Maryland’s Cash for Appliances

Energy StarHappy Earth Day!

Today marks the first day Maryland residents can take advantage of the Cash for Appliances program, known as the Maryland Energy Efficient Appliance Rebate Program.

There are three main pieces to the program – $100 for Energy Star Clothes Washers with a Modified Energy Factor of at least 2.0 and a Water Factor no greater than 6.0; a $50 rebate for Energy Star Refrigerators, at least 25% more efficient than the federal standard; and $300 for an Electric Heat Pump Water heater. You can work with your utility company to get the rebates.

Before you run out and buy an appliance, this rebate should not replace your breakeven analysis.
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9 Year End Tax Moves to Make by Dec. 31st

1040 Bobblehead DudeAfter last week’s Thursday post on adjusting your tax withholding, I thought that we needed a full blown post on the best year end tax moves. So who better to turn to than prolific tax expert Kay Bell, author of The Truth About Paying Fewer Taxes? She was kind enough to list not one, not two, but nine tax moves you can make before the ball drops.

It’s time to make your year-end tax list and check it twice to ensure that you give yourself the gift of tax-savings. Here are 9 ways this month to help make your 2009 tax bill as small as possible.

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 The Home 

2009 Federal Energy Tax Credits

Energy Star LogoWhile many parts of of the Emergency Economic Stabilization Act of 2008 (or what some call the $700 billion bailout) probably upset you, one aspect that did make me smile was the reintroduction of energy tax credits. (You thought I was going to point out the extension to the provision that allowed racetracks to depreciate their tracks over 7 years rather than 15, huh?) The federal energy tax credit for energy efficiency was a benefit I took advantage of two years ago whenever we replaced our aging windows and sliding doors. While it’s great that the credits have returned, one unfortunate aspect is that the $500 credit limit will apply to 2006, 2007, and 2009. We won’t be able to take advantage again.

With home improvements, you have to place the home improvement in service after January 1st, 2009 and on or before December 31st, 2009. If you do anything between now and December 31st, 2008, you’ll be out of luck. I would review the Energy Star chart for the specifics of each improvement, how much you can get from the credit, before making any decisions but I’ll highlight the major ones.

The biggest bang for your buck is in the form of replacement windows and, to a certain extent, doors. For windows and skylights, you can get a credit for 10% of the cost, up to $200, for Energy Star qualified or IECC meeting windows. Labor is not included. For exterior doors, if they meet IECC standards, you can get a credit for 10% of the cost, up to $500.

Insulation is another good way to reduce energy costs without costing you a lot of money and they come with a 10% credit, up to $500. The only requirement is that they must be expected to last 5 years or have a 2 year warranty. One great place to check your insulation levels is in the attic, it’s important to have at least 12 inches of insulation. If you can see your joists, you need more insulation.

Finally, there are a few home improvements that are afforded energy credits. Compliant HVAC systems and water heaters can get a $300 credit. If you happen to live in an area with plenty of sun, solar systems can get 30% off, up to $2000 (there is no $2000 cap if is it’s a Photovoltaic system!), and are not subject to the $500 credit cap. While the credits probably aren’t enough to get you to install it, they are nice if you’ve already made the decision.


Where To Invest Outside the Stock Market

Stock MarketI quit investing in the stock market.

OK, just kidding, I didn’t really quit. I haven’t changed my retirement contributions in anyway (though I feel foolish every time I see a contribution go through, followed by the stock market falling even further). I left my retirement contributions alone because my time horizon gives me the the benefit of time, the one certain cure for this economic malaise.

However, we have stopped contributing to our taxable brokerage accounts simply because of how violent the market has become. Check out the CBOE volatility indices:

  • VIX – S&P 500 Volatility Index
  • VXN – Nasdaq 100 Volatility Index
  • VXD – DJIA Volatility Index

The volatility indices show the market’s expectation for volatility over the next thirty days and as you can see on their charts, they’re at all time highs. That’s why we’re not putting in any more money, we are going to wait until things calm down before we add back in. (That account was for savings on items we need beyond the next five years)

So, without the stock market, the next question is where should we go with our savings?

Bolster The Emergency Fund

This is never a bad decision. With the economy the way it is, we should use any abundance we have left to start saving for potentially leaner months (or years) to come. If you listen to any experts, you might notice more and more are bolstering up their cash positions. As regular people, emergency funds (and CDs/High Yield Savings) are our cash positions and it’s never a bad idea to squirrel away a few nuts for the winter.

Pay Down Debt

If you have any debt, whether it’s a 6% mortgage or a 20% credit card, paying it down is a smart move. Some would say that you should invest your money and take advantage of the leverage, but I think that’s a little too risky given the volatility of the market. The rewards you will reap by getting rid of your debt will far outweigh the potential gains you’ll earn in our current market. I’m not saying that the money you put into the market will be lost, maybe we have hit the bottom and its on its way up, but by paying down debt you free yourself in a way a few extra dollars in stock gains simply won’t. Also, when you pay down a debt, that rate of return is guaranteed.

CDs & High Yield Savings Accounts

There’s nothing wrong with taking the 3-5% APY of a certificate of deposit (the best cd rates are hitting 5% APY) or a high yield savings account (the best high yield savings account rates are near 4% APY). I think there is a stigma against taking these “safe” gains because we have it in our heads that the stock market can yield returns of 10%. The reality is that the 10% metric is one that’s been overplayed and so ingrained that people are looking at the volatility in the market today and wondering how that figure could possible be correct. It’s not. The market may have yielded gains of 10% since the beginning of time but as all mutual funds state – “past returns are not indicative of future performance.”

One thing is certain though – a certificate of deposit or high yield savings account will get you that yield. The worst case is that you get your money back (bank failure). Unlike money market accounts, CDs and savings accounts are FDIC insured and you’re protected from loss.

Take the safe bet, it’s OK!

Invest In Yourself

Now is the perfect time to invest in yourself by taking some classes, buying some books, and otherwise augmenting your skills to make yourself a more attractive employee or prospective employee. Investing in yourself is one of the best things you can do with your money as knowledge is something that can stay with you for a very long time and there’s always something you can learn.

You don’t have to go as far as taking a class but if you’re in an industry where certifications, and the knowledge those certifications confirm, are important, go out and test for them. In certification heavy fields, many requisitions are filled by those certificates.

Invest In Money-Savers

It’s often said that replacing a ten year old refrigerator can yield significant cost savings (some figures claim $100-$200 of savings [1] [2]). If you have a ten year old refrigerator, consider taking your investment money and replacing it. Let’s say you buy a $2000 fridge and it saves you $100 a year in energy costs – that’s a 5% return on your investment. Since that 5% isn’t taxed, that’s the same as a 6.67% return in the stock market if you’re in the 25% marginal tax bracket. 6.67% return, a new fridge, and being nicer to the environment isn’t too shabby, is it?

There are plenty of other money-savers you can find both in and outside of your home.

Do you have any suggestions on where people can invest nowadays?


Truth Behind The Energy Star Label

Energy Star LogoEnergy Star is a sham. That’s right, I said it, the Energy Star label as it stands today doesn’t really mean much for a lot of the products its put on.

Let me give you a ridiculous example. On televisions, the Energy Star label is applied on products based on the energy they consume when the unit is OFF. What!? Are you kidding me!? I’d like to meet the individual or individuals in charge of that decision because it defies all logic. I argue some ridiculous positions in my Devil’s Advocate series and even I have difficulty justifying applying the Energy Star label based on a products phantom electricity usage.

But, moving past that, Leigh Gallagher, senior editor of Smart Money magazine, and their staff went behind the scenes to dig deeper behind the meaning of the label. It’s meaningless for some products, like televisions, but it’s reliable for others. That inconsistency bothers me because inconsistency in a brand, and Energy Star is very much a brand in and of itself, leads one to question it and we live in times when we shouldn’t give any reason to question environmental friendly markers.

According to Smart Money, these are the appliances you can’t trust the Energy Star label on:

  • TVs
  • Air Conditioners
  • Computers (Desktop & Laptop)
  • VCRs

On those items, check the yellow and black EnergyGuide label required by the FTC. Those will tell you how much energy it consumes and where it is relative to its peer appliances.

These are the products that you can trust the Energy Star label for:

  • Dishwashers
  • Refrigerators
  • Freezers
  • Washing Machines

Now, there are items that carry the label but aren’t actually regulated (which mean the label is meaningless!):

  • Dryers
  • Ovens
  • Home water heaters
  • Toaster or toaster ovens
  • MP3 players

See what I mean about the confusion? Fortunately they’re making moves to make the Energy Star more consistent and reliable, such as changes in the way televisions are tested, so perhaps we’ll get more consistency and reliability in the future.

The Truth Behind Energy Star [CBS]

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