I saw this article about Suze Orman in which she admits she has about a million dollars in the stock market and has that much in there because she doesn’t care if she loses it all (she said that estimates that she was worth approximately $25M were “pretty close”).

She says she has about a million dollars in the stock exchange, because if she loses it all “I don’t personally care.”

Ignore the first three paragraph, they’re just gossip drivel where they mention that she has a female life partner and has never been with a man (as if that has any bearing on her credibility when it comes to personal finance advice, I have a female life partner, I’ve never been with a man, and you all still read my blog), but the last paragraph shows how ridiculous she is.

I don’t really like Suze Orman because of her abrasive attitude, some like the “tell it like it is” attitude but I think she’s taking a page out of Judge Judy’s playbook (I’d rip my eyes out before I’d watch an episode of her show, not that I’m a fan of courtroom shows like that anyway…) to make her name. Either way, would and should you go to someone for advice if they were recklessly investing in the stock market because they wouldn’t “personally care” if they lost it all?

I usually save Devil’s Advocate posts for more big time personal finance advice but with the recent spat of 0% balance arbitrage posts (of which I’ve wrote several), I felt that I should write a post arguing the potentials risks of 0% balance transfer arbitraging because you don’t see many of these out there. For those who aren’t familiar with the practice, basically you apply for a bunch of credit cards with 0% balance transfer offers, request a balance transfer check, and deposit it in a high yield savings account – pocketing the interest.

Here are some reasons why you shouldn’t do 0% balance transfers:

Universal Default = Death

Universal default is the keywords you should look for in your credit card agreement (don’t bother looking, I guarantee its in there) and what it means is that if you miss a payment, any payment on any account, you could see your 0% balance transfer offer interest rate spike up to rates as high as 30%. So if you miss a cell phone payment or a water bill payment or anything anywhere, you could see your 0% rate disappear.

Oh, and if your card does two cycle billing, you could get creamed the last two months as your 0% balance disappears but the “two cycle” math keeps it on the books. It’s a ridiculous thing but it does happen. No one has ever complained of this, I don’t have a card with two-cycle billing, so I’m not 100% sure this is true but it should be.

Your Credit Score Will Plummet

When you apply for credit cards, the bank will do a hard pull inquiry of your credit history to assess your credit worthiness. As you accumulate more and more of these inquiries, your credit score will fall lower and lower. As you request balance transfers from these new lines of credit, your credit utilization will increase tremendously and your credit score will fall lower and lower. Plus, when you pay off these debts, your credit score isn’t going to recover immediately – it takes a little while before you get back to normal. So, if you’re planning on any big purchases, this drop in your credit score will likely result in loans with a higher interest rate that will make your interest earnings look meaningless.

The Payoff Is Miniscule

Let’s say you get $10,000 in debt at 0%, you put it in a 5% high yield bank account, that means at the end of the year you’ll get about $500 for your trouble. Now, take out a fat chunk for taxes and you’re really talking about very very little (at 25%, you only keep $375, or $31.25 per month). Is that really worth all the trouble of setting up an automatic bill pay (or paying it manually) every month, double checking when the offer expires so you pay it off, and then sending a big payment?

Anyone else have any good reasons why you shouldn’t be doing 0% balance transfers just to make a few extra bucks?

The latest public security breach at a retail store comes from Stop and Shops in Rhode Island where “high-tech thieves” basically bugged the credit card swipes and stole a lot of data. Most places are now recommending you keep a diligent eye on your credit card statements for fraudulent charges if you shopped there, but I think that’s ridiculous. If you think someone has stolen your checkbook, you don’t wait until the first fradulent check hits your account before you do something about it – you cancel the checks. If someone stole your wallet, you don’t wait until they go on a shopping spree before you cancel your credit cards. So, why keep a diligent eye on your credit card statements if maybe your card was skimmed? It’s ridiculous, don’t be passive about it, be active – cancel your credit cards! Report them stolen, report them lost, just report them so the cards are deactivated and no one can use them. Don’t wait for fraud to come to you because these thieves will wait months or even years before they use the card, just to wait for the heat to cool off.

If you only have one credit card and you’d be lost without it, this should be a wakeup call that you should have at least two – so you have a card if one is every lost or stolen in the first place.

FMF is running his annual March Madness battle of the personal finance posts and has started requesting posts, I’ve decided to scour the archives to find four posts I’ve written over the last two years as my entrants. I’ll list the four below as well as a blurb about why they’re the best, let me know if you think one should be chucked and another added in its stead! Thanks!

I Hate U-Haul Truck Rental (And So Does Everyone Else)

This is one of my most commented posts and it’s about how badly UHaul tried to screw us on a move from NJ to MD a few years ago. With over 80 comments, this is basically a big bashfest on UHaul, how dangerous their trucks are and how poorly they do business. If you want to read the most vitriolic of comments (luckily not against me), this is the place to go.

How To Invest With Only $100

I was turning up the creativity bone on this particular post where I recommend ways someone with $100 could increase that to over a $1000 by taking advantage of referral bonuses from banks like ING and Bank of America and signup bonuses from Sharebuilder and the like. It was picked up by Lifehacker and quite popular with readers.

Understanding Your Financial Fortress

A fun post chock full of pictures in which I draw the analogy of your personal finances into that of a financial fortress, complete with a moat, high tower, and castle walls. It’s a unique way of looking at your finances and hopefully one in that resonates with anyone regardless of their financial situation.

