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If I make over 120k a year, what are my options for retirement plans? | Put in the maximum you can into the 401(k), the limit should be $16,500 so long as the highly compensated rules don't kick in. Since you cannot deduct the traditional IRA, it's a great option to deposit to a traditional IRA and immediately convert that balance to a Roth account. That puts you at $21,500/yr saved, nearly 18%. There's nothing stopping you from investing outside these accounts. A nice ETF with low expenses, investing in a stock index (I am thinking SPY for the S&P 500) is great to accumulate long term. |
Setting up a LLC for two partners in different states, what should we look into? | TL;DR: Get a tax adviser (EA/CPA licensed in your State) for tax issues, and a lawyer for the Operating Agreement, labor law and contract related issues. Some things are not suitable for DIY unless you know exactly what you're doing. We both do freelance work currently just through our personal names. What kind of taxes are we looking into paying into the business (besides setup of everything) compared to being a self proprietor? (I'm seeing that the general answer is no, as long as income is <200k, but not certain). Unless you decide to have your LLC taxed as a corporation, there's no change in taxes. LLC, by default, is a pass-through entity and all income will flow to your respective tax returns. From tax perspective, the LLC will be treated as a partnership. It will file form 1065 to report its income, and allocate the income to the members/partners on schedules K-1 which will be given to you. You'll use the numbers on the K-1 to transfer income allocated to you to your tax returns and pay taxes on that. Being out of state, will she incur more taxes from the money being now filtered through the business? Your employee couldn't care less about your tax problems. She will continue receiving the same salary whether you are a sole proprietor or a LLC, or Corporatoin. What kind of forms are we looking into needing/providing when switching to a LLC from freelance work? Normally we just get 1099's, what would that be now? Your contract counterparts couldn't care less about your tax problems. Unless you are a corporation, people who pay you more than $600 a year must file a 1099. Since you'll be a partnership, you'll need to provide the partnership EIN instead of your own SSN, but that's the only difference. Are LLC's required to pay taxes 4 times per year? We would definitely get an accountant for things, but being as this is side work, there will be times where we choose to not take on clients, which could cause multiple months of no income. Obviously we would save for when we need to pay taxes, but is there a magic number that says "you must now pay four times per year". Unless you choose to tax your LLC as a corporation, LLC will pay no taxes. You will need to make sure you have enough withholding to cover for the additional income, or pay the quarterly estimates. The magic number is $1000. If your withholding+estimates is $1000 less than what your tax liability is, you'll be penalized, unless the total withholding+estimates is more than 100% of your prior year tax liability (or 110%, depending on the amounts). The LLC would be 50% 50%, but that work would not always be that. We will be taking on smaller project through the company, so there will be times where one of us could potentially be making more money. Are we setting ourselves up for disaster if one is payed more than the other while still having equal ownership? Partnerships can be very flexible, and equity split doesn't have to be the same as income, loss or assets split. But, you'll need to have a lawyer draft your operational agreement which will define all these splits and who gets how much in what case. Make sure to cover as much as possible in that agreement in order to avoid problems later. |
Why is it rational to pay out a dividend? | It comes down to the practical value of paying dividends. The investor can continually receive a stream of income without selling shares of the stock. If the stock did not pay a dividend and wanted continual income, the investor would have to continually sell shares to gain this stream of income, incurring transaction costs and increased time and effort involved with making these transactions. |
Obtaining Pound Sterling Cheque in US to pay for family history records from England? | Most US banks don't allow you the ability to draft a foreign currency check from USD. Though, I know Canadian banks are more workable. For instance, TD allows you to do this from CAD to many other currencies for a small fee. I believe even as a US Citizen you can quite easily open a TD Trust account and you'd be good to go. Also, at one time Zions bank was one of the few which lets US customers do this add-hoc. And there is a fee associated. Even as a business, you can't usually do this without jumping thru hoops and proving your business dealings in foreign countries. Most businesses who do this often will opt to using a payment processor service from a 3rd party which cuts checks in foreign currencies at a monthly and per check base. Your other option, which may be more feasible if you're planning on doing this often, would be to open a British bank account. But this can be difficult if not impossible due to the strict money laundering anti-fraud regulations. Many banks simply won't do it. But, you might try a few of the newer British banks like Tesco, Virgin and Metro. |
How to rebalance a passive portfolio if I speculate a war is coming? | At a risk of stating the obvious: a passive portfolio doesn't try to speculate on such matters. |
Why could rental costs for apartments/houses rise while buying prices can go up and down? | They are two different animals. When you rent you are purchasing a service. The landlord, as your service provider, has to make a profit, pay employees to do maintenance, and buy materials. The price of these things will increase with inflation, and that rolls into your rent price. Taxes also are passed to the tenant, and those tend to only go upward. Market forces of supply/demand will drive fluctuation of prices as well, as other posts have described. When you buy, you are purchasing just the asset - the home. This price will also be driven by supply/demand in the market, but don't try to compare it to buying a service. Cheers! |
Dalbar: How can the average investor lose money? | How is it possible for the average investor to underperform the market? The "average" investor probably makes some bad decisions. You also might need to take transaction costs into play (including borrowing on margin), so that there's a natural "erosion" of returns across the market. Meaning if transaction/borrowing costs are 1%, and the market return is 5%, the "average investor" Alternatively, if by "average" they mean the average of the population, not weighted by amount, it's plausible that the mass of smaller investors perform slightly worse than the smaller number of large investors (and have larger relative transaction costs), thus having a lower average on a per-capita basis. Doesn't the fact that investors can consistently underperform the market by making poor decisions, imply that an investor could consistently outperform the market by making the opposite decisions? No. If my investment decisions cause me to earn only a 10% return compared to the "average" 12% return, then making the opposite decision will cause me to lose 10%, not to make 14%. |
How do I get into investing in stocks? | Before putting any significant money into stocks, I would recommend spending at least a year paper trading. It is amazing how much money you can lose trading stocks when you don't know what you are doing! |
Multi-Account Budgeting Tools/Accounts/Services | IngDirect has this concept of sub accounts inside a main account - that might be perfect for what you are looking for. To clarify, you basically have one physical account with logical sub account groupings. |
Should I have more than one brokerage account? | I believe the answer here is no: SIPC protection of customers with multiple accounts is determined by "separate capacity." Each separate capacity is protected up to $500,000 for securities and cash (including a $250,000 limit for cash only). Accounts held in the same capacity are combined for purposes of the SIPC protection limits. So even having 2 individual accounts - you would only be covered for $500,000/$250,000. You can see more about the type of accounts that would give your more coverage here. Also note: If you own a stock - the record probably exist. Therefore you would not lose your ownership or shares. The SIPC is there to protect the times this does not happen. |
Could capital gains from a stock sale impact my IRA eligibility? | Yes, eligibility for contributing to a Roth IRA is determined by your Modified Adjusted Gross Income (MAGI) which is based on your Adjusted Gross Income (AGI). Now, AGI includes the net capital gains from your transactions and MAGI adds back in things that were subtracted off (e.g. tuition deductions, foreign earned income exclusion) in arriving at the AGI. There is a worksheet in Publication 590 that has the details. You are always entitled to contribute to a Traditional IRA. The MAGI affects how much of your contribution is tax-deductible on that year's tax return, but not your eligibility to contribute. Both the above paragraphs assume that you have enough compensation (wages, salary, self-employment income) to contribute to an IRA: the contribution limit is $5500 or total compensation, whichever is smaller. (If you earned only $2K as wages, you can contribute all of it; not just your take-home pay which is what is left after Social Security and Medicare taxes, Federal taxes etc have been withheld from that $2K). If your entire income is from capital gains and stock dividends, you cannot contribute to any kind of IRA at all. |
In the UK, could low-income pensioners (or those near a low-income retirement) find a student loan useful for boosting their finances? | In theory - Yes. So as long as someone will accept you as a (very) mature student, you plan to never earn over 21k a year for the next 30 years (no longer wiped out at 65), you could get a loan, slightly unethically (unless you fancy doing the course). Also if you did have to start paying it back - since interest rates are currently 6.1% this means the loan is doubling potentially just under every 12 years (approx) As to the side question of is it fraud? I couldn't say. Is a student getting maximum loans but planning on being a jobless bum for the rest of their lives and never paying back loans also committing fraud? One could argue Yes, but i don't believe a lack of ambition is currently illegal. |
What is a good way to save money on car expenses? | Do your own oil change! If you are a hands-on person, you could also avoid the cost of the semi-annual oil change, by doing it yourself. Edmunds.com has a great how-to to help you accomplish this. Be prepared for dirty fingernails! But savings, you will realize, as an oil change will run you anywhere from $20 - $200 (if you drive a European car and require a specialized filtre). |
I may earn a lot of cash soon through self-employment on a lucrative project. How to handle the tax? | I'm not familiar with Canadian taxes, but had your question been written about the United States, I'd advise you to at least consult for a couple of hours with an accountant. Taxes are complex, and the cost of making a mistake generally exceeds the cost of getting professional advice. |
Why do consultants or contractors make more money than employees? | In addition to the other answers, consultants and contractors face a real risk (though admittedly small) of not getting paid. The more short-term the gigs are, the higher the risk of not getting paid for a particular job. As an employee, there are laws to ensure that you get your paycheck. As a contractor, you're just another creditor. I know a couple of contractors (software engineers) who have had difficulty collecting after a job. (I'm not even sure one ever got paid the full amount.) I also personally witnessed a contractor show up for a job who was then told by the company that they unilaterally decided that they would pay half of their pre-arranged rate. |
Is there a rule that a merchant must identify themself when making a charge | In some case the customer wants the name to be cryptic or misleading. They don't want to advertise the true nature of the business they visited. In other cases the transaction may be reported through another business. A few years ago the local PTA was having a silent auction as a fundraiser. A local business allowed the PTA to use their credit card reader to process transactions over a certain amount. Of course when the credit card statement arrived it looked like you spent $500 at the florist. I have seen PayPal listed when donating to some small charities. I have noted another case where confusion can occur. I used a debit card to buy a soda from a vending machine: the name and location were the name of the vending machine company and the location of their main office. It didn't say soda machine city A. It said Joe's vending company city B. In most cases the business and the credit card company want to make it easy to identify the transactions to keep the cost of research and charge backs to a minimum. |
Will prices really be different for cash and cards? | My guess would be for small merchants there could be a small difference. For large merchants, the cash is also at a cost equivalent to the card fees. Check for my other answer at How do credit card companies make profit? |
