ONE: if you don't have one, open a bitcoin wallet with Coinbase

STEP TWO: each of the sites below allow you to earn free bitcoins

Bit Visitor - Bit Visitor pays you bitcoin for visiting websites. Bitvisitor shows you each website for 5 minutes (during which time you can check out the site), and pays you for each site you visit. Between sites, you're required to enter a captcha.

Bitcoin 4 You - This is another site viewing service, through which you visit sites for 3 minutes at a time, and receive a small amount of bitcoin for each website view.

Earn Free Bitcoins - Like Bit Visitor, Earn Free Bitcoins pays you bitcoin for visiting websites.

BitcoinGet - The easiest way get free Bitcoins. Earn Bitcoins for watching videos and completing simple tasks.

Got another site you think would make a good addition to this list? Please let us know.

Eleven Simple Financial Tips You Should Have Followed 30 Years Ago

2013-12-29T00:00:00.000-05:00

by Buck Hartzel

"Boy, if only I had found you guys 20 or 30 years ago. I would be all set!"

I hear some variation of that comment all the time from members of our Motley Fool community. Sadly, we can't turn back the clock and do things right. We can, however, teach the younger generation to avoid making our mistakes.

With that in mind, I created a handy, one-page financial checklist that will allow everyone to build their wealth over the long term. If you follow this simple advice, you'll be on the road to financial freedom. Best of all, you'll have no regrets in the future about your financial condition.

Hidden Secrets of Money 5 - When Money is Corrupted

2013-12-07T10:00:00.000-05:00

Hidden Secrets of Money is a completely free series that reveals the economic reality that has been hidden from you in plain sight. Discover the secrets that will allow you to unlock the greatest wealth transfer in history. We created this new free video series to allow viewers to turn today's economic crisis into opportunity by simply learning from history. Hope you enjoy it.

Watch Episode 4: The Biggest Scam in the History of Mankind

Watch Episode 3: Dollar Crisis to Golden Opportunity

Watch Episode 2: Seven Stages of Empire

Watch Episode 1: Currency vs. Money

Personality Type Will Determine Your Paycheck

2013-11-09T10:00:00.000-05:00

by Jay Busbee - Yahoo Finance

Upset that your paycheck isn't quite the size you'd like it to be? Ready to blame your company, the economy, Obama? Turns out you need to look a lot closer to home: in the mirror, specifically. A new study from Career Assessment Site indicates that your personality, specifically how driven and results-oriented your are, has a significant impact on your earning potential.

Granted, this shouldn't be world-shattering news to you. But it's useful to understanding how our specific personality types map out against the demands of work. The study at Career Assessment Site uses the famed Myers-Briggs Personality Test, which divided everyone into one of sixteen personality types based on introversion/extroversion, rationality/emotion, and so forth. If you don't already know your type, you can learn more about the Myers-Briggs Type Indicator here.

Here's how the United States as a whole breaks down along Myers-Briggs lines:

Here's how far each personality type tends to get in her/his educational career:

And finally, the big news: how much money each personality type tends to earn:

Obviously there are many factors at play here, but the results play along expected lines: rationalists have the highest overall earning potential, with extroverted rationalists leading the way by a mine. Introverted idealists? Man, your folks have it tough. Get out in the world or stop thinking everthing's prefect, one of the two.

For the complete graphic, including more detailed breakdown of each personality type, click here to read more.

Hidden Secrets of Money 4 - The Biggest Scam in the History of Mankind

2013-10-27T21:00:00.000-04:00

Watch Episode 3: Dollar Crisis to Golden Opportunity

Watch Episode 2: Seven Stages of Empire

Watch Episode 1: Currency vs. Money

Hidden Secrets of Money 3 - Dollar Crisis To Golden Opportunity

2013-09-29T19:12:00.000-04:00

Watch Episode 2: Seven Stages of Empire

Watch Episode 1: Currency vs. Money

Hidden Secrets of Money 2 - Seven Stages of Empire

2013-08-14T00:00:00.000-04:00

Watch Episode 1: Currency vs Money

Where the rich get their money

2013-06-16T16:00:00.000-04:00

by Robert Frank

Much of the debate over taxing the wealthy focuses on taxing giant salaries.

But a new study from the nonpartisan Tax Policy Center found that the real money for the wealthy is made from investments and business income—not compensation.

The paper, from Joseph Rosenberg, takes a broader definition of income. The so-called "Expanded Cash Income" includes retirement and health-care benefits, retirement income, tax-exempt interest and other add-ons aimed at providing a more accurate picture of the nation's income distribution.

The results show a stark contrast between the 1 percent and the rest. The population as a whole earns 64 percent of its expanded cash income from so-called "compensation," basically a paycheck from a company. But the top 1 percent earns only 39 percent from compensation. It gets 24 percent from business income and 29 percent from investments.

The top 0.1 percent is even more reliant on investments, with 35 percent of their income from investments.

In other words, the richer you are, the more likely you'll make your money from investing or owning a business.

As Jared Bernstein of the Center on Budget and Policy Priorities points out, "Once you get up to the very top of the income scale ... you've got two-thirds of their income coming from nonlabor sources."

That's not to imply that the wealthy are just living off passive income, or that they're not working as hard as the everyday American.

"When we think about small business owners, these are 24-7 people and they can be working harder than you or me," said Roberton Williams of the Tax Policy Center. He said there is little correlation between the type of income people receive and their level of work.

Indeed, economist Emmanuel Saez of the University of California at Berkeley writes that since the 1970s, the rising incomes of the wealthy are due largely to a growth in their wages and salary income.

"The evidence suggests that top income earners today are not 'rentiers' deriving their incomes from past wealth but rather the 'working rich."'

Of course, working might also mean "owning."

Our Expert (Finally) Reveals His Personal Retirement Strategy

2013-04-27T14:00:00.000-04:00

by Walter Updegrave

I haven't said much about my own finances in the more than 1,000 Ask the Expert columns I've written over the past 13 years. Everyone's situation is different, so I wouldn't want people to assume they should follow a particular strategy or invest in a certain way just because "The Expert" has done so.

But since I'll be leaving MONEY at the end of this month, I thought it would be appropriate to share the overall approach I've taken to retirement planning during my 26 years at MONEY in the hope that readers might apply it not in every particular, but in a general way to their own planning.

I'm not going to get into the nitty-gritty details. My wife would have my head if I started divulging account balances and such. Rather, I'll break down my retirement-planning efforts into two broad categories, specifically: What I've Done Reasonably Well and What I Could Have Done Better.

What I've done reasonably well

The single most effective thing I've done is save on a regular basis.

Whether my zeal for saving reflects an innate impulse, a reaction to my family's precarious financial situation as I was growing up, a rational decision to stash away money for the future or a combination of these, I can't say. But I can say that for whatever reason I've always tried to live below my means and contribute the max (or as close as I could get to it) to tax-advantaged retirement plans.

For example, as a freelance writer prior to joining MONEY, I opened and funded a Keogh account and then a SEP-IRA, both of which are retirement savings plans for the self-employed.

Once I became a MONEY staffer, I made it a point to take advantage of virtually every opportunity my employer offered to save, including the company 401(k) plan, which I funded to the max pretty much every year.

I also applied the 401(k) system of automatic payroll deductions to saving outside of tax-advantaged plans. In the late '90s, I set up an automatic investing plan, directing a mutual fund company to transfer $300 a month (later increased to $500) from my checking account to a stock fund. I felt a pinch at first, but after a few months I adjusted quickly to having a little less spendable income.

Today, those monthly transfers, plus investment earnings, total in the low six figures. Hardly a fortune, but a nice little sum of what I think of as "extra" money, in the sense that I otherwise would have squandered that dough on lord knows what.

I think I've also done a decent job on the investing front. Not that I've employed any grand strategies. Far from it. My not-so-secret secret has been to keep it simple and hold the line on costs.

