I hope everyone had a wonderful Christmas and came out of it financially unscathed!  Here are my random Christmas wishes for you, my readers:

1) Get out of debt this year
I know this isnt within reach for some of you, but for some of you, it is.  For those that can; do.  For those that can’t; make progress.

2) Save
I know that trying to get on top of #1 might make #2 seem like less of a priority, but its a good idea to still try and put some away for an emergency fund.

3) Spend on something worthwhile
Take a vacation with your wife/husband/Significant other.  Buy something you need.  This also conflicts with #1 and #2 but it is also important.   Life should be enjoyed, even if it is in moderation.

4) Take up/rediscover a hobby
My wife has gotten back into photography and it has been a lot of fun seeing her enjoy it.  I want to get back into writing, despite my ridiculously busy schedule.  I also want to get back into lifting, and find time to play some sports.  We all have things we love but have forgotten.  Do your best to find time to get back into whatever you love.

5) Read TPS more
If I promise more articles, hopefully you read more.

Merry Christmas everyone!

As many of you know, despite the links on my navigation bars, I do promote a lot of websites, blogs, books or anything else other than common sense and financial information (ok and maybe a healthy love for sarcasm photoshopped pictures) but I have run into something recently that I just plain love.  Well, times are a changing, or at least this one time is a-changing.  What is this mysterious site that I am referring to? Pets.com?  No… its…

Bing shopping cash back!

If you are like me, you probably only know Bing as the overly-advertised-we-wish-we-could-compete-with-google site from microsoft.  This time though, they win a battle with google in the shopping department.

Depending on the merchant you can earn between 1-30% cash back on any purchase.  Thats a pretty damn good deal if you ask me.  The only thing that I can think of that compares is the discover card 5% cash back when they have it (rarely).

Some other nice things about bing are that
1) You dont have to use a credit card you can use paypal, checking account, debit card, some other credit card
2) You can do it all from your computer – hurray culture of laziness convenience!
3) You can use it for everyday things
4) Great customer service – Their turnaround time is less than 1 day.  That’s really really good.

Disadvantages:
1) It takes a while to get your money back
2) Sometimes it doesn’t register correctly and there is no way of knowing for a day or two after purchase
3) Coupons/special codes will usually void cashback

Overall, pretty cool and supposedly there are going to be some huge cashback specials coming up to compete with the “black friday” craze.  I don’t know about you but I would much rather  sit at my computer to shop than go fight the crowds.

For the majority of my life I have really struggled with keeping track of bills.  It sort of goes back to the fact that in their natural state, my organization skills consist of at best piling everything into one giant pile to be “sorted later.”

Every time I try and organize mail or a stack of papers, I end up with either 1 stack, or 10,000 stacks which in the end are combined into (you guessed it) one giant stack.  I think my ability to categorize might be broken.

As you can imagine, inability to organize papers has a slightly negative effect on keeping track of bills.  “I know I remember putting in here somewhere” is a thought that I have had more in my adult life than I like to reflect on.

As far back as six years ago I heard people talk about auto bill pay but I honestly never put much thought into it because it either 1) cost monday or 2) I was scared of money being auto pulled.  Now that I am settled in, out of college, married, and have a one year old I am realizing that…hey, my expenses are the same every month, and man is it a pain to call and pay 10 different bills.  This coincides with the fact that recently Wells Fargo started offering online bill pay.

I took the plunge…and I love it. I get paid and my money automatically goes where it is supposed to go; bills, savings, checking, thin air.  Ok the thin air one is the part that goes into checking.  No late payments, no late fees, no forgetting anything, no overspending just steady as she goes.  I will say this, I highly recommend centralized autopay.  I can imagine many scenarios where I had things automatically pulling from my account and magically disappearing into thin air for years after I meant for them to stop.  That one bit aside, I love logging in and seeing a nice list of my bills and ‘paid’ next to all of them.  Except Qwest which likes to reject autopayments because, well, qwest has the worst customer service in the history of man kind.  Just google qwest customer service sucks and you can read for days.

All said, auto bill pay lives up to it’s billing (I know, har har). Now go forth and autopay!

Its never too soon to agree with your spouse on how you spend money.  There was a study that I read a long time ago that said the number one source of tension in marriages in a random sampling of couples was (Dum dum dum) MONEY!  Ok, so who here is surprised?  I know I am not.  Considering most of us Americans have a large load of debt so when you bring two people with debt together (or even one person with debt and one without) there are bound to be some hard money discussions.  The best time to figure out finances is before you’re married when both of your money is separate.

I’m getting married in August but we have had relatively combined finances for quite a while.  Admittedly I came into the relationship with more debt than Lauren did.  The one main thing is that we both want to get out of debt but not become misery in the process.  That being said, I know quite a few couples who just cannot figure the money thing out.  There is a one huge lesson to learn here: if you are getting married, talk about money beforehand, it is never too soon.