The Benefits/Disadvantages of using a credit card | The thing you need to keep in mind is that if you take on debt, you need to have a plan to pay it off and execute on it. You also need to understand what your carrying cost is (what you will pay in finance charges every month.) There are times when you need to take on debt in order to be a productive person. For example, in many places in the US, you need a car in order to have a job. It's ludicrous for someone to assert that you shouldn't take on any debt in order to get a reliable vehicle. That doesn't mean you go out and lease the fanciest car that you can get on your income. In this case, I'd say it's a bit of a grey area. Could you live in an unfurnished apartment for a while? Perhaps. Many people would have a hard time living like that and it could affect your ability to perform at work. I would argue that buying a decent mattress to sleep on falls under the same category as getting a car so that you can work. You don't want to be missing work because your back is in spasm from sleeping on the floor or a worn out mattress. As far as the rest of it goes, it really depends on how fast you can pay it off. If you are looking at more than a few months (6 tops) to pay off the purchase in full, you should reassess. Realize that the interest you are paying is increasing the cost of the furniture and act accordingly. As mentioned, you can often get 0% financing for a limited period. Understand that if you don't pay off the entire balance in that period, you will normally be retroactively charged interest on the entire starting amount and that interest rate will likely be quite high. The problem with credit is when you start using it and continually growing the balance. It's easy to keep saying that you will start paying it off later and the next thing you know you are buried. It's not a big one-time purchase (by itself) that normally gets people into trouble, it's continual spending beyond their means month after month. |
How long can I convert 401(k) to Roth 401(k)? | Conversions must be done during the calendar year. This would apply to both IRA and 401(k) accounts. For IRAs, deposits may be made until 4/15, and the same holds for Solo 401(k) accounts. For conversions, the IRA permits a recharacterization, basically, a do-over, which reverses the conversion, any or all, in case you have any reason it should not have been done. That has a deadline of 10/15, i.e. 4/15 plus 6 month extension. The 401(k) conversion has no such provision. Simple answer 12/31 of the given year. |
Understanding the Nasdaq insider trading information | Usually insiders are in a better position than you to understand their business, but that doesn't mean they will know the future with perfect accuracy. Sometimes they are wrong, sometimes life events force them to liquidate an otherwise promising investment, sometimes their minds change. So while it is indeed valuable information, as everything in fundamental analysis it must be taken with a grain of salt. Automatic Sell I think these refer to how the sell occurred. Often the employees don't get actual shares but options or warrants that can be converted to shares. Or there may be special predetermined arrangements regarding when and how the shares may be traded. Since the decision to sell here has nothing to do with the prospects of the business, but has to do with the personal situation of the employee, it's not quite the same as outright selling due to market concerns. Some people, for instance, are not interested in holding stock. Part of their compensation is given in stock, so they immediately sell the stock to avoid the headache of watching an investment. This obviously doesn't indicate that they expect the company will go south. I think automatic sell refers to these sorts of situations, but your broker should provide a more detailed definition. Disposition (Non Open Market) These days people trade through a broker, but there's nothing stopping you from taking the physical shares and giving them to someone in exchange for say a stack of cash. With a broker, you only "sell" without considering who is buying. The broker then finds buyers for you according to their own system. If selling without a broker you can also be choosy with who is buying, and it's not like anybody can just call up the CEO and ask to buy some stock, so it's a non-open market. Ultimately though it's still the insider selling. Just on a different exchange. So I would treat this as any insider sell - if they are selling, they may be expecting the stock to become less valuable. indirect ownership I think this refers to owning an entity that in turn owns the asset. For instance CEO of XYZ owns stock in ACME, but ACME holds shares of XYZ. This is a somewhat complicated situation, it comes down to whether you think they sold ACME because of the exposure to XYZ or because of some other risk that applies only to ACME and not XYZ. Generally speaking, I don't think you would find a rule like "if insider transactions of so and so kinds > X then buy" that provides guaranteed success. If such a rule was possible it would have been exploited already by the professionals. The more sensible option is to consider all data available to you and try to make a holistic evaluation. All of these insider activities can be bullish or bearish depending on many other factors. |
Does the P/E ratio not apply to bond ETFs? | The simple answer is technically bonds don't have earnings, hence no P/E. What I think the OP is really asking how do I compare stock and bond ETFs. Some mature stocks exhibit very similar characteristics to bonds, so at the margin if you are considering investing between 2 such investments that provide stable income in the form of dividends, you might want to use the dividend/price ratio (D/P) of the stock and compare it to the dividend yield of the bond. If you go down to the basics, both the bond and the stock can be considered the present value of all future expected cashflows. The cash that accrues to the owner of the stock is future dividends and for the bond is the coupon payments. If a company were to pay out 100% of its earnings, then the dividend yield D/P would be conveniently E/P. For a company with P/E of 20 that paid out it's entire earnings, one would expect D/P = 1/20 = 5% This serves as a decent yard stick in the short term ~ 1 year to compare mature stock etfs with stable prospects vs bond funds since the former will have very little expected price growth (think utilities), hence they both compete on the cashflows they throw off to the investor. This comparison stops being useful for stock ETFs with higher growth prospects since expected future cashflows are much more volatile. This comparison is also not valid in the long term since bond ETFs are highly sensitive to the yield curve (interest rate risk) and they can move substantially from where they are now. |
How to decide on split between large/mid/small cap on 401(k) and how often rebalance | One other thing to consider, particularly with Vanguard, is the total dollar amount available. Vanguard has "Admiralty" shares of funds which offer lower expense ratios, around 15-20% lower, but require a fairly large investment in each fund (often 10k) to earn the discounted rate. It is a tradeoff between slightly lower expense ratios and possibly a somewhat less diverse holding if you are relatively early in your savings and only have say 20-30k (which would mean 2 or 3 Admiralty share funds only). |
How are stock buybacks not considered insider trading? | Companies already have to protect themselves against employees trading the company's shares with insider information. They typically do that in a number of ways: Taken together, this tends to mostly mitigate the risk of employees trading with insider information, though it's probably not perfect. In practice, the company itself's knowledge of insider information is the same as that of its senior management. So it makes sense for a company to be allowed to trade under the same conditions as its senior management. From https://corpgov.law.harvard.edu/2013/03/14/questions-surrounding-share-repurchases/ : If the company is repurchasing outside of a Rule 10b5-1 trading plan, it should limit its purchases to open window periods when officers and directors are able to buy and sell securities of the company. In addition, the company also can choose to disclose any material non-public information prior to any share repurchase if it is in possession of material non-public information at a time when it is seeking to make a share repurchase outside of a Rule 10b5-1 trading plan. As mentioned in the quote, a company can also set up a trading plan in advance (at a time when it doesn't have inside information) to be executed unconditionally in the future. Then even if the company comes into possession of inside information, it won't be using this knowledge to direct trades. |
Are the guaranteed returns of regulated utilities really what they sound like? | Typically a private company is hit by demand supply issues and cost of inputs. In effect at times the cost of input may go up, it cannot raise the prices, because this will reduce demand. However certain public sectors companies, typically in Oil & Engery segements the services are offered by Public sector companies, and the price they charge is governed by Regulatory authorities. In essence the PG&E, the agreement for price to customers would be calculated as cost of inputs to PG&E, Plus Expenses Plus 11.35% Profit. Thus the regulated price itself governs that the company makes atleast 11.35% profit year on year. Does this mean that the shares are good buy? Just to give an example, say the price was $100 at face value, So essentially by year end logically you would have made 111.35/-. Assuming the company did not pay dividend ... Now lets say you began trading this share, there would be quite a few people who would say I am ready to pay $200 and even if I get 11.35 [on 200] it still means I have got ~6% return. Someone may be ready to pay $400, it still gives ~3% ... So in short the price of the stock would keep changing depending how the market percieves the value that a company would return. If the markets are down or the sentiments are down on energy sectors, the prices would go down. So investing in PG&E is not a sure shot way of making money. For actual returns over the years see the graph at http://www.pgecorp.com/investors/financial_reports/annual_report_proxy_statement/ar_html/2011/index.htm#CS |
2008-2009 Stock Market Crash — what caused the second drop? | First, I would like to use a better chart. In my opinion, a close of day line chart obscures a lot of important information. Here is a daily OHLC log chart: The initial drop from the 1099.23 close on Oct 3 was to 839.8 intraday, to close at 899.22 on Oct 10. After this the market was still very volatile and reached a low of 747.78 on Nov 20, closing only slightly higher than this. It traded as high as 934.70 on Jan 6, 2009, but the whole period of Nov 24 - Feb 13 was somewhat of a trading range of roughly 800-900. Despite this, the news reports of the time were frequently saying things like "this isn't going to be a V shaped recovery, it is going to be U shaped." The roughly one week dip you see Feb 27 - Mar 9 taking it to an intraday low of 666.79 (only about 11% below the previous low) on first glance appears to be just a continuation of the previous trend. However... The Mar 10 uptrend started with various news articles (such as this one) which I recall at the time suggested things like reinstating the parts of the Glass–Steagall Act of 1933 which had been repealed by the Gramm–Leach–Bliley Act. Although these attempts appear to have been unsuccessful, the widespread telegraphing of such attempts in the media seemed to have reversed a common notion which I saw widespread on forums and other places that, "we are going to be in this mess forever, the market has nowhere to go but down, and therefore shorting the market is a good idea now." I don't find the article itself, but one prominent theme was the "up-tick" rule on short selling: source From this viewpoint, then, that the last dip was driven not so much by a recognition that the economy was really in the toilet (as this really was discounted in the first drop and at least by late November had already been figured into the price). Instead, it was sort of the opposite of a market top, where now you started seeing individual investors jump on the band-wagon and decide that now was the time for a foray into selling (short). The fact that the up-tick rule was likely to be re-instated had a noticeable effect on halting the final slide. |
Switch from DINK to SIWK: How do people afford kids? | How do people do it? Firstly, I'd advise you to explicitly budget all taxes. The reason is because taxes get complicated when you have a child deduction. Not that raising a child is profitable post taxes, but it can change your perspective. SIWKs with high income get by just fine. The rest sacrifice. They buy less house, or rent. They drive more than 30 minutes to work every day. They work second jobs. They stop saving for retirement. And when they fail to save or plan, they borrow from family or rack up huge credit card debt. They don't buy the sweet new truck they were planning on. They cut cable and cook meals at home. They skip church, because they can't afford the tithe, and say it's because they don't have time, don't want their children to disrupt services, etc. So right now, that "other" basket is looking pretty juicy, and the taxes can maybe be examined as well. But ultimately, if you're looking at a 30 percent hit in pay, that won't cut it. Mortgage + food alone is nearly half your budget! |