I've never had much faith in money managers' ability to beat the market after investment costs, nor in my ability to predict which asset classes would perform best in the short-term. So for the most part I've tried to build a portfolio of low-cost broadly diversified index funds that track the overall stock and bond markets. Then I sat back and rode the long-term upward sweep of the financial markets.

Granted, that ride has been a bit bumpy at times. But I've found that the best way to deal with the market's inherent uncertainty and volatility isn't to try to outguess it by jumping in and out of the market. Rather, it's to gauge your risk tolerance and then set a mix of stocks and bonds that will allow you to participate in the upswings while enduring the downturns without panicking and selling at the bottom.

One final trait that's served me well has been my inclination to ignore the fads, crazes and shifting fashions that pop up so often in the investment world.

I suppose a critic could see this as a failing, my inability to embrace innovation. Perhaps. But over the years I've seen too many Next Big Things (option-income funds, world currency funds, government plus funds, auction-rate preferred securities, to name just a few) implode, hurting investors in the process.

So anytime someone touted a revolutionary new exchange-traded fund, an alternative investment designed to generate all-gain-no-pain or a novel withdrawal strategy guaranteed to boost your retirement income and extend the life of your nest egg at the same time, I reacted with a heightened sense of skepticism. I recommend you do the same.

What I could have done better

Of course, with the benefit of 20-20 hindsight we can all point to things that we'd do differently given a second chance. One area where I definitely could have improved (and still hope to do so in the future) is coordinating my wife's retirement investments with my own.

You would think in these days of instant online access to investment accounts that a married couple could easily share information about how their 401(k)s and other savings are invested. But in the real world tasks like sifting through retirement accounts and making sure our various pots of savings are invested in a complementary way sometimes take a backseat to other work and family issues.

So despite assurances from both of us that "we'll definitely sort out the finances this weekend," a year slips by and my wife's 401(k) balance with a former employer still hasn't made its way into an IRA rollover or her new employer's plan.

Another place my planning fell short was in moving my retirement portfolio to a more conservative stance as I, ahem, aged. The issue isn't ignorance. I know that as you get older you should generally shift your portfolio more toward cash and bonds to preserve capital and protect against severe market downturns.

But even though every day in the mirror I saw a man approaching his 60s, in my mind I was still that young guy in the '60s. I have since gotten my portfolio in shape. But I mention this shortcoming so other people out there will remember to keep their asset allocation in line with their biological age even if mentally and emotionally they feel much younger.

Finally, I could have prepared better for my next stage of life. I'm not actually retiring. I expect that one way or another I'll continue weighing in about retirement planning, investing and personal finance. I'm also keeping my mind open, to paraphrase Monty Python, "for something completely different."

Still, leaving the place where you've spent the major part of your career is a big deal, and ideally I should have given that transition more thought ahead of time, much as I've counseled others to do. That said, you can't always plan your life down to the smallest details. You also have to be willing to leave yourself open to serendipity and chance.

So all in all the answer to your question is yes, I have largely been faithful to my own advice, despite the occasional lapse. And if it's any consolation, I've found that as long as you get the big things in retirement planning right -- save consistently, invest sensibly, avoid rash moves and ignore fads and marketing gimmicks -- you'll do just fine even as you make a few inevitable missteps along the way.

Your Sequestered Brain Can't See Next Crash Coming

2013-03-11T03:00:00.000-04:00

by Paul Farrell

Warning: Forget the cuts, your brain is sequestered. That's the real problem: Your Brain. That's why the economy and markets will crash, a new Dow high notwithstanding. Why it's inevitable. Bigger crash than 2008. Longer afterwards. No bank bailouts. Austerity worse than the Great Depression. Hunker down.

Listen closely: America’s big problem is our “sequestered” brains. Meaning: “to remove, isolate, set apart, retire, withdraw into solitude.” Think post-trauma stress, paralysis, amnesia, lobotomized, entranced, just plain irrational. You’re out of it, incapable of acting rational.

And not just you: Economists, politicians and media pundits all have sequestered brains. They blab on endlessly about this or that of their special interests hiding among the trillion-dollar war-and-peace sequester cuts. Blab on and on. Myopic.

Why? Their brains are sequestered too. Millions of noisy brains. But you can’t hear them, no matter what. Your brain is on a different frequency. Only hears your set channels. That happens to your sequestered brain.

In fact, our collective brain, America’s conscience, our psyche, mind-set, even our soul is sequestered. America lapsed into a trance, confused. Our entire nation’s rational brain has been sequestered, collectively “removed, set apart, isolated, retiring, withdrawn.”

Brain sequestration: read all about your biggest problem

This is also why 152 nations worldwide as well as America can’t see the light at the end of the tunnel. Why we’re blindly driving headlong into a massive economic and market collapse. Why we refuse to see it. Why? Our collective brain periodically goes through these cycles, in the economy, markets, drama, in our personal lives. But our sequestered brains can’t hear, never learn.

Still our noisy self-centered economists, politicians and media pundits blab on, telling us: this time really is different. Why? They too, says Shakespeare, have their prescribed “entrances and exits.” The script never changes. Always the same drama, bull-bears, boom-busts, recession-recoveries, prosperity and austerity. Like Lear, same play, new actors, same result, always too late, main character blinded.

Flash forward. BusinessWeek just asked: “Why won’t anyone listen to Alan Simpson and Erskin Bowles?” Two brilliant brains, they see the oncoming train: A former GOP senator. Former Clinton chief of staff. Been “touring the country almost nonstop, warning of America’s impending fiscal doom,” for two years.

Yes, they see doomsday dead ahead. But few listen.

History repeats. History teaches. But, we never learn. Our brains are sequestered, trapped, repeating an 800-year old drama that you, me, all Americans and all world leaders can’t seem to escape.

Even Harvard historian Niall Ferguson, author of “The Ascent of Money: A Financial History of the World,” admits economists Carmen Reinhart and Kenneth Rogoff’s brilliant “This Time Is Different: Eight Centuries of Financial Folly” is “the best empirical investigation of financial crises ever published.”

But “This Time is Different” is much more than an 800-year history of endless human “follies” through bull/bear, boom/bust cycles. It is also the single best book on behavioral economics ever. It exposes the shadowy side of the investor’s brain and the faux promise of behavioral economics: “Just follow our advice, and your irrational brain will become less irrational.”

Princeton psychologist Daniel Kahneman’s 2002 Nobel Prize in Economics killed that theory. Investor’s decisions are always irrational, because our brains are sequestered.

800 years of historical proof: This time is never, never different

The fact is, the market’s roller-coaster ride of bull-bear cycles will never end. It’s trapped in our brains and genes. Nobody can stop America’s endless economic, market, financial and business cycles. The big reason, Wall Street doesn’t want behavioral economists educating Main Street to beat them.

If the promises really worked, investors would wise up and Wall Street’s con game wouldn’t work. So they’ll keep replaying the script in investors brains for the next 800 years. Here’s how Reinhart and Rogoff explain the never-ending drama:

Brain sequester ... fading memories, lessons forgotten, renewed arrogance

“This Time Is Different” is a “quantitative history of financial crises in their various guises. Our message is simple: We have been here before. No matter how different the latest financial frenzy or crisis always appears, there are usually remarkable similarities from past experience from other countries and from history.”

No country is immune: “Fading memories of borrowers and lenders, policy makers and academics, and the public at large do not seem to improve over time, so the policy lessons on how to ‘avoid’ the next blow-up are at best limited.”

Delusions ... we’re smarter, learned our lessons, old rules don’t apply

“The essence of the ‘this-time-is-different’ syndrome is simple. It is rooted in the firmly held belief that financial crises are things that happen to other people in other countries at other times; crises do not happen to us, here and now.”

