Personal Finance 101 Posts of the Day 4/18/07

• Web CFP talks about the tax consequences of mutual funds.
• Young and Broke talks about why young people aren’t saving.
• Credit Card Lowdown talks about 10 common credit card scams.
• Edith Yeung talks about the 7 habits of highly effective money managers.
• Money Walks talks about the difference between being frugal and cheap.

Personal Finance 101 Posts of the Day 4/6/07

• Fire Finance talks about the risks of payday loans.
• Money Walks give 10 tips on how to master your savings skills.
• Ririan Project lists 22 myths that can cost you money.
• Wealth Building Lessons talks about how to increase your FICO score.
• Saving Simply talks about why tax refunds are bad.
• Bankruptcy Law New York posts about why he hates pre-bankruptcy credit counseling.
• Money Walks talks about how to become a saver.

Refund Anticipation Loans Part 2

In January I wrote this post about how tax prep firms were getting into the Refund Anticipation Loan (RAL) business.

Now, according to this NY Times article, fewer people are making this financial mistake. Apparently the number of these loans has decreased 22.5%. All I can say is THANK GOD! These loans made me sick because they allowed people who know better to prey on those who don't. Lack of knowledge isn't a great excuse, but there is a level of trust involved when someone hires a financial professional of any sort (tax, investment, etc.). People assume that the person they're hiring isn't going to screw them over. Unfortunately that is what often happens.

The solution? Education! Education! Education! I keep talking about it, eventually I'm going to do it. I want to start a non-profit that is dedicated to getting financial education in our school systems. Until that happens though, I call on all of you! Particularly those of you who have kids. Get involved with your kids school and get the parents together to lobby for financial education requirements. The squeeky wheel gets the oil so come on people! Squeek loud!

Personal Finance 101 Posts of the Day 2/24/07

• Money Walks put together a list of the different types of taxes.

Refund Anticipation Loans

Today Personal Finance Advice posted about how tax preparers have become loan sharks. It's a great article and a disturbing trend. It takes advantage of those who don't have the knowledge to manage their own money when that group is the one that needs the most help.

Anyone who has met me or has been involved in one of my forum discussions on the topic knows that I abhor payday loan companies. They're sneaky, underhanded and take advantage of people. Their rates are usury and they only get away with it because they charge "fees" instead of interest.

These Refund Anticipation Loans (RAL) seem to be the new payday loans. Lots of states have started coming down on payday loan companies and I hope these RAL companies are soon to follow. I guess it makes sense though. Face-to-face companies have started losing a lot of business because of online filing software but hopefully they'll come up with a better solution than completely screwing the consumer. I suggest you boycott companies that offer RALs and read Boston Gal's posting on how to get DIY tax preparation software for cheap. Then you can do it yourself and get your money back quickly and cheaply.

This week in Blogs (1/14-1/21)

• JLP at All Financial Matters talks a bit about his concerns about Social Security as a follow up to comments about a prior post. It’s a divisive issue that many people don’t want to think about. Check out the comments that he’s getting. He also has a great post on how to calculate the expected return on a portfolio.
  

• Boston Gal talks about the cheapest way to get DIY tax software. She also made a great post about how having kids impacts your financial plans.
  

• At Blueprint for Financial Prosperity they take a look at historic federal tax brackets. I absolutely agree with his conclusions and have been saying it for a while. People who think that when they retire they’re going to be in a lower tax bracket are in for a rude awakening. When you take into account inflation and history it’s almost certain that rates will be higher in the future – and you should plan accordingly. Also, as a compliment to our article about why a Roth is great, here’s a post on why you should invest in your Roth right now.

Are you ready for the new financial year?

2006 is ending and it’s time to start preparing for 2007 so you can start off on the right financial foot. Here are some things you can do now to make 2007 a financially fit year:

At work:

• Increase your retirement contributions. The 2007 annual retirement contribution limit for 401(k) and 403(b) plans was increased to $15,500, so make sure you adjust your contribution levels accordingly. If you can’t max out the annual retirement contribution, at least try to increase your contribution 1% this year.
  
• Review your FSA contributions. If your employer offers a Flexible Spending Account (also called a Cafeteria or Section 125 plan) it’s a great thing to take advantage of. Try to sit down and use your budget to figure out how much you’ll need for the next year. Remember, you can now use it for over-the-counter medicine like aspirin or cold medicine and things like contact lens solution. Just don’t over estimate since if you don’t use it by the end of the year you lose that money.
  
• Double check your taxes. If you’re getting a big refund for this year, you probably need to take a look at what you’re having withheld each pay check. Your goal should be to break even at tax time and take that money you would have gotten in a lump sum at tax time and invest it monthly. If you aren’t sure how much you should have withheld, www.paycheckcity.com has a great paycheck calculator. Similarly, if you’ve had a major life change (house, marriage, divorce, etc.) that impacts your taxes you should double check that your withholdings are still correct.

On your own:

• Review your asset allocation. As investments rise and fall throughout the year they can impact your asset allocation plan. Make sure that at least twice a year you are rebalancing your investment portfolio to make sure you stay on track.
• Max out your Roth IRA . If you contribute $333/month to a Roth IRA you will have maxed it out for the year. The easiest way to do this is to set up an automatic contribution plan that will deduct money automatically from your checking account and invest it in an appropriate mutual fund. If $333/month is a bit too rich for your blood, look at the program that T. Rowe Price has that will allow you to start a Roth IRAwith as little as $50 to start and $50/contribution. If you haven’t yet maxed out your 2006 contribution you have until April 15, 2007 to do so, just make sure that you indicate that the money is for your 2006 contribution or they will credit it to 2007.
• Do a budget check. Look over your budget for the last 12 months and see if there were any unexpected expenses that you need to plan for this year and adjust accordingly. Better to save up for that license plate renewal than to get caught by surprise!
  
• Review your financial goals. Are you on track for your financial goals? Have you added/removed/changed any of them? Take a look and see where you are. Increase or decrease your savings based on any changes to your financial goals.