Frugal Living 
6
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Understand the Five Love Languages

Valentine’s Day is tomorrow and it’s a day when many men and women will spend hundreds or thousands of dollars on gifts, activities, and other acts of lavishness in the name of love and affection. If you’re one of the many procrastinators out there, you probably will pick your gift today. However, have you ever considered that the object of your affection has no interest in objects whatsoever? Have you considered that he or she may actually prefer quality time over a trinket? What I’m talking about is a concept known as love languages and one that my friend Fred (who writes at a home improvement blog called One Project Closer) mentioned to me today. The concept of Five Love Languages was popularized by one Dr. Chapman and you can discover your love language in a mere thirty seconds (it’s actually far quicker).

So, why am I writing about this? So many people erroneously think that gifts are the way to a person’s heart, by this I really mean mostly men (but some women). A lot of guys think that if they spend a lot of money then they can get away with something last minute that requires very little thought. I know a friend who, when he thought his girlfriend would be upset, just ran off and bought a bathrobe and some perfume for her (I have no idea if it worked but it did cost him $60). For some people, that works. For others, it’s never going to work. Understanding the love languages is crucial to ensuring that you’re spending money and effort in a way that the recipient will fully appreciate and react favorably to.

Now, back to the five love languages. They are:

  • Words of Affirmation – People who speak this language respond most favorably to words of encouragement, compliments, and other acts of verbal kindness.
  • Quality Time – People who speak this language respond most favorably to spending quality time with their loved ones.
  • Receiving Gifts – People who speak this language respond most favorably to gifts and visual symbols of love.
  • Acts of Service – People who speak this language respond most favorably to favors and things that their partner does on their behalf, regardless of size or significance.
  • Physical Touch – Vavavoooom baby. :) Actually, it’s more than that but you get the idea.

How do you apply this? Well, if you know that your partner responds more favorably to acts of service, then you know that buying him or her a lavish gift just isn’t going to get the results you want. If your partner wants quality time, give him or her quality time… not high fives or a congratulations on a job well done. And if your partner wants physical touch, heck it’s Valentine’s Day, touch them. :)


 Personal Finance 
25
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How To Become A Millionaire (In 6 Easy Steps!)

Becoming a millionaire used to be hard back when gum was a penny and comics were ten cents. Now that a pack of gum costs a buck and comics suck, becoming a millionaire is much easier but still a laudable goal. Don’t believe me when I say that becoming a millionaire is easy? I’ll give you six easy steps that, if you have the diligence and the discipline to discard the temptations of a world filled with easy credit and consumerism, will leave you a millionaire. $1,000,000 buckaroos. If you don’t follow them, you’ll likely have to start a dot-com that Google will buy or work 16 hour days and climb that corporate ladder (that’s if you don’t hit some glass ceiling because you’re not in the old boys network).

Many of these ideas are so simple the could make you crazy. None of them are sexy. None of them have you racing down the autobahn in a convertible going 150 MPH. None of them have you throwing dice in Vegas and none of them involve games of poker against James Bond. That’s part of the reason so few people do them… that’s exactly why if you do them you will become a millionaire.

(Click to continue reading…)


 Personal Finance 
10
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USPS Price Hike – Stamps to 42 Cents

Looks like it’s about time to start buying those Forever Stamps now! The United States Post Office announced today that they’ve decided to current stamp price by a penny to forty-two cents, effective May 12th. Less than a year ago the USPS increased the price of a first class postage stamp by two cents to the price of 41 cents, all within its newly granted rights of being able to increase it within the rate of inflation.

With inflation at 2.9% last year, the USPS was allowed to increase the price of a stamp by a penny without any oversight as long as they give 45 days notice (they plan on giving 90 days). I don’t know why anyone (or even businesses) would need 90 days to react to a price hike but I guess that’s considerate of them.