Each new generation convinces itself, like Silicon Valley did in 1999, that “we are doing things better, we are smarter, we have learned from past mistakes. The old rules of valuation no longer apply.” And that each new boom, “unlike the many booms that preceded catastrophic collapses in the past (even in our country), is built of sound fundamentals, structural reforms, technological innovation, and good policy. Or so the story goes.”

Similar self-delusional “stories” guarantee the cycle will repeat ad infinitum.

New technologies ... new leaders, new regulations, but same old greed

“The lesson of history, then, is that even as institutions and policy makers improve, there will always be a temptation to stretch the limits. Just as an individual can go bankrupt no matter how rich she starts out, a financial system can collapse under the pressure of greed, politics and profits no matter how well-regulated it seems to be. … Technology has changed … but the ability of governments and investors to delude themselves, giving rise to periodic bouts of euphoria that usually ends in tears, seems to have remained a constant.”

Excessive debt ... one common problem repeating in all crises

“If there is one common theme to the vast range of crises … it is that, excessive debt accumulation, whether it be by the government, banks, corporations, or consumers, often poses greater systemic risks than it seems during a boom.”

Our brains are sequestered, too irrational in good times as well as bad. “Highly indebted governments, banks, or corporations can seem to be merrily rolling along for an extended period, when bang — confidence collapses, lenders disappear and a crisis hits. …”

Blinded ... credit fuels success, arrogance, warning signs missed

Reminds us of 1999.“Highly leveraged economies … seldom survive forever … history does point to warnings signs that policy makers can look to access risk, if only they do not become too drunk with their credit-bubble-fueled success and say, as their predecessors have for centuries, this time is different” as leaders and followers all stay “too drunk,” till too late.

“This Time Is Different” should be in every investor’s library — it’s the best description of our financial history, the impact of behavioral economics and why your sequestered brain is the real culprit in Washington’s sequestration drama.

Looking back 800 years, we now know bull-bear cycles are inevitable. The reason? Because our brains are sequestered, forever vulnerable to this endless roller-coaster ride. And why, right now, the cycles are again peaking, will crash, making the right exits, then the next entrance.

No, this time really is not different. And, unfortunately, Reinhart and Rogoff also tell us that in the process our sequestered brains are also sabotaging capitalism, damaging America’s role in the world and, sorry to say, killing your retirement.

Worse, the cycle will go on for another eight centuries. Prepare to hibernate.

READ MORE

Hidden Secrets of Money 1 - Currency vs. Money

2013-03-05T03:00:00.000-05:00

Who is Mike Maloney?

Mike Maloney is the author of the world's best selling book on precious metals.

His personal journey with money and its secrets began over a decade ago, when he discovered that his financial planner had been losing his family's wealth for years.

It wasn't until Mike fired his financial planner and took control of his own destiny that he began unlocking the secrets that he shares with you today.

Twelve Common Tax Mistakes That Waste Time and Money

2013-03-03T11:00:00.000-05:00

by Brandom Ballenger

Experience is simply the name we give our mistakes. - Oscar Wilde

As parents know, some lessons are best learned the hard way. Taxes, however, aren't one of those times.

Messing up on taxes is common. In the best cases, it could mean a delayed refund. But it could also mean a smaller refund, spending extra money and time to amend your return, or in the worst case, facing an audit.

Tax software helps avoid a lot of errors – especially the math kind – but it can’t fill out personal information or replace common sense. These days, that’s where the most frequent mistakes happen.

In the video, Money Talks News founder and CPA Stacy Johnson covers some of the most common tax errors. Check it out, and learn more on the other side….

The tax code runs thousands of pages and is constantly changing, so it’s easy to make mistakes. But experience shows we tend to make the same ones, over and over. Here’s a checklist to help you out…

1. Social Security info

What’s on your Social Security card goes on the return – if your name is wrong there or has been changed, contact the Social Security Administration. Getting your number wrong, or that of a dependent or spouse, is even worse: The number might belong to someone else. This kind of error can completely stop the whole process.

2. Math

Software can help, but not every program spells out every step of the process. In some cases you may still have to tally numbers on the side to enter totals. When you do, triple-check your work.

3. Signature

It’s like turning in homework without your name on it: no name, no credit. Make sure you sign your return – and the check, if you’re sending one. Otherwise you may face delays or penalties.

4. Wrong form

Again, software often helps here by picking the relevant forms. But sometimes using a 1040EZ won’t get you as much money as a 1040 or 1040A. And certain situations require additional forms or numbers in different places. For instance, where you claim a home office deduction differs depending on whether you are an employee, self-employed, or a business partner.

5. Paying

There are a lot of tax software options, with varying fees for preparing, filing, and amending, not to mention state returns if that applies. But if your income is under $51,000, chances are you can get your taxes prepared and filed for free. Check out 4 Ways to Get Your Taxes Done Free.

6. Going pro

If you have a simple tax situation that hasn't changed much since last year, there’s no reason to pay a professional: All they’re going to do is use the professional version of software you can buy (or get free) yourself. Check out 9 Tips to Pick a Tax Pro– If You Need One.

7. Waiting on a check

Filing your return electronically through the IRS Free File is always free, no matter your income. But however you file, do it electronically and sign up for direct deposit and your refund will most likely hit your account in less than two weeks. Just don’t forget to triple-check your bank account number to make sure the money doesn’t end up in someone else’s account.

8. Hiding income

This can happen accidentally if you have multiple employers, or if a W2 or 1099 goes missing. So take your time, think it through, and make sure you report everything – not just from your job but also investments and anywhere else that might be reporting to the IRS. Ideally you’ll track this throughout the year so you can’t forget.

9. Missing deductions and credits

Polonius from Hamlet said, “Neither a borrower nor a lender be.” He was a jerk.

But he was right too – don’t leave money on the table, at least not for the government. Did you buy a home in the past year? Go back to school? Life changes and major purchases may mean tax benefits. And don’t forget to see if you can claim a home office deduction.

10. Taking out a refund loan

If you’re desperate for your refund money, realize the interest charges on a refund anticipation loan or check only make things worse. Read why in our story from last year, Kiss Refund Loans Goodbye, and learn about a better idea: changing your tax withholding so you get bigger paychecks year-round.

11. Procrastinating

Tax Day is April 15 – and many people have already received their refunds. From the date this article was published, you have 53 days to get the job done right. So don’t short-change yourself literally and figuratively by waiting until the last minute, and then rushing through it. That’s how you make dumb mistakes and forget things that could have lowered your bill or gotten you more back.

12. Blowing it

Once you get your refund, don’t make the mistake of misspending it. Use it wisely: to pay down debt, get tax advantages for next year, or at least do something memorable and fun. Whatever you do, don’t fritter it away. We’ll have a story next week on smart uses for your tax refund.

READ MORE

How A Family Of Four Manages To Live Well On Just $14,000 Per Year

2013-02-26T11:00:00.000-05:00

by Mandi Woodruff

In the years since the recession, the median household income in the U.S. has dropped to just over $50,000, while fixed costs like health care, higher education, and housing have only soared. Now imagine trying to support a family of four on a fraction of that income.

It's a reality that stay-at-home wife and mother of two Danielle Wagasky has lived for the last four years. And, perhaps a little surprisingly, she wouldn't have it any other way.

Wagasky, 28, lives with her husband, Jason, 31, and their two young children in a three-bedroom family home in Las Vegas, Nevada. While Jason, a member of the U.S. Army, completes his undergraduate studies, the family's only source of income is the $14,000 annual cost of living allowance he receives under the G.I. Bill. Despite all odds, the family has barely any credit card debt, no car payment, and no mortgage to speak of.

Wagasky has been sharing her journey to living meaningfully and frugally on her blog, Blissful and Domestic, since 2009.

She was kind enough to chat with BI and tell us how she makes it work.

