My First Freelance Post on Adaptu!

As yadaptu_logoou may or may not know, I am now a  freelancer for adaptu.com!  Adaptu is a similar service to Mint, but with more a community feel to it (I’ll be featuring a review of adaptu on here soon).

You can read my first post on changing banks.

This is really exciting to me, as it’s my first real writing gig! I feel like it’s a great accomplishment for me. It’s definitely a step towards earning more money on the side of my 9-5 job.

I’ll continue to post on adaptu every two weeks or so. Be sure to check out my posts and others on adaptu.

Why I’m Happy To Loan My Tax Refund to the Government

Uncle Sam empty bank (due to tax refunds!)“If you get a tax refund, you just gave the government an interest-free loan!” I seriously can’t count how many times I’ve heard people say some variation of that phrase.  You’ve heard it, too (or maybe you’re the one that said it to me).  It’s technically true. But obviously people who say this really haven’t run any math on that to see how insignificant the interest can be nor have they considered any other implications.

Let’s examine the impact that going a year without my refund had on my finances this year.  I received a tax refund of $900 for 2010.  Assuming that I placed an equal portion of this each month (which is $75) into a savings account each month and my deposits earned a generous 1.5% APY (note: I currently get 1.0%  on ING), I would have earned a whopping $7 of interest by the end of the year (which is, ahem, taxable).  Geez, looks like one less burrito at Chipotle this year.

Math aside, you could also point out that you had to wait to get the rest of your money, interest or not.  The $900 is sorta a big deal to me (it’s currently almost a full month’s pay).  But what if I screwed up my withholding and I suddenly owed $900 in taxes?  This can easily happen if you get a big pay raise mid-year or change your allowances on your W-4.  As Ramit Sethi points out, many who would owe this amount of money at tax time wouldn’t have the cash to pay their taxes.  This would definitely put a strain on my finances.  There’s potential to create a real mess with the IRS and that’s far more of a pain than whatever reward that would  .

Moving on from interest and waiting, it’s just plain fun to get a bunch of cash all of a sudden that you didn’t really have to do anything more to earn.  I don’t plan ahead for when I get my tax refund, and I don’t know how much it’s going to be.  But when I get the refund, I treat it a bit like a reward (while still being careful how I save/spend it).  This lump sum is much more beneficial to me.  I obviously survived the year without that $900.  If that $900 had been spread over every paycheck, that would’ve only been an extra $35.  I would’ve easily squandered that on one or two meals at a restaurant.  But by getting the refund as a single, large payment, I can do something much more significant with it.

This year, my refund (after I added to my emergency fund) covered my airfare to my upcoming trip to Spain.  There’s not any other easy way I could have come up with this amount of cash by trying to save or skimp throughout the year.

While it is fun to get one, I’m definitely not suggesting you just squander it.  I really like knowing that I have money that I can just put into savings or other places that I can’t always afford.

Perhaps there’s something meaningful that you pay for, too.  You could use your refund to tackle credit card debt.  Throwing a few thousand on that fire could go a long way.  Either way, I hope the tax refund haters out there will get over all the “free government loan” fussing.

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photo by: Infrogmation

Five Arguments For Self-Preparing with Tax Software

I’ve prepared and filed my taxes without the help of an accountant since I was 18 years old.  At first, I was intimidated into thinking that it was a complicated process and that I needed outside help to figure it out.  Then, I was lured in by Tax Slayer web-based tax preparation software (note: I am not paid a dime by Tax Slayer, I’m just a happy user).  I’ve been using it for more than five years now, and I keep going back. In fact, many people are doing the same with a variety of e-filing software. For tax returns filed in 2010, about 25% of returns were self-prepared and e-filed.  This is an 8% increase from 2009.

If you don’t have an incredibly-complicated tax return, here’s why you should prepare your return yourself:

1.  It’s intuitive and much easier than filing by hand.  With all the proper documents in hand, it’s basically as simple as reading instructions on a screen.  All the calculations are done automatically.  The software picks up on errors, too.  There are different “wizards” that help find areas that might lead to different deductions or credits.  I rarely run into problems, but when I do, a simple search through the help section or IRS website have given me the answers quickly.

2.  It’s cheap.  On Tax Slayer, you can e-file a federal and one state return for $15! That’s an amazing bargain to me.  Paying an accountant costs about $200, on average. There’s also more expensive tax software, like Turbo Tax, but you might get the same results with the cheaper Tax Slayer.  This year, I tested to see how Tax Slayer stacks up against Turbo Tax by preparing and comparing my refund results on each website.  Turbo Tax does have some extra bells and whistles that are convenient but not necessities.  In the end, I got the exact same refund amounts on both sites. The big difference: Tax Slayer cost $20 for federal and two state returns, while Turbo Tax wanted $109.  Obviously, I filed with Tax Slayer.

