The High Cost of Comparison

The following post is by MPFJ staff writer, Catherine Alford. Cat is a freelance personal finance writer who blogs at www.BudgetBlonde.com. 

Comparison is a natural part of everyday life.

We automatically compare prices on produce at the grocery store, clothes in the mall, and yes, even the way we raise our kids and interact with our families.

Comparison can be healthy in many ways. For example, you might compare yourself to a more established colleague or a writer you admire, trying to find ways to improve yourself or better your surroundings.

Comparison can be used as a personal gauge as well. I like to compare where I am now to where I was a few years ago. The comparison shows me how much I’ve grown, developed, and matured.

Yet, there’s a darker side to comparison, too.

There’s the mom who seems to always have it together who makes you feel like you’re not doing well enough. There’s the husband who constantly takes his wife out on dates, when it seems yours just wants to relax and watch the game. Then, there’s the skinny celebrities, the wealthy next-door neighbor with the new BMW, and your co-worker who got the promotion you’ve always wanted.

The types of comparisons listed above can be a danger not only to your relationships but your finances as well. They can cause undue strain on your life and unrealistic expectations.

Let’s take a look:

Dangers to Relationships

Comparing your relationship to other ones is a natural part of life. However, it’s when the negative thoughts creep in that it can deeply affect the way you go through life: “They always seem so in love.” “He regularly buys her flowers just because.” “I wish my husband did that.” “I wish my wife always had dinner ready like his wife.”

Raise your hand if any of these thoughts have run through your mind before, especially when you’re out to dinner with friends or checking your Facebook newsfeed.

Even though comparison is a pretty natural part of life, the way to get around the negative impact is to remember people are always going to put their best foot forward. I’m hardly going to post a status update that says, “My husband and I just had the worst fight ever!”

The world doesn’t need to know that. Yet, I will post about a great dinner he made or another happy part of my day. It’s just how it goes. I don’t think people purposefully try to portray their lives in a perfect way; they just don’t share private details with the public.

Dangers to Finances

You’ve heard of “The Joneses” and how everyone is trying to keep up with them. The thing is, no one would be worried about The Joneses if they didn’t spend so much time comparing themselves to them.

I was very fortunate growing up, but my dad always taught me to never be boastful or showcase our vacations or belongings. He told me many times that there were people far wealthier than we were out there, and acting like I was better than anyone simply because we were upper middle class was rude.

I didn’t truly understand what he meant until I studied abroad one summer in Europe. I took a side trip to Paris, and I was walking down the street when I saw a limo pull up to a hotel. A bellman rushed out and pulled out Louis Vuitton bag after Louis Vuitton bag from the trunk. There must have been 20 pieces of luggage, all extraordinarily expensive.

Standing there with my little backpack as a college student, my dad’s words jumped into my mind. It was only because of his training and instruction that I didn’t stand there envious of the family in the limo. I just acknowledged via a detached comparison that they were extremely wealthy, and I was not. It was a world I’d never seen before and will never be a part of. It was an excellent reminder that sometimes, you simply can’t measure up to others in some ways so comparison is futile.

Still, there are people who try to attain this level of wealth through gathering possessions that very wealthy people own, whether they can afford it or not. This includes the young 25 year old who buys a $1,000 La Perla swimsuit instead of a $30 Target one. It includes the young couple who are buying a first home but insist on the 3,000 square foot house on the lake that they “deserve.”

Comparisons, especially negative comparisons, lead people to live well beyond their means every single day. Whether it’s something small like buying a designer dress that your friend has or something big like booking an expensive vacation to try to one up your wealthy coworker, comparison can drive your finances into the ground.

I know it’s hard to resist comparing yourself to others, since it’s a natural part about being human. However, next time you find yourself wishing your life resembled someone else’s, take a little bit of time to think logically about the situation and acknowledge what’s great about you just being you.

How about you all? What comparisons do you yourself or you see others making that might be negatively affecting them?

Share your experiences by commenting below! 

***Photo courtesy of http://www.flickr.com/photos/laruth/345492908/sizes/o/

Google Drive, Dropbox, and Box – A Review of Cloud Storage Options

This is a post by MPFJ staff writer, Jeff. Jeff writes about sustainable living and finances at his website, Sustainable Life Blog. Jeff really enjoys traveling with his wife as much as he can, to wherever he can.

Over the last 5 years, there has been this huge buzz in computing about the “cloud”.

Everyone talks about leveraging the resources of the cloud, storing your data in the cloud, but what exactly do they mean when they talk about the cloud, and how can you use it to help you?

Well, the cloud is simply online data storage. It works exactly like the hard drive on your computer, except you can access your data from any computer with an internet connection. The service is pretty handy because it allows you to access (or share) pictures, documents and other stuff over any internet connected device. I keep trying to use it as much as possible, but old habits (mainly MS office) die hard. I’m starting to get everything into the cloud though, and it’s making life easier for me.

There are a lot of different cloud services out there, but the main 3 are Google Drive, Dropbox, and Box.

I’ve used each of them for different purposes and each has some advantages and disadvantages, so we’ll go over everything and let you decide what one (if any) of these services meets your needs. The most popular (and one I’ve been using the longest) is Dropbox, so we will start there.