Here are other notable increases (or unchanges):

  • Each additional ounce of a letter will remain an extra 17 cents (no change).
  • Cost to mail a postcard increases to 27 cents (+1 cent).
  • Large envelope of up to two ounces will now cost $1 (+3 cents).
  • Money orders up to $500 will remain $1.05 (no change).
  • Certified mail will now cost $2.70 (+5 cents).

If you haven’t picked up a few of those Forever Stamps, now’s a good time to buy some. I hardly mail any letters nowadays, mostly cards, and I probably won’t be getting any of Forever Stamps myself (too many leftover stamps from the wedding invitations and RSVP cards). I think that the USPS needs to rethink its strategy if it really wants to remain competitive in the shipping game. However, based on the behavior and performance of the staff at most post offices I visit, it’s clear that competitiveness is hardly a concern (government subsidies don’t hurt either!). :)


 Education 
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Take Advantage of Education Reimbursement

If your employer offers any tuition reimbursement and you’re not taking advantage of it, you’re leaving a tremendous amount of value on the table each year. In the two jobs I’ve had since graduating college in 2003, I’ve been lucky enough to be offered the opportunity to pursue higher education in return for sacrificing some of my time. At my first job, every educational dollar I spent was fully reimbursed (you were only allowed to take two classes a semester, or six a year) with no requirements afterwards. In my second job, I was afforded $5,000 a year with some continuation of work requirements. Through both programs I was able to get a majority of my MBA paid for (ooooh, an MBA!). In both cases, I took advantage of them to the fullest extent possible and if you have this opportunity, you should too.

Time on the Side of Youth

I can understand if you don’t take advantage of it because you have children to care for and a family to attend to, those are perfectly acceptable demands on your time. If you’re young and have an abundance of time and a limited amount of responsibility, you’re doing yourself a tremendous disservice by not taking advantage of this. After work each day, how do you spend your time? Do you spend it lounging in front of the television? Do you spend it drinking at the bar? Unless it’s volunteering or working towards a higher purpose, I would recommend swapping at least one night of drinking and lounging with a night of classes. After a couple years, you’ll have a degree instead of nothing (or a beer belly!). One night is not too much to ask in return for shifting your path.

Consider It Compensation

Give yourself a raise by taking these classes. In fact, when you’re done, you can take your more competitive resume out into the marketplace and give yourself a second raise. I took twelve classes at my first employer over the course of two years. Each class cost approximately $1,500, so I gave myself a $9,000 a raise onto my base pay each year. In my three years of working for that company, my salary when I left wasn’t even $9,000 higher than when I started! After you are awarded your degree, shop yourself around. Your job isn’t your girlfriend, you can date other jobs.

If your current employer has an attendance requirement, as in you have to stay in your job for a period of time or repay the tuition reimbursement, you can stay on until that’s fulfilled or you can ask prospective employers to give you a bonus for that amount. Good talent is extremely difficult to find, paying a few dollars more to get someone into the door is worth it for a business that’s seriously considering you.

Take Electives to Expand Your Horizons

Don’t want to commit yourself to a full blown degree? Not a problem, signing up for a full menu of classes may be too much for you right now. Consider taking a few electives in your spare time, electives that will expand your horizons and give you more breadth of understanding in your field. Oftentimes the full menu of classes for a degree contain classes that are too basic and broad. This is especially common in programs designed to generate revenue for a college (think part-time MBA!). Does an MBA student really need a remedial statistics class or a basic economics class? Taking electives should give you a laser-focused area of study that you will find immediately applicable.

Networking, Networking, Networking

While education is important, networking is more important. I had a friend whose brother went to an excellent school. It’s a top notch university that has an extensive history of extremely famous and accomplished alumni. My friend’s brother’s roommates were All-American athletes, the children of officers in the armed services or politicians, or ridiculously brilliant. Sure, the school was “tough” but there was a fair amount of grade inflation and a fair amount of intellectual and athletic competition. That institution is a little school in Boston, MA known as Harvard University. (true story, at least as told by my friend)

There are many reasons why you should take advantage of tuition reimbursement plans, I listed only a few. Many people don’t have the benefit of these programs and would give up a lot to be able to have their education partially paid for, please don’t squander the opportunity unless you have a very good reason.


 Personal Finance 
5
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Remember to Adjust Your Emergency Fund Limits

Today must be emergency fund day because earlier this morning I talked about how you shouldn’t rely on credit as an emergency fund; now I’m going to remind you that you should adjust your emergency fund limits based on any changes in you or your environment.

Having an emergency fund is one of the cornerstones of a solid personal finance plan. Whether you subscribe to the three month, six month, or full year’s worth of expenses, an emergency fund is something that every single person and family needs. Emergency funds enable you to weather the difficult times, especially since they all seem to cluster together, without putting you in an even worse situation. Some people rely on credit cards to supplement the emergency fund and others will only rely on credit cards at the last moment, but ultimately you need to have an emergency fund that matches both your needs and the chance of a Bad Thing happening.

The first part of that last sentence is pretty well understood by people who have emergency funds. Most people are very aware of their own needs and how it affects their emergency fund. If you buy a house and have to service a mortgage, it’s clear that the emergency funds requires additional padding. If you have a child, most people recognize that the emergency funds need to be boosted to weather any additional crises that come with children. For those of you who understand risk analysis, the part people understand best is the impact or severity of a risk.

The part people are less cognizant of is the second part. In risk analysis, we’re talking about the probability (as opposed to the severity) of a risk occurring. Specifically, we’re talking about people changing their planning as the probability changes. For example, the onset of a recession increases the likelihood that you will be fired or laid off. While the severity of being fired remains the same (you lose the same amount of salary regardless of future he economic prognosis), the probability increases based on the economy and the industry you’re in.

So, how do you do this? Periodically sit down and re-assess your financial plans. Check out your retirement accounts, check out your bank statements, and check your emergency fund. Think about whether the environment has changed and whether you need to increase or decrease your emergency fund. Now, if you think a potential recession will increase the chances you’ll be fired, boost your emergency fund. You’re essentially self-insuring against being fired (and other negative events). As long as you recognize that the environment has changed and your emergency fund needs to as well, you’ll have done what you can to help weather any potential downturn. You can’t predict the future but you can at least prepare for it as best you can.


 Personal Finance 
8
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Don’t Rely On Credit As An Emergency Fund

Countrywide decided to cut off the home equity lines of credit (HELOC) of tens of thousands of people, one of whom was Nina at Queer Cents! For Nina, that HELOC was like an emergency fund – capital that could be accessed if she needed it and existed solely to mitigate any catastrophic situations. However, last week, in an instant, her catastrophic fund was snatched away when Countrywide decided to close her HELOC with very little notice. Luckily for her the HELOC wasn’t her emergency fund, it was actually the backup to the emergency fund, but it underscores the importance of having a actual (non-credit) emergency fund.

Many people use HELOCs as an emergency fund. A HELOC as an emergency fund makes a lot of sense because the interest is tax deductible, making it significantly cheaper than a normal loan. It’s akin to using credit cards as an emergency fund but a little less scary (credit card interest rates are much higher and not tax deductible). Until the other day, I never heard of a lender suddenly closing a HELOC and very rarely do credit cards close accounts. Lenders want you to spend and closing an account makes it much harder for you to spend. So when this does happen, it happens suddenly, unexpectedly, and likely catches you unaware. Ultimately, it’s not a problem if they just closed your Macy’s account and you can’t buy clothes. It is a problem if they just closed your Macy’s account and you can’t make a surprise medical bill payment because it was your emergency “fund.” (it’s an extraordinary scenario but that’s what emergencies often are)

This underscores the importance of having an actual emergency fund, actual dollars in an actual bank account where the principal is protected. A credit card or a HELOC can be a supplemental emergency fund but it shouldn’t your primary. It can handle months 13 and 14 but don’t lean on it for month 1 and 2. You never want your future in the hands of a third party (especially if they are focused solely on their own profit!).


