Archives for January 2014

Target Offers Free Credit Monitoring & Identity Theft Protection

Posted on January 13, 2014 // 12 Comments

After losing their customers’ credit card numbers and other personal data, Target is offering free credit monitoring services at creditmonitoring.target.com to anyone who shopped at their US stores. (Supposedly the data breach “only” affected the 70 million people who shopped at US-located Target stores between November 27th and December 15th, but they also seem to be “discovering” more data lost every week.)

The package includes a complimentary copy of your Experian credit report and 12 months of daily credit monitoring from Experian’s ProtectMyID, which includes identity theft insurance and personalized assistance with identity theft fraud. You must sign up for an activation code by April 23, 2014 and redeem by April 30, 2014. ProtectmyID only monitors your Experian credit report for change, including new inquiries, newly opened accounts, new derogatory information (such as delinquencies or medical collections) and more.

This is not part of Target’s offering, but for better overall protection (2 out of 3 credit bureaus) you can also get free credit monitoring of your TransUnion credit report at CreditKarma.com. If you only used one card for Target (or everywhere) you can just ask for a new credit card number without affecting your credit history or credit score.

Filed Under: Credit Cards, Deals & Offers //

ETF vs. Mutual Funds: Tax Efficiency, Capital Gains, and Index Funds

Posted on January 12, 2014 // 2 Comments

2013 was a great year for US stocks, and that also means that many mutual funds distributed (taxable) capital gains to their shareholders. ETFs are hot right now and there are many articles like this one which tout the tax-efficiency aspect of ETFs as to why they are superior to mutual funds.

Yes, it is true that ETFs have an inherent structural advantage over mutual funds in avoiding the production of capital gains. (I won’t explain it here, but here is one explanation.) However, the primary reason that mutual funds tend to distribute more capital gains is that most ETFs are passive and thus trade sparingly, while actively-managed funds by definition buy and sell much more frequently (what else are you paying them to do?).

But if you hold a good index fund, it will have very low turnover and thus you’ll rarely have to deal with capital gains either way. For example, both the Vanguard S&P 500 Index Fund (VFINX) and the Fidelity Spartan 500 Index Fund (FUSEX) had zero capital gains distributions in 2013 despite being up over 30% for the year.

On top of all that, at Vanguard their mutual funds and ETFs of the same name are structured as different share classes of the same basket of securities. That means the mutual funds and ETFs have exactly the same level of tax-efficiency. From the Vanguard website:

Are there tax advantages to owning Vanguard ETFs?
Because Vanguard ETFs are shares of conventional Vanguard index funds, they can take full advantage of tax-management strategies available to conventional funds and to ETFs. Conventional index funds can manage tax liabilities by selling high-cost securities to realize losses to offset realized gains. Vanguard ETFs can also limit a fund’s potential capital gains exposure by using in-kind redemptions to eliminate stocks with high built-in capital gains from the portfolio. This advantage gives our Vanguard ETFs management team more flexibility in implementing tax-management strategies.

For example in 2013, both the Vanguard Total Bond Market Index mutual fund (VBMFX) and ETF version Vanguard Total Bond Market ETF (BND) distributed a small long-term capital gain 0.076% of NAV.

Bottom line: If you hold passively-managed index funds, it really won’t matter much tax-wise if you pick ETF or mutual fund. If you hold Vanguard funds, it won’t matter at all. There are other factors like expense ratio differences or intra-day pricing availability that may sway you to either mutual fund or ETFs.

If you hold actively-managed funds, you will be less tax-efficient and that will be an additional drag on performance unless you hold them in tax-advantaged accounts.

Filed Under: Investing //

Frontier Airlines World MasterCard Review: 50,000 Bonus Miles = Two Roundtrip Award Tickets

Posted on January 9, 2014 // 5 Comments

Update – This offer is now EXPIRED

Frontier Airlines is a lesser-known budget airline that actually has a pretty decent nationwide footprint using its main central hub at Denver. (see route map). For example, you could fly from Los Angeles to New York La Guardia or from Seattle to Orlando (with a stop in Denver). They also fly to Costa Rica, the Dominican Republic, Jamaica, and Mexico.

