27 March 2013

Hump Day Herald: Cyprus

It's Wednesday again, so I've prepared another haiku. But first, there's a topic that is simply too big and important to go unnoticed: Cyprus. If you haven't been keeping up with the news, Cyprus has finally reached a deal to address their financial crisis. But that leaves questions. What is Cyprus (as opposed to cypress)? What crisis? How could such a tiny place have such a big splash? And most importantly, how does it affect you? (Assuming you're not a Cypriot or Russian business(wo)man. If you are, it's time to call your accountant.)


Cyprus is a small island nation in the Mediterranean off the coast of Turkey. With only 1.1 million citizens, they're a rather small country. Accordingly, their entire economy is almost smaller than the monthly savings under sequestration. Their economy is only 0.2% of the Eurozone. So how have they been holding the news spotlight so effectively after never being heard of since Isaiah?

The situation

As it so happens, Cyprus was a popular tax haven for Russian business(wo?)men, akin to places like the Bahamas are to America. This has led to an inflated sector of the economy, namely banking. Much like in the American financial crisis we recently exited, banks were very prominent in the economy despite not actually doing very much of anything. Things were humming along as the economy grew, but the slowing and recession caused the problems to become painfully obvious because perpetual growth can't exist.

A large portion the money in the banks was being used to make loans to Greeks. Greece has its own set of problems, and those had a big impact on the Cypriot banks when the loans started going bad. At length, it became evident that the banks were going to fail, but as part of the European Union, Cyprus doesn't have its own central bank. So unlike America, they couldn't just print more money to  make the problem go away kick the can down the road and must instead actually face the music now.

The bank is being raided.

The "solution"

To resolve the problem, the EU is going to loan Cyprus some money. But they need collateral. Lots of it. And about the only place to find it was bank accounts. As a result, the first solutions proposed included a "one-time" tax of about 10% on all bank accounts. This was quickly changed to be about 7% for bank accounts with under €100k. The final deal spares the lower accounts completely, but any amount above €100k might see up to 30% 40% of the balance disappear to fund the bailout. They also won't even be able to remove what's left over to another more solvent bank elsewhere.

The aftermath and YOU

Finance, accounting, law, economics, banking, and plenty other professors now have fodder for years worth of lectures. But even if you do not plan to be sitting in their classes (or reading their blogs), this was not just another story in an otherwise mundane day. It has very real implications for everyone, namely the security of funds held in account and access to those funds.

Make sure you know how your money is (not) insured. We put our money in the bank to keep it safe, both from personal attacks and from inflation. But what about from the bank itself? Thousands of banks have failed since 2007, when the financial crisis first started bubbling up and more continue to fail every day. Whether at a bank or credit union, deposit accounts are federally insured, but only up to $250k. That means that if the institution fails, you'll get up to that much back for each qualifying account. What makes the Cyprus situation disturbing is that they were essentially going to only insure 90% of the account balances. In the future, that could happen here. YOUR hard-earned money that has already been taxed would be taxed yet again to fund bad decisions by management. So that they and bondholders don't have to lose money. Doesn't sit well with me.

Keep some cash on hand. As they say, "cash is king". You're only as rich as the amount of money you can actually get to. Access to the funds is a major issue. All the insurance in the world is no good if you cannot access the funds. While I don't believe that things are going to completely fall apart (yet), there are plenty things that could lead to being unable to access your funds in the bank. The banks in Cyprus have been closed for over a week. No one has been able to get money from an ATM in about that long and their debit cards also are not working. (I experienced the same thing once when my bank decided to upgrade their computers. On a holiday weekend.) As a result, those caught unprepared have had to find ways of making do, whether by borrowing from friends/family members or begging what few businesses were even open to be merciful. Neither is a position you want to be in.

So in conclusion, two major realizations have come out of Cyprus:

  1. We cannot be so sure of the safety of our money, even in "insured" accounts
  2. Cash. Keep some. Probably at least a week's worth of living expenses. In smaller bills.
  3. Now haiku.
The banks failed today
People waiting with much fear
Everyone lost.

Image from 401(k) 2013 on Flickr.

22 March 2013

Considering College: Go or No?

As previously mentioned, college is all the rage these days. But, several questions need to be answered before you run down to give all your money to the first institution claiming to give out a 'degree'. The first and most important question that must be answered is should you even go at all? Looking all around, one can easily get the idea that college is now mandatory. We're often told that not going to college means you're a failure.

Where do I sign up?!
However, don't make the decision based solely on what society is telling you. Not going to college doesn't have to mean a life of misery   and poverty. Plenty people who have a bachelor's degree (or higher) still got laid off during the Great Recession and ended up on food stamps.

In light of that, it's no surprise that several prominent figures in our society didn't finish college. However, it's also worth noting that they dropped out of college. In other words, they started college, presumably with the ambition to finish, but found a profitable venture that dragged them away. Despite all that, I still would recommend going, though with some very heavy qualifications due to changing market conditions.

Most importantly, even though I think you should go to college, your parents might be expecting you to go to college, and society thinks you will, it doesn't mean that you need to sign up at the most expensive place. There are plenty other options available for getting college knowledge that don't require a sackful of cash or a mortgage worth of student loans.

This time of year is high time for college preparations in families all across the country. Visiting campuses, figuring out 'financial aid', wrapping up the high school transcript on a good note. However, if that is not an accurate description of your spring, you still have other options. Maybe your high school transcript isn't "good". Or perhaps, you didn't get accepted to the school you wanted. You might have run into a financing issue. All are issues, but they shouldn't be insurmountable. In future discussions, we can look at what to do in those situations and more. Until then, keep calm and study on.

20 March 2013

Hump Day Herald

Lo and behold, it's Wednesday again! As luck would have it, it also happens to be the first day of spring for those of us here in the Northern Hemisphere. It's also very nice to see the sun again. It was missing the entire time I was on vacation last week. Now I know why people from the Midwest run around in Speedos in the 50 degree weather when they come out here to CA. On the flip side, biking in a snowstorm didn't phase me, but my girlfriend was less impressed. Despite being a native.

No shortage of offers here...
Anyway, I arrived back home to a stack of mail. A few books that I'd ordered, credit card statements, and a big pile of fireplace kindling credit card offers. I already have more cards than I really need, but they still keep sending me offers nonstop. I've been getting them for years, but being gone for a week gave them time to pile up and I really got to see exactly how much and how frequent they send me junk. And this is in addition to what slips past my spam filter and bombards my email address.

As you can see to the right, I got six offers (three from the same company!) while gone directly into my mailbox. I delete several more from my email every single day. I can already hear the protests. "Why don't you just remove yourself from the mailing lists?" I would, but the offers do serve a purpose: a crude barometer of my credit score.

But how does it tell my credit score? I've noticed over the years that the terms offered fluctuate. I'm sure it may have been partly due to the economy, but it still ultimately is a barometer of credit scores. When my credit card balances are higher, the 0% offers taper down from 12 months to the 6 month range or even disappear completely. So as I've recently gotten my cards paid down (as well as my car loan), the offers have been getting better. Of course, it doesn't tell me an actual number and it's no substitute for checking your credit report regularly. If you want to know your actual* number, use Credit Karma. I'd sign up, but I haven't felt a big need to really follow my "score" that closely yet. Going forward, we'll see what happens.

The haiku! I haven't forgotten about it. This one is for everyone who is currently on, about to take, or just ended spring break.

Spring Break
Spring break time is here
Don't blow all your funds on beer!
Debt will last too long.

*I understand that everyone is now coming up with their own number, so finding out your "true" score may very well be an exercise in futility.

15 March 2013

Tax Dash

Today is March 15, which means there's exactly one month left before tax returns are due for us here in America. If you have yet to file for whatever reason, don't delay any longer. It would be unfortunate to end up owing penalties for filing late, but things can and do pop up that often hamper last-minute preparation. Here are a couple tips to hep things roll along smoothly.

Gather your documents. Unless your situation consisted of a single W-2 and nothing else, you really don't want to wait until the last day to file to just start to look over your stuff, even if you expect to get a refund. In addition to your W-2, there is a whole ream worth of other documents you need to have both received and to fill out if you received taxable interest, took college classes, put money into a retirement plan, gave large sums away, had a good day at the casino, etc., so on, and so forth. Waiting until the last possible day to figure out that you're missing an interest statement is a losing strategy.

Get them prepped. If you've gathered all your documents, but aren't sure you want to brave the 1040 on your own, you do have plenty of other options to help you get done. The two major tax preparation assistance companies in this country are H&R Block and TurboTax. They are supposed to help you prepare your taxes for free if you earned under $57,000 AGI last year and both the computer and online versions of their software reflect that. You can also take your pile of papers into H&R stores to have them look over as well, something you cannot do with TurboTax. Of course, an accountant is always an options. But one place that might also be worth a look is a local college or university. It's primarily done by acccouting students, but is overseen by actual CPAs with experience. A local one to me offers free preparation to several select groups and is certainly better than having to pay.

File electronically. After you get your taxes prepared, it's time to get them filed. If at all possible, file your tax return electronically. Turnaround time to refund is drastically reduced. There's a smaller chance of error. E-filing is free. And an increasingly important reason, you want to get your return filed before someone else files one for you. In this digital era, no one's information is safe. (If you're reading this blog, then the chances are greatly increased that you are more vulnerable to unauthorized access to your information than the hermit who shuns technology. It's an unfortunate fact of life we have to now live with.)

Refund schmefund. You have plenty options for getting back your money, no matter how you file. You can get a direct deposit to your checking or savings account (or several), a good, old-fashioned check in the mail, US Savings Bonds, applying it towards future tax bills, or any combination of those. Pick your favorite when you file. After you file, whether online or by mail, you can track your status online and figure out exactly when you should expect to see the money back in your hand. First and foremost, make sure you are at the official IRS website for checking refunds found here. Although I have not seen or heard anything about them yet, I'm fairly certain that scammers may very well try to run phishing scams using bogus website fronts. Be vigilant.

So, there you have it. If you haven't started your taxes, this weekend presents quite an opportunity to do so and get the bulk of the work out the way. Like I said, getting caught at the deadline to find a laundry list of stuff to do just to file would be unfortunate. That will also be the exact same time that your internet decides to go down, making e-filing impossible and Starbucks will also be closed. You don't want that to happen. Au revoir!

Photo sourced from Tax Credits.

13 March 2013

Hump Day Herald, Hawkeye Edition

This weeks edition of Hump Day Herald is coming to you from Iowa, the Hawkeye State. In addition to the plentiful corn and soybeans, my girlfriend lives here. She's been the one to visit me for the last couple visits, so it was my turn to make the trip over. Maybe another time, I'll look into posting about saving money on travel. I've paid roughly the same amount for the round trip for the last several years, so I know when if I'm actually getting a deal. This time, the price was within the average range, so I didn't overpay, but no money was saved either.

A picture of corn would be appropriate.
Anyway, enough of that. Being on vacation means I actually have ample opportunity to get more posts ready for here. Instead of rushing out the door at 0700 to go to work and not returning until after 2200, I might roll over and out of bed before 1000. At that point, I really don't have much else to do. I'd intended to use the free time to get posts all lined up, but that hasn't materialized as easily as I'd hoped it would. I even tried sitting at Starbucks and writing, to no avail. Fortunately, I still have another five days here, so I hope to rectify the issue.

Moving on to other news: I finally got one of my goals for the year taken care of and paid off a credit card. It was the first card I ever got, but the interest is something awful, and they won't lower it even though I've called and asked several times. However, they have been kind enough to voluntarily raise my limit over the years which I suppose is a blessing in disguise if properly managed. Needless to say, I didn't manage it properly until recently. Now that it's paid off, some might suggest that I put it away for good going forward. I will be greatly curtailing its use, but I still have a few reasons to pull it out on occasion. The extra rewards categories are nice to have. Getting paid to buy what I was already buying sounds good to me. Also, it is my oldest card, and closing it would ding my credit score a bit.

In reviewing the goals post, I realized I'd actually finished two of them. One of the retirement account loans also got paid off a bit over a month ago. That has freed up just about $55/month in cash flow in my budget (about a week's worth of gas). When combined in conjunction with the money I will no longer be sending my credit card, a tidy sum will now be redirected into servicing other debts and building up my reserves for FIRE. After years of mediocrity, I can finally see some real progress and I intend to keep the momentum going.

Anyway, enough about me. If you have a similar story of finally getting some debt paid off that has been sticking with you, do share in the comments. Ditto if you have some that you've been wanting to get rid of, but just haven't figured out why it hasn't happened yet. I know exactly how that feels and I'm sure there're plenty of other people who also share those sentiments. We're all on this journey together. And don't worry, I didn't forget. I still have haiku for you.