What is a Student Loan and does it allow you to cover a wide range of expenses relating to school? | The short answer is that you can use student loans for living expenses. Joe provides a nice taxonomy of loans. I would just add that some loans are not only guaranteed, but also subsidized. Essentially the Government buys down the rate of the loan. The mechanics are that a financial aid package might consist of grants, work study (job), subsidized, and guaranteed loans. One can turn down one or more of the elements of the package. All will be limited in some form. The work study will have a maximum number of hours and generally has low pay. Many find better deals working in the businesses surrounding the college or starting their own services type business. The grants rarely cover the full cost of tuition and books. The loans will both be limited in amount. It mainly depends on what you qualify for, and generally speaking the lower the income the more aid one qualifies for. Now some students use all their grant, all their loan money and buy things that are not necessary. For example are you going to live in the $450/month dorm, or the new fancy apartments that are running $800/month? Are you going to use the student loan money to buy a car? Will it be a new BMW or a 8 year old Camary? I see this first hand as I live near a large university. The pubs are filled with college students, not working, but drinking and eating every night. Many of them drive very fancy cars. The most onerous example of this is students at the military academies. Attendees have their books and tuition completely paid for. They also receive a stipend, and more money can be earned over the summer. They also all qualify for a 35K student loan in their junior year. Just about every kid, takes this loan. Most of those use the money to buy a car. I know a young lady who did exactly that, and so did many of her friends. So kids with a starting pay of 45K also start life with a 35K. Buying a nice car in the military is especially silly as they cannot drive it while deployed and they are very likely to be deployed. At least, however, they are guaranteed a starting job with a nice starting pay, and upward potential. College kids who behave similarly might not have it as good. Will they even find work? Will the job have the ability to move up? How much security is in the job? One might say that this does not apply to engineers and such, but I am working with a fellow with a computer science degree who cannot find a job and has not worked in the past 6 months. This even though the market is super hot right now for computer engineers. So, in a word, be very careful what you borrow. |
When a company liquidates, are earlier investors paid back first? | Assuming no debt, as you've specified in the comments to your question, the assets should generally be distributed proportional to ownership share. BUT, without any sort of agreement, there might be contention on what each investor's share is and that might get fought out in court. With a corporation issuing shares, the corporate charter probably defines the relationship between different classes of shares (or specifies only one class). For a partnership though, you could conceivable have people making claims of ownership stake based on labor in addition to any cash that they put up. Messy if there's no up-front agreement. |
Should I be claiming more than 1 exemption? | J - Approaching the answer from the W4 perspective (for calculation purposes) may be more trouble that it's worth. I'd strongly suggest you use tax software, whether it's the 2016 SW or a current year one, on line, to get an estimate of your total tax bill for the year. You can then look at your current run rate of tax paid in to see if you are on track. If you have a large shortfall, you can easily adjust your withholdings. If you are on track to get a large refund, make the adjustment so next year will track better. Note, a withholding allowance is equal to a personal exemption. Some think that "4" means 4 people in the house, but it actually means "don't tax 4 x $4050" as I have $16200 in combined people or tax deductions. |
Does the rise in ACA premiums affect employer-provided health insurance premiums? | It's likely impossible to determine why premiums are increasing in a meaningful way; not only is the interrelationship between the various data points very complex, but some of the increases are likely due to decisions by people who do not and will not publicly post what they decided and why. However, it is possible to compare health insurance premium increases over time to see if the increases in employer-sponsored health insurance premiums are comparable or not to the pre-ACA timeframe. Since the ACA phased in over a few years, we can compare the period 2008-2010 "pre-ACA" and 2013-2015 "post-ACA", ignoring 2011-2012 as being unclearly affected by the ACA phase-in. For this, I will look at single coverage premiums only for the purpose of simplifying the analysis. I found a good table of 2008-2010 premiums from the NCSL; they list the following: Kaiser Permanente had a good list for 2013-2015 here: From 2008-2010, the average growth was around 6% per year. From 2013-2015, the growth averaged about 3%. In both of these cases we are comparing total premiums (sum of employer and employee contributions). So, from a data-driven look, it seems that the premium growth is lower post-ACA than pre-ACA, so it's unlikely that the ACA could be accused of causing increased premium growth. Of course, this is US-wide average, and on a state-by-state basis there may well be significant differences that may or may not be related to the ACA. One thing that is covered on the NCSL page linked above that is interesting: while the premium growth has slowed significantly (about 50% of the growth pre-ACA), health insurance premiums are a higher proportion of employee's wages, and that growth is continuing - because wage growth has not kept pace with inflation post-2008 recession. Employee contributions also may be higher post-recession; many companies reduced their contribution percentage (as my then employer did, for example). Finally, increases in the ACA plans are also commonly overstated. They largely are in line with employer plans or even less. In 2015, premiums were basically flat, decreasing slightly in fact - see the KFF analysis here. 2016 saw a 3.6% by this methodology (see the 2016 analysis). It's very easy to cherrypick examples that are favorable to any interpretation from the data, though; there are such big swings as a result of the different conditions in the marketplaces that it's easy to pick a few that have high swings and claim the ACA has massive premium increases, or pick a few that have low swings and claim it's reducing costs. |
Best way to invest money as a 22 year old? | The classic answer is simple. Aim to build up a a financial cushion that is the equivalent of 3 times your monthly salary. This should be readily accessible and in cash, to cover any unforeseen expenses that you may incur (car needs repairing, washing machine breaks down etc). Once you have this in place its then time to think about longer term investments. Monthly 'drip feeding' into a mutual stock based investment fund is a good place to start. Pick a simple Index based or fund with a global investment bias and put in a set amount that you can regularly commit to each month. You can get way more complicated but for sheer simplicity and longer term returns, this is a simple way to build up some financial security and longer term investments. |
Ways to establish credit history for international student | I think you should try to talk with the credit union at your campus first, they may have offer you a credit card even you don't have any credit history. |
Roth IRA all in one fund, or not? [duplicate] | In your case, you could very well leave it in something like FFFFX, which for readers is a self balancing fund with a target retirement date of 2040. These funds are a conglomeration of other funds that tend to move more conservatively as time passes. However, I like to put no more than 10% of my portfolio in one fund with exceptions made for balances less than 20K. So If I had 18K it really wouldn't matter if it was in FUSEX a S&P 500 index fund. However by investing in FFFFX you pretty much meet that requirement. So you are golden if that fund meets your goals. For me, I kind of hate bonds and despite being of similar age, I have almost no money invested in bonds. |
How do I get bill collectors who call about people I know to stop calling me? | http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre27.pdf if you are in the US Look at section 805 and 805 about how they may contact you and what they are and aren't allowed to do. You can simply send a Certified Mail, Return Receipt (CMRR) letter explaining you have no part of it, and that they are not allowed to contact you by any means other than in writing from this point forward. Then you can either put return to sender on the letters (it costs them money) or open them and delete anything you don't need. |
What to bear in mind when considering a rental home as an investment? | Real estate is not an investment but pure speculation. Rental income may make it look like an investment but if you ask some experienced investor you would be told to stay away from real estate unless it is for your own use. If you believe otherwise then please read on : Another strong reason not to buy real estate right now is the low interest rates. You should be selling real estate when the interest rates are so low not buying it. You buy real estate when the interest rate cycle peaks like you would see in Russia in months to come with 17% central bank rate right now and if it goes up a little more that is when it is time to start looking for a property in Russia. This thread sums it up nicely. |
What is considered high or low when talking about volume? | Volume is really only valuable when compared to some other volume, either from a historical value, or from some other stock. The article you linked to doesn't provide specific numbers for you to evaluate whether volume is high or low. Many people simply look at the charts and use a gut feel for whether a day's volume is "high" or "low" in their estimation. Typically, if a day's volume is not significantly taller than the usual volume, you wouldn't call it high. The same goes for low volume. If you want a more quantitative approach, a simple approach would be to use the normal distribution statistics: Calculate the mean volume and the standard deviation. Anything outside of 1.5 to 2.0 standard deviations (either high or low) could be significant in your analysis. You'll need to pick your own numbers (1.5 or 2.0 are just numbers I pulled out of thin air.) It's hard to read anything specific into volume, since for every seller, there's a buyer, and each has their reasons for doing so. The article you link to has some good examples of using volume as a basis for strengthening conclusions drawn using other factors. |
Why is stock dilution legal? | If that company issues another 100 shares, shouldn't 10 of those new 100 shares be mine? Those 100 shares are an asset of the company, and you own 10% of them. When investors buy those new shares, you again own a share of the proceeds, just as you own a share of all the company's assets. A company only issues new share to raise money - it is a borrowing from investors, and in that way can be seen as an alternative to taking on loans. Both share issuing and a loan bring new capital and debt into a company. The difference is that shares don't need to be repaid. |
Electric car lease or buy? | I might be missing something, but I always understood that leasing is about managing cash-flow in a business. You have a fixed monthly out-going as opposed to an up-front payment. My accountant (here in Germany) recommended: pay cash, take a loan (often the manufactures offer good rates) or lease - in that order. The leasing company has to raise the cash from somewhere and they don't want to make a loss on the deal. They will probably know better than I how to manage that and will therefore be calculating in the projected resale value at the end of the leasing period. I can't see how an electric car would make any difference here. These people are probably better informed about the resale value of any type of car than I am. My feeling is to buy using a loan from the manufacturer. The rates are often good and I have also got good deals on insurance as a part of that package. Here in Germany the sales tax (VAT) can be immediately claimed back in full when the loan deal is signed. |
What U.S. banks offer two-factor authentication (such as password & token) for online banking? | E*Trade offers banking services, and will provide you with a security token free if you have sufficient assets there ($50,000). Otherwise they'll charge you a $25 fee. |
Making an offer on a property - go in at market price? | From then on we've felt he was really pushy and rushing us to make a decision (we need to lock in a good rate, its a sellers market, it'll go fast, snooze loose, etc). This is the first reason for walking away. I understand that all those factors might be true but my question is: How do I know we made a good offer? I'm going to be blunt, here: You don't. You work out ahead of time what you will pay (ignore the agent) and you make the offer on the basis of your own research, research you spent months undertaking. The listed price on the location is $375,000 and according to our agent similar units over the last few years had sold for that amount. So our agent suggested making an offer at market price. According to the agent. I'm going to be blunt here, what do any of the real estate sites out there - that offer a wealth of information for free - indicate? If you don't know, then yet again you don't know if you made the right offer or not. Do some research now by yourself. I would be shocked if your offer was at the right level. Set your emotions aside - there are a gazillion houses out there. |
