Should You Rent or Buy a House After College?

The following is a post by MPFJ staff writer, Derek Sall. Derek is the owner of the blog, LifeAndMyFinances.com, where he teaches people how to get out of debt, save money, and become wealthy.

When college students graduate, they typically have three things on their mind: (1) they need to find a job, (2) they’d like to reward their achievements with a new car, and (3) they want to buy their very first house. Now, even though college graduates have learned much in school and may have graduated with honors, most of them are still quite financially illiterate at this stage in their lives. What they might think they deserve or need could actually hurt them financially for many years to come.

While I don’t disagree that many students should be looking for their first job, I certainly disagree with the purchase of a brand new car. But what about this notion of purchasing a house? Is this a wise choice for recent college grads?

Buy vs. Rent for the College Graduate

For starters, quite a few college graduates probably won’t qualify for a home loan because of their large student debt. However, as the economy continues to recover, banks are becoming more and more relaxed on the requirements to qualify for the home loan. This means that more students will have this decision to make: “Is it wiser to rent an apartment after college or buy a house?”

The Arguments For Buying a House

Here are the popular arguments for buying a home instead of renting:

• You’re building equity with each mortgage payment
• A house will appreciate in value and is a good investment
• By purchasing a house, you are avoiding the cost of rent, which everyone knows is just like throwing your money down a rat hole
• Buying a house will give you further responsibility and will mature you
• You need a house if you want to start a family

The Arguments For Renting an Apartment

• You can find a rental for cheaper than a mortgage, which provides more cash flow
• A rental means fewer unexpected expenses, as all the issues should be fixed by the landlord
• Apartments provide greater flexibility in your life, should you want to travel or just have a more flexible life
• By renting, you take on less debt (since you probably have enough as it is from those student loans)

The arguments both for and against buying a house sound like reasonable ones, but which option makes the most sense for the great majority of the time?

In my opinion, a new college graduate should find a cheap rental after graduating and finding their new job, especially if they have college debt to pay off (which almost everyone does these days).

The typical college grad has about $25,000 in student loans when they graduate. If they rush out and buy a house, their debt load could quickly grow to $200,000, all before the grad even understands how debt works and what they are signing up for. Sure, they understand that their student loan will take 10 years to pay off, and that their home mortgage will take 30 years, but do they realize how long that actually is? I highly doubt it.

It is my belief that college grads should first pay off their student loans before even looking at house properties. By avoiding the home purchase right away they can pay off their student loans much faster. Plus, this gives them a respect for debt and how difficult it can be to just pay off a small amount (when compared to a home loan). Even though that house will most likely appreciate in value, it is of greater financial significance for young adults to pay off their debts and mature prior to taking on a property of their own.

How about you all? Do you agree or disagree? Do you have a pro or con that I did not mention?

Share your experiences by commenting below! 

***Photo courtesy of http://static2.businessinsider.com/image/51363eedecad04a079000005/renting-vs-buying-which-is-the-best-option-for-house-hunters.jpg

Prepare For The Future – Invest In A Funeral Plan

The following post is by Kevin Fullerton. Enjoy! 

It’s easy to fall into that fateful cycle – your wages pop into your bank account, then instantly plunge to zero again as you buy a glut of products you don’t need.

Indeed, in a recent survey from finance news site This is Money, it was revealed that one in three people deliberately overspend on nights out so they don’t appear cheap to friends. We’re collectively wasting money just to keep up with the Jones’s.

But there’s one thing more important than saving face – having money set aside for your passing.

That’s right – while a large sum of people are willing to splash out on an evening, few have savings set aside for those autumn years, and even fewer are taking precautions such as funeral plans to ensure a good send-off.

Why should I? you might be thinking as you shell out for your next holiday or luxury item.

From a financial point of view, a funeral plans are one of the soundest purchases you can make, ensuring that your family aren’t lumbered with debt upon your passing.

Saving at any age

As a rule, these plans are marketed squarely at the over-65 market, but that doesn’t mean you can’t start saving and planning your funeral at any age.

And saving has become an imperative, especially if you want a touching tribute.

With funeral costs rising year-on-year, national newspaper The Daily Mail claims that the average service (including clergy, medical, casket, wreath and burial fees) costs around £7,600 – and that price is only set to increase.

However, with a plan from a trusted provider, you’ll be able to make a series of monthly payments that won’t leave you out of pocket before your wages come in.

The fate of the pauper

What’s the alternative if you don’t pay for your funeral? The perfect way to answer that is to tell you about a man called Chris Sievey.

The creator of beloved cult figure Frank Sidebottom, Sievey tirelessly focussed on his oddball creations, songs and stage shows. He pumped so much of his cash into his creative ventures that he had none left for actual living.

