The breakdown of the net worth calculation for June is as follows:

• Credit card balance(++++): Our total credit card balance in June increased rather significantly percentage wise. At the end of the month, we had $3,778.97 charged on our credit cards, an increase of $315.29, or 9.10%, from May. The increase in spending is related to a few minor projects that we did on our house last month before putting it on the market, which I think is worth it. Since now I am working in Virginia, I expect our spending in the next couple of months to be higher than usual, hopefully not by too much.
• Cash(++++): For a second month in a row, our savings in checking and savings accounts increased by $6,654.42, or 7.49%, in June to $95,461.33. Last month, I finally opened an Ally Bank Savings Account after considering whether I should do it or not for weeks. However, I wasn’t very happy with the bank when I was trying to open another CD account a couple of days ago. At the end, I didn’t move any more money to the account as I planed to do. Most of my savings is now back to Dollar Savings Direct. After all these trouble opening the account, I am very disappointed it ended like this. Maybe one day, I can still use the bank, but not now.
• Taxable accounts(—): As I was busy with job interviews and selling our house last month, I didn’t add any new money in broker accounts and didn’t buy any new stock in June either and my existing stock investments didn’t do well as the market was struggling a little bit (even though finished the quarter with the most gain in 10 years). The only new investment in taxable account last month was Exxon Mobile stock that I bought through DSPP program at ComputerShare. I scheduled the purchase in May, but it only started last month. For June, our taxable investments in brokerage accounts and mutual fund companies lost $2,633.59, or 1.05%, to a total of $246,728.44.
• Retirement accounts(++): Relatively speaking, our retirement investments did a little better, at least they ended the month in positive territory. For the month, the retirement accounts gained $3,987.31, or 1.78%, to reach a total of $227,443.85. Again, no other new money was added to those accounts last month except 401(k) contributions.
• 529 plans(+++): The gain in our investments in 529 accounts last month is the highest among investment accounts, percentage wise. On June 30th, the total market value of 529 accounts was $19,833.85, up $855.55, or 4.67%, from May.
• Bonds(+): I am still buy $100 I-bond every month, just to keep the only bond investment outside retirement accounts going. For the bond part, the gain in June was $128.96, or 83%, to a total of $15,733.64.

Year-to-date, our net worth has increased $130,628.53, or 27.63%. Year-over-year, the net gain is $34,993.56, or 6.16%. It’s the first time we saw year-over-year gain in a long, long time.

Original Post on The Sun's Financial Diary

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June 2009 Score Card — Part I: Net Worth

The good news is that you may be able to get some of that money back in the form of a tax deduction. That’s right, if you itemize your deductions on Schedule A and your registration fee is based on vehicle value (not weight), you can itemize that deduction. This is an often overlooked deduction, but given the value of some vehicles, it could be worth checking into.

I know this is helpful for us because we have two vehicles that each cost roughly $125 a year for registration and it’s based entirely on value. That’s a quick and easy $250 tax deduction each year.

The IRS states:

It has to be a personal property tax, not an excise tax, in order to be deductible. Deductible personal property taxes are only those based on the value of personal property such as a boat or car. The tax must be charged to you on a yearly basis, even if it is collected more than once a year or less than once a year. To be deductible, the tax must be charged to you and must have been paid during your tax year. Taxes may be claimed only as an itemized deduction on Form 1040, Schedule A, Itemized Deductions.

So, you will want to check with your state to determine whether your vehicle registration fee is calculated by value, weight, or a combination. If all or part of the fee is based on value, you should be able to deduct that portion on line 7 of Schedule A.

For more information: IRS Publication 17 - Personal Property Tax Section

About the Author: Jeremy is a retirement planning specialist and founder of Generation X Finance and the guide to Financial Planning at About.com. To learn more, follow Jeremy on Twitter.

Deducting Vehicle Registration Fees If You Itemize Your Tax Deductions

I’ve been using Quicken at home for more than 10 years so my first question was, “is there any benefit for me to use Quicken Online?” What I didn’t realize is that Intuit has setup Quicken Online to be more of a cash flow tool than a total personal finance application.

