1)   Seek help of a tax agent: A professional tax agent or a trustworthy accountant can help you to take control of your tax problems. Do not worry about the fees that you will have to pay to your tax agent as it will be menial compared to the much larger debt accumulation  and IRS penalty fees later on. The worst thing you can do is to wait for things to get out of control. Meet with a professional after organizing all your financial papers, tax documents, spending records etc. This will help you to get rid of your tax debt as fast as possible.

2)   File for an extension: If you are facing trouble filing your (federal) tax forms on time, you can file for an extension. You, or your accountant, can file Form 4868: Application for Automatic Extension of Time To File U.S. Income Tax Return. This helps you to extend your time by six months to file your taxes. You should file for form 4868 by April 15^th and you do not get extra time once your six month extension is over.

3)   Set up a payment plan for your back taxes owed: Set up a payment plan with the IRS if you can’t pay your taxes in full this year or you still owe taxes from the previous year. But for this, you need to prove to the IRS that you will be unable to make your payments in full without experiencing economic hardship. Once you can meet this qualification, an affordable payment plan can be chalked out. This will satisfy both you and the tax collector.

4)   Consider an Offer in Compromise (OIC): If you are unable to meet even the minimal fees of tax collectors, then you can go for an OIC. This is an agreement between you and the IRS that allows you to settle your tax debt by paying a one-time discounted settlement on the taxes that you owe. But the deal comes with a hitch; you need to sign an agreement which states that you promise to pay your taxes on time and in full for the next five years.

5)   Submit a Penalty Abatement request to the IRS: If you can prove to the IRS that you have a valid reason for not paying your taxes on time, then a Penalty Abatement request can prevent the penalty fees from being imposed by the IRS for your unpaid tax debt. An accountant can help you draw up an accurate representation of your financial situation while submitting a Penalty Abatement request.

It is important to understand as much of the tax process as possible in order to take control of your tax debt. Prepare for your next year’s taxes from now to prevent your tax debt from snowballing. Take your accountant’s help, make quarterly tax payments ahead of time and create a budget which helps to keep little money aside each month to make your tax payments. These steps will surely help to keep your financial worries at bay!

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Many people start planning for their retirement long before they actually retire. Yet, there are still a large number making some pretty big retirement mistakes. Read on to know if you are one of them.

1. Lack of proper planning: You need to have a good idea of how much you actually need to save up for your retirement. For this, you can start with a few basic steps by creating a rough estimate of your current expenses and dividing them into categories viz. fixed expenses such as home payment, utilities, taxes etc. and discretionary expenses which can cover groceries, clothing, entertainment and the like.
2. Based on the expenses that you know will significantly increase or decrease over the years, it becomes much easier now to estimate how much you would need for retirement lifestyle changes.
3. Making use of Social Security at the wrong time: Social Security benefits form a part of most people’s retirement plan resources. If you are uncertain about whether to start receiving Social Security benefits at early retirement (age 62) or waiting until full retirement (ages 65-67 or later), you can seek advice of a trusted financial advisor. He can also help you determine when to make withdrawals from other accounts.
4. Not saving enough money: According to a recent government report, an average U.S. household saves $60,000 for retirement. Many observers report that Americans do not save enough and that retirement savings are especially inadequate. This is said to be the case for households and workers, as well as business owners and the self-employed. Only half the work force is covered by an employer-sponsored pension plan and this share has not changed for almost three decades. Over 9 million self-employed individuals are without retirement plan coverage.
5. Premature use of money: Many employees making use of workplace retirement plan, cash out their 401(k) balances when they change jobs. Since borrowing and hardship withdrawals are allowed under the rules, people frequently tap into their balances. This greatly hampers the long term growth of their assets. However, rolling your 401(k) balances over to new employers or IRAs, during a job change, can be beneficial to you and help you save up for your post-retirement life.
6. Investment risks: Investing too much in stocks can be a risky affair. According to a report completed in 2008, most investors approaching retirement had more than 80 percent of their account balances in the wrong asset allocation. Here again, a financial advisor can help you in taking the right decision after assessing market trends so that you do not suffer any market loss.

Today it has become more important than ever to plan carefully for retirement. If you can avoid the planning mistakes, you can easily increase the long term effectiveness of your retirement savings. Make sure that you are on the right track to ensure a happy and peaceful retired life.

