One of the best ways to negotiate a discount on a job or sale is to offer to pay for it in cash. There are a multitude of reasons why this is the case but if you ever want to knock a few dollars off, consider offering to pay in cash and see what the business says. This won’t work if you’re talking to a large national business and a salaried employee with very little latitude but it will probably work for everyone else.

Two of the main reasons why this works are totally benign but the third reason, in red below, is the biggest reason why this works and it’s along the same lines of a post I wrote in the past about paying tips in cash.

Credit cards have fees
When you pay with a credit card, the credit card company (and all the third party middlemen) extract a fee that amount to a few percent. When you offer to pay with cash, the business doesn’t have to pay these fees and so you can usually get a small deal out of it.

Financing has risk, cash does not
If you finance through the business (actually a bank or lender that has a relationship with the business), there’s an inherent risk involved because you might default on the loan. You can’t default on cash.

They can do potentially do the job or sale off the books
This is probably the biggest financial reason why a business would might give you a little discount, though they won’t say it, if you pay with cash - there’s no paper trail and they can avoid paying taxes on the income. If you view tax as an expense, such as building supplies, if you could suddenly do a job without paying 30%, you’d probably offer a discount for the job too. Unfortunately, this expense is nationally unavoidable and it’s illegal.

Now, back when I wrote about paying tips in cash, many readers left comments chastising me for recommending you pay tips in cash because you would be helping the wait staff, if they chose to, avoid taxes by underreporting their tips and thus avoiding tax. Now I pose this question to you (especially if you said paying tips in cash was ethically wrong), have you ever negotiated a deal using cash and do you see this as ethically wrong? Remember, you’re not doing anything illegal, the business owner may not skirt out on taxes, but by virtue of paying in cash it is possible that you could be enabling an illegal act (similar to the paying tips by cash, except this time you benefit too). I’m very curious to see what everyone says about this scenario!

If you have a moment, send Tricia some love as she’s going through a difficult time.

Now, onto personal finance stuff…

Nickel does a good job analyzing a mortgage refinancing offer. It’s a great post that you should read if you’re considering refinancing because often times people don’t look at the total cost to you, just the drop in monthly payment. By calculating the full cost, he saw that it wasn’t a good deal because of how the clock would reset (back to thirty years). On a slightly different note but still related to housing, Flexo discovered a tool that will help you figure out if you’re overpaying for rent. If I was renting, this tool would be crucial in the decision making process, overpaying on anything, especially high dollar things like rent, always bothers me.

FMF’s March Madness is still going on and it’s down to the Final Four, so get your vote on! Also, check out MBH’s dollar coin allowance - MBH’s been on a serious dollar coin kick lately.

On the consumerism front, JLP went to Sears lately and saw that they were fudging with their stats. If you’ve ever read Freakonomics, you probably aren’t surprised by this especially if there are incentives for coming in under time.

If you can get past the crassness, I think Jeremy’s article on burying for under $1000 is worth reading. Not knowing anything about this sort of thing, thankfully, it’s good to read it before you go through it - it’s a little less stressful now.

While not directly applicable to me, some of you may find this children’s allowance strategy insight helpful at Raising4Boys.

Lastly, SVB asks an interesting question: how much credit have you turned down? The estimate is half a million but considering how I get every single day in the mail and how I shred all of those offers, I wouldn’t surprised if it was considerably more. That’s not saying much because getting offered $5,000 credit lines a hundred times is different than getting one half a million dollar line but it’s still an interesting thought.

I received a notice in the mail yesterday from Citi stating that they would start charging balance transfer fees of 3% with no maximum ($5 minimum) starting April 3rd. Some Fatwalleters have reported getting these as well. The notice itself stated that this would be effective on the cards I already have so there’s no information as to whether no fee 0% balance transfers (and thus the balance transfer arbitraging that many people are now doing) is coming to an end but it’s certainly an ominous notice to be getting in the mail.

