Personal finance questions

Posted:
in General Discussion edited January 2014
1. Is anyone making money now? I usually try to ignore my investments, but I just found out that my money market account is making 1.5% , and I also have a balanced stock/bond/cash fund that of course isn't doing anything either. I won't even look at my retirement accounts, which are all stocks. :eek:

(OK, that was more of a rant than a real question.)



2. Does anyone use a tax preparer? I've always done my own and I've never itemized, but this is the first year I've owned a home, and (I think) you have to itemize to do the mortgage interest deduction thing. Is it too tough to do on your own? What are the benefits of having someone else do them?

Comments

  • Reply 1 of 20
    1. Am I making money now? No, I have a minimum wage position doing web and graphic design(!) My freelance work has shrivelled up to nothing. And I have practically no savings/investments/financial future.



    2. Tax preparer? H&R Block. :o



    This year I have to do something radical. Save every penny, keep searching for a real job. Maybe even find another direction career wise. That can be hard though...being in my 40's. But my sister did it. She went back to school and got a teaching degree at my age and is now a well paid teacher.



    But it's going to be rough for me. I'll try. Sure as hell this government isn't going to do sh!t about it...
  • Reply 2 of 20
    trick falltrick fall Posts: 1,271member
    I don't have much investments to speak of, just my 401k. Luckily I switched all of my 401k money to a fixed 4.5% return back in April and made a couple of bucks while most were losing.



    I'd go with an accountant for the taxes, less aggravation and they usually pay for themselves.
  • Reply 3 of 20
    One of the problems of my huge pile of the ones I´ve had for the last three month has been my bank finances. I have a credit on my bank account I made five years ago a year before I started at Uni. It is $3300 and it has been used out for the last two years. One month ago I got a letter saying that my bank wanted to renegotiate it (a standart five year thing). I just stopped my 30 h/w job, have loans for my appartment and students loans, all things I didn´t have five years ago. So I am pretty sure I won´t get the credit again so somehow I have to come up with $3300 in less than one month from now. On top of that I lost my bike, I had to buy a new computer instead of my Pismo etc etc etc.



    I´ve managed to come up with half of it, all in legal and ethical correct ways (quite amazing if you ask me), so anyone wants to buy my soul for $1650 please say so <img src="graemlins/hmmm.gif" border="0" alt="[Hmmm]" />



    Sorry for ranting in your thread
  • Reply 4 of 20
    trumptmantrumptman Posts: 16,451member
    I made about $150k last year from my real estate investments. (Not realized yet because I continue to own and rent them rather than sell them) My return was about 880%-900% depending upon how you measure it. That is just the initial return and of course if you measure it over the course of a lifetime it will be much more than that. I personally wouldn't consider any investment for myself that didn't return less than 300%.



    I wouldn't know anything about stocks or bonds because I don't own any of them. Stocks use to be good investments in my opinion because people bought them for the dividends they paid above their profits. Now people just seem to own them for what they think the stock will be worth. That isn't smart in my opinion.



    I am a very, very big fan of the Rich Dad series of books.



    I personally like Real Estate as an investment vehicle. It is pretty mistake tolerant, it isn't rocket science. I have read that if you can own about 4-5 houses and have them paid off by retirement age, you don't really have to worry so much about a 401k account. Of course you could have a bad renter or two and have that cost you a few thousand but as you noticed your 401k isn't guranteed to go up either. In fact it isn't guranteed at all.



    I have used an accountant and also tax software to prepare my taxes. I ALWAY itemize my deductions. There is about a 30% increase in your savings possible for itemizing. I don't aggressively itemize as much as some though.



    I wouldn't say that the accountant has gotten me back anymore money or helped me pay any less taxes than I would have done. However I don't know how complicated your tax situation is though.



    My suggestion would be this, prepare your taxes online. You can enter all the information and you don't have to actually pay anything until you choose to print it or electronically file it.



    If you are happy with the result, pay the fee and file. I use the TurboTax online at Quicken.com and last year it ran about $45.(Federal and state filed electronically)



    If not consider using an aggressive tax attorney (if your taxes are that complex) or bookkeeper/accountant. The fees for tax preparation go up every year and last time I paid it was about $250. (3 years ago if I recall)



    The Quicken tax filing system is pretty amazingly sophisticated though. It has helped me very well for the last two years. It even handled all my deductions for owning a rental property.



