Archives for January 2011

Chances of Getting Audited? IRS Audit Rates 2010

Posted on January 31, 2011 // 20 Comments

With doing our taxes properly on our minds, what are the chances we’ll get caught if we don’t? Well, there are several ways that the IRS can detect if your return is suspicious, especially if your inputs don’t match up with their W-2 and 1099 records.

Here are the number of IRS audits and the respective probabilities for individuals and businesses during 2010. Large corporations and wealthy individuals have the highest chance of getting audited, which makes sense since they offer the largest potential payoff. If you are an individual making under $200k a year, then your overall chances are 1 in 100. However, I’m sure if your tax return is clean and you didn’t claim to donate $10,000 in used clothing, your actual odds are even better.

Source: IRS, Businessweek

Anyone out there get audited last year?

Filed Under: Taxes //

Distribution of Law School Graduate Starting Salaries

Posted on January 27, 2011 // 32 Comments

During recessions, interest in graduate school rises as people lose their jobs or otherwise decide to go back to school for better prospects. Are you thinking about law school? I’ve thrown the idea around, as I think estate law would be a growth area. Well, check out these stats from the National Association for Law Placement (NALP) first.

The NALP found the national median starting salary for full-time law jobs for the Class of 2009 was $72,000 and the average was $93,454. After adjusting for the fact that many smaller law firms don’t report salary details (and also tend to pay less), it found the adjusted average salary to be $85,198. But you should also consider the distribution of the salaries as well, shown below.

Distribution of Reported Full-Time Salaries — Class of 2009

From this Law.com article:

That’s because salaries are clustered in two areas — a phenomenon known as the bimodal distribution curve. One cluster is in the $40,000 to $60,000 range and the other around $160,000. The lower range tends to include attorneys in public interest and government jobs, while the higher cluster includes associates at large law firms.

This means that after three years of law school and probably accumulating more student debt, lots of new grads are still far away from six-figure salaries. For the Class of 2009, 1 out of 4 are working temporary jobs. Going to law school primarily for the money can be a long road.

What about after the entry-level? This article quotes the Department of Labor as stating that the median lawyer makes $113,000 per year, and those in the 25th percentile make $76,000 per year. Certainly, many people still make solid livings as lawyers. I know a lot of other JDs that are doing things unrelated to law as well, and most of them are doing alright. However, I don’t know if they would have still gone to law school again if given a redo.

Filed Under: College & Education //

Trulia.com Rent vs. Buy Housing Ratios: First Quarter 2011

Posted on January 26, 2011 // 9 Comments

Buy vs. rent? It’s still a tough question for a lot of folks. According to real estate website Trulia.com, one rule of thumb is to divide the median list price compared with the median rent of similar properties. If the price/rent ratio is over 20, you should rent because buying is too expensive. From 16-20, it can be a grey zone, depending on a variety of factors. If it is under 15, you should consider buying. Very rough, but it’s a place to start.

Trulia has calculated this ratio for the two-bedroom apartments, condos and townhomes listed in their database for the largest 50 cities in the US, and illustrated them on an interactive chart. There are a few options to play around with. (Click to visit and enlarge.)

It looks like big red New York City is still more affordable to rent, with more cities being pockets of green. Supposedly, in 72% of major cities it is now more affordable to be a homeowner. I guess we’ll see if they’re right. I just added some nice vinyl fencing to my money pit home sweet home. Specific cities are highlighted in this related CNN Money article.

Filed Under: Real Estate //

S&P Case Shiller Home Price Index Update

Posted on January 26, 2011 // 5 Comments

The S&P Case Shiller Home Price index was updated yesterday with data through November 2010. Here is the press release [PDF]. Here is the housing price index from 1987 to November 2010. (Click to enlarge.)

I don’t look to closely into these things or like to make crystal ball predictions, but I like to check in occasionally to see what’s happening. It looks like we are still hovering around 2003 price levels.