God help me, I am going to have a Garage sale aka yard sale, aka garbage sale as I lovingly refer to them.  Not to say the things we intend to sell are garbage, There is actually quite a bit of good stuff like a whole doctors choice queen size bed with frame, a working 32 inch TV and some other good stuff.  It all came about because people in the neighborhood decided to have a neighborhood wide garage sale.  At first we weren’t going to participate but we really want to pour a patio and it just hasnt been fitting in the budget.  So now the goal is to get as much money as possible to put toward the patio (and get rid of some stuff in the process).

Its been a while since I have had a garage sale but I remember some strategies that helped last time.

Its all about Location – We are on the edge of town so if we were doing it by ourselves it wouldnt be worth it.  Since the entire neighborhood is involved we will be much more likely to get people out and about.

Planning What You Will Sell-  We will probably spent a decent amount of time just sorting through things to figure out what we want to sell.  There are a few big things that we know of, but other than we really need to sit down and figure out what we want to try and sell.

Advertise-  This is another time that having a multi family sale is helpful because everyone can help advertise.  Put signs up, put an ad in the paper, advertise at grocery stores, on stickboards and wherever else you can think of.

Pricing-  When you have a yard sale you should be prepared for some pricing negotiations.  Keep that in mind when you price your items.  I have heard from several people that roughly 1/3 to 1/4 of the cost of the item new can be a starting point.  The advantage of prepricing is that it will save a ton of time on the actual sale day – and the annoyance of constantly having people ask how much something costs.

Money-  Something to keep in mind is that you will have to make change for customers.  Its probably a good idea to have a fair amount of change to start.  Ive seen some tips on the internet to ‘wear a fanny pack.’  As it is not 1990 and I still have some dignity, I do not intend to wear a fanny pack.

Have power available for electronic items – If there is a TV, but no way to plug it in and test it, are you really going to buy it?  Really?

Anyway I will report back with our earnings when it happens.  Come on patio!

Every year there are only 2% of all returns audited by the IRS but I promise you, everyone in that 2% is absolutely miserable.  There are several ways that your return might get flagged; there is the initial computer evaluation of it for accuracy, the computer evaluation based on a formula and finally the good old fashioned random bad luck of the draw.   So what are some of the things that might trigger an audit?

1. Making more money
If you make more than 100k, you are at higher risk.  Surprise, surprise.  Then again, those that make over 100k probably aren’t complaining about it.

2. High charitable contributions.
This shouldn’t really surprise you.  If Bob makes 50k a year and you make 50k a year, but Bob claims 1/3 of what you do for charitable donations, guess who is more likely to be audited?

3. Using round numbers
Dont round up.  Dont round at all.  It looks very suspicious if everything is neat little numbers.  “I spent 5000 on my home office.”  Yeahhhh…

4. Lying about income
The. IRS.  Will. Find. Out.

5. Screwing up the forms
This is why it really makes sense to use a tax software.  It’s dumb to make mistakes on a form that could flag you when there is so much good software out there to make life simple.

6. Home office / Self employment
The IRS loves to go after people that claim a lot of home office deductions.  I actually went out of my way this year to not put income from this blog into a home office category, because the little bit of money it might have saved me is not worth the greater risk of being audited.  Maybe next year when one of you donates me a ferrari for a work car, then Ill go ahead and get on top of that home office deduction.

7.  Fuzzy Math
Add your numbers correctly.  Better yet, lets talk again about that whole ‘tax software’ thing.  Seriously though, if you add incorrectly, the IRS computer will catch it, and you get to board the train to auditville.

8. Mistyping Dependent information
Make absolutely sure the kids social security numbers are in there correctly, or the IRS computer will most definitely flag it, and you better believe they will follow up on that one.

9. Missing Information
If things are missing, it will get a personal review.  Person reviews lead to audits.

10. Low income
If you are statistically lower than other people in your occupation, it will raise some major red flags.

Good luck everyone, ‘here’s to many happy returns!’

I thought I would branch out and give the readers some of my favorite investing books – ones that I have read that you probably havent heard of recently.  These are especially important now that the market is so low….its the time to invest.

Many books and their authors claim to have all the answers but rarely do they meet your expectations. These authors are sure to provide the insight necessary to be successful. The list is in no specific order except for the first book. It should be read upfront to give novice investors an excellent overview although its content is helpful to all levels. After that you’re on your own to pick and choose the order in which you read them. Just make sure that you finish them all before getting too far into the investment process. It will make a difference.