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Mutual funds may seem inexpensive because the costs are hidden. Mutual funds are loaded with fees such as sales charges, management fees, and 12b-1 fees. Sales charges are front-end loads charged by the broker or advisor for buying mutual fund shares, and charges for selling mutual funds shares are back-end loads. These charges depend on the various classes of shares. For example, Class A shares usually have front-end loads and Class B shares usually have back-end loads. Front-end charges can be as high as 8.5 percent for Class A shares. This means that an investor with $10,000 is only putting $9,150 to work while $850 goes toward the sales charge. In addition to sales charges, someone has to manage the fund and therefore, also has to be paid a management fee. This fee can range from 0.10 to 2.00 percent per year and depends on the fund itself and its investment style. Another type of fee is 12b-1 which is paid to brokers or advisors to pay for marketing, distribution and service costs. The Financial Industry Regulation Authority (FINRA) allows funds to charge 12b-1 fees as high as 1.00 percent on an annual basis.

Adding up all of the fees, it is no wonder that mutual funds are popular on Wall Street. It’s a great business because everyone except the investor benefits from this investment vehicle. Unfortunately, for the investor, the returns are not as good as the investment industry promises. The average investor in a stock-oriented mutual fund generated 5.66 percent per year over the ten-year period ended December, 31, 2007, according to a study by Dalbar, Inc., a leading financial services market research firm. Notice that this doesn’t include the stock market decline in 2008.

But are all mutual funds bad? No, not all mutual funds are created equal. Saying that all mutual funds are the same would be equivalent to saying that all restaurants are the same. Mutual funds are simply investment companies that make investments on behalf of their investors. There are some mutual funds that delivered fabulous investment performances for its investors and did not charge outrageous fees. But the problem is that most of the investment public would never know about them because these funds don’t advertise much, and they don’t pay high commission fees to entice brokers and advisors to sell them. In other words, they don’t play the Wall Street game.

About the author

Mariusz Skonieczny is the founder and president of Classic Value Investors, LLC, an investment management company. He is also the author of Why Are We So Clueless about the Stock Market? Learn how to invest your money, how to pick stocks, and how to make money in the stock market.

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Why Use A Credit Card As An Entrepreneur To Cover Start-Up Costs For A New Business?

We’ve all heard the business adage that you have to spend money to make money, however you may be wondering about how clever it really is to use the bank’s money to cover the start-up costs of your new business. Consider the benefits and reasons that you can benefit from as an entrepreneur with a new business to fund:

• Many successful businesses have used credit cards in their start-up periods. The founders of Cisco Systems for example use their personal credit cards in the early stages of starting their business, and so too did the founders of Google who needed to cover the costs of computers and office equipment, so consider where we would all be if the founders of Google had decided not to take the risk of using their credit card to start their business, because those debts are well and truly paid by now.
• You don’t have the opportunity or want to get a loan. Borrowing money from family and friends to start up a business can get messy down the track and you may also not want to worry with the hassle of a personal loan or a business overdraft in the early stages, and more importantly you may not even qualify as a start-up business for a loan. However your credit card can help you find the business items you need to bring in customers and of course income.
• You already have a credit card. The reality is that most of us have at least one credit card in our wallets already and if you are careful in your spending and plan your repayments you can use your personal credit card to fund your business start-up. While it is not always wise to use a personal credit card for business expenses, in the case of a business credit card the debt will still be your personal responsibility unless your business is an incorporated company, and sometimes this does not even remove you from all liability.

How To Use A Credit Card For Funding

As with your personal credit card spending, there is also a right way and a wrong way to use a credit card to fund the start-up of your business. No matter how much of an innovative or creative entrepreneur you are, you can still benefit from following these few simple business credit card funding tips:

• Choose a dedicated business credit card. A credit card designed specifically for business use will allow you higher credit limits which can be especially useful in the start-up period where there are a lot of equipment, advertising and wage expenses. A business credit card will also offer you more flexibility in the number of additional cardholders you’re able to have seen you can monitor your staff spending as well. Business credit cards will also offer you business rewards, such as discounted or free travel or discounts or special offers on office stationery will stop
• Manage your account online. This allows you to always keep up-to-date with your spending and the spending of your staff, and ensured that you don’t spend more than you can reasonably afford to repay.
• Compare interest charges. While the interest charges on your business credit card will be largely tax-deductible, you still want to shop around for a business credit card with a lower interest rate or a long interest-free period because you have to pay the interest before you can play it back at the end of the financial year.
• Check the debt accountability. Unless your business is a company there is little doubt that you will be held personally responsible for any debt the business gets into. However even as a company you may have to go guarantor for your business credit card and can still be held liable for your business debts. Therefore try and exclude your personal assets, or look for a guarantor option where the guaranteed portion declines as the business grows.

