Getting Your Tax Stimulus Check

If you’re wondering where your stimulus check is, try this IRS tool.

Update: The bill has passed, the checks will be mailed out based on this stimulus tax rebate check schedule, so file your returns (even if you didn’t need to) to get your check.

I wanted to make an addendum to the article I wrote about the 2008 Tax Rebate Stimulus package that was recently passed in the House of Representatives. There have been a lot of questions as to how much someone would get, what tax year the rules are applied to, what counts as a “child,” etc.

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First off, I think we are still too early in the game to be discussing those things because the Senate still needs to pass a similarly worded bill, the two bills have to be married, and then the President needs to sign it. Then the number crunchers have to do the math and then finally checks will be mailed out in May or June or July. The biggest of the hurdles will come in the Senate but ultimately there still are many hurdles. This “economic stimulus package” (I put it in quotes because there is fierce debate as to the effectiveness of the package) is still far from a certainty. Preparing as if it will appear in a few months would be a mistake.

Secondly, since you won’t have to do anything (you don’t file a form, you don’t call anyone), there isn’t really much you should do. If it goes through, a check will arrive in the mail one day in May or June or July and you’ll find yourself a few hundred dollars richer. If you’re just treading water, maybe that gets you some breathing room. If you’re more financially stable, maybe you put that towards some debt or pad your emergency fund. If you’re looking to make a purchase that’s contingent on getting that check, I’d wait until after it clears before swiping your card.

lastly, don’t believe the mainstream media when they say that a deal has been struck and that you will definitely be getting money. A deal was made in the House, the other chamber has yet to pass something, and Congress’ idea of breakneck speed leaves much to be desired. Do not count on this money!

 Personal Finance 

Why You Shouldn’t Time The Market

I separate the world of stock market traders (not actual market traders, I mean individual investors) into three categories: hardcore, informed, and casual. The hardcore ones are the ones who pore over financial documents, scan the news wires, and in general are practically up to the minute in terms of knowing the mind-set of the market. The informed ones are those who read read the news as it happens, may scan annual reports, may read some analysis documents, but in general are midway between hardcore and casual investors. The casual investor is the one that reads the news from time to time, generally goes with mutual funds, has a very general sense of the market, and on the whole isn’t as informed and relies, albeit unknowingly, more heavily on localized information (what their friends say, what a few of their favorite websites say, etc.).

I guarantee only a small subset of the hardcore market traders could’ve even predicted that the stock market performance on Wednesday was going to turn out that way. Before the bell, futures indicated that the market was going to collapse and the Dow Index was going to fall 500 points. Five hundred points. Would anyone have predicted that the Fed was going to swoop in and cut the federal funds rate by a whopping 75 basis points? Even after the bell, we were see-sawing around a loss of 200 points… until miraculously sometime in the late afternoon the market rallied like crazy and we ended up nearly 300 points?

You know what this taught me? You cannot time the market. As I mentioned in my 5 year stock market rule a few days ago, emotion dominates the short term because there are so many individual investors. It’s akin to how the world of poker changed when amateurs entered the tournament fields and threw it on its head. (Pros know the odds by heart, they play “correct strategy” based on those odds; amateurs don’t know the odds as well and often just try to catch some good luck and make “bad” decisions)

I cannot time the market, chances are you can’t time the market, so please don’t bother because you will find yourself disappointed, frustrated, and likely a little poorer for your troubles.

 The Home 

Verizon Triple Play: Free 19″ Sharp LCD HDTV Promotion!

This Verizon FiOS promotional offer has ended but was replaced with a promotion for a $200 American Express gift card with activation.

Verizon Triple Play Promotion: Free 19-Inch Sharp LCD HDTVEver sign up for something only to find a hot coupon or promotion after you’ve completed the process? As you may remember, I had Verizon service installed yesterday and today I discovered that they have a Verizon Triple Play promotion where they will give you a free 19″ Sharp LCD HDTV if you sign up for digital cable television, high speed internet, and phone service. I recently only got the Double Play package, which is the Triple Play minus telephone service, but I did not score a free television. 🙁

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2008 Tax Rebate Stimulus Package Explained

Money Money Money1/15: The Committee on Appropriations just released the an executive summery of the details of the American Recovery and Reinvestment Plan.

This post refers to the first economic stimulus package of 2008. You can read about the second stimulus package here.

Looks like the stimulus payments will be sent out ahead of schedule, with the 800,000 direct deposit payments on Monday April 28th, Tuesday, Wednesday, and a whopping 5 million on Friday (none on Thursday). The schedule of payments will follow the original schedule, just accelerated by a week.

No doubt you’ve heard the “great” news that a deal on a stimulus package has been reached and that checks will be in the mail as early as May. Whether you believe the naysayers that say we’re really just propping up the Chinese economy (or oil rich nations) because we’re borrowing from them to buy their goods or whether you believe the proponents that say this will boost own economy in magical ways the fact of the matter is a deal has been reached – so what is it? Essentially, it’s a removal of the 10% tax bracket for everyone with some modifications. It includes phaseouts that begin past annual incomes of $75,000 and a component that includes those working Americans that don’t earn enough to pay income taxes.

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 The Home 

Verizon: Even On Installs You Can Threaten Cancellation!