Wagasky finds inspiration everywhere from the library to tips from readers on her blog.

"My husband told me he'd heard about this book, America's Cheapest Family Gets You Right on the Money" she said. "We talked about it over the phone and I read it and thought how it could apply to us."

The couple had a single savings goal in mind - scraping together $30,000 for a down-payment on their home in their native Henderson, Nevada.

The mindless spending was out, and Wagasky came up with a budget she could make work. "I changed the way I was grocery shopping and started working my way up, " she said.

She stopped eating out and learned how to cook.

Wagasky barely knew her way around a kitchen when she started her money makeover.

Now she's an avid cookbook collector (she checks them out from libraries or asks for them as gifts to save), and it's one of the simplest ways she's managed to cutback on spending.

With a $7 bread-maker she scored at a local thrift shop, she never spends on store bought slices. She's not shy about professing her love for wholesale stores like Costco, which is her go-to source for baking ingredients.

Everything in the home is either hand-sewn and or made from scratch.

"Everything must be budgeted," Wagasky wrote in a June entry on her blog. "From family outings, to toiletries to clothes purchases. It must be budgeted."

And she takes Do-It-Yourself to the extreme. Everything from laundry soap and clothing to the kitchen her husband installed in their new home was either crafted by hand or thrifted.

She swears by this home-made laundry detergent recipe.

The family swapped cable for Netflix and Hulu.

When it come to cutting costs, cable was as easy luxury to part ways with.

With two children aged 6 and 8 to entertain, Wagasky invests $14.99 in a Netflix plan and recently added Hulu to the mix.

The family also uses a simple antennae to pick up basic cable channels.

She goes to the grocery store once per month, pays cash, and never goes over budget.

With a single source of fixed income, there's no room for impulse purchases in the Wagasky household.

They budget $400 for groceries each month and that's it.

"Once that $400 is gone, it is gone," she writes. "There are no extra shopping trips made because there is no more money."

They are a cash-only household but keep a credit card for emergencies.

Wagasky said they have no credit debt, but they do charge emergency expenses on plastic when absolutely necessary.

"We recently had some medical bills we had to pay, and we were able to take our savings and pay those down as fast as we could," she said.

They fill up their tanks once per month and combine errands as much as possible.

With gas prices creeping higher each all the time, the Wagaskys watch their mileage like hawks.

That means combining errands together and doing all they can to make one tank of gas last a month.

"We know we don't get to drive and visit family often, so when we do we cherish it," she wrote in a blog entry.

"We don't go just for an hour, we stay and visit and even run errands that may be close to where we have family. We try to remember that when the gas is gone...it is gone."

They paid for both of their cars in cash and have no car payments.

After Wagasky's husband left active duty and started school, the couple knew they would only have $14,000 per year to live on.

So they paid off the $8,000 he owed on his truck while he was earning more and they could afford the expense.

They also bought a van, which they saved $10,000 for initially and were able to pay the remaining $12,000 owed within a year.

Having zero car payments is a nice relief.

She skips all kiddie snacks in favor of healthier, cheaper DIY options.

Like anyone with simple math skills, Wagasky was quick to realize how much cash she was wasting on prepackaged snacks for her children.

She cut them out completely and whips up homemade granola bars and trail mix instead.

If she can freeze food, she will.

If you're on a tight food budget, your freezer will become your best friend.

Wagasky chops vegetables and fruits and freezes them for a month. She actually does the same for dairy products like cheese, butter and yogurt.

"I am able to freeze about 8 gallons of milk each month," she writes. "They sit at the bottom of my freezer and we thaw them out when we need them." Baked goods get the same chilly treatment.

She uses a food co-op to save on fresh produce.

Wagasky was dubious about joining a food co-op, but after three months, she realized she would never beat the savings or quality she found.

Food co-ops pool membership fees together in order to fund a monthly harvest that's distributed at designated pick-up points.

A couple of times per month, Wagasky gets a basketful of in-season produce for $15 - way better bargain than she'd ever find in stores.

They took advantage of Nevada's declining housing market to score a cheap foreclosure.

By the time Wagasky's husband came home from Iraq, they had managed to scrape together the $30,000 they needed for a downpayment on a home.

"But we decided the best option would be not to have a mortgage payment at all," she said. "We found a fixer-upper that didn't have a kitchen ... and we paid cash."

Price tag: $28,000. With the leftover cash, they were able to finish the kitchen and install wood flooring throughout the house.

Take Control of Your Life by Managing Your Emotions

2013-02-15T10:00:00.000-05:00

by Georgia Kral

How many times have you found yourself getting angry and saying something you've regretted? Or feeling sad enough to skip out on an important event or meeting?

It doesn't have to be that way.

Author, counselor and talent representative Ken Lindner has been helping people harness their emotions for good use for almost his entire career. A Harvard University and Cornell Law School graduate, Lindner owns and runs the representation firm Lindner and Associates. He has helped develop the careers of big names in news and T.V., from Matt Lauer to Mario Lopez to Shepard Smith. His recent book, "Your Killer Emotions" is out now.

In "Emotions," Lindner lays out a path for those seeking to better handle their emotional responses to difficult situations.

"Your life is a reflection of your choices," Lindner said in a phone interview. "You can be the smartest person but if you're overwhelmed with emotions - if you're sad, angry or feeling hopeless - you often opt for the quick, emotion assuaging fix. But oftentimes that choice is counter to what's good for you or your career."

Lindner says the way to confront your negative emotions is to break the "toxic behavioral script." He offers these tips on how to do it:

1. First, you must identify and acknowledge that your emotional responses to situations have had a negative affect on your life.

2. Never attempt to deal with an important situation or life choice when you're overwhelmed with negative emotions. Give yourself a cooling-off period before moving forward.

3. Think about what it is that you truly want, and figure out the best way to get there. Don't react, make a plan.

4. Motivate yourself. If you're feeling disadvantaged, harness that energy for a good purpose.

5. Visualize your behavior. Before you head into a meeting, think about how you want to be perceived.

6. Make sure you understand what triggers a positive or negative emotional response.

7. Be "consequence cognizant." Think about how your reactions affect others.

8. Remember that by mastering your emotional response to situations, you will develop confidence.

Lies We Tell Ourselves About Retirement

2013-02-08T02:00:00.000-05:00

by David Ning

We may not want to admit it, but our own beliefs are often the biggest obstacle in the journey to financial freedom. Sometimes our own behaviors make it more difficult for us to achieve a financially secure retirement. Here are a few lies you may be telling yourself that are preventing you from reaching a comfortable retirement:

Everybody works until full retirement age. In recent years there has been a surge in the proportion of people who expect to work past 65, but the reality is that a significant number of people will stop working well before the traditional retirement age. Whether it's due to choice or a disability that prevents mature employees from being able to endure the daily grind, more than a few individuals will stop working well before age 65. Not everyone gets to choose when they enter their retirement years.

The Joneses have everything. It may seem like everybody else is able to go out to buy whatever they want while you barely scrape by, but that's probably not the case. You may be concentrating solely on what they just bought versus their total budget. Bill may have a brand new car, but perhaps he doesn't eat out much. Perhaps Sandy spends a few hundred dollars on fine wine, but she may not spend much on clothes. Retirement savers are spending too, but their focus is on building a nest egg. If you want to have a comfortable retirement, you need to make saving for it a priority.

There's a secret to investing that I don't know about yet. There may turn out to be a secret investing formula, but the odds of finding the holy grail are so slim that it doesn't make economic sense to pursue the hunt. Stick to the boring but effective strategy of saving early and often, watch investing fees, and pick an asset allocation plan where you can stay the course when the market inevitably takes a dive. This will give you a much better chance at living a comfortable retirement than trying to pick winning investments.

