Your Take 
19
comments

Your Take: Splitting Checks

Reading this brief post on Alpha Consumer on money etiquette brought on a thought about a weekend several weeks ago with a bunch of friends. I spent part of Saturday afternoon at a local Baltimore bar called Lime drinking some margaritas with some of my friends, BS’ing about the week, and drinking some more margaritas. (That place has this thing called a Birdbath, three margaritas in one huge cup/bowl for $13… can’t beat it) Anyway, several hours later we go to split up the check and somehow the bill is short. Short by a lot. We eventually figured out that it was just that someone had left and misjudged their part of the bill and everything was settled later on, but it got me thinking about how splitting checks always seems to end badly 9 out of 10 times.

I’m a fan of splitting checks evenly as long as it’s reasonably equitable. If one person gets a rack of lamb and a bottle wine while another person gets a grilled cheese sandwich, then splitting the check evenly just isn’t going to be fair. However, in cases where it’s hard to gauge who got what (like at bars, which are exasperated by a larger crowd), I think splitting it evenly just makes it easier to take care of. Ultimately, if the difference is a few bucks, I would argue that most people are okay with overpaying a few dollars.

However, you almost never have the case where the inequity is so apparent. If there are two people and one person gets lamb and another gets a grilled cheese, I would hope the person with the rack of lamb wouldn’t be so obtuse that they would ask to split the check 50-50 (if they are, I recommend never eating with them because they obviously suck). It’s always something a little grayer, like 10 people and everyone is about the same and 1 person got there late (or something like that). In those cases, I think it’s fair for that one person to pipe up and say “Hey guys, I got here later and I only had one margarita, I think that should run me only about $x.xx.” Hopefully no one is looking for a free ride, it’s just a matter of simplicity.

What’s your take on this sticky wicket? Is the onus on the person who should pay less or on the person who obviously got the more expensive drink or meal? A little of both? I realize it’s one of those gray area type questions with no real answer but I’m curious what all of you think.


 Banking, Credit, Debt 
8
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Pay Day Loans Have Equally Bad Financial Friends

Pay day loan shops (and cash checking and other similar short term loan shops) are often singled out as places that prey on consumers in a tight spot. While I don’t dispute that, I want to point out other places that also prey on consumers in a tight spot that don’t often get the spotlight.

Pay Day Loans Are Bad

Don’t get me wrong, pay day loans are horrible products for consumers because of their high fees, high interest rates, and their propensity to become financial sinkholes. It’s the financial version of someone going in for a routine cavity filling and coming out with a lobotomy. You just need a little extra help to get you to the next pay day but end up paying for years. According to this warning by the FTC, they give an example in which “the cost of the initial loan is a $15 finance charge and 391 percent APR. If you roll-over the loan three times [42 calendar days], the finance charge would climb to $60 to borrow $100.” $15 to start and 391% APR is horrible but let’s compare to some of these other products.

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 Personal Finance 
10
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Wow, Another Reason I LUV Southwest

Right now we’re sitting on a two hour layover in Oakland, CA on our way to Hawaii for our honeymoon. Our trip thus far has taken us through Kansas City on Southwest and we were reminded once again why Southwest is easily my favorite airline. We were the only two people on the flight from Baltimore to Kansas City that would continue on to Oakland and we arrived ten minutes early so we had some time to chat with the flight crew. They asked us where we were going and my wife said we were flying onto Honolulu for our honeymoon. They said their congratulations and we thanked them, everyone smiling all around, and we thought nothing of it. A new flight crew came on board to help the first flight crew clean up and then we were on our way. About five minutes before we were to land in Oakland, the a member of the flight crew came on the PA and said “We wanted to congratulate two of our passengers who recently got married, everyone please give them a round of applause!” There was clapping all around, some more congratulations, and then one of the crew walked over and gave us a bottle of Korbel champagne!

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 Business 
3
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Contracts Are About Understanding, Not Trust

There was once a time when a handshake and a person’s word were all that was needed to formulate an agreement. If promises were broken, the only recourse was through thoughtful deliberation and six shooter. Okay, I’m just romanticizing the Wild West but I do think the point still holds true. Nowadays you see contracts here, signed documents there, notarize this page and initial there. When push comes to shove, contracts are scrutinized every which way and even English grammar comes under fire. However, when all is said and done, it ultimately comes back to building relationships, reaching an understanding and then putting it on paper.

