Taxes: Preparing for 2008

Being the end of the year, it’s time to start thinking about taxes…

In some ways, I’m looking very forward to February when we’ll file our taxes and get our nice big refund like we do most years but right now, I’m looking to change my filing status for 2008 on my Form W-4 so that I don’t have so much taken out of my regular paycheck.

In the past, I’ve filed single with zero exemptions, with an additional $50 taken out of each paycheck. This was due to the fact that I was earning more than $1000 per month from the hockey team without having taxes taken out so I was trying to cover that through overpaying from my full-time job. It worked out, or more accurately, I still over paid because I’ve received a large refund each February shortly after I filed my return.

But with that job done and gone now, it’s time to reassess things for 2008.

PayCheckCity.com has a nifty calculator, and one that I’ve been seeking for a long time, that calculates what your net pay will be based on how you file. Best of all, for me, it was accurate to within $0.74 for the 2007 tax year.

I plugged in numbers for 6 different scenarios for the 2008 tax year just to see how each change would affect my bottom line — the net pay that I’d take home.

Filing single, married, zero exemptions, one exemption, two exemptions, 10% for 401k, maxed out 401k, that sort of thing…

I settled on the most conservative option (because I still have a fear of owing money to the IRS) by switching my federal filing status to married (from single), and switched from zero to one for the federal exemptions.

I also maxed out my 401k. It was just under 10% — as of my next paycheck, it will be 15%.

Bottom line? Well, it’s one of those wacky scenarios where by saving more, I’m giving myself a raise.

My net pay increases $85.78.

It’s not a huge increase, but the 401k increase is quite large.

Best of all, it’s not even 2008 and I can already cross off one of my goals for the year. How about that?

Posted on December 27th, 2007 at 9:15 am by Brainy Smurf
401k, Finance, Success, Taxes | 3 Comments »

Christmas 2007: Paid in Full

Well, Christmas has come and gone and the days away from work are over now too.

I’d say it was a pretty successful Christmas this year. I think I made out better than my wife, but she may say otherwise.

Best of all, as far as I can tell, it’s 100% paid for already.

I can’t remember if that was the case last year — it may have been — but it feels great to be finishing out the year without any new bills hanging over us, no large expenditures on the horizon, and sizable cash reserves in both of our checking accounts just in case anything should come up.

Should be a good start for 2008…

Posted on December 27th, 2007 at 8:40 am by Brainy Smurf
Current Events | No Comments »

Online Payment Error?

So I went to throw a little bit more at my ATT Universal credit card this morning and came up with this:

If you can’t read it, it states, “You are permitted 4 online payments per billing cycle. You have already made 4 payments totaling 915.00 this billing cycle.”

I like how they call it an “Online Payment Error.” Ha!

I understand why they do this — fewer transactions on their end to deal with and, well, more finance charges to be handed out at the end of the cycle too.

A little crooked, eh?

Anyway, I think it sucks.

Posted on December 20th, 2007 at 9:55 am by Brainy Smurf
Credit Card | No Comments »

Since when is Santa Claus a role model?

I heard about this for the first time a few weeks ago, but this week it seems to be making the rounds again on the radio and on tv (as a fluff piece).

US Surgeon General Rear Adm. Steven K. Galson, in regards to Santa’s portly stature, recently said, “It is really important that the people who kids look up to as role models are in good shape, eating well and getting exercise. It is absolutely critical.”

Santa Claus? Are you kidding?

Okay, besides all of the anti-politically correct tangents I could go off on here, since when is Santa Clause a role model?

I like to think I had a pretty normal childhood. I remember in first and second grade when the teacher would ask each of us what we wanted to be when we grew up.

Among the responses, lots of firemen, doctors, lawyers, veterinarians, astronauts, nurses, teachers, that sort of thing…

And you always had that one weird kid who said he wanted to be Optimus Prime, Voltron, Batman, or maybe even Papa Smurf or something.