I can always save later, so why start now? This may be true, but there are few things in life more comforting than being financially free. Start saving as soon as possible, and you'll become financially independent sooner. When you do, you'll notice that your stress level will decrease. This could help not only with your relationships to others, but also your work performance, possibly helping you to increase your income.

It's too late to save, so let's not even try. It doesn't matter how old you are, because putting money aside for retirement is always a step in the right direction. Put some effort into saving money and you may find that reducing your expenses might be easier than you first thought. The more you have saved up, the more you get to spend in your golden years.

Money is safe in a bank account. Too many people have the illusion that money is safe as long as the balance doesn't go down, but the reality is that inflation will eat into your purchasing power unless you learn how to properly manage and invest your wealth. Those who put all their money in a savings account may not experience the volatility that comes with different investments, but they are sure to be able to afford less and less as years go by, which is a real threat too.

Our false beliefs about money can often get in the way of our investment growth. But if you can overcome these common obstacles you will be on a better path toward financial freedom.

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Don't Forget to Take These Tax Deductions and Credits

2013-02-05T06:00:00.000-05:00

Taxpayers preparing to file their 2012 returns can breathe a collective sigh of relief.

The alternative minimum tax or AMT has been patched - permanently - and several tax credits and deductions that technically expired at the end of 2011 were extended as part of the "fiscal cliff" legislation that Congress passed and President Barack Obama signed into law in January.

"It certainly puts back into place many of the tax benefits that had expired for many people," said Mark Steber, chief tax officer with Jackson Hewitt Tax Services. "The extenders will be back on people's tax returns, making their 2012 refunds larger than they would have been."

But the delay in congressional action could mean confusion for some taxpayers over what credits and deductions still exist.

That could make going it alone on tax day costly. Experts say people should seek some guidance, whether it's from a professional tax preparer, up-to-date software programs or tax guides, before filing returns.

More than 90 percent of taxpayers go to a tax preparer or use tax software to file their returns, estimated Jim Buttonow, a 20-year IRS veteran who is now vice president of products for New River Innovation, a tax technology company.

The Internal Revenue Service will begin accepting returns Jan. 30, an eight-day delay necessitated by the late congressional action.

"We have worked hard to open tax season as soon as possible," IRS Acting Commissioner Steven T. Miller said in a statement. "This date ensures we have the time we need to update and test our processing systems."

The agency said most taxpayers - more than 120 million households - would be able to begin filing Jan. 30. But filing for those claiming energy credits, depreciation of property or general business credits will be delayed until late February or March.

Last year, the agency received 137 million returns.

Electronic filing increased by 6.2 percent to 113 million in 2012, an upward trend that tax experts expect to continue. Although most electronically filed returns are by tax professionals, increasing percentages of individuals are doing their own returns electronically.

Nearly 104 million people received refunds last year totaling about $283 billion. The average refund was $2,707, slightly less than the year before, according to the IRS.

As people sit down to do their taxes this year, they'll find that the standard deduction has been adjusted higher for inflation, to $11,900 for married couples filing jointly, $8,700 for heads of households and $5,950 for single taxpayers.

About two-thirds of taxpayers claim the standard deduction, according to Barbara Weltman, an author of J.K. Lasser's Tax Guide 2013.

Each personal exemption is worth $3,800 this year, up from $3,700 in 2011. Look expansively at dependents beyond your children under 19, or 24 if in college. For example, if you're paying more than half the support for your parents and their taxable income is less than the $3,800 exemption, you might be able to claim them as dependents even if they're not living in your own home.

"If a parent's only income is Social Security, chances are little or none of the Social Security will be taxable. Otherwise, very few people would get to claim a parent," said Jackie Perlman, principal tax research analyst with H&R Block's Tax Institute.

Single taxpayers with qualified children or relatives as dependents also may be able to use head of household filing status, which is more advantageous to the taxpayer.

There also are higher mileage rate deductions — 55.5 cents per mile if you use your car for business, 23 cents per mile for moving or medical issues and 14 cents a mile for charity.

Capital gains rates are unchanged from 2011 - a maximum of 15 percent for assets held more than a year.

And don't forget planning for retirement. You can contribute up to $5,000 to a traditional individual retirement account - $6,000 for people age 50 and older - and reduce their income by that amount. If you haven't made a contribution yet, there's still time. You have until April 15, the tax filing deadline.

Be aware, however. Many deductions and credits phase out at higher incomes.

Dozens of credits and deductions that affect 2012 taxes had been due to expire at the end of 2011, but were extended as part of the legislation that restored the Bush-era tax cuts for most taxpayers.

The measure breathed new life into deductions for state and local sales taxes and an array of education-related credits and deductions. Not to mention the lack of an AMT patch.

"There was broad bipartisan agreement it had to be fixed," Steber said.

Originally set up to make sure millionaires were paying taxes, the AMT was ensnaring increasing numbers of middle-class taxpayers. To avoid that, the tax has been adjusted for inflation every year, but the last patch expired at the end of 2011. Without a new one, Miller said in a letter to Congress last fall, about 33 million taxpayers would have to pay the AMT in 2012, up from about 4 million in 2011.

Congress, as part of the fiscal cliff bill, passed a permanent fix for the AMT. Going forward, it will be indexed according to inflation.

For 2012, the AMT exemption is $50,600 for unmarried individuals and $78,750 for joint filers.

"It's just not that they passed the threshold amount and indexed it for inflation," said Kathy Pickering, executive director of H&R Block's Tax institute. "The other nugget in there is that the nonrefundable credits are allowed."

That means filers subject to the AMT may still be able to use these credits, as long as their income doesn't exceed the phaseout limits.

The fiscal cliff bill signed by Obama also extends the $1,000 per child tax credit, the expanded earned income tax credit and the credit for adopting a child.

Several education-related credits and deductions also were extended in the legislation.

The American Opportunity Tax Credit can be worth up to $2,500 for college tuition. The credit, which can be claimed for each of the first four years of college, was extended through 2017. Elementary and secondary school teachers will still be able to deduct up to $250 of their out-of-pocket expenses for the classroom.

And taxpayers will have the choice of deducting state and local sales taxes instead of state and local income taxes. This is especially important to residents of states like Florida, which doesn't have an income tax.

Knowing what tax credits and benefits you're eligible for is key. No one wants to pay more than is required in taxes.

"You certainly want to understand the tax law," Steber said. "Look to life changes" like retirement, losing a job, getting married, having a child or an elderly parent moving in as events that can affect your taxes.

For people in the Northeast, Superstorm Sandy certainly was a life-changing event. State officials have estimated the total damage at more than $80 billion, most of it in New York, New Jersey and Connecticut.
Tax law allows victims in federally declared disaster areas to file casualty claims in the year the incident happened or file an amended return for the previous year.

If they don't have all the material they need yet to file 2012 returns, they can amend their 2011 return now to include the casualty losses.

"It's one of the unique things about those disaster areas," Pickering said.

That's just one of the reasons people file amended returns.

Amended returns are often filed when taxpayers discover discrepancies in the income that was reported.

Sometimes they receive a 1099 form late or a corrected one after they filed their returns. Or they may discover that they didn't take a deduction or credit to which they were entitled.

Some people are reluctant to file amended returns out of fear that they might be audited.

Mark Luscombe, principal tax analyst for CCH, said the IRS closely guards statistics on what type of returns invite audits. "An amended return would not necessarily be an invitation for an audit," he said.

"It depends what's contained in there," said Greg Rosica, a partner at Ernst & Young. "If it's a very large refund it could get a different level of review."

Are You Planning a Big Life Change This Year?

2013-02-01T06:00:00.000-05:00

by Andrea Coombes

Life goes on. If you are anticipating some major changes in 2013, you'll need to do some planning.

Here's a checklist of essential money strategies to consider before you take one of these five key steps in your life.

So, if you're ...

