jump to navigation

List: US States Income Tax and US States with No Income Tax July 26, 2006

List: US States Income Tax and US States with No Income Tax
The following states levy no income tax on earned income and no income tax on unearned income (interest and dividends):

The following states levy no income tax on earned income however they do levy income tax on unearned income (interest and dividends):

The following states levy the following MAXIMUM income tax as of January 2005:

Re- Re- Refinancing Home Loans to Keep Payments The Same July 24, 2006

I think I’m partially crazy for taking on a 30% debt-to-income ratio by buying a home in New York City. But if you read the NY Times article yesterday about people refinancing their mortgages before their adjustable-rate mortgages reset just to to keep their payments the same, I think it’s time to say that a lot of people are just delaying their debt drowning.

Millions of Americans have turned to adjustable-rate mortgages to afford a home as prices soared. But when you don’t plan for the ARM interest rates reset when interest is rising, it’s time to start living below your means. The artificially low teaser rates are attractive when you think you might not stay in your home for more than 5 years, but you never know what your financial circumstances or housing market will be like when your interest rate resets. People who are refinancing and re- refinancing are just building up their mortgage with closing costs and delaying a possible financial meltdown. We all would like to assume that we’ll be making more money in a few years or that we can build up enough of an emergency fund, but anyone who doesn’t have a trust fund can loose their income. I try to make myself useful at work, but we all know that employment is an at-will term, which means the company can fire me or I can quit at anytime. Even if you have your own company, business can slow down. I know I’m not indispensible, so I’m trying to build up my cushion. Don’t you get nervous when you read articles like this one and the person they interview says:

Still, borrowers like Mr. Perry say the loans make sense because in a few years they plan to move to another home, earn more or refinance again, often using the same assumptions they made when they took out their earlier loans.
…“I am not going to be here for 30 years. Why is it important to have a fixed mortgage?”

If home prices keep rising, maybe this won’t matter in 5 years, but what are the chances they keep going up like they have been in the past 5 years? (Looks like there’s about 50% of all loans in major California cities in 2006 are negative amortization mortgages. What will happen in 2010? Scary thought. Check it out in the article).

Source:
Re-Refinancing, and Putting Off Mortgage Pain, NY Times
Published: July 23, 2006

I Used to Be Drowning in Debt July 21, 2006

I used to be drowning in debt and paid hundreds and hundres of dollars (who knows, maybe a thousand?) a year on credit card interest rates. Until one day, it just dawned on me that unless I changed my lifestyle, I would not only be treading in debt but the credit cards would slowly pull me under, until one day, I’ll drown and not be able to come up to gasp for air. I’m not sure what it was, it was just a sudden decision to not spend anymore, not worry about what other people thought of me, not worry about labels on clothing. When you’re young (16-25), what matters to most is what other people think of you and being accepted…and I’m a pretty self confident guy. Now that I’m in my early 30s, I don’t think about how other people look on the surface, but who they are. I hate the idea of “keeping up with the Joneses” because that’s essentially what I was doing when I was young. I tried to keep up with the rich kids who had trust funds and bought expensive meals, went on weekend trips to Vegas, and had supposed high profile jobs.

I spend every extra dollar on credit card payments and it didn’t seem like I was making much progress. When I realized that I was paying down a $1000 on cc payments but just treading, it was time to change. Paying down $1000 and not spending anything got me back and after years and years of almost drowning, I finally was on dry land.

For many Americans who are drowning in debt who are trying to keep up with everyone else around you, stop thinking about how other people judge you. Because the you’re the most important judge of yourself, not the dude who has a BMW 650i with the 18″ rims or the 16 year old whose parents throw their child a $100,000 sweet 16 party who thinks you’re lame because you don’t wear True Religions or own the latest Botkier Bag.