    I don't know how well it will handle cashing out a 403b, selling a rental property, refinancing your house, and purchasing and repairing two other rental properties though which is what I have to file for this year.



    Good luck, and take a look at Rich Dad, Poor Dad, it will really change your opinion about money.



    Nick



    [ 01-05-2003: Message edited by: trumptman ]</p>
  • Reply 5 of 20
    brussellbrussell Posts: 9,812member
    [quote]Originally posted by trumptman:

    <strong>...

    </strong><hr></blockquote>Thanks for the great advice. I checked out that Quicken site, and it looks very good. My worry is that I haven't spent the last year thinking about itemizing my taxes, so I don't have much in the way of documentation.
  • Reply 6 of 20
    sc_marktsc_markt Posts: 1,393member
    [quote]Originally posted by BRussell:

    <strong>



    2. Does anyone use a tax preparer? I've always done my own and I've never itemized, but this is the first year I've owned a home, and (I think) you have to itemize to do the mortgage interest deduction thing. Is it too tough to do on your own? What are the benefits of having someone else do them?</strong><hr></blockquote>



    Me and my wife have done our own before. It's not too bad. Takes about 2 or so hours. And we have a house. However, we also have a tax preparer now and he seems to be able to squeak out a few more dollars in our return.
  • Reply 7 of 20
    trumptmantrumptman Posts: 16,451member
    [quote]Originally posted by BRussell:

    <strong>Thanks for the great advice. I checked out that Quicken site, and it looks very good. My worry is that I haven't spent the last year thinking about itemizing my taxes, so I don't have much in the way of documentation.</strong><hr></blockquote>



    Do you mind if I ask what sort of deductions you are worried about? Some things, as long as they fit within what is reasonable don't really need proof. I mean they might if you were indeed audited, but the Quicken web program actually knows the norms of all the deductions you claim and will check your return to insure nothing is out of line.



    The IRS looks for nails that are sticking out of the wood. They are profoundly understaffed and the only way they kick out anything for an audit is if one of their computers notices something really out of whack. The TurboTax online program will scan your return and insure that you have no nails sticking out.



    So in other words as long as it is reasonable you can pretty much claim most deductions without substancial proof. Mortgage interest and things like that would need proof, but gas and mileage on a vehicle is much less firm.



    I mean think about it this way... if they couldn't catch Enron, how are they going to know exactly how many times you took a client out to lunch and if the receipt was for the client or from you family. They simply don't know. It isn't as if you send in the proof. You just stick everything in an envelope and stick it in your files for 5 years.



    Just a few pointers...



    Nick
  • Reply 8 of 20
    brussellbrussell Posts: 9,812member
    [quote]Originally posted by trumptman:

    <strong>Do you mind if I ask what sort of deductions you are worried about?</strong><hr></blockquote>I'm a teacher like you. I don't know enough about what deductions are even possible. I assume the big one would be mortgage interest, but obviously I have that one documented. Where do most of your meaty deductions come from?
  • Reply 9 of 20
    trumptmantrumptman Posts: 16,451member
    [quote]Originally posted by BRussell:

    <strong>I'm a teacher like you. I don't know enough about what deductions are even possible. I assume the big one would be mortgage interest, but obviously I have that one documented. Where do most of your meaty deductions come from?</strong><hr></blockquote>



    Well first as a teacher you get to deduct $250 from your taxible income. You don't even have to itemize it. It will even be available on the 1040ez form this year.



    We also get deductions for contributing to both church and charities. It would be a little late for this year but when you do your spring cleaning take it to goodwill or a similar place.



    They will give you a very fair receipt. You basically are earning cash for whatever bracket you are on that receipt. If you donate $300 worth of goods, and you are in the 31% bracket, it is like putting $100 in your pocket.



    I get a lot of deductions because of my rental property. It is a fantastic write off. Since the properpty is rented you get to DEPRECIATE the building even while the property is APPRECIATING. Likewise you can transfer the growth to another property with a 1031 exchange to move on up.

    Most of my deductions come from having a rental property. It allowed me to write off between 6-7,000 of taxable income each year. (It's like putting 2-2500 of money back in your pocket.)