No matter how many brilliant business ideas you have they will remain just ideas unless you can get them out there to your customers and for that you will need funding. Using credit cards to fund a business start-up has proved successful for other entrepreneurs in Australia and around the world but that doesn’t mean that using your credit card for your business start-up will automatically be successful too. Instead make sure you maintain the same financial responsibility with your business credit card and business debts as you do for your personal ones to ensure success now and long-lasting success into the future.

This is a guest post written by Timothy a personal finance writer for Balance Transfer Card.

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Therefore, following a comparison of the frugality of your own car vs public transport, based on both the financial costs and the costs to your time, because after all your time is not only worth something to you, it is time you could be spending cooking a meal instead of ordering take away, it is time you could be spending ironing instead of paying a drycleaner to press your shirts.

The Costs of Owning and Running a Car

Everyone uses their car differently and everyone has a different taste in cars and so repayments, fuel costs and usage are going to vary in your own comparison. Therefore, we have chosen a standard family car for the comparison of the frugality of a car vs public transport, to give you an idea of the differences between driving your car to work every day vs working in the city, and whether the savings you make in catching public transport really add up for you.

The comparison car:

A middle sized sedan with comfort and luxury as well as room for a family, shopping or large purchases.

• The cost of a middle sized car is approximately $27,000 to buy new, including on road costs.
• On a seven year personal loan at an average current interest rate of 11.49% your monthly repayments would be approximately $498.
• The  gets 7 L/100 km and has a 60 L tank.
• With fuel on average $1.20/L you will pay around $70 to fill up your fuel tank.

Is a Car a Frugal Option to Commute to the City?

First we compare the costs of someone who drives a 100 km round trip into the city and back to work five days a week. This is an approximately 40 minute drive and is a common commute time, and the average amount of time most people spend driving to and from work.

Costs of driving 100 km to work in the city:

• You garage your car in a secure parking lot and pay $10 a day in parking.
• You insure your car based on your commute and usage and pay approximately $78/month.
• You drive another 350 km after work and on weekends to sporting commitments, shopping trips and to see family and friends.
• You therefore pay $70/week to fuel your car.
• Weekly financial costs of owning and driving a car to the city = $265.

Benefits of driving to work in the city:

• A 100 km car trip will be faster and more direct than travelling the same distance by public transport.
• Public transport across this distance will often require you catch a connecting bus, train or tram.
• You are not subject to hot, cold or wet weather.
• You are travelling in safe transport and retrieving your car from well lit private garage.

Is a Car a Frugal Option if You Live in the City?

If you both live and work in the city then you may want to compare the savings you can make from owning a car for the convenience of weekend shopping trips and ferrying the kids around, without the costs of fuel and parking which those with a longer commute face. Plus, if you drive your car less, many insurance companies will also offer you reduced premiums.

Costs of owning a car but not driving to work:

• You insure your car based on your usage and you can pay approximately $58/month.
• You use your car after work, on weekends and in bad weather and so drive approximately 350 km a week.
• You pay $70 to fill your fuel tank every fortnight.
• Weekly financial costs of owning a car but not driving to work = $174.

Benefits of owning a car but not driving to work:

• If you live and work in or close to the city or your office you can walk and stay fit and healthy though you may spend the majority of your days behind a desk.
• You have the convenience of a car if you have a large amount of files to carry to or from work, and in case of extreme hot or cold weather conditions.
• Your reduced use of your car saves you fuel, insurance and parking costs.

The Costs of Using Public Transport

The costs of using public transport vs using your own car may immediately seem much lower financially, however to truly be frugal in using public transport you will financially benefit the most from not owning a car at all. Owning a car but taking public transport to work costs you both for the car and the public transport and as you can see from the second example above, owning a car but not driving to work costs you approximately $174 a week, on top of which come your public transport costs which are detailed below.

Costs to use public transport:

• A ticket which gives you 10 public transport trips each week – one to work and one home each day – will cost you around $29.
• The financial costs of public transport are the same whether you are travelling within the city, or whether you are making a 100 km round trip each day.
• Weekly financial costs of catching public transport to work = $29.

Convenience costs of using public transport:

• Service interruptions cost you time, be they from bad weather, warped tracks, driver strikes or break downs.
• No option to travel in your own car during extreme hot or cold weather can cost your composure when you arrive at work, can damage suits or shoes, can cost for hair appointments and blow-dries to appear professional.
• No option to travel safely late at night, in the dark or early morning.
• You will have your own price to put on the weekly financial costs of these conveniences.

Is a Car or Public Transport the More Frugal Alternative?

To use public transport to and from work while also owning a car for convenience and weekend use will cost you around $200 a week. For just another $65 a week you can travel in the privacy, the security and the comfort of your own vehicle, leave and arrive at work when you choose rather than when it matches with a public transport timetable and be able to arrive composed and ready to get down to work each morning no matter what the weather.

Very few people will do away with a car in their lives completely in favour of public transport as ferrying children, pets and friends requires the use of your own car. Therefore, while using only public transport and not owning a car is the most frugal alternative, catching public transport to work and using your car on the weekends can help you be more frugal and remain organised and in control.

Alban is a personal finance writer specialising in credit card comparison. He helps people to compare the best credit cards online

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She mentioned that she was heading into an Edward Jones investment rep this afternoon and wanted me to chime in with a few questions to help her make a good decision. Like I said, she is 55 with no retirement money aside from about 20k she cashed out of a universal life insurance policy she had out on my dad that was taking payments out of the equity it had built up.

That’s another conversation, but for this one, we’re focusing on how her conversation went.So the rep called me up and we had a conversation about what my mom had, and what she was doing now, and where she was headed. The first thing he mentioned was that “we need to start making your Mother’s money work for her NOW!” I obviously agreed and mentioned to him, “what funds do you recommend she get in?”

He came back with a handful of loaded mutual funds and I just stopped him in the middle of it and ask him why he wanted to put my mother in loaded funds. He actually was very up front about why. He said, “Clearly because that is how I make my money.”

I agreed and proceeded to tell him that we weren’t interested in his services and thanks for his time. He proceeded to tell me how “scary” and “difficult” and “dangerous” it was to be investing on your own. He said, “There are a lot of pitfalls along the way. Wouldn’t it be nice if you had someone to help you?”

I responded, “Yes, that would be nice to have someone that would warn me about financial advisors like yourself.”

That stopped him in his tracks and my mother took off.

New to the blog? Asking yourself, “what are loaded mutual funds exactly Hank?”

When I say “loaded mutual fund,” I mean a mutual fund that carries a sales load. A sales load is a mutual fund commission paid to brokers like this Edward Jones rep for selling you something you don’t need their help in buying. Sales loads do not benefit you, they benefit, and ONLY benefit the person selling them to you, much like an insurance policy.

Load fees typically range from four to eight percent and the way they are paid varies:

1. Front-end load (usually class A shares) – you pay the sales fee up front to the helpful broker.
2. Back-end load or deferred load (usually class B shares) – you pay the sales fee on your way out to your helpful broker.
3. Constant load fund (usually class C shares) – you pay the sales fees every year and might even have to pay a full load when you sell to the fine person selling you this.

Well Hank, I really like paying extra money for things I can do for myself (joking) what else is it costing me?

Well, think of it this way. By purchasing a loaded fund, you’re starting two steps behind. Let’s use simple numbers, say you bought a loaded fund with $10,000 that carried a 5% front end load. Well, as soon as you sign on the dotted line, you’ve just lost $500, so you’re starting with $9,500.

Think of the same guy that has the entire $10,000 to run on – who is going to be ahead in 1 year? 2 years? You can’t catch up because you’re starting behind. Think of it like an oval race track. If you are both running in the same lane, you are starting 5% of the way behind them, and will likely not catch up.

But Hank, they broker told me that these funds were spectacular and that I should make more from them than a no-load fund. Isn’t that worth it?

If a broker really did tell that to you; you are in a bad situation. Turn and run immediately. Do not pass go, do not collect $200. I can almost guarantee if you give me a loaded mutual fund ticker symbol, I can find a very similar NO-load fund out of the 12,000+ funds out there.

Feel free to contact me if you don’t believe me; I’ll find one for you. How many different ways can a sales guy scare you into buying the fund? Anyone else have some wise lines brokers have used to get you in their grasps and in to your pockets? I think if I wouldn’t have figured it out on my own, I’d still be playing Poker to take care of my retirement.
Photo by: Snap@

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Why is The Fed pushing rates down hard and fast?

Because the government is seeing a danger that troubles them. The housing market could create a downward spiral that would do widespread damage to consumers and businesses. The main problem comes from several things that get started when home prices start the fall. When home prices fall, it inherently fosters large numbers of foreclosures. That throws a bigger supply of houses onto the market, which in turn push prices down further.

Another problem happens when falling home prices force banks and other lenders to take losses on housing-related investments. They certainly don’t want that because it takes a bite out of their capital and reduces the amount of money they have to lend. That in turn makes it harder for home buyers to borrow, and lending banks to lend. If this housing problem continued for an extended period of time, the damage to banks and consumers could become so profound that the economy plunges into a recession the likes of which we don’t want to see.

How is the government planning on fixing this?

Well, they’ve hacked the interest rate 1.25% over the last 11 days. With this drop in interest rates, combined with a stimulus package from Congress, the hope is that they can stave off the looming recession, which isn’t fun. The goal of doing this isn’t pretty in the short term, but it can significantly limit the damage and keep things from falling into the ocean.

So do I want the Feds to cut interest rates or not?

Well, if you are a homeowners with an adjustable-rate mortgages, you like it. If you have an adjustable rate home equity loans, you like it. If you are a homeowners with a good credit rating and can refinance at lower rates, you like it. If you are a business with a loan tied to the prime Fed rate, you like it. However, if you are investing in CD tied to the prime rate, you DON’T like it. If you have a money market account, which is likely tied to that rate at which banks can borrow, you DON’T like it. If you have a savings account at a bank, you DON’T like it.

Overall there are a lot of pieces to the pie, and a lot of people complain about the setup and what the government is doing, but that is what people do, they disagree a lot. You don’t have a lot of choice in the matter so make the best of it and take advantage of the lower priced stocks, and mutual funds you find when the economy is slow.

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Buy technology stocks and fund. They’ve done really well this year, and think about it. We’re in the technology era; people WANT technology and are willing to pay for it still. As long as you’ve got a good time horizon for investing (10+ years left till retirement) I think you’ve got a good shot to get in at the bottom floor during the recession.

There are special recession ETFs geared towards recession. Look at medical, people always need to go to the doctor. Look at Claymore Securities.

Ultimately, my recommendation is to keep your money headed towards your investments as long as you’ve got a job. Keep your portfolio on track, this is the time when many people are getting out of the game, and as long as you’ve got time on your side, a perfect time for you to capitalize on the low prices being tossed around.

Do you have any secrets you’d like to share? Anything you’ve done in the past? Advice for the future?

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Hello Hank, I see you have a Universal Life Insurance policy also. Do you know if it is taxed when I “expire”? Barney from North Carolina

Hey Barney, I actually DO know the answer to that. I checked with my accountant to be 100% sure and he agreed with me that your beneficiary will NOT (99.999% of the time*) have to pay taxes on it. This is the one time I don’t mind having my Universal Life Insurance through Hartford Mutual. I slashed the “investment” piece of the policy and am only paying for the insurance side of it now. Don’t mix investing with insuring. They mix similar to oil and water.

* – The time this doesn’t apply to you is very rare, but CAN happen if you die at the same time your beneficiary and 2nd beneficiary also die. So it is very rare, but possible.

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So it has been pretty engraved in the minds of folks for years, and seemed to have fallen off in the 90′s but rumor has it coupons are making a comeback. A recent study by comScore, an Internet information provider that tracks consumer behavior, found that 53% of consumers say they regularly visit brand Web sites to find promotions. I admit, I still have a tendency to look for the food deals when I see them – Where have I looked?

Coupons.com is the big dog I see the most ads about – I think it has the best advertising and I’m sure the domain name doesn’t hurt. It has a ton of grocery printable coupons for major household brands such as Johnson & Johnson, Unilever, Pepsi, General Mills, and Kraft. You can view available savings by category or by brand, print area-specific coupons by entering your zip code, and get an estimate of how much money they will save you.

I’ve stopped at CouponMountain.com a time or 2 specifically because they don’t require registration or a lengthy sign-up process in order to access coupons. They have coupons for all the big stores (Walmart, Toys R US, Home Depot). They also have discount codes for airfares, hotel reservations, car rentals, and online dating. And if you’re a fan of a specific store, you can subscribe for email notifications whenever special offers from that store are available.

CurrentCodes.com has a lot of well-known online stores like Barnes and Noble, Staples, and Amazon.com have a place within their shopping cart for a “coupon code” that gives a percent or dollar amount off your purchase. If you don’t know the code, you don’t get the discount, so find a coupon. A lot of times you can find these secret discount codes and coupon codes listed on in a google search, but the problem with these sites is that they’re usually personal homepages and they don’t keep the lists up to date very often.

Dealcatcher.com has a feature called SundaySaver that compiles the weekly sales circulars and Sunday ads into a similar webpage. Just enter your state to see all of the stores that had ads that week—click on a store to see the deal. You won’t find quite as many categories of coupons on Dealcatcher as on Coupons.com. Nonetheless, it has been known to cross my screen a time or two.

FatWallet.com is a big one, but it has a lot of ads, and is difficult for me to navigate. I don’t dig on it very much because of that. I like a site that has everything I want right out in the open. Check it out, but don’t spend too much time figuring it out.

All in all, I’ve got to admit, I visit them less the more my salary goes up, and time goes down; but they are very good places to find deals to live the frugal way if you’ve got the time!

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