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 Banking 
41
comments

Endorsing Checks With Two Names After Marriage

As many of you know, I recently got married to the love of my life (awwww!) and had a wonderful wedding and reception this past weekend. Everyone had a blast, we had a blast, and all in all I think the entire weekend went very very well considering the magnitude (both in size and importance!). Anyway, with a wedding comes gifts and some gave a gift in the form of a check.

Why is this worth mentioning? As you can probably tell from the title, the tricky part was in the fact that the checks were made out to my name and my wife’s name. That, in and of itself, is not big deal except they put it in my wife’s new (and, dare I say, better) name, which is not the name on our joint account. So, in the eyes of both the state and the bank, one of the person’s listed on the “Pay To The Order Of” line doesn’t actually exist. So, what were we to do? There are in fact two solutions.

Change Account Name

One solution is to change her name from her maiden name to her new (better) name and all we need for that is the marriage certificate. With the account name changed, she would simply sign the back of the checks in her new name and be done with it.

Double Endorse The Check

The other, far easier, solution would be for her to sign the check twice: first with her new name (name on the check), then with her old name (name on the account). While this struck me as a bit shady, it seemed to be the typical result. If the two names were in fact two different people, this is how we would’ve signed the checks to deposit them into the account. When she signed her new name, she was endorsing the check for deposit anywhere (you can write, “For Deposit Only” on the check to force it into an account your name only). It seemed tricky but the Bank of America tellers (two at two different branches) seemed to think that was business as usual and an accepted practice. Either way, no one will be disputing the deposits so it’s no big deal either way.

After those shenanigans, I needed to sign the check in order to deposit it. If a check has two names (with an “and” between them, rather than an “or”), both have to endorse the check before it can be cashed, deposited, etc.


 Shopping 
19
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Rebate Shenanigans & Ethical Gray Areas

I have an interesting “ethical” question for you all, especially given the fervor over the Costco return policy.

I recently purchased an Epson Home Cinema Projector that came with a $300 rebate and a free bulb rebate (worth nearly as much). One of the quirks about the rebate was that you had to mail it within thirty days, rather than the typical static time limit that was ignorant of when you purchased. As you can imagine, what happened was I got all excited with the projector and forgot to mail the rebate within the 30 day limit. I did exactly what the manufacturer wanted, I purchased the project at the “list price minus the rebate amount” in my mind but I actually paid full price. It’s been a while since I’ve made a $300 mistake like that, one that could be chalked up to carelessness and laziness rather than circumstances that were less within my control.

My solution to this was something that some may find unethical (or at least gray) but I didn’t see a problem with it. I purchased another Epson projector and then submitted that receipt with the other documentation (UPC code, serial number) so that I’d be compliant and the rebate was approved. The only cost to me was shipping the second project back via UPS Insured; it set me back around $60. All in all, the added hassle netted me $240 and a free bulb.

While I feel that was certainly in the gray area (submitting a receipt that didn’t technically match the UPC), I personally found that to be on the good side of the ethical line. I returned the project in exactly the same condition that it was sent to me and Amazon wasn’t out anything (maybe shipping fees) and I received a rebate I was rightfully entitled to (I did buy the projector, I just missed the 30 day window by a few days). And I was certainly on the good side if you consider how quickly rebate fulfillment companies are to screw the consumer at every opportunity!

What do you think?


 Personal Finance 
11
comments

Investigating A Error On My Equifax Credit Report

When the Federal Reserve lowered the target federal funds rate last week, lots of people started inquiring about refinancing options to see if they could get a better loan. I was among the crowd. I requested refinancing information through LendingTree and fielded a few offers before deciding that refinancing was not a viable option for me at the moment. One of the lenders pulled my credit and Equifax was obligated to tell me about it.

I learned that my score was a 643, not surprising that it’s not an awesome score because I recently closed out some balance transfer arbitrages, but the listing of items that adversely affected my score did concern me:

  1. 78 – Serious delinqncy, derog, public recd or collection with balance
  2. 58 – Insufficient length or lack of credit history
  3. L – Length of time since legal item filed or collection item reported
  4. F – Prop. of bal. to high cr. on bk rvlvng or all rvlvng accts
  5. Y – Inquiries impacted the score but not significantly

Items 2 isn’t much of a concern overall and items 4 and 5 are certainly related to my balance transfer arbitrage days, but what about Items 1 and 3? Legal item? Collection item? Delinquency? This calls for a trip to the Equifax for a copy of my credit report (my one freebie each year) and a side trip to their Equifax Online Dispute page.

