Brother Can You Spare A Minute?

Family can be a great source of wisdom when it comes to financial matters. I’ve been very fortunate that my family (for the most part) has provided me with excellent advice and models of behavior when it comes to money. Not all families are perfect; I have a friend whose family provides some great models of what not to do. Even there, being mindful of the implications of those choices helps us to shape our own financial choices and future.

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Normally, determining if you can claim a child as a dependent is relatively easy when filling out your IRS tax forms. But like most things tax related, the answers aren’t always simple. In my case, even though my son spends more than 6 months a year living with me I won’t be claiming him as a dependent this year on my tax return. As part of my divorce settlement I agreed to allow my ex-wife to continue to claim our son as a dependent on her taxes. However, the divorce decree alone is insufficient to allow my ex to claim this exemption. To do this my wife also needs me to complete a copy of “Release of Claim to Exemption for Child of Divorced or Separated Parents” otherwise known as IRS Form 8332.

Currently congress is debating an economic stimulus package which centers around an $800 (individual) or $1600 (married filing jointly) rebate. The intent being that taxpayers will take this rebate and put it back into the economy.

So we at 60 Second Finance have two 800 dollar questions for you:

1. What will you do with the $800 of your own money the government is so graciously giving back to you?
2. If giving back $800 they took in taxes is good for the economy, why did they take it in the first place?

I’ll answer this question for myself in the comments section below. Please leave your thoughts as well.

When you think about financial matters are you overcome with dread? Do you get a giant knot in the pit of your stomach when you think about trying to pay off your credit cards? Do you panic when the phone rings and check caller ID against your known list of bill collectors? Is there a pile of unopened bills sitting in a drawer so that you won’t have to think about them right now? [Read more →]

As parents we want the best for our kids. We want them to grow up to be happy, successful and well adjusted. We spend money on clothes, food and activities for our kids every day. But how many of you are investing on your children’s behalf today? The laws of compounding interest make this one of the best things we can ever do on our child’s behalf. By investing early we give them a running start at a sound financial future.

Ignoring tax implications for a moment, did you know that if you invested $2500 for your child the day they were born and it achieved a 10% annual return on investment that at age 65 your child would have over $1.2 million? That’s without you or them ever having invested another dime towards their retirement. [Read more →]

J.D. over at Get Rich Slowly has a book review of Growing Money: A Complete Investment Guide for Kids. Based on his review I’m going to pick up a copy for a friend who has several small kids (it’s a great cost per kid value) and if I like it as much as he did I may pick up additional copies to send to my niece and nephews for Easter.

Teaching kids about money is an important responsibility and there are far too few resources to aid parents. It’s great to see a good book on the topic. Once the initial copy arrives, I’ll post a review with my thoughts on it as well.

Identity Theft is an epidemic in the United States affecting over 10 million people a year to the tune of $5 billion. This has given rise to a fast growing industry to protect consumers from identity theft. Probably the best known company in this space is LifeLock. Lifelock claims to be the most effective identity theft prevention method available today, proactively preventing id theft rather than simply notifying the victim after the damage is done.

For victims of identity theft, repairing the damage can take months or even years. Identity theft can cost you job opportunities, loans and better interest rates. 10 million victims a year and in an election year I’ve not heard a single candidate even broach the issue.

Interestingly enough, identity theft is primarily an American problem. In Europe, identity theft is almost a non-issue. The primary reason for this is that their retirement account numbers are not used as global identifiers. That, combined with very strict data privacy laws which prevent organizations from sharing or selling consumer information greatly reduces the risk to consumers.

What can you do to protect yourself from identity theft?

• Shred all credit card offers and other documents with personally identifying information.
• Secure your mailbox or get a PO Box.
• Pay cash or with your credit card in hand (to prevent credit card skimming).
• Protect your Social Security number.
• Know who you’re dealing with when you give out personal financial details.

TrustedID Protects Your SSN from Identity Theft. Click here for more information!

Groups and individuals go on strike to make a point. Going without food or going without a paycheck? That’s some serious commitment. Are you committed to getting your spending under control? Consider undertaking a spending strike. One of the things that I’ve learned is that it is easy to fall into bad habits and much harder to develop good ones. A spending strike might seem to be a pretty extreme solution to a problem, but it’s the very nature of the idea which makes it so effective.

So what is a spending strike? When you undertake a spending strike, you stop spending money. Period. The benefit to doing this is that you get out of the habit of spending money. Open up your checking account statement and figure out the total number of withdrawals. Divide that by the number of days in the statement. How many times a day on average are you saying ‘yes’ to spending? On the peak day in my last statement I said ‘yes’ to spending 15 times. 15? What the hell was I thinking? And one of those was a cash advance which probably led me saying ‘yes’ 2 or 3 more times. Like I said, bad habits are easy.