When he died of cancer in 2010, it was feared that this icon of eccentricity would be left with what’s known as a pauper’s funeral. A basic funeral subsidised by the government, Sievey narrowly avoided this fate thanks to donations from entertainers like Jason Manford, Jon Ronson, Phil Jupitus and many more.

But not everyone is quite so lucky, and this imaginative entertainer is just one cautionary tale on the value of effective planning for your passing.

While you’re out with friends or planning a major holiday, it’s easy to ignore those nagging thoughts of your mortality. But with an effective amount of money set aside, you won’t leave your family in the lurch.

4 Factors That Can Sink Your Small Business

The following post is by MPFJ staff writer, Sally. Sally is the blogger behind TinyApartmentDesign.com, a blog about design, living well, and simple, tiny spaces. Enjoy! 

Done right, small business ownership has been a path to economic mobility and career success for many aspiring Americans.

This weekend’s WSJ article provided one example of how franchise restaurant ownership has provided a path for hardworking people to increase their income while owning their own business. Small businesses of all kinds have been a major source of wealth for Americans, but they have their own risks that someone who is making the transition from employee to business for the first time may not always consider.

Before beginning any business, a management plan will help keep the following factors in check.

Inventory

If you keep inventory of a product, one of the first things you will need to learn very quickly is exactly how much inventory you need, what the right items are and when to stock them. For example, a swimsuit retailer needs to know the average numbers sold in each size from XS to XL or 00 to 16, the most popular colors, and the brands that will sell. If you haven’t done your market research, you may end up at the end of a six-month selling season with hundreds of bikinis that are now considered “last season” and in colors that are no longer popular in the coming season. In the case of the restaurant owner, it’s been said that the mark of a good chef and owner is when the daily special is sold out. 50 pounds of uneaten Bluefin tuna at the end of the night just means lost revenue for the owner (or maybe tons of spicy tuna specials the next day).

Labor

It’s hard to be realistic about your labor needs with no prior experience, but owners will need to determine how much help they can utilize fully. If workers have nothing to do, and you don’t have the time to train the time, then their labor is eating into your margins. Conversely, if you don’t have enough hands on deck, your product and reputation can suffer much more quickly than it can be repaired. Preventative measures help- hire extra help when you expect extra sales.

Taxes

I’ve owned a few very small businesses and never hired a CPA until last year. I now see that having my CPA around from the beginning would have forced me to keep more organized records, account for expenses and revenue more consistently, and saved me in taxes owed. His fee is trivial in comparison to the peace of mind I have that there is second set of eyes on my records, and he is motivated to save me more in order to keep me as a returning customer. With payroll and regular expenditures, small business owners will do best when they keep organized, clear records from the outset.

Resources

There are so many resources available to small business owners to help them grow and manage their companies. Need more referrals? Try your local Chamber of Commerce. Not sure what product to order for next season? Attend your industry conferences and webinars on industry trends. Need to update your online strategy? Hit the blogs for tons of marketing ideas and referrals to trusted developers and social media marketing firms.

Your small business has the potential to become your path to financial independence, but you’ll have to stay involved and active in every part of your business as it grows.

How about you all? Have you ever started a small business before? If so, what were some of the primarily factors that either enabled or prevented it from growing?

Share your experiences by commenting below! 

***Photo courtesy of http://www.freeimages.com/photo/1336617

5 Ways to Break the Cycle of Living Paycheck-to-Paycheck

The following is a post by MPFJ staff writer, Kevin Mercadante, who is a professional personal finance blogger, and the owner of his own personal finance blog, OutOfYourRut.com. He has backgrounds in both accounting and the mortgage industry.

A lot of people dream of the day that they’ll have enough money saved and invested that they’ll be able to live the way they want, to have the things that they want, and be able to come and go as they please. But you won’t ever be able to reach that point if you aren’t able to accumulate the savings and investments that will make it happen. And you won’t be able to do that until you learn to break the cycle of living paycheck-to-paycheck.

If you are in that situation, here are some ways to break the cycle so that you will be able to accumulate the kind of money that you’ll need to live the life that you want.

1. Cut your expenses across-the-board – or just a couple of big ones

Weaning yourself off the paycheck-to-paycheck merry-go-round won’t be accomplished without cutting your living expenses. You’ll need to do that in order to create room in your budget so that you will be able to build the level of savings that you need that will put an end to the negative cycle once and for all.

There are two basic ways that you can do this:

Cut all expenses across-the-board – You can do this by making a percentage cut across your entire budget. For example, if you are currently spending $3,000 per month, and you decide to cut your budget by 10%, you’ll free up $300 per month that you can put into savings.