Fine.

But I have never heard of someone wanting to be Santa Claus.

Kids know that job is taken. And kids don’t want to “be” like Santa Claus.

Gimme a break…

Posted on December 18th, 2007 at 2:10 pm by Brainy Smurf
Rants | No Comments »

Brainy Smurf’s PF Goals for 2008

With all remaining bills for 2007 paid already, it’s time to start looking ahead to 2008. This will be my official “Goals for 2008″ posting. Earlier this month, I had a preliminary version, but as I’ve thought about it some more over the past few weeks, there were a few things I felt I should add.

In no particular order:

• Eliminate all credit card debt by the end of June 2008. Current credit card debt is $10318. I’m aiming to achieve this goal slightly ahead of schedule, by about a month, according to the snowball plan I started in November. Achieved 03-27-2008
• Eliminate PMI from the Mortgage by the end of December 2008. Right now, it’s costing me over $1000 per year. For what? Nothing. To meet this goal, I’ll have to contribute an additional $160 per month towards my mortgage. Achieved 07-08-2008
• Pay off my auto loan by the end of December 2008. Current balance is $7418. This is also included in my snowball plan and it’s scheduled to be paid off in October if all goes as planned. I’m not looking to speed this up — just finish it off. Achieved 09-25-2008
• Increase my 401k contributions to 15%. This way I’ll receive the maximum match allowed from my employer. Right now, I’m contributing just under 10%. I’ll plan to make this move once the credit card debt is eliminated. Achieved 12-27-2007
• Increase my passive income. Now that I’ve dumped my largest client, the hockey team, I’ll soon find myself bringing in a lot less income. But, I also find myself with a lot more free time. Free time that I should use to optimize my other ventures to make up the difference — except now I’ll focus on more passive income streams because, in all honesty, I’m tired of working so much. Right now my 100% passive income hovers around $50/month. With the least effort possible, I’m looking to triple that in 2008 and pick-up a few low maintenance clients as well.
• $10k in savings. This is my lofty goal. I’m not sure it’s even possible. Right now my ING account is holding a mere $1k. No matter how far rates fall, with a 5-figure balance working in my favor I’ll have to be making atleast $1/day in interest and for whatever reason, I like that. I’d also like to pay for some still needed interior renovations in 2008 with cash and this is where I’ll draw from.

Posted on December 18th, 2007 at 8:30 am by Brainy Smurf
2008 Goals, 401k, Credit Card, Finance, Mortgage, Motivation | 10 Comments »

Estimating Monthly Home Values for Net Worth Updates

For my monthly “Net Worth” assessments, I’m toying with the idea of including the value of my home on the assets side for the first time.

In the past, I’ve left it off entirely because I never thought I was in a position to accurately estimate the value of my home. Enter Zillow.com.

I’ve played with Zillow for a few months now. Mostly to check in on what my house was worth at any given moment.

Okay, I admit it, it was to size myself up with all of my neighbors — oh yeah, and really pretty much everyone I’ve ever met.

It’s not a “keeping up with the Joneses” type of thing, but let’s face it, it’s fun to compare yourself to others.

Anyway, the city we live in recently completed its city wide home revaluation for tax purposes. The results came in a few weeks ago, and I was going to post about it, but never did because it was, well, a little to bland unless I got a little too personal for my own comfort.

The news, for me, and really everyone in the city was not good.

Average residential property went up a staggering 47% in the city since the last revaluation in 2002.

Thinking about it, from 2002 — the numbers sound reasonable, but the 2009 property taxes are going to hurt considerably, as are my mortgage payments because the property tax is paid through an escrow account linked to my mortgage.

Needless to say, I’m not looking forward to the next escrow analysis Countrywide does on my account.

All of that aside — the report that each homeowner in town received in the mail, along with the bad news, held some really interesting information. Among it — the assessed value, the appraised value, and the replacement cost of your home. (and better yet, a link to an internet site where you could look up everybody in town’s information too!)

I looked at the Appraised Value and liked what I saw. I then headed over to Zillow and their “Zestimate” on the value of my home was, well, within $2000 of what the city’s report said.

I then looked at the historical data Zillow offers to see what the “zestimate” was of my home back when I purchased it, and you know what? It was right around the price I paid for it. How about that?

So I’m thinking that for 2008, I’ll start to use an average of the city’s 2007 apparaised value and the current Zillow zestimate (weighted double to the appraised value as it’s more current) to semi-accurately track the value (and equity I have) of my home.

Posted on December 14th, 2007 at 4:59 pm by Brainy Smurf
Net Worth Updates | 5 Comments »

So much for the ING Strategy…

Drat.

So I logged into my ING Direct account this morning to see how things are progressing…

C’mon… Big money! Big money!

$2.49 earned this month. Woo-hoo!

Okay, yeah, that’s not so great, but what I also noticed is that there was *another* interest rate change yesterday. It went from 4.121% down to 4.025%.

Not really a shock considering the fed’s move on Tuesday.

You know what that means for my personal finances?

Yep, I’ll be pulling all but $1000 out today to throw towards debt (and Christmas.)

Posted on December 14th, 2007 at 8:48 am by Brainy Smurf
Finance, Savings | 2 Comments »

American Greed in the Markets?

Just when I thought I had the stock market figured out, well, yesterday happened.

When it was hinted that another rate drop was coming from the fed, there was much rejoicing and the markets went up.

When they cut the rate last month, things went up. Okay, I see a trend. Rate cuts hurt the savers, but makes the markets go up. A lightbulb went on for me. I’ve got a pretty good grip on how that works now.

But yesterday, they cut rates, and the markets went down. Way down. Personally, it hit me with a $1300 loss.

Apparently the rate cut they wanted (and received) wasn’t good enough. “Oh, I’m sorry, we should have cut it more than we did…”

Maybe I’m out of line here, but as far as I’m concerned, that’s just greedy.

In essense, investors took their ball and went home. Sigh…

Posted on December 12th, 2007 at 8:54 am by Brainy Smurf
Current Events | 2 Comments »

Mortgage Gamble – From Winner to Loser

A month ago, the State of Connecticut launched a plan to help the poor subprime borrowers out there. I was upset then.

Now, as I’m sure anyone reading this already knows since I’m a few days late, the Federal Government is following suit.

And yes, I’m still upset.

The lending companies gambled by lending money to people who couldn’t afford it. Subprime, adjustable rate, call it whatever you want. The fact is, they loaned money to people who couldn’t afford it. In a lot of ways, they deserve what they’re getting right now.

On the flip side, there are the borrowers. President Bush calls them homeowners. Homeowners who shouldn’t lose their homes. Homeowners we all should feel sorry for. Homeowners that people like you and me should bail out.

But that’s the thing. These “homeowners” took a gamble too. And you know what? They lost.

If the homeowners can’t afford the new adjusted rates, or weren’t wise enough refinance, well, they lost. If the mortgage companies made poor decisions and chose to loan large sums of money to people that they knew couldn’t afford it, well, they lost too. Plain and simple. Sucks to be them. Both of them.

But now the plan is for my tax money to go to bail these “suckers” out. Another blogger, I forget who, said that people who went the traditional 30-year fixed route should get some sort of tax credit or something. I couldn’t agree more.

I took out my loan in September of 2002. Just over 5 years ago — right when all of these “teaser-rates” started being advertised so heavily. I looked at it and knew that it was a gamble. A gamble not worth taking.

I pat myself on the back for my decision 5 years later. It *was* the correct move. But now, the carpet is being swept out from under me. I should have gone with an ARM. I’d have more money in my wallet today — and as the President is planning, for another 5 years to come.

We, who went the 30-year route, played by the rules, paid a little more on our mortgages, and then got screwed in the end. That’s messed up.

Further, this is just delaying things. Okay, fine, the folks in this situation may get another 5 years on their mortgage rates. But what then? It’s inevitable — they can’t afford their homes. Deep down, I hope finally get what they should have had coming this year.

I guess I just don’t like it when losers take advantage of the system and come out winners. But it seems that’s the ‘new’ American way…

Posted on December 7th, 2007 at 10:00 am by Brainy Smurf
Current Events, Mortgage, Rants | 1 Comment »

Goals for 2008

Yeah, it’s a little early for this, but I’m gonna do it anyway.

First and foremost, my goal for 2008 is to eliminate all credit card debt. This should be completed sometime during the summer of 2008. Done. Finis. Finished.

I’ll still use the cards, I just won’t carry a balance.

Next goal will be to eliminate PMI insurance from my mortgage. This has been costing me an additional $85/month for the past five years. When rolled into the mortgage, it doesn’t seem like that much, but when you do the math, that’s $1020 per year, or another $5100, that could have gone towards the principle.

To meet this goal, I’ll need to knock around $6000 from my mortgage balance.

Broken down, each regular payment in 2008 will pay down around $191, or around $2300 over the year. Right now, I toss in around $150 extra per month, or an additional $1800 over the year.

Combined, that’s a $4100 drop in the principle over the entire year just on its own.

I’ll need to step up an additional $1900, or around $160 per month to meet the goal. Considering it was just last week that I contemplated throwing an additional $250 per week towards the mortgage — this goal should be a sure thing.

The last goal isn’t really a financial one…

I’m going on vacation this year. My wife and I haven’t gone on a vacation since 2004 and that one was a rather miserable camping-in-the-rain experience — though we did see a bull moose up close. That’s much too long to go without a vacation. We should probably start planning it now!

That’s it.

I’m sure I’ll add to it before month’s end, but for now, this works.

Posted on December 3rd, 2007 at 4:21 pm by Brainy Smurf
Credit Card, Finance, Mortgage | 2 Comments »

December 2007: Quest for $1,000,000.00 Dollars

Another month where the market recovered, for the most part, in the last couple days…Without the pseudo-recovery on the last day of the month, my bottom line would have decreased significantly.  Even still, November of 2007 would still have gone down as another month headed in the right direction thanks to some large credit card payments.

For those of us with a high percentage of our wealth in the markets, I’m not sure any of us could have come up positive on the Assets side this month.

And on that side, besides the sizable drop in the 401k balance, things were pretty steady.

I temporarily moved some money from my savings over to checking in order to keep my daily balance above Bank of America’s minimum in order to avoid a service fee.

If the $3,000+ payment I’m waiting for on one of my side income projects comes in soon (God willing) — that savings withdrawal will be re-deposited first thing. But, I’m also considering pulling even more out of savings next month to pay for Christmas and knock down debt more rapidly. I’m still weighing the pros and cons but right now I may even withdraw all of it due to the looming interest rate drop scheduled for December 11th.

The Liabilities portion of my net worth is where most of the action took place.

I didn’t make a mortgage payment this month because I’m far enough ahead to be able to let it slide, so I applied what would have been my mortgage payment to the credit cards instead — and did it ever help!

My Bank of America Business Mastercard should be paid off in full by the end of the year as I’d planned back in October before I’d even given a second thought about this snowball business. That’s going to feel really nice as it’s my highest rate debt (a tolerable 9.9%) right now.

At this pace of nearly $3000 falling off of the total credit card balance per month, I could wipe out all of them (and in doing so, fully pay for the siding project that ran them up so high in the first place) in the next four months.

Unfortunately, I don’t think this pace is sustainable.

You never know though, ’tis the season for bonuses and tax refund time is just around the corner as well. I’m not counting on anything, but we’ll see!

Posted on December 1st, 2007 at 2:24 pm by Brainy Smurf
Finance, Net Worth Updates | No Comments »