Category Archives: Financial stuff

The Minimum Wage Millionaire – Book Review and Giveaway

minwagemillion I was recently given a copy of the book, The Minimum Wage Millionaire: How a Part Time After School Job Can Change Your Financial Life, to review. I’m offered books to review almost every week, but I have been declining them for quite a while since I’ve read so many personal finance books that I’m pretty much burnt out on the subject. Plus, I regularly read lots of personal finance blogs so I like to read about something else for my additional reading. Since I hadn’t done a giveaway for a long time and I liked the idea of this book I decided to review and give away this book.

The concept of the book is fairly simple. If you are able to invest the maximum Roth IRA contributions for six years while in your teens and early 20’s then you have a good chance of that money growing to a million dollars by the time you are retirement age. You can quibble about the expected return on investment or note that a million dollars won’t be worth near as much by that time, but it is still obvious that starting your savings early will dramatically improve your financial situation later in life.

The author states that this is the book he wishes he would have read when he was younger. By writing the book he hopes to make more young people aware of how beneficial starting to save early for retirement can be. This idea resonates with me. I read a lot personal financial books when I was in my early 20’s and knew how powerful starting to save early could be. Unfortunately, I worked minimum wage jobs back then and barely made enough to pay my bills so I wasn’t able to save much. Once I finally landed a decent paying job I totally abandoned my good financial habits and blew all my money and went into debt. I eventually ended up cashing out the few thousand I had managed to save in an IRA while trying to get out of debt. If only I had kept the same money habits I had when I was making minimum wage once I started making a decent wage I’d be a lot better off financially right now. Having the knowledge isn’t the same as applying the knowledge. If there are any young people reading this post, don’t make the same mistake I did.

The Giveaway

In order to enter to win a Kindle copy of the book, “The Minimum Wage Millionaire”, all you need to do is leave a comment. There is a limit of one comment per person. Other contest rules will apply as needed to maintain fairness. Entry to the giveaway will end on Sunday June 22, 2014 and a winner will be chosen by random drawing. Note that you do not need to own a Kindle in order to be able to read a Kindle book. There are free Kindle apps for smart phones, tablets, and PCs that can be used to read the book.

My Student Loan Repayment

My law school loans have been on income based repayment. Since my income has been so low since graduating law school my monthly payments have been $0. Last year I had a good year for income and as a side effect of that my law school loan payments are no longer $0. For the next year I will have to pay $105 a month towards my law school loans. Some people were quite upset when I posted a couple of years ago about my student loan payments being $0 and not being concerned about my student loans. This might make them happy. Although I liked the $0 payments, since the reason for the new higher payments is that I’m making a lot more money than I used to I can’t complain. I’d rather have the higher income than the $0 payments. You can learn about the different repayment plans at fafsa.ed.gov.

The $105 a month payments will not even touch my principal. The payments will be all interest. That will at least give me a little bit of a tax deduction. My loan balances have steadily been rising ever since I graduated and these payments will probably barely slow the increase in my balances.

There is a pretty big drawback to using the income based repayment plan. Using an online repayment calculator at my present rate I would end up paying over $95,000 in interest by the time my loan is forgiven after 25 years. At that time I would still have a remaining balance of over $255,000 that would be forgiven. The calculator makes some assumptions about my income growth and the change in the poverty line which could change the results quite a bit. Also, the calculator is based on 25 years remaining and I only have about 21 years remaining now. A different calculator showed I would have about $200,000 forgiven. It is pretty scary to see that after making $95,000 of payments my remaining balance could be almost twice as much as my original loans. To make matters worse the forgiven amount is counted as taxable income. If the top tax rate at that time is 40% I would end up with an $80,000 tax bill.

If I were to have my loans forgiven under the public service loan forgiveness program the forgiven amount would not be taxable income. You have to have 10 years of public service to qualify for that program. Working for the government or a non-profit is considered working in public service. I have about 1 year of working for the government or a non-profit since graduating from law school. It now looks like working nine more years for the government or a non-profit would be very financially beneficial. The loan forgiveness would add about a $9000 a year benefit to any non-profit or government job. That makes them a lot more attractive. Or I could wait and see if they decide to make the 25 year forgiven loan amounts non-taxable as well. Given the current amount of federal debt I seriously doubt that will happen.

Now that I have completed my initial degree, I plan to continue my education. Not only will this allow me to improve my earning potential, but I will also have the chance to earn scholarships that will help me to pay for my schooling. Some universities offer a 25% tuition scholarship for their alumni. If I am eligible, this credit will allow me to have 25% of my next degree paid for, whether it is a doctorate, a graduate certificate, or even a second bachelor’s degree. From my perspective, I might as well take advantage of every benefit that is provided for me because it will make me more employable.

To Fincon or Not to Fincon

I have been debating whether to attend FinCon or not this year. I went to the 2011 FinCon and enjoyed it, but missed out on a lot of the activities because I was also working the that weekend. I decided to skip the 2012 FinCon because I was too broke for it be sensible to go. FinCon 2013 was in St. Louis which is just a four hour drive away for me. That made the cost of attending pretty cheap so I bought a ticket and planned on attending. I did show up for the first morning, but I just didn’t feel comfortable with the crowds and left at the lunch break and didn’t make it back for the rest of the convention. It was a weird attack of anxiety like I hadn’t experienced since my high school days. I’m sure almost everyone would have been cool and nice if I had stayed and actually talked to people, but I wasn’t up for socializing that weekend and basically wasted my convention ticket.

If I buy a ticket to FinCon 2014 and end up not using it, that would be an even bigger waste of money. The price of a ticket is a bit higher this year and I’ve already missed out on the cheapest ticket prices. Plus, it will cost me more to fly or drive down to New Orleans. I didn’t bother getting a hotel last year. The weather was nice and I knew of nearby places that I would feel safe sleeping in my car so that is what I did. I don’t know New Orleans well enough to be comfortable sleeping in my care there. I’m not sure if there is anywhere close to the convention that I’d be able to safely sleep in my car. It may still be a little warm to sleep in my car as well, since the convention is earlier this year and in a warmer location.

Other than the financial aspect, my reason for being unsure if I want to attend is that I don’t have any plans to change my blog. The convention seems to be about growing your blog and making it into a big business. I don’t really want to turn my blog into a business. I like to write for my blog and don’t want to spend much time doing anything else having to do with the blog. It would be nice to have more readers and more engagement with my posts, but if that means spending hours each week on social media, constantly tweaking my design, experimenting with plugins, and developing an email list than I’d rather just be content with my blog as it is. For those reasons, I’ve decided not to attend FinCon this year. I do reserve the right to change my mind.

How to File Your Taxes for Free

The Internal Revenue Service opened the electronic tax return filing season on January 31, 20123. It can cost hundreds of dollars to have your taxes done if you go to a tax preparation firm.  Even using tax preparation software can be expensive.  If you haven’t filed your taxes yet you may be able to use free tax software online and file your taxes for free.  Most people are eligible to prepare and file their returns for free.  If you don’t qualify to use the free online software there are other free or low-cost options available to you.

Go to IRS.gov and click on the Free File icon on their home page to see your free filing options.  Or you can just go to freefile.irs.gov to find out more about the Free File program. Free File is a free, federal income tax prep and electronic filing program for eligible taxpayers, developed through a partnership between the IRS and the Free File Alliance, a group of private sector tax software companies. The Free File program is open only to taxpayers with a 2013 Adjusted Gross Income of $58,000 or less. About 70% of taxpayers have an AGI of $58,000 or less meaning most taxpayers can use the free file program. At the Free File site you answer a few simple questions and then it will list companies that you can use to file your taxes for free.  Major online tax preparation companies such as H&R Block are participants in the program.  You do need to click through to the company site from the IRS site to ensure that your tax preparation is free.

For those that have AGI above the limit there are some companies that allow you to file your federal return for free regardless of your income. These companies hope that after using their software for free to file your federal return you will pay to file your state return with them as well.  Even if you qualify for free file for your federal return you may have to pay for your state return.  You usually have several companies to choose from, so look at them all to see if there is a free option.  If there is no free option then you can at least go with the lowest cost option.  Things are easier for those of you from a state with no income tax since all you need to worry about is whether the federal return is free.

An option available to everyone is Free File Fillable Forms. As you might guess from the name, these are tax forms that you can fill out online.  When you are finished you can file the return online.  This option requires more tax knowledge than using preparation software.  There are no questions leading you through the forms.  You need to know what to put into the forms.  This option is for the federal return only.  Some states may offer a similar option.

If you can’t use any of these options then my next suggestion would be to buy online software to prepare and file your taxes. The questionnaire style makes these easy to use. If your taxes are very complicated or if you aren’t confident enough in your ability to do your own taxes then I would go to a tax preparation office. If you do go to a tax office, see if they have any promos or discounts and avoid costly refund anticipation checks.

I’ve used free file software to help my niece and brother file their federal and state taxes for free. My girlfriend was also able to file her federal and state return for free, although she did have to pay for the second state. Paying $17.95 to file the second state return was a lot better deal than the over $100 to file she usually pays.

Go to the IRS Free File site to see if you can save money on your taxes.

*The image at the beginning of this post is an affiliate link.

My Terrible 2013 Investment Returns

Here is a breakdown of my investment returns for 2013. Although the stock market returned about 32% for the year I managed to do much worse. I don’t think I’ve ever given any advice here on investing in stocks and bonds, but if I did I hope you didn’t take it. I calculated the returns using the portfolio personal rate of return calculator at My Money Blog. The calculator doesn’t give your exact return, but it is close enough.

I have three different investment accounts. My Roth IRA which was invested in a bond fund. My Traditional IRA which is invested in index funds and my dividend stock account which consists of individual dividend stocks. I’ll share how each of them did and why I think they had sucky returns for the year.

I will start with the worst. My Roth IRA which was invested in a bond fund managed to lose 9.09%. This was quite a feat considering the bond fund I invested in lost 8.77% for the year. Somehow I managed to lose just a little more. It could have been even worse. I bailed out of the bond fund and into a money market fund about halfway through the year and it ended even lower than when I bailed out. I’m guessing my return was worse then the bond fund’s return because the additional investments I made early in the year were when the fund had appreciated a bit from the beginning of the year. I knew the bond fund would take a big hit when interest rates began to rise and I had been thinking of switching out of it, but I waited too long to do anything. I’m not sure what I’m going to do with this money now. The money market fund actually has a slight negative return after expenses so I don’t want to leave the money there. I’ll probably put the money back into a different, shorter-term, bond fund, but I am still a little wary of doing that. What would you recommend.

The second worst was my dividend stock portfolio. It managed to return 5.9% for the year. That is pretty bad when the overall market returned 32%. My worst mistake here was not being diversified enough. Part of the reason I wasn’t diversified enough was not having enough money. Since it costs $4.95 to buy a stock, I like to wait until I have a $1000 to invest before purchasing a stock. The most stocks I’ve had in the account was 10 which is still not diversified enough. I had to sell some of them in 2012 because I needed the money so for 2013 I only had seven stocks. A couple of the remaining stock positions were well under $1000 because I had sold part of them when I needed money. The two REITs I had in the portfolio were full positions and their value went down quite a bit due to the entire REIT sector going down over fears of higher mortgage rates. I stopped investing in that account last year and started buying stocks through LOYAL3 . This allowed me to diversify a little more since they don’t have any transaction fees and I can invest as little as $10 in a stock. When you have a small investment amount like I do not having to pay $4.95 to buy and sell the stock makes a difference. The big drawback to Loyal3 for me is that they do batch orders for buying and selling so you can’t be sure what price you will get. I’m holding off on buying any more individual stocks for now because I want to max out my IRA and build up my cash savings a bit.

My traditional IRA account was my best performing account for the year although it still lagged the overall stock market by quite a bit. This account returned 20.64%. The account was invested in a couple of domestic dividend stock index funds, a preferred shares fund, and an international dividend stock fund. The preferred shares fund and international fund both had small losses which dragged down the overall return. This year I’m not going to invest in the preferred shares fund. Also, the two domestic dividend stock funds have a lot of duplicate holdings so I’m just going to invest in the lower cost one from now on. Investing in both is an unnecessary extra cost.

My overall portfolio return for the year was measly 3.51%. I could make that much with a savings account. I’m hoping that with a change of strategy I’ll do better this year.

Healthcare.gov Finally Worked for Me (Mostly)

healthcare With the deadline to sign up for a new health care plan through Healthcare.gov approaching a couple weeks ago, I decided to give the web site one more try.  After signing in I saw that there was an option to discard my previous application.  Since that application never let me finish I scrapped it and started a new application.  I was pleasantly surprised that the new application worked and I was able to sign up for a new health insurance plan.  This is how the site should have worked when it first went live.

The only glitch was that when I finished the application there was a link to pay for my health insurance.  That link didn’t work.  I was able to contact the health insurance provider on my own and pay for the insurance.  The health insurance company also left me a voice message and mailed me a bill although I’d already paid my premium by the time those arrived.

After deducting my subsidy amount I will be paying $56 a month for health insurance.  That is $9 cheaper than I am currently paying, but the new plan would be $215 without the subsidy.  If I make more money than I predicted I’ll have to pay back some or all of the subsidy.   If I end up going full-time at my employer and receiving health insurance from them I’ll also have to pay back the subsidy.  On the other hand, if I end up making less than I predicted I could receive an additional subsidy amount when I pay my taxes.

The new plan does have a much smaller maximum out of pocket cap of $6000 compared to the $13,000 of my current plan.  That doesn’t seem like much of an improvement for a plan that costs $150 more a month.   It doesn’t matter much if my maximum out of pocket is $6,000 or $13,000.  Either way I have to pay out of pocket for doctor’s visits which means I won’t be going to the doctor and I won’t actually be receiving any health care for my money.  Either plan only helps me if I become seriously ill or injured.  I’m hoping someday the government can come up with a better solution to health care, but I’m doubtful that will happen.