Paid Off
Paid the charge card off
Making progress toward FIRE
No more crisis mode

Image courtesy of koratmember / FreeDigitalPhotos.net

06 March 2013

Hump Day Herald

Fun fact: this is the largest architectural use of
stainless steel in the world.
Ok, so there will be no haiku today on account of my laziness. Also, I kind of like how that title sounds. Not that there was necessarily anything wrong with Hump Day Haiku either. It's just that this one flows a bit better, at least IMHO. (I usually like alliteration anyway.)

Anyway, moving on to what we're heralding: FinCon13! Anime geeks have ComiCon, PF geeks have FinCon. If you may recall, I had hoped to virtually 'attend' FinCon12, but that ended up not happening. So when the FinCon13 information popped up in my Facebook newsfeed yesterday morning, I wasted no time in getting over to order my tickets and putting in my request for vacation time. That's a hot commodity lately, I certainly don't want to be left unable to attend again. Here go the meaty bits.

What it is: Financial Blogger's Conference, 2013

Where: Gateway City, aka St. Louis, MO.

When: October 17-20, 2013.

Cost: $99 (+ about $3 in fees) for the next 15 or so hours, $179 thereafter.

For: Financial bloggers, or anyone interested in becoming a (PF) blogger, anyone connected with personal finance, anyone wanting to improve their own finances, etc.

If you buy a ticket then decide for whatever reason that attendance just isn't feasible, tickets are transferable! I understand that that can be done through the Eventbrite website, though I'm not sure on all the details. But that is a recourse available in case your situation changes between purchase time and conference time.

Yours truly will be there, though I definitely have no plans of presenting. I intend to just focus more on mingling and absorbing information. Maybe at a future gathering, I will take the mic. But for now, that time will have to wait. Au revoir!

01 March 2013

Monthly Mashup: February

Well folks, it is Friday...right? With that, I'll also acknowledge that another month has already left us. Hard to believe that 17% of the year is already gone! Anyway, the month of February saw more stuff happen in the world, ranging from absurd to tragic. Alas, I am simply unable to keep up with the flow of information and channel it all to you. My twitter feed updates faster almost than I can read at times, and I am pretty selective in whom I follow to begin with. As such, I can only channel a small smattering of information to you.

First stop, taxes. The height of this season is already evident in the advertising world, let's see what the PF blogosphere has to say about it. Very early in the month, we readers of 20somethingfinance were made aware of the rise of IRS e-file identity theft and ways to combat it. I was already working on my taxes, but that information pushed me into action to round up all the paperwork and submit it. In the end, my federal refund was down quite a bit from years prior and I owe the Golden State. That should put a damper on my making dumb choices with a large wad of cash. (Yeah, guess how I 'funded' my car?) C'est la vie, I guess this is growing up.

Speaking of taxes, Elle at Couple Money reviewed the tax software that I use, TurboTax. She was having a little giveaway as well for a free copy of the software, but we're a tad bit late for that party. However, if instead of using tax preparation software, you decide to take your pile of papers into an actual tax preparer, you need to know some things about them first to make sure they're accountable.

Equally intriguing piece of news as taxes: I cut my hair. My hair is now the shortest that it has been in at least a decade. However, it wasn't to save money. (I've never been to a barbershop in my life.) I've owned a set of clippers for years, but usually just have a family member trim it for me with scissors. This time, I finally just took the clippers to my head and produced the ball to the right. We'll see how long it lasts at this level. It has simplified my hair care in other ways beyond cutting, and if I get around to getting a motorcycle/scooter, it will be much easier to put on a helmet.

Coming up soon, I hope to finally get some new content updated for any of the number of serials I started. I've been reading voraciously, so I do have plenty fodder for several Look at Lit posts. I am also debating going to graduate school, so some Considering College posts are on the horizon as well. And of course, Hoodwinked is the newcomer, but I can't even begin to write down everything fast enough for those posts. Not making promises, but all this content needs to get out.

So if you haven't already done so, set aside some time this weekend to finish up your taxes. You don't want to end up putting it off until April 14, only to find that you're missing a document, there's a long line at the Post Office, or any other usual application of Murphy's Law. It's a shame to end up owing penalties based on something that can be so easily avoided right now. Good luck!