Whether it’s medical benefits or free cash via a retirement account, I think many people underutilize the benefits they receive from work. I know I don’t think of using my free checkups/physicals until I have to re-enroll for the next year (coming up soon in July). Not only have you already paid for these benefits, it’ll help you live a healthier and fuller life!

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So on the front page of Yahoo! Finance there’s an article by Kay Bell from Bankrate.com titled “15 common tax-filing mistakes you can avoid” (article removed from site) that posted yesterday. Most of these errors are simply careless. It’s like when you took that arithmetic test in elementary school and did all the math in your head because you thought you were smart. You are smart… you just mess up sometimes. With Free Tax Filing (endorsed by the IRS!) and lots of free e-Filing methods, there is almost no excuse for any of these “mistakes.”

Here is the list:
1. Making math errors
2. Not including Social Security numbers
3. Not signing and dating your return
4. Not using the preprinted label and envelope from the tax package
5. Forgetting about interest and dividends
6. Forgetting to claim charitable donations
7. Not including all your forms
8. Not properly tracking your investment basis
9. Using the EZ form when a longer form could cut your taxes
10. Making the check out incorrectly — and forgetting to sign it!
11. Forgetting to bunch your deduction
12. Not taking all the credits you’re eligible for
13. Using the wrong tax table
14. Missing the deadline to request an extension
15. Not putting the proper postage on your return package

I put in red every “common mistake” that is automatically avoided as a result of using tax filing programs and using e-file. The only ones I can see that you might mess up on is not bunching your some of your deductions and tracking your investments. It makes no sense not to use a free program (you can even print out a return if you want to tempt fate and try to make errors 3 and 15) and I don’t see a benefit.

TurboTax does everything online so you don’t need to download a program you’ll never use again. (Read a review of TurboTax) Don’t want to send anything unnecessary online? Try TaxAct. Download some software and run it all locally. (Read a review of TaxAct)

There is no reason why you shouldn’t do your taxes electronically and there are at least 15 common reasons why you should.

I have a friend who is thinking about buying a boat and he’s going to have to get himself a loan. That got me thinking about the different rates for various loans. Basically, my conclusion was that the collateral you put down dictates the general range your interest rate will be. Within that range, the better the credit score and shorter the payment period, the lower the rate you can expect. For the lender, it’s all about risk mitigation. A home is better than a car, so the rate will be lower. A 750 FICO score is better than a 650 FICO score, so the rate will be lower. At my particular credit union, there are loans for almost anything these days too like for a computer, a vacation, an RV, and motorcycles. I want to see how they all compare.

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So after finding out I could read the April issue of Money magazine for free, I did. One of the good articles inside was one titled “How Normal Are You?” which basically tells you about the “Medians,” a fictitious family from which you can draw comparisons to your own. They do have a caveat: Americans don’t save enough, the Medians should really be the “Bare Minimums.” (Haha, yeah the bad play on words was my own creation) The beauty of the article is that you can compare your own statistics with the Medians in the privacy of your own mind. (Definitely read the article and enjoy the Sims-like images, it also goes into greater detail than I do below)

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A concept I recently read from a Suze Orman book in Costco a couple days ago was to “Play House” before you purchase a home. I won’t have enough time to fully play this game (it’s six months long) if I want to buy a house by the time my apartment lease is up (end of June) but I can always backtrack the game the full six months. Essentially, pay your mortgage for six months into a savings account to see if you can handle the payments. The savings account also acts as funds you can then use as a down payment and perhaps reach that 20% to avoid PMI (or a piggyback loan).

Conceptually, it’s a great idea. It’s one thing to look at your budget numbers and guess that you can cover an additional payment; it’s another actually transfer it out of your regular checking account. I’ll give it a try.

Right now it looks like the price I will need to pay for a home is around $275,000 (!!!). Suze Orman (I don’t take what she says as gospel, but it is her game) suggests that you take whatever the monthly mortgage payment is and add 40% (I’ll call it a “reality” premium). I figure 40% is a nice conservative estimate for taxes, insurance, and incidentals. Bankrate’s front page rate for a 30 year loan is 5.53% (I figure I can probably do better, my credit score is better than average) and according to their calculator I would pay $1253.28 a month if I can put down 20% (a cool $55,000; I probably can’t put down anyway). Add 40% a month and I’m looking at a payment of $1810.54. If I put nothing down and the mortgage was the full $275k, it would be $2193.24 (with the premium). Hrm… I don’t know if I can handle the second one. $1800 a month may be do-able.

Well actually, the next step is to subtract my rent and utilities… which would be around $600. That means each month I have to put $1210.54 ($1593.24 on the full $275k) away to handle that kind of loan. Worst case, we’re talking sixteen hundred bucks. Best, almost impossible case, $1200. Once you crunch the numbers, reality starts to set in… $275k may be too far away financially.

$225k? With 20% down ($45k), we’re talking only $835.57 (with 40% premium minus rent). Without the downpayment? $1194.46.

But I’ve had two friends take out mortgages for homes more expensive than $275k. Lots of people buy homes beyond their means… perhaps interest only loans are the trick (I’m not really considering those, but they do have their merits). I probably want an ARM of some kind anyway (I don’t envision being in the home more than 7 years) and perhaps the lower rate will soften the blow. 5.53% is also probably too high a rate, I can probably do better than that. But the ballpark figures should be good enough… I’ll try playing with the rules I have for a $225k home and put all the money into an ING Direct (Or Emigrant if I can ever get it opened) and see how it goes. I can handle back paying three months but it’s the future that may concern me. Wish me luck!

Let’s be honest… the average Joe Trade is awful at picking stocks. I am awful at picking stocks (don’t ever listen to my stock suggestions). Everyone I know is awful at picking stocks… but everyone knows what the hot sectors are these days right? During the Internet boom, everyone knew Internet stocks were crazy! Get in on the IPO and get rich! The problem was Joe Trader picked a stock, it tanked, he (or she) was burned, and quit trading all together. Diversification is Joe Trader’s best friend and ETFs/Mutual Funds allow Joe Trader to capitalize on the “hot sector” concept without swinging at the blazing fastball and striking out miserably. ETFs are like fast moving mutual funds because you can trade them throughout the day, whereas with a mutual fund you need to wait until the end of the day. That’s why ETFs are becoming more popular.

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JLP at AllThingsFinancial wrote about how he liked the rework of Money Magazine for April in an article yesterday, so I poked around and managed to find it available for free! (edit: so did he, I just didn’t notice, haha)

Money Magazine - Online (April 2005) (I imagine this generic link won’t lead to the April issue for too long though)

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