... Getting Married, Then

Talk with your intended about money. Discussing finances before the wedding can help forestall disagreements that can ruin a marriage.

"Money is an area of intimacy that a lot of couples heading into marriage have not yet addressed," says Maura Griffin, chief executive of New York-based Blue Spark Financial. The conversation should include a discussion of the couple's money values and earliest money memories. That "sets the stage for being open about money," she says.

Get specific. Create a budget for managing expenses, discuss how to pay down debt outstanding, talk about specific savings goals and compare investing philosophies.

Decide how to merge finances. Some planners suggest separate checking accounts in addition to a shared account, but Randy Warren, chief investment officer with Warren Financial Service in Exton, Pa., says all of a couple's money should be pooled.

"If you want your marriage to be solid, then you need to work as a team," Mr. Warren says. Put all the money in one account, and agree on an amount above which neither spouse will go without talking to the other first.

Update beneficiary designations and add your spouse's name to accounts. "That's especially important for second marriages," says Keith Beverly, principal with New Paradigm Advisory Group in Durham, N.C. "If they haven't done proper planning, they don't necessarily know where their assets will be directed if something were to happen to them."

... Having a Baby, Then

Start saving for college. Many planners point to the tax advantages of 529 college-savings plans—they make it easy for grandparents to pitch in, too. But wherever you stash the money, try to save something.

"Even $100 a month can have a huge impact," says Stephen Johnson, a certified financial planner with Charles Schwab in Boston. That said, if a choice must be made, advisers often suggest that parents shouldn't let college costs trump retirement savings.

Prepare a will. Some couples might include creating a trust, Ms. Griffin says. A key task is to name a guardian for the child in the event a tragedy befalls the parents.

Revisit short-, medium- and long-term financial goals. For example, buying a minivan, then a house, and funding college and retirement.

Shop for life and disability insurance. Ms. Griffin says couples shouldn't rule out whole-life insurance—it allows policyholders to save a balance and borrow against it.

... Buying a House, Then

Assess how much house you can afford. Generally, housing costs, including principal, interest, property taxes and insurance, shouldn't exceed 28% of monthly gross income. And total debt obligations—including mortgage, student loans, credit cards—shouldn't exceed 36%. If your costs would top those figures, "you may need to wait or buy a less-expensive home," Mr. Warren says.

Consider the future. Spending less now may pay off later. "You're 55...and all of a sudden you want to join the Peace Corps," Mr. Johnson says. "Not having a mortgage allows you that flexibility."

Manage credit. Check your credit reports. If you find surprises or errors, it may pay to delay your mortgage application until clearing those up. You can get one free credit report from each of the three credit-reporting firms—Experian, Equifax and TransUnion—annually at annualcreditreport.com.

Negotiate loan terms. Mr. Beverly says he helps clients save thousands of dollars in interest and closing costs by telling lenders about competing offers.

... Paying for College, Then

Resist student loans. Try to keep debt to 50% or less of the student's expected starting salary, Mr. Beverly suggests. For example, if expected income is $50,000, take on no more than $25,000 in loans.

Be careful with financial-aid forms. "The number one thing is to accurately fill out those FAFSA and CSS Profile forms," says Ms. Griffin, referring to the Free Application for Federal Student Aid and the College Scholarship Service form. "Don't be afraid to pay a professional," she says. "There are so many mistakes that people can make."

Open a bank account, and discuss money management. High-school graduates "may not know how to budget or how to avoid fees," Ms. Griffin says.

Talk about costs you won't cover. Consider suggesting the student work over the summer to save for other costs, such as off-campus dining.

Shift investments. "Anyone who's within two years of college, that investment allocation should be conservative. You don't want a 2008-type situation to wipe out the earnings," Mr. Johnson says.

... Retiring, Then

Clarify your definition of retirement. "Think long and hard about what you will spend your days doing," Mr. Beverly says.

Detail income and expenses. "It can't be just a gut feel," says Jim Heafner, president of Heafner Financial Solutions in Charlotte, N.C. If you underestimate how much money you need, he says, "it can be hard to go back."

Develop a spending plan, delineating where your income comes from. The order in which you access assets can help maximize income while reducing taxes, Mr. Heafner says. For some, that might mean tapping taxable brokerage accounts first, and letting tax-deferred individual retirement accounts continue to grow. Or, it might make sense to pay taxes now and convert some IRA money to a Roth IRA, so it can grow tax-free.

Research Social Security options. When to claim benefits can get complicated, particularly for couples. Choosing right can mean hundreds of thousands of dollars more in retirement, Mr. Heafner says.

Consider long-term-care costs. Mr. Heafner likes index annuities that provide income and a long-term-care benefit. Others might opt for traditional long-term-care insurance.

Consult with a financial planner. They have access to sophisticated software that can help ascertain a portfolio's level of risk. Says Mr. Warren: "You want to know, 'Am I going to drown if I get the normal volatility of the stock market, or am I going to survive it?' "

$58 Billion Unclaimed: Is Some of It Yours?

2013-01-31T08:00:00.000-05:00

by Melanie Hicken

Millions of Americans are missing out on billions in forgotten cash.

Currently, states, federal agencies and other organizations collectively hold more than $58 billion in unclaimed cash and benefits. That's roughly $186 for every U.S. resident. The unclaimed property comes from a variety of sources, including abandoned bank accounts and stock holdings, unclaimed life insurance payouts and forgotten pension benefits.

Some people are owed serious cash. Last year, a Connecticut resident claimed $32.8 million, proceeds from the sale of nearly 1.3 million shares of stock. The recipient of the funds requested to remain anonymous and no further details were provided.

More than $300 million in pension benefits is currently owed to some 38,000 people, according to the Pension Benefit Guaranty Corp. The unclaimed benefits currently range from 12 cents to a whopping $704,621, with an average benefit of $9,100. Benefits may go unclaimed because an employee is unaware they had accrued retirement benefits at a previous employer, the agency said.

However, the majority of the forgotten funds -- roughly $41.7 billion -- are held by the states, according to the National Association of Unclaimed Property Administrators.

Under varying state laws, financial institutions and other companies are required to turn over any funds considered "abandoned," including uncashed paychecks, forgotten bank account balances, unclaimed refunds, insurance payouts and contents of safe deposit boxes. They have found some pretty unusual items like diamonds, bottles of liquor and sardines. Property is usually considered abandoned after the holder of the account or property has had no activity or contact with the owner for several years.

The states then try to find the owner through websites, newspaper ads and booths at events like state fairs. But every year, the vast majority of unclaimed funds remain in state coffers, where the cash can be used to fund government operations. Although the states are careful to note that the owner's claim to the property will always remain valid.

"The money belongs to the owner in perpetuity. Even if the owner dies, then their heirs could come back and claim it," said Carolyn Atkinson, West Virginia's deputy treasurer for unclaimed property and a past president of National Association of Unclaimed Property Administrators.

Florida's chief financial officer announced this month that the state had received 61,271 new unclaimed property accounts worth more than $25 million as part of a settlement with insurance company AIG. The settlement is one of several reached last year with major insurers, including MetLife, Prudential and Nationwide after regulators in 20 states audited the methods they used to locate life insurance beneficiaries after a policyholder's death.

The state auditors found that many insurers would use the Social Security Administration's Death Master File to cancel annuity payments to clients who passed away, but not to start issuing payments to their beneficiaries. In some cases, companies would continue collecting premium payments from the policy's value for years after the insured's death, depleting the cash reserves down to zero.

Through the settlements, those balances are being reinstated and remitted to the states. But in many cases, beneficiaries remain unaware of their policy claim and many of their current addresses are unknown, making it hard for the funds to be connected with their rightful owner.

"Once it goes to the state, it's unlikely that the rightful owner will be found," said Mark Paolillo, a Massachusetts-based accountant and Ryan LLC's abandoned and unclaimed property practice leader.

