Tuesday, September 27, 2011

A Christmas Fairy Tale

Once upon a time, in a land not so far away, a pregnant princess was told she must stay in her castle

in bed, for 6 weeks. 

Now, as much as this would be a wonderful respite for the now mom of 3 kids under 4; alas, she had no children – other than the one she was carrying.  

Therefore, she became very bored…very quickly.

She found solace in HGTV.  

Her husband...

The prince, soon grew weary of all the painting and redecorating she was doing from her throne bed and forbid her from partaking in any more HGTV entertainment.

She became very sad until one day, her mother, the Queen, told her of a very special event.  Beginning July 25th, a home shopping channel began their Countdown to Christmas.

You see, Christmas season was the Princess’ absolute most favorite time of the year.  She loved the sweaters, the soup, the shopping, the football (yes, even Princesses like football.), the happiness, the music...She loved it all. Most of all, she loved celebrating her Savior’s birth. 

So on July 25th she tuned in.  And fell in love with the magical elves selling their Christmas goodies and the dream-like sets sparkling in their Christmas best.  And she did again on August 25th, and September 25th, and October 25th, and November 25th.

It became a tradition for the Princess to watch the Countdown to Christmas year after year, month after month.  And although the Princess rarely, if ever, purchased anything, it (along with a Pandora Christmas station) put a Christmas Carol in her heart and a bounce in her step...even on a dreary September day.

And reminded her that Christmas wasn’t so far away…
And that she’d better get on the ball with her Christmas shopping…
And her Christmas budgeting…

And thus, the Princess and her Prince lived happily ever after.

And fully prepped for Christmas.

The End.

Friday, September 16, 2011

The Birthday Party Dilemma

September is a big month in our house.  I turned a year older.

This little girl turns one today.  Yeah - it's a big deal around our house.

This little guy turned 4.  He made it a big deal in our house.  (As all good 4 year olds do.)

And every year I wrestle with the same dilemma. You see this little guy gets invited to a lot of birthday parties.  Some we go to, some we don't. 

And every year, the parties get bigger...

and Bigger...

and BIGGER! 

And every year we struggle with the appropriate size party to have. 

Growing up, I did not have a party every year.  For one reason, we just couldn't afford it.  But also because my parents were smart enough not to spoil us.  We could always have a friend spend the night and they'd usually take us out to dinner or something.  We only had bona fide parties on big birthdays - 6, 10, 13, and 16.

You know?  The ones where you invite your classmates, your sunday school friends, your family, basically every one you know.

And so when we started having birthdays in our house, that's kinda what I went with.  We just invited family and our best friends.  Even that usually ended up being about 20 people.

So last year, I had what I considered a "BIG" party for my son.  We even rented a bounce house.

(Never mind we got it ridiculously cheap through the police department.)

It rained the entire time and the kids were soaking wet, but they had a good time.  We even had a theme cake made.  And I prided myself on actually having a "big" birthday party. 

But then the next birthday party we went to, was this...

Ok, so I'm exaggerating a teeny bit
When it comes to birthday parties, I feel I'm in a constant state of failure.

I really shouldn't care.  It's not a competition.  (Sure...all mom's say that.)

And yet, a part of me will always wonder if I am doing my children a favor or if they will be in therapy twenty years from now complaining about how their mother was too cheap to give them parties comparable to their friends' parties.

Pleaser tell me I am not alone in this plight?

Tuesday, September 13, 2011

Is $250,000 Enough?

Despite what the President thinks, more taxes are not going to solve the financial problems of this country.  This is an interesting article about the "rich," aka those making over $250,000.  And although I'm sure if any of us were given the chance to live off $250,000, it does make the point that it still wouldn't be enough for the average family to live care-free.

This article was reported by Karen Hube for The Fiscal Times.

In the ongoing debate over whether to use tax policy to help resolve the nation's massive deficit, a single number has emerged from the crossfire: $250,000. It's the annual income that President Barack Obama and others have used to define what it means to be "rich" in America today. And while the Bush-era tax cuts were temporarily extended to 2012, when their deadline comes around for the second time, $250,000 will be etched in the minds of policymakers and pundits as the number that separates the middle class from the wealthy.

By most measures, a $250,000 household income is substantial. It is six times the national average, and just 2.9% of couples earn that much or more. "For the average person in this country, a $250,000 household income is an unattainably high annual sum -- they'll never see it," says Roberton Williams, an analyst at the Tax Policy Center, a nonpartisan think tank in Washington, D.C.

But just how flush is a family of four with a $250,000 income? Are they really "rich"? To find the answer, The Fiscal Times asked BDO USA, a national tax accounting firm, to compute the total state, local and federal tax burden of a hypothetical two-career couple with two kids, earning $250,000. To factor in varying state and local taxes, as well as drastically different costs of living, BDO placed the couple in eight different locales around the country with top-notch public schools, using national data on spending.