After reviewing my account, there was one entry in the Collections category for an account with “PPL ELECTRIC UTILITIES,” a power company that appears to be located in Pennsylvania. About a year ago I cleared up some errors on my credit report from another bureau for a cell phone that wasn’t mine, an social security number linked to my account plus some address history; could this be a leftover from that account? It appears so.

What’s infuriating is that the other SSN was identical except a six was replaced with a zero and Equifax felt it was “close enough” to link to my account! I don’t understand why it didn’t have to be an exact match. Anyway, I submitted a dispute and we’ll how quickly they can get that resolved.


 Taxes 
7
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Adjusted Gross Income and Modified Adjusted Gross Income

With the recent passage of the 2008 tax stimulus package, many people have been asking what their adjusted gross income is and how that differs from their take home pay, their salary, and the other similarly named modified adjusted gross income. The differences are pretty simple once you understand the motivations behind it but it’s easy to confuse many of them together.

First off, you salary is the pre-tax amount your employer pays you to work for them. Next, your take home pay is your salary minus any deductions you may have for health insurance, retirement plan contributions such as a 401(k), taxes, and any other adjustments. Your take home pay is the dollar amount that gets written on the check (or is deposited into your bank account). Your salary is what you tell your parents when you get a job (it’s bigger). :)

Why is this important? The AGI and MAGI are often used to determine if you are eligible for certain benefits, deductions, etc. For example, the MAGI is used to determine contribution eligibility for IRAs such as the Roth IRA.

Adjusted Gross Income

According to the IRS, your AGI is all taxable income you earn including the following categories:

  • wages,
  • salaries,
  • tips,
  • taxable interest,
  • ordinary dividends,
  • taxable refunds, credits, or offsets of state and local income taxes,
  • alimony received,
  • business income or loss,
  • capital gains or losses,
  • other gains or losses,
  • taxable IRA distributions,
  • taxable pensions and annuities,
  • rental real estate,
  • royalties,
  • farm income or losses,
  • unemployment compensation,
  • taxable social security benefits,
  • and other income

minus

  • specific deductions including educator expenses,
  • the IRA deduction,
  • student loan interest deduction,
  • tuition and fees deduction,
  • Archer MSA deduction,
  • moving expenses,
  • one-half of self-employment tax,
  • self-employed health insurance deduction,
  • self-employed SEP, SIMPLE, and qualified plans,
  • penalty on early withdrawal of savings, and
  • alimony paid by you.

Some argue that this is what appears on your 1099 or your W-2′s, but that’s not entirely accurate (self-employment tax isn’t even within scope for a 1099). The full list above is comprehensive and provided by the IRS so that’s the official story (source). Note one important item(s) missing from the “minus” list, the standard deduction or any other itemized deductions (like mortgage interest).

Modified AGI

How does the MAGI differ? You simply take your AGI and exclude the following (source):

  • Any passive loss or passive income, or
  • Any rental losses (whether or not allowed by IRC § 469(c)(7)), or
  • IRA,
  • taxable social security or
  • One-half of self-employment tax (IRC § 469(i)(3)(E)) or
  • Exclusion under 137 for adoption expenses or
  • Student loan interest.
  • Exclusion for income from US savings bonds (to pay higher education tuition and fees)
  • Qualified tuition expenses (tax years 2002 and later)
  • Tuition and fees deduction
  • Any overall loss from a PTP (publicly traded partnership)

Relationships

So your MAGI will be higher than your AGI but smaller than your gross income. Your gross income will be your salary plus any other income, passive or active, and thus larger than MAGI or AGI (since they include subtractions for certain items).

Why is this important?

Knowing what makes up these numbers is important because those values will dictate what you are permitted to do, tax-wise. The best example is with a Roth IRA. If you file as a single and your MAGI is under $99,000 for 2007, you can contribute the maximum $5,000. If your MAGI is between $99,000 and $114,000 then your contribution is phased out (Roth IRA contribution phase outs). If your MAGI is over $114,000, then you can’t contribute to a Roth IRA.

So, if you know you’re within those phaseout ranges, you might want to contribute a little bit more into the 401(k) so you can take advantage of the Roth IRA. Since you know what makes up the MAGI calculation, you would be well informed and smart to do that (if you wanted to contribute to a Roth IRA).

There you have it, AGI and MAGI, all wrapped up in a pretty little (and somewhat complex) bow.


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