Dropbox

The one that I’ve been using for the longest is Dropbox.

There are two versions of the service, a free and paid version.

Free Version

• The free version comes with 2gb storage space, and you can expand that up to 18 gb for free by referring friends to the service.
• I’ve been using the free version for the entire time, and while I’ve deleted stuff out of there that I no longer use, I’ve never gone above 70% utilization of space. The free version has suited me just fine so far.

Pro Version

• However, if you plan on needing more space than that, there’s a pro version of Dropbox that costs 9.99/mo (Or $99/yr) and gives you 100gb of space – nearly 50x what a free account does.
• This would be valuable if you’re interested in putting ALL your data in Dropbox as a backup, but that’s not how I’ve been using it thus far. I just use it for a few files that I need access to frequently.

The best part about Dropbox is that you can get to it from everywhere. They have great apps for andriod (and iphone, but I havent used that one) as well as desktop apps for mac & pc, and a web interface. They make it super easy to upload and download files from their server.

Below are the Dropbox app links:

Dropbox app: iphone , Droid.

Google Drive

The next one on our list is Google Drive.

• Google Drive has a free version that will give you 15gb for free (though this is combined with your Gmail and Google photos),
• And they have tiered pricing for paid plans, allowing from 100gb (4.99/mo) to 16 tb (799.99/mo).
  • This is half the price per month compared to Dropbox for the same amount of space! 
• Personally, I think that 15gb will be fine for 99% of the population, but you’ll need to decide that for yourself.

Google Drive is more than just a file storage/upload area though. There are apps built into Google Drive, that will help you make documents and spreadsheets, forms and surveys and even do drawings, all of which can then be saved in your Google Drive and shared (if need be).

(From Jacob:) However, one disadvantage that presents itself with Google Drive is that to my knowledge, you cannot open your Google Drive folders on your desktop using MS Office applications. Instead, you can only edit directly from the Google Drive website. 

In addition to creating documents with Drive, you can also share them with people. They can have view permissions or edit permissions, allowing you to collaborate on things with others. My wife and I use this a lot when we were wedding planning to do the guest list, favors, vendors and more.

Just like Dropbox, Drive is with you anywhere you go, and you can access and edit from a computer or your phone with the Google Drive apps, which can accessed by clicking the links below.

Drive App: iphone , android.

Box

The last alternative we will discuss is Box.

• With Box, you can get 10 gb of file storage in their cloud for free, with a maximum file upload size of 250mb.
• If you need more than that, you can move to a personal paid plan with Box, which will get you 100 gb storage online, and a 5 gb upload limit, for $10 per month.

With Box, you can share folders for others to edit and collaborate on the documents inside, or even assign tasks (perhaps to yourself). Personally, I haven’t put this app much through the ringer as much as I have Drive and Dropbox, but from what I can tell box is a pretty solid option if you’re looking to store files online. However, there are some complaints about the small (250mb) file upload limit.

Below are the links to the apps if needed:

Box App: Android, iphone

Conclusion

There are 3 pretty good apps here, and because of the document creation, I think that Google Drive is the most robust, although maybe not suited for folks who like to edit documents inside MS Office applications. Even though Dropbox has the lowest amount of storage space, it’s the one that I’ve been using most (and will continue to use). I’ve never bumped up against my limit, but then again I’m not a heavy user.

If you think you’ll be a heavy user, consider looking at one of the options with a larger amount of storage space. As always, evaluate your needs before choosing, but with any of these three, you cant go wrong.

How about you all? Do you use any cloud storage services? If so, which one?

What features do you specifically look for in cloud storage services?

***Photos courtesy of http://www.flickr.com/photos/joeybones/6779772214/sizes/o/, http://img.talkandroid.com/uploads/2012/12/Dropbox-Logo.png, http://www.ozom.cl/wp-content/uploads/2013/09/Google_Drive_Logo-1000×288.jpg, http://www.techtuple.com/wp-content/uploads/2012/03/Box-Android-Apps-on-Google-Play.png

Is It Worth It to Make a Non-Deductible, Non-Roth IRA Contribution?

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.

The widespread popularity of 401(k) plans has made IRAs – at least traditional IRAs – something of a minor league play these days. Most people will take them only if they are able to get a tax deduction for the contribution. If they can’t – or they merely think they can’t – they may not even bother making a contribution of all.

That’s not always the right choice. In fact, in most cases, it’s the equivalent of leaving money on the table. Here’s why…

The Basics of Traditional IRAs

For 2014, you can contribute up to $5,500 toward an IRA, plus an additional $1,000 under the “catch-up provision” if you’re 50 or older. This is unchanged from 2013. You can make a full contribution, and deduct the full amount of the traditional IRA contribution from your income taxes, if neither you nor your spouse are covered by a pension plan through your employer.

But even if you or your spouse are covered by a retirement plan at work, you can still contribute the full amount to an IRA, but there are limits as to how much of the contribution you can deduct for income tax purposes.

If you are covered by an employer sponsored retirement plan. If you are single, you can deduct the entire amount of the IRA contribution for tax purposes if your modify adjusted gross income, or MAGI (click here for a definition of MAGI;), does not exceed $60,000. At that income level, your deduction begins to phase out, up to $70,000, where disappears completely.