Stop saying yes to spending and go on strike. The length of time one can undertake a spending strike is going to vary by person, but for the purposes of discussion let’s consider a 2 week strike. Undertaking a spending strike to improve your financial health shouldn’t damage your financial health in the process, so there’s some preparation work that needs to go on before you begin.

Before you begin:

1. Identify all recurring bills which will be due during the strike period and pay them now or schedule payments.

If you rent, electric bill and car payment will be due in the next two weeks go ahead and either pay those now or schedule their payment. If you can pay them now, I recommend doing that. One of the advantages to that is that if you can view your checking account and credit card statements online, if any transactions do occur during the strike they will stand stick out like a sore thumb.

2. Stock up on food.

You need to eat right? A spending strike means no eating out unless you’ve got a gift certificate you hadn’t gotten around to using. I normally go to the grocery store 2 or 3 times a week (I live across the street from one) so buying 2 weeks worth of food is a pretty big change for me.

3. Fill up your tank.

Unfortunately you still need to go to work during the spending strike. I know it sounds crazy but just because you’re not spending any money doesn’t mean that you can get paid for sitting around. If you are going to need to fill up during the strike, that’s unavoidable. However, don’t buy anything else at the convenience store and do your best to eliminate any non-essential travel (you’re spending gas money on those trips right?). Consider riding the bus or car pooling during your strike. Who knows, you may find that riding the bus is a nice alternative and carry that habit forward after the strike.

4. Put away your cards and cash.

Keep a single card in your wallet along with an emergency cash fund. Unexpected expenses can come up and need to be dealt with. The goal of a spending strike is to break bad habits not punish ourselves. So if something comes up that needs to be dealt with, deal with it.

5. Grab a notebook to record your observations.

Every time you would have spent money on something make a note of it. Record what it was and how much it would have cost. Also take some time to record your thoughts about the strike or idea you have for saving money on an ongoing basis at work.

Morning latte $4
Lunch with Bob in accounting $12
Surfing magazine $5

6. Have fun.
Really.

When you’ve finished your strike, drop me a note and let me know how it went. I’ve done this exercise a few times and have learned something new each time.

The Washington Post has an article about the employment outlook for highly skilled workers and it isn’t particularly encouraging. The basic jist of the article is that highly skilled workers are finding it more difficult to obtain a new job and when they do find one it is often for less than what they were making at their previous position.

In such uncertain times, it might make some worry about the future may hold. But worrying doesn’t put food on the table or pay the rent. If this news concerns you, do something about it. The best thing you can do is to put together an emergency fund. Typically financial advisors recommend a cushion equal to 3 months of your current salary. Some of you might be choking on that. 3 months?! I haven’t got 3 days. The good news is that it’s never too late to start saving to provide protection against a layoff. Analyze your finances to determine how much you can save and what, if anything, you can cut out from your budget to increase that amount. Then put that amount aside and continue to do so until you have a sufficient nestegg put aside to cover. It won’t assuage your concerns today, but like most things money related, doing the right thing over time gets you to a good place.

At the same time you are doing this, consider taking advantage of any opportunities you may have to improve your skills to make yourself more marketable (especially if your current employer will pay for them). I’ve been taking free online classes from Microsoft lately for example. Additionally I’ll be attending a training course this spring to tighten up my core skill set.

And finally… start refreshing your network. You don’t need to start reaching out to friends and family for a new job, but it never hurts to touch base with people you haven’t spoken with just to see how they are doing. I make 2-5% of my income each year though small projects which come from my network. It’s not a large percentage of my income by any means, but at the same time I’m not actively soliciting work… things just occasionally drop in my lap. Making sure that my network is up to date is therefore not just good on a personal level, but also on a professional one as well.

Its funny sometimes how easy it is to overlook the real cost of free. At my office we have free soda. It’s free. I can have as much as I want. Hell, at least once a day someone offers to bring me one so I don’t even have to get up to get it. Did I mention it’s free? I did some math last night and figured out that the free soda at work is costing me over $400 a year. How? Before I came to this job I had kicked the soda habit. Now I buy a case of soda a week (my son drinks some of that to be sure, but I wouldn’t buy it if I didn’t drink it). And where I used to normally just drink water when I went out now more often than not I have soda. I’ve been at this job for 6 years, so that’s over $2,400 in soda. I admit that no one forces me to buy soda outside of work, but it’s a habit and habits tend to carry over.

The same thing is true for all the free offers we’re bombarded with daily. Free copy of your credit report from your credit card company? Read the fine print to see that you’ve just signed up for a credit monitoring service @ $3.99 a month.  Sure there’s a ‘30 day out’ on the service, but if you forget that free report costs you $3.99 until you remember. Just remember anytime a business is giving you something for ‘free’ there’s a reason and a cost. Make sure you understand the cost before you decide to take them up on their offer.