Tax Tantrum Tuesdays: Tax Time a Ticking

I was thinking...

December 31 is almost here. You know what that means? Tax time is almost upon us.

Last tax season I spent a lot of time writing posts around income taxes and how to understand yours (remember the red bottoms?). This year I'm hoping most of you have taken the time and energy to pay more attention to your income in order to minimize money wasted in witholdings and maximize tax deductions.

My goal for the 2011 tax year was to be able to itemize. Since I don't own a home yet and therefore can't deduct property taxes or home loan interest, I can't use that to itemize. But! Charitable deductions and state income taxes are both itemized deductions I can take advantage of. So...I challenged myself to do more charity (the state is already taking my money) through tithing. Aside from tithing, I've also given $$$ here and there to other charitable organizations. Since tithing was something I should've been doing anyway (because I believe in it) I found this to be a great motivator for me to stay on it.

Confession: I fell off...somewhere around July. However, all hope is not lost! As long as my last tithes are paid by December 31, 2011, they count towards my curent year return. And so....I will be making a bulk tithe payment before the end of this year to cover the tithes I've missed from August - December.

Your task: Think about what your income tax return will look like now! Did you have any major job changes, income shifts, new possible deductions, possible lost deductions, that may impact your 2011 taxes in a few months? Think about those things now. Doing this and reaching out to a knowledgeable tax professional (or doing the research on your own) may alleviate the stress that tax season brings most Americans. You won't be fearing the unknown (that you somehow owe the government some absurd amount of money).

Instead...you'll know just what to expect.

Fed Up With Fees

Recently, there has been intense discussion regarding the new fees being imposed on customers by "big banks." When Bank of America announced the $5 fee it planned to impose on debit card users at the beginning of 2012, folks...went...crazy. Bank Transfer Day was organized in an effort to hit big banks where it hurts. Well...it worked.

In the month or so since this announcement was made, the news has reported that more than 650,000 "big bank" users have taken their money and accounts elsewhere...to credit unions. To give you an idea of how major this is...

• Credit unions across the nation normally see 650,000 new customers every year. To get this many in one month is a major increase for them.
• Bank of America has experienced a substantial drop in their stock price since losing so many customers (and thus so much money).
• Bank of America (and all other big banks: JP Morgan Chase, Wells Fargo, etc) have taken back their plans to impose monthly fees for debit card use. 

I guess Americans are sending a major message to "big banks." Something along the lines of....eff you, pay me.

In hearing this on the local news, I realized that I, a "big bank" customer (and lover, might I add),  don't really know the difference between credit unions and banks.  I decided to check it out and jot down the following lists of differences:

Banks

• for-profit
• publicly traded
• larger selection of products (retirement plans, investment plans, usually not offered by credit unions)
• regulated by Federal Reserve
• more ATMs and branches
• easy to join
• less personalized service
• primary focus: making money

Credit Unions

• not-for-profit 
• owned by members of the credit union
• members share a commonality (belong to the same church, school, employer, etc)
• regulated by National Credit Union Association
• limited locations
• limited range of product offerings
• higher interest rates on savings accounts (than banks)
• lower interest rates on loans (than banks)
• hard to find and join
• more personalized experience
• primary focus: making customers happy

A few important things to note about the above lists:

1) Because credit unions are non-profit entities, they are not subject to state and local taxes, have far less marketing expenses,  and don't have to pay out high executive salaries, like banks. These limited expenses allow them to offer higher interest rates on savings accounts, lower interest rates for loans, and lower or no fees on checking accounts, late payments and overdrafts.

2) Because credit unions are more concerned about pleasing their owners (the customers) they offer more educational services and seminars to teach customers about financial products and how to make smart financial decisions. Banks are less inclined to want you to be financially savvy because they are interested in making money.

3)  For both credit unions and banks, customers are insured up to $100,000. Just in case you're ballin' and thus this poses major cause for concern. lol.

I'm a big banker, but this list has definitely made me think twice about looking into credit unions. They could prove to be an awesome option as us 20-somethings to save for and purchase our first homes, kids' college educations, and retirement. This Bank Transfer Day just may have led to the rise of the credit union and if it saves me money...I'm not mad at that!

Update: I found this article about folks like me who are addicted to their big banks. Check it out.
I'm Addicted To My Big Bank

What Is Your Capacity?

Have you ever had a friend, significant other or any other person in your life, whom you felt was not giving as much of themselves to your relationship as you were. Even worse, it felt like they just didn’t get it. They didn’t understand why what they were giving wasn’t enough. They were looking at you like you had the problem!

Well last night, I heard a sermon from T.D. Jakes that posed a very interesting question:

What is your capacity?

Bishop’s sermon came from Exodus, the story of the Manna and the Quail. If you’ve never read it, check out chapter 16 of Exodus.

The part of the sermon that spoke to me was God and fairness. In the scripture, God provides manna, which is food, for the people. Some got more manna than others, but the people who got little, got enough, and the people who got a lot, got enough. One would think, well that's not fair, why did some get more than others. And to this point Bishop pointed out:

Who said God is fair? The bible does not say anywhere that God is fair. It says that God is just.  He further pointed out the difference between these two words:

Fair is to divide equally. Just is to respond to capacity. If you haven’t caught on yet, this means, God gives however much each person has the capacity to handle. For those families that had the capacity to eat more food he gave more, for those who did not, he gave less.

Bishop Jakes went on to compare this to relationships (this is where it gets relevant y'all). He pointed out that the problem with a lot of the relationships and marriages of today is that folks don’t have the same capacity. The man or woman you are in love with but you don’t feel like they’re loving you equally in return, may not have the same capacity to give as much love as you do. Sometimes, a person can be loving you as best they know how, with all of their might, giving you everything they have to give, but they may only have the capacity to give a “cup” while you have the capacity to give a “quart.” So that cup will never be enough for you. And you will burn up all of your energy trying to force that person to give you more than they are capable of giving.

  

Now I'm sure you're asking, as was I, how does one build their capacity? Bishop covered this as well: Your hunger (or drive) allows you to gain more capacity. As you push to love better, live better and do better, you gain the ability to handle more. On the other hand, if you remain complacent, your capacity will never grow.

Definitely an "a-ha" moment, as Oprah would say, for me. I'm sure we can all think back on past relationships that didn't work out for whatever reason and now realize that maybe the other person wasn't a bad person per se, maybe they just didn't have the capacity to give the same to the relationship that we did. Conversely, for those of us who have been left by someone when we felt like we were giving things our all, maybe we were giving it our all but they had the capacity to give a little bit more and thus expected more. The key, to finding SUCCESS in a relationship, is to find a person with the same capacity as you. And at the very least, we should all be pushing to love better, live better and do better, so that we will be able to give (and receive) the biggest capacity possible.

Chuch

For those of you who would like to hear this sermon, I've attached the video. The video is from the first time he preached this sermon at The Potters House (Bishop Jakes' church). The sermon starts about half way through the video.

I Knew He Was the One For You

I went to a wedding a few weekends ago for one of my ex-colleagues and her new hubby. It was beautiful. She was beautiful. They were beautiful.

I noticed during most, if not all, of the bridal party’s speeches, that people, in some way, shape, or form said “when he first told me about her” or “when she first told me about him, I knew s/he was someone special and/or the one.” I leaned over to my good girlfriend sitting next to me and said “so since apparently all of my friends will know who ‘the one’ is before I even know, can you let me know as soon as you know who my one is, because I would rather you not reveal that you knew for so dang on long at our wedding. I want to know right then damnit!” She cracked up laughing and assured me that she could do that much.

I had to wonder after listening to these speeches, do your friends really know when someone you meet is “different” and is the “one?” or is that just something people say during speeches because it sounds good and is polite to your new hubby/wifey?

I have actually had one of my very best friends tell me that she thinks (well now that she thought…and I guess maybe still thinks) that this one guy I recently experienced a connection with was the one. I mean…it makes sense that she thought that…heck, even I thought that. There is something extremely special about him that I can’t really put into words. There’s this compliment, even in the worst of times, that I feel like we give each other. Something I’ve never experienced before.  Now maybe I will experience this again. Who knows. But I know that he’s the first guy who I felt I could get through absolutely anything with and it was then that I realized that, that feeling is a VERY integral part of knowing you’ve found the “one.” Not love. Not happiness. But really FEELING like you can make it through the WORST of times with this person because you all have some natural (well really it’s unnatural) bond that will withstand the test of times. A feeling that when he’s not at his best, you can fill in, when you’re not at your best, he can fill in and when you both are not at your best, you still find a way to pull each other up out of the “bottom.” A feeling that even imagining him at his WORST, isn’t enough to make you think you’d ever want to leave. It’s just a very powerful feeling to have.  I think so at least.

I wondered to myself, is this maybe what the difference between loving someone and finding your soulmate is? I certainly don’t believe that everyone ends up with their soulmate. I think timing and proximity play such a big role in who you end up with, that sometimes, if you’re lucky enough for your soulmate to enter your life, s/he might exit just the same and you just have to be thankful that you got the chance to meet them at all.

I also wonder if the “thing” that my newly married friend’s bridal party saw is the same thing my friend sees.

I ALSO wonder if one of my very best friends is right.

Only time will tell.

And I happen to have recently fallen in love with this song. :-)

Question: What do you all think finding your soulmate feels like? Can outsiders see that you’ve found “the one” before you?

Reeeeee-Mixxxx

As you can tell, I’ve been struggling with writing lately. I think I finally figured out why: my finances aren’t all there is to my life. And what I mean by that is…for the past few months, I’ve had a crap load of other things to concern myself with and in dealing with those things, the time I could devote to researching, reading up on, and writing about financial stability had to take a major back seat.

It finally occurred to me late one night that this is okay. It’s okay if I can’t always write about financial stuff. Anddddd… it is okay if I broaden the intensely pointed premise of my blog currently and allow it to become more well-rounded and inclusive of my life.  After all, I AM 25.

One of my favorite bloggers,  sofullsista (who also happens to be one of my wonderful line sisters), advised me early on that there will be long hiatuses, bumps in the writing-road, and complete direction changes with my blog. They are all necessary for it to grow and reach it’s full potential.

Well here’s my first major revamp. I am still 25 and retiring, but now…you’ll get to see a bit more of the 25 year old J

Can All the Rich Folks...PLEASE STAND UP.

Did you all read Warren Buffet's op-ed for the NYT? I <3 him...genuinely I do. I am definitely a proponent of taxing the rich heavier...not merely because the U.S. is broke and our economy and deficit both need some serious help, but just off of principle man...they can afford it.

Buffet acknowledged that his effective tax rate for 2010 was 17.4%. GTFOH. That means only 17.4% of his billions went to the government. While there are middle class Americans making much less than him paying 25% or more of their income to taxes. How is this possible you ask?

Well yes, Buffet is part of the highest tax bracket (35%), however, the tax breaks for the wealthy are just that plentiful that he went from 35% of his income to actually only paying 17.4% of his income. This is expressly why rich people should have to pay higher taxes. They can afford better tax professionals, sift money into legal tax shelters, and ultimately come out on top. It makes me sick.

Now Warren argues that increasing taxes to individuals grossing more than $1million would create additional revenue for the U.S. without impacting their lifestyle. Agreed. He also argues that lower capital gains tax rates do not "increase investment," they merely give rich folks another tax break. He said, and I quote, "People invest to make money, and potential taxes have never scared them off." Agreed. He also argues that lower tax rates correlate to lower job creation. I'm not quite sure I get that one but because I love the man...AGREED.

Well two days later, guess who agreed he would be willing to pay higher taxes...THE DONALD. lol. Although he agreed he would pay higher taxes, he disagreed that Warren Buffet's philosophy will work. He argues (along with many economists) that increasing taxes on the rich will hugely affect the business climate. Wealthy businessmen will move to other countries (and take their businesses with them) to avoid the taxes. As we all know this would negatively affect the job market andddd ultimately be bad for everyone.

I get that philosophy but I wonder if THAT many wealthy businessmen would leave. I don't really think so. Lol It seems like such a hassle to pick up and do all of that just because you have to give the government $5 and you've got $5,000. But Donald says these folks are business machines, all they do is think money, and for them, that'd be enough. Of course no one is willing to call their bluff so alas we have this never ending argument on taxing the rich. Blah-se blah-se.

What do you all think?

Debt Ceiling Vote: This is getting ugly

As most of you have probably heard, there's this huge debt ceiling deal going on right now in Washington. Specifically, back in January we realized that the debt ceiling needed to be raised because by May 2011 the U.S. would pass the legal borrowing limit of $14.294 trillion (we passed it on May 16). A short term solution was to move some money around to pay our bills. But now...we need a long term solution...legislation to increase the debt ceiling. If this doesn't happen it would would be quite horrible for the U.S. economy and also possibly reduce the U.S.'s S&P credit rating. A reduction in the credit rating would mean that the U.S. would incur higher borrowing rates (because they'd seem like a less reliable borrower; it's pretty much the same thing as if your credit score dropped). The bad part for us is that if the U.S. incurs higher borrowing rates, that will mean higher borrowing rates for me and you. Here's where we will most likely be impacted:

1) Credit Card rates will increase - although most credit card rates are tied to the prime rate which probably won't increase, credit card companies may raise the margin rate tied to the prime rate. So instead of your interest being the prime rate + 10% you may be seeing new rates of the prime rate + 11 or 12%. The good thing I guess is that your credit card providers are required by law to let you know about any interest increases 45 days before the change.

2) Slightly higher mortgage rates - for anyone looking for a home right now, you may want to pay close attention to this. Although the rates may not raise more than 0.2%, no one wants a higher mortgage rate. For current homeowners, your rate wouldn't be impacted until it's reset.

3) Student loans may undergo even higher increases than currently planned - student loan rates are already scheduled to increase from 3.4 % to 6.8% for federal loans. This would become even higher if the debt ceiling legislation is not passed. And for private loans that could mean interest rates out of the WAZOO! We know how they will take you for everything you own.

4) Slightly  higher car loan rates - of course as soon as car financiers feel the pinch of the increased loan rates they will pass it on to consumers. This increase is thought to only be about 1% though which does not make a huge dent in a car payment. It is still something to keep in mind if you're in the market for a new car.

5) Money market and savings account returns see NOTHING - unfortunately the current returns on your savings and money market accounts will stay the same. Yes, we'll have to pay more interest but they won't have to pay us anything extra. Just the way the cookie crumbles.

6) Investment portfolios - this is going to be something you'll want to watch closely as it will have all sorts of impacts if this legislation doesn't pass. For one, people will start to sell their stocks and bonds, decreasing stock prices. Corporate earnings will fall as interest rates on corporate debt increases and in turn make investment in companies look less attractive - another hit to the stock market. Lastly we'll also be hit by a loss of confidence in investments and any impact to our current economic environment, especially anything portraying it as more uncertain will negatively impact stocks and bonds.

Now why can't Congress get this done:

As always, Congress can't agree on anything! The House refuses to pass a debt ceiling bill that won't cut enough spending. Obama has vowed to veto any bill that only extends the debt ceiling in the short term. The Republicans are threatening to filibuster. There's all of kinds of disfunctionality going on here. And the worst part is...if this doesn't get solved by tomorrow, August 2nd...the U.S. is officially BROKE. And you can prepare for your grandparents, great aunts and uncles to not receive their social security checks until the U.S. gets some money to pay its bills.

Lord have mercy. 

Take a look at the actual budget amendment bill here