 Taxes 
2
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Major 1099 Forms & Where To Use Them

The deadline for a company to send you a W-2 or 1099 was January 31st. Since that date is more than a week behind us, you should have all of your forms and you should be able to prepare you taxes this very moment. If you are expecting a rebate, I’d finish up your taxes this weekend, e-file, request direct deposit, and you could have the funds back to you in less than two weeks. If you’re expecting to pay taxes, maybe you can wait a little bit!

What if you haven’t received them all or don’t know which ones to expect? Below I’ll list all of the major 1099 forms out there, who will be sending what, and what you should do if you haven’t received it yet.

First, you don’t actually need any of your 1099 forms at the time you fill out your taxes. It’s important to have a copy of them in case you are audited but you won’t send any of them with your return. If you e-file, you don’t send anything at all. The IRS will already have their copy of the 1099 anyway so they don’t really need yours. You will, however, need the information on the 1099 since you will need to enter that as income on your return.

So, what 1099s should you expect? Six 1099 forms cover what the majority of taxpayers will be receiving and they are:

  • 1099-INT – This 1099 form primarily covers interest income from banks. A lot of banks have stopped mailing the form and make them available online (such as ING Direct). This is better for the environment and cheaper for them! If you haven’t gotten one you should just check your online account. If you don’t have online account access, you should sign up for it! If its not available online, which is extremely unlikely, call your bank and request your 1099. They should be able to tell you how much interest you’ve earned last year so you can fill out the return without waiting for the form.
  • 1099-B – Typically sent to you from a brokerage, these indicate the proceeds earned or lost from the sale of securities. Again, many brokerages will provide this on the brokerage site itself and not mail out a paper form. You’ll use this information on Schedule D (Capital Gains and Losses).
  • 1099-DIV – This one covers “Qualified and non-qualified dividends” and those values will typically be used on your 1040 form. This will usually come from a brokerage so turn to them for the form if you haven’t received one yet.
  • 1099-SSA – This form will detail your Social Security earnings for the year. If you’ve lost it, you’ll have to request a new one from the Social Security Administration and that will take 10 days.
  • 1099-R – This form details any distributions you’ve received from your IRAs, pensions, and annuities. Since each IRA, pension, and annuity account will send you one, you should request this form from the place you are actually missing it. So if you have a Vanguard account and you received a distribution from a Traditional IRA with them, request a 1099-R from Vanguard. The values on this form will go onto your 1040 as well.
  • 1099-MISC – This is for… everything else. If you performed work as an independent contractor, your “employer” will send you a 1099. Usually they will only send one if you earned more than $600 that year but they will report the income regardless of the amount (it’s an expense on their books, they’re going to take the deduction!). The income from this usually goes on a Schedule C: Profit and Loss from Business. If you need a new one, request it from your “employer.”

 Personal Finance 
2
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PFBlogger Spotlight: Mighty Bargain Hunter

Welcome to another edition of PFBlogger Spotlight, a series in which I interview some personal finance bloggers so that we all get to learn a little more about them. This week, we have John from Mighty Bargain Hunter, a blog that is a member of the Money Blog Network and someone I had a chance to know better when I was a member. MBH and I have privately discussed everything from the government screwing us by re-taxing the Roth IRA to hoarding gold, but after today even you will have a greater insight into the mind behind the Mighty Mighty Bargain Hunter! :)

jim: Hi MBH, could you tell us a little about yourself?
MBH: I grew up and went to college in upstate New York and came to Virginia in 2000 to thaw. I’m in my mid 30s and have a wonderful wife of almost six years and an adorable three-year-old daughter.
jim: What’s something no one else in the blogging world knows about you?
MBH: If I told you, then it wouldn’t be known by no one anymore! ;) I’ve put enough out there in “tell us five things about yourself” memes that I have to think hard — or make something up. OK, here’s one: I love shopping for shoes. Just kidding. Really, here it is: I love to play Monopoly and I shoot to kill. (Figuratively. While playing Monopoly, that is. Not killing people in real life. That would be bad to say in a widely-read public forum such as Blueprint For Financial Prosperity.)
jim: What motivated you to begin blogging and how long have you been doing it?
MBH: A friend from work got me onto online rewards programs and estate auctions, and I really liked them. I started the website in 2004 as a smart-shopping, bargain-hunting, frugal-living newsletter. I sent out the newsletters and posted them to the website. The original articles are here. Basically, I saw what SavingAdvice.com and TheFrugalShopper.com were doing, and it looked like I had something to say and could contribute to the discussion.

Since I’m an introvert, this also seemed like a good way to start up a side income. In the site’s first incarnation, I spent about 25% of my time writing the articles and 75% of the time formatting the web pages — they were all hand-coded. This got tedious, and my posting slowed to a crawl for a while. After squeaking out one article per month or so for a while, I stumbled on blogs like pfblog.com, and commented on Free Money Finance’s posts and (probably) Five Cent Nickel’s posts there until they informed me that they had their own blogs.

In the spring of 2005 I started blogging because I could spend 95% of my time on the website writing content and about 5% formatting it. MUCH better. And a couple thousand people think I still have something worthwhile to say. Which is why I keep doing it. ;)
jim: What do you think makes your perspective unique?
MBH: I love getting good deals and deep discounts. I have an entrepreneurial streak. I’ve learned conventional wisdom regarding career, money management, and investing, and have had enough of it thrown into question that I’m a little contrarian in my thinking.
jim: What are your favorite personal finance books?
MBH: The Millionaire Next Door (Stanley and Danko) and Automatic Wealth by Michael Masterson.
jim: Which of your posts do you think all your readers should read?
MBH: Judging by comments, hands-down it’s “Missed Fortune 101: Horrible Advice!” with more than 200 comments. One that still makes the rounds on StumbleUpon is “Twenty-five ways I save money.” Another one I like is “Sixteen ways being disorganized costs you money.”
jim: What financial “mistake” that you’ve done has bothered you the most?
MBH: I had a tech stock that lost 99% of its value post-bubble. I got frightened listening to a colleague that it might go completely worthless, and sold it near its low. It went up 25-30 times its price in the following years, and had I listened to the actions of every single board member in the company (they were buying the company stock like there was no tomorrow) rather than my friend, I’d own my house free and clear now. Lesson: Don’t let someone scare you into selling at a loss, especially if they don’t have a stake in it and if you know they like stirring the pot. Think for yourself.
jim: How about your best decision?
MBH: Getting married to a Christian woman and having a daughter. Aside from a joy that you can’t put a price on, I see money much more as a tool than as an end in itself. I was socking away a lot more before I got married, but it has turned out to be much more rewarding to provide for a family and return part of what I earn to God’s Kingdom than to just protect myself, by myself.
jim: What is your favorite personal finance blog and why?
MBH: I don’t have a favorite. I like dozens of blogs for very different reasons.
jim: What do you hope to accomplish this year?
MBH: I have a post that outlines my goals for the year. The financial goals are to track my finances regularly and to get my online income to cover my mortgage payment again (I wasn’t wise enough to have diversified my online income when Google moved the text-link cheese).
jim: And, lastly, if your blog ended today, how would you like people to remember it?
MBH: I’d like it to be remembered as a blog that had something useful to say to someone, and as a blog that didn’t take itself too terribly seriously. Heck, how serious can the blog be if it has posts written in the style of Dr. Seuss?

Go check out Mighty Bargain Hunter and tell him I sent you (then duck!). :)


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