I looked this up because The Frontier Airlines World MasterCard® currently has a sign-up bonus of 50,000 miles. You get 40,000 bonus miles after spending $500 in purchases in the first 90 days, and another potential 10,000 bonus miles on balance transfers (1 mile per $1 transferred) in the first 90 days. The extra 10,000 balance transfer miles aren’t really worth it due to the 3% balance transfer fee (there are better no-fee balance transfer options).

The good news is that it only takes 20,000 miles to book a roundtrip award ticket anywhere in the US that they fly. (Roundtrip awards from US to Mexico and Costa Rica are only 30,000 miles.) This means 40,000 miles is enough for 2 domestic roundtrip award tickets (subject to government fees/taxes of $2.50 per leg). I just quickly priced out a San Francisco to New York La Guardia flight and it was $385 roundtrip per person. That’s over $750 of potential value right there.

You will need to subtract out the $69 annual fee that is not waived for the first year. However, the spending requirement is relatively low at $500 within 90 days and the issuer is Barclaycard. This makes it a good option if you’ve already gotten the good cards from the other major issuers like I have. The only Barclaycard that I have so far is the Barclaycard Arrival Plus™ World Elite MasterCard® with $400+ value bonus, but this card can actually offer more value if your flight plans match up with their routes.

Filed Under: Credit Cards, Deals & Offers //

IRS Estimated Taxes Due Date Calendar 2013

Posted on January 9, 2014 // 11 Comments

Reminder for last quarter of 2013. If you’ll earn income outside of your W-2 paycheck this year, you may need to send the IRS some money before the usual tax-filing time. Here are the due dates for paying quarterly estimated taxes in 2013; they are supposed to be in four equal installments. This is for federal taxes only, state and local tax due dates may be different.

Tax Year / Quarter Due Date
2013 First Quarter April 15, 2013 (Monday)
2013 Second Quarter June 17, 2013 (Monday)
2013 Third Quarter September 16, 2013 (Monday)
2013 Fourth Quarter January 15, 2014* (Wednesday)

* You do not have to make the Q4 payment due January 15, 2014, if you file your 2013 tax return by January 31, 2014.

Who needs to pay estimated taxes?
In general, you must pay estimated tax for 2013 if both of the following apply:

  1. You expect to owe at least $1,000 in tax for 2013, after subtracting your withholding and credits.
  2. You expect your withholding and credits to be less than the smaller of
    • 90% of the tax to be shown on your 2013 tax return, or
    • 100% of the tax shown on your 2012 tax return. Your 2012 tax return must cover all 12 months.

If you forget to pay (like I’ve done before), then you should make a payment as soon as possible even though it is late. This will minimize any penalty assessed. This is all taken from IRS Form 1040-ES [pdf].

How do I pay?

  • By check. Fill out the appropriate 1040-ES voucher (last page) and send to the indicated address. If it is postmarked by the due date, the date of the U.S. postmark is considered the date of payment.
  • By online bank transfer. You can link your bank account and pay via electronic funds transfer at EFTPS.gov or call 1-800-555-4477. No convenience fees. It takes a little while to set up an online account, so plan ahead.
  • By debit or credit card. Here is page of IRS-approved payment processors. Pay by phone or online. Fees will apply.

I usually pay online at EFTPS.gov for both convenience and to avoid fees. In rare cases with the right credit card promotion, it can be worth it to pay the credit card processing fee. For example, last year I paid taxes with my Chase Ink Bold card. I paid $189 in fees, but earned $500 of bonus points.

Filed Under: Self-Employment, Taxes //

15-Minute Resolution: Save More For Retirement Today

Posted on January 7, 2014 // 3 Comments

The problem with most New Year’s resolutions is that they just take a moment to make but to actually accomplish it you’ll need to re-make that decision hundreds of times. If you’re trying to be healthier, every single day you’ll have to choose the grilled chicken with steamed vegetables instead of the bacon cheeseburger with fries. Walking the stairs instead of taking the elevator. Willpower is like a muscle, and it gets fatigued after a while.