[Read more…]

Filed Under: Real Estate //

Discover Card Now Only Allows One Card At A Time

Posted on January 21, 2011 // 13 Comments

Here’s a quick note for those considering applying for a Discover credit card, which came up after a few folks got rejected from the Discover More Card offering 0% interest on balance transfers for 12 months with no balance transfer fee. The limited time offer is scheduled to last until February 28, 2011.

On the upper right hand of the application, there is some light grey print that you might overlook that says “Offer Valid For New Cardmembers only”. However, it wasn’t really clear what this meant. You can’t have a current Discover More card? any current Discover card? any Discover card ever?

It turns out that there is a new Discover policy that anyone can only have one open Discover Card of any type at a time. As long as you don’t have an open Discover card currently, you can apply for a new card.

Below is the text from my Live Chat sessions with Discover. Basically, if you want this no balance transfer fee promotion and you already have a Discover card, you must cancel that card first, and then come back and apply for this new card. You can’t switch cards and still get this promotion.

Patricia: I appreciate your interest in the Discover Card. What questions can I answer regarding your application today?

Jonathan: Hello, I am interested in applying for this Discover More card. I don’t have a Discover More card, but I do have an old Discover Miles card. I am able to be approved for this card?

Patricia: I am sorry but we do have a one account policy at this time so we cannot open an additional account. Would you like us to switch the card type you have with us?

Jonathan: That would be okay, as I don’t use my Discover Miles card anymore. Would I still be able to get the 0% for 12 months with no balance transfer fee?

Patricia: Thank you for your business! This chat is to assist with applying for a Discover Card and we do not have access to any Account information. I will transfer you to our Customer Service chat for assistance with your Account. They will access that account and see what is available on it for transfer for you.

[Result: No, the offers in my account were much worse with higher fees.]

Patricia: I appreciate your interest in the Discover Card. What questions can I answer regarding your application today?

Jonathan: hello… if I recently closed a Discover card but currently do not have one, can I still apply for this new More card iwth 0% for 12 months? Do I still count as a new cardmember?

Patricia: You can apply for this card if that other account is closed.

Jonathan: So basically a person is just allowed to have one open Discover card, of any type, at a time now?

Patricia: Correct

Jonathan: Great, thank you for your help. That’s all for me today.

Filed Under: Credit Cards, Deals & Offers //

Flowchart: Should You Work For Free?

Posted on January 21, 2011 // 5 Comments

Here’s a decision chart that’ll amuse those of you who work independently, perform some freelancing/consulting work, or just happen to be especially good at something. Should you do the work for free? Well, it depends:


(click to visit site)

By Jessica Hische at ShouldIWorkForFree.com.

Filed Under: Entrepreneurial, Self-Employment //

No Time To Budget? Track Your Expenses In 15 Minutes

Posted on January 20, 2011 // 12 Comments

Ah, budgeting. New year, same old goals? While I’m not one of those people that think everyone needs a detailed budget, I do think everyone should track their spending at least once a year or so. This way, you have a real snapshot of where your money is going (which may just surprise you). Writing down every little transaction on a piece of paper or even tapping it into your smartphone can get really tedious. So here’s what I do to manage it in 15-minutes a year.

Put All Your Spending On A Credit/Debit Card

The main idea is to put all your spending in an electronic format so that a bank keeps track of all your purchases for you instead of little slips of paper. If you don’t like credit cards, use a debit card. But credit cards offer superior consumer protection features, so I prefer them. You don’t need to put it all on one card, but it does make things simpler.

Now, do this for a month, and avoid paying cash whenever possible. Don’t change your spending behavior, and there is no need to record anything.

Sign Up For Mint.com

Next, you should sign up for the online aggregator tool Mint.com. I also like versions of Yodlee, but it looks like their development has slowed significantly. To start, all you need is your e-mail address and the login details for your credit card website.

I know that many people are wary about giving out their login credentials, but in my opinion your credit card login is not as sensitive as say, a bank login. Credit card companies make so much money that they are happy to refund any fraudulent charges immediately. It is in their interest to make you feel very safe about using credit cards.