Make big cuts in a couple of big expenses – If you don’t like the idea of cutting all of your expenses at the same time, you can target two or three big ones and make deep cuts there. For example, let’s say that you are paying $1,300 per month for your house payment. By moving into smaller quarters at $1,000 per month, you’ll free up $300 per month for savings. Similarly, you can dump a car that has a $400 per month payment on it, in favor of an older car that you can afford to buy for cash, and thus eliminate the monthly payment. That will provide $400 per month for savings, or $4,800 per year!

2. From now on – no new debt

A lot of people believe that in order to break paycheck-to-paycheck cycle, you first need to get out of debt. While that certainly would go a long way toward creating surplus in your budget, you don’t necessarily have to pay off all of your debts before your situation begins to improve.

Simply by avoiding new debt, your financial situation will begin to improve over time if only gradually. Just by making your required minimum monthly payments on each of your debts, the loans will begin to be paid down, and eventually you’ll pay them off.

But the key is always to avoid adding debt to your existing pile of debt. If you can at least do that much, your cash flow will gradually improve, helping you to break the paycheck-to-paycheck cycle. And you won’t have done anything radical to make it happen.

3. Commit to a long-term plan to increase your income

You probably won’t be able to do anything as dramatic as increasing your income by 50% in the next three months – and the truth is that you don’t have to. All you need to do is commit to a plan to increase your pay over the long-term.

There are various ways to do that, but the least taxing way may be to plan on doing several:

• Get a part-time job – an extra $200 per month will enable you to save $2,400 in one year.
• Start a side business – assess your best skills, then work on hatching a plan to monetize them by selling your services to the general public.
• Plan on getting a better paying job in the next year – with the understanding that you may have to pick up a new skill or two in order to make it happen.
• Look into buying and selling – find a product or product line that you’re particularly interested in, and start selling it as a sideline.
• If your compensation includes commission or bonus income, get serious about increasing your results.
• Find ways to monetize your situation – like renting out a room to a boarder.

You don’t have to do any of the above for the rest of your life, but just long enough to get enough money put away that you’re in control of your financial situation.

4. Redirect any and all freed-up cash into savings

Whether you are improving your cash flow by cutting your expenses, increasing your income, or both, it’s vitally important that any additional cash from these activities be directed into savings. The idea isn’t to create additional cash flow so that you can buy more stuff, but to accumulate the kind of money that will eventually lead to something that looks like financial freedom.

The best way to make that happen is by making it automatic:

• Take advantage of direct deposit with your paycheck, by having some of your pay direct deposited into your savings account.
• Have your income tax refund direct deposited into your savings account.
• Make it a policy and a habit to deposit any additional income into your savings immediately – as in before you have time to think about it.

If you’ve never been into saving money in the past, it will be very important to make sure that the money goes to its intended destination – and that’s your savings account.

5. Investing your savings makes it permanent

This is the final step, because it makes saving money permanent. Once you begin moving your money into investments – like stocks and mutual funds – it will be “tied up” and therefore unavailable in case you’re tempted to spend it.

Investing money can also provide outstanding motivation. The prospect of being able to earn money with money that you already have can turn investing into a lifelong pursuit. And once you’re earning money on your investments – in addition to earning extra income and cutting expenses – your move away from living paycheck-to-paycheck will become almost effortless.

How about you all? Are you having trouble breaking out of the cycle of living paycheck-to-paycheck?

Share your experiences by commenting below! 

***Photo courtesy of https://www.flickr.com/photos/orphanjones/677386754/sizes/n/

Why Your Debt Is Costing You More Than Money

The following is a guest post by Richard, who blogs about his personal experiences of getting out of debt, saving money and gaining financial freedom over at Frugality Magazine. Enjoy! 

As someone who has recently succeeded at paying off all my consumer debt I recently spent some time considering how debt has affected my life – and what changes I expect now that I’m free from the shackles of unpaid debt and all the negatives that come with it.

As it turns out, debt robs you of far more than the money we all think about. We know that once you take on debt, you then have obligations to repay it. You’re borrowing from your future self and reducing your freedom because you’ll not only need to pay back the principle that you borrowed but also the interest on top of that.

But what else does debt cost you?

5 Things I Personally Missed Out On Because of My Debt

Here are just a few of the things I realized my debt cost me – over and above the obvious financial constraints…

Sleep

When you’re drowning in debt, wondering if you’ll ever dig your way out and in some extreme circumstances even wondering how you’ll meet your minimum payments, it’s not surprising that a few sleepless nights can be had worrying about the situation.

But there’s more.

In my own situation, I opted for a “short term pain for long term gain” mindset in order to repay my debt as quickly as possible. In order to do this I landed the best paid job I could find – irrespective of any other factor (working hours, job satisfaction etc.).

I ended up working 50+ hours a week, which included shifts, which essentially meant I could either choose sleep or spending time with my friends and family with the few remaining hours I had each week.

