Why Having Nothing To Wear Is Making You Broke

Don’t get me wrong, I love to shop, buy a new outfit or two, but I have never been the type of woman who stands in front of my closet saying…I have nothing to wear.  Maybe it is my oversized sense of self or just my decisive nature, but it is just something I don’t do.  Many of my friends agonize over this decision daily, ultimately resulting in the purchase of more (and more and more and more) stuff.

The thing about stuff is, you will NEVER have enough, there never comes a point where you will say, yep, that’s it.  Anyone remember Amelda Marcos, the wife of a Philipino dictator in the 80s?  She had 3,500 paris of shoes.  Nuff said.

If you are trying to get ahead financially, this infinite money suck, called your closet, is not an asset to your financial health.  My suggestion is, set a monthly clothing number.  You will probably spend it the first week of the month, I always do!  And the number will vary wildly from person to person based on your income and other monthly outlays but setting up monthly limits will tame your inner Imelda and help release your inner Warren Buffett:)

Please contact Dollars & Sense Education to bring our seminars to your company or organization!

Dollars & Sense Education – Raising Your Financial IQ!
http://www.daseducation.com
nicole@daseducation.com
215-499-3834

The Golden Rule of Personal Finance

The Golden Rule is a fundamental moral principle which simply means, “Treat others as they would treat you.”  It is arguably the essential basis for human rights.  Similarly, in my mind there is a Golden Rule for Personal Finance.  Like the moral Golden Rule, it doesn’t encompass everything you need to know but unless you tackle it, the rest is moot. 

Golden Rule of Personal Finance:  You must earn more income than what you spend.

Sounds simple enough but so many folks don’t follow this rule.  Check out this link to an awesome skit on SNL.

The Jock Exchange

I love sports.  I love watching sports, I love playing sports.  I also love finance.  For years I have thought, why isn’t there an exchange the deals in the business of athletes?  Soon there will be!  On the proposed A.S.A. Sports Exchange, an athlete would sell 20 percent of all future on-field or on-court earnings to a trust, which would in turn sell securities to the public.  

I can see it now, “Honey, how would you like to allocate our assets in our IRA? I would like 30% in an S&P 500 Index, 50% in International funds and 20% in Ladainian Tomlinson”. Life is good.  I just wish I launched the idea myself.

A Personal Finance Blog Revolt!!!

My one pet peeve with MOST personal finance blogs out there is their almost religious commitment to being thrifty.  I have read articles lately about refilling toothpaste bottles and reusing cereal liners.  In my opinion that’s not personal finance, that is borderline homelessness. 

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I know there are people out there that are mired in debt and need to use these gorilla tactics to crawl out of the hole they are in.  I have been at those points in my life where I had to stretch every dollar reeeeeeeeeeeeaaaaaaaaaaaallllllllllllllyyyyyyyy far.  However, I suspect that there is another group of individuals out there that are so turned off by the “personal finance paupers” that they eschew personal finance blogs, articles and tv shows.  My belief is that you can still have a comfortable life and build wealth.  You just need to budget accordingly.

I have a confession to make: I eat out every day.  That’s right.  Every day.  No, I don’t buy my food in bulk at Sam’s Club.  And you know what else, I drink alot of beer at bars.  I have budgeted these things into my life because they make me happy.  Could I sock a little bit more into my savings account if I ate at home and drank a six pack all by my self.  Sure, but what fun would that be?  I have been able to invest a hell of alot of money from age 22-29 without living a boring life.  Does it help that I am single with no children? Sure.  Does it help that I live in a city with a low cost of living (Philly)? Sure.  Does it help that I have made a decent salary over the last few years? Sure.  But I am convinced you can have your cake and eat it too.  In college, I made $12,000/year.  My pay was able to cover rent, electric, gas, car insurance, food and alot of partying.  Did I have to skimp on luxuries? Obviously.  But I budgeted around my priorities and 12K went a long way.

My view is personal finance should be about finding the sweet spot between growing your net worth and living a fulfilling life.  Just my 2 cents.

 Please contact Dollars & Sense Education to bring our seminars to your company or organization!

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Dollars & Sense Education – Raising Your Financial IQ!
www.daseducation.com
nicole@daseducation.com
215-499-3834

Retirement Accounts for the Self Employed (Part 4 of 5) – The Keogh

Ok folks, another entry for the self starters out there!  Part 4 of how to sock your money away for retirement for the self employed.  Non self employed folks, come back next week and I’ll some good stuff for you!  So let’s do this… Part 4 – The Keogh. 

Keogh plans are the self-employed equivalent of corporate retirement programs.  They come in two basic flavors: profit-sharing plans and defined benefit pension plans

Annual contributions to Keogh profit-sharing plans are based on a percentage of self-employment income or compensation and subject to a $45,000 ceiling.  A plan document must be drafted in Year One (this may cost a couple hundred bucks), and the IRS demands an annual report (you can probably do this yourself).

Keogh defined benefit pension plans are designed to deliver a targeted annual retirement benefit, which can be as high as $180,000.  Each year’s contribution must be calculated by an actuary — the exact amount depends on your income, the target benefit, years until retirement and anticipated investment returns.  Annual actuarial fees and the required IRS report can run up to a couple grand.  Another negative: You’re locked into making the actuarially determined contribution each year.  However, if you make good bucks and are over 50, a defined benefit plan may be worth all the trouble — because it permits much bigger contributions than any other type of program.  If you’re younger, go with a SEP, profit-sharing Keogh or Solo 401(k).

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To put this entry in perspective, the Keogh plan is quite complicated and probably not appropriate for most self employed folks out there.  Keogh setup and ongoing fees for paperwork and for professional guidance are more suited to self-employed individuals with established businesses and consistent incomes.  One reason behind this limited parameter is that once you open a determined benefit contribution plan, you’re locked into that contribution every year

Do I Qualify For A Keogh?

Any sole proprietors, partnerships, LLCs, and anyone with self-employment income.

Are Keogh Contributions Pre or Post Tax?

Keogh plan contributions are deducted from pre tax income and contributions and interest income are tax deferred until withdrawal.

Where Do I Set Up a Keogh?

A Keogh plan is something you REALLY want to talk to a live financial advisor about.

How Much Can I Contribute Annually to a Keogh for myself?

You will encounter the same $45,000 ceiling for contributions to a Keogh profit-sharing plan but you can set a ceiling as high as $180,000 for a defined benefit Keogh plan.

Why Not Just Open a Traditional or Roth IRA?

Do Both!

When Do I Set This Up?

If you are establishing a plan for the first time, complete the Adoption Agreement(s) by December 31 (Simplified Keogh plan) or your fiscal year-end (Standard PSP/MPP plan), and you will be eligible for a deductible contribution for this year.

What If I Already Participate In My (Other) Employers Plan?

I was not able to get a definitive answer about this.

Do I Have to Put Away the Same Amount of Money Every Year?

With a profit-sharing plan you can vary annual contributions from 0 – 25% of compensation per year or skip a year if business conditions change.

With a defined benefit pension plan you make fixed contributions each year (1 – 25% of compensation) as your commitment to retirement benefits but once you select a percentage, you must contribute that same percentage each year, no more and no less. This contribution cannot be changed unless you amend the plan.

What If I Have Employees?

I was not able to get a definitive answer on this one!

Next Stop!

In Part 5 I will sort out what plans make sense for your individual situation!

For the rest of this series:

https://daseducation.wordpress.com/2007/10/08/a-retirement-accounts-for-the-self-employed-part-1-of-5-the-sep-ira/

https://daseducation.wordpress.com/2007/10/09/retirement-accounts-for-the-self-employed-part-2-of-5-the-solo-401k/

https://daseducation.wordpress.com/2007/10/10/a-retirement-accounts-for-the-self-employed-part-3-of-5-the-simple-ira/

Please contact Dollars & Sense Education to bring our seminars to your company or organization!

d_s_education_logo.gif 

Dollars & Sense Education – Raising Your Financial IQ!
www.daseducation.com
nicole@daseducation.com
215-499-3834

Retirement Accounts for the Self Employed (Part 3 of 5) – The Simple IRA

More Retirement Accounts for the Self Employed! Cmon.  I know its dry, I know.  But its like eating vegetables, its goooooooood for you.  He He.  The good news is if you are not self employed, you don’t need to bother reading.  If you are self employed – read on brothers and sisters!  Don’t you want to learn the best way to shelter your income?  If you have employees, don’t you want to help them save for retirement?  So let’s go.  Part 3 – The Simple IRA.  Part 4 of this series will describe the KEOGH and the last entry, Part 5, will discuss what options are appropriate for you according to the kind of business you have and your goals!

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Do I Qualify For A Simple IRA?

Employers are eligible to establish and maintain a SIMPLE plan only if the employer:

  1. No more than 100 employees (including self-employed individuals) who earned $5,000 or more in compensation during that year; and;

  2. No other qualified retirement plan, 403(b), or SEP at the same time.

Pre or Post Tax Contributions?

Simple IRAs are pre-tax contributions. 

Where Do I Set Up a Simple IRA?

The usual: Vanguard, Fidelity, ETrade, TRowe Price, etc.

How Much Can I Contribute Annually to a Simple IRA for myself?

Max contribution: up to $10,500 (2007) as an employee an an employee for a total of $21,000 (2007).  If you are 50 or over, you can contribute a total of $26,000 (2007) of PRE-TAX money.

Why Not Just Open a Traditional or Roth IRA?

Do both if your income makes you eligible for a ROTH IRA or Traditional IRA.

When Do I Set This Up?

Deadline to open an account is Oct 15th of the reported tax year.

What If I Already Participate In My (Other) Employers Plan?

Make sure you stay under the annual limits for total contributed to all employer sponsored plans!  So between your SIMPLE IRA and the other employer’s 401K your own contribution cannot exceed a total of $15,500 for 2007 or $20,500 if you are 50 or over. 

Do I Have to Put Away the Same Amount of Money Every Year?

No.

What If I Have Employees?

The SIMPLE IRA has a mandatory employer contribution requirement. This contribution requirement can generally be made as follows:

  1. The employer can make a dollar-for-dollar matching contribution on the first 3% of compensation that the individual elects to defer, or;
  2. The employer can make a nonelective contribution of 2% of each employee’s compensation for all eligible employees. You may choose to give the nonelective contributions only to eligible employees who make $5,000 or more in the year.
  3. Employees can contribute 100% of their annual compensation up to $10,500 ($13,000 if age 50+) for 2007.

 Anything Else?

There are such a thing as SIMPLE 401Ks but there is no benefit to this plan as you still have the lower SIMPLE limits $10,500 (2007) and more administration.

Next Stop!

In the next installment of this series (Part 4 of 5) I will describe another kind of retirement account for the self-employed – The KEOGH!  In the Part 5 I will sort out what plans make sense for your individual situation!

Other great blog entries and articles on Simple IRAs:

http://www.irs.gov/retirement/article/0,,id=111420,00.html

For the rest of this series:

https://daseducation.wordpress.com/2007/10/08/a-retirement-accounts-for-the-self-employed-part-1-of-5-the-sep-ira/

https://daseducation.wordpress.com/2007/10/09/retirement-accounts-for-the-self-employed-part-2-of-5-the-solo-401k/

Retirement Accounts for the Self Employed (Part 2 of 5) – The Solo 401K

So for all you self employed folks out there, this week is for you!  I am laying out all of your retirement plan options in gory detail.  For everyone else, take the week off from reading.  Grab a beer.  Watch Heroes:)  The first installment of this series discussed the SEP IRA.  Part 2 of this series explores another popular option: the Solo 401K. The next two entries will describe the other options available to the self employed and the last entry will discuss what options are appropriate for you according to the kind of business you have and your goals!

Do I Qualify For A SOLO 401K?

Any type of business with no employees, can establish an individual 401(k) plan – generally referred to as a Self-Employed 401(k), or Solo 401(k).  The business can be brand new or old. It can be a sole proprietorship, LLC, partnership, or corporation.

Where Do I Set Up a SOLO 401K?

Fidelity and T. Rowe Price offer SOLO 401Ks or 401kBrokers.com.

How Much Can I Contribute Annually to a SOLO 401K for myself?

For the tax year 2007 you can contribute up to $15,500 plus 20% of your business income, with a maximum contribution of $45,000 in 2007. You can make an extra $5,000 catch-up contribution if you’re 50 or older.
 

Why Not Just Open a Traditional or Roth IRA?

Do Both!   

When Do I Set This Up?

Each Self-Employed 401(k) must be set up no later than December 31, to be eligible for tax deductions for that tax year.

What If I Already Participate In My (Other) Employers Plan?

If you have a regular 401(k) through an employer and have some freelance earnings on the side, then your solo 401(k) limits will be reduced by any contributions you’ve made to a regular 401(k). But that only affects the first $15,500 of contributions, not the 20% of business income. So if you contributed $10,000 to a regular 401(k) through your employer, for example, then your solo 401(k) contributions will be limited to $5,500 plus 20% of your business income.

Do I Have to Put Away the Same Amount of Money Every Year?

No!

What If I Have Employees?

If you have employees you are not eligible for a SOLO 401K unless it is your spouse.

Anything Else?

Keep in mind that the eligibility requirements for having a self-employed 401k plan are quite strict. It’s not widely offered by most investment companies and those that do offer it provide limited investment options. And once you add a single employee outside of your spouse, you must convert to a traditional or SIMPLE 401k plan. 

Summary 

If work for yourself take full advantage of the tax benefits that affords you! A Solo 401K allows you to defer a significant portion of your retirement savings from taxes. Don’t let Uncle Sam get more than his fair share!

In the next installment of this series (Part 3 of 5) I will describe another kind of retirement account for the self-employed – The SIMPLE IRA!

Other great blog entries on Solo 401Ks:

http://www.mymoneyblog.com/archives/2007/10/fidelity-self-employed-401k-account-review.html

http://www.my-personal-finance-blog.com/2006/12/28/set-up-my-solo-401k/

http://taxplaya.typepad.com/tax_playa/2007/03/selfemployed_40.html

For the last article:

https://daseducation.wordpress.com/2007/10/08/a-retirement-accounts-for-the-self-employed-part-1-of-5-the-sep-ira/