How to deal with the credit card debt from family member that has passed away? | Debts do not inherit to the children. You are absolutely not liable for your parent's debt, in any way whatsoever. ** Collection agents will lie about this; tricking you is their job, and your job is to tell them Heck no, do I look like an idiot? When a person dies, all their personal assets (and debts) go to a fictitious entity called the Estate. This is a holder for the person's assets until they can be dispositioned finally. The estate is managed by a living person, sometimes a company (law firm), called an Executor. Similar to a corporation which is shutting down business, the Executor's job is to act on behalf of the Estate, and in the Estate's best interest (not his own). For instance he can't decide, in his capacity as executor, to give all the estate's money to himself. He has to loyally and selflessly follow state law and any living-trust or wills that may be in place. This role is not for everyone. You can't just decide "la la la, I'm going to live in their house now", that is squatting. The house is an asset and someone inherited that, as dictated by will, trust or state law. That has to be worked out legally. Once they inherit the house, you have to negotiate with them about living there. If you want to live there now, negotiate to rent the house from the estate. This is an efficient way to funnel money into the estate for what I discuss later.** The Estate has assets, and it has debts. Some debts extinguish on the death of the natural person, e.g. student loans, depending on the contract and state law. Did you know corporations are considered a "person"? (that's what Citizens United was all about.) So are estates - both are fictitious persons. The executor can act like a person in that sense. If you have unsecured debt, how can a creditor motivate you to pay? They can annoy and harass you. They can burn your credit rating. Or they can sue you and try to take your assets - but suing is also expensive for them. This is not widely understood, but anyone at any time can go to their creditors and say "Hey creditor, I'm not gonna pay you $10,000. Tough buffaloes. You can sue me, good luck with that. Or, I'll make you a deal. I'll offer you $2000 to settle this debt. What say you? And you'll get one of two answers. Either "OK" or "Nice try, let's try $7000." If the latter, you start into the cycle of haggling, "3000." "6000." "4000." "5000. "Split the difference, $4500." "OK." This is always a one-time, lump sum, one-shot payoff, never partial payments. Creditors will try to convince you to make partial payments. Don't do it. Anyone can do that at any time. Why don't living people do this every day? How about an Estate? Estates are fictitious persons, they don't have a "morality", they have a fiduciary duty. Do they plan on borrowing any more money? Nope. Their credit rating is already 0. They owe no loyalty to USBank. Actually, the executor's fiduciary duty is to get the most possible money for the assets, and settle the debts for the least. So I argue it's unethical to fail to haggle down this debt. If an executor is "not a haggler" or has a moral issue with shortchanging creditors, he is shortchanging the heirs, and he can be sued for that personally - because he has a fiduciary duty to the heirs, not Chase Bank. Like I say, the job is not for everyone. The estate should also make sure to check the paperwork for any other way to escape the debt: does it extinguish on death? Is the debt time-barred? Can they really prove it's valid? Etc. It's not personal, it's business. The estate should not make monthly payments (no credit rating to protect) and should not pay one dime to a creditor except for a one-shot final settlement. Is it secured debt? Let them take the asset. (unless an heir really wants it). When a person dies with a lot of unsecured debt, it's often the case that they don't have a lot of cash lying around. The estate must sell off assets to raise the cash to settle with the creditors. Now here's where things get ugly with the house. ** The estate should try to raise money any other way, but it may have to sell the house to pay the creditors. For the people who would otherwise inherit the house, it may be in their best interest to pay off that debt. Check with lawyers in your area, but it may also be possible for the estate to take a mortgage on the house, use the mortgage cash to pay off the estate's debts (still haggle!), and then bequeath the house-and-mortgage to the heirs. The mortgage lender would have to be on-board with all of this. Then, the heirs would owe the mortgage. Good chance it would be a small mortgage on a big equity, e.g. a $20,000 mortgage on a $100,000 house. Banks love those. |
How to choose a good 401(k) investment option? | Great question and good for you for starting investments. Are you young, like in your 20s? I would do all that you can in the ROTH. You will not get a tax break now, but you will get one later. Keep in mind that any company match does not go into ROTH but the IRA. I try to look at two things when judging a mutual fund: the historic performance, and the expense fee. When comparing two funds, if one has a 10% average return for 10 years, and a 1% fee, I feel it is better than a fund that has a 12% return for the same time period and a 3% fee. If they are close, you can always put a little bit in each one. An important question to ask is if you have debt. You may want to scale back your contributions some to pay down that debt. For me, I don't like to go below a company match to do so, but anything over and above might be better utilized to move that student, car or credit card loan to zero. Others might disagree, so YMMV, but I have done this myself. |
Why do financial institutions charge so much to convert currency? | Banks do of course incur costs on currency transactions. But they're not as high as the fee charged to the customer. Most banks in most places lose a lot of money on operating bank accounts for customers, and make the money back by charging more than their costs for services like currency exchange. If you don't choose to pay those fees, use an online service instead. But bear in mind that if everyone does so then banks will be forced to charge higher fees for current accounts. |
5/1 ARM: Lifetime cap, First Adjustment Cap, Margin, and Annual Cap? | Interest rates are at a record low and the government is printing money. You can get a fixed rate loan at a rate equal to inflation in a healthy economy. Unless you know that you are moving in < 5 years, why would you expose yourself to interest rate risk when rates are about as close to zero as they can be? If your thought with respect to mitigating interest rate risk is: "What's the big deal, I'll just refinance!", think again, because in a market where rates are climbing, you may not be able to affordably refinance at the LTV that you'll have in 5-7 years. From 1974-1991, 30 year mortgages never fell below 9%, and were over 12% from 1979 to 1985. Think about what those kinds of rates -- which reduce a new homeowner's buying power by over 40%, would do to your homes value. |
What are the important differences between mutual funds and Exchange Traded Funds (ETFs)? | The main difference between an ETF and a Mutual Fund is Management. An ETF will track a specific index with NO manager input. A Mutual Fund has a manager that is trying to choose securities for its fund based on the mandate of the fund. Liquidity ETFs trade like a stock, so you can buy at 10am and sell at 11 if you wish. Mutual Funds (most) are valued at the end of each business day, so no intraday trading. Also ETFs are similar to stocks in that you need a buyer/seller for the ETF that you want/have. Whereas a mutual fund's units are sold back to itself. I do not know of many if any liquity issues with an ETF, but you could be stuck holding it if you can not find a buyer (usually the market maker). Mutual Funds can be closed to trading, however it is rare. Tax treatment Both come down to the underlying holdings in the fund or ETF. However, more often in Mutual Funds you could be stuck paying someone else's taxes, not true with an ETF. For example, you buy an Equity Mutual Fund 5 years ago, you sell the fund yourself today for little to no gain. I buy the fund a month ago and the fund manager sells a bunch of the stocks they bought for it 10 years ago for a hefty gain. I have a tax liability, you do not even though it is possible that neither of us have any gains in our pocket. It can even go one step further and 6 months from now I could be down money on paper and still have a tax liability. Expenses A Mutual Fund has an MER or Management Expense Ratio, you pay it no matter what. If the fund has a positive return of 12.5% in any given year and it has an MER of 2.5%, then you are up 10%. However if the fund loses 7.5% with the same MER, you are down 10%. An ETF has a much smaller management fee (typically 0.10-0.95%) but you will have trading costs associated with any trades. Risks involved in these as well as any investment are many and likely too long to go into here. However in general, if you have a Canadian Stock ETF it will have similar risks to a Canadian Equity Mutual Fund. I hope this helps. |
How could the 14th amendment relate to the US gov't debt ceiling crisis? | Section Four of the amendment reads: The validity of the public debt of the United States, authorized by law, including debts incurred for payments of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned. In other words, if President Obama wants to, he could unilaterally invoke this provision and go ahead and get the money he needs. Good articles describing this in some detail can be found here and here. |
What are some factors I should consider when choosing between a CPA and tax software | I'm glad keshlam and Bobby mentioned there are free tools, both from the IRS and private software companies. Also search for Volunteer Income Tax Assistance (VITA) in your area for individual help with your return. A walk-in tax clinic strength is tax preparation. CPAs and EAs provide a higher level of service. For example, they compile and review your prior year's return and your current year, although that is not relevant to your current situation. EAs and CPAs are allowed to represent you before the IRS. They can directly meet or contact the IRS and navigate audits and other requests on your behalf. Outside of tax season, an accountant can help you with tax planning and other taxable events. Some people do not hire a CPA or EA until they need representation. Establishing a relationship and familiarity with an accountant now can save time and money if you do anticipate you will need representation later. Part of what makes the tax code complicated is it can use very specific definitions of a common word. Furthermore, the specific definition of a phrase or word can change between publications. Also, the tax code uses all-encompassing definitions and provide detailed and lengthy lists that are not exhaustive; you may not find your situation listed or described in the tax code, yet you are responsible for reporting your taxable events. The best software cannot navigate you through your tax situation like an accountant. Lastly, some of the smartest people I have met are accountants and to get the most out of meeting with them you should be as familiar as possible with your position. The more familiar you are with accounting, the more advanced knowledge they can share with you. In short, you will probably need an accountant when: You need to explain yourself before the IRS (representation), you are encountering varying definitions in the tax code that have an impact on your return, or you have important economic activities that you are unsure of appropriate tax treatment. |
MasterCard won't disclose who leaked my credit card details | I found a german article describing the legal situation in Germany. To summarize As outlined by the many possible reasons in the other answer, it is unclear from the information I have, whether condition 1 holds. Also condition 2 may not hold since the credit card was frozen. I suppose this makes a good argument to MasterCard and my bank, but I also suspect they will not care unless it comes with a attorney letterhead. |
Indie Software Developers - How do I handle taxes? | This is not an end-all answer but it'll get you started I have been through accounting courses in college as well as worked as a contractor (files as sole proprietor) for a few years but IANAA (I am not an accountant). Following @MasonWheeler's answer, if you're making that much money you should hire a bean counter to at least overlook your bookkeeping. What type of business? First, if you're the sole owner of the business you will most likely file as a sole proprietorship. If you don't have an official business entity, you should get it registered officially asap, and file under that name. The problem with sole proprietorships is liability. If you get sued, not only are your business' assets vulnerable but they can go after your personal assets too (including house/cars/etc). Legally, you and your business are considered one and the same. To avoid liability issues, you could setup a S corporation. Basically, the business is considered it's own entity and legal matters can only take as much as the business owns. You gain more protection but if you don't explicitly keep your business finances separate from your personal finances, you can get into a lot of trouble. Also, corporations generally pay out more in taxes. Technically, since the business is it's own entity you'll need to pay yourself a 'reasonable salary'. If you skip the salary and pay yourself the profits directly (ie evade being taxed on income/salary) the IRS will shut you down (that's one of the leading causes of corporations being shut down). You can also pay distribute bonuses on top of that but it would be wise to burn the words 'within reason' into your memory first. The tax man gets mad if you short him on payroll taxes. S corporations are complicated, if you go that route definitely seek help from an accountant. Bookkeeping If you're not willing to pay a full time accountant you'll need to do a lot of studying about how this works. Generally, even if you have a sole proprietorship it's best to have a separate bank account for all of your business transactions. Every source/drain of money will fall into one of 3 categories... Assets - What your business owns: Assets can be categorized by liquidity. Meaning how fast you can transform them directly into cash. Just because a company is worth a lot doesn't necessarily mean it has a lot of cash. Some assets depreciate (lose value over time) whereas some are very hard to transform back into cash based on the value and/or market fluctuations (like property). Liabilities - What you owe others and what others owe you: Everything you owe and everything that is owed to you gets tracked. Just like credit cards, it's completely possible to owe more than you own as long as you can pay the interest to maintain the loans. Equity - the net worth of the company: The approach they commonly teach in schools is called double-entry bookkeeping where they use the equation: In practice I prefer the following because it makes more sense: Basically, if you account for everything correctly both sides of the equation should match up. If you choose to go the sole proprietorship route, it's smart to track everything I've mentioned above but you can choose to keep things simple by just looking at your Equity. Equity, the heart of your business... Basically, every transaction you make having to do with your business can be simplified down to debits (money/value) increasing and credits (money/value) decreasing. For a very simple company you can assess this by looking at net profits. Which can be calculated with: Revenues, are made up of money earned by services performed and goods sold. Expenses are made up of operating