The desktop products, like Quicken Deluxe and Quicken Premier, have capabilities such as investing research, portfolio management, tax information, net worth tracking, etc.  You could spend hours with these Desktop tools doing financial analysis and planning. 

Rather than try and squeeze all that into Quicken Online, Barron and his team created the online version to be a tool to help you know where your money was going for cash flow purposes.  It’s setup to help you avoid overdrafts, not spend more than you make, and to look at how you spend your money and make spending recommendations.

They’ve seen a lot of people using the advanced features of the destop software at home but also taking advantage of the “anywhere access” offered by Quicken online.  Next time I’ll look at the mobile options they’ve created that let you use Quicken Online when you’re out to help make spending decisions.

When he is not reading or writing about personal finance topics, he can be found in his vegetable garden pulling weeds and pawning zucchini off on the neighbors! Brian shares his gardening adventures at Meadowwood Garden.

The Big Purchases

Often when we become interested in personal finance and saving money we do something that is human nature — we focus on the big stuff like houses, cars, etc. It makes sense too – armed with careful research and smart negotiating tactics you can save large amounts of money on big-ticket purchases.

One of the ironies of personal finance is that all-too-often the money saved on those savvy big ticket purchases ends up being thrown away on a bunch of smaller purchases we usually never think about.

Everyday Purchases

Those smaller purchases are what I like to call “everyday purchases.” Everyday purchases are those you make on a consistent basis — not necessarily daily but often enough that you can identify a pattern to them. Examples include lunch at work, coffee every morning, cigarettes if you smoke, that pizza you have every Friday night, a soda at break time, etc.

Take a second and jot down a few of the everyday purchases you make. Next to each item write down how often you buy it and what it costs each time you make the purchase. Average prices are fine. We’ll use this list a bit later.

Annualize Everyday Purchases

Now that we’ve identified what everyday purchases are, the real question is — what are they costing you? Really costing you? Do you know? Have you ever thought about it?

Here is how you can find out. A great way to gain some perspective on these purchases is to annualize them. Knowing what your everyday purchases cost on an annual basis it makes much it easier to compare them to your other spending.

Ready to give it a try? The numbers might surprise you!

Using the list you made a couple minutes ago, grab a calculator and figure out what your everyday purchases are REALLY costing you. Follow this example:

• Lunch out at work $8/day, 5 days a week = $2080
• Cigarettes $5/pack/day = $1825
• Morning Starbucks $5/day 5 times a week = $1300
• Friday Night Pizza $25/week = $1300
• Soda During Break $1/twice a day, 5 days a week = $520
• Cable TV $65/month = $780

I threw Cable TV into the list to show you that this trick works for any item or service you pay for on a regular basis.

Do some of these numbers surprise you? More importantly, do some of YOUR numbers surprise you?

Make Adjustments

Doing this exercise can help you identify where you can make some adjustments. Want to save $1000 a year? Eat out at work half the time instead of every day. Need to free up $600? Have pizza every two weeks instead of weekly. Caffeine buzz not worth $520 a year to you? Drink water during your breaks instead.

The point is the more you know about your spending habits the more control you have over your finances. These purchases are not necessarily bad. If you don’t want to make changes that is perfectly fine — at least you have some idea of where your money is going and if you are happy with your choices stick with them!

Now you have an easy way to figure out how small, regular purchases impact you financially. Based upon what you have learned, will you be making any changes to your everyday spending habits?

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What is TDMP?

The TDMP is a basically a way for someone interested in leveraging their home to invest to hand off the whole setup.  That is, TDMP will arrange the readvanceable mortgage, investment account/investments along with arranging payments, and mortgage pay down.  Coincidentally, their setup is very similar to the way that I have constructed my leveraged investment strategy.

What Does it Cost?