Are you owed money? Here's where you can find out.

State-held unclaimed property: Visit NAUPA's unclaimed.org for a map with links to each state's program.
Life insurance: For benefits not held by the state, check the insurer's site directly. For example, MetLife has an online search.
Pensions: For Pension Benefit Guaranty Corp. benefits, visit the agency's online search directory.
U.S. savings bonds: More than 45 million matured savings bonds, worth nearly $16 billion, remain unredeemed, according to the U.S. Department of the Treasury. To search the database, visit treasuryhunt.gov.
Tax refunds: In 2011, the Internal Revenue Service said it had $153.3 million in tax refund checks that were undeliverable. To make sure you've received your checks, visit the IRS's Where's my refund? tool.
Overbid proceeds: If a foreclosed home or tax lien for delinquent taxes is sold at auction for a price above the money owed, the former property owner is owed the so-called "overbid proceeds," which are typically held at the county level. But, counties typically send notifications about the funds to the foreclosed address, so many people remain unaware of the extra cash, according to Mary Pitman, author of "The Little Book of Missing Money." These funds are different than other unclaimed funds in that the property owner's claim in some counties only last a few years. Contact the county clerk to find out which local agency holds the funds.

Twelve Sectors Where You Can Get Rich and Save the Earth

2013-01-29T06:00:00.000-05:00

by Paul B Farrell

You tell us: where should investors put their money to "make a difference"? In "Conscious Capitalism: Liberating the Heroic Spirit of Business," the new book by John Mackey and Raj Sisodia, co-founders to Whole Foods Markets, the mission is clear.

“We believe,” they write, “that business is good because it creates value, it is ethical because it is based on voluntary exchange, it is noble because it can elevate our existence, and it is heroic because it lifts people out of poverty and creates prosperity. Free-enterprise capitalism is the most powerful system for social cooperation and human progress ever conceived.”

“Conscious capitalist” companies include Southwest Airlines, Costco, Google, Patagonia, the Container Store, UPS and dozens of others. Their group has been together for years. Hopefully in the next generation, organizations like Cargill, Exxon Mobil, Massey Coal, Du Pont, J.P. Morgan and the U.S. Chamber of Commerce will join Mackey and Sisodia’s Conscious Capitalism after their consciences and bottom lines are shocked awake by public pressure following a huge catastrophe.

12 macroeconomic sectors: Make a difference, get rich, save planet

So how should you invest if you want to make a difference, make a decent return — and make sure Planet Earth is here in 2050 for your children? We want your input. Yes, you could just invest in Whole Foods and other “conscious capitalists.”

You can also take the long-term perspective, one we’ve been exploring since putting together an investment-research model based on the 12-part formula in anthropologist Jared Diamond’s book “Collapse: How Societies Choose to Fail or Succeed.” He analyzed 12 macroeconomic sectors that for centuries influenced whether and how nations and economies self-destruct or survive.

In recent years we’ve used this 12-part formula to analyze future macrotrends and individual investment opportunities that lead to survival and challenges for nations.

Diamond says that as global population increases, “more people require more food, space, water, energy, and other resources,” triggering wars, famine, pandemics and political miscalculations, threatening economic growth. So we’ll take a broader look at our future using the 12 macrotrends in our model, to see how “conscious” and conscientious these capitalists really are, with 18 examples of how they plan to protect the planet for 10 billion inhabitants in 2050.”

1. Food: Buy hot commodities, become a farmer

“If you want to become rich, become a farmer,” says Jim Rogers, co-founder with George Soros in the Quantum Fund, in “Hot Commodities: How Anyone Can Invest Profitably in the World’s Best Market.” The United Nations, IMF and World Bank estimate over a billion of the planet’s 7 billion people are poor, half are underfed, living on what amounts to $2 a day. Most are farmers, subsistence farmers.

Monsanto and other agricultural giants have a huge stake in the future of large and small farmers, in fertilizers, pesticides, irrigation systems, genetically engineered seeds. The challenge is daunting. U.S. money manager Jeremy Grantham says the planet can’t feed 3 billion more people. Others focus on commercial opportunities. So if you want to get rich in the near future, “become a farmer,” and invest in commodities.

2. Agriculture: land banking, land development

Billionaire investors and nations see value: Having farmlands in your portfolio is a solid bet on the future of both developed economies and emerging nations. Critics call it land grabbing, where rich nations buy the agricultural assets of poorer nations. But rich or poor, populations are exploding, demanding better lifestyles, and all need more food.

So today there’s a rally in productive agricultural properties, thanks to possible 25% returns. Check out the list of 416 land grabs from Grain.org with large-scale real-estate deals in 66 counties, more than 85 million acres, more coming.

3. Water: the new gold for 21st-century investors

Warren Buffett says buy what you know. Well, buy water. It’s everywhere, essential for drinking, industry, agriculture, transportation. A couple of years ago, Fortune said: “Water is the new gold in the 21st century.” Water generated over a half-trillion dollars in revenue worldwide in 2010.

As global population accelerates from 7 billion today to 10 billion by 2050, and more than a billion “lack access to clean drinking water,” it will soon “trade like oil futures. For many, water is more valuable than fuel. Consider bottled-water companies, soft drinks, purification, desalination. Buy water.

4. Forest lands: rapid conversion as world urbanizes

The demand for lumber and urban lands is exploding with population growth. China and India are planning 500 new cities. Half the world’s original rain forests and natural habitats have already been sacrificed to development, adding resource demands and pollution. A quarter more will be converted in the next 50 years.

Soils are “being carried away by water and wind erosion at rates between 10 to 40 times the rates of soil formation,” much higher in forests where soil-erosion rate is “between 500 and 10,000 times” replacement rate, due to vastly increasing megafires.

5. Energy: Oil, coal, natural gas, fossil fuels at the peak

OK, so you’re not a cash-rich nation or super-rich billionaire. Check out mutual funds like Vanguard and Pimco — they manage hundreds of billions in oil and natural-gas equities, bonds and commodity funds. Pimco’s Bill Gross predicts a “significant break” in the world’s “growth pattern” and is betting we’re past the “peak oil” tipping point.

His New Normal strategy accounts for a decline in consumer shopping as economies grow slower and “corporate profits will be static.” But with population exploding, every investor’s portfolio needs energy stocks and funds.

6. Alternative energies: biofuels, wind, nuclear at 20%

In “The Quest,” Daniel Yergin, one of the world’s most respected energy experts, says alternative energies will remain a niche market for decades, while fossil fuels will be 80% of the total in 2050. And the journal Foreign Policy confirms Yergin’s forecast in “The 7 Myths About Alternative Energy.”

Biofuels, solar, wind and nuclear many not be the “major ticket.” But with the global economies in excess of $80 trillion annually and with America spending over a trillion dollars annually on total energy usage, 20% on alternatives may grow even faster as fossil-fuel production costs increase.

7. Solar Power: space rockets and robots mining asteroids

We know sunlight is not unlimited, that we could reach max use by mid-century. But enlightened minds are already investing heavily in innovative alternatives, such as fuel cells and batteries.

And when the Mars Rover project shut down, Silicon Valley investors essentially privatized the Mars engineering team tasked to build new rockets and robots to explore and mine 10,000 asteroids for energy resources potentially worth trillions.

8. Ozone-layer protection: geoengineering climate change

Yes, human activities, autos and manufacturing plants produce carbon dioxide and other gases that escape into the atmosphere and destroy the protective ozone or absorb and reduce solar energy. Innovative geoengineering plans are under development to explore the use of space rockets to block harmful rays, reduce global warming and climate change.

