Don’t Feed the Alligators

A Personal Finance Blog from a Small-Scale Landlord’s Perspective

Archive for the 'taxes' Category

06.26.2008
The Main Monkey Business

The Main Monkey Business

Creative Commons License photo figure credit: ezola

Last week ScrapperMom and I received our “Economic Stimulus Package” via Direct Deposit. Since there are the two of us plus one dependent, our package totaled $1500. For now, this money will sit in our high interest savings account. With all of the bad economic news lately, we feel a bit more secure with more of a buffer — just in case. (I would like to thank our children and grand-children for giving us this money — you guys really shouldn’t have — really)

If you haven’t received your stimulus check or deposit yet, you can check the schedule at the Economic Stimulus Payments Information Center at the IRS website.

Even though we will be squirreling away our refund for the time being, that doesn’t mean that we won’t still be able to take advantage of some really great additional incentives offered by a number of retailers, including grocery stores. A number of stores have made the offer to increase your stimulus check by 10% if you use it to shop at those stores.

Here’s a list of stores participating:

Each of these stores has a different policy on the increment value of your check that you can redeem, but they all offer to stretch your check an additional 10%. Now I certainly don’t encourage you to spend at these stores just to get the extra 10%, but if you were going to shop there anyway, or needed something that one of these stores offers, then by all means, stretch away.

If, like us, you received your stimulus payment by Direct Deposit, you may still be able to receive the 10% by showing proof of your receipt of the stimulus in the form of a bank statement. This article from the Boston Globe states explicitly that Shaws will allow you to redeem your 10% in this way.

In our case, we will be getting triple credit by using the Stimulus like this:

  1. Purchase $1320 worth of gift cards from Shaws (which is where ScrapperMom typically does our grocery shopping) for a cost of $1200.
  2. Use our Chase Freedom card, which offers 3% cash back on grocery purchases to buy the gift card, to reduce the cost of the gift card to $1164.
  3. Keep the $1500 Stimulus in our high interest savings account until September when our credit card bill for the year is due (point 2 in this article).

And actually, since we would be spending money at Shaw’s anyway, the final payment for the gift cards will come out of the grocery line item for our spending plan (aka budget) for the next 3-4 months anyway, allowing the Stimulus to continue sitting in our high interest savings account, earning away.

Here are some other ideas for what to do with your Stimulus:

  • Start or augment your emergency fund
  • Pay down high interest debt like credit cards or car loans
  • Fund your Roth IRA
  • Pay down low interest debt like student loans
  • Fund your kids’ 529 college savings plan
  • Donate it to your favorite charity or cause

Have you received your stimulus check yet? How did or do you plan to spend it? Let’s hear it in the comments section!

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Recently my wife’s boss proposed the following: If she could give up health benefits she would receive a 17% raise. Until now, our family had been receiving all of its health benefits through my wife’s employer. My employer, however, offers health insurance as well. So the math is pretty simply here: Do the health benefits through my job cost more or less than 17% of my wife’s salary?

The astute reader, however, will recognize that this equation is not so simple. The health insurance premium is quoted in a before-tax amount, which means the actual difference in my paycheck would be somewhat less than the premium amount. Additionally, my wife’s raise would mean that more taxes would have to be paid on her earnings. To figure out what the difference would be, exactly, I popped over to the NetPay calculator at Paycheckcity.com

Paycheck City

To use this calculator, you choose your state, enter your salary indicating how often you earn the amount you enter, fill in your deductions, and click calculate. In my case I already know the deductions that I’m claiming, and wanted to compare 4 different sets of incomes and deductions. But this tool can also be used when you start a new job and need to figure out what your actual check amounts will be, Additionally, if you over- or under- withheld on your taxes you can figure out how many more exemptions to take or how much extra to withhold. You can also figure out what the impact of increasing your 401k deduction will be.

The result of my calculations shows that my wife, who works half time as a structural engineer (and more than full time as a stay-at-home-mom) for good money, and I will net a whopping $136/month increase in salary. Now $136 is $136, but it’s a little surprising to me that a 17% raise can result in such a small net increase. This increase will go straight into our debt snowball extra payments.

I have used this Salary Paycheck Calculator a number of times and it’s great to have an analytical tool like this to see what the effects of payroll changes can have before you actually make them. So check out the tool and let me know if you find it useful.

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04.20.2008

Here are some interesting articles that I read this week:

  • Lynnae at BeingFrugal.net started a multi-part book review on (Not) Keeping Up with Our Parents by Nan Mooney. Lynnae was upset at the assertion that people don’t have choices, and I agree with her. However, I argued that the middle class is being squeezed by both corporations and the government and that “middle class” members should be able to take their kids to Disney World now and again. Yes, people make bad choices, but all too often these days many people are taken advantage of by greedy companies under the full knowledge of our government. See my review on Maxed Out for more thoughts on this.
  • The interview with the author’s of Nudge at the Freakonomics blog was very interesting. It’s amazing what a difference can be made simply but changing the framing of the question or the default choice for such things as organ donation and 401(k) contributions.
  • At MyTwoDollars.com guest poster Tisha Kulak discusses the pros and cons of co-signing a credit application for your children (or anyone else for that matter). Most of the comments conclude that one should not co-sign for one’s children. I tend to be less black and white about just about any issue. I suggested that co-signing for a credit application is acceptable as long as it’s not the first lesson your child is getting in money management and responsible use of credit.
  • Paidtwice at Paidtwice.com argues that All Funds are Emergency Funds until you have sufficient reserves. We have a fund into which we make monthly payments towards annual bills (insurance, taxes, etc.). This article reminds me that we don’t have to have a whole year worth of payments for each annual payment before paying out of the account. All we really need to have is enough money to cover the biggest bill.
  • Madison at MyDollarPlan.com writes about the lessons learned while filing her taxes this year. Madison and I both had issues with Roth IRA conversions this year that required recharacterizing contributions due to ineligible conversions or contributions. The recharacterization was easy, but I’m still struggling with how to fill out the necessary tax forms. I have not yet filed our taxes this year (we’re getting a refund, so we’re not late…). I’d like to thank Madison for her help to me on this sticky issue.

Off topic:

  • I enjoyed reading the article by Lenore Skenazy here and the follow-up here, as well as Ms. Skenazy’s NPR Talk of the Nation Interview which featured a great quote: “It’s not like we threw him into the East River…”. Her thoughts about Free Range Kids sure has generated a firestorm of comments. ScrapperMom and I find ourselves on opposite sides of the issue, though we are not radically left and right on it, but rather both closer to the center.

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