Early this month I decided to switch from one crappy cable provider to another crappy cable provider (Comcast to Verizon) in an attempt to chase the lowest rate. Well, yesterday was the day Verizon and I scheduled the install (it was nearly 20 days after the order date!) and they did the typical cable provider not-going-to-make-it-as-scheduled game… until I pulled out the trump card. Let me enjoy the fun of explaining the entire story (it’ll take like a hundred words).

They called at around 10am, saying they needed to extend the installation window from 8-noon to 8-5pm because the installer called in “sick.” I’m sure you’ll recognize this script. They called against at 2 pm saying that there was a 50-50 chance that the installer wouldn’t be able to make it today and that the next available was next Thursday. This brought back memories of what my friend said the weekend before: “Good luck with Verizon, they screwed me three times on missing installs.” (I don’t remember how many times but it was more than the acceptable number of one) Well, when they called at 2 pm and asked if I wanted to reschedule. Ha! I told them that unless the next call is “The technician is standing outside” then they don’t have to send anyone because my business is going back to Comcast. Someone showed up at 4:15 PM.

I was fully planning on canceling Verizon and upgrading service with Comcast. I even called up Comcast to get rates, setup a faux install order (I didn’t fake an order to see the install date, it was a recommendation by the CSR) so they could check the date of the order, and it would’ve been next Tuesday. So, the threat of cancellation works even if you aren’t using their service (yet)!

Does this say something about what I should expect after I’m locked in? Maybe, but all cable companies play this game so you’re dealing with the devil either way, it’s just a matter of what label is on his shirt.

 Personal Finance 

15 Year Mortgages Are 30 Year Mortgage With Extra Payments!

A reader once asked: What’s the difference between getting a 15 year fixed mortgage and getting a 30 year fixed mortgage and then paying extra onto the principal?

My answer is: nothing. Let’s do the math…

The two loans are:

  • 15 year fixed loan for $300,000 at 5.0%, vs,
  • 30 year fixed loan for $300,000 at 5.0%.

Here’s how the stats compare (based on Dinkytown calculators):
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 The Home 

Revisiting My Rent vs. Buy Analysis from 2005

Two and a half years ago, I did a quick and dirty rent vs. buy analysis prior to purchasing my home. At 3% annual appreciation, my breakeven point was approximately 8 years away. At 6% annual appreciation, the break-even point was a mere 2.3 years away. I believed the regional market I was buying into was only slightly bubbly and that 6% “seem[ed] somewhat reasonable” for an appreciation rate. Nearly three years have passed so how did my analysis stand up?

First, let’s try to establish the “actual” appreciation based on recent home sales in my neighborhood. In the three years, five homes have been sold in my little cul-de-sac (homes within two hundred feet of my front door). These homes have nearly the same configuration as mine with some minor differences. For example, none of them had fireplaces, none of them had finished basements, one of them had original 20-year-old windows. In the last six months, two of those homes were physically connected in my row of townhouses and they sold for $305k and $309k. On paper, my home was likely going to command a higher price. However, we’ll just assume a nice round conservative premium of $10,000 (for new windows, finished basement, and a fireplace) putting the value of my home at $319k. That’s an appreciation of $24k from my purchase price of $295k.

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Don’t Rate Chase High Yield Savings Accounts

The Fed just dropped the federal funds rates, a ton of banks recently dropped their high yield rates on their high yield savings accounts, and now you’re thinking about switching banks, right? Well … don’t be tempted. There are two huge reasons why rate chasing is a foolish endeavor:

  • Rates are not guaranteed.
  • You lose interest in the interim.

(Case in point, when I opened an E*Trade account three weeks ago, the rate was 5.05% – it’s only 4.40% now. That’s a drop of 0.65%!)

Rates Aren’t Guaranteed

Just because you signed up for a 5.05% APY savings account at E*Trade doesn’t mean that the rate will stay there for any period of time. These bank accounts aren’t CDs and the rate can drop just as easily as you can transfer your funds. While it’s tempting to swap your bank account for another one with a higher rate, the higher rate might disappear in a few days simply because that bank was slow to update their rates! Some banks anticipated the Fed rate drop and lowered their rates, other banks will wait until after the Fed move to shift their rates, you have no guarantee which one your prospective bank is. Banks can and will lower rates to as low as they are able to get away with so chasing is never as valuable as you think it is.

Interest Lost

When you transfer the funds between two accounts, you lose the interest that would’ve been earned during that time. The transfer usually will take about a week so that’s 1/52th of your interest gone. While that may not seem like a lot, you start moving your funds around every few months and that 1/52th becomes 1/26th, then 1/13th… you get the picture.

So, let’s say you still want to rate chase, is there anything you can do to ensure the rates stick? No, but you can do the next best thing, start analyzing their CD rates and consider putting some funds into those. What I do at ING is ladder my CDs in $500-$1000 increments such that I create a psuedo-liquid situation (click thru for an explanation of CD laddering). The laddering gives me some downside protection against a big rate drop and you should be looking for something like that. For example, right now I have several CDs in the 4.90% to 5.25% range – the ING rate is currently 4.1%.

So if you want to chase, look for banks that will let you take a no-minimum CD with a decent rate so you can give yourself some protection against a drop.

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