25 Steps To A Wildly Successful Personal Finance Blog

A popular one with the ladies was this one post in which I outlined some steps a personal finance blogger should take if they want a “wildly successful” blog. Not everyone who follows ever step will reach wild success but many have said they’ve found this list very helpful and I’m very glad that I wrote it well enough to be of some assistance. The list itself is actually 29 items, the extra four coming as ideas after I hit publish!

So, anyone want to recommend a replacement?

So right after I wrote up that walkthrough for the Citi 0% balance transfer process, I thought I’d do the same for Discover card. The only problem is that if you want to take advantage of their 0% balance transfer offers, you have no choice but to send a check to actual creditors - you can’t get a check sent to you (something Citi does do).

So, if you’ve been thinking about giving 0% balance transfer arbitrage games a try, I recommend that you first go with Citi cards and then, after those offers have expired or are expiring, go with a Discover card offer and pay off your outstanding transfer amount on the Citi cards.

Now, you might be thinking that you can just “pay off” a credit card with a $0 balance and then request the overage back to you but that card will likely flag your account, investigate, and generally take a few weeks before they’ll send you the overage. Then they’ll yell at you for doing it because, let’s face it, that’s pretty shady. It’s much easier to just go with Citi and get the check made out to you in the first place.

Lazy Man and I Have Plasmas, We Are Not Crazy…

Lazy Man penned a post in which he talked how he owned a plasma television and how personal finance bloggers called him crazy (technically, he only supposed that pfbloggers would call him crazy) and I’m here to back him up, I’m a pfblogger who wouldn’t call someone, with a plasma television, crazy. I would call that person foolish if they put the whole thing on a credit card and planned on paying it off over the next 234908230943 years at 203984230% interest (that’s quite a bit!), but I wouldn’t call them crazy.

(Click to continue reading…)

If you’re like me, you won’t start thinking about taxes until maybe around April 1st, which is about a month and a half away; if you’re not like me and are instead smarter, more responsible, and more organized, you’ve probably started thinking about doing your taxes already. Even if you’re like me and won’t want to do your taxes until April, it’s important for you to make sure that you have all the forms you’ll need for the big day. I don’t mean IRS tax forms like a 1040, those you can get easily from irs.gov, the tax forms I’m referring to are all the 1099s and W-2s you should have already received from your employer, your banks, your brokerages, etc.

Where To Get Your W-2:

The deadline for your employer (or former employer) to mail out your W-2′s for 2006 was January 31st so if you haven’t received it yet then it was probably lost in the mail. If so, don’t panic, just request that your employer send you a new copy (you might have to pay a fee, depending on how cheap your employer is) but it will take some time so it’s important to make that request now rather than later. The W-2 form is really the only form you’ll need to include with your return.

Now, if you can’t get your employer to give you one (they’re just not very nice), you can call the IRS for help at (800) 829-1040. If that doesn’t yield any fruit (or you can’t get a copy before the due date), the last resort is to use Form 4852, which is a substitute, and you have to show that you made a good effort at getting your W-2.

Where To Get Your 1099s:

1099-INTs, MISCs, WHATEVERS, are all mailed out in the same time frame as the W-2s but there is one crucial difference between the W-2 and the 1099, you don’t include the 1099 forms with your return. That information, just like the W-2, has already been reported to the IRS and so it’s only for your use on your return (why this isn’t the case with W-2s, who knows).

The rule of thumb is that anyone who has paid you over $600 this year will issue you a 1099, so if you haven’t received it just call that person or company up and ask for a copy (if they want a fee, just have them tell you what they reported).

As for interest you’ve earned on deposits at banks, all banks will send you a 1099 if you earned more than $10 last year though they will report that amount regardless (Thanks Evan & Tom for the fix, you guys are right, my mind just skipped a beat on that one). Again, all you need to do is fill that information into the appropriate fields on your return, the form itself is unnecessary. If you haven’t received 1099 from all of your accounts, you can usually download them from the bank’s online website. Lately banks have been going the “all electronic” route so you’ll have to log into your account and print it out yourself. If that isn’t available, just stop on by a branch and ask for a printout.

This was a question posed to me by a recent reader:

Hi Jim,

I see that you’ve written a lot about sep-ira’s and I had a question I hoped you could answer, I was going to make a contribution to my sep-ira, can I deduct that on my taxes?



Thanks,

The answer is yes but where you deduct it will depend on your situation.

Self-Employed Persons

If you are self-employed, you can contribute to an SEP-IRA as either an employer or an employee. When you contribute to the SEP-IRA as an employer, you can deduct that contribution but you deduct it from your business/self-employment income. If you contribute to the SEP-IRA as an employee, you can deduct that contribution from your own income.

Not Self-Employed Persons

If you work for a business that offers a SEP-IRA, you’re going to be contributing as an employee and subject to the rules of a Traditional IRA. So, again you will be able to deduct the contribution but you will be deducting it against your own income.

So to recap, if you are a self employed and contributing as an employer, you deduct it against your business’ income (you are still subject to self employment tax). If you are self-employed and contributing as an employee or you are not self-employed, you deduct it from your own taxes.

Anyone want to add anything? (or fix something I may have gotten wrong?)