    You also get to write off any repairs, materials things that aren't capital improvements.



    You get a standard deduction for yourself and your children.



    You get to deduct interest on what the government considered to be desirable loans. (Home, student, etc)



    You get to deduct money spent on medical and dental care.



    You get to deduct the money you have had to spend on other taxes. (property, state income, etc.)



    Those are a few I can think of right off the top of my head. If you don't mind me asking why do you have a 401k if you are a teacher? Is Colorado different in that regard then California? Here we have a pension. (One of the only decent benefits from being a teacher)



    Nick



    [ 01-08-2003: Message edited by: trumptman ]</p>
  • Reply 10 of 20
    For the past 3 years, I've done my taxes online with TurboTax. Pretty easy and since I live in a state with no income tax it's also cheap.
  • Reply 11 of 20
    timotimo Posts: 353member
    Started going to an accountant when my side business turned into my main business. I used to use tax programs, but one year I used two different ones, only to get two very different answers. I decided to go to an accountant at that point, who found stuff that I wouldn't have thought to look for.



    Better accountants can also help you organize now for next year, especially in the itemized deduction department.



    Keep in mind that all costs associated with tax prep (and investments, I think) are tax deductable. While that doesn't make 'em free, it does take some sting out of the accountants' bills.



    Ask around for someone reputable.
  • Reply 12 of 20
    fellowshipfellowship Posts: 5,038member
    Greetings BRussell,



    It is nice to see the help you have received from the responses to your thread. I would only add that real estate is a great way to grow wealth. You can use a small seed as a down payment to secure the debt to purchase a property and over the years the renters will pay rent that covers the mortgage, property taxes and insurrance. It is a good way to grow wealth in this period of weak returns. Just make sure you have a buffer of cash on hand to cover bills during any time the property is not rented. I would encourage small entry-level single or multi-family buildings that have apartment level rent rates as they are recession proof. People have to live somewhere and if it is an entry level rent rate in your area it will do well in good and bad times.



    Best of luck to you and your financial future.



    Fellowship



    [ 01-09-2003: Message edited by: FellowshipChurch iBook ]</p>
  • Reply 13 of 20
    timotimo Posts: 353member
    Hmpth. Lan'lord. C-I-L-L. Lan'lord.
  • Reply 14 of 20
    brussellbrussell Posts: 9,812member
    [quote]Originally posted by trumptman:

    <strong>If you don't mind me asking why do you have a 401k if you are a teacher? Is Colorado different in that regard then California? Here we have a pension. (One of the only decent benefits from being a teacher)</strong><hr></blockquote>I have a 403b with TIAA-CREF. My accounts went down 30% in 2001 and 20% in 2002. So I upped my contribution this year.



    I don't know if it differs by state, but I know that some of the people who have been around for a while are on defined benefits plans, but I believe most of us are on contribution plans where the University matches whatever contribution we make up to a limit.
  • Reply 15 of 20
    [quote]Originally posted by BRussell:

    <strong>1. Is anyone making money now? I usually try to ignore my investments, but I just found out that my money market account is making 1.5% , and I also have a balanced stock/bond/cash fund that of course isn't doing anything either. I won't even look at my retirement accounts, which are all stocks. :eek:

    (OK, that was more of a rant than a real question.)

    </strong><hr></blockquote>



    My 401k took another hit last year although the fourth quarter took some of the sting out of it. I didn't move out of stocks two years ago like I probably should have. I knew stocks were high but this is a long-term position. I just keep plowing the money in high or low. Last quarter was very good though. I rebalanced everything at the end of December and so far this year I'm up. Maybe last quarter's trend will continue but it's too early to say.



    My sister and brother-in-law are doing well with real estate. They're riding a nice little boom in Savannah. They have a number of rental properties and bought another house just a few weeks ago that they're fixing up to sell. Structurally it was very sound (brick construction) but the interior hadn't had anything done to it for decades. They're putting in new central heat (the house never had any), a new electric service, a new kitchen and bathroom. They're also painting everything and doing work on the floors with completely new floors in the kitchen and bathroom. They already have a number of feelers from potential buyers. Hopefully they'll be able to realize a nice little profit.
  • Reply 16 of 20
    shetlineshetline Posts: 4,695member
    Even if it's a good investment, I absolutely dread the idea of having to be somebody's landlord in order to make money from real estate. I'm glad I can make good money as a software engineer instead. I suppose, however, if I weren't so risk-averse I could be making even more money by properly investing what I earn.