Anyhow, Mint has improved their back-end system so that most credit card information syncs up fairly quickly. Click on the “Transactions” tab on the top of the page, and you should see all your recent purchases. You can wait until after a month of spending on the card, because Mint should upload all your historical transactions within the last few months.

Categorize Transactions

Without any input from you, Mint will have tried their best guess for the Category of each of your purchases. They’ve gotten better, but there will likely still be a few that are incorrectly categorized or simply left labeled as “Uncategorized”. In addition, some of your purchases from a megastore like Walmart/Target/Costco might be “groceries” or it might be “electronics”.

Use the the pull-down menus and spend a little time “teaching” Mint the proper categories that you prefer. If you want all future CVS purchases to be under “Groceries” instead of “Pharmacy”, you can click on Details and make a rule that will do that for you automatically. This saves lots of time in the future.

Finally, if you have certain transactions that you wish to have Mint ignore in your budget calculations, use the “Exclude from Mint” category.

Pretty Pie Charts!

After all your transactions look nice, click on the “Trends” tab on top, and check out some pretty pie charts created from your spending history. The charts are very interactive, click around and drill down into your data. You might need to go back and re-label some expenses to get everything to sort nicely.

Now you should have a clearer idea of where your money goes. If you have bills that you had to pay by bank account, you’ll want to account for those separately if you don’t want to sync it up with Mint. If you make some small cash purchases, just track your ATM withdrawals. I just made a rule that labeled all ATM withdrawals “Dining Out”, since that’s usually where it goes.

Filed Under: Budgeting //

LivingSocial: $20 Amazon Gift Card For $10

Posted on January 19, 2011 // 10 Comments

LivingSocial is a group-buying deal-a-day website like Groupon, and I guess they want some attention too.

They’re offering a $20 gift card to Amazon.com for only $10, looks like at every major US city today. Over a million have been sold already, with about 10 hours left as of this writing. So hurry! (Sorry couldn’t post this earlier, I’m on the road…)

Filed Under: Deals & Offers //

Where I Keep My Emergency Fund Cash – January 2011

Posted on January 18, 2011 // 30 Comments

The results of my Emergency Fund survey are in, and appears that there are a lot of big savers out there! 28% of respondents had cash reserves of over 12 months of expenses, and 24% of you had the more-often recommended 4-6 months of expenses.

With such sizable cash reserves, where you do guys put it all? I figured I’d share my stash-the-cash choices, which may not be perfectly optimal but I’m open to talking about it. The size of the circles are proportional to how much of my money I keep in each respective account.

With interest rates so low across the board and still dropping it seams, it’s been hard to get really excited about many new options. But remember, it can be better to be earning 2% with low inflation than 5% interest in a high inflation environment. Every basis point helps.

Rewards Checking Accounts

You’ve likely heard of these by now. Usually through local credit unions, these checking accounts pay a higher interest rate if you jump through some hoops each month. However, if you make a mistake you’ll forfeit virtually all your interest for that month, so it can be tricky. More coverage here.

One nationally-open example is DanversBank, which offers their Free Rewards Checking currently paying 3.01% APY on balances up to $25,000, provided you satisfy the following each month:

* perform at least 12 debit card transactions (excluding ATMs);
* receive their monthly statement electronically;
* access Online Banking, and
* sign up for direct deposit or receive a recurring ACH transfer

To find a local rewards checking account limited to your area, check out DepositAccounts and use the filters. Sadly, my local account recently dropped their rate significantly.

Long-Term CDs – Ally Bank

If you have a large cushion, it’s quite possible (if you’re lucky) to not have to touch it for years or more. Therefore, I think it’s okay to put some of it in safe investments but slightly less liquid.

With the Ally Bank certificates of deposit, you can still access your money as long as you pay a early withdrawal penalty of 60 days interest. That’s significantly less than at other banks. I have a 5-year CD paying 3% APY, but the current rate for new deposits is 1.60% APY for a 5-year CD (as of 10/25/13).

Rates change constantly, but let’s assume you have a certificate of deposit from any bank paying 2.39% APY with an early withdrawal penalty of the last 60 days of interest. (2.39% APY ~= 2.26% rate compounded daily.) Here’s how your actual annualized interest rate would fluctuate given your holding period.