The analysis assumes that this hypothetical couple -- let's call them Mr. and Mrs. Jones -- both have professional positions at their companies. They take advantage of all tax benefits available to them, such as pretax contributions to 401k plans and flexible spending accounts for medical care, child care and transportation. They have no credit card debt, but Mr. Jones racked up $40,208 in student loan debt in undergraduate and graduate school, and Mrs. Jones borrowed $22,650 to get her undergraduate degree (both amounts are equal to the national averages for their levels of education). They also have a car loan on one of two cars, and a mortgage for 80% of the value of a typical home in their communities for a family of four, which includes one toddler and one school-age child.

The bottom line: It's not exactly Easy Street for our $250,000-a-year family, especially when they live in high-tax areas on either coast. Even with an additional $3,000 in investment income, they end up in the red -- after taxes, saving for retirement and their children's education, and a middle-of-the-road cost of living -- in seven out of the eight communities in the analysis. The worst: Huntington, N.Y., and Glendale, Calif., followed by Washington, D.C., Bethesda, Md., Alexandria, Va., Naperville, Ill., and Pinecrest, Fla. In Plano, Texas, the couple's balance sheet would end up positive, but only by $4,963.

Taxes take a hefty toll. Everything from property taxes and the alternative minimum tax to the taxes added to cell phone bills and the cost of gasoline, when combined, takes a massive bite out of earnings -- in some cases even more than the federal income tax. And it's not likely to get better soon. States and municipalities have been steadily raising income tax rates to help close gaping holes in their budgets. Property taxes are also increasing, even though real estate values have cratered. And sales taxes are hitting record levels, in some areas nearing 10%. Gas taxes, alcohol taxes and hidden surcharges on everything from airline flights and ferry rides to vehicle registrations, rental cars and even sodas have also been stealthily rising.

On top of that, additional tax increases for couples with salaries of $250,000 or more (and single people earning $200,000 or more) are scheduled to go into effect in 2013 under the health care bill passed a year ago. Plus, the Democrats, who supported legislation to raise income tax rates for higher earners last year, will probably push for the same measure when the Bush-era tax cuts expire at the end of 2012.

Thinking about tomorrow

Being in the red on a $250,000 annual salary may still seem surprising. But taking responsibility for their retirement and their children's future is costly. The Joneses are maximizing contributions to two 401k's and to all flexible spending accounts available to them, and they are squirreling away $8,000 a year for their kids' college educations. And their spending is conservative, based on national averages for professional couples with two children. Not included are those hefty run-of-the-mill payouts for charitable deductions, life insurance premiums, disability insurance, legal fees -- or monthly sessions at the hair colorist, or membership at a gym.

As educated professionals, the Joneses buy books, newspapers and magazines; they own computers and pay for Internet access. But they don't take lavish vacations, don't belong to a country club, don't play golf, don't drive luxury cars, don't have a swimming pool, don't buy designer clothes, don't own or rent a second home and don't send their kids to private schools. They don't even shop at high-end grocery markets. (They spend what the U.S. Department of Agriculture defines as a "moderate" amount on food for the average family of four.) In short, they're not "wealthy," even if they're in the top 5% of earners.

In reality, to make ends meet, this squeezed couple would have to cut back on discretionary expenses -- take a pass on a new suit, skip an annual vacation and drop some of their children's activities. Unfortunately, the family would also probably have to save less, at the ultimate expense of their retirement or their kids' educations.

Taxes of every kind

Consider the tax profile of the Joneses when they're based in Huntington, a suburb of New York City. Thanks to all their smart pretax contributions and a fat deduction for mortgage interest and state and local taxes, the couple's federal income tax is only $29,344. But what often goes overlooked is the toll taken by state and local taxes. In this case, it exceeds that of the federal income tax bill: $31,066.

State income taxes, taken alone, are just $10,557. But factor in the gas tax ($2,679), property tax ($15,222), phone service taxes and surcharges ($350), and sales tax ($2,258), and the picture looks far different. Their total tax bill, including the AMT and payroll taxes: $78,276.

"When most people think about taxes, they think first about federal income taxes, then maybe about sales taxes, but there are a lot of taxes out there," says Mark Robyn, an economist with the Tax Foundation, a nonprofit tax research group in Washington, D.C. "It's eye-opening to step back and take a look at the whole picture."

Location is critical

Moving to a state with no income taxes or low taxes in general would help the Joneses' bottom line. In Pinecrest, Fla., a suburb of Miami, they would owe zero state income tax, and pay an annual $10,976 in property taxes, $1,833 in sales taxes and $350 in phone service taxes, for a total state and local tax burden of $13,476. Because they would have no deduction for state and local taxes on their federal tax return, they would have to pay Uncle Sam more than they did in Huntington: $31,768. Still, the total tax burden would be significantly less: $61,621, versus $78,276 in Huntington and $71,683 in Glendale, a suburb of Los Angeles.