1. The first book is The Neatest Little Guide To Stock Market Investing. It’s extremely focused and written by a guy who used to work in the technology industry and now spends his time living in Japan investing in the markets. Amazon readers give it five stars. Check out his web site and you’ll see why his book is listed first. It’s very readable, easy to understand and available at your local public library.
2. In 1994 Peter Lynch, the legendary portfolio manager, wrote Beating The Street, a book about his investment style and how the average person could do the same to beat the markets. It is extremely well written and well received. To date no other money manager has written something nearly as compelling.
3. Four years later, another money manager by the name of David Dreman wrote the book on value investing entitled Contrarian Investment Strategies: The Next Generation. While not nearly as readable as Peter Lynch’s book, it is an excellent examination of value investing and everything it entails. Light on brevity and heavy on statistics but informative nonetheless.
4. The last two are investment classics. The first was originally published in 1958 by Phil Fisher, one of the pioneers of growth investing, and it is still a bestselling book. Common Stocks and Uncommon Profits was a reference to his belief that you bought growth stocks and held them for the long term. One example of this was Motorola. Fisher bought it in 1955 and still owned it when he died in 2004. How many people do you know that have held a stock nonstop for 49 years.
5. The final choice is the ultimate book about investing: The Intelligent Investor. None other than Warren Buffett has declared it the finest book ever written on the subject. It just so happens that its author, Benjamin Graham, was Buffett’s teacher and mentor at Columbia Business School. I think Buffett turned out pretty well, don’t you? Originally published in 1949, it is the bible for serious investors. You must read this book if you can only read one. It’s that good.

Everyone has good intentions when it comes to a money management plan.  Unfortunately the road to hell is paved with…ok you get the picture.  We’ve put together a set of guidelines to help you on your way.  These guidelines will assure you of a money management plan to fit your special needs. If you follow each step, It will also save you a complicated job of bookkeeping. This guide won’t be able to work miracles for you but will help show you the way to get the most out of your money.

To make a sustainable plan:

1. Add up your total income, including any funds you receive in addition to your earnings.
2. Figure out your total fixed expenses such as rent or mortgage, insurance premiums or car payments.
3. Provide for a savings fund adequate to meet emergencies and achieve special goals.
4. Estimate how much you need for day to day living expenses.

While these steps are listed in sequence, it’s likely you will arrive at your final estimates by considering them as a group. You may need to do some adjusting of the amount in each step until you have what you feel is a satisfactory plan. After going through each step and filling out the worksheet, you will have a better idea of where your money is going and how much you have left over to work with.

Before you begin to work out your plan, it is important to remember good money management starts long before you begin keeping track of dollars and cents. As we have discussed in previous lessons, your plan is a personal or family matter. You need to take a long hard look at your values. Your goals will reflect your values. No one can tell you what your lifestyle ought to be. Only you can decide how your income is spent. Effective money management will depend on the way you choose to live and the goals you plan to achieve.

So where do you cut expenses to keep the budget balanced? Travel? Clothes? Entertainment? Education? That’s up to you. Think about where you are now and where you want to be in five or ten years. Your long-term plan should reflect those goals you and your family have decided are most important.

Plan For Savings
When making out your budget, plan for savings first. You can grow richer each month if you pay yourself first. Here’s an idea you might want to try. Before paying any bills, decide on an amount, to pay yourself first–say five or ten percent–or whatever you decide– of your paycheck. Then, deposit the amount into a savings account before paying any bills. When you do this at the beginning of the month, your entire paycheck will not slip through your fingers. If you wait until the end of the month, there may be nothing left to save.

Paying yourself first gives you a systematic way to make your money grow. Regardless of the kind of job you have or your income, this system works!

Another technique you might try for saving money is to empty your change into a coffee can or jar each day. At the end of the month, roll the coins and put them into your savings account. You may be able to save up to $30 a month this way.

Remember, good money management is more than a mathematical formula. It’s too closely tied with the ups and downs of living for that. Your money management plan is always subject to change if your life situation changes. The object of a good budget is to make your money help you reach your goals, not to force you to conform to rigid rules. Don’t be discouraged if this budget plan doesn’t work out right away. You may have to revise it several times until it fits your wants and needs. Then, review it from time to time; to be sure it continues to help you use your income in the best way.

I know what you are thinking…Sounds easy right? It’s just one number divided by another. In reality, it requires detailed bookkeeping to track all of your income, investments, loan accounts, and bills. But what about your mortgage–is the principal really an expense? How about that employer stock grant program that awarded you 50 shares for a price of $26.22 but withheld 18 of the shares to pay taxes, that you then sold the remaining 32 for $28.19 two months later? Not so easy, is it?

To properly compute the ratio, you need to build an income statement. An income statement is a document that tracks the inflow and outflow of cash over some set time period – usually a month, quarter, or year. For personal finance issues, a month is a good resolution to use.