After just 6 months, you’ll already be earning 1.58%, more than a comparable 12-month CD. If you somehow had to withdraw after 1 year, you’d still have earned 1.99% APY. Basically, after just 6 months I have nothing to lose and a lot to gain, so I keep a sizable chunk here.

Savings Bonds

I have some older Series I Savings Bonds, but they aren’t a very good buy right now. The total rate consists of a fixed rate and a variable rate that adjusts with inflation every 6 months. If you bought a bond now, you’d get a 0% fixed rate and only 0.74% from inflation. However, my older bonds have higher fixed rates, and according to my TreasuryDirect statement they are earning 1.74%, 2.25%, and 2.75% right now. The annual purchase limit is now $5,000 in paper I-bonds and $5,000 in online I-bonds per Social Security Number. I’ll keep them for a while, as I like the tax deferral benefits and inflation may come back to bite us.

Online Savings Accounts

Rewards checking account and savings bonds have deposit limits, and you only want to lock up a certain amount in longer-term CDs, so the rest goes into the now-popular online savings account. There are a lot of players out there now, but many of them are packed together with very similar features and interest rates.

Right now the rest of my cash is over at SmartyPig.com, an FDIC-Insured bank account that lets you save for specific goals like an online piggy bank. However, they’ve added so much flexibility that you can pretty much use them like any other savings account. Their rate has dropped recently from 1.75% APY to 1.35% APY for balances up to $50,000. This is still amongst the top rates, but I’ll be watching them closely.

Alternatively, Everbank has their Yield Pledge Money Market paying 1.10% APY for the first 6 months for new accounts. This rate is higher than any 6-month certificates of deposit currently available, while still being available for withdrawals at any time. The rate is guaranteed stay in the top 5% of competitive accounts. Evantage Bank has their Mega Money Market account paying 1.75% APY for balances up to $35k. Most other banks are clustered around the 1% to 1.2% mark.

So… where’s your cash?

Filed Under: Banking, Investing //

Talent Is Overrated, Deliberate Practice, & Tiger Moms [Book Review]

Posted on January 17, 2011 // 15 Comments

If you’re looking for a inspirational book to read for the new year, consider this one, but read on to see if you like what you’ll learn. 🙂 In Talent Is Overrated, author Geoff Colvin explores what makes world-class performers different from everyone else.

What is the key to great achievement?

  • Hard work?, or
  • Innate talent?

Talent vs. Practice

One area where we often give the credit to talent to is musicians. Look at the “kid genius” Mozart, who famously composed his first piece at age 5. Well, Mozart started learning music at age 3 from a pushy composer father who loved to teach (and likely helped write many of his early works). He had been working at music for over 10 years by the time he wrote anything that was widely acknowledged to be of special quality.

In a separate study comparing music students enrolled in elite music schools with those in regular public schools, it was found that the average number of practice hours need to reach the same level of skill was the same for all students. Sure, the students in the elite group were often practicing 2 hours a day vs. only 15 minutes a day for the other kids. But no matter how you clocked those hours, quickly or slowly, nobody got there without putting in the same amount of hours.

Next, let’s look at sports and Tiger Woods. Woods was a prodigy, but he was also an only child to a army-trained teacher/father who started him playing golf at a mere 7 months old. He was playing and practicing on a real golf course by the age of two, and throughout his career was known for his intense practice habits.

The fact is, that almost every study that has looked for evidence of the sort of genetic edge that we call “talent”, has failed to find it. Instead, they find that without exception, every single top achiever has put in thousands upon thousands of hours of practice into their field. In addition, the amount of skill is almost directly proportional to the amount of hours put into it. Terms like the “10,000 hour rule” (as noted in the book Outliers) or the similar “10-year rule” have been created to describe how long it takes before true mastery is achieved.