While not everyone has the time to watch their investments, automation can be a good thing. The automation with TDMP, however, comes with a cost (and other problems).  From their site:

The TDMP Setup fee is $2750 + GST and recurring Cash Management fees are $39.95 per month. These fees are 100% Tax Deductible and are funded from the proceeds of the plan so you are never out of pocket.

The Problems

While the fees are high (even if they are tax deductible), the biggest problem I have with TDMP though is their choice of investments.  The TDMP invests in a high distribution fund, and uses the monthly distributions to pay down the non tax deductible mortgage.  High distributions are great right?  With a leveraged investment account, it really depends on the content of the distribution.  Their 8% income fund has at least a portion of the distribution in the form of Return of Capital (ROC).

The TDMP withdraws all of the distribution and uses it to pay down the mortgage, similar to my modified Smith Manoeuvre strategy.  As readers of MDJ know, withdrawing ROC from a leveraged investment account can mean tax trouble for the underlying investment loan.  Basically as time passes, and the mortgage gets paid off, the investment loan will slowly become a non tax deductible loan due to the return of capital.

Over time, the investor will be left without a mortgage (hooray!) but with a large non-deductible investment loan in the place of a mortgage (boo!).  So basically back to square one.  Without the tax deductibility of the investment loan, the investor will be taking higher risk and will most likely face sub par returns after fees.

Final Thoughts

In my opinion, the only way that TDMP would make sense is if they use an income fund that payed distributions in the form of dividends only.  Dividends are tax efficient and can be withdrawn from a leveraged investment account without any consequence to the underlying investment loan.  That way, when the mortgage is eliminated, the investor will be left with a tax deductible investment loan.

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Copyright 2009 MillionDollarJourney - All Rights Reserved

Foreclosures on homes happen for a variety of reasons. Maybe the homeowner lost his or her job.  Maybe they overextended themselves on the mortgage.  Maybe they have a health crisis that sucked up their life savings.  The homeowner could be an honest, hardworking person forced by circumstances to default, or the homeowner could be a bum.  Anything is possible.

Yet the reaction by the bank holding the mortgage often seems to be “if the homeowner can’t pay $3000 per month, let’s seize the home and resell it to someone who will pay $2000 per month.” Perhaps that is the best way for the bank (or whoever lent the money in the first place) to admit that they made a mistake.  But maybe it’s just that the bank wants to punish someone who can’t pay the full amount by giving their property to someone who can’t pay the full amount either.

If I had a job paying $50,000 per year, and the company determined that someone else could do it for $30,000, I’d argue that I have some advantages over a new guy – I know people at work, I don’t have to be shown where the copier is, etc.  If I was a homeowner about to be foreclosed on, I’d argue that the bank should keep me on at a new, lower rate because I have advantages over a new buyer:  I already live there, my stuff is there, and most importantly I am physically there.  A new buyer might take months to find, and during that time the house would sit empty.

Should banks work with existing homeowners? What if the homeowner was stupid and overextended himself or herself when buying the property?  What if the homeowner had a medical disaster (cancer or some similar problem) that made payment difficult?  What if the bank has no realistic hope of selling a foreclosed property for more than a fraction of the home’s (old, pre-bubble) value?  Would a widespread move toward simply reducing mortgage payments set a bad precedent for the lending industry?

I know that if I make a contract to pay a bank $2000 per month on a mortgage, I shouldn’t expect them to reduce that to $1000 if I fall upon hard times. I wouldn’t expect them to raise it to $3000 if I got a raise at work.  But with communities being emptied out and foreclosed properties sitting empty for months at a time, wouldn’t keeping existing homeowners in their houses make sense?  It’s not an easy question to answer, because the obvious answer is “this is capitalism at work,” followed shortly by “if you can’t pay your debt, you don’t deserve to keep your property.”  Too many crazy mortgages were given out, but even omitting those you might see foreclosures on truly distressed homeowners.  Whether banks should have compassion or simply stick to the profit motive is a tough question in the worst cases, and I think it reveals one of the few weaknesses in the capitalist model:  human suffering for profit.

photo by dok1

would you buy a foreclosed property?

Still, for many of you sales tax holidays are second only to Black Friday in their opportunities to spend money. Funny the things that suddenly look affordable minus sales tax, when just a month or two ago they were way out of reach. Just imagine the number of people out there charging up balances on store credit cards at 24% interest rates to save 7% on sales tax.

Don’t get me wrong; I’m not totally against the idea of a sales tax holiday. Quite the opposite. I look forward to just about every opportunity to eliminate a tax from our lives. However, I consider it a spending trap because days like this often lead normally frugal people to lose their frugal minds and shop like crazy just to “save on taxes.” Spending $100 to save $7.00 rarely makes sense, unless you were going to spend the $100 anyway, and then it might.

Of course, it would be unfair for me to pick on sales tax holidays. There are plenty of spending traps put down for us these days. Many first-time homebuyers feel compelled to run out and a buy a home before they are financially ready because of the first-time homebuyers tax credit being offered. Others feel the tug of car fever driving them to car lots to trade in their clunkers for cash when their clunkers were getting them from A to B just fine.

All of these traps are designed with one purpose in mind: to increase spending. In some cases these programs offer excellent ways to save money. However, if you are not prepared to spend the money wisely you should not be tempted to spend it at all, regardless of the incentives to do so.

Since most states are offering sales tax holidays towards the end of this month and early August you still have a little time to prepare, assuming you are brave enough to fight the crowds. Start planning a back-to-school budget and set aside a little from each paycheck between now and your state’s tax holiday in a cash envelope. When the sales tax holiday is in effect you’ll have a cash budget to shop with, minimizing the risk of going over budget or resorting to credit cards to fund the shopping spree.

Will we participate in the sales tax holiday? Probably not. The only thing I might be interested in buying around that time would be a new computer, as ours is over eight years-old now. I’ve upgraded a few components over the years, but the processor and hard drive space is laughable compared to current models. Computers are the one thing that don’t usually fit into my, “if it ain’t broke, why replace it” mantra. If you want to stay fairly current, you have to upgrade every couple years at a minimum. As you can see, we are far from “current.”

By waiting until sales tax holiday weekend I could save up to $70 on a $1,000 computer purchase (I won’t spend that much, but to keep the math simple I rounded up). Retailers also typically plan sales around such holidays which could mean even higher savings.

It’s worth noting that this year’s recession, combined with severe budget shortfalls, have caused many states to cancel or postpone sales tax holidays. Be sure to check a current 2009 Sales Tax Holiday Schedule for your state before shopping.

Post from: Frugal Dad

With MS Money now out of the personal finance software market (it’s been discontinued for good as of last month), we recently wrote about some options you can use in its place. You can check out this article I’ve written on budgeting tools and software products that can serve as alternatives to Microsoft Money. Or you may want to take up the offer of some of MS Money’s competitors who have announced discounts and sales on their desktop products for a limited time.

With MS Money Discontinued, Budget Planners and Tools Are On Sale

Quicken Products

We already pointed out that there’s an ongoing Quicken download sale going on right now both at Amazon and at the Quicken site, where you’ll receive at least $20 off the regular prices of Intuit’s products (Quicken Online is always FREE).

YNAB (You Need A Budget)

But another popular desktop budget planner is currently being offered at 10% off its usual price of $49.95. The YNAB (You Need A Budget) personal budget software is one of our favorite tools for expense management and budgeting, and is known to be pretty effective with helping you reduce your debt.

You can order YNAB Pro here with the coupon code “msmoney” to receive the discount.

YNAB uses a built in methodology that encourages you to build a savings buffer pretty easily; it’s a proactive tool with features that support short and long term budget planning. You can check out what this tool can do for you by going through this tour. One more thing to note: YNAB is only available on Windows, but can be made to run in an emulator if you’re using other platforms.

Quick Features (just a sample of what you’ll see):

• Automatically import data from your bank accounts.
• Categorize your savings into buckets using features that support envelope budgeting.
• Schedule recurring transactions easily.

YNAB Extras:

• Try it for free; you can download a 15 day free trial.
• Check out how the YNAB methodology actually works to help you manage your money more successfully.
• There’s a community that’s built around the use of this tool. Visit the YNAB forums.
• There’s also a Quick Start Guide, online video tutorials, YNAB live coaching classes (!) and a User Manual. Check their support page for all the materials you need.
• There’s a 60 day return guarantee.
• Get 5 free bonus spreadsheets plus a free copy of the e-book called “The YNAB Way”.

YNAB News and Updates
In other news, YNAB will be discontinuing their YNAB Basic version, which is based on Excel, and will only be supporting it throughout the rest of this year. But you may still purchase this version if you so wish (it’s $24.95). Those who want to upgrade from Basic to YNAB Pro will be eligible for a 50% upgrade discount, just use the site’s contact form for this request. I also cheered the news that the YNAB folks are developing a new version of their application called YNAB 3, using Adobe AIR, which will allow it to run on both the Windows and Mac platforms.

Budget Planner On Sale For 10% Off

Here were my picks at the beginning of the year

My 4 Stock Picks

1. Hanfeng Evergreen (HF.TO) - This company creates high yielding fertilizer for the Chinese market.  I’ve been watching this stock for a couple years now and it seems to be oversold relative to their (profitable) earnings.  This stock has the possibility of making a comeback providing that the Chinese market makes a partial recovery.  If the markets don’t cooperate in 2009, then this stock could go down even further.  Price as of closing Dec 31, 2008: $5.63
2. Johnson and Johnson (JNJ) - Now that I have my exciting stock out of the way, time to go to the boring large cap stuff.  Johnson and Johnson manufactures ’staple’ items like Tylenol, Johnson baby products, band aid, Listerine and other popular skin care products.  Even in a recession, I believe that people will continue to buy these products.  JNJ also offers a sustainable dividend at an attractive yield.  Price as of closing Dec 31, 2008: $59.83
3. Husky Energy (HSE.TO) - This is my pick for some energy sector exposure.  Even though the potential global recession throughout 2009 could keep oil prices depressed, I like Husky Energy’s oil properties and their profitability.  Their dividend doesn’t hurt either. Price as of closing Dec 31, 2008: $30.87
4. Power Financial (PWF.TO) - This holding company has large positions in IGM Financial, Great West Life, Canada Life and London Life.  It offers a generous sustainable dividend and I believe that this stock has been irrationally oversold.  Hopefully PWF will recover in 2009. Price as of closing Dec 31, 2008: $23.90

Here were the results during the last update:

Here is the most recent update:

1. Four Pillars 48.83%
2. Intelligent Speculator 43.32%
3. The Wild Investor 41.45%
4. Where does all my money go 28.72%
5. The Financial Blogger 13.29%
6. Million Dollar Journey 4.76%
7. Dividend Growth Investor 0.70%
8. Zach Stocks -3.09%
9. My Traders Journal -11.36%
10. S & P 500 +3.16%

My picks are slightly beating the S&P500, but lagging most of my fellow colleagues.   For those of you who had your own picks in the original article, how did you do?

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Copyright 2009 MillionDollarJourney - All Rights Reserved

And yes, the kids enjoyed it very much.

Weekend Readings

• 10 Things to Tell a Graduating High School Senior
• Save Your Money By Paying Yourself Last
• Planning To Declare Financial Independence
• The Pros and Cons of Joining a Local Food Co-op
• Wealth Creation: Is it a Myth?
• Common Q & A about Financial Coaching
• Mortgage Pre-Approval When Buying a House
• 12 Tasks for Your Mid Year Financial Checkup
• One Simple Way To Get Started Investing in Stocks
• The Fascinating World Behind Credit Cards And Fraud Detection
• Credit Card Rates and Usury: Where is the Line?
• Negotiation Tips For Beginners – A Real Life Example Of How I Saved $150 With Just A Few Questions

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Weekend Linkage – July 5, 2009