And while I tried to find the best balance I could, a “normal” nights sleep weighed in at between 5 and 6 hours. Not healthy and certainly nowhere near as much as I need to feel refreshed and rejuvenated each day.

Sadly, I’m now so used to getting up at 4 am for work, even on my days off or while on vacation I still find myself waking up at a similar time.

Birthday Parties

I have a number of nieces and nephews of school age or younger. Which means there are birthday parties going on all the time. And while I get invites, they’re often last minute. Which means I haven’t got time to request the specific day off work.

So I miss out. I’m resigned to seeing all the photos on Facebook and hearing about the party second-hand from the family members who attended. While I don’t enjoy my job at the best of times, it’s hardest when I know I’m missing out on a big family get-together.

Vacations

Vacations cost money. Money that could arguably be better put into debt repayments. So while my girlfriend and I had a number of lovely days out, over the last few years we’ve avoided the temptation of taking off for foreign climates and instead put our hard-earned cash into paying down our debt.

Surprisingly, while I love to travel, this hasn’t been too painful. And now that the debt is repaid, there’s nothing to stop us jetting off the the sun this year if we so choose. And to do so without any feeling of guilt 😉

My Dream Job

When I had made the decision to land a new job and get serious about my debt I was actually offered two different positions. There was the highly paid yet life-sucking position I took and then there was the alternative; in many ways my dream job.

Relaxed, enjoyable, reasonable hours, based around my passions and with loads of opportunity for personal growth and fulfillment. Except it paid barely more than half of the alternative.

If I’d been debt free I’d have jumped at the chance – I could easily have lived on the salary and would be doing something I love for a living. But, my debt repayments took priority, I (politely) turned down the dream job and instead went after the money.

A mistake? Who knows. Hopefully other opportunities will arise. Now my debt is paid off and my monthly expenses have dropped like a stone, I have far more options available and far more flexibility in my career.

I’m sorry to have missed the job, but I’m more glad I paid off my debt and bought back my freedom.

A House In The Countryside

Real estate is expensive – even more so in the UK (where I live) than the States. The prices we pay – particularly as a percentage of the average salary – would make your eyes water.

So in another attempt to keep costs down and snowball all available funds into debt repayments we opted for a low-cost home in the middle of the town I work in. It’s acceptable, but it’s not what we want long term.

We’ve found properties we like online and in newspapers but the additional cost of a “nice” home has kept us from making the transition. We’ve had to say no to the home in the countryside with the beautiful garden that we want.

Has It All Been Worth It?

You might be thinking by now that I’m a bit depressed looking at all the extra things that my debt has cost me. And in a way it’s a bit sad. But it was also temporary. And now I’m in a better financial situation than most of my friends with their nicer houses, fancy cars and piles of debt.

I’ve spent 4 years making compromises so that I don’t have to make any after that. Has it been easy? No. Would I recommend it to others? That depends. Am I glad I did it? Yes, actually I am.

I’m not proud of the things I’ve given up/missed out on, but it feels like I’m entering a new era of my life – free of the burden of debt. Where I’m free to dream about the future without needing to factor in any kind of debt.

In all, I’m pleased I made those compromises because the end result will be far better.

What have you missed out on because of your debt? What costs have you found to debt besides the obvious financial ones?

Please leave your experiences in the comments below!

***Photo courtesy of https://c1.staticflickr.com/9/8094/8456188296_375a94bc19.jpg

What Should You Expect From Your Banker When Applying For A Loan?

The following post is by MPFJ staff writer Travis.  Travis is a customer blogger for CareOne Debt Relief Services, and also appears weekly at Enemy of Debt.  Travis candidly shares his personal journey to pay off $109,000 of credit card debt and the tips he’s learned along the way. As a father and husband he provides a unique perspective on balancing debt, finances, and family.

I walked into our bank last November to discuss the possibility of getting a loan to consolidate our remaining unsecured debt.

We were just a few payments away from eliminating $109,000 of credit card debt through a debt relief program but had two accounts that we were unable to include in program.  I hadn’t ever applied for a consolidation loan before, and didn’t know what to expect with regard to what the process would entail, or how long it would take.

I didn’t know it at the time, but I was about to have a horrible experience.  When it was all said and done, we had been denied mainly because we still had accounts being managed by a debt relief plan.  We were told to try again after we had completed the program.

My wife and I agreed that when we made another run at it, we would go to a different branch of our same bank, and deal with someone new.  Last week we did exactly that, and had a completely different experience.

This is a tale of two loan applications; one fantastic, and one miserably sub-par. 

Tale #1: The Agonizingly Slow Path of Failure

My first meeting with the banker was setup at my request as an exploratory meeting.  I thought I should explain our situation with the debt relief program, what our goals were, and discuss our potential options.  The banker seemed optimistic that we would be approved and wanted to meet with both my wife and I to go over details.

We setup a meeting for a week later at his suggestion.

One week later, we both sat in the banker’s office as he asked us for some basic information, then sent us home with a list of documentation including W2s and tax forms that we needed to gather for him.  Since that meeting was on a Saturday afternoon, I wasn’t able to get him the paperwork until the following Monday.   He was to take the paperwork and submit a loan application.

The next few days were riddled with unreturned messages.  The banker was either not available, or out of the office.  Finally, on Thursday, I got the banker on the phone and found he was still working on the application.  He was to call us with an update by end of day on Friday.

Close of business came and went and no phone call was received.

We did, however, receive an email during the evening from him notifying us the loan application had been submitted, and we would likely hear back regarding the decision the next day.  The next day, of course, went by without any notification from the banker.

On Monday, I called several times leaving messages.  Towards the end of the day, I physically walked into the branch to find him in his office.  He quickly apologized for not returning my messages, and broke the news to me:  Our application had been denied.   But, he was going to attach a note to our application reminding the underwriters that we had been customers for a long time, that we were just a few months away from completing our debt management program, and ask for reconsideration.

A few more days went by.  Finally on Thursday, nearly three full weeks from our initial meeting, we were informed that our application had been denied again.  Tough luck, try back in a few months.

Tale #2:  The Fast Lane of Success

We met our new banker at 10am on a Saturday morning.  We quickly explained our situation, to which banker #2 nodded his head and tapped on his keyboard.

“I think we can help you now,” he said.

He asked us for our personal information, typing it directly into a loan application as we gave it to him.  He asked for the account names and numbers we wanted to consolidate, which we were able to give him since we had our smart phones handy.  He then asked for estimated income information, stating that if they needed specifics they would ask for them.  A message popped up after hitting the “Submit” button telling him that it may take up to 24 hours to turn around the application.

“Let’s see if we can do better than that,” he said as he picked up the phone.

He dialed an internal number and asked if they could expedite the loan application as the customers were sitting right in front of him and really wanted to know.  The underwriter  calmly explained that they were swamped and it would take 24 hours.

Kudos to the guy for trying.

We were in the bank for a total of 23 minutes, and in that time we were further along than in the first two weeks of our previous attempt.  When we got home I found a pleasant surprise from the bank in our email inbox.

We were able to check the status of our loan online.

On Sunday evening we were notified through their automated system that our application had been conditionally approved.  We needed to provide additional documentation such as W2s and pay stubs.  I quickly gathered them all and put them in a manila envelope.

On Monday, banker #2 called and reiterated what we already knew.  When I delivered the documentation to him, he made copies and was told to expect a phone call from him the next day.  True to his word, he called Tuesday morning telling us we could come in at any time to close on the loan.

Three days after our initial meeting, we signed the paperwork for our approved loan.

Lessons Learned

These were obviously two very different experiences from the same bank no less, even if you disregard the decision on the loan. Having gone through these two experiences, I learned several lessons that could benefit anyone who may be looking to apply for an unsecured personal or consolidation loan:

1. Filling out a loan application takes minutes.  Banker #2 did it while we sat in his office and watched!
2. Gather the account number and balance of any accounts you want to pay off with the loan
3. Collect W2 forms from the last two tax years for all income streams and make copies of them
4. Collect the last pay stub from all income streams and make copies
5. Bring the information from 2,3 and 4 with you to your meeting with the banker
6. Ask your banker how long the decision will take, and if they have a way for you to check  he application status online.
7. Get a business card from your banker, and ask for his schedule so you know when he will and will not be in the office.

Knowing and executing these pieces of advice will help speed up the process of applying for an unsecured loan, not to mention reduce your own stress level while you go through the process.

How about you, readers? Have you ever applied for a personal or consolidation loan?  What was your experience like?

***Image courtesy of Stuart Miles / FreeDigitalPhotos.net

How to Avoid Taxes at Retirement

The following is a post by MPFJ staff writer, Derek Sall. Derek is the owner of the blog, LifeAndMyFinances.com, where he teaches people how to get out of debt, save money, and become wealthy.

Don’t you just love paying taxes?

Of course you don’t. Nobody does. Sure, some of the taxes we pay are for the good of the community, but it seems that much of the funds are spent for products and functions that we could care less about. Often times, I figure it would be best if I could just avoid as many taxes as possible, which is how this article came about. If you are interested in keeping your money, rather than gifting it to the government, you may want to keep reading.

1) A Low Income During Retirement

Just like when you’re working, your tax bracket is dependent on how much you earn each year. If you can live off of very little, then you will land yourself into a very low tax bracket and only owe the government a miniscule amount.