The income statement contains two main parts – one for all the cash that comes into your household, and one part for all the cash that leaves your household. Transfers don’t count. So if you contributed some of your pay to a retirement account, it really doesn’t belong on an income statement. What does belong on the income statement is gross pay, not your net. Remember to include interest from bank accounts, dividends from stock, 401(k) employer match, and realized capital gains. Unrealized capital gains will affect your balance sheet, but should not show up on your income statement. All numbers should reflect pre-tax amounts. We can account for taxes in our expense column.

This second part – expenses – is usually the longer column in the balance sheet. Aside from your regular bills, be sure to include all of your monthly insurance costs, income tax, and payroll taxes that were deducted from your paycheck (even if they were in the form of stock); and any interest you paid on a loan. This brings us to an important point:

If your car payment was $460, then only the $60 or so that went toward interest on the loan was really an expense. The payment to principal was simply a transfer of your cash into equity in your car. Remember that transfers don’t count. The same concept applies to your mortgage and student loans of course. Keep in mind though, equity you build in a home tends to stay put or grow, but the equity that’s put into a car tends to evaporate over the next 5-10 years. It’s like filling up a bucket with a big hole in the bottom.

So after you’ve tallied up all of your gross income and all of your expenses for the month, you’re finally ready to divide one by the other. Hopefully, the ratio is greater than 1. Otherwise, you’re living well outside of your means and eroding your existing net worth.  It seems like its simple, but its amazing how difficult most people find it in practice.

I am sitting on an airplane as I write this on the way to beautiful Dayton Ohio. Ok maybe not beautiful Dayton Ohio, how about “At least its not Cleveland.” The day started rough because Jackson has been sort of fussy during the days so I am not thrilled to leave Lauren to deal with everything at home while I am gone, but such is life. In any case, I got to the airport and parked. It was fairly empty but it brings me to point number 1.

1) Know your airport and allocate time to park
Unless you are flying out of an easy airport on a sunday morning, you are going to have an adventure trying to park. Figure out if your airport has plenty of parking, and if it doesn’t plan accordingly. I flew out in late fall one time and my buddy from work that I was with and I had to park far away and nearly missed our flight. Then as a bonus, when we got back we had to walk a mile to the far parking in the middle of freezing rain at midnight. Convinced yet?

I made it into the terminal with a ton of time to spare and came up to security. I put my stuff on the conveyor and walked through the screener. This brings us to point number 2.

2) Know the toiletry/packing rules (and follow them)
I have flown out of DIA on average of at least once a month for the past year. I have always just kept my toilettries in my black zip up bag despite knowing the rule about the plastic bag. I have never once had a problem with it…until today. The screener pulled my luggage off the belt and said “meet me over at the table.” So I put my shoes on walked and walked over to the TSA station. Everyone knows this is either going to be 1) quick or 2) painful. You guessed it, pain. The highly trained, polite, unassuming TSA employee started ripping things out of my suitcase while verbally berating me.

Him: “Did you even bother to read the sign?”
Me: “Sorry, Ive never had a problem with this befo…” (he interrupts me)
Him: “Um hello, so if you were smart you would read the sign and then, oh if there was a plastic bag around somewhere you could start packing your toilettries in it. Oh look, there is one.” (pointing to a plastic bag).
Me: silence (I start packing up the toiletries)
Him: “Do you talk? Yes? No? Anything?”

This entire time he is just taking stuff out and throwing it on the table. This was thrilling since I spent a good amount of time ironing things this morning and rearranging them since my carry on is fairly small.  We then had a little exchange about my shaving cream which was apparently .5 oz over the limit or some such nonsense.  Finally, this:

Him: “So?”
Me: “Yes, I got it. I will never again put my deodorant in my carry case instead of a plastic bag.”
Him: “I hope you learned something.”
Me: “Yes sir I did. Thank you for serving and protecting me. I can’t tell you how much safer I feel right now than I did twenty minutes ago.”
Him: “Good. You know better now.”
Me: “I will spread the good word.”

I guess they don’t teach sarcasm recognition in TSA school. Finally I was on my way to my Gate. This brings me to my next point.

3) If you can, fly Frontier or a similar airline. Avoid United.

Bigger seats, personal TVs, better service, 66% chance of sitting on an aisle or window. Those are just a few of the reasons. All you really need to do is fly United once and you will understand. I like to pick one airline and stick to it, its a great way to build bonus points for your personal travel for free. There are other reasons to stick to one airline such as frequent flyer status. I now get to pick where I sit on every flight, including the super extra roomy exit row. Bonus: if you read TPS faithfully you know that with the current bankruptcy you should have bought some frontier stock. And hey, why not help your business that you own a piece of.

Business travel is always stressful, but we here at TPS are here to make it managable…to be continued tomorrow…