Deliberate Practice

But wait, lots of people do the same thing, every day, for years. Why aren’t they all awesome? Researchers have also found that “practice” is too vague of a word. Instead, what creates excellence has been termed “deliberate practice”. Deliberate practice is not just hitting through a bucket of golf balls every day.
[Read more…]

Filed Under: Book Reviews, Family //

California: You Can’t Afford It

Posted on January 14, 2011 // 37 Comments

It’s my third day of being sick, so I will simply wish you a great weekend and share an amusing t-shirt I found in Target.

It would be more funny, except it’s kind of true for half of Californians:

More than half of the state’s homeowners with a mortgage—51.4 percent—spend more than 30 percent of their monthly income on housing costs, according to 2005-2009 estimates from the U.S. Census Bureau’s American Community Survey. Renters in California are in the same boat, with 51.8 percent spending more than 30 percent of their income on rent and utilities.

The 30 percent threshold for housing costs has long been a conventional marker of affordability.

Time to suck down more Ricolas…

Filed Under: Funny //

Rewards Credit Cards: Rotating Categories 2011 January to March Update

Posted on January 11, 2011 // 9 Comments

When you charge something on your credit card, the merchant usually pays about 2-3% in transaction fees for the convenience and benefit of accepting these cards. To get your business, issuers often rebate part of these fees in the form of % cashback rewards or frequent flier miles. Credit cards also offer handy conveniences like easily tracking spending, fraud charge-back protection, and extended warranties, but who doesn’t like cash? Extreme users treat them like Swiss army knives to maximize rewards. New customers also get incentives of up to $100.

Here’s an update for the offers during the first quarter of 2012. There is a slight lean towards a New Year’s resolution theme, but I like the inclusion of everyday spending like grocery stores, drugstores, and restaurants. You can often also see the rewards for the rest of the year on the applications.

Chase Freedom Visa – $100 Bonus Cash Back
Reward categories change quarterly. From January 1 to March 31, you can earn 5% cash back on up to $1,500 spent in the following categories:

  • Gas Stations
  • Amazon.com

From October 1 to December 31, you can earn 5% cash back on up to $1,000 spent in the following categories:

  • Dining
  • Department Stores
  • Movie Theaters
  • Charitable Organizations

You must enroll at ChaseBonus.com. All other purchases do earn a standard 1%, with no tiers or expiration of rewards. Currently, the Chase Freedom Visa card has a promotion offering a $100 check if you sign up and make $500 in purchases in your first three months.

Citi® Dividend Platinum Select® Visa® Card
Reward categories change quarterly. From October 1st to December 31st, you can earn 5% cash back on

  • Department Stores
  • Clothing Stores
  • Electronics Stores
  • Toy Stores

After you get your card, you must enroll by logging into your account or calling 1-800-231-0891. There is no cap on the 5% back, except for the $300 overall cap on all dividend rewards annually. All other purchases do earn a standard 1% with no tiers, and rewards do not expire as long as you have activity once every 12 months. Also, 0% APR on balance transfers for 12 months with 3% fee and on purchases for 12 months.

Discover More Card
Discover More CardReward categories change quarterly. From January 1 to March 31, you can earn 5% cash back on up to $800 spent in the following categories:

  • Travel
  • Restaurants

You must enroll online to activate the rewards each quarter. Discover card has a tiered cashback rate (1% unlimited Cashback Bonus on purchases after your total annual purchases exceed $3000; purchases that are part of your first $3000 earn .25%.).

PenFed Platinum Cashback Rewards CardPenFed Platinum Cashback Rewards Card
Bonus categories appear and change regularly for this card, but not on a set schedule. Currently I don’t see anything available. However, the best feature remains – the year-round rewards structure of 5% cash back on gas purchases (must pay at pump), 2% cash back on supermarket purchases, and 1% cash back on everything else. Rewards are credited monthly on your next statement.

Note: To get this card, you must also have membership to the Pentagon Federal Credit Union (you can apply for both at the same time). In general, membership is open to the military, US government employees, or the family or household of existing members. However, anyone can become eligible by joining the National Military Family Association (NMFA) for a $20 one-time fee.

Filed Under: Credit Cards, Deals & Offers //
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