costs, materials, payroll, consumables, interest on liabilities, etc. Basically, if you brought in 250K but it cost you 100K to make that happen, you've made 150K for the year in profit. So, for your taxes you can count up all the money you've made (Revenues), subtract all of the money you've paid out (Expenses) and you'll know how much profit you've made. The profit is what you pay taxes on. The kicker is, there are gray areas when it comes to deducting expenses. For instance, you can deduct the expense of using your car for business but you need to keep a log and can only expense the miles you traveled explicitly for business. Same goes for deducting dedicated workspaces in your house. Basically, do the research if you're not 100% sure about a deduction. If you don't keep detailed books and try to expense stuff without proof, you can get in trouble if the IRS comes knocking. There are always mythical stories about 'that one guy' who wrote off his boat on his taxes but in reality, you can go to jail for tax fraud if you do that. It comes down to this. At the end of the year, if your business took in a ton of money you'll owe a lot in taxes. The better you can justify your expenses, the more you can reduce that debt. One last thing. You'll also have to pay your personal federal/state taxes (including self-employment tax). That means medicare/social security, etc. If this is your first foray into self-employment you're probably not familiar with the fact that 1099 employers pick up 1/2 of the 15% medicare/social security bill. Typically, if you have an idea of what you make annually, you should be paying this out throughout the year. My pay as a contractor was always erratic so I usually paid it out once/twice a year. It's better to pay too much than too little because the gov't will give you back the money you overpaid. At the end of the day, paying taxed sucks more if you're self-employed but it balances out because you can make a lot more money. If as you said, you've broken six figures, hire a damn accountant/adviser to help you out and start reading. When people say, "a business degree will help you advance in any field," it's subjects like accounting are core requirements to become a business undergrad. If you don't have time for more school and don't want to pay somebody else to take care of it, there's plenty of written material to learn it on your own. It's not rocket surgery, just basic arithmetic and a lot of business jargon (ie almost as much as technology). |
Should I include retirement funds in calculating my asset allocation? | You probably want to think about pools of money separately if they have separate time horizons or are otherwise not interchangeable. A classic example is your emergency fund (which has a potentially-immediate time horizon) vs. your retirement savings. The emergency fund would be all in cash or very short-term bonds, and would not count in your retirement asset allocation. Since the emergency fund usually has a capped value (a certain amount of money you want to have for emergencies) rather than a percentage of net worth value, this especially makes sense; you have to treat the emergency fund separately or you'd have to keep changing your asset allocation percentages as your net worth rises (hopefully) with respect to the capped emergency amount. Similarly, say you are saving for a car in 3 years; you'd probably invest that money very conservatively. Also, it could not go in tax-deferred retirement accounts, and when you buy the car the account will go to zero. So probably worth treating this separately. On the other hand, say you have some savings in tax-deferred retirement accounts and some in taxable accounts, but in both cases you're expecting to use the money for retirement. In that case, you have the same time horizon and goals, and it can pay to think about the taxable and nontaxable accounts as a whole. In particular you can use "asset location" (put less-tax-efficient assets in tax-deferred accounts). In this case maybe you would end up with mostly bonds in the tax-deferred accounts and mostly equities in the taxable accounts, for tax reasons; the asset allocation would only make sense considering all the accounts, since the taxable account would be too equity-heavy and the tax-deferred one too bond-heavy. There can be practical reasons to treat each account separately, too, though. For example if your broker has a convenient automatic rebalancing tool on their website, it probably only works within an account. Treating each account by itself would let you use the automatic rebalancing feature on the website, while a more complicated asset location strategy where you rebalance across multiple accounts might be too hard and in practice you wouldn't get around to it. Getting around to rebalancing could be more important than tax-motivated asset location. You could also take a keep-it-simple attitude: as long as your asset allocation is pretty balanced (say 40% bonds) and includes a cash allocation that would cover emergencies, you could just put all your money in one big portfolio, and think of it as a whole. If you have an emergency, withdraw from the cash allocation and then rebuild it over time; if you have a major purchase, you could redeem some bonds and then rebuild the bond portion over time. (When I say "over time" I'm thinking you might start putting new contributions into the now-underallocated assets, or you might dollar-cost-average back into them by selling bits of the now-overallocated assets.) Anyway there's no absolute rule, it depends on what's simple enough to be manageable for you in practice, and what separate shorter-horizon investing goals you have in addition to retirement. You can always make things complex but remember that a simple plan that happens in real life is better than a complex plan you don't keep up with in practice (or a complex plan that takes away from activities you'd enjoy more). |
How much more than my mortgage should I charge for rent? | While JoeTaxpayer gave a very insightful answer, and clearly the best answer, let me break it down really simple for you. Talk with a good to great property management company. Given that you will be out of state, you will need one anyway. A good one is worth their cost, a great one even better. They will tell you what the "market will bear" on renting your place and the expected costs. From there you can make an intelligent decision. Have you had any experience in running rental properties? I am going to assume not, and as such you should have professionals as part of your team. More than likely you will have to put money in to sustain this property as a rental. It is just how the numbers tend to work out. |
Can mortgage insurance replace PMI? | PMI IS Mortgage insurance. It stands for "Private Mortgage Insurance". This guy is just trying to get you to buy it from him instead of whoever you have it with now. Your lender would always be on the policy since it is an insurance policy they hold (and you pay for) that protects them from you defaulting on the loan. Don't think of it as insurance for you in case you can't pay. If that should happen, your credit would still be trashed, the bank just wouldn't be out the money. You don't really get any benefit at all from it. It is just the way a bank can mitigate the risk of giving out large loans. This is why people are keen to drop it as soon as possible. The whole thing about keeping the house in your estate after you die makes me think he is trying to sell you a different type of insurance called Mortgage Life Insurance. PMI isn't typically about that type of situation. Your estate will go into probate to work out your debts if you die and my understanding is that PMI doesn't usually pay out in that situation. If this is what he is selling, buying such a policy would be on top of your PMI insurance payment, not instead of it. Be forewarned, personal finance experts usually consider mortgage life insurance to be a ripoff. If you want to protect against the risk of your heirs losing the house because they can't make the payments, you are better off with Term Life Insurance. However, don't worry that they will inherit your debt on the house unless they are on the loan. If they don't want the house, they won't be obliged to make payments on it (unless they want to keep it). It won't affect their credit if they just walk away and let the bank have the house after you die unless they are on the note. Here is an article (in two parts) with a pretty good treatment of the issue of choosing your own PMI policy: "Give Buyers Freedom to Choose Mortgage Insurance" Part 1 Part 2 |
How often do typical investors really lose money? | How often do investors really lose money? All the time. And it's almost always reason number 1. Let's start with the beginner investor, the person most likely to make some real losses and feel they've "learned" that investing is no better than Vegas. This person typically gets into it because they've been given a hot stock tip, or because they've received a windfall, decided to give this investing lark a try, and bought stock in half a dozen companies whose names they know from their everyday lives ("I own a bit of Google! How cool is that?"). These are people who don't understand the cyclic nature of the market (bear gives way to bull gives way to bear, and on and on), and so when they suddenly see that what was $1000 is now $900 they panic and sell everything. Especially as all the pundits are declaring the end of the world (they always do). Until the moment they sold, they only had paper losses. But they crystallised those losses, made them real, and ended at a loss. Then there's the trend-follower. These are people who don't necessarily hit a bear market, or even a downturn, in their early days, but never really try to learn how the market works in any real sense. They jump into every hot stock, then panic and sell out of anything that starts to go the wrong way. Both of these reactive behaviours seem reasonable in the moment ("It's gone up 15% in the past week? Buy buy buy!" and "I've lost 10% this month on that thing? Get rid of it before I lose any more!"), but they work out over time to lots of buying high and selling low, the very opposite of what you want to do. Then there's the day-trader. These are people who sit in their home office, buying and selling all day to try and make lots of little gains that add up to a lot. The reason these people don't do well in the long run is slightly different to the other examples. First, fees. Yes, most platforms offer a discount for "frequent traders", but it still ain't free. Second, they're peewees playing in the big leagues. Of course there are exceptions who make out like bandits, but day traders are playing a different game than the people I'd call investors. That game, unlike buy-and-hold investing, is much more like gambling, and day-traders are the enthusiastic amateurs sitting down at a table with professional poker players – institutional investors and the computers and research departments that work for them. Even buy-and-hold investors, even the more sophisticated ones, can easily realise losses on a given stock. You say you should just hold on to a stock until it goes back up, but if it goes low enough, it could take a decade or more to even just break even again. More savvy stock-pickers will have a system worked out, something like "ok, if it gets down to 90% of what I bought it for, I cut my losses and sell." This is actually a sensible precaution, because defining hard rules like that helps you eliminate emotion from your investing, which is incredibly important if you want to avoid becoming the trend-follower above. It's still a loss, but it's a calculated one, and hopefully over time the exception rather than the rule. There are probably as many other ways to lose money as there are people investing, but I think I've given you a taste. The key to avoiding such things is understanding the psychology of investing, and defining the rules that you'll follow no matter what (as in that last example). Or just go learn about index investing. That's what I did. |
In US, is it a good idea to hire a tax consultant for doing taxes? | I've been highly compensated for a while now, and I have never used a tax professional. My past complications include the year that my company was bought by a VC firm and my stock options and stock held were bought out to the tune of 5x my salary. And now I have two kids in college, with scholarships, and paying the remainder out of 529 accounts. Usually, I don't even use tax software. My typical method is to use the online software -- like turbotax online -- and let it figure out where I am. Then I use the "Free File Fillable forms" online to actually complete the process. Search for "Free File Fillable Forms" -- it's not the same as using turbotax or TaxAct for free. My suggestion to you: download the PDF form of 1040EZ and 1040A from the IRS. Print the EZ, and fill it out. This will give you a better feel for what exactly is going on. With your income, I don't think you can file the EZ, but it's a good way to get your feet wet. The way income taxes work here in the US: According to the IRS, the Personal Exemption this year is worth $4,050, and the Standard Deduction $6,300, assuming you're single. Lets assume that your salary will be in fact 75,000, and you don't pay for any benefits, but you do make a 401k contribution of 15% of your salary. Then your W-2 at the end of the year should tell you to put 63,750 in a particular box on your 1040 form. (63,750 is 85% of 75,000). Lets then assume 63,750 is your AGI after other additions and subtractions. 63,750 - 4,050 - 6,300 == 53,400. The federal Tax system is graduated, meaning there are different ranges (brackets) with different percentages. The term tax people use for taxable income of 53,400 is "marginal tax rate"...so the last dollar they tax at 25%. Other dollars less. According to the IRS, if you're single, then on 53,400, you pay "$6,897.50 plus 25% of the amount over $50,400" Or 6897.50 + 750, or 7647.50. Note this is only Federal Income Tax. You will also be paying Social Security and Medicare payroll Tax. And I'm guessing you'll also be paying colorado state income tax. Each state has its own forms and methods for figuring out the taxes and stuff. By the way, when you start, you'll fill out a "W-4" form to "help" you figure out how much to withhold from every paycheck. (I find the W-4 is not helpful at all). Your company will withhold from your paycheck some mysterious amount, and the process of filling out your 1040A or 1040EZ or whatever will be, likely, to get the over-withheld amount back. |