3.  You can produce the same results as an accountant.  So you aren’t a professional when it comes to taxes? That may not matter.  J.D. at Get Rich Slowly uses an accountant, but some readers question if this is necessary.

The general rule of thumb is the more complicated the return, the more beneficial an accountant might be.  For the younger crowd that doesn’t own a house or any investments, the process should be really straightforward as you probably only need to file at 1040EZ. If you don’t have many deductions, taking the standard deduction, which is $5,700 when filing as single for 2010, is definitely preferred.  If your deductions are less than this, there’s no need to itemize.  This can cut out a lot of rules and time spend looking at receipts and other records. When you don’t have many complicated tax situations like capital gains or self-employment, a tax return is simple with little room for improvement with an accountant.

4.  You can start (and basically finish) a return for free.  If you don’t like the software, you owe nothing.  If I haven’t convinced you yet, you can give Tax Slayer a shot without obligation. I tried Turbo Tax without paying this year, but didn’t end up filing with Turbo Tax after the results were no better than the cheaper Tax Slayer.  Give it a try, and if it’s not for you, you won’t be out anything more than a little bit of your time.

5.  You get a real sense for how taxes work and where you can find deductions.  Many people that I’ve talked into doing that own taxes really had no idea what different factors determine what you owe.  They had no idea how taxes were calculated and what types of deductions could be taken.  While I’m not an expert on tax code by any means, I’m far more knowledgeable that I was before I did my own tax returns.  That helps with decisions I make during that year that will have tax implications in the future.

I have to admit, since I haven’t had an accountant prepare my taxes in recent years, I have no independent verification that I’m receiving all the deductions and credits I’m entitled to.  I’ve pondered switching to an accountant, especially when I receive income from being self-employed this year.  Things can also get a little confusing when capital gains, tax lots, and dividends from investments come into the picture.  Maybe next year I’ll hire an accountant AND attempt my return on Tax Slayer as an experiment.

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photo by: jekert gwapo

Finding Financial Bright Sides of Valentine’s (Even if You’re a Hater)

As you might be able to guess, I’m in the “Valentine’s Day is a total commercial holiday” crowd.  With Valentine’s comes a lot of wasteful spending.  As this article points out, my “excuse” is one the major mistakes that men make with Valentine’s Day.  I think the core message of Valentine’s Day is a good thing: celebrating a relationship with someone you love. That said, I’ll still celebrate, reservations aside. Okay, enough of the mooshy stuff, let’s go on to what you can do if you’re like me.

1. Celebrate in a way you’ll both enjoy.  Even though my girlfriend appreciates Valentine’s Day more than I do, it doesn’t have to be a one-sided celebration.  We plan to go out to eat at somewhere that we both like.  I’m sure we’ll watch a movie or do something else special, too.  We do these things in a typically week anyway, so I’m definitely not sacrificing.  I’m sure I’ll have fun.

2. Spring for experiences instead of things.  Buying a stuffed animal is a waste of money as well as a clutter-builder.  It’s cute for about 5 seconds then it’s tossed aside.  Don’t buy things like this! Instead, go out for dinner, a show, or ice skating.  Spending on experiences instead of things can build much better memories and be much more meaningful at the same time.

3. Tone down spending without ditching Valentine’s.  The average male allegedly spends $159 on Valentine’s Day.  Whoa! That sounds excessive and unaffordable for a budget.  But even if you’re not willing to spend that much, for whatever reason, you can find plenty of things that cost less.  Find a reasonably priced (but not cheap looking) assortment of flowers, maybe add a reasonably-sized box of chocolates, and skip that damned stuffed animal!  And make your own greeting card instead of buying one. Using your own words to say how you feel costs less but is appreciated much more by the receiver.

4.  Find deals or other rewards on the things you ending up buying.  I typically buy flowers just once a year. After begrudgingly starting my online flower search, I came across a great realization: I can get rewards for purchasing flowers online.

I recently enrolled in Chris Guillebeau’s Travel Hacking Cartel, and I’ve already become addicted to earning miles (many of which can be earned without spending any money) .  After searching through the Continental Mileathon site, I found that I could earn about 1400 miles from one $55 flower purchase.  These miles are potentially worth up to $56 (if redeemed wisely).  Score!