9. Chemicals, minerals, mining: economic growth and public health

Diamond says human solutions have unintended consequences. For example, mining generates economic growth and also dumps toxins into the air, soil, rivers, lakes and oceans that break down too slowly or not at all — from insecticides, pesticides, herbicides, detergents, plastics. Balance is essential between economic growth and public health, with solutions more in the realm of politics, lobbying, government regulations at odds with business plans.

10. Species diversity: Variety isn’t always the ‘spice of life’

Diamond explores the consequences of transferring native species to new lands, causing the unpredictable “preying on, parasitizing, infecting or outcompeting” of native animals and plants that lack evolutionary resistance, and infect native species with new diseases.

“A significant fraction of wild species, populations and genetic diversity has been lost, and at present rates a large percent of the rest will disappear in half a century.” The solution requires innovations and trade restrictions unavailable to most investors.

11. Population: a world out of-control, 10 billion by 2050

A special issue of Scientific American calls population “the most overlooked and essential strategy for achieving long-term balance with the environment.” By 2050 world population will grow from 7 billion to 10 billion, with 1.4 billion each in China and India.

Yes, experts challenge the projections, but even Bill Gates’s 8.3 billion projection may be too much to handle. Earth Institute director Jeffrey Sachs says even 5 billion is unsustainable. Meanwhile, Gates is working on population-control initiatives in vaccines, family planning.

12. Population lifestyles: American Dream goes global, demanding more

Worldwide, most people now have their own version of the American Dream. In fact, we are all capitalists: the rich, middle class and even the poor. Witness microloans in India and luxury-car sales in China.
The problem, says Diamond, is that if all nations consumed resources at the same rate as America — 32 times more resources — and dump 32 times more waste, we’d need six Earths to survive, which will eventually force even hard-right capitalists like the Koch brothers to embrace environmentalism.

Saving the planet takes political will, leaders and long-term thinking

Bottom line: The world needs new leaders fast, says Diamond. Leaders with “the courage to practice long-term thinking, and to make bold, courageous, anticipatory decisions at a time when problems have become perceptible but before they reach crisis proportions.”

Unfortunately, history tells us that leaders all too often tend to respond to short-term crises, focus on economic growth and fail to plan ahead for predictable disasters, droughts, pandemics, famines, global warming. And so they act too little, too late. Eventually caught off-guard, they collapse fast.

Comments: What would you do? Where to invest? Focusing on what sectors? Specific assets and investments? What kind of long-range policies are essential to be a conscious capitalist and conscientious citizen committed to protecting the planet for generations into the 22nd century.

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January To Do List for Taxes

2013-01-27T13:00:00.000-05:00

by Eva Rosenberg

We start the year off with tax legislation that finally makes it possible to do some definitive tax planning. Some of the measures affect your 2012 taxes; the rest cover 2013-17, with permanent changes.

The single most helpful tool for keeping your tax resolutions is a checklist. Every successful self-improvement course, study program - and even job - benefits from one. Have you ever noticed how many checklists you use on a daily basis?

Consider consolidating them, so you can see your daily, weekly and monthly responsibilities at a glance. Let’s build your tax checklist for January 2013:

- Set up your 2013 tax file. Pull out your labelmaker and put new labels on file folders, expanding files, or drawers, so you have a place to drop your 2013 records and receipts. Now you can consistently file all relevant documents for the year in one place. Instead of a set of file folders, consider using an expandable file. While you’re at it, do the same for last year - and get a head start on locating and organizing your 2012 papers.

- Set up your 2013 tax calendar. Individuals can use IRS Publication 509 to locate deadlines for the year. Small businesses can use the IRS’s colorful “Important Tax Dates for Small Business” calendar to set reminders for 2013 due dates. Not only is it available online, but there’s also a desktop version and a tool to integrate it with a variety of personal electronic calendars. The Spanish print version is sold out and won’t be reprinted again this year due to budget limitations. But the calendar is still available in English.

- Update your address. If you moved in 2012, be sure to update your address with everyone who is expected to send you tax-related documents: Former employers (W-2s), banks (1099-Int), lenders (1098), brokerages (1099-DIV, 1099-B), the IRS, your state tax agency, clients (1099-MISC), investments (K-1s) and trusts (K-1s).

- Update your name. New brides generally remember to change their names on driver’s licenses and paychecks, but often forget to notify the Social Security Administration. You won’t be able to e-file your tax return with your new name if it doesn't match the Social Security Record.

- Get a special IRS PIN. Were you the victim of identity theft last year? Make sure to contact the IRS and have them issue you a special Identity Protection Personal ID Number. Notifying the IRS about the identity theft will flag your account. By getting the IP PIN issued to you, no one will be able to file a tax return under your Social Security Number without it. Your refund will be safe.

- File a new W-4 with your employer now - and again in March. The legislature did not extend the 2% reduction of Social Security payments from paychecks. Your paycheck will be a little lower this year. Consider increasing your withholding if you have refinanced your mortgage and your mortgage interest has been reduced, or if your child or children are no longer dependents. You can reduce your withholding if you are making a payment for private mortgage insurance (PMI). The deduction has been restored, retroactive to Jan. 1, 2012. Also, reduce your deductions if you have bought a home, gotten married, have a new child or expect large, deductible losses in 2013. Use the IRS withholding calculator to help.

- Send out W-2s this month. Have you been paying household employees? Although the IRS has sort of a short-cut - Schedule H - for reporting and paying taxes for those workers, you’re still responsible for sending them a W-2 in January. Your state will require full, year-end payroll tax returns.

- Send out 1098s this month. Folks collecting payments on private mortgages or loans must send out Form 1098 showing the amount of interest paid by their borrowers. Even if you don’t send out the form, be aware that your borrower will be reporting the interest on their Schedule A. There’s an area on Schedule A to list your name, address and taxpayer ID number. So remember to report the private mortgage interest income you receive.

- Send out a 1099-MISC this month. Although owners of rental properties don’t need to send 1099s to folks who worked for them, all other business owners must still comply. Send Form 1099-MISC to anyone who was paid $600 or more during the year for services. There’s no need to send it to vendors who supplied merchandise or supplies - just service providers. There’s no need to send 1099s to corporations, except attorneys and medical care providers. When a company operates as an LLC, you don’t know whether or not they are filing as a corporation. So get a Form W-9 from each vendor and have them tell you. In fact, it’s a good idea to send a new Form W-9 to each vendor in January, so you can have the most up-to-date information before paying them.

- Use up your medical Flexible Spending Account (FSA). If you haven’t spent enough money on medical care to get all your FSA deductions back, you might still have some time. Turn in your receipts from your doctors, dentists, clinics, therapists and pharmacies immediately. If you don’t have enough receipts to get all your money back, contact your FSA administrator or payroll department to find out if your plan gives you extra time. Some plans are set up to give you until March 31 to get the medical care and the related receipts. Naturally, if you get reimbursed by your FSA plan for these costs, you may not list them as itemized deductions.

- Retirees: Make contributions from your IRA in January. Congress has restored the special provision for those age 70.5 or over to transfer up to $100,000 from their IRA to a charity for 2012. You have until Jan. 31, 2013, to make this donation. You will not get a deduction for the charitable contribution. But you will avoid all taxes on this withdrawal. It will count as your required minimum distribution.

- Make your fourth estimated tax payment. Jan. 15 is the due date for the fourth quarter estimated tax payment for 2012. This is important for folks who have investment income, unemployment income or any freelance income. If your business profits were over $400, you will owe self-employment taxes, even if you don’t owe income taxes.

Make 5 tax resolutions for 2013.

Resolve to pay no more than your share of taxes.
Resolve to pay no penalties and interest this year.
Resolve to take advantage of every tax credit and deduction legally available to you.
Resolve to make your tax return audit-proof.
Resolve to read MarketWatch’s tax columns year-round.

Five Ways Money Makes You Happy

2013-01-23T14:00:00.000-05:00

Financial Expert Farnoosh Torabi explains several ways money can make your happy.