Capital Gains Tax - Does this apply only to the actual “gains” or to the entire amount of my sale? | Assuming you bought the stocks with after-tax money, you only pay tax on the difference. Had you bought he shares in a pretax retirement account, such as an IRA or 401(k), the taxation waits until you withdraw, at which point, it's all taxed as ordinary income. |
If the co-signer on my car loan dies, can the family take the car from me like they're threatening to? | My grandmother passed away earlier this year. When I got my car 3 years ago, I did not have good enough credit to do it on my own or have her as a co-signer. We had arranged so that my grandmother was buying the car and I was co-signing. A similar situation was happening and I went to my bank and took out a re-finance loan prior to her passing. I explained to them that my grandmother was sick and on her death bed. They never once requested a power of attorney or required her signature. I am now the sole owner of the vehicle. |
Cost Basis in Retirement Accounts Irrelevant? | Cost basis is irrelevant because the entire distribution is taxed as ordinary income even if the custodian distributes stock or mutual fund shares to you. Such distributions save you the brokerage fees that you would incur had you taken a cash distribution and promptly bought the shares outside the retirement account for yourself but they have no effect on the tax treatment of the distribution: the market value of the shares distributed to you is taxed as ordinary income, and your basis in the newly acquired shares outside the retirement account is the market value of the shares, all prices being as of the date of the distribution. |
The Intelligent Investor: Northern Pacific Railway example | The company was paying "only" $1 a share in dividends, compared to $10 a share in earnings. That is a so-called payout ratio of 10%, which is low. A more normal payout ratio would be 40%, something like $4 a share. If a $13 stock had a $4 dividend, the dividend yield would be about 30%, which would be "too high," meaning that the price would go up to drive down the resulting yield. Even $1 a share on a $13 stock is a high dividend of about 7%, allowing for appreciation to say, the $20-$25 range. Graham was a great believer in the theory that management should pay out "most" of its earnings in dividends. He believed that by holding dividends so far below earnings, the company was either being "stingy," or signalling that the $10 a share of earnings was unsustainable. Either of these would be bad for the stock. For instance, if $1 a share in dividends actually represented a 40% payout ratio, it would signal management's belief that they could normally earn only $2.50 a year instead of $10. |
How To Record Income As An Affiliate ( UK ) | Every bill you write counts as income (if the bill doesn't get paid, you would count that as an expense). In cases where you don't write bills, I think the payment you receive would count as income, but you might check that on the HMRC website. So to record your income, you can basically record the payments that you receive. Anything you pay out for your business is an expense. You keep a receipt for every expense - if you don't have a receipt, you can't count it as an expense, so keeping all the receipts is very, very important. An exception are investments, for example buying a computer that should last multiple years; there you can count a percentage of the investment as expense every year. All income, minus all expenses, is your profit. You pay tax and National Insurance contributions according to your profit. You can do whatever you like with the profit. Notice that I didn't mention any salary. Self employed means you have no salary, you have profits and do with them whatever you like. On the other hand, you pay taxes on these profits almost exactly as if they were income. If you have this blog but are also employed, you'll add the profits to your normal income statement. |
What expenses do most people not prepare for that turn into “emergencies” but are not covered by an Emergency Fund? | The most obvious one these days is unexpected and extended unemployment. If you are living paycheck to paycheck, you are asking for trouble in this economy. |
Can saving/investing 15% of your income starting age 25, likely make you a millionaire? | I'll offer another answer, using different figures. Let's assume 6% is the rate of return you can expect. You are age 25, and plan to retire at age 65. If you have $0 and want $1M at retirement, you will need to put away $524.20/month, or $6,290.40/year, which is 15% of $41,936. So $41,936 is what you'd need to make per year in order to get to your target. You can calculate your own figures with a financial calculator: 480 months as your term (or, adjust this to your time horizon in months), .486755% as your interest (or, take your assumed interest rate + 1 to the 1/12th power and subtract 1 to convert to a monthly interest rate), 0 as your PV, and $1M as your FV; then solve for PMT. |
How does remittance work? How does it differ from direct money transfer? | If you are a citizen of India and working in Germany, then you are most likely an NRI (NonResident Indian). If so, you are not entitled to hold an ordinary Indian bank account, and all such existing accounts must be converted to NRO (NonResident Ordinary) accounts. If your Indian bank knows about NRO accounts, then it will be eager to assist you in the process of converting your existing accounts to NRO accounts most likely it also offers a money remittance scheme (names like Remit2India or Money2India) which will take Euros from your EU bank account and deposit INR into your NRO account. Or, you can create an NRE (NonResident External) account to receive remittances from outside India. The difference is that interest earned in an NRO account is taxable income to you in India (and subject to TDS, tax deduction at source) while interest earned in an NRE account is not taxable in India. The remittance process takes a while to set up, but once in place, most remittances take 5 to 6 business days to complete. |
Can I write off time I spent working on my business? | No, you cannot write off time, period. You should price the time spent into your product. I, occasionally, work on side projects of my own and forgo the possibility of earning direct income for that time. Income not earned is income not taxed, so there's nothing to deduct. |
No transaction fee ETF trades - what's the catch? | what is the mechanism by which they make money on the funds that I have in my account? Risk drives TD Ameritrade to look for profits, Turukawa's storytelling about 100,000$ and 500$ is trivial. The risk consists of credit risk, asset-liability risk and profit risk. The third, based on Pareto Principle, explains the loss-harvesting. The pareto distribution is used in all kind of decentralized systems such as Web, business and -- if I am not totally wrong -- the profit risk is a thing that some authorities require firms to investigate, hopefully someone could explain you more about it. You can visualize the distribution with rpareto(n, shape, scale) in R Statistics -program (free). Wikipedia's a bit populist description: In the financial services industry, this concept is known as profit risk, where 20% or fewer of a company's customers are generating positive income while 80% or more are costing the company money. Read more about it here and about the risk here. |
How can I stop a merchant from charging a credit card processing fee? | Mastercard rules also prohibit asking for ID along with the card. Yet, when I was at Disneyland, years ago (so I don't know if this is still a practice) they asked for my driver's license with every purchase. I can charge up to $200 at Costco with a swipe, not even a signature, but a $5 bottle of water (maybe it was $6) required me to produce my license. The answer is Pete's comment, don't patronize these merchants. By the way, it's legal now. From Visa web site - Note - 9* states still prohibit surcharges, so they tend to offer cash discounts. The question you linked is from 2010, things change. |
Is Bogleheadism (index fund investing) dead? | The reports of my death have been greatly exaggerated. - Twain I use index funds in my retirement planning, but don't stick to just S&P 500 index funds. Suppose I balance my money 50/50 between Small Cap and Large Cap and say I have $10,000. I'd buy $5,000 of an S&P Index fund and $5,000 of a Russell 2000 index fund. Now, fast forward a year. Suppose the S&P Index fund has $4900 and the Russell Index fund has $5200. Sell $150 of Russell Index Fund and buy $150 of S&P 500 Index funds to balance. Repeat that activity every 12-18 months. This lets you be hands off (index fund-style) on your investment choices but still take advantage of great markets. This way, I can still rebalance to sell high and buy low, but I'm not stressing about an individual stock or mutual fund choice. You can repeat this model with more categories, I chose two for the simplicity of explaining. |
Purpose of having good credit when you are well-off? | A $250K earner might have $4M in retirement savings and $500K in available funds, but doesn't wish to spend all his liquidity on the house. In general, a house might cost 2-3 times one's annual income. It would take many years to get that saved up. They might want to have the house sooner. It all goes back to choice, priorities, personal preference. |
Do Americans really use checks that often? | I know this an old thread, but one that caught my interest as I just moved to the USA from Australia. As per the OP I had never written a check in my whole life, and upon arriving in the US I was surprised as to their proliference. In Australia pretty much all bills you receive can be paid in a number of ways: For small amounts between friends cash is probably used most, but for larger amounts direct transfer is popular. Your friend/landlord will give you their bank account number and BSB number, which identifies their bank, and then you transfer the money in. We don't have a SSN like some other countries. Cheques are still used by some however, esp by the older generations. Now that I'm in the US initially I had tried to set up direct transfer to pay my rent however the bank has a $1000 daily transfer limit. I contacted the bank to get this increased however I was informed that this limit applies to ALL accounts at the bank. I asked how do people pay their rents with this low limit and was told that most people used cheques. (This explains the strange look I got from my landlord when I asked for their bank account details so I could pay the rent!) I now have some bills to pay here and I use online banking. You enter the biller's name and address and then the bank actually prints off a cheque and posts it to the biller on your behalf! My first couple of pays here were also cheques, which were the first actual "paychecks" I had ever received. |
Is interest on a personal loan tax deductible? | Assuming USA: It is possible to make the interest deductible if you go to the trouble of structuring, and filing, the loan as an actual mortgage on a primary residence. Websearching "intra-family loan" will find several firms which specialize in this. It costs about $700 for all the paperwork and filing fees as of last time I checked, so unless you're going to pay at least three times that in interest over the life of the loan it probably isn't worth considering. (For an additional fee they'll take care of the payment processing, if you'd really rather be hands-off about it.) I have no idea whether the paperwork fees and processing fees can be deducted from the interest as a cost of producing that income. In theory that ought to be true, but I Am Not A Lawyer. Or accountant. Note: one of the interesting factors here is that the IRS sets a minimum interest rate on intra-family loans. It's pretty low (around 0.3%), so in most cases you can say you gifted the difference if you'd prefer to charge less... but that does set a floor on what the IRS will expect the lender to declare, and pay taxes on. There's a lot more that can be said about this, but since I am NOT an expert I'll refer you to those who are. I have no affiliation with any of this except as a customer, once; it seemed pretty painless but I can't claim to know whether they were really handling everything exactly correctly. The website seemed to do a pretty good job of explaining what choices had to be made and their effects, as well as discussing how these can be used to avoid excess gift taxes by spreading the gift over a number of years. |
Which is better when working as a contractor, 1099 or incorporating? | There is some benefit to creating a corporation or LLC -- you theoretically have a liability shield. As Michael Pryor points out in his answer, though, there will probably be little difference if you get sued. Operating the corporation or LLC incurs some extra costs: you have to pay annual fees to the state, and there's a bit of extra administrative overhead (very little overhead for an LLC though). |
Can I actually get a share of stock issued with a piece of paper anymore? | Yes you can get them from your broker. Two main advantages I can see are: |
What are some good ways to control costs for groceries? | For a while I tried shopping multiple grocery stores, checking fliers each week from three different stores and then making the trip to all three stores to save ten cents on each item. After a couple months, I decided it just wasn't worth it. So, I picked my favorite store. I shop once a week, after reviewing the flier and making a list. I clip coupons and try to only buy what's on my list. (I confess that coupons sometimes get me to buy a brand or item I wouldn't have otherwise... it's my weakness!) The biggest place that we save money though, is by paying attention to meat prices. I know that chicken and pork go on sale for $1.99/lb every 4 to 6 weeks at my grocery store. When it does, I buy a enough to last until the next sale, and freeze it in single-meal portions. Steak and fish are special treats, but on the rare occasion that they're less than $4/lb, I'll buy those. We also try to limit our meat consumption to every-other-day. It's not worth it for me to obsess over the price of ketchup that I buy twice a year, but on expensive items like meat, and items we use daily, I become familiar with their regular prices and sale prices, and buy extra when it's on sale. If, like me, you don't have room in your brain to keep track of the prices of everything, stick with the things you spend the most on, either because they're expensive, or you buy a lot. |