The good news is that if you want to save more, automation technology allows you to make a decision now and never be asked about it again. If you can, consider simply increasing your 401(k) contribution rate by 1% (or more). Just log into your account today and make the change. Today being the operative word! Let’s see how much 1% is for a household with a single earner making $50,000 gross per year. For simplicity, let’s say they live in a state without income tax. If you are paid bi-weekly, putting away $500 pre-tax annually (1%) into a Traditional 401k amounts to an additional $19 per paycheck.

Alternatively, it is quite easy to set up recurring online transfers from your checking account to either a savings account or IRA account ($100 a month, $50 a week, etc). Once set up, it will happen automatically and you won’t have to think about it. I like the idea of opening a online savings account, as it gives you a separate “savings jar” that psychologically you’ll be less likely to raid.

If you do it this week, you’ll already be done with your 2014 resolution!

Filed Under: Budgeting, Retirement // Tagged:

College Tuition Growth Rate vs. Stock / Bond Investment Performance

Posted on January 7, 2014 // 8 Comments

Inside this Morningstar article discussing the choice between a prepaid 529 plan or a 529 college-savings account, there was an updated chart comparing the 10-year growth rates of tuition at 4-year public and private universities, the S&P 500 index, and the Barclays US Aggregate Bond index. A blended 60% stock and 40% bond portfolio would have returned 6.34% annualized.

There used to be some great prepaid 529 options out there, but they have been gradually going away. Only a few states even offer a prepaid plan anymore (Alaska, Florida, Illinois, Maryland, Michigan, Massachusetts, Mississippi, Nevada, Pennsylvania, Texas, Virginia, and Washington). I’m not familiar enough to recommend any one in particular, but I do know people who still invest in both the Washington and Texas plans. You should look for one that provides at least some investment return if the student ends up going to an out-of-state school.

For many of us the traditional stock/bond route will have to do, which we see would only have just about kept up with tuition inflation over the least 10 years. I still can’t see tuition compounding away at 8% annually for the next 20 years, but I will probably make my 529 contributions under the assumption that a 60/40 stock/bond portfolio will only keep up with tuition over the long-term (as opposed to contributing less and hoping stock performance will cover the gap).

Filed Under: College & Education //

IKEA Small Space Floor Plans: 240, 380, 590 sq ft

Posted on January 5, 2014 // 11 Comments

While walking through an IKEA home furnishings store last week I saw a bunch of neat “model homes” that took up very little space. Supposedly every IKEA store has their own sampling of small space floor plans – only a few are profiled on their website – so here are some pictures and videos that I took with my smartphone. (Apologies in advance for the poor film quality.) Some of the tight designs require specific wall positioning, but many of the concepts could be used to maximize the space in any home.

590 sf Floor Plan – 1.5 Bedroom, 1 Bath
This home is designed for a young couple with a young child. The kitchen island doubles as the family dinner table. The main bedroom is a pretty decent size, and floor-to-ceiling closets and shelving maximizes storage. I call this a 1.5 bedroom floor plan because the “kid’s room” is fine for a crib but would be really tight for a twin bed. If you could move walls you could take some space from the kitchen.

 

 
380 sf Floor Plan – Studio w/ Separate Bedroom
This studio layout means there are no walls between the bedroom and the living room, but at least they are separate spaces. The kitchen is actually a pretty good size, but there is no room for a dining table. I think the kitchen counter is meant to be the eating space. Designed for one or two people.

[Read more…]

Filed Under: Frugal Living, Home Improvement //

Big List of Free Credit Reports, Free Credit Scores, and Free Credit Monitoring

Posted on January 2, 2014 // 11 Comments

Annual reminder for 2014. Want to get back on track for the new year? Here is a list of ways to get free credit reports, free credit scores, and free credit monitoring services.

Remember that there are three major consumer credit bureaus – Equifax, Experian, and TransUnion – all with possibly different data. A few of these offers require a free trial and noted as such, which is not preferred but I am not completely opposed to as you’re getting something of value in exchange for a bit of hassle. My personal tip is that I always cancel them the same day as part of one continuous process, preferably within an hour after saving what I need, that way there is nothing to forget later.

Free Credit Reports

Fair Credit Reporting Act (FCRA). Visit AnnualCreditReport.com or call 877-322-8228 to request your federally-mandated free credit report from one or all of the 3 major bureaus. You can get one from each every rolling 12 months, so either get them all once a year or space them out. No trials, no credit card required, although the bureaus may try to sell you a credit score.