I know this might not sound like a great solution (since you might be assuming that you have to live an unhappy life just to avoid paying taxes), but if you have absolutely no debt then how much do you really have to spend to survive? You’ll need some money for food, clothing, insurance, and gas. That’s pretty much it. A happy life can be had for less than $1,000 a month (believe me, I’ve done it, and that was with a mortgage payment!).

If you plan to retire before the age of 59 ½, don’t sweat it, this plan will still work for you. According to Section 72(t) of the tax code you may withdraw a set amount each month from your 401k and receive no penalty. So, if you have no debts and are able to live off of very little, then this tax avoidance method should work fantastically for you.

2) Contribute to a Roth IRA

If you are worried about paying taxes during your retirement, then why not just get them out of the way now while you have a consistent income? By investing in a Roth IRA, you will be putting money away for your retirement and paying tax on it, but when you withdraw it in your retirement years you will not need to pay any tax whatsoever!

3) Contribute to Your Health Savings Account

If you currently have the high-deductible insurance plan through your work, then you most likely have the option of contributing to a Health Savings Account (HSA). This is an excellent option and I would strongly recommend it as a way to both grow your money and to avoid paying taxes.

Your dollars are put into the HSA pre-tax and as long as you spend the money on medical products or services (this includes vision and dental as well), then you will never pay taxes on this money. Better still, if you have over $2,000 in your HSA account, then you can invest your money and grow it exponentially for your retirement years. And, if by the age of 65, you have not used the money on medical expenses, you can start withdrawing the funds for non-medically related purchases as well without penalty (although, you will pay tax at this point).

4) Invest in Your Home

As home prices are rising again, the strategy of buying a home, living in it for a while, and selling it for a profit is making more and more sense. If you are handy and have a knack for picking out properties that will increase in value, then this might be a great option for you.

All you have to do is find a foreclosure in an excellent neighborhood, move in, put your hands to work and restore the house to appeal to the masses. After two years you can sell the house for thousands of dollars in profits and pay absolutely no taxes on your earnings (up to $250,000). As long as home values steadily rise, this is an amazing opportunity for anyone to earn some tax-free money, not just retirees.

5) Draw From Social Security

If you earned an average wage throughout your working years, then your Social Security checks will not be taxed. As long as this program continues, this is a great way to earn a non-taxable income in your retirement years.

6) Earn Capital Gains, Not Income

If you have a large income and often pay many taxes because of your high tax bracket, then you might want to earn more of your money through capital gains where the standard tax is just 15%. Capital gains are paid on the money earned through the buying and selling of assets. This phrase is often used in reference to stock earnings, but could be used for any asset that is bought and sold for more than the purchase price. If you have the ability to buy low and sell high, then the cap on your tax payment is 15%. Not a bad deal.

How about you all? How are you going to avoid paying taxes in your retirement years?

Share your experiences by commenting below! 

Technology Is Not Always the Answer

The following post is by MPFJ staff writer, Grayson Bell. Grayson, who runs the finance blog Debt Roundup, is a fan of personal finance, brewing beer, and working on cars.

There is no doubt we are a technically advanced society.

Almost everything we do revolves around technology. Some of our biggest advancements have spawned from the evolution of technology.

Just look at what the smartphone has done to our society. We are now instantly connected with people from anywhere. Not only that, but we can surf the web with a flick of our finger. The smartphone has almost killed the pay and home phone. They also allow us to get information quickly and easily. The same goes with email. Look at what it has done to our communication. The need for letters and mail has been reduced dramatically as we no longer have to write and send communications through “snail” mail. We can instantly shoot a reply right to your computer with a few clicks of a mouse.

By all standards, technology has allowed us to do some amazing things. We have been able to advance our healthcare, build better products and services, and the list goes on. While we all might think technology is the best thing since sliced bread, I do believe there is an evil side to technology. I think it is not always the answer.

Where Technology Goes Wrong

Don’t get me wrong, I love technology. My main job is revolved around it. I wouldn’t be able to blog like I do everyday without it. I do think it is an important aspect of our everyday lives, but it is not every part. At least not in mine. Over time, I feel we have lost some of our ability to comprehend what we learn around us.

Before technology was in mass, we had to absorb the lessons all around us. We would learn from other people right next to us. We would learn most of our skills from our parents, friends, teachers, and family members. We would think for ourselves and come to our own conclusions. I think technology has dumbed that down quite a bit. Have you ever been in a conversation with people who couldn’t answer any questions without looking them up in Google? Well, I have and it is utterly frustrating. I have met people where they couldn’t come to a conclusion to something without checking what people on Twitter said.

I am all for being connected, but it has been pushed to a point where we have lost our ability to think and comprehend for ourselves. Now we have to throw stuff out to the social world and see if they can help. Technology has slowly become the downfall of our basic communication skills.

How Technology Inhibits Us Financially

I have written before about how managing money is all about basic math. There is nothing fancy about it. This number plus this number minus this number. We all think we understand math, but I have seen otherwise.

With the influx of great financial technology like Mint.com or YNAB, we do not have to handle reconciling our money anymore. We can create a budget in software and have it hook to our bank accounts. We set up spending limits and then call it a day. The software takes care of the rest and notifies us when we are going wrong. I loved these services and still use Mint.com today. The difference between now and when I was first in debt is how I manage my money before I even look at Mint.

Now, I go back to basic math. I have brought the skill back where I can calculate how much items will be with tax before I even check out. I was never good at math in school. It didn’t interest me and I didn’t care. After I got into debt, numbers started to jump out at me. I looked everywhere to find numbers and found them in the strangest places. After a few years of getting back on my feet, I realized I had taught myself how to do complex math problems in my head on the fly. The better part is I could do basic math problems really quickly without the need of technology or calculators.

In order to get your finances back in shape, don’t be worried about stepping away from technology and relying on what your brain tells you. Remember, basic math will take you all the way you need to go with finances. If you need any complicated equations, then think about using a calculator or even put your finances in the trusty spreadsheet. Yes, it is technology, but you have to do all of the work and come up with how the math equations are run. I use spreadsheets for most of my numbers. Not only does it become a great budget spreadsheet, but it also is a fantastic math learning tool.

Technology is not always the answer to all of our problems. We have to remember technology was created by people who thought outside of the box and applied things they had stored in their brains. I do believe too much technology does make us a little dumbed down than we should be. Unfortunately, I have come across too many people that back up my statement. If we continue to over complicate how we manage our money, we might not ever understand the real reason we are having money troubles. Technology is going to be a part of our lives, but it doesn’t have to be every part.

How about you all? For your finances, are there certain areas where you prefer to do thing “the old fashion way?” 

What technological tools do you use in your finances?

Share your experiences by commenting below!

***Photo courtesy of https://www.flickr.com/photos/katerha/5520292679/sizes/l

Why It’s Easy To Save Money In The Summer

This is a post by MPFJ staff writer, Jeff. Jeff writes about Sustainable living and finances at his website, Sustainable Life Blog and chronicles his (semi successful) journey to earn money online at onlinesideincome.com. Jeff enjoys spending time with his wife and dreaming about financial independence.

I am so glad it’s finally summer – it is my favorite time of year.

The weather where I live (Wyoming) is perfect – always sunny and not too hot. There is so much daylight to take advantage of, and I just cant help but feel energized every day when I wake up. Summer is a great time to have some fun and enjoy life, but summer is also a great time for one of my other favorite things – saving money.

The first thing that summer helps me save on is entertainment. Every Friday night in my town, there is a free concert, which typically lasts from 6-8 pm. My wife and I go down there, meet and chat with our friends, enjoy some live music and relax after a long week in the dwindling daylight and company of great people. Even though these acts are not big names, they do play enjoyable music, and both my wife and I like the time to catch up with friends that we don’t get to see much during the week. If we were to arrange something like this when the weather is not nice, there would no doubt be a cost associated with it (even a small one) due to travel, finding an activity, bringing food to a dinner, etc etc. These concerts are a great free way to hang out and enjoy all that the summer has to offer. You don’t need to go to an “organized” activity to enjoy the nice weather outside though. Consider taking a walk through your neighborhood at night or head over to a local park with your family and enjoy!

One of the next things that I love about summer is riding my bike. I am a pretty die-hard commuter and very against driving (I have not driven to work in 3+ years), but the summer time allows for me to ride my bike to more places than just work. I can ride it to the hardware store or to go pick up groceries, and I don’t have to worry because it’s almost always very nice out and riding my bike isn’t as much of a chore during the summer as it is when the weather is mediocre or downright poor. The best part about this is that I’m not the only one in town who feels this way, so I see a lot more bikers during the summer when the weather is nice than I do when the weather is not nearly as good – it makes biking much more fun!

My most favorite thing about the summer time though is that I can finally hang my laundry out to dry with out it freezing solid! I love to dry my clothes outside because they come in all dry and they smell so fresh! Hanging the clothes out saves us so much energy and so much money during the summer that we try and do it as long as we possibly can. The weather does not always cooperate for us, but we can usually knock 15-20 dollars per month off of our electricity bill (or more) when we hang our clothes out to dry.

We love the nice weather during the summer and all the opportunities it provides us to enjoy the outdoors and save some money.

How about you all? What do you like to do during the summer time that is cheap or free?

Share your experiences by commenting below! 

***Photo courtesy of https://www.flickr.com/photos/shedboy/3627728169/in/

Can You Rent a Car Without a Credit Card?