IT Workers, What Do You Make? July 18, 2006

Are you in IT? How much do you get paid? This is the question, someone asked on The Joel on Software Group. The thread got Digged as well. It’s an interesting peek into IT salaries. People have submitted their anonymous salaries (some post fake salaries), and in general, people who have been in the industry for approximately 10 years can make $100,000 per year.

base salaries for Sr Developers in NYC range from 90k - 120 k. In the financial industry, you’re looking at a 20% bonus at least.

What I found amazing was the difference in pay among those who worked for a big company, and those who did their own thing.

There’s a range of job descriptions, from a software architect at Google to developers in India:

Experience: 4 years
Education: BS Computer Engineering
Certifications: No
Company: Google
Title: Software Architect
Location: MountainView, CA
SALARY: $165,000 + 20K Stock option @ $85.00 [That’s $1.7mil!]

Experience: 6 & 1/2 years
Education: some college
Certifications: none
Company: Large well known public company
Title: Team Lead
Location: Bangalore, India
SALARY: $17,000 a year

The danger of posting all these is that this is not a scientific poll, it is probably not very accurate, and entry level staff feel like they are not getting paid enough. There’s more to a job than salary. Living expenses in your area, benefits, flexibility, and education have to be accounted for. Are you surprised by IT pay?

The Frozen Drink Non-Latte Factor July 12, 2006

If you’ve been to Starbucks, Dunkin Donuts, Jamba Juice, Amazon Juice, Cold Stone Creamery, and many other eateries lately, you’ll notice that there’s a barrage of new drinks (usually frozen, since summer has arrived) to get the consumer to have more trendy drink options. It’s the Latte Factor of the frozen summer drinks. I love frozen things; ice cream, slurpees, slushes, smoothies. I even chill my water in the freezer and will create a ‘water slush’. And these coffee shops, cafes, and smoothie places make it hard on a frozen drink lover who’s trying to save money. So far I have not tried any of these because looking at the prices is a deterrent. Some examples:

If you buy one frozen drink a week at $5 (with tax), it adds up to $20 per month. I know, the 7/11 Slurpees are cheaper at $1.65 but you’re essentially drinking frozen sugar water. As an alternative, blend your own smoothie at home. There are tons of recipes online. They’re easy to make, cheap, and you can make them with any fruit, and it’s healthier than the store bought ones because it has less sugar. Buy frozen bags of fruit at your grocery store and mix and match.

Source:
Fruity summer drinks are a tropical paradise of profit, By Bruce Horovitz, USA TODAY

What’s Your Nest Egg Ranking? July 7, 2006


That’s my score up there according to a new online calculator from A.G. Edwards that lets you figure out how well you are building wealth vs. the rest of the U.S. public (nesteggscore.com). According to the site, the national average is 631, a ‘fair’ ranking:

The 14 question survey told me that I have a score of 748, which gives me a Nest Egg Score ranking of “Good”:

You’ve done a respectable job of saving up to this point in your life. To improve your Nest Egg Score, you should focus on saving more — especially for retirement — and reducing debt, such as paying down credit cards or building more equity in your home (if you own one).

The scoring factors in age, housing, investments, and location (cost-of-living). With my ‘Good’ ranking, their suggestions are:

  1. Continue to manage debt.
  2. Maximize your retirement contributions.
  3. Consider your other financial goals.
  4. Review your investment mix.
  5. Create or review your estate plan.

While the suggestions sound like standard retirement planning advice, the scoring is an interesting indicator of how you’re doing. If I took this survey 3 years ago, my score would probably have been much lower. Since then, I’ve contriuted the maximum allowed in my retirement accounts, spent less than I make, and saved up to purchase real estate. How are you scoring?

Apple.com refurbished deals July 5, 2006

Here’s an idea for those of you who are looking to buy iPods and Mac computers. You can buy refurbished products for great prices. I never thought of looking for this, and would consider it if I ever need a computer. Some sample prices:

These are current Apple models, includes free shipping and Apple’s one year warranty. Dell also has their outlet section for reduced PC and accessories prices. So if you’re looking for a way to save on your computer purchases, buying refurbished or outlet prices might be worth looking into.