Is it possible to buy stock as a gift for a minor without involving the guardians? | This is an old question, but a new product has popped up that provides an alternative answer. There is a website called stockpile.com that allows you to purchase "stock gift certificates" for others. These come in both electronic and traditional physical form. This meets my question's original criteria of a gift giver paying for stock without having any of the recipient's personal information and thus maintaining the gift's surprise. I should note a few things about this service: Despite these limitations I wanted to post it here so others were aware of it as an option. If no other alternative will work and this is what it takes to get a parent interested in teaching their child to invest, then it's well worth the costs. |
Are personal finance / money management classes taught in high school, anywhere? | In Houston, Texas USA where I went to a private high school they had a half-semester class in personal finance, but it was optional and didn't give you any credits towards graduation. You are right though, it should be a standard class. After all, who doesn't need that information in their adult lives, and not everyone goes to college. |
Why doesn't change in accounts receivable on balance sheet match cash flow statement? | QUICK ANSWER What @Mike Haskel wrote is generally correct that the indirect method for cash flow statement reporting, which most US companies use, can sometimes produce different results that don't clearly reconcile with balance sheet shifts. With regards to accounts receivables, this is especially so when there is a major increase or decrease in the company's allowances for doubtful accounts. In this case, there is more to the company's balance sheet and cash flow statements differences per its accounts receivables than its allowances for doubtful accounts seems responsible for. As explained below, the difference, $1.25bn, is likely owing more to currency shifts and how they are accounted for than to other factors. = = = = = = = = = = DIRTY DETAILS Microsoft Corp. generally sells to high-quality / high-credit buyers; mostly PC, server and other devices manufacturers and licensees. It hence made doubtful accounts provisions of $16mn for its $86,833mn (0.018%) of 2014 sales and wrote off $51mn of its carrying balance during the year. Its accounting for "Other comprehensive income" captures the primary differences of many accounts; specifically in this case, the "foreign currency translation" figure that comprises many balance sheet accounts and net out against shareholders' equity (i.e. those assets and liabilities bypass the income statement). The footnotes include this explanation: Assets and liabilities recorded in foreign currencies are translated at the exchange rate on the balance sheet date. Revenue and expenses are translated at average rates of exchange prevailing during the year. Translation adjustments resulting from this process are recorded to other comprehensive income (“OCI”) What all this means is that those two balance sheet figures are computed by translating all the accounts with foreign currency balances (in this case, accounts receivables) into the reporting currency, US dollars (USD), at the date of the balance sheets, June 30 of the years 2013 and 2014. The change in accounts receivables cash flow figure is computed by first determining the average exchange rates for all the currencies it uses to conduct business and applying them respectively to the changes in each non-USD accounts receivables during the periods. For this reason, almost all multinational companies that report using indirect cash flow statements will have discrepancies between the changes in their reported working capital changes during a period and the dates of their balance sheet and it's usually because of currency shifts during the period. |
Buying back a covered Call | Your three options are: Options 2 and 3 are obviously identical (other than transaction costs), so if you want to keep the stock, go for option 1, otherwise, go for option 3 since you have the same effect as option 2 with no transaction costs. The loss will likely also offset some of the other short term gains you mentioned. |
Stock Trade Transaction Fee - at what point is it worth it | I'm going to assume that you want to be invested all the time and each trade consists in selling a security and buying another one (similar to your example). How much commissions you are willing to pay depends on several factors, but one way to think about it is as follows. You have a position in stock A and you want to switch to stock B because you think it will perform better. If you think there's a good chance (>50%) that B will outperform A by more than x% then you can happily pay up to x/2% commissions and still make money over a long time horizon. If you like formulae, one way to express it is: Where: Example: if you tend to be right 51% of the time (hit rate), and gain 110% more than you lose on average (win loss ratio), you can see that your expected profit is: 5.1% - commissions, so you could pay 2.5% commissions on entering and closing the position and still make money*. Unfortunately, common sense, statistics and numerous studies tell us a sad truth: on average, people have a hit rate of 50% and a win/loss ratio of 100%. Which means that their expected profit per trade is 0% - commission. Based on that crude observation - unless you can prove to yourself that you are better than average - you should aim at reducing commissions paid to your broker as much as possible through: * 51% and 110% are not random numbers, they correspond to the results of the top 15% (professional) managers in a research paper using a sample of 215 funds managing $150bn. |
Why invest in becoming a landlord? | There are at least three important aspectss missing from your equation. However they come with some uncertainty as one typically cannot tell the future performance. Appreciation of the rental units value. When comparing to the gain of any alternative investment an increasing value of the flat is a gain too. Increase of rent. Rents are typically adjusted either on a regular basis or at least when changing tennants. Calulation with a flat rent over 20 years is therefore way off. Tax deductions due to capital expenditures (i.e. mortgages), expenses for the upkeep and maintenance of the property, conserving and management, and so on. Obviously those are depending on your local legislation. There are multiple other issues to consider of course, e.g. inadvertant vacancy, which would not act in your favour. |
I spend too much money. How can I get on the path to a frugal lifestyle? | Since you ask.... How do I do it? My frugality doesn't come from budgeting or even half so much from keeping money away from myself (though mostly-one-way retirement accounts help). It's a matter of world-view. Spending and shopping for things you don't need is a vice. Limit your indulgence in it. I've also made wasteful purchases in my life. When I find myself considering buying something that I don't really need, I ask myself whether it will end up like... like the stupid eyeglass cleaner gadget from the Sharper Image that I used twice. Or the Bluetooth earpiece that spent 98% of its time lost and .02% of its time in my ear. Or the little Sony VAIO laptop which was great on the train, but probably cost 8 times as much as an EeePC and didn't do way too much more. (In my defense on that one, it was just before netbooks were really taking off... but I still felt bad about it the next year). I've also got two savings goals. The first is responsible and very big (financial stability: a year's expenses plus money for a down payment on a house. a California house. in a good neighborhood.) The second is personal and just medium-big (a large musical instrument). I've decided not to spend money on the second until I'm financially stable and I have enough money to take care of the first... so that makes me more willing to scrimp and save to pursue the first than I would be otherwise. Advice for others? Ask yourself: Why are you buying that thing? You can survive without it, can't you? You didn't need it a week ago, did you? Does the old one have holes in it or something? Or will you at least use it regularly, for years? Why aren't you buying the cheaper kind? Or buying it used? |
Money transfer from India to USA | We have a house here in India worth Rs. 2 Crores. We want to sell it and take money with us. Selling the house in India will attract Capital Gains Tax. Essentially the price at which you sell the property less of the property was purchased [or deemed value when inherited by you]. The difference is Capital Gains. You have to pay tax on this gains. This is currently at 10% without Indexation and 20% with Indexation. Please note if you hold these funds for more than an year, you would additionally be liable for Wealth tax at 1% above Rs 50 lacs. Can I gift this whole amount to my US Citizen Daughter or what is the maximum limit of Gift amount What will be the tax liability on me and on my Daughter in case of Gift Whether I have to show it in my Income Tax Return or in my Daughter's Tax Return. What US Income Tax Laws says. What will be the procedure to send money as Gift to my Daughter. Assuming you are still Indian citizen when to gift the funds; From Indian tax point of you there is no tax to you. As you daughter is US citizen, there is no gift tax to her. There is no limit in India or US. So you can effectively gift the entire amount without any taxes. If you transfer this after you become a US Resident [for tax purposes], then there is a limit of USD 14,000/- per year per recipient. Effective you can gift your daughter and son-in-law 14,000/- ea and your husband can do the same. Net 14,000 * 4 USD per year. Beyond this you either pay tax or declare this and deduct it from life time estate quota. Again there is no tax for your daughter. What are the routes to take money from India to US Will the money will go directly from my Bank Act.to my Daughter's Bank Account. Will there will be wire transfer from bank to bank Can I send money through other money sender Certified Companies also. The best way is via Bank to Bank transfer. A CA Certificate is required to certify that taxes have been paid on this funds being transferred. Under the liberalized remittance scheme in India, there is a limit of USD 1 Million per year for moving funds outside of India. So you can move around Rs 6-7 Crore a year. |
Some questions about investing [duplicate] | What is the best form of investment? It only depends on your goals... The perfect amount of money depends also on your particular situation. The first thing you should start getting familiar with is the notion of portfolio and diversification. Managing risk is also fundamental especially with the current market funkiness... Start looking at index based ETFs -Exchange Traded Funds- and Balanced Mutual Funds to begin with. Many discounted online brokerage companies in the USA offer good training and knowledge centers. Some of them will also let you practice with a demo account that let you invest virtual money to make you feel comfortable with the interface and also with investing in general. |
Does Warren Buffett really have a lower tax rate than his secretary? | The scenario you mention regarding capital gains is pretty much the core of the issue. Here's a run-down from PolitiFact.com that explains it a bit. It's important to focus on it being the tax rate, not the tax amount (which I think you get, but I want to reinforce that for other readers). Basically, most of Buffett's income comes from capital gains and dividends, income from investments he makes with the money he already has. Income earned by buying and selling stocks or from stock dividends is generally taxed at 15 percent, the rate for long-term capital gains and qualified dividends. Buffett also mentioned that some of the "mega-rich" are hedge fund managers "who earn billions from our daily labors but are allowed to classify our income as 'carried interest,' thereby getting a bargain 15 percent tax rate." We don't know the taxes paid by Buffett's secretary, who was mentioned by Obama but not by Buffett. Buffet's secretary would have to make a high salary, or else typical deductions (such as the child tax credit) would offset taxes owed. Let's say the secretary is a particularly well-compensated executive assistant, making adjusted income more than $83,600 in income. (Yes, that sounds like a lot to us, too, but remember: We're talking about the secretary to one of the richest people in the world.) In that case, marginal tax rates of 28 percent would apply. Then, there would be payroll taxes of 6.25 percent on the first $106,800, money that goes to Social Security, and another 1.45 percent on all income, which goes to Medicare. The secretary’s overall tax rate would be lower than 28 percent, since not all the income would be taxed at that rate, only the income above $83,600. Buffett, meanwhile, would pay very little, if anything, in payroll taxes. In the New York Times op-ed, Buffett said he paid 17.4 percent in taxes. Thinking of the secretary, it gets a little complicated, given how the tax brackets work, but basically, people who make between $100,000 and $200,000 are paying around 20 percent in federal taxes, including payroll and income taxes, according to an analysis from the nonpartisan Tax Policy Center. So in this case, the secretary's rate is higher because so much of Buffett's income comes from investments and is taxed at the lower capital gains rate. Here's Buffet's original Op-Ed in the NYT for those of you that aren't familiar. |
What should I do with $4,000 cash and High Interest Debt? | Patti - I realize, of course, that you pose an either/or question. It seems the question closes the door on other potential solutions. |