Even if frequent flyer miles aren’t your thing, there are other deals to be had. By shopping though the Discover online store, I could have earned 20% cash back on my purchase.  There are lots of other promotions and coupons out there for flower sites, so be sure to look around.

If going out to a restaurant, check restaurant.com or buy from Groupon.com to save a few bucks if there’s a deal offered for somewhere you would go anyway.

With these methods, I managed to plan Valentine’s without being a cynic or cheapskate.  I didn’t have to make sacrifices, yet I found ways to keep from ripping a hole in my wallet.  Dare I say I’m looking forward to it?

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photo by: Beadmobile

Gen Y who?: how a new generation (supposedly) approaches finance differently

An article from Kiplinger.com about Generation Y recently caught my eye.  Laden with lists and statistics (which I am a sucker for) and dropping lines like “For Gen Yers, tattoos are common: 40% have at least one. 18% have six or more,” I couldn’t resist reading through.  Plus, I’m a Gen Yer myself, so naturally I’m interested to hear what someone else has to say about who I am.  While a lot of what I found in the article wasn’t surprising, I was surprised by (and even doubted) some of the other generalizations that were stated.  Here’s a list of statements from this article that intrigued me most:

1.  “Millennials have different expectations about their jobs and careers than earlier generations. They expect work to be fun and meaningful. Few will stick with a job they dislike just for a paycheck.”

I wholeheartedly agree that Gen Yers “expect work to be fun and meaningful” at least some point in their lives.  But I have a hard time believing that all, or even most, Gen Yers are really enjoying their jobsMore than half of Americans are dissatisfied with their jobs, and I sincerely doubt that this generation is any different.  The younger crowd may even be more disillusioned by the working world.  Those who are lucky enough to have a job may simply be sticking with it just for a paycheck.  While I think the spirit of the question is sound, I don’t see widespread action by Gen Y to find “fun and meaningful” careers.

2.  “For now, [Gen Yers are] less acquisitive than their Baby Boomer parents, steering away from what they see as conspicuous consumption.”

I’m curious about what stats are considered here.  From many indicators, credit card debt is still running rampant, even in younger generations.  I guess if we’re talking in relative terms, Baby Boomers might just have much larger debts.  But I think this statement implies a sense of frugality that may not exist on a large scale for Gen Y.

3.  “Millennials are more likely to buy based on peer recommendations. And they’re a bit more willing than older shoppers to pay higher prices to protect the environment.”

I have no arguments with this one, as it is definitely true in my life.  I live and die by the Amazon.com customer reviews.  I also happily seek out green-friendly products.  While there are certainly varying levels of devotion to this statement, it is most likely a noticeable generational difference.

4.  “Millennials are more risk averse than previous generations were at the same age. About half of their nest eggs are in bonds, money market accounts or cash.”

I’d like to see what statistics there are to back this up.  First of all, how much of a “nest egg” do Gen Yers have?  Second of all, are they sticking to bonds and cash because it’s safer or for another reason?  Perhaps they have no clue how to invest their money.  Or maybe they feel they don’t have enough to get started.  In fairness, the article points out that there hasn’t been a lot for Gen Y to be excited about as far as the stock market and other investments go in recent years.  But, if Gen Yers are intelligent and really in touch with their investments and nest eggs as the article implies, it seems hard to believe that they’d simply be content to avoid investments that have historically done well over long periods of time.

5.  “…time is more valued than money. Millennials want flexible schedules and may prefer additional vacation days to cash bonuses.”

I really like where the article is going with this one.  I most certainly agree that I, and many others, do want this.  But the real question is: are Gen Yers actually getting flexible schedules and more time from their careers? This point represents a real crossroad where desire meet reality.  Perhaps this statement indicates an increasing trend of workers that feel this way, but I’m skeptical that it’s anywhere near a reality for all at the moment.

Overall, I think this article brings up a lot of interesting desires and traits that Gen Yers (supposedly) possess.  What I’m really interested in is how successful Gen Yers will be at achieving several ideals that go against a lot of what previous generations valued and strived for.  This is what I think the goals of Gen Y should be:

1. Work less for others and more for yourself.
2. Value time more than simply money.
3. Find something you love to do for a career; if you don’t love it, don’t do it.

I certainly hope Gen Y is the generation where we don’t have to make sacrifices like working 50+ hour weeks instead of spending time with our family or holding out on hopes and dreams by staying with “safe” jobs instead.  But to change that, Gen Yers need to overcome a plethora of conventions and fear that have existed for decades.  Nonetheless, I, and hopefully many other Gen Yers out there, are ready to show Baby Boomers how to really live life.