My Story on Getting to $0 Credit Card Debt and Staying There June 30, 2006

On my continued quest to the next income bracket, I am grateful for not having any more credit card balance. Since college I had a credit card balance in the thousands and got pretty good at managing the servicing of my debt by taking advantage of 0% balance transfers, limited time low balance offers, and credit card issued checks. I had up to 7 credit cards and at one time had $4,000 of credit card debt in college and $13,000 debt post-college. The interest rates on those cards were between 15% and 23%. I wasn’t financially saavy and didn’t consider negotiating rates, calling to ask to cancel that occassional late fee, or taking it seriously. It wasn’t easy, but it took some dedication, education, and a commitment to myself that I will change my lifestyle to erase that debt. Now, I only have 2 credit cards and $0 balance on both. It’s been more than a year that I’ve had a $0 balance, so like a successful diet, I’ve removed my debt and kept it off. Once you pay off debt, the race isn’t over. You still have to work hard at keeping it at $0. I’ve used the money I would have used to pay off the credit card and saved up for a home and put in $15,000 per year in my 401k retirement fund. There’s so much freedom in having the choice to direct your earned money to YOU.

For those of you who have credit card debt, you can achieve financial freedom. Read up on all those great PF blogs out there and take the debt and shove it out of your life. There’s so much collective wisdom that everyone has to offer from sites such as PFblogs.org (a great collective personal finance site, by the way), and I wish I had that back in college. Anything is possible if you decide that you don’t want to be a slave to money and work hard at keeping the debt out of your life. Once you get there, imagine your life with that extra money and the relieved feeling you’ll have. This is the best step you can take to improve your life and get to the next income bracket to give you choices.

PS: ING Direct Savings Account just increased their savings rate to 4.35% today. I’ve parked my money there since I don’t need to put all my extra money into Visa or Mastercard. :P

Education Gap May Lead to Income Gap for the US June 28, 2006


A lot has been written up about the American education system failing our kids, while Europe and Asia’s education system is churning out many more Ph.D.s and M.D.s than the US education system. (Google some news stories on the US Education System). But what about the economic consequences of our failing schools? On a personal income level, workers with a high-school diploma earn on average $18,734 a year, according to the Census Bureau, while high school graduates earn $28,000 a year. The average worker with a bachelor’s degree earns three times as much as a high-school dropout.
On a macro level, if there’s a widespread difference between the US students and the rest of the world, the lack of qualified workers will slow our economy. What’s the difference between US and Chinese students? NY Times’ Nicholas Kristof writes in his column from yesterday:

…In math, science and foreign languages, the Chinese students were far ahead.

My daughter was mortified when I showed a group of Shanghai teachers some of the homework she had brought along. Their verdict: first-grade level at a Shanghai school.

…One reason Chinese students learn more math and science than Americans is that they work harder at it. They spend twice as many hours studying, in school and out, as Americans.

Chinese students, for example, must do several hours of homework each day during their summer vacation, which lasts just two months. In contrast, American students have to spend each September relearning what they forgot over the summer.

…only 13 percent of American high school pupils study calculus, and fewer than 18 percent take advanced biology.

Yet if the Chinese government takes math and science seriously, children and parents do so even more. At Cao Guangbiao elementary school in Shanghai, I asked a third-grade girl, Li Shuyan, her daily schedule. She gets up at 6:30 a.m. and spends the rest of the day studying or practicing her two musical instruments.

So if she gets her work done and has time in the evening, does she watch TV or hang out with friends? “No,” she said, “then I review my work and do extra exercises.”

A classmate, Jiang Xiuyuan, said that during summer vacation, his father allows him to watch television each evening — for 10 minutes.

The Chinese students get even more driven in high school, as they prepare for the national college entrance exams. Yang Luyi, a tenth grader at the first-rate Shanghai High School, said that even on weekends he avoided going to movies. “Going to the cinema is time-consuming,” he noted, “so when all the other students are working so diligently, how can you do something so irrelevant?”