So, if you’ve thought about doing the balance transfer arbitrage thing, I’d get on it because the opportunity might be slipping on these. Here’s a quick hitlist of posts I’ve done on balance transfer arbitrage:

• List of cards with 0% balance transfer offers - segmented by fees (no transfer fee cards listed first), potential bonuses, and promotional period.
• My 0% balance transfer arbitrage experiences - discusses my first foray into the whole game.
• Citi Balance Transfer Request Walkthrough - is a helpful article detailing the handful of steps needed to get a Citi balance transfer check mailed to you.
• Potential risks in doing 0% balance transfer arbitrage - It would be remiss in not posting a DA post arguing against getting a 0% BT.

I was poking around Debt Hater this morning when I found her post about how she wasn’t deducting her charitable contributions to her church on the grounds that her donations (tithe) should be 10% gross, not net, and you shouldn’t be rewarded for doing it (the deduction). Here’s what she said:

My church provides every member with a receipt for the money they’ve given — in tithes and/or offerings — for tax purposes.

But I didn’t claim that on my taxes. It seems wrong to me. If you believe in tithing, you know that you tithe 10%. That’s gross, not net, because if you tithe net, then you’re paying the government before you’re paying God. So, if you get the money back through taxes, then you’ve gotten your blessing that way, and not God’s way, whatever way that may be.

The fundamental difference in thinking is probably with the perception of the deduction - DH sees it as the government giving you money (a reward) whereas I see it as you keeping your money. If you donate 10% of your gross income, you’ve actually lost 12.5% of your gross because 25% of that has gone towards the government. So if you’re paid $100, you donate $10, you’re actually down $12.50 because $2.50 of that $10 donated goes towards the government in taxes on income. The government has decided that donations are not considered income (in effect) so they let you deduct it, thus you get the keep the $2.50 because you gave away the $10 (the government is not rewarding you, you are merely paying less because you’ve in effect, out of your generosity, earned less).

Now, let’s say you still aren’t convinced that you should deduct it. If you deduct it, you can donate $12.50 instead of just $10 - thus not only are you not keeping it, you’re making your gift that much larger. Of course, now you deduct $12.50 on your taxes instead of $10 and the never-ending math cycle continues, but you get the idea.

As for the question of “Are you doing it to provide something to your community or are you doing it to hide money from Uncle Sam?” I don’t see how donating money is hiding any money because you don’t get that money back later.

DH, I think you should take the deduction.

What do you all think?

This promotion has ended.

Citi e-Savings has a hot new promotion for those of you who don’t already have (or have ever had) a Citi e-Savings account. Simply apply for a regular checking account and an e-Savings account by the end of March and collect your $50 payola. Unfortunately I can’t take advantage of this because I’ve had Citi e-Savings accounts in the past.

Also, if I had a Citi branch locally, I think I’d use the Citi e-Savings account because it’s really nice to be able to transfer in and out of an online savings account instantaneously. Right now I have ING and Emigrant and transfers out of those accounts take like four days, significantly longer than “instantly.”

Anyway, this is how you take advantage of the deal:

1. Visit Citi.
2. Click the big green Apply Now button,
3. Then scroll down and replace Offer Code CSA6 with CSKL.
4. Collect the cash!

Terms:
To qualify for Free Citibank EZ Checking, you must apply online for both a new regular checking and e-Savings Account in the EZ Checking package by 03/31/2007. Your relationship package will then be free of monthly maintenance fees and per-check fees. Charges for other account-related services may apply. All accounts are subject to approval. Offer only available for first-time Citibank checking/deposit account customers, and is valid only once for any individual.

$50 offer is only available for first-time Citibank deposit (checking or savings product) account customers, and will be paid only once to any individual. Persons who currently have or at any time have had a deposit account at Citibank (or any of its predecessor banks) are not eligible. To receive this offer you must: make a single application for both a new regular checking and e-Savings Account in the EZ Checking package and open both accounts by 3/31/07. $50 will be credited to your regular checking account within 90 days from the end of the statement period in which your accounts were opened.

Thanks to the crazy folks over at the Fatwallet Finance forums for finding this deal.

Budgets are great, they keep you in line and they help you reach the goals that you’ve set for yourself and your family. The thing is, there’s a point when the budget stops being a means to an end and they start dominating your life… and that’s when you start tracking things to the penny. Listen, if you’re going to budget, experts advise that you track everything but I’m going to give you a few reasons why you should track to the dollar and not down to every last cent.