But for most people, moving to a low-tax state in midcareer is difficult, if not impossible. People are generally bound to their high-tax states by their jobs. And often it's tough to find high salaries in low-tax states like Florida.

How far the 'big bucks' really go

The $250,000 threshold was first mentioned in a campaign speech by Barack Obama when he was running for president in 2008. "It's an historical accident," Williams says of the number's importance. "I don't think there was any thought given to why $250,000 -- it became a mantra." Whether or not $250,000 represents affluence "depends a great deal upon where you live," he says.

Consider, for example, the tab for the same assortment of ground beef, tuna, milk, eggs, margarine, potatoes, bananas, bread, orange juice, coffee, sugar and cereal. In Twin Falls, Idaho, the cost would be $23.41. In New York City, you would have to shell out 72% more, $40.29, according to The Council for Community and Economic Research. That higher percentage carries across all expenditures, from child care to haircuts.

Of course, housing costs are among the biggest variables. In Glendale, the Joneses can live reasonably well -- but not extravagantly -- in a three- or four-bedroom home valued around $750,000. In Twin Falls, they would need to spend only about half as much for an equivalent home.

After covering taxes and only essential expenses for housing, groceries, child care, clothing, transportation and their dog, the Joneses would still be in the red by $1,787 in Huntington. In Plano, they would have $27,556 to spare. Factor in common additional expenses for a working couple with two children -- music lessons, day camp costs and after-school sports, entertainment, cleaning services, gifts and an annual weeklong vacation -- and the Joneses get deep in the red in Huntington, to the tune of $23,178. In Plano, the best-case scenario, they would still have money to spare, but just $4,963.

Some of the expenses incurred by couples like the Joneses may seem lavish -- such as $5,000 on a housecleaner, a $1,200 annual tab for dry cleaning and $4,000 on kids' activities. But when both parents are working, it is impossible for them to maintain the home, care for the children and dress for their professional jobs without a big outlay.

And costs assumed by the Joneses could be significantly higher if their circumstances changed. For example, if they worked for themselves, they would have to foot the bill for all their medical insurance premiums, which average $14,043. As it is, they pay 30% of the premiums, and their employers pay the rest.

The bottom line: For folks like the Joneses -- who live in high-tax, high-cost areas, who save for retirement and college, who pay for child care to enable them to earn two incomes and who pay higher prices for housing in top school districts -- $250,000 does not a rich family make.

Monday, September 12, 2011

The Costs of Luxury

Sorry for last week's absence...huge event at church that I was in charge of.  Back to the real world this week.

Yesterday afternoon my mom took my two oldest kids for the afternoon.  She took them to a local playground and they had a blast.  I had a little luxury...a Sunday afternoon basically free.  (When you have three kids, only one seems "free.")  I spent it catching up on my favorite restaurant makeover shows and Gail Vaz-Oxlade's newest show, "Princess." 

 The basic point of the show is for "princesses" - those who think they deserve the best of everything...and get it - to be cut off and learn to live on their own without going into debt.  If they succeed for 6 weeks and complete all of her "challenges" they win up to $5000. 

(Don't even bother trying to sign up to be on it...unless you live in Canada.)

But one of her points this weekend was eye-opening to me.

She had one of the princesses calculate how many hours of work it would require to buy their luxuries - purses; shoes; travel, eating out, etc...  But that wasn't the eye opener, she had them calculate it using their disposable income.

Basically, the girls would have to do their budget for the month, and (for simplicity) let's say they'd have $60 left over...yes, for the whole month.  An average, 40-hour/week, employee works 160 hours a month.  60/160 = $.375 of disposable income per hour.  Meaning, if they wanted a $400 pair of boots, it would require that they work 1067 hours.  That's 26 weeks...or half of the YEAR!!!

Not many people would work half a year for a pair of shoes.              

(Me...if it were the right pair...just maybe.   Lol.)

So I started doing that with random things around my house.  Not bragging, but just being honest, when you're debt-free it doesn't take long to pay off little things like a night out or a new dress. 

So I started doing that with the big things, Christmas, our Florida/Disney vacation we're planning in May 2012. 

And wow...it's going to take a while to work for those things.   More than a month is a lot to me..

More than two months is an eternity.  (What can I say...I have ADD.  Much longer than that and I lose interest.)

Anyhow, I just thought that was a neat little challenge that I would pass along.  When you're planning that weekend away or the new appliances, it is eye opening to see how long you have to work for it to be able to pay for it.

Friday, September 9, 2011

…And the greatest of these is….CHARITY

First of all, kudos to you if you know where that saying came from. 

Second, let’s talk about charity.

Not a charity; your charity.

I’ve talked about my Give & Take on Tithing. 

Charitable giving, tithing especially, is one of those math equations that just don’t work.  The more you give, the more you seem to get.  Don’t ask me why.  It’s simple fact faith.

Yes, God rewards you for your tithing and charitable giving.

And so does the government.

You can deduct your tithes, offerings, charitable donations on your tax return.*

(*NOTE: You can only deduct them, if you have enough contributions, along with other things such as mortgage interest, to qualify you for taking itemized deductions over the standard deduction.  Not sure?  Ask a professional.)

This is one of those deductions that completely rely on your honesty.  You could put down that you donated $7,000,000 to charity.  Unless your income is well over 8 figures, I wouldn’t recommend that.

But how do you prove what you gave?

1.                  Give by check.  If I can give you one single piece of advice, this would be it.  GIVE by check.  You can easily get a copy of that check if you would need it.  Plus, it helps the organization you gave to be able to track the donation. 

2.                  Ask your church/charity to provide you with a year-end statement with the total that you gave.

Keep in mind that, never, not once, ever, has the statement that I received from a church been correct, so double check it.  Often times, they may leave out special offerings, fund raisers, etc. that are deductible. 

3.                  Make sure your donation is eligible for deduction. 

Even though you make think your local booster club is a “charity” they may not have applied for “501(c)(3) status.”  A 501(c)(3) organization has been recognized by the government as a bona fide tax-exempt organization.  If not, a donation to them is not tax deductible for you, and is actually taxable income to them.

Not sure?  Check here.  All 501(c)(3) organizations (other than churches) are listed there.  (Churches are inherently tax exempt, unless they make a big boo-boo.)

4.                  If you do give cash, if it’s over $250 get a receipt or put it in an envelope with your name on it.  Otherwise, there is no proof of it.  No proof equals no deduction.  If it’s less than $250, I would still recommend one of the above methods, but at least keep a note with the date and the amounts.

5.                  If you donate to a fundraiser for a bona fide organization, some of that may be deductible.  Say you bought a pizza for $20, and that pizza retails for $5.  You can deduct $15.  In other words, you can deduct the excess of what you paid from what it’s worth. 

6.                  If you donate items, get a receipt!!!  No matter the amount.  If not? See #4. 

If you give at all during the year, I would recommend keeping track.  Every $100 you give, means $25 back in your pocket.  (Assuming a 25% tax bracket.) 

Although you may not think it’s much, every little bit makes a difference to that charity and on your taxes.

Thursday, September 1, 2011

The Secret to Successful Online Shopping

I love saving some dough, the Benjamins, cold hard cash.

And I will admit, I frequent the online world of shopping...shocking, I know.

But before I ever click on "Buy" I follow a couple steps to make sure I'm getting the absolute best price online.  I assumed the rest of the world operated this same way. 

So imagine how my debt dumping, ever saving, penny pinching world was rocked when I found out THEY DON'T.  The best way to convey my reaction is this...

I still love this movie!

I was shocked!  Aghast!  Flabbergasted! 

So, here are my top three tips for savvy online shopping.  (Does anyone else but me want to say "savvy" with an accent like Captain Jack Sparrow?)

1.  Go through a cash back service.

Always, always shop through a cash back service.  My personal favorite is Ebates.

All you do is go to the site, search for your retailer (such as Barnes & Noble, Groupon - yay!!, Sears, just to name a few.)  Click through their website and wa-lah, you'll be earning anywhere from 2%-10% back on your purchase.  Just for clicking through their link.  And if you're feeling philanthropic, you can choose to donate your cash back to a charity.

There is also Shop at Home which is a lot like Ebates.  Just different stores.

I've had an Ebates account since 2006 and earned $141 dollars.  That's not a huge amount, I know.  But $141 is $141.  (A tenth of the way to your emergency fund!)  I don't do ridiculous amounts of online shopping, but I usually rack up during the Christmas season.     


2.  Google "[retailer] promo code"

Even when using one of the above cash back sites, you can still use discount codes.  I typically google the name of the store and "promo code."  This will bring up several sites that "specialize" in this.  A word to the wise, don't just click on a random one.  You'll end up with smut all over your computer.  :) 

My favorite site is http://www.retailmenot.com/ .  They're bona fide.  But retailers can opt out or limit codes that can be posted so if you don't find success there, keep trying.

3.  Don't forget to price compare.

Pricegrabber compares prices online from different retailers.  When you factor in discounts, shipping costs, and sales, the amount you pay can vary widely on the same exact item. 


Hopefully, on this Thrifty Thursday, these simple strategies can keep some coin in your pocket next time you single handedly decide to stimulate the economy.