How can I deal with a spouse who compulsively spends? | Perhaps it seems harsh, but I would get separate accounts: credit cards, savings, retirement, all the way down the line. Your only joint account should be for paying mortgage/rent and other bills. And as another poster said, delete all your saved info from browsers &c. Perhaps you even need to set up separate user ids. If this really is a case of compulsive spending, curing it is likely to be a long, hard process, if it's even possible. You need to put yourself in a position where you won't be dragged down with him. |
Do you have to be mega-rich to invest in companies pre-IPO? | Short answer: No. Being connected is very helpful and there is no consequence by securities regulators against the investor by figuring out how to acquire pre-IPO stock. Long answer: Yes, you generally have to be an "Accredited Investor" which basically means you EARN over $200,000/yr yourself (or $300,000 joint) and have been doing so for several years and expect to continue doing so OR have at least 1 million dollars of net worth ( this is joint worth with you and spouse). The Securities Exchange Commission and FINRA have put a lot of effort into keeping most classes of people away from a long list of investments. |
Money Saved on finance charges | Avoiding a cost (interest) isn't quite the same as income. There is no entry, nothing for you to consider for this avoided interest. What you do have is an expense that's no longer there, and you can decide to use that money elsewhere each month. |
Interest charges on balance transfer when purchases are involved | The 'common sense' in it is that they want the maximum money from you while still suggesting to a quick read that you get away free. Their target is not to make you happy, but to make money of you. |
At what age should I start or stop saving money? | It's nearly always a good idea to save for your future, if you don't already have sufficient funds to see out the rest of your days. The hardest part of the saving decision is knowing exactly what portion of your funds to save. If we save too aggressively, we risk having an adverse impact on our everyday life and, of course, there's always the possibility that we'll never make it to old age. But if we don't save, we risk the prospect of a poverty stricken retirement. It's not always easy to find a balance. The best solution is to make so much money that we cannot possibly spend it all! |
How to get the lowest mortgage rate on a new purchase? | Start with the bank where you have your checking and savings account. They can streamline some of the paperwork, because they can see how much you make, and have access to several years worth of bank statement. Legitimate mortgage companies do publish their rates. But there is no guarantee that you will qualify for the best rate without them knowing your credit score, salary, and down payment information. There is no way to know that you have the best rate because of the time lag involved. You will pick the best one you can work with, but the rates can change every day. Even when you lock in the rates, other companies can drift lower. Once you have started down the application process you will reach a point where switching companies will cost you time and money. Once you decide to purchase a house, the contract usually only gives you a few weeks to prove that you have financing in place. Therefore you will have to start the process before deciding on the house. Some advance work is needed to give you an idea of the maximum monthly payment you can afford, which will then based on the rate and down payment determine the maximum house you can buy. I have had good luck with my credit union, but there is no guarantee that yours will be competitive. Keep in mind that while rates are very important, some people also value customer service, and also like that the mortgage won't be sold to out of town investors. |
What should I do with $4,000 cash and High Interest Debt? | If it were me, I would pay off the 23%er. That is as long as you don't borrow anymore. Please consider "your hair on fire" and get that 26%er paid off as soon as possible. From my calculations your big CC is sitting at 26% has a balance of 20K. Holy cow girl, what in the world? The goal here is to have that paid off in less than one year. Get another job, work more than you have in your life. Others may disagree as it is more efficient to pay down the 26%er. However, if you pay it all of within the year the difference only comes to $260. If you gain momentum, which is important in changing your financial life, that $260 will be meaningless. With focus, intensity, and momentum you can get this mess cleaned up sooner than you think. However, if you are going to continue to rack up credit card debt at these rates, it does not matter what you do. |
Can I Accept Gold? | Yes. "There is, ...no Federal statute mandating that a private business, a person or an organization must accept currency or coins as for payment for goods and/or services." Taken from the US Department of the Treasury. |
Transferring money between two banks | The US (in fact the global) banking industry is subject to Anti-Money Laundering & Counter-Terrorism funding laws, slowing down funds transfer eliminates a great deal of fraud. |
How dividend payout happens | As the record date is 7th August, you need to hold stocks on the 7th August closing. You need not hold it till 2nd Sept. The list as taken on 7th August would be processed and instructions given to Bank and the dividends credited by 1st Sept. Edit: To Clarify Victor's comment Typically from the time one sells the stocks to the time it actually gets transferred has a clearing cycle. Most stock exchanges have 2 or 3 days cycles. i.e. if I sell the stock today, it is still in my name. The money is still with the buyer. On Day 1, the positions are arrived at. On Day 2 the stock gets credited to the buyer and the funds gets credit to seller. As the question was specific whether to hold the stock till 7th or 22nd Sept, my initial answer was simple. The illustration by Victor is more accurate. |
How is it possible that a preauth sticks to a credit card for 30 days, even though the goods have already been delivered? | Open a dispute for the preauth. It is effectively a double charge, since you have already paid for the item. You can provide evidence of the other transaction. This forces them to go through some hassle and waste some time on the issue. |
For a mortgage down-payment, what percentage is sensible? | I am currently in the process of purchasing a house. I am only putting 5% down. I see that some are saying that the traditional 20% down is the way to go. I am a first time homebuyer, and unfortunately we no longer live in the world where 20% down is mandatory, which is part of the reason why housing prices are so high. I feel it is more important that you are comfortable with what your monthly payments are as well as being informed on how interest rates can change how much you owe each month. Right now interest rates are pretty low, and it would almost be silly to put 20% down on your home. It might make more sense to put money in different vehicle right now, if you have extra, as the global economy will likely pick up and until it does, interest rates will likely stay low. Just my 2 cents worth. EDIT: I thought it would not be responsible of me not to mention that you should always have extra's saved for closing costs. They can be pricey, and if you are not informed of what they are, they can creep up on you. |
Home Renovations are expensive.. Should I only pay cash for them? | I agree with MrChrister about first considering how necessary the renovations are (is it a nice-to-have, or a need-to-have?), as well as the importance of consulting a Realtor, if you are selling your home, as they will advise you wisely. For instance, they might advise you to replace the linoleum with a neutral beige ceramic tile, as you would be assured a better resale value on your dollar spent, than if you were to replace the old linoleum with new linoleum (or laminate). There are many types of renovations that simply don't pay off, and others that do provide good return-on-investment (like intelligent kitchen and bathroom updates). I found this ROI grid at lendingmax.ca (which is pretty consistent with what I remember reading in the Toronto Star this spring): Top 10 Renovations ~ Average return on investment Painting and interior decorating = 73% Kitchen renovations = 72% Bathroom renovations = 68% Exterior painting = 65% Flooring upgrades = 62% Window/door replacement = 57% Family room addition = 51% Fireplace addition = 50% Basement renovation = 49% Furnace/heating updating = 48% If you are selling your home, and your Realtor has suggested improvements, they are probably necessary, and not doing them might serve as an impediment to quickly selling your home - so factor in the (potential) costs of carrying your home for additional weeks/months, or worse, overlapping mortage costs, if it takes your home longer to sell, and you end up owning two homes simultaneously for a bit. As far as your question (should you pay cash for renos or take out a loan), one factor to consider if you live in Canada is the Home Renovation Tax Credit, which applies to renos that take place until Feb 1, 2010, and can deduct up to $1,350. So if you have to do a reno and yours qualifies for this tax credit, and you won't have the cash before that deadline, factor in the cost of borrowing vs. the $1,350. Good luck! |
What US tax laws apply to a 13 year old game developer? | After doing a little research, I was actually surprised to find many internet resources on this topic (including sites from Intuit) gave entirely incorrect information. The information that follows is quoted directly from IRS Publication 929, rules for dependents First, I will assume that you are not living on your own, and are claimed as a "dependent" on someone else's tax return (such as a parent or guardian). If you were an "emancipated minor", that would be a completely different question and I will ignore this less-common case. So, how much money can you make, as a minor who is someone else's dependent? Well, the most commonly quoted number is $6,300 - but despite this numbers popularity, this is not true. This is how much you can earn in wages from regular employment without filing your own tax return, but this does not apply to your scenario. Selling your products online as an independent game developer would generally be considered self-employment income, and according to the IRS: A dependent must also file a tax return if he or she: Had wages of $108.28 or more from a church or qualified church-controlled organization that is exempt from employer social security and Medicare taxes, or Had net earnings from self-employment of at least $400. So, your first $400 in earnings triggers absolutely no requirement to file a tax return - blast away, and good luck! After that, you do not necessarily owe much in taxes, however you will need to file a tax return even if you owe $0, as this was self-employment income. If you had, for instance, a job at a grocery store, you could earn up to $6,300 without filing a return, because the store would be informing the IRS about your employment anyway - as well as deducting Medicare and Social Security payments, etc. How much tax will you pay as your income grows beyond $400? Based upon the IRS pages for Self-Employment Tax and Family Businesses, while you will not likely have to pay income tax until you make $6,300 in a year, you will still have to pay Social Security and Medicare taxes after the first $400. Roughly this should be right about 16% of your income, so if you make $6000 you'll owe just under $1000 (and be keeping the other $5000). If your income grows even more, you may want to learn about business expense deductions. This would allow you to pay for things like advertisement, software, a new computer for development purposes, etc, and deduct the expenses out of your income so you pay less in taxes. But don't worry - having such things to wonder about would mean you were raking in thousands of dollars, and that's an awfully good problem to have as a young entrepreneur! So, should you keep your games free or try to make some money? Well, first of all realize that $400 can be a lot harder to make when you are first starting in business than it probably sounds. Second, don't be afraid of making too much money! Tax filing software - even totally free versions - make filing taxes much, much easier, and at your income level you would still be keeping the vast majority of the money you earn even without taking advantage of special business deductions. I'd recommend you not be a afraid of trying to make some money! I'd bet money it will help you learn a lot about game development, business, and finances, and will be a really valuable experience for you - whether you make money or not. Having made so much money you have to pay taxes is not something to be afraid of - it's just something adults like to complain about :) Good luck on your adventures, and you can always come back and ask questions about how to file taxes, what to do with any new found wealth, etc! |
How to decide if I should take my money with me or leave it invested in my home country? | The key is whether you plan to stay in Sweden forever, or plan to move back to Brazil after completion of 2 years. If you have not decided, best is stay invested in Brazil. Generally markets factor in currency prices so if you move the money into Krona and try and move it back it would in ideal market be more or less same. In reality it may be more or less and can't be predicted. |
The Benefits/Disadvantages of using a credit card | Personally the main disadvantages are perpetuation of the credit referencing system, which is massively abused and woefully under regulated, and encouraging people to think that it's ok to buy things you don't have the money to buy (either save up or question price/necessity). |
If I pay someone else's property taxes, can I use it as a deduction on my income tax return? | You cannot deduct. Even if you could, unless you also hold the mortgage, it's unlikely that you would have sufficient deductions to exceed the standard deduction for a married couple. |
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