This particular DA is a little weak in the sense that the “conventional wisdom” aspect, budgeting to the penny, isn’t something that everyone thinks you should do but merely the default approach towards budgeting. Personally I do not budget (anymore), but when I did I budgeted to the penny and felt that technique was a little restrictive. I eventually stopped in part because of reason one. So, in this respect, I am truly the Devil’s Advocate and not merely playing the role for grins and giggles.

If It’s Hard, You’re Less Likely To Keep It Up
Let’s be honest, no one likes to budget in the first place because no one wants to feel like they have to track every single thing that they do because it takes the actual fun out of doing it. Going to the movies becomes “watch a movie, oh yeah I have to put $9.50 in my budget,” and you get a little bit away from the enjoyment of the movie. Also, if you have to track every last penny every single time, you’re probably going to put it off… and put it off… and then maybe not even track it at all! You want to put as few roadblocks in the way of you and your goal, of saving money to do X or pay for Y, and tracking to the penny is a headache that is a potential roadblock.

That Level of Visibility Not Necessary or Useful
$1.05 or $1? $50.87 or $51? Let’s be honest, when it comes to your budget, tracking to the penny really doesn’t get you all that much. Depending on how you opt to do the rounding, at the absolute maximum your budget will be off by the number of transactions you have; on average, you’ll be pretty close to your actual budget. If you always round up, you’ll be off but never short, which isn’t that bad when it comes to budgeting because you’ll “find” money at the end of the month. Unless you enjoy tracking down to the penny (and there are certainly folks who do and there’s absolutely nothing wrong with that), you can see how it doesn’t get you all that much more given the added effort.

That’s Not The Point
The purpose of budgeting is to track your expenses so you know how much you’re spending and what you’re spending it on. If you’re the type of person who blows their whole paycheck and has no idea where it went, budgeting is for you. If you’re trying to find places in your spending to trim the fat in order to pay off debt or save for something, then budgeting is for you. If you just want to keep an accurate picture of where you are, then budgeting is for you. In all three scenarios, tracking down to the penny is absolutely irrelevant and likely to derail your attempts to budget. Getting “close enough,” that is within fifty cents for each transaction or any of the other rounding tricks, is good enough and likely to keep you at budgeting a while longer.

I know there are a lot of readers who budget, so please share your strategies (down to the penny? round up? round down? keep a notebook? anything you want to share!) so we can all learn!

The rule for contributing to an IRA, whether it’s a Traditional, Roth, or whatever else type of IRA you may have, has always been that you must contribute the funds before the filing deadline for taxes that year. If you want to contribute to your IRA for 2006, you must do so before the April 17th deadline (normally 15th, but this year because of holidays it’ll be the 17th) or when you actually file your return. So what’s noteworthy here? For the longest time I thought that it didn’t matter when you filed your return, you just needed to contribute before the deadline, but if you believe that, as I did, you’d be wrong - something TurboTax clued me in on. If you file your tax return on Feb 20th, you must contribute before Feb 20th, not April 17th.

Why? I’m not entirely sure why other than to prevent yourself from messing things up. With a Traditional IRA, you get to deduct the contribution from your income because you’re deferring that until disbursement, so if you were to note on your return that you are contributing $4,000 and don’t, that could result in a sticky situation. You’d have to amend your return and deal with that whole process. I don’t see a similar problem with a Roth IRA but the rules still apply.

Whatever the reason, just make sure you make the contribution before your actually file and try not to wait until the deadline (and make sure to contribute to or open up a Roth IRA!) - you never know what could happen.

So I did my taxes over the weekend and found that I had a significant tax shortfall (more than I’ve ever had as a rebate, but I see it as a good thing) as a result of not paying quarterly estimated tax payments last year. Now, I wasn’t assessed a penalty because I paid more tax than I did the year before (I wasn’t within 90% of what I owed, which is the other ‘get out of jail free’ card) but this year I will have to be paying these estimated payments in order to avoid penalties. If I hadn’t paid more than last year, I would’ve had about a hundred and fifty bucks in penalties, which isn’t bad on an absolute scale but terrible when you consider it’s a completely avoidable loss. So, here is my rough and tumble guide to calculating and paying your quarterly estimated taxes.

Calculating How Much Tax You Owe
You must make quarterly estimated tax payments on any self-employment income you earn and the process of calculating the amount of that tax isn’t tricky but does require a calculator. The first thing you need to do is to figure out what your average tax rate is, which you can find on your previous year’s tax return by dividing your income tax (line 43 on your Form 1040) by your adjusted gross income (line 37 on your Form 1040), that is your average tax rate. As a self-employed person, you need to tack on an additional 15.3% for Social Security and Medicare. Now, you take that tax rate and multiple it by your quarterly profits and that’s the amount you need to pay.

Another safe way to go about it is to see how much you paid in taxes last year, estimate how much you’ll have withheld and subtract that value from your tax paid, add some buffer to that and divide it by 4. If your business is growing, you’ll still experience a tax shortfall but you’ll avoid penalties. So, if you have a tax liability of $10,000 for 2006, your job withheld $6,000 last year, then your shortfall was $4,000. Add some buffer, say another $400, and you should send in $1,100 each quarter. That means for 2007, you’ll have paid $11,600 in taxes which is more than the $10,000 you owed last year - penalties avoided.

Paying That Quarterly Estimated Tax
As for paying it, you have two options - the 1980 way of writing a check, or the 2000 way of sending payment through the Electronic Federal Tax Payment System. I recommend the EFTPS because you won’t lose a payment in the mail but if you use a check, be sure to make out the check to United States Treasury, your social security number on the check, and include a copy of Form 1040-ES. The due dates for payment are April 15th for the first quarter, June 15th for the second quarter, September 15th for the third quarter, and January 15th (of the following year) for the fourth quarter. Obviously, keep copies of all your checks, forms, etc. for tax time next year.

Now, another question I had was whether the payments have to be equal and they aren’t required to be equal but they should. I don’t know what the ramifications are if they aren’t equal but as long as you do a pretty good job of estimating, a small deviation probably isn’t a big deal.

(As with anything you read on blogs, please consult a tax professional before you take any action)

One of the options in the Thank You reward network, Citi’s cashback and reward network, is the ability to turn your points into donations to a set of charities on a 1 point to 1 penny basis so that 1000 points turns into a $10 donation. I always wondered whether you were allowed to deduct that as a charitable donation on your tax return and today I was treated to the answer in an article about reward credit cards (Smart Money).

The answer is no. The reason is because the charitable donation is actually made by the credit card company and not by you so you can’t deduct it. In order to deduct it, you have to make the contribution yourself so you should request the cash back and then make the donation.

This also holds true for any reward programs you might be a part of, outside of a credit card company, where you can convert loyalty points into a charitable contribution. That stinks but it does make sense from a tracking perspective. Don’t let it stop you from donating though, it’s just one extra step!

On May 14th, it will cost forty one cents to mail a first class letter. Also on May 14th, you will be able to buy what’s been called the “forever stamp.” The forever stamp, which will cost forty one cents, will let you mail a first class letter no matter what the rates increase to in the future, thus it will be good forever.

I don’t send many letters and the only personal correspondence I send nowadays that even requires a stamp are cards, whether their holiday cards or birthday cards or thank you cards, it’s mostly cards. I avoid stamps by using bank billpaying services or direct debit whenever possible because, let’s be honest, while the USPS is 99.9999999% reliable, I don’t want important payments being part of that .0000001% error rate (and I’ve received some mangled letters before). The excuse of “it got lost in the mail” really doesn’t work with mega-corporations, they want their money when they say they want it.

So, how many freaking 2 cent stamps will you need and how many of these forever stamps do you think you’ll be getting? And how many people are ecstatic that you’re no longer paying for Lance Armstrong’s sponsorship in the Tour de France? (Nothing against the Tour de France or Lance Armstrong, I just think the USPS advertising on something like that, a bike race, is stupid especially when they were jacking up stamp prices and claiming loss of market share to competitors)