    What really bugs me is that our society is geared towards giving the greatest financial rewards when people figure out clever ways to shuffle money around from place to place, rather than when people directly perform useful tasks or produce useful things. (Not that I couldn't manage to grin and bear it if I was benefiting from the money shuffling! )



    Participating in the distribution and allocation of capital does have some social value, of course, but it amazes me how distorted the value of wheeling and dealing has become. The crooks who bankrupted Enron, having failed miserably as what they were supposed to be doing, have already enjoyed and will continue to enjoy much more wealth than most of us could obtain in a hundred lifetimes of solid, honest, quality work.



    [ 01-09-2003: Message edited by: shetline ]</p>
  • Reply 17 of 20
    trumptmantrumptman Posts: 16,451member
    [quote]Originally posted by BRussell:

    <strong>I have a 403b with TIAA-CREF. My accounts went down 30% in 2001 and 20% in 2002. So I upped my contribution this year.



    I don't know if it differs by state, but I know that some of the people who have been around for a while are on defined benefits plans, but I believe most of us are on contribution plans where the University matches whatever contribution we make up to a limit.</strong><hr></blockquote>



    Ah, I had one of those once upon a time. (Up until this year in fact) Then I realized that I should just get smart and put my money to use for me instead of handing it to someone and praying they might make me some money.



    Please don't take that in a bad way. I assure you if there is a mistake to make with money, heck even with landlording, I have made it.



    The concept behind the 403b is terrible. I stopped my contributions and dissolved the account and that was with getting about a 4.5-5% return.



    As one fellow teacher to another, I would really recommend reading some financial books starting with Rich Dad, Poor Dad. Teachers already don't work for money, so they might as well learn how to have money work for them.



    Nick
  • Reply 18 of 20
    trumptmantrumptman Posts: 16,451member
    [quote]Originally posted by shetline:

    <strong>Even if it's a good investment, I absolutely dread the idea of having to be somebody's landlord in order to make money from real estate. I'm glad I can make good money as a software engineer instead. I suppose, however, if I weren't so risk-averse I could be making even more money by properly investing what I earn.



    What really bugs me is that our society is geared towards giving the greatest financial rewards when people figure out clever ways to shuffle money around from place to place, rather than when people directly perform useful tasks or produce useful things. (Not that I couldn't manage to grin and bear it if I was benefiting from the money shuffling!



    Participating in the distribution and allocation of capital does have some social value, of course, but it amazes me how distorted the value of wheeling and dealing has become. The crooks who bankrupted Enron, having failed miserably as what they were supposed to be doing, have already enjoyed and will continue to enjoy much more wealth than most of us could obtain in a hundred lifetimes of solid, honest quality work.</strong><hr></blockquote>



    If properly invested your income could bring about such a return that you wouldn't have to worry about income and what you earn. My goal is to have enough monthly income being cleared from my rental properties to match what I take home from my job. I figure having an additional salary to invest on myself wouldn't suck.



    As for the shuffling money around part, it seems to me that the biggest financial disasters occur from pyramid schemes and companies or individuals that radically over-leverage themselves.



    In both cases, while the crashes are spectacular, I don't feel to bad for the parties involved because they were suffering from greed just as bad.



    The people at the bottom of the pyramid got in and bought the lie of something for nothing. Likewise the folks that loaned the money to Enron and others had to know the exponential returns were not going to carry on forever.



    Nick
  • Reply 19 of 20
    shetlineshetline Posts: 4,695member
    [quote]Originally posted by trumptman:

    <strong>If properly invested...</strong><hr></blockquote>



    Now there's an 'if' you could drive a truck through!



    [quote]<strong>your income could bring about such a return that you wouldn't have to worry about income and what you earn.</strong><hr></blockquote>



    I don't doubt that that's possible. Maybe it's because I had a "Poor Dad", however, that the idea of putting huge wads of my hard earned money into real estate conjures up more images of nightmare tