So I admittedly have a lead foot sometimes. The funny thing is I had only one speeding ticket in my life for going 8 over in the middle of nowhere in New Mexico. Who DOESNT speed in New Mexico? Anyway that was until recently. I got two tickets in ONE WEEK. Blehck. The truth is I didn’t deserve one of them, the cop pulled me over for speeding up to soon when the speed limit increased from 30 to 45 - I was literally 10 feet in front of the sign when I sped up. Im pretty sure it had more to do with my car than anything. In any case instead of just letting them take me for 200 bucks and 8 points on my driving record I decided to fight it.

Fighting a speeding ticket is actually much easier than you would think and can save you a ton of money. Never, ever, ever just send the ticket in if it includes points against your license and/or huge fines. There are all sorts of ebooks out there on “how to fight a speeding ticket” and sites with 100 step programs to do so. Well guess what, you don’t need it, its OVERKILL. I am going to tell you how in three simple steps:

1) Go to court at your appointed time

2) When the judge reads you your rights, say “I understand” and then instead of pleading say:

“I would like to speak to the prosecuting attorney.” Which you HAVE to be granted.

3) Tell the attorney you would like to make a deal.

4) Make a deal with him or her.

The truth is no one wants you to go to court. Not the prosecution, not the attorney, not the judge, and most of all not you. In fact, many times you might not even have to go before a judge, you might just strike a deal before you ever go into the court room, sign something and be done.

What kind of deal can you get?
Generally they have set deals they hand out that you plea down to. I had a couple of options that would have gotten rid of my ticket completely but since I had another ticket for the next week I asked to take care of them both at the same time, which they granted. I went down from 8 points and $400 to 1 point and $80. Thats right $320 and 7 points saved…and all it took me was 25 minutes at a municipal court.

So, I have to say the contest has been both great and disappointing at the same time.

The disappointing:
5000+ visitors in the past two weeks, yet only 17 picture entries. Basically half of the minimum.

The great:
Most of the people that wrote in had great, touching stories. The people that did respond really really made me feel good and Im glad to see that this contest actually had an impact on some people.

So with all that out of the way, lets get down to business! Before I announce the winners as promised, here is my video:

You can get it here or you can watch it on youtube

In case you are wondering, yes that is the poop eater in the background. Ok, Ok so on to the winners!

Since there were not enough entries for the iPods I am not giving those away. However, because I was so impressed with the entries I picked winners and I have some individualized prizes for them on top of the normal ones and I added a couple extra winners as well. Oh and that surprise prize I was going to give to 10 people? It is my new ebook that I am going to release next week entitled “Earning Power.” Instead, I am going to give it to everyone who sent in a picture entry as well as a few people who wrote excellent entries but were unable to send a picture. I have to say that this was one of the hardest things to do: pick winners. I went ahead and did a weighted system of one point for every card cut up shown and up to 10 points for story. All of the stories were just plain awesome…so much so that instead of posting a select few I am going to feature every good story in their individual posts in the upcoming weeks. The first prize entry I will post today. All winners will be notified by email and are welcome to post comments here. Also any victory photos are welcome

First Place: Ramits ebook, Trents ebook, AND a $20 gift certificate to anywhere she would like. Gails from Ohio’s entry:

I am a reader of your blog and wanted to enter the contest. I cut up many cards recently, some old and some current. Picture attached! I have been working the Dave Ramsey Plan officially since October 1, 2007, so that’s the last time I used any of my cards. I have been in credit card debt for many years but it really escalated about 4.5 years ago when the company I worked for closed down. I accepted my current job but with a $300.00 a week pay cut!!!! Ouch! I did however know that this would be the perfect job for me, and since that time I have received raises and bonuses and am now making more money than I was before. I also have been working 4 part time jobs in addition to my day job, so luckily I have no time to shop anyway! I am an avid reader of PF blogs and have learned so much from them, and am so inspired by all the stories. Thanks for the contest, I hope I win…I never win this kind of stuff, but what the heck I entered anyway.

Second Place: Ramits ebook, Trents ebook, free advertising for his blog on my site

Mr DebtBeaters entry (thats 16 cards total amongst some paper) I wanted to show this pile because its huge:

Third - Fifth Place: Ramits ebook, and $5 gift cards

Joseph from somewhere, Scott from Jersey, and Mary from Colorado

Random winners: Linda P from unknown and Max from California

Until each person gets their own post, I made a collage of all of the cut ups.

Thanks to everyone for entering!

Baidu - the “google of china” as has been proclaimed by Lord knows how many experts lately is a hot hot topic of discussion so you know what that means….time to weigh in on it.

What is Baidu?
It is the leading search engine in China. Thats right, its not Google, Yahoo or anything else, its Baidu. It debuted on the Nasdaq exchange on August 5, 2005.

There really is not a need for a long review of things here, it reall comes down to one thing:
What is your confidence in capitalism spreading in China?

If your confidence is high, then you best go out and buy stock in baidu right now. Seriously, go right now. The stock price has already risen to over 263 but I don’t think its hit the ceiling by any means. They are just starting to monotize as well as google has and they have a lot of improvement to do which will no doubt in crease their worth.

Then there are the rest of us. I’ve read the book Atlas Shrugged which means I will forever be skeptical of anything that resides or caters to a socialist/communist society. Just ask anyone who has money invested in Venezuela right now how they are feeling - not too good, that is for sure. China has definitely moved away from hard line communist economic principles but they are still a communist country and quite frankly that scares me.

Still a good buy - but buyer beware.

Networking is one of the most trite terms floating around right now, mostly due to social networking sites exploding. There is myspace, facebook, twitter, linked in etc etc. As much as I hate to use the word, its one of the most important things you can do for your career and your life. So lets dive in.

The first thing to understand is that every where you go, you are networking. Networking is simply this: building relationships. I know that kind of sounds weird…well, am I networking when I go to the store to buy groceries? Potentially, yes. The other day I was at Albertsons buying some groceries. I don’t normally buy any groceries at Albertsons because its not near my house, and its not near my girlfriends house. I went to the back to buy some tilapia and struck up a conversation with the guy working the seafood counter. Even though I knew I was going to get tilapia I asked him what his favorite fish was and how he liked to cook it. I told him I was going to get some tilapia because I like less “fishy” fish at which point he told me “Oh you’ve got to try this shark!” I said thanks for the recommendation but it was kind of expensive so Id just stick to the tilapia…so he said “well, we are having this special and shark isn’t included, but Ill toss it in for you, you’ve gotta try it!” So I went home with some shark instead.

Now take that and dissect it. Networking is about learning things about other people. You are doing yourself a major disservice if you do all the talking when you meet someone. People have had great experiences and everyone has some sort of wisdom that they have gained. The vast majority of people are dying to share their wisdom and expertise with you and help you in any way they can, provided you are actually building a relationship with them and are interested in what they have to say.

Networking in person
What you want to do is ask questions to learn about the person. The truth is for anyone in the world there is some sort of common ground. The real key is listening to what they say because you can then build on that to ask another question. Most of us do this naturally in everyday conversation when we are interested in what someone is saying but sometimes you have really make yourself focus.

Applying this at work
For some reason most of us have divided what we do for work and what we do daily into different buckets. This is fine for some things but when it comes to networking we should be doing the exact same things. For instance my talk at the grocery store was just natural, yet these kinds of things don’t necessarily happen at work - especially in large corporations. Get to know the people you work around…don’t think of it as “networking” so much as connecting and finding common ground with people. Talk and get to know them, just like you would meeting a friend of a friend for the first time. The trick is breaking through the “work” layer when you are networking into the “personal” layer.
What is the payoff?
Luckily I have a story about this as well. When I was 16 I started working at Hewlett Packard doing web design for an internal web page and ordering office supplies. I was outgoing and got to know all of the people around me. Now fast forward 7 years. I am working for my current company and someone from my old team called me because they heard a position was opening and a lady I knew from all those years ago was the hiring manager. As it turns out the job req was already closed and they had all the candidates they needed. All of which were people with MASTERS degrees (I have a Bachelors). Well, the lady recognized me and brought me in to interview anyway….skipping the first two screening interviews. I got the job. Now, in the end, I did not take the job and decided to stay at my current company but look at what it can do for you. If I had not been so proactive in networking all those years ago I could never have had an opportunity just get handed to me like that.

No matter what you are doing or where you are, always keep in the back of your mind exactly how powerful networking is.

I wrote a comment a long time ago on an investing blog about Southwest Airlines. I was praising them because of certain business practices. Well, somehow one of you sneaky astute readers got a hold of it to drill me on it because of the breaking news about their failed inspections. The truth is, I STILL like Southwest as company despite this terrible break down.

Southwest Airlines (NYSE:LUV) is an airline which immediately makes red flags go up like its Chinese new year. Admittedly their stock is well off of its high, but then again what isn’t right now. So lets go over the good, the bad and the elephant in the room.

The Good:
Southwest does things that allow it to be be one of the best values in low cost airline travel. They don’t have all the frills of other airlines but they offer decent leg room, clean areas, and the basic compliments. What do they do differently? Here is my list:

1) One type of plane
They operate all Boeing 737s. Why is this a big deal? It means that they only need parts for one kind of plane, they only need to hire mechanics that know one kind of plane, and they can easily exchange planes for any given flight. They hire pilots that are proficient flying 737s. The list goes on and on. This is huge, and one of the main failures of the larger domestic airlines.

2) Flying into and out of Denver
This small move that they made a year and a half ago allowed them to directly compete with Frontier…and in many cases win. Denver is logistically out of the way of any other major cities….but it is right smack in the middle of the US. It also is one of the largest and newest airports in the entire United States.

3) Low fare sales
They lead ALL airlines in low fair sales. This builds frequent flying as well as loyalty.

4) Fuel Price Hedging
They were one of the first airlines to realize years ago that oil prices (And thus jet fuel) would go up substantially so they starting hedging accordingly. They have years of price protection ahead.

5) General innovation
They are constantly on the lookout on ways to increase efficiency without sacrificing quality. This is ABSOLUTELY necessary for any airline hoping to succeed.

The Bad:

1) Failed Inspections. They had to ground 42 jets today in the wake of last weeks 10 million dollar fine over failed inspections.

2) Bad publicity over the “clothing” incident has lingered and now there is bad publicity over their “obesity” rule.

3) #1 is so bad we don’t need a number 3

The Elephant in the Room
Even after all this trouble with inspections and grounded jets blows over…the airline industry as a whole is still a terrible buy. Oil prices are going to continue to rise, and consumer spending is dropping like a rock. One of the first things to go when people are cutting back is travel costs. There will always be high volumes of business travelors but the fallout from the lack of economic growth will affect the airline industry even more.

Have we seen the bottom?
I don’t believe so.

Should I sell?
No, they WILL recover. If you are still holding, I believe long term they will recover well.

Should I buy?
Now thats a tricky question because their stock is so low currently on the heals of the recent problems, but at this point I cant recommend buying. I do think they will reach the bottom sometime in the next 5 months.

Overall as a company I see them recovering, but I think it will be a while before this audit is resolved. Couple that with reduced consumer spending and it is going to be a rough going for a while. On the other side when the economy starts to recover, whenever that is, I believe Southwest will recover VERY well.

Tax audits are sort of like root canals - you go every year and hope you don’t have to go through one. The difference is that at least a root canal is only one day of pain, a tax audit can be weeks of pain. The good news is that most of us get through every tax season without having to do much except fill out our annual turbo tax forms and send them in. Others, sadly, are not so lucky. So what happens if you do get picked in the IRS’ wonderful tax audit lottery? Well, we will take a look at that and at what happens if they decide you owe money on your taxes.

Tax audit prep - ALWAYS be prepared

The absolute number one rule of surviving a tax audit is a rule that hopefully you followed before the pain came. Keep track of your records. Collecting and organizing your records through the year will not only make it easier to prepare your taxes but in case of the audit, it will also allow much easier defense of yourself if the IRS picks you. Here are things you should be doing:

-keep at least three years’ worth of tax returns and records
-keep your online bank records if your bank doesn’t do it automatically
-keep your check stubs
-track your cost basis for property and investments
-keep your bills filed
-keep track of deductible items WHEN THEY HAPPEN

Who gets picked for a tax audit?
The IRS has been auditing more and more people every year, but most audits are directed at high income tax payers. I have an entire article on risks of being audited but I will go back over a few quickly:

-Big Charitable Deductions
-Someone rats you out
-Lots of business transactions
-Lots of itemized deductions
-Not reporting cash income (hello waiters)
-Inaccurate W-2 or 1099 Reporting
-Tax Shelter losses
-Home business expenses
-Prior audits (if there were problems)

Getting ready for a tax audit

If you get the lucky distinction of being chosen for a tax audit, its time to get audit prepared. The first thing to do is go back over every inch of your tax return and get VERY familiar with it. Once you have that straight its time to gather all of your records to support whichever items were questioned by the IRS. Before the actual examination you should figure out what kind of settlement you are looking for…the IRS likes to settle because it saves both parties headaches. If things go this far it might be in your best interest to get a tax attorney because they are knowledgeable and have dealt with it before. However, if you believe you are in the right and all of your records match it probably will not go that far…you may simply have to present your records.

What you should NOT do is offer any information not related to the IRS questions. This can potentially get you in trouble if they decide to audit OTHER items. Offer what is requested, nothing more.

What happens if I owe money after the tax audit is complete?

If you underpay, you may have one of these penalties:

20% Penalty - This is the “basic” penalty. It goes along with problems with property value, understating liability, messing up on your return, etc.

75% Penalty - If the IRS thinks you have been fraudulent in your claims this is where you get in big trouble. This deals with all of the “serious” tax offenses that aren’t jailable offenses.

Prison - Were you doing some tax evasion or other tax crimes? You can not only get massive fines, but even go to jail.

Ok so a tax audit is scary, but the truth is you can survive if you haven’t committed any serious crimes. The odds are good that you WILL pay some additional taxes so don’t get too discouraged if you owe more than you originally thought….but hey, better than jail. If you have organized records, you can get through it without too terrible a headache.

I received an email yesterday from a financial advisor…and he was not happy:

Dear Eric,
Yes, thats right I know your real name. I came across your article “Credit counseling is fraud” and I am not sure what makes you think you have a right to give people financial advice on how to handle their money. I went to HARVARD and studied ECONOMICS to earn my right to work as a financial adviser. I don’t sit and write a blog about how to get rid of engineers so how about you <edited> off. Credit counseling is a valid job and we provide a SERVICE to people, you are just a sarcastic big mouth on the internet stirring up trouble. You are probably just a reject college drop out who is hoping to make money online because your janitor job pays minimum wage. For someone who claims “sports” and “bodybuilding” as hobbies you go to great lengths to show pictures of yourself either head up or with heavy coat on you lying fat ass.

<Edit> you.

This email is funny for a variety of reasons, not the least of which because my name is not Eric. Eric is the name of my friend I share hosting with. Aside from that, I am somewhat of a sarcastic big mouth I suppose so hes got me there, ha!

What this really tells me is that people like this are threatened by you being empowered. So read on. Oh and heres a gratuitous collections of pictures of me doing things from my about page

Recession investing seems to be the next most asked question I get in regards to recession next to 401k questions. The two are obviously completely linked but for the purpose of tonight I am going to tackle individual investing during a recession. I am going to take a general view here.

Generally all stock returns are poor during recessions. Both value and growth stocks returned well under their long term averages. In the past, value stocks have beaten growth stocks by about 4% during recessions. This is interesting because value stocks are also the least volatile - something that is important during a downturn in the economy.
Recession investing, What what exactly is the bottom line?
It boils down to this: anything that is invested in the stock market that does not follow an index is a specific risk. However if we are in a recession, or you believe we are going into a recession its a lot safer to invest in value stocks.
What are some examples of recession investing?
The very easiest thing to do is think about things that people use every day. No matter what is happening, people are going to need tp, breakfast cereal, toothpaste etc etc etc. You might hear people talk about cutting down on driving, but how often do you hear someone talk about cutting down on eating breakfast?

Credit card week here at TPS has been fairly busy and so in my endless digging to defend you Ive come up with some extra things to watch out for. Your credit card is costing you money in ways you probably didn’t even realize. Thats right, that innocent little piece of plastic you’ve come to love (or hate) is actually hiding some secrets away.

1) Annual Fee
If there is an annual fee, make like a flock of seagulls and run far far away. The ONLY time this is acceptable is if the rewards program FAR outweighs the annual fee. This happens just about 0% of the time.

2) Rewards that really aren’t that rewarding
You finally saved up those 25,000 points to fly somewhere, awesome! Oh except you have to travel on certain dates….at certain times, and stay in certain places, oh and you have to book it a year in advance, oh and you can get bumped at any time….etc etc.

3) Cash advance fees
Never ever use your credit card to get a cash advance from an ATM. Card companies see these as loans. That means you’ll pay a 3% fee on the amount you withdraw, plus interest which starts accruing immediately. Interest rates on cash advances are generally ridiculously high. We are talking 10-30% kind of high. Thats a lot to pay just to get some cash out. Why on earth do you need cash that urgently anyway, and where the heck is your debit card?

4) Convenience checks are convenient for sucking you dry
Filling in convenience checks, which come with a lot of low-rate balance-transfer offers, is a terrible idea. These are treated as cash advances, and you may get smacked with a 3% fee, AND $5 to $10 minimum. As a sweet bonus not only do you get nailed if you use the checks, but card issuers will hit you with an average fee of $30 if the check is returned or stopped payment on. Even more awesome.

5) Lottery Tickets are treated as cash advances
Thats right , see #3 and don’t do it again!

6) Overseas? Get more Fees!
You will usually end up with 3% extra charged against you for “conversion” fees by both Visa/Mastercard and whoever the card issuer is. Ouch.

7) Pay by phone - More Fees
Paying by phone might cost you an extra $5-$20

Lose your statement? - More Fees
Thats another $15 probably. Unless of course you are using online banking (which you should be!)

9) Lose your card? - More fees
Theres another $20 most likely.

10) Late payment fee
This will cost you anywhere from $15-$25

11) Over limit uh oh fee
Go over your limit for even two seconds and you’re likely to get a nice $35 fee.

12) No balance at all fee
Thats right, you could get hit with a “Finance charge” for NOT having a balance. This is probably the most annoying of all credit card fees. Its small $2-$5 but it is absolutely BS.

13) Lack of use fee
This is rare anymore, but they may charge you for NOT using the card often enough.

14) Calculating interest from the time of purchase
Thats right, you could make a purchase, pay it off the next day and STILL get charged interest on the purchase.

15) Return Item Fees
You can be charged for returning an item you bought. Guess charging you interest on the day you bought it isn’t good enough, you need to pay a fee for returning it too.

A penny saved is a penny earned - we’ve all heard the phrase. There’s lots of variations on it too:
The Penny Saved is a penny earned

and some funny ones too:
A penny saved is a penny plus interest earned
A penny saved is a penny earned — and taxed.

Ok so the truth is, I don’t even like the phrase, its pretty cliche. But I figured after all this time calling this site that, I should probably do a little blurb to explain it for a little bit of Monday fun and start a little experiment. The original quote is indeed “A Penny Saved is a Penny Earned” by Benjamin Franklin. After looking up some quotes pages apparently a lot of the cheesy quotes we hear on a day to day basis came out his mouth.

So what does a penny saved is a penny earned mean exactly?
The general gist is pretty easy. Every penny you can save on something, is one less penny you have to earn, thus it is a penny earned. It could be extended though: for every penny you save and then invest, in 45 years that penny has turned into a dollar (assuming 11% interest rate).

If I saved a penny a day and invested it at 11% interest, how much would I have in 40 years?
$2,357.27

I read somewhere that the average american goes by 6 cents per day just laying around. I dont know if that includes in penny holders at gas station counters or driving in your car or what, but if you were to save that 6 cents a day, that would be $21.90 in one year, and if invested yearly at 11% that would be $14,143.61 after 40 years.

Well, I am going to test this out.  Thats right, I am going to start picking up pennies, and actively watching for them.  I am curious exactly how many pennies we pass by or throw out or get rid of per day.  I am going to track this  and post it in a nice little graphic.

Oh and I just found my first one laying on the ground, no joke.