The following is a post by MPFJ staff writer, Kevin Mercadante, who is a professional personal finance blogger, and the owner of his own personal finance blog, OutOfYourRut.com. He has backgrounds in both accounting and the mortgage industry.

Most people generally assume that you need a credit card if you plan to rent a car from a car rental company. While it’s typically easier to get a rental with a credit card, it turns out that it’s not an absolute requirement.

Since methods of payment have become more diverse in recent years, car rental companies have responded by being more flexible in the methods of payment they will accept.

Acceptable Forms of Payment – Apart From Credit Cards

In addition to credit cards, there are at least three other forms of payment that are accepted by car rental companies, some more common than others.

Debit cards – Debit cards are in common use, and widely accepted by car rental companies. Typically, if you use a debit card to rent a car, the car rental company will run a credit check on you, as well as imposing a deposit requirement – generally $100 to $300 – which will be reserved on your debit card until you return the car and settle the bill. However, car rental companies are increasingly imposing the same restrictions for people who use traditional credit cards to rent their cars. The difference between renting a car with a credit card or a debit card is becoming increasingly small.

Cash – This payment method comes as a surprise to most consumers, not the least of which since car rental companies don’t advertise their willingness to accept cash. But several car rental companies actually do, though the terms under which they will vary widely from one company to another – or even from one rental office to another within the same company.

Prepaid debit or gift cards – Some companies will accept these as a form of payment at the end of your rental, but they cannot be used to reserve your rental, or as upfront payment at the time of actual rental. Typically, you’ll need a credit card or debit card for both credit verification and upfront rental authorization, but the rental company will accept your prepaid debit or gift card as final payment when you return the car.

The limitation on both prepaid debit and gift cards is that each is for a fixed amount. There is no room on these cards for a car rental company to pursue additional compensation in the event that you retain the car beyond the agreed upon rental period, or return it in less than perfect condition.

Now that we’ve established acceptable payment methods beyond credit cards, let’s take a look at three major car rental companies and their individual policies in regard to the acceptance of cash in particular (since all accept debit cards, but only very limited use of prepaid debit or gift cards).

Hertz

Hertz has the most accommodating policy in regard to acceptance of cash for a car rental. You can even use cash for the upfront rental, however you must first obtain a Hertz Cash Deposit ID Card. Since cash is problematic for a car rental company (no paper trail to identify you), they use the ID card to overcome that issue.

It order to be eligible to obtain the ID card, you must be at least 18 years old and pay a $15 nonrefundable processing fee.

IMPORTANT: The application for the Hertz Cash Deposit ID Card will take at least 30 days. For this reason, you will not be able to show up at one of their stores and rent a vehicle immediately. If you plan to pay for your rental with cash, you will need to complete your application and have it ready to go before you need to rent a car.

Enterprise

Enterprise has its own procedure for cash paying customers. They call it the Cash Qualification Process, and unlike the Hertz Cash Deposit ID Card – which is good for a specific length of time – the Enterprise version must be done each and every time you want to pay cash for your car rental.

In order to qualify, you must provide the following:

• Two current utility bills
• Most recent paycheck stub
• Driver’s license issued from the rental state (you’d do well to presume that this provision prohibits paying cash if you are renting a car outside of your home state)
• A minimum deposit plus the entire cost of the rental at the time of pickup (Deposit amounts vary by location from $100 to $300)
• Proof of insurance
• Personal reference (no specifics are given on the types of references that are acceptable)

If the amount of cash that you have paid exceeds the final cost of the rental, you will be credited back to your account within 15 business days.

IMPORTANT: The company website warns that not all locations will accept cash payments even if you qualify under the Cash Qualification Process. If you plan to pay cash for your car rental with Enterprise, you need to check with the specific location where the transaction will take place, to make sure that they are willing to accept cash.

Avis

Avis is the least cash-friendly car rental company. They will accept cash as full payment upon the return of your vehicle, however in order to reserve or rent a vehicle upfront, you must have either a credit card or a debit card.

The only place on the Avis website that clearly indicates the acceptance of cash – on this very limited basis – is the FAQs page, and you must enter “Requirements for renting”, then “Forms of payment” to find the policy at that.

At any car rental company, and especially if you intend to pay with cash, you should check the company’s website, or call their 800 number, to get the specifics. Not only does each company have its own requirements for the acceptance of cash (or any other payment method), but they may not accept that at all locations, and company policies do change from time to time.

A credit card is always the best way to rent a car, but it’s also nice to know that there other options if you need them.

How about you all? Have you ever used a form of payment other than a credit card to pay for a rental car? Why or why not?

Share your experiences by commenting below! 

***Photo courtesy of https://www.flickr.com/photos/fanofretail/8615633564/sizes/n/