…Now, I don’t want such a pressured childhood for my children. But if Chinese go overboard in one direction, we Americans go overboard in the other. U.S. children average 900 hours a year in class and 1,023 hours in front of a television.

You say it can’t happen? Bill Gates and Warren Buffett are worried enough to donate $60billion of their money into the Bill and Melinda Gates Foundation to focus on education and global health. If we don’t do anything to improve graduation rates and education in the US, our kids and grandkids’ incomes will drop.

Source:
Chinese Medicine for American Schools, NY Times (subscription required)
By Nicholas D. Kristof
Published: June 27, 2006

Urban Financial Etiquette June 27, 2006

Want to be a socially responsible financial etiquette friend? The Urban Etiquette Handbook article, in the June 26, 2006 issue of New York Magazine has some great rules for getting along with everyone in New York. There are some personal finance related ones as well (along with my take on them):

Who pays the bill on a date?
The asker pays, unless the woman does the asking—then the man should pay. If the check’s on the table and her suitor hasn’t moved for it, a woman should allow him a one-bathroom-trip grace period. If it’s still there when she comes back, she should split the bill but is entirely free to silently ruminate about what a cheap jerk he is. (For same-sex couples, the asker really does pay.)

I’m somewhat of a traditional person, so I agree with this one. The man should always pay. However, the woman should always offer to pay, as a courtesy. Men, if a woman offers to pay, never accept her offer.

Should the wealthier half of a friendship be expected to give more-expensive gifts?
In an ideal world, no. But in the real world, yeah, pretty much. A rule of thumb: Give according to your means, not the recipient’s. If you’re the richer friend, your impoverished friends will appreciate your generosity infinitely more than a cheap trinket you purchased so as not to embarrass them. If you’re the poorer friend—and you’re worried about being outclassed—get together with other friends of lesser means to pool resources on an item of greater value. Better still, spend extra effort on a thoughtful but nevertheless affordable gift that shows you’ve actually paid attention to your friends’ most obscure tastes and interests.

I’m not sure if I agree with this one. The less wealthy friend shouldn’t expect anything from the wealthy friend. If you’re close friends, both sides will offer friendship, not tangible items, right?

How do you pick restaurants and other social activities in circles that involve widely varying incomes?
Inviting the whole gang over for dinner solves some problems—the poor people won’t have to choose between missing a credit card payment or being treated, and the richer folk get a nice meal if you’re a generally decent cook. Of course, it creates an altogether new problem: In your sensitivity to everyone’s income issues, you alone wind up underwriting the entire evening. That’s fine some of the time, but for another alternative, choose an under-the-radar, inexpensive restaurant where everyone will feel cutting-edge— self-congratulatory hipsterdom knows no class boundaries.

I’ve been guilty of paying for my friends once in a while for no apparant reason, but it’s been a while since I’ve done that. I payed for thanking my friends for helping me move recently, that’s another story. There are plenty of affordable but hip restaurants, even in Manhattan.

What’s the best way to split the check in a group?
At a group meal, an equal split should be the baseline expectation: It falls to those who ordered more-expensive dishes to offer to pay more, not to others to pay less. Failure to partake in the appetizers or the wine can be cited as a reason to cut one’s contribution only if there was some socially sanctioned reason for declining (veganism, Islam, pregnancy). If you just got the soup and you don’t think that’s fair, well, think about whether it’s “fair” to make your friends eat dinner with a buzz-killing cheapskate.

This one’s a pet peeve of mine. I’ve witnessed too many times when a friend of a friend joins in a dinner and leaves less than they owe. On top of that, they duck out early hoping that no one will notice! If you’re among friends, it’s ok to do that as long as you acknowledege that you’re short $10 or something. My philosophy is that it eventually evens out among friends.

So do you have any other financial etiquette rules? Do you agree with the NY Mag’s etiquette rules?

Source:
The Urban Etiquette Handbook, from New York Magazine

« newer posts | older posts »