If you are married filing jointly, you can take the full IRA deduction on a MAGI of up to $96,000. At that income level, your deduction begins to phase out, up to $116,000, where disappears completely.

If you are NOT covered by an employer sponsored retirement plan, but your spouse is. You can take a full IRA deduction if your combined MAGI does not exceed $181,000. At that income level, your deduction begins to phase out, up to $191,000, where it disappears completely.

Statistically at least, that means that most people are entitled to take a tax reduction on the full amount of their traditional IRA contribution, even if they or their spouse are covered by an employer pension plan.

But what if your income level exceeds these limits? Is it still worth it for you to make a traditional IRA contribution – even if you won’t get a tax deduction for it?

Absolutely.

Your traditional IRA contributions may not be tax deductible, but your investment gains will still be tax deferred

People often forget that while the tax deductibility of retirement contributions is a nice feature, the real power of tax-sheltered retirement plans is the ability of your money to grow on a tax-deferred basis. Any money that you put into a retirement plan – including an IRA – can grow without regard to tax consequences. That enables faster growth as a result of the full compounding of investment returns.

This is a benefit that you should never forgo, even if the actual contributions are not deductible for income tax purposes.

Building tax diversification into your retirement plan

While it’s true that the inability to deduct your IRA contributions is a limitation, there is a back-end benefit that kicks in when you retire. The non-deductible contributions that you made into your IRA will not be subject to income tax when the money is withdrawn. No tax savings on the way in, no tax paid on the way out. Simple.

This means that at least some of your retirement portfolio will come back to you free from tax consequences. This will provide you with a certain amount of tax diversification, already built into your retirement portfolio.

More rapid accumulation of retirement assets

There’s an even more obvious benefit to putting money into an IRA even if it isn’t tax-deductible. The more money that you save for retirement, the more quickly it will grow.

Imagine making the maximum 401(k) contribution each year. Now calculate in the impact of annual contributions of $5,500, or $6,500, on top of that. If you’re maxing out your 401(k) contribution at $17,500 per year, adding an additional $5,500 through an IRA will increase your annual retirement funding by more than 30%.

With or without a tax deduction for the actual contributions, adding money to an IRA is a way of getting more investment capital into a tax sheltered investment plan. That’s always a solid strategy, and a necessity if early retirement is a goal.

Having more control over your retirement assets

Though 401(k) plans are the best way to accumulate large amounts of retirement capital for most people, they’re not always the best investment vehicles. Since the plan is run by your employer – or your employer’s trustee – you will have little control over the plan, other than deciding allocations. And those allocations are usually restricted to a limited number of investment options.

An IRA, by contrast, is completely under your control and therefore self-directed. You can choose the investment company that you hold the account with, and do so in a way that will not only maximize investment choices, but also give you the ability to trade what you want.

For example, let’s say that you like to trade individual stocks. A typical 401(k) plan won’t provide that ability. Your investment choices are typically limited to a small number of funds, a single family of funds, or maybe company stock. But with your IRA, you’ll be able to trade not only stocks, but also funds in any fund family you choose.

An IRA will provide you with the kind of investment flexibility that a 401(k) plan – or other employer-sponsored retirement plan – typically won’t.

Consider contributing to an non-deductible IRA even if you can’t take the tax deduction for the contributions you’re making and do not qualify for contributing to a Roth IRA. There are just too many advantages to doing so.

How about you all? Have you ever made non-deductible IRA contributions? Why or why not? What do you feel some of the advantages or disadvantages would be? 

Share your experiences by commenting below! 

Reference sources: IRS IRA Contribution Limits, 2014 IRA Contribution and Deduction Limits – Effect of Modified AGI on Deductible Contributions If You ARE Covered by a Retirement Plan at Work, and 2014 IRA Contribution and Deduction Limits – Effect of Modified AGI on Deductible Contributions if You are NOT Covered by a Retirement Plan at Work.

***Photo courtesy of http://www.flickr.com/photos/lendingmemo/11745940785/sizes/n/

6 Differences Between Variable Annuities and Mutual Funds

The following is a guest post. Enjoy!

Investing your money today can bring you significant returns tomorrow. The key to maximizing financial growth is to put your money in the right investment program. Variable annuities and mutual funds are both viable options, but which one is better for you? To find the answer to this question, you need to understand the differences between variable annuities and mutual funds.

Here are 6 key differences:

Insurance Product vs. Investment Vehicle

• Variable annuities are insurance products that you buy from an insurance company. Under a contractual agreement you contribute money, either through serial payments or in a lump sum, and the insurance company agrees to return the money back to you at a set time in the future. Meanwhile, the insurance company invests your funds in a series of mutual funds, otherwise known as subaccounts.

• Mutual funds are investment vehicles in which a money manager collects your cash, combines it with other peoples’ cash, and invests it in stocks, bonds, and similar assets. Mutual fund programs give groups of people access to a diverse portfolio of securities they would most likely not be able to afford with their own capital.

Lifetime Payment Guarantee vs. No Guarantee

• Annuity holders are promised a lifetime of regular payments once they reach their Payout Phase. Depending on market performance, the payments may be small or large, but they continue until death.

• Mutual funds make no such guarantee. You might earn enough cash to support you for decades to come, but you might not. There are no insurance benefits to be had in a mutual fund plan.

Survivor Benefit vs. No Survivor Benefit

• Annuity beneficiaries are guaranteed a survivor benefit in the event of an annuity holder’s death.  They receive whichever is greater, the sum of all the monies in the account or a guaranteed minimum payment for life.

• Mutual fund programs do not guarantee a survivor benefit to beneficiaries in the event of a fund holder’s death.

Tax-Deferred vs. Taxable

• Money earned by an annuity is not taxed until the money is withdrawn. This tax deferrment allows annuity holders to avoid paying the government for money they are not yet using. When the money is finally withrawn, it is then taxed at a regular income tax rate.

• Money earned by mutual funds is taxable on a yearly basis. Tax on all dividends and distributed capital gains from mutual funds must be paid in the year the money is received. When the money is finally withdrawn, it is not taxed again.

Withdrawal Penalties vs. No Withdrawal Penalties

• If you’re not yet 59 ½ and you need to get your hands on more than 10 percent of the accumulated cash in your annuity, you’re going to pay a tax penalty on that money. Money taken out of annuity before the standard 7-10 year surrender period is over comes with a penalty price tag, too.

• If your money is tied up in mutual funds, you’re free to access it at any time without paying a tax penalty.

Long-Term Goals vs. Any Term Goals

• Variable annuities are designed specifically for long-term retirement saving.  They don’t make people rich overnight, and a person who doesn’t have the time to sit around waiting around for funds to grow would be better served elsewhere.

• Mutual funds are designed to serve both long and short term financial goals.

Major Fees vs. Minor Fees

• Annuities are notorious for their extraordinary fees. The insurance company charges you a “mortality and expense fee” for the handling of your money. You also pay subaccount fees, insurance fees, and numerous taxes.

• Mutual funds charge an upfront administrative fee. You also pay account mangement fees, purchase fees, and other assorted charges. Overall, the fees typically associated with mutual funds are lower than annuity fees.

Depending on who you talk to, one of these investment plans can seem a lot better than the other one.  In reality, both plans offer significant benefits and drawbacks.  Before entrusting your hard earned money to an insurance company or money manager, consult a financial advisor.

***Photo courtesy of http://www.flickr.com/photos/76657755@N04/7027604401/

The Worst Valentine’s Day Gift Ideas

The following post is by MPFJ staff writer, Shondell of Call Me What You Want, Even Cheap. She blogs about her recent car loan and mortgage pay off and a whole bunch more. Check out her blog right here.

Valentine’s Day is for giving your sweetheart beautiful gifts in order to win her heart or to show how much you care.

A gift given on this day should be such that it touches your significant others heart and makes her think fondly of it until the next V-Day. Sadly, some men are not the greatest at giving gifts and may need some assistance on what not to buy their partner.

Here are some of the worst Valentine’s Day gift ideas:

• Lingerie: Giving lingerie in the early days of dating is like extending a direct invitation to you know what….. It would probably be a great idea if you are already a couple and deeply in love, but a woman you just started dating may find it insulting. Depending on her personality, she might just ignore it and never call you again, which would be quite sad if you really liked her.

• Chocolates: If your partner is not a chocolate lover, and or if she’s on a diet, then chocolates are a definite no, no. So ignore the commercials about chocolates being great Valentine’s Day gifts, it will only work if she really likes chocolates, so be sure to know this before you decide to buy any.

• Fifty Shades of Grey, the novel: There may be a lot of buzz on the internet about the erotic novel “Fifty Shades of Grey” and it may have become a bestseller, but that doesn’t mean women like to see themselves in the same role as the masochistic Anastasia Steele. Giving the novel as a gift on Valentine’s Day is like making an open invitation to her to play the role of Anastasia with you as the sadistic Christian Grey. No thinking woman would appreciate this gift.

• Diamond ring: Unless your sweetheart is already married to you, giving a diamond ring to her is a bad idea. If she is deeply in love with you, she might think it’s as a proposal and if it is not, then it would be very awkward for the both of you. If she is not in love with you or has no intention of getting hitched with you, then it might simply drive her away. With that one diamond ring you could hurt her feelings or cause her to end the relationship.

• Plastic roses: A bouquet of roses is fine for Valentine’s Day. But never make the mistake of giving plastic roses. Sure, they look beautiful, but they may send a negative message. She might think that you have a cold and insensitive heart and toss it in the trash. It also sends a message that you are extremely cheap, so if you don’t want her to view you as being cheap, get the real ones!

• Deodorant: This one is obvious, and although your intentions may be in the right place, it just sends the wrong message. Imagine getting deodorant from anyone you know. Maybe if it was packaged with body wash, soap, and perfume it wouldn’t be as bad, but let’s be honest if someone gave me deodorant, I would definitely be offended.

• Tools: Have you ever gotten a gift that your significant other wanted for themselves, and instead of just buying it for themselves, they purchased it for you, knowing full well that they will be enjoying it and not you? This happened to someone I know. She got an electric saw! I laughed when she told me, and said he might as well have not gotten you anything. Don’t get me wrong, a gift is a gift, and we should all be grateful, but if your wife/girlfriend has never used a hammer, chances are she won’t enjoy a tool.