Special Situations – Denied Credit, Unemployed, Welfare, Identity Theft. As outlined by the Federal Trade Commission, here are a few other scenarios where you also get a free credit report:

  1. You were denied credit, insurance, or a job due to information on your credit report. A notice stating which credit bureau supplied the report should be included in your letter of denial. You then have 60 days to request a free copy of your report from them.
  2. You are unemployed. You’re also entitled to one free report a year if unemployed and plan to look for a job within 60 days.
  3. You are on welfare.
  4. You are a victim of fraud, including identity theft. Place a fraud alert on your file, and then ask for a free copy of your credit report.

Here are the numbers you’ll need (remember to mention FTC if needed):

* Equifax: 800-685-1111; Fraud Dept. 800-525-6285
* Experian: 888-397-3742 (same for Fraud Dept.)
* Trans Union: 800-916-8800; Fraud Dept. 800-680-7289

MyFICO Score Watch Trial. If you sign up for a free 10-day trial at MyFICO.com, you’ll get a free Equifax credit report and Equifax FICO credit score. You’ll need a credit card. You must call 1.888.577.5978 to cancel. My recommendation is to get your credit report and credit score, print or save to PDF, and then cancel immediately afterward on the same day so that you won’t forget later. Hours (PDT) M-F 6am-6pm, Sat 7am-4pm, Sun Closed.

Free Credit Scores

Your credit score. Did you know that you have probably 50 flavors of your credit score. Even the “real” FICO score comes in several different versions, and there’s one per bureau. Personally, I would never pay $10-$20 a pop for a score. Many of the free providers below will also provide selected information directly from your credit reports, like overall credit limit utilization or total balances.

Credit Sesame / Experian. You can get a free credit score based on your Experian credit report from Credit Sesame, updated every month. They make money by sending you offers like lowering your mortgage rate. Screenshot:

CreditKarma / TransUnion. Similarly, get a free credit score based on your TransUnion credit report from CreditKarma.com, updated daily as long as you login each time. Also ad-supported. Screenshot:

MyFICO Trial / Equifax. Same as above… If you sign up for a free 10-day trial at MyFICO.com, you’ll get a free Equifax credit report and Equifax FICO credit score. You’ll need a credit card. You can try to cancel online, but it told me that you must call 1.888.577.5978 to cancel. My recommendation is to get your credit report and credit score, print or save to PDF, and then cancel immediately afterward on the same day so that you won’t forget later. Hours (PDT) M-F 6am-6pm, Sat 7am-4pm, Sun Closed.

Citi Idenitity Monitor Trial. Finally, if you’re willing to spend $1 and endure a trial, you can sign up with Citi Identity Monitor get a free credit score and free credit reports from each of the three major bureaus. After you submit your personal info, enter your credit card info, and choose your username/password, be sure to opt for the “free upgrade” which will give you the 3-in-1 report. You’ll have to call 866-279-9637 to cancel within 30 days. Again, cancel the same day if possible. Hours (ET) M-F 8am-11pm, Sat 9am-6pm, Sun Closed.

Free Credit Monitoring

Credit monitoring checks your credit report data daily and sends you an email or text alert if any activities have occurred – for example, if there was a credit pull by a lender or a new address added. This can provide early warning of attempted identity theft, reporting errors, or simply am overzealous lender checking your credit without permission. Many providers charge $10-$20 a month for similar monitoring, and while it’s potentially useful I’ve never warmed to the idea of paying a hundred bucks a year for it.

Credit Sesame. You can get free daily credit monitoring based on your Experian credit report from Credit Sesame. If you’ve already signed up for the free Experian-based credit score, it’s a very simple opt-in. Screenshot:

Selected AAA Members. If you’re an AAA auto club member, you may be eligible for free Experian credit monitoring as well. To see if your local club offers this, visit aaa.com/identitymonitoring.

CreditKarma. Get free daily credit monitoring of your TransUnion credit report from CreditKarma.com, also easy to add if you already subscribe to their free TransUnion-based credit score.

Filed Under: Credit Cards, Deals & Offers //
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