When people ask me if they could be successful at day trading, my first response is, “Do you know what day trading is?”

Most people don’t. You might think day trading is about finding the best online brokerage, grabbing a stack of financial reports, arming yourself with financial blogs and news and then diving in.

What many would-be day traders don’t realize is that success doesn’t come from the uncanny ability to analyze balance sheets and fundamentals like Warren Buffett. And even if you have the ability to interpret charts and price action–the primary skill for day trading–this is secondary to having the strict discipline of adhering to specific rules and guidelines.

Without these rules in place, day trading is like a child playing with a chainsaw.

I’m not judging the merits of day trading. I know both very successful day traders and those who blew themselves up financially with day trading. (For what it’s worth, I know many more of the latter variety.) But if you’re going to succeed at this kind of investing, you’d better understand what it takes.

What it takes to succeed

Here are observations from my experience as both a professional trader and money manager about what it takes to succeed at day trading:

• Hard work. Brains don’t hurt, but day trading is a skill, and that skill needs to be developed by treating this as a business. A lot of people day trade as a side avocation or hobby, maybe because it seems like an easy road to riches. Don’t fall for that mentality. I’ve known people with a gambling mentality who have been drawn to trading, only to be chewed up because they treated the markets as a casino and not a business.
• Discipline. Do you ever see the same people wandering around your gym who have no noticeable changes in their appearance from a year ago? It’s from lack of discipline and goal-setting. Trading is no different. People jump from strategy to strategy, or worse, have no strategy at all. The importance of discipline to day trading can’t be overstated. You may think you have discipline, but the true litmus test is your results.
• A keen grasp of probabilities. The best baseball players–the ones who get paid the most–hit the ball around three times for every 10 at-bats. A guy who hits it four times for every 10 at-bats is the best in the business. Put another way, even the best baseball players in the world achieve an undesirable result most of the times they get up to bat. Great traders are the same. Making money through day trading doesn’t mean you make the right call most of the time. The key is to lose a little when you are wrong (which is often) and make a lot when you are right.
• Letting go of the need to be right. Some people would rather be right than make money (or would rather be right than be happy, but that’s another blog post!). This personality trait makes for lousy day traders. In day trading, you will be wrong more than you are right, but that is not failure, it’s probability.

Defining your day trading personality

On a recent episode of “America’s Got Talent” (I admit it, I somehow got hooked on a summer reality TV show) judge Piers Morgan told one performer that he did not know how to define his act and asked the performer how he would define himself. The entertainer looked completely bewildered, and it’s no surprise that his act fell flat.

Ask 100 people to define their “investment personality,” and you’re going to get 90 blank stares. Lacking a clear description of your investment personality–are you a trader, gambler, investor or saver?–is a common error, one that can make or break your results.

In the broadest sense, everyone’s financial goal in investing is to make money. But that’s not enough. You have to find a strategy and set of rules that you’ll stick to and will keep you from an expensive labyrinth of mistakes.

Spending some time doing a little self-discovery can yield a strategy that is more in sync with your personality type, which may help reduce some of the emotional impulses that often lead people astray.

Still think you have what it takes to be a successful day trader? You’re the only one who can really know. But if you lack any of the key traits or a strong investment personality, don’t be surprised if you’re in for a long grind–or a financial meltdown.

Marc Pearlman is the author of the Positive Money Mindset and host of the popular radio show Your Money Matters! For more about Marc, visit marcpearlman.com or www.Yourmoneymattersradio.com.

Securities offered through Securities America, Inc., Member FINRA/SIPC. Advisory services offered through Securities America Advisors, Inc. Marc Pearlman, Representative. Your Money Matters! radio show and the Securities America companies are unaffiliated.

Source URL: Day trading: Do you have what it takes?

Copyright Protected © 2010 Money Blue Book: Personal Finance Blog. All Rights Reserved.

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Source URL: Investing tips for today: Q&A with money expert Saly Glassman

Copyright Protected © 2010 Money Blue Book: Personal Finance Blog. All Rights Reserved.

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Back in the early to mid-1990s I made my living by sitting in front of computer monitor with green and red glowing pixels that flashed stock and commodity prices. I was an off-the-floor stock and commodity trader, and in my world, green and red meant everything. Green meant I was making money, and red meant I would be drawing out of my savings to pay for monthly expenses.

Fortunately for me, I was given some sage advice from a wealthy mentor of mine who was about 25 years my senior and knew of an obstacle that I was likely to encounter. I still remember his wise words: “Kid, make sure you put money into an account you can draw from when times are lean–and expect some lean times. It’s part of the game.”

Even though I heeded his advice, there was one thing I didn’t account for: the feeling I’d have when trekking to the bank to withdraw those savings. While I had been diligently depositing money in my high yield savings account specifically to be drawn on when needed, the mental anguish of seeing my balance decrease–sometimes month after month–was one of the biggest challenges I had to overcome as a trader.

From Retirement Saving to Retirement Spending: Getting Past the Anxiety

Fast-forward 16 years: now I manage other people’s money for a living. I’m on the phone with a client in his mid-60s who recently retired. He asks me if taking $10,000 out of one of his accounts to purchase a timeshare is going to throw his retirement savings into a flat spin.

I remark that he could buy ten such timeshares without making much of a dent in his financial resources. But thinking back to those down months from my trader days, I quickly add, “I think I understand where your mind is and what you may be feeling. The retirement transition is a little bit like buying an umbrella and then worrying it will get wet when it rains.”

Learning how to develop the retirement spending mindset is a major challenge for many retirees. There’s already a lot of change when you retire: a shift in routine, of people you spend time with on a daily basis, maybe even a new home in a new city.

Add to the mix a wrenching shift in habit from saving for 35 or 40 years (or more) to actually spending down the funds carefully grown in that retirement account–no wonder it’s a jolt. Seeing that balance drop month after month, even if you’ve planned for it, is profoundly unsettling.

Another issue is that many people who enter retirement now have access to the most money in a lump sum that they’ve ever had in their lives. This alone can bring a suite of emotions, from fear and paralysis to greed.

You may have gone over financial variables in retirement planning over and over through the years–average lifespan, rates of return, annual income needs, and so on–but nobody prepared you for these particular mental adjustments.

How to Combat Retirement Spending Anxiety

The upshot is that these feelings are normal, and there are strategies you can use to ease yourself into retired life:

• Set up a “retirement bucket.” This strategy simulates the consistency of earning a steady income. With your “retirement bucket,” you spill some money into a separate deposit account that you access for regular expenses. You might accomplish this with a scheduled transfer on the first of each month from a high-interest online savings account to a linked checking account, for instance. The retirement bucket method provides stability, creates a natural budgeting mechanism, and shields you from the dread of treating your retirement funds as an ATM.
• Test-drive retirement. You may have long imagined what life you’ll lead in retirement, but the truth is, you won’t know until you get there. You might find yourself drawn to different activities than you expected and budgeted for. This is the “human factor” of retirement planning that no computer model can simulate. For example, I have clients who eat out more frequently now that they are retired because they have more free time to socialize. By all means, estimate your fixed expenses before retirement, but get into the swing of retired life for a few months before locking into a budget.
• Set a deadline. That said, don’t let fear of handling a large sum of money (especially in uncertain economic times) lead you put off budgeting forever. If making big decisions about retirement spending frightens you, let yourself have a few months to just get used to your new life. But set a precise date in the future to revisit decisions, or several milestones spaced out if you prefer–something to make sure that you take some thoughtful action in a timely manner.
• Blow your money–but just a little. Some new retirees have the opposite reaction to financial anxiety–they convince themselves that they deserve new cars, designer shopping sprees, and luxury vacations. Deserved they may be, but these large purchases come at a great cost if done on an impulse. If you’re worried you may be the type to come back from the Porsche dealership with a big case of buyer’s remorse, try this: take a very small percentage of your retirement money and go blow it on something frivolous. It could be that you just needed to get that impulse purchasing out of your system, and this way you can satisfy that impulse without doing yourself some major financial damage.

Above all, I encourage new retirees to view money as a tool. When we make financial decisions out of emotion, we often satiate an emotional need at the expense of good financial judgment. Unless you can identify the emotion driving that financial judgment and adjust accordingly, all that careful number crunching, planning, and forecasting from your working years can become meaningless.

Marc Pearlman is the author of the Positive Money Mindset and host of the popular radio show Your Money Matters! For more about Marc, visit marcpearlman.com or www.Yourmoneymattersradio.com.

Securities offered through Securities America, Inc., Member FINRA/SIPC. Advisory services offered through Securities America Advisors, Inc. Marc Pearlman, Representative. Your Money Matters! radio show and the Securities America companies are unaffiliated.

Source URL: Overcoming Spending Anxiety: When Financial Planning for Retirement Isn’t Enough

Copyright Protected © 2010 Money Blue Book: Personal Finance Blog. All Rights Reserved.

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As of July 1, credit card issuers were required to conform with new rules approved by the Federal Reserve Board to protect consumers from what many have seen as unfair (or at least unclear) practices by the card issuers.

The new statement does a lot of things right–it’s now abundantly clear, for example, just how long it’ll take you to pay off even a small balance if you just send in the minimum payment required (and how much interest you’ll rack up in the process). Closing one of the classic traps of card usage that have ensnared many, the new statements must tell cardholders up-front just how much their credit card rates will jump and how much the late fee will be if you’re late with your payment. And interest fees and fee charges of all types are now labeled clearly–you’ll be able to see at a glance whether that zero percent balance transfer transaction was correctly implemented.

FiveCentNickel.com has a nifty infographic with mouseover highlights of the new changes:

Source URL: New Credit Card Statement Format

Copyright Protected © 2010 Money Blue Book: Personal Finance Blog. All Rights Reserved.

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Many tax cuts enacted by President Bush in 2001 and 2003 are set to expire in 2010. These cuts were designed to help all income levels: America’s low-, middle-, and higher-income workers. The Tax Foundation summarized some of the major changes to the tax code during the last decade:

• lowered key federal tax brackets (28% to 25%, 31% to 28%, 36% to 33%, 39.6% to 35%) and created the 10% federal tax bracket
• doubled the child tax credit to $1,000 per child
• made more married couples eligible for the earned income tax credit (EITC) and raised the standard deduction for joint filers

More Uncertainty Than in Years Past

As the United States budget deficit hits astronomical levels, we have good cause to worry about what “paying our fair share” means. Usually, a number of tax provisions are legally tied to inflation–and as there’s not been too much of that lately, you might think the projected tax provisions won’t move much.

That was the case for the 2010 income tax bracket projections. But for 2011, the triple whammy of the deficit, the recession, and scheduled expirations to previous tax code changes makes for some uncertainty. As of this writing, how Congress is going to address the expiration of those significant tax cuts and credits has not yet been resolved.

What’s the 2011 tax year outlook? Let’s take a closer look at what to expect in 2011 for federal tax bracket income ranges and other changes.

2011 Projected Federal Income Tax Brackets

Tax experts feel that the brackets we’ve grown accustomed to are going to increase to pre-Bush administration levels or at least begin adjusting in that direction, though the recession has put a dent in President Obama’s ability to simply let the tax cuts of the last decade lapse. Among the major changes proposed, is raising the top two federal tax brackets back to 36% and 39.6%.

Policy experts at groups like the Tax Foundation have come up with projections for 2011 federal income tax brackets for various filers. Here are their estimates for 2011 tax bracket income thresholds for married and single filers, assuming that the tax code supports what has been laid out in President Obama’s budget.

Federal Income Tax Brackets For 2011–Based On Taxable Income Ranges

Again, this assumes that the highest two federal tax brackets move back to their pre-Bush tax cut levels of 33% and 35%, respectively. We’ll make updates if the IRS comes out with different official numbers.

Other Federal Income Tax Projections for 2011

Other 2011 tax year predictions from experts, mostly based on scheduled changes, include:

• Standard deduction increase: The standard deduction should increase from $5,700 to $5,800 for single filers and from $11,400 to $11,600 for those married filing jointly.
• Revival of the estate tax: For people who die after 2010, the federal estate tax will be revived with an exemption of $1,000,000 and a maximum rate of 50%. But Congress is widely expected to take action on the estate tax issue in 2010–too late to catch some estates that have, by pure luck of timing (for their tax burden, anyway), escaped estate taxes entirely.
• Increase in long-term capital gains rate: The long-term capital gains rate had temporarily been decreased to 15%; it’s meant to go back up to 20%, though filers in the 10% and 15% federal tax bracket will likely be subject to a 5% capital gains rate.
• Qualified dividends: In 2011, dividends may be taxed as ordinary income based on your highest marginal tax rate; another likely scenario is that they will follow the long-term capital gains rate of 20% for federal tax brackets of the 25% marginal rate and higher.
• Child tax credit: The $1,000 credit per child may go back to $500 for 2011 unless the higher credit is extended.

How to Prepare for Your 2011 Federal Income Tax Return

Now is a good time to revisit your tax deductions. Planning ahead with more information means we won’t be left in a lurch come Tax Day, or the opposite pitfall, withholding too much.

The appropriate versions of tax prep software for the 2011 tax year won’t be out for a while, of course, but doing some research on the best tax preparation software can make it . Most software will automatically load in previous years’ worth of tax information, so if you can commit to one side in the H&R Block vs TurboTax debate (or have another favorite entirely), using that software for 2010 is one way to stay ahead of the game for 2011.

Source URL: 2011 Federal Income Tax Brackets (IRS Tax Rates)

Copyright Protected © 2010 Money Blue Book: Personal Finance Blog. All Rights Reserved.

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Of course, opening a balance transfer credit card on its own won’t make your debt evaporate overnight and shouldn’t be an excuse to spend more–but if you understand what the balance transfer credit card is for and stay disciplined in your debt payments, it can be a very useful tool.

Ten Steps to Debt Reduction Using Zero Balance Transfer Credit Cards

1. Make a list of all of your debts–and add them up. This gives you a clear idea of how much you owe, how much the interest rate is on each debt, and what you are currently paying in monthly interest and minimum payments. Awareness is the first step toward being debt-free.
2. Review the terms of your current debt. If you currently pay little or no interest on at least some of your debt, you may not even need to transfer that part. However, if your existing low interest rate is for an introductory period that is ending soon, you may want to consolidate that debt with the rest.
   
3. Find a low interest credit card that can be used to transfer balances. If you don’t already have one that will work, apply for a new balance transfer card. If possible, select one with at least a 6- to 12-month introductory period, during which the card issuer charges reduced or even zero interest. Apply for a credit limit sufficient for all the debt you want to consolidate at this time.
4. Learn the fees associated with any balance transfer. There are two typical balance transfer fees: an upfront fee at the time of transfer, plus an interest rate to be charged monthly until the balance is paid off. Try to obtain a zero balance transfer credit card, if possible, which may charge only one type of fee during your introductory period–or possibly no fee during the intro period.
5. Read the fine print about your balance transfer terms. Many low interest transfer credit cards will charge you a higher-than-promoted rate if you make any late payments or otherwise violate their terms, especially during the introductory period. This can potentially cost you even more than before you transferred your debt–so be forewarned, plan ahead, and figure out a way to commit to paying on time.
6. Transfer your target debt to the low interest credit card, then review and update your list of debts. Create an overall debt repayment plan based on your budget and income, and commit to pay it all off within your chosen timeframe. Avoid adding new debt and making unbudgeted purchases–and use any unexpected income (a raise, overtime, a side gig) to pay it down even faster.
7. Pay more than the minimum required total payment. As long as you can pay more than just interest on all your debt, you can pay down your debt and eliminate it over time. But it will take more than just the minimum payment to pay off credit card debt within a reasonable timeframe. The Federal Trade Commission’s credit card calculator shows you just how much time you can save by paying down more.
8. Pay down any remaining higher interest debt first. If you were unable to consolidate all debt on your low interest credit card, pay only the minimum monthly amount on your lower interest rate debt, and then put the difference from your planned monthly debt payoff amount toward paying off your highest interest debt faster.
9. Don’t assume you can transfer debt balances indefinitely. When the interest rate on your consolidated debt goes up after the introductory period, you may consider a second balance transfer. While this strategy has worked for some, this usually means you’ll need to obtain a new zero balance transfer credit card. Be aware that too many new accounts can negatively affect your credit score, and that credit card companies may simply stop approving you for the new offers. Ideally, you should just select a decent zero balance transfer credit card with a low ongoing interest rate to begin with to avoid getting caught again in the cycle of perpetual new accounts and transfers.
10. Do something nice to reward yourself. Eliminating the burden of debt is a reward in itself–but don’t forget to find little ways to reward yourself inexpensively along the way. This will help you stay motivated and continue to enjoy life as you should. Once you pay off your debt, do something nice for yourself and your family–and pay cash! It took a lot of effort, but you’ve made it.

Debt Payoff: Keep Your Eyes on the Goal

The purpose of consolidating debt is to make it easier and faster to pay it off–instead of putting it off until it becomes overwhelming. Make paying off your credit card debt the number one priority in your financial life, after meeting your family’s basic needs and commitments. You’ll be relieved to finally live a life without overwhelming debt obligations.

Source URL: 10 Steps to Pay Off Debt with a Zero Balance Transfer Credit Card

Copyright Protected © 2010 Money Blue Book: Personal Finance Blog. All Rights Reserved.

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Of course, until I find a way to definitively achieve financial independence or acquire a method to ensure a guaranteed passive income stream, I will inevitably have to end my extended vacation and return to my full time job sometime in the next few weeks. Thus I’ll be getting back to my regular full time day job as a self employed attorney and part time gig as a blogger very shortly. Blogging has been an interesting part time job for me for the last two years (bringing in a very steady and rather lucrative income stream), however at some point, the inevitable pangs of writer’s block and declined motivation inevitably creep. Thus it was nice to finally get away and get a multiple month breather after all this time. However, now that I’ve taken my sabbatical, spent time with the family, and pursued other extracurricular activities, I’m almost ready to get back on the horse again and retake the reins.

My Current Net Worth and Financial Status Update Compared To Last Month

Reliable Passive Online Income Through Blogging

Despite my multiple month absence from my normal blogging duties, I continue to rake in a steady monthly income via my small network on profitable blogs and affiliate websites. While I used to earn a significant portion of my monthly take via my small legal practice as an attorney, I have been undergoing a winding down process in recent months to slowly transition my way out of the whole trading hours for dollars routine that working as an attorney entailed. While the legal work and training has certainly been interesting at times, my heart has never been all that much into it. Pursing the viability of online businesses and trying to harness all that the Internet can provide has always drawn much more appeal for me. The lure of being able to make money online by blogging from the comforts of one’s home is what got me started in this industry years ago.

As my primary online blogs (most notably, the financial blog you are reading now) have grown to the point where their traffic levels are now inherently stable and the sizable income profits they now earn are now very reliably self sustaining, I am at the process of trying to decide where to go from here – call it a fork in the road if you will. Do I sell off a few major sites for instant income now and turn my entrepreneurial attention elsewhere, or do I put in the additional effort now and continue to grow these sites into something inevitably bigger?

While the nature of blogs and Internet businesses can be fickle at times, I truly believe that the future of media and information lies with the adaptive power of Internet. The web is continuously transforming how old and new information is consumed. While it would certainly be great to possibly sell off my most prized websites in terms of traffic levels and income, I am somewhat cautious about cashing out too soon when I think there is still tremendous upside to be had in the coming years. Of course, anything is possible and these things are just a handful of the issues that I’ll be pondering a lot about in the coming months as I slowly get back to my old blogging routine again.

Continue Investing In A Down Stock Market

Not much further needs to be pointed out about the stock markets beyond the truism that big wealth can be made during the worst of times. Markets have certainly been choppy and volatile recently, but given a sufficiently long period of time, they will almost always recover in spades. Despite having rather significant chunks of money invested into various index funds and individual stocks, I barely glanced at my holdings throughout the month. Perhaps it was because I’ve been traveling overseas, but more likely than not it was because I see my investments as appropriately geared for the long haul and I don’t want to be overly bothered by the emotional highs and lows of short term price swings. “Set it and forget it” is how I’ve been investing these past few months.

If you haven’t already opened up an investment account with a discount broker or opened up a retirement account with a Roth IRA broker, now is as good of a time as any.

My New Home Construction Is Nearly Complete

As long time readers may already know, my new house has been under construction since summer 2009. After months of construction activity and suffering through periodic pauses due to severe winter snow, the home is now nearly complete. With construction now projected to conclude by the end of March 2010 and with my home mortgage application paperwork eagerly waiting on the sidelines, I am preparing to close on the house by the end of March. It’s been an interesting ride in terms of my journey to become a first time homeowner. I went through spats of doubt, indecision, and even exuberance during my home purchasing process, so one can’t say that I didn’t fully think my decision through. I had and still have occasional doubts of the timing of my purchase, particularly in light of the reality that the real estate market is still lingering in the doldrums. However, I have faith that in due time, the home prices and sales numbers will recover, as early indicators do seem to be bearing that out. Particularly in the Washington D.C. suburbs of Maryland and Northern Virginia where I live, the housing market has been remarkably resilient. Living close to the epicenter of the federal government, which powers and maintains such a reliable supply of jobs definitely has its positive secondary benefits in terms of ensuring the need of a continuously growing housing supply.

Source URL: February 2010: Net Worth Report and Making Money By Blogging

Copyright Protected © 2010 Money Blue Book: Personal Finance Blog. All Rights Reserved.

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For January 2010, the combined income accumulated from this personal finance blog, the revenue generated by my other online affiliate ventures, and the part time income I earned from my small legal practice as an attorney – all saw slight increases. However, much of the income stats were gobbled up by the hefty estimated tax payments I had to make to the federal and state government during the month. Because I operate my small business and solo legal practice using a cash basis form of accounting, I don’t spread the estimated quarterly tax payments evenly throughout the year, but rather record them on my personal financial balance statements only when they are actually paid out – resulting in these precipitous drops in total net asset value that occur four times a year.

There was one major financial hit however which came from a furious stock market correction that reared its ugly head at the latter half of the month, which pretty much wiped out the hefty gains I would have been on track to record. But as far as the worth of my stock investments go, I don’t generally pay substantial attention to them – as I see them as long term investments that will ultimately pay off years down the road. Month to month dips in stock portfolio value don’t generally rattle me in any significant way (so long as there aren’t serious financial Armageddon type issues lingering in the market). On the whole, so long as I can continue to pull in a steady income with my online website businesses and small legal practice, I am generally content to stay the course. No one ever said becoming a millionaire would be easy, as there are bound to be unexpected bumps on the road. But so long as the rules haven’t changed to any major degree, the economic and financial landscape will inevitably improve in the long run, and such long term investments will ultimately enjoy much success.

My Current Net Worth and Financial Status Update Compared To Last Month

Paying My Quarterly Estimated Taxes As A Self Employed Taxpayer

For those not familiar with what quarterly estimated taxes are in general, or not sure as to why they took such a big bite out of my networth this month, here’s a quick explanation. Estimated taxes are basically the  income taxes that self employed individuals like myself  pay on income that is not subjected to withholding. This income includes everything  from self employment income, interest, stock dividends, rental income, and gains from the sale of assets, etc. It’s important to pay attention to this obligation, because failure to timely pay the quarterly assessed estimated taxes on time does result in a hefty penalty and associated interest charges, even in those cases where you are ultimately due a refund when you file the tax return.

Most people never have to deal with paying estimated taxes because their employers usually already withhold their federal, state, and social security taxes on their paychecks. But for self employed small business owners like myself, because we don’t have someone else to withhold these types of taxes for us, the Internal Revenue Service (IRS) has mandated that we do so ourselves – requiring us to make four projected pre-payments throughout the year at set intervals on April 15, June 15, September 15, and January 15 of the following year. One of these hefty tax payment dates occurred in January, which is why the vast bulk of the income I generated during the month was siphoned off to pay the Man. But next month, my networth will likely return back to its regularly anticipated upward growth trajectory.

Buy Low, Sell High – And Continue Investing In A Down Stock Market

Some are saying that we are up for another routine market correction after a somewhat furious run up from spring 2009, while others are running around in circles predicting another major collapse again. But once you cut past the rhetoric and emotional hyperboles, you realize that it’s really just business as usual. The economy naturally ebbs and flows and there is always bound to be good stock market days and bad ones as well. But if you are generally optimistic about the distant future as I am and are willing to make your long term investment bets today, I am confident that years from now, your investments will pay off quite handsomely.

While I keep a rather sizable amount stored away in my safe and secure FDIC insured high interest bank accounts for emergency fund purposes, the vast bulk of my savings reside in discount broker accounts – invested into a variety of long range investments. I intend to stay invested for quite a few years – at least 3-5 years before I plan to engage in any significant portfolio reshuffling. I think the market is currently at its low and that all indicators strongly suggest that there is only tremendous upside from hereon. It is certainly possibly for the market to continue getting spooked and experience a pullback, but I don’t think we are in for another financial Armageddon scenario or are on the verge of a serious economic depression – the likes of which were talked about during the early part of last year. We are definitely on the road to economic recovery – however, admittedly, the road is long, and heavily paved with pot holes and obstacles.

Cashing In and Taking Advantage Of Credit Card Rewards and Bonuses

This month I also happened to redeem a rather large chunk of the credit card rewards I’ve accumulated over the last many months – converting my various credit card reward points into usable currency – namely, gift cards. Overwhelmingly, the more lucrative card reward program I use at the present time is the Citi Thank You network, with the American Express Blue Cash program being a close second. Because I used reward credit cards to pay for pretty much everything I purchase, I tend to rack up a substantial amount of reward points in a very short period of time.

The amount of credit card reward points I had accrued after only a year of routine credit card spending was rather enormous (in my opinion) – an amount that exceeded a value of $1,500. Ultimately, I decided to convert the majority of them into gift cards to places like Marshall’s and Macy’s. I don’t go shopping for clothing very often, but I’ll probably go on a small shopping spree in the near future with my new found loot. I had the option to convert my accrued credit card reward points into a cash lump sum, but for those who are familiar with credit card rebates and rewards, the point to cash conversion rate is frequently pretty low – and you tend to lose a big chunk of your points during the conversion process. While pure cash back credit card rewards are more versatile and bypass the hassle of having to manually convert accrued points into usable gifts or rewards, I’ve found that point based reward programs tend to offer a higher purchase rebate percentage. If you don’t mind a little work or putting in a little effort towards micro-managing your points, you’re better off going with a point based reward program.

I know credit cards tend to get a very bad rap with many out there believing them to be the source of all evil as evidenced by the government’s recent crusade to regulate every aspect of how credit card issuers run their businesses. However, I personally feel credit card programs are what you make of them. If you spend responsibly and pay off your balances in full every month, the credit card usage incentives they provide can be extremely lucrative. Even those who persistently carry monthly balances are not without options – there are a variety of 0% balance credit cards and low interest credit card deals out there for the qualified applicants to take advantage of. Keep those FICO credit scores high and monitor them regularly with programs like MyFICO Score Watch like I do, and you’ll ensure that you’ll always have access to the best credit card offers according to your personalized needs.

Source URL: January 2010: Net Worth Update and Paying Estimated Taxes

Copyright Protected © 2010 Money Blue Book: Personal Finance Blog. All Rights Reserved.

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According to most public sentiment surveys I’ve seen thus far, the overwhelming consensus is that 2009 was a particularly terrible year. The economy tanked, retirement savings were largely wiped out, and home equity values were pretty much eviscerated. However, where there’s misery, there always seems to be a smidgen lining of hope. Despite most people’s vastly negative opinion of 2009, the great majority of surveys indicate a very optimistic outlook for 2010. Maybe it’s because this time around, we are no longer staring at the barrel of an imminent financial sector meltdown and hearing the ghastly doomsday warnings of a possible decade-long economic depression, but things certainly feel less dire than the same time 12 months ago.

Most certainly, while we are still languishing under the worst economic recession in decades with depressive unemployment rates continuing to climb, the pace at which the economy continues to worsen has drastically decreased. In other words, while the economy is still deteriorating, it’s worsening at a significantly slower pace than before. This is very good news for the aspiring optimists and opportunists in all of us. Most significantly, there also does appear to be tangible economic metrics emerging to back up the growing optimistic fervor for 2010. While I personally think we are still many months away from a real and sustainable recovery, I think we are decidedly heading in the right direction as punctuated by the fact that I’ve been jumping back into the stock market of late and starting to invest strongly and aggressively in long term positions again – positions that I think will pay off handsomely in the future. Previously during the very early part of spring 2009, I exited and stayed away from the market to protect myself from the effects of the irrational fear and panic that was crippling the American psyche. But with the way things are now, I am pretty confident that the worst case scenario has been averted and all that remains now is for the economy to begin its long and steady natural progression towards recovery. While home prices will almost undoubtedly not return to pre-recession levels anytime soon, home prices will most likely stabilize during 2010, leading to a positive and steady ripple effect across other sectors.

In terms of my New Year’s resolutions for myself in the financial planning and income growth department, I plan to make 2010 a banner year for my bank savings account balances and investment holdings. Now is the most opportunist time to start placing one’s bets for the distant future. Despite the mild market run up since spring 2009, stock market prices on the whole are still lagging and have not returned to pre-recessionary panic levels. If you have cash on the sidelines and have been waiting for the so-called “best time to start investing”, now is the time to start opening up a discount broker account and start investing those excess savings into long term mutual funds, or better yet – into the exchange traded funds (ETF’s) of your choice. I’ve personally chosen to invest heavily into riskier financial and emerging market funds (such as the XLF and EEM funds) to fully maximize the potential of my future gains. However, your personal investment strategy is up to you and dependent on your willingness to assume risk today for a greater payday in the not too distance future.

My Current Net Worth and Financial Status Update Compared To Last Month

Allocating Cash Savings For The Closing Of My New Home Purchase

Back in August 2009, I signed a contract for the purchase of a brand new construction 4 bedroom, 4 bathroom cottage style single family colonial home. For several months now, I’ve been patiently monitoring the construction progress of my first home purchase ever – swinging by the home lot to take photos of the inside and outside at least once every week. Most recently, the transformation from a pile of dirt to a free standing wood and concrete structure has been nothing been dramatic. With the roof tiles now in place and the windows having been installed, the home is starting to really take shape. While the housing construction is proceeding rapidly and steadily, there have been a few slow downs due in large part to the recent snow storm activity that we’ve been experiencing in the D.C. Baltimore area the last few weeks. Coupled with the time off effects of Christmas and New Year’s, construction work has occasionally stalled – but I expect things to start picking up again briskly when construction starts rolling into January.

Currently, the new home is tentatively scheduled to be completed and delivered sometime early March 2010. As such, I’ve prepared and saved up a sizable cash balance to pay towards my new home mortgage 20% down payment. With the home priced at around $622,000 (this is pretty much average for the D.C. area), I presently have set aside and reserved more than the necessary $125,000 down payment I will need for home mortgage purposes. While there have been several times that I’ve been tempted to allocate this special purpose money into various lucrative stock market investments, I managed to do the right thing and keep the funds safely segregated in their own separate bank accounts.

Funding My IRA and Opening Up A New SEP-IRA Account For Stock Investing

Most people rely on their employer’s 401(k)’s with matching contribution packages for most of their retirement planning needs. But because I am currently fully self employed with my network of online businesses and run my own legal practice from my home office, I have to depend on myself. Fortunately for solo practitioners and self employed folks like myself, the IRS provides a useful mechanism for us to still take full advantage of the tax deferred benefits of individual retirement savings accounts – namely the SEP-IRA. Because I’ve already maxed out my limited Roth IRA and Individual IRA contribution limits and desire to contribute more, I recently, I opened up a SEP IRA account with Fidelity Investments. The greatest benefit of a SEP-IRA account apart from the obvious tax deferred benefits, is that the maximum contribution limit is pretty generous – at 25% of an individual’s compensation, capped at a maximum of $49,000 for both individual tax years 2009 and 2010. Eventually, I may very well open up a few more other SEP-IRA investment accounts with other reputable online discount brokerage firms to test them all out – but for now, I’m going with Fidelity.

Relying On My Passive Online Income Streams For A Living

Unfortunately, due to several notable and rather complicated personal situations during the last few months, I’ve neglected to post on my personal finance blog and other online blogs as frequently as I would have liked to. While I’ve continued to maintain and tend to my online businesses and network of profitable websites on a regular basis, I have not really posted new articles with much regularity. But despite my lack of effort and lack of any substantial headway in the way of content creation, my online income streams continue to remain very stable (with even signs of growth). This brings me to the most powerful and compelling aspect of why I truly believe any person who is strongly self motivated ought to start blogging to make money online and not delay in tapping into the powers and limitless potential of the Internet. Because of all of the effort I had previously put into my online craft for the last 2 and a half years, I’ve built up a very substantial network of online traffic streams that remain solidly consistent despite my lack of present effort. Contrary to what most layman and blogging beginners believe, once you have built up solid search engine traffic and have earned reputational authority in the eyes of major search engines such as Google, Bing, and Yahoo – your keyword rankings pretty much stay consistent indefinitely (and dare I say it, permanently). Once you have this search engine authority built up, it’s very difficult for new blogging and website entrants into the field to supplement your existing position. This probably explains why numerous major media companies have been trying to contact me recently to inquire about potential buyout opportunities or website acquisitions. Frankly, I have very little incentive to entertain such offers as I truly enjoy the significant incomes I generate from the sites that I own, as they require very little effort on my part – but of course, with the right offers, anything is possible I suppose.

For those of you who have always thought about wanting to start blogging online to either share your  interests with the rest of the world or just to make some money on the side or even provide your family an alternative income source during these difficult and unpredictable times – now is the time to start blogging and pursuing your web business aspirations. The more you delay, the more such opportunities will gradually slip away. Carpe diem!

Source URL: December 2009: Net Worth Report and Financial Plans For Year 2010

Copyright Protected © 2009 Money Blue Book: Personal Finance Blog. All Rights Reserved.

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Whether you’re a buy and hold investor or a savvy trader of penny stocks, I’m pretty sure commissions and fees are a few of those brokerage conditions that you pay particular attention to. If you aren’t too concerned with them, then perhaps you ought to be. After all, high fees and hidden trading costs have a nasty way of surreptitiously consuming huge chunks of your potential stock gains and profits. Nowadays, there really is no reason why any investor ought to pay full price for his or her stock investing needs. There are a broad range of heavily discounted brokerage firms to choose from, each offering its own unique online trading experience and each touting its own unique mix of low fees and hassle free conditions.

If you’re not completely new to the world of investing, I recommend checking out OptionsHouse, a fairly intriguing newish entrant to the discount broker foray. While the name OptionsHouse may be unfamiliar to those not intimately plugged into investment circles, the company is a fairly established company, associated and backed by PEAK6 Investments, one of the biggest options trading brokerage companies around. Despite the “options” moniker in its name, the firm is not an exclusive options trading firm as it provides a large wealth of resources for stock trading as well.  While options trading is its primary expertise and specialty, the company still caters to the stock and fund investors out there – touting trading rates that are some of the cheapest, if not the absolute cheapest rates in the market today. At a mere flat $2.95 for each stock and exchange traded fund (ETF) trade, you would be hard pressed to find another reputable discount broker capable of matching such low commission fees for equity transactions. In the cost arena, OptionsHouse is a standout, even amongst all of the other top recommended names in my online discount broker review list.

Like most legitimately established online broker firms, OptionsHouse is a member of the Securities Investor Protection Corporation (SIPC), the non profit federal government entity tasked with protecting investors from financial harm in the event of a catastrophic brokerage failure. As such, OptionsHouse customer accounts are insured against loss and protected by SIPC insurance up to $500,000 with a variety of other protection measures in place as well. In terms of its target customer, OptionsHouse’s primary account base consists of active individual stock and options traders with some semblance of investing savviness. While OptionsHouse may also appeal to true beginners to investing, its advanced trading tools and technical analytical option analyzers may slightly intimate newbies. If you are a first time stock market investor, I’d recommend going with a more down to earth, more accessible discount brokerage firm like Scottrade, TradeKing, or even E-Trade. But if you are an active stock or options investor, Options House’s incredibly cheap stock trading commissions and low cost fees for options trades will certainly offer you immense appeal. Stock and options investors who trade frequently or execute larger than average trade sizes will have the most to gain from what this discount brokerage firm has to offer.

OptionsHouse Is An Up and Coming Award Winning Discount Brokerage Firm

While I personally don’t think one should judge or make a decision on which is the best discount broker based on the number of accolades and rewards received alone, these type of editorial recognitions do go a long way in helping investors and traders weed out the winners from the losers. Despite its fairly recent entry into the market, OptionsHouse has already earned a reasonable amount of attention from the professional reviewers – including a 4 star rating in Barron’s 2008 Best Online Broker Survey, along with a #1 ranking in the category of “Usability”. In its 2009 Online Broker Survey, Barron’s awarded OptionsHouse a 4.5 star overall, tagging the brokerage firm the “Best For Options Traders”, as well as rating it #1 in “Trade Experience”, beating out other notable brokerages like thinkorswim, optionsXpress, Etrade, and Charles Schwab. However, it will probably take a few years of such consistent performance before OptionsHouse will truly be able to unseat the current reigning champs like E-trade Financial or TradeKing – firms which have consistently ranked at the top on multiple review listings like SmartMoney’s Best Broker Survey, and Kiplinger’s annual review of the top online brokers.

Cheap $2.95 Flat Commissions Rate For Stock Trades, and Low Flexible Rates For Options

As I indicated above, OptionsHouse offers some of the lowest commission fees in the market today – adopting a primarily flat pricing model that is very popular among those account holders who want to avoid the hassles of tier based or volume influenced pricing. Currently, Options House touts a remarkably cheap $2.95 flat rate for all stock trades, regardless of the number of shares purchased, and regardless of whether the trade was executed online or with the assistance of a broker agent. I have yet to see many other legitimate brokers that can even come close in terms of pricing. The only cheap discount broker firms that can even remotely compare are perhaps the ones that offer conditional free stock trades such as Zecco. While Zecco does indeed offer an allotment of monthly stock trades for its customers free of charge, there are certain pre-qualifying conditions that must be regularly met (either the maintenance of a certain account balance or satisfaction of a certain volume of trading activity).

For option trades (the firm’s bread and butter), OptionsHouse offers its customers the flexibility to pick the rate that works best for them. Those that trade less than 10 contracts can pick the “Up to 5 for $5 rate” where their  first five option contracts are only $5. Trade over 10 contracts? You can select OptionsHouse’s low $8.50 +.15/contract rate for maximum value. You are free to change your options commission rate as your trading behavior changes to help you maximize your savings. In a comparative analysis of OptionsHouse’s option contract savings to its competitors for anywhere from 5 to 100 contracts, OptionsHouse easily beats out other top performers such as TradeKing, TradeMonster, thinkorswim, E-Trade, optionsXpress, and Fidelity Investments. Contrast that with what some of the other top name brokerages charge and you’ll understand why OptionsHouse’s prices are so remarkably cheap. For example, top brokers like TradeKing may charge just $4.95 per option trade, but they also tack on an extra $0.65 fee per options contract. Those that trade large quantities of option contracts will benefit the most from OptionsHouse’s efficient pricing structure.

When it comes to investing in stocks, ETF’s, and options – OptionsHouse is an extremely affordable brokerage choice. However, if you’re looking to trade other financial products beyond just those three such as mutual funds or bonds, you may want to be mindful of the fact that while OptionsHouse’s commission fees for stocks and options are super cheap, it’s prices for other products beyond its core base are higher. My advice is to open an account and use OptionsHouse for stock, ETF, and option trades, but go directly to the mutual fund sources for all of your other investment needs. For example, Fidelity and Vanguard are the two most popular providers of mutual funds and index funds today. If you want to invest in either a Fidelity or Vanguard labeled fund, you should open accounts with both of them directly to avoid the extra transactional fees associated with mutual fund investing.

Overview Of OptionsHouse’s Online Brokerage Account Features

Along with its extremely low cost commission fee structure for both stocks and options, OptionsHouse also offers its customers the conveniences of no maintenance fees, no minimum trade requirements, and no extra charges for broker-assisted trades (a rarity among discount brokers). Those traders and investors who trade frequently or trade large volumes of equity in one sitting will benefit strongly from OptionsHouse’s flat pricing for stocks and very competitive flexible pricing for options.

In terms of its basic account offerings, OptionHouse provides all of the usual assortment of cash and margin account types that most customers have come to expect from their online discount brokers. OptionsHouse account holders have the ability to conduct purchases and sales in transactions involving stocks, options, ETF’s, mutual funds, Roth IRA’s, Traditional IRA’s, Education IRA’s, and many more. To assist account holders, the firm provides its customers a broad range of educational resources including books, guides, webinars, calculators, simulators, and various screeners to help them take maximum control of their financial lives – and they’re not just all for options trading either. Those that want to test out OptionsHouse’s investment functions and tools but don’t wish to commit to using real funds can opt instead to take a trial run using OptionsHouse’s Virtual Trading tool, which allows an individual to execute mock transactions using what’s essentially play money. It’s a good way to get familiarized with all of the widgets and trading features that the company has to offer.

After having used my OptionsHouse investment account for some time now, I have to say that the trading platform is generally pretty intuitive and similar to what I’ve come to expect from my online brokerages. While account holders are given some limited ability to customize, such as the ability to change colors here and there, and offered the ability to tweak how various charts and graphics display information, most of the online account features are intuitively preset. The firm keeps its award winning (rated highly by online reviewers for “trade experience”) interface simple and offers an online trading platform that ought to satisfy and beat the needs of most active stock and options investors. You are of course welcome to take a video tour of the brokerage firm’s online interface for more information.

Bottom line, I would recommend OptionsHouse as a deep discount brokerage choice for stock and options trades. If you believe you will invest primarily in mutual funds on the other hand, I’d recommend opening an account with the appropriate mutual fund provider directly (example: Vanguard, Fidelity, Charles Schwab) to avoid the extra mutual fund transaction costs. Also, if you’re a relatively new investor who is still getting the hang of investing, I would recommend going with a brokerage firm that caters more to beginner investors – firms like Scottrade and TradeKing. But if you already have some background or basic experience with investing, then OptionsHouse’s incredibly low rates and transactional costs will suit you very well. At a flat $2.95 for stock trades, it’s almost impossible to beat that with any other discount online broker.

In case you still need a further incentive, for a limited time during the firm’s special promo period, OptionsHouse is offering new customers a special promotional 100 free trades during the first 60 days after a new account is funded with a minimum of $3,000.

Source URL: OptionsHouse Review: Discount Broker For Stock and Options Trades

Copyright Protected © 2009 Money Blue Book: Personal Finance Blog. All Rights Reserved.

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However, this is not yet the time to start high fiving or fist bumping each other, or be reveling in premature optimism. Rather, this is the time to start placing your financial bets in a strong, but calculated way in anticipation of an eventual economic recovery. There are still a large number of unforeseen factors and worldwide catastrophes that could easily derail the economic momentum train off its tracks. Because we now live in a global economy where all established and developing markets are interlinked and highly inter-dependent with one another, it’s crucial to recognize that there are many worldwide factors beyond our control that still have strong sway on the economic lives of those that live in the states. Certainly we can lower interest rates all we want, issue as many economic stimulus checks as the public demands, or extend unemployment benefits for as long as jobless folks need them – but if other major countries whose high expansion rates and growth we’ve been counting on to boost our own economic markets are not able to successfully salvage their situations and ensure social stability among their populace, we are likely to suffer as well. Let’s hope our federal government can continue to promote the natural worldwide growth of free markets, continue to adopt favorable tax rates, and not resort to protectionist agendas that serve only to stifle the efficient and orderly expansion of the world’s interlinked economies.

As an investor for the long term who anticipates a gradual economic recovery in the coming years, I’m particularly intrigued by the availability of powerful growth prospects overseas, especially in the so-called BRIC nations of Brazil, Russia, India, and China. A great deal of my present stock investments are focused on these developing nations as well as centered on sectors in the United States that have been especially beaten down by the 2008 and 2009 recessions such as the financials and the real estate housing stocks. While many risk averse investors continue to seek out so-called safety stocks by investing in gold, I prefer to bet on the future rather than on the short term. Flee to the safety of gold investments and buy gold bullion holdings if you must, but I’m personally placing my bets for the distant future now, rather than hiding in assets that will only offer short term security. The emerging markets, particularly China (with its ginormous billion strong population and growing appetite) will emerge from this global economic recession as the new focus of worldwide economic growth for many years to come. Whatever qualms we may have about China’s human rights track record and censorship activities are unlikely to detract from the country’s importance in our own future plans for economic prosperity. Strange and surreal as it might be to fathom – but the Communists will ultimately pull all of us out of this capitalist nightmare (who would have thunk it).

My Current Net Worth and Financial Status Update Compared To Last Month

My Financial Blogging Business Income Continues To Grow

Amidst the backdrop of Thanksgiving, I feel quite fortunate, lucky, and blessed in the income department. While the economy continues to struggle through the worst economic recession we’ve seen in decades brought on by the housing bubble and subprime mortgage crisis, my income has remained fairly steady over this period of time with just a slight bit of retrenchment. I currently generate my monthly income through a small collection of online and so-called real life sources. Only about 4 years ago I was still working a regular full time day job as an associate attorney. Not long thereafter I went through a chaotic period of my life when I jumped from one temporary legal assignment to another as an attorney for hire. There was even one brief but unforgettable period of time when I wound up as the lackey slave for a miserably oppressive female attorney who ran her solo practice like a mafia. With numerous un-fulfilling and miserable stints as a “real attorney” under my belt, about two years ago, I decided to entertain the prospect of running a solo legal practice of my own. Around the same time, I randomly and rather fortuitously stumbled upon blogging and internet marketing as a way to generate passive income online. The rest is history. Years later, I continue to work for myself, running my own small legal practice as well as running a few online based businesses on the side. While I continue to make money online by blogging and generating revenue through a variety of income producing niche sites and by earning fees through online consulting work, my hope one day is to either make everything completely self automated or sell my entire business so I can finally retire from the rat race.

Progress and Status Report Of My New Single Family Home Construction

With a recent CNN report indicating that almost 1 in 4 current homeowners are underwater, meaning that they owe more on their home mortgages than their homes are actually worth – it truly does feel like you’re potentially signing your life away when you become a new homeowner nowadays.

I recently became a first time buyer and owner of a brand new construction 4 bedroom, 4 bath single family home – and thus far, the journey from location scouting, to price negotiation, to pending construction has been a rather disconcerting experience for me. While there have been lots of great highs experienced such as the awesome feeling I felt when I walked through a beautifully constructed model home for the first time, there have been many ongoing lows as well. Lately, I’ve been plagued by a bit of buyer’s remorse, and while I don’t seriously doubt my new home purchase to a critical degree, I do wonder at times if I might have prematurely and hastily locked myself into the largest investment of my life. After all, by purchasing such a pricey home, I’m officially chaining myself to a certain geographical area and lifelong home mortgage contract for many years to come.

As I run my home business and legal practice from my home office, my living location is actually quite flexible as I don’t necessarily need to be located near public subway transportation sites for example. Thus I have occasionally pondered the prospect of living in another state or even living overseas for a short while to experience something different in my life. But now that I’ve locked myself into a new home with monthly mortgage payments to be forthcoming when the new construction home is finally delivered sometime in March 2010, it looks like I’ll be staying in the Washington D.C. suburban area for some time now.

Other persistent issues that continue to nag at me include the home’s somewhat close proximity to electrical powerlines and the home’s location away from the city center. But after having worked through these lingering doubts in my mind, I am ultimately comforted by the fact that I made a good purchase as far as real estate investments go. I purchased the home in the latter half of 2009, at a time when local and national home prices have already plummeted 20-30%, and during a time when mortgage rates are presently at historical lows and free government homebuyer tax credit incentives are abundant. Furthermore, despite what worries I may continue to have, perhaps the very most comforting aspect of owning my own home at this time is the fact that I will now have a place to call home, and can finally put an end to my formerly nomadic lifestyle of moving from rental apartment to another every few years. I will finally have a place to designate as my permanent home base, and a primary residence where no landlord or management office can tell me what I can or cannot do in my own home.

Source URL: November 2009: Net Worth, Real Estate, and Blogging Income

Copyright Protected © 2009 Money Blue Book: Personal Finance Blog. All Rights Reserved.

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To keep this stagnating economic train running, President Barack Obama has recently signed a new bill – extending the duration and expanding the coverage of the federal housing tax credit. Previously, the economic stimulus package only provided free tax credit assistance to first time home buyers and was slated to expire in late 2009. But with economists and pundits still doubting the ability of the economy to recover without additional stimulus intervention, the federal government has now officially extended the deadline of the federal homebuyer tax credit program until April 30, 2010 for new home contracts, or until June 30, 2010 for the final closing. The home’s closing can occur by June 30, 2010 and still qualify for the free tax credit, but the contract  to buy the home must be completed by April 30, 2010 at the latest. Those looking for a further extension after early 2010 might be disappointed as current indications suggest that this extension may be the final one.

To incentivize and encourage continued homebuying activity (as much of our economy is intertwined with the housing industry – example: banks, construction related services, home equity based spending), the new federal legislation will not only extend the current program’s eligibility deadline for new home buyers, but it will also add additional tax credit incentives for qualifying existing home buyers who choose to move out of their present homes and trade up for new homes. While the whole motivation behind the federal government’s approach towards providing housing tax credit assistance is to jump start and spur on sluggish housing sales, it really remains to be seen whether this will ultimately have a sustainable long term impact on the economy. Hopefully, the government’s well meaning emergency actions today won’t drive us into irreparably dire deficits and higher tax brackets down the line. After all, it’s been said that the road to hell is often paved with good intentions.

Buy A New Home Not For The Tax Credit, But Because It’s A Good Investment

As a new first time homebuyer myself, I recently purchased a new construction home in August 2009. Despite the fact my high income precludes me from qualifying for the housing tax credit, even if I qualified for it, it’s unlikely the tax credit alone would have been the primary impetus for my home purchasing decisions. In almost all of the reputable surveys I’ve seen on the subject, including ones conducted by the National Association of Realtors (NAR), only a tiny portion of first time home buyers cited the tax credit as the primary reason behind their recent decisions to purchase a new home. I think the strongest encouragement to buy a home now comes not from the federal government’s tax credit incentive, but rather from the innately driven love of the American people to own their own homes, and the current prevalence of favorable market conditions in the way of super low mortgage rates and depressed home prices that have plummeted 25-30% from their previous year 2005/2006 highs. I know the primary reason I decided to pull the trigger now and purchase a home for the very first time was not because I wanted to take advantage of any federal housing tax credit, but due to the fact that home prices in my target neighborhood have dropped into incredible lows and now sit at once-in-a-lifetime levels of affordability. For those of you who have been contemplating the prospect of buying a new home for the very first time or even for those of you who are long time homeowners pondering the idea of swapping up for a new and improved home – now may be the time to do it. The free housing tax credit carrot that the federal government is now dangling as an incentive for qualifying individuals might be just what you needed to push you over the decisional edge.

For both the $8,000 tax credit for first time home buyers and the newly expanded $6,500 tax credit for existing homeowners looking to buy a new home, there are a few restrictions in the way of income limits and what type of home may qualify. Buyers claiming the tax credit must be at least 18 years or older, and no individual or couple may receive the credit if he or she may be claimed as a dependent on someone else’s tax return. For both housing tax credits, the credit gradually phases out for individual single filers with $125,000 and $145,000 of modified adjusted gross income (MAGI). For married couples, the income range phaseout is between $225,000 and $245,000. Beyond $145,000 for single filers and $245,000 for married filing jointly couples – the tax credit is completely phased out.

How To Qualify For the $8,000 First Time Home Buyer Tax Credit

To be considered eligible, you must first and foremost be a first time home buyer – defined as an individual who has not owned a principal residence home in the past 3 years prior to the present purchase. This definition of “first time home buyer” also includes both partners of a married pair. There is some flexibility as to which tax return year the tax credit must be claimed. Under the new law as was the case under the old, a first time homebuyer who purchases a home in year 2009 may opt to claim the federal tax credit on either their 2008 or 2009 tax returns. Similarly, one who purchases a new home in year 2010 may opt to claim the tax credit on either their 2009 tax returns or on their 2010 tax returns.

In terms of how much money you are permitted to get back on your tax return in the way of tax credits, first time home buyers are permitted to claim up to 10% of the home’s final purchase price, up to a maximum tax credit limit of $8,000. One great feature of the first time homebuyer tax credit is that it’s a dollar for dollar reduction of tax liability and is completely refundable. What this means is that even if you don’t owe the Internal Revenue Service (IRS) sufficient taxes to completely offset the housing tax credit, you can still qualify for a free tax refund check of the difference. Thus if you qualify for the full $8,000 housing tax credit and ultimately only owe the IRS $6,000 in taxes – you can still qualify for a $2,000 tax refund check.

Additionally, there are a few other limitations on who may qualify for the tax credit. The first time homebuyer may not purchase the home from a descendant such as one’s children or grandchildren, and the home may not be purchased from a lineal ancestor, such as a parent. The same restriction also applies to purchasing from one’s spousal ancestors and descendants as well. Furthermore, for home purchases made after November 6, 2009, the price of the purchased home may not exceed $800,000. Homes priced in excess of that amount are not eligible for the tax credit. Basically, the government doesn’t want rich folks to profit from this middle class based credit.

How To Qualify For The $6,500 Repeat Homebuyer Tax Credit

This is an exciting new addition to the federal homebuyer tax credit program. To be considered eligible for the $6,500 existing homeowner’s tax credit, the homeowner applicant must have owned his or her current home for at least 5 consecutive years out of the past 8 years, and must purchase a new home by April 30, 2010. The purchase of the new home can include a new construction home, but the purchasing contract must be signed by April 30, 2010, and the final closing date must be on or by June 30, 2010. The income qualification restrictions are the same as that of the first time homebuyer’s credit – for single filers, the tax credit phases out between $125,000 and $145,000 of modified adjusted gross income, and for married filing jointly couples, the income range phases out between $225,000 and $245,000.

While there is no explicit requirement that the homeowner must ever pay back the $8,000 or $6,500 housing tax credit to the federal government, the obligation to pay it back does arise if one claims the tax credit but then sells the house or condominium (or otherwise stops using the home as the principal residence) within 3 years (36 months) after the purchase.

Source URL: Tax Credit For First Time Home Buyers Extension

Copyright Protected © 2009 Money Blue Book: Personal Finance Blog. All Rights Reserved.

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