• A Gym Membership: This one could go either way, but to avoid an argument, I would not recommend this as a gift. The first thing that may go through your partners head is “Is he trying to tell me I need to lose weight?” Especially if there was never a conversation about joining a gym, and then all of sudden BAM! A gym membership.

How about  you all? What’s the worst Valentine’s Day gift you’ve gotten?

Share your experiences by commenting below! 

***Photo by Justin Lucarelli

Can You Invest In Real Estate With An IRA or 401(k)?

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.

The short answer to this question is yes. But, the real question that needs to be answered is why would you even want to? That’s the issue were going to take a look at here.

You can – but you probably can’t invest in real estate through your 401(k) plan

Confused? Though the IRS does not specifically prohibit investing in real estate through a 401(k) plan, employers and plan trustees are almost unanimous in avoiding it. This is particularly true when it comes to investing in a specific piece of property for the benefit of a single plan participant. There are technicalities and prohibitions (discussed in more detail below) that make direct investing in real estate a nightmare for retirement plan trustees. You can inquire of your plan trustee whether or not this will be permitted, but it’s 99.9% certain that the answer will be no.

There are articles and experts who will advance the cause of buying real estate with a 401(k) plan, but there’s some sleight-of-hand involved in the discussion. What is typically advocated is borrowing against your 401(k) plan to provide at least some of the funds for the purchase of a specific piece of property.

Under IRS regulations, 401(k) plans are permitted to loan out up to 50% of the participants plan value – to a maximum of $50,000 – to the participant. This money can be used as a down payment for the purchase of property.

However, even if you are going to engage in this practice, you will be leveraging your retirement plan in order to buy a real estate investment which itself will be further leveraged.

Let’s say that you borrow $50,000 from your 401(k) to make a 20% down payment on a $250,000 property. The remaining $200,000 will come from a mortgage directly secured by the property itself. That means that your investment in the property – which itself is a risk investment – will be 100% leveraged. That’s an even bigger risk.

If the investment blows up for any reason, you’ll not only lose money on the property, but you also lose some or all of the money borrowed from your retirement plan.

I believe that’s called double jeopardy.

You can with an IRA – and also SEP or SIMPLE IRAs, or Solo 401(k) plans

What do all these plans have in common? They’re all self-directed plans. For that reason it’s theoretically possible to invest directly in a specific piece of real estate through the given retirement plan. Since you have direct control over the plan, you can structure it in a way that will permit you to do this.

But there are some restrictions, and that’s where this gets messy.

When you purchase real estate in your retirement plan, all funds used to purchase the property must come out of that specific retirement plan. Any income earned by the property – including proceeds from the ultimate sale of the property – must be returned to the retirement plan.

There’s an even bigger restriction: if you purchase real estate in your retirement plan, you cannot personally manage the property in any way. This is the limitation that makes ownership of real estate through a retirement plan technically impossible for small real estate investors.

If you are buying a property for the purpose of managing and profitably selling for a big gain, you’ll automatically disqualify both the investment – and your retirement plan. All investment within a retirement plan must be handled on an arm’s-length basis. That means that in order to comply, you’ll have to hire a management company to run the real estate investment for you.

You won’t be able to manage property any way. You will not be able to work on physical maintenance or remodeling of the property, market rentals, screen tenants, collect rents, or pay bills. With those restrictions, you’re better off making a paper investment in real estate through third-party sources.

Direct management of the property is considered a prohibited transaction under IRS retirement plan rules. And there are other such prohibited transactions (For a more detailed discussion of prohibited transactions, please check Retirement Plans FAQS Regarding IRA Investments).

If you engage in a prohibited transaction with your retirement plan – something that is very easy to do when investing in real estate – the IRS can literally invalidate your plan. If they do, your entire plan will be considered distributed, and you’ll be subject to ordinary income tax, plus a 10% early withdrawal penalty.

Should you invest in real estate with your retirement plan?

In a word, nope! Even though the IRS says you can invest in real estate with certain retirement plans, that doesn’t mean you should. There are too many reasons why you shouldn’t.

Losses are not tax deductible. This is a risk of all capital investments, but much more so with real estate. For starters, real estate often operates at a loss especially in the early years. You won’t be permitted to deduct those losses. And if the entire investment goes sour, you won’t have the benefit of capital loss deductions. There’s no upside to investing in real estate through a retirement plan if the investment goes bust.

Real estate is not a liquid investment. One of the difficulties with real estate in general is a fact that it‘s not particularly liquid. Not only can it be difficult to sell an individual property, but you may need to hold onto it for many years before it becomes truly profitable. That will crowd out other potential investment opportunities.

Excessive capital allocation. Since you will have to make the entire real estate investment through your retirement plan, an inordinate amount of the plan will be invested in single asset. Diversification of the portfolio will be close to impossible.

Potential for trouble with the IRS. This gets back to those prohibited transactions we talked about above. The risk of this is substantial.

It will be difficult to find a trustee who will allow it. Just because the IRS permits real estate investment for certain retirement plans doesn’t obligate trustees to offer it. For all the reasons listed above – plus an almost impossible administrative burden – most retirement plan trustees will not permit you to hold real estate in the plans.

Investing in real estate through your retirement plan – an interesting concept, most definitely – but not one you should participate in. As an alternative, you can hold real estate investment trusts (REITs) in your retirement plan, as well as stocks and funds that are primarily engaged in real estate related activities. Or you can purchase investment real estate with non-retirement funds, and enjoy a whole lot more flexibility – as well as generous tax benefits.

How about you all? Have you ever thought about investing in real estate with one of your retirement accounts? Do you know anyone that has done this type of thing? 

Share your experiences by commenting below! 

***Photo courtesy of http://www.flickr.com/photos/9731367@N02/6988181354/sizes/n/

$168.15 – Community and Charity 10% Monthly Blog Income Give Back # 29 – February 2014 Edition

The 10% give back giveaway fun rolls on for the month of February.

In case you missed the first 28 editions of the 10% Blog Income Give Back, after doing some thinking at the beginning of October 2011 about what direction I want this blog to grow and evolve towards in the future, I decided that any income made from this blog would have more significance to me at a personal life values level if I knew that a portion were being given back to the following places:

• 1) The readers – Obviously, without you here to read my articles and interact with my ideas, there would be no blog in the first place (let alone blog income). As such, it is only fitting that you receive a portion of any blog income.
• 2) Charitable organizations – If you’ve read my blog before, you know that I’m a big believer in donating a portion of my money to charity. Each year, I donate between 5-10% of my income to the National Multiple Sclerosis Society as part of the Bike for MS fundraiser that I do. Beyond the good that is done by donating your money, getting used to contributing to charity is also a good practice to emulate the actions of affluent individuals (T. Harv Eker discusses this in his book, Secrets of the Millionaire Mind, which I would definitely recommend reading if you have a few hours).

Because of these considerations, I’ve decided that each month going forward, I’m going to give away 10% of my net (after-tax) blogging income/profit to My Personal Finance Journey readers (5%) and to charity (5%). Listed below is a summary of the results we’ve achieved together thus far through this give back effort:

• After each calendar month passes, I’ll tally up my net blog income and determine what Dollar value correlates to 10%.
• So far, I’ve been very happy with the success of the October 2011 – January 2014 give backs. Listed below is a summary of what we’ve accomplished so far with the give back effort.
  • Current total given to charity = $2,382
  • Current total given to blog readers = $1,078 

So, that’s the overall flow of things and a brief recap of what’s happened so far with the give back initiative. Now, let’s get in to the specific details for this month’s (February 2014) giveaway.

Details of February 2014 10% Blog Income Giveaway

How to Enter the Giveaway – Deadline to Enter is 11:59 PM, February 28th, 2014

Like previous months, I’ve decided to use the RaffleCopter giveaway management tool to handle sign-up facilitation for this giveaway, so simply go through the steps listed in the widget below to enter the running for the prize and accumulate entry points.

There is no limit to the amount of points you can earn. If you refer 10 subscribers – your name will have accumulated 170 entry points! Or, if you link to the giveaway more than once, you can accumulate those 10 entry points multiple times. You can also share other My Personal Finance Journey articles via social media sites once per day. In the event of a tie, I will be using a random number generator to select the grand prize and runner-up (2nd place) prize winners.

Important instructions: After you complete an entry method, make sure to click and fill out the “I Did This” or “Enter” button in the widget so that I have a record of your points.

a Rafflecopter giveaway

Remember, the deadline for entries will end at 11:59 PM, February 28th, 2014 (~2.5 weeks from today – the start of the give back). Good luck to you all! Please contact me if you have any questions. After the deadline for entries passes, the grand prize and runner-up prize winners (one with the most points and second most points accumulated, respectively) will be contacted via email to receive their prizes.

***Photo courtesy of http://www.flickr.com/photos/kouchi/151196377/sizes/o/

Are Holidays A Total Waste of Money?

The following post is by MPFJ staff writer, Catherine Alford. Cat is a freelance personal finance writer who blogs at www.BudgetBlonde.com. 

I should probably admit upfront that I have a bit of a sore spot when it comes to holidays.

I used to love them so much growing up. I enjoyed Christmas as a kid, and my dad always made us girls feel special on Valentine’s Day, etc.

After my family endured Hurricane Katrina in 2005, I remember sitting there numbly that first Christmas after the storm. I got in my car after my last exam and started to head “home” in the opposite direction from the house I grew up in. It was a really devastating moment for me. For so long, the house I grew up in was what Christmas was to me. Driving somewhere else, after everything we had been through, was too much for me. All I wanted was to go back to a few months before when everything was right with the world and our house wasn’t damaged by flood waters. I cried the whole way to our rental house in another city. It was awful. I don’t even remember what happened on Christmas Day; it was all a blur.

I also remember the first time we celebrated Thanksgiving after the storm. The Thanksgiving directly after Katrina, my family went on vacation. I just don’t think my parents could bear the idea of dealing with such a big holiday after so much devastation. However, I remember the one after that, my dad went and bought a new dining room table (because all we had at that point were just really basic stand ins) and we had a proper Thanksgiving feast. It was really sweet and really memorable. So, I guess I can’t say all holidays are bad. It’s just they aren’t all they are cracked up to be.

At the same time, when my husband and I moved out of the country, we spent countless holidays away from our families. We made new traditions and new friends, but there was always this nagging feeling that we should be somewhere else, doing something else.

All of these experiences over the past 8 years have made me a little bit grumpy about holidays in general. I just don’t understand them and wish they didn’t exist. Perhaps this will all change when I have kids, as I’m going to try to make things as positive as possible for them. However until then, let’s look at some facts:

1.     Holidays Are Expensive

We can’t just have a normal holiday in the States.

We are pushed and pressured to buy extensive decorations, new wreaths, cards, and anything else this consumer driven economy can throw at us. Even in the middle of a recession, stores were still pushing people to buy, buy, and buy some more. Plane tickets and hotel prices always go up just so people can make a buck, and everyone is sad the month afterwards because they spent much more than they anticipated.

 2.     Holidays Are Stressful

Everyone takes pictures of themselves on holidays and portrays their absolute best selves on social media. But what those pictures don’t show is how stressed your mom got when she burned the turkey, how you had to yell at your kids to clean up the house because you had company coming over in five minutes, and how many dishes you had to wash after the fact. Plus, there’s that unspoken pressure too.

Maybe your wife has high expectations for Valentine’s Day and maybe you feel like you should plan something or book a reservation at a nice restaurant lest you fail as a husband. All of these expectations, pressures, and stress make holidays something to dread, not something to look forward to. I guess it really depends on the type of family and the type of relationship you have, but on the whole I feel like people expect a little too much out of these “special days.”

 3.     You’re Always Going to Hurt Someone’s Feelings

The worst part about any holiday is that you’re always going to hurt someone’s feelings.

Someone, somewhere whether it’s your best friend or your great-grandmother is going to wish you would have done something differently. You can literally drive and fly all over the country going to 5 different Thanksgiving dinners and someone will be mad that you weren’t there at a certain moment. It’s really hard to establish your own traditions and try to decide which family member’s house you’re going to go to.

If holidays didn’t exist, you could just invite your parents and your siblings over any old time without worrying that you’re neglecting one half of the family just because you weren’t there on this very specific pre-planned day.

Ultimately, there are many things in this world that are a total waste of money, but to me, national holidays rank pretty high on that list. With a whole slew of them coming up, including the ever so popular Valentine’s Day and then Mother’s Day, remember to keep it simple, take it easy, and to try to do your best. I personally asked if I could order a few pairs of pink socks for Valentine’s Day to put in my hospital bag. If that’s not a perfect way to spend such a big, commercialized day, then I don’t know what is.

How about you all? How do you feel about the holidays? Do you think I need to lighten up a bit when it comes to them?

Share your experiences by commenting below! 

***Photo courtesy of http://www.flickr.com/photos/76657755@N04/7027602839/sizes/l/

Accept Your New Life to Make Permanent Changes

The following post is by MPFJ staff writer, Melissa Batai.  Melissa is a freelance writer who covers topics ranging from personal finance to business to organics to food.  She blogs at Mom’s Plans where she shares her family’s journey to healthier living and paying down debt.

My cousin is a sucker for those Facebook pages that ask you to pray for so and so who is battling such and such physical problems.

I resisted clicking on any of them until I saw the cute face of Caleb, a little baby who had multiple heart defects.  Something about his smile and his mother’s openness in her Facebook postings held my attention.

Even when his condition deteriorated so badly that I felt certain I would be reading about his death soon (at less than 6 months old), I kept reading in the hopes that maybe, just maybe, he’d get the heart transplant he needed.  And then he did last summer!

Now little Caleb is 10 months old and home with his family, though he’s not completely medically healed yet.  On her December 30th post, his mother shared that it was her eighth wedding anniversary.

She said that she was crying to her husband that they’ll never have their old life back, which was much less stressful than their current one.  (However, she’s obviously very thankful that Caleb is still with them.)  To which her husband replied, “We cannot make our old life an idol, as something to be attained again, because it may never look like that again” (Pray for Caleb).

That statement stuck with me all day, and then into the next day.  Of course, this family has a great adjustment to make to their lifestyle as they learn to care for a medically fragile child who may or may not have delays.

But, even those of us who don’t face such challenges would be wise to heed his words.

We all have to let go of the past to flourish in the present.

Paying Down Debt and Staying Out of Debt

When you’re on a mission to pay down debt, you change your lifestyle radically.

You stop going out to eat.  Perhaps you buy used close and drive an old beater car.  You cut corners and do without.  All of your extra money goes on the debt.  Sometimes paying off that debt is all you can think about.

Yet, what happens when the debt is gone?  If you haven’t changed your mindset and adjusted to a new normal, you may go right back into debt.

I have a friend who was gazelle intense.  She and her family paid down all of their debt (over $40,000) in less than two years.  I was so impressed (and, I admit, a little jealous).  But just recently she confided to me that she and her husband are back in debt, and not just a little bit of debt.  In less than 2 years since becoming debt free, they acquired another $35,000 in debt.

She explained that they felt like they could relax and live it up because they’d worked so hard to pay off the debt.  Then, when she lost her job, they figured it was only temporary.  They didn’t scale back their lifestyle because they didn’t want to start scrimping and saving again.  They didn’t want to feel the pain of the struggle.

To her and her husband, being mindful of their money and saying “no” to things like going to the coffee shop and dinners out as a family was something they could endure temporarily, but they couldn’t accept that this way of life might be a permanent change for them.

They kept dreaming of their old life.  They started living the way they had before, and now they have the debt to match.

Losing Weight and Keeping It Off

This phenomenon of temporarily enduring what we perceive as difficult circumstances only to go back to our old behaviors is the number one reason why people fail at weight loss.  Time and time again we see people who follow a diet to the letter and hit their target weight.  Then, a few months or years later, the weight is all back on, plus more.  Kirstie Alley is a celebrity who has regularly lost weight only to gain it all back as has Oprah Winfrey.

Unfortunately, I’m no different in that regard.  This past year, I lost 75 pounds following a strict Paleo Auto Immune diet to heal my digestive issues.

I know that sugar is my weakness, and for five months, I had absolutely no sweets.  Then one day I thought, “I can have just a little bit.”  Well, guess what?  There is no having a little bit for me.  I thought I could handle a little bit in early October and had my first bit of a sweet then.  Now, almost 4 months later, I have had much more than a “little bit” of sweets and I’ve gained 20 pounds back.  I know I’ve also delayed my healing.

Last week I finally gave up sugar again.  This time I know that thinking, “I can have just a little bit” is a dangerous thought for me.  Much like an alcoholic, I can’t have just a little bit.  If I do, I open the flood gates and go on a sugar bender.

My new reality is that I can’t have sweets.  I have to change my perception of my life.  That old way of life is gone.  While maybe a long time ago I could handle having only a bit of sweets, I can’t any more.  Sweet treats just can’t be in my life.

Try A Behavior Change Just for Day

One of the best ways to accept your new reality is to write down what you want for your life.  If you want to be free of debt and have a healthy savings account, perhaps going out to eat, as much as you used to like it, just isn’t right for you anymore.  When you’re faced with a challenge, think about your goals and ask yourself if going out for coffee, for instance, will help you meet your bottom line?  If not, then know that this behavior, while you may have loved it in your old lifestyle, isn’t a fit for now.

Another thing to do is to use some of the strategies from Alcoholics Anonymous.  Those using the AA program can’t think, “I’ll never have alcohol again” because that thought is too overwhelming.  Instead, they need to think, “I won’t have alcohol this hour” or if they’re further in their journey, “I won’t have alcohol today.”  That’s how I need to know think of sugar.  I won’t have sugar today.  But string together days of not having it “today”, and you develop a new habit that is better for you and helps you reach your current goals.

Embrace Your New Lifestyle

Finally, don’t look at yourself as a victim.  Rather than thinking, “I can’t hire a babysitter and go to the movies with my spouse because we don’t have the money,” think, “I’m choosing to be responsible with my money and do what will help us reach our financial goals.”

Also, remind yourself that you’re changing your life so that you will be financially comfortable for years.  You choose this over struggling financially to make minimum payments on your debt.  Remind yourself, “I choose temporary discomfort of not being able to do what I want to do so that I have the opportunity to live a better life not just now but in the future.”

How about you all? Have you been able to make permanent life changes?  What has helped you to be able to do so?

Share your experiences by commenting below! 

***Photo courtesy of http://www.flickr.com/photos/alan-light/251536635/sizes/o/

Trying to Beat ‘The House’

The following post is by Jade Anderson. Enjoy! 

‘The House’ sounds a bit like something out of Downton Abbey or Pride and Prejudice, where everyone looks beautiful, plays with an unfair advantage, and always come out on top.

The House is the business behind the gambling games such as poker, roulette, blackjack, and any number of other activities designed to keep you guessing and keep you playing. The house is used to convince gamblers and players that they have a chance to make a lot of money by putting down their own hard cash first.

Sometimes they do, there are stories which talk about players who strike gold and usually these are invented as a means of encouraging others to part with their hard earned cash. There are some players who really do beat ‘the house’ but this is usually long after they have invested a huge amount of time, energy and money into the game and by this time, they probably haven’t made a huge profit out of it.

Who Beats ‘The House’ ?

More often than not, The House wins. The gambler loses every penny they bet with, and comes away with less than they had to start with. Take slot machines, for example; with these games, the idea is that you feel you are betting a small amount each time. And you are, but it soon adds up! Combine that with the fact that winning that big score on one of these machines can be as high as one in 34 million, and you can see that The House definitely has the advantage.

Statistics aren’t pretty for beating the house in other games either. Statistics for roulette, for blackjack, and for poker all conclude that you have as much as a 70 per cent chance of losing when playing against the house.

How Do I Beat it?

There have been those who had tried to beat The House by coming up with ingenious systems based on complicated maths, card counting, and even using good luck charms or special routines. The problem with all of these, however, is that if they work at all, they only work for a little while. There is always the chance of losing everything, and ending up with less money than you had at the beginning.

Free Play

There is, however, one fool proof way to beat The House. It might sound too simple. It might sound impossible. But it is neither – and it really works! The best and most reliable way to beat the house, to not lose any money at all (and potentially walk away with winnings), is to play for free…

These days there’s not a lot you can get for nothing, but it is entirely possible to play a real, engaging and fun game of poker for no outlay whatsoever! So if anything suggest you can’t possibly beat The House, just tell them, you could always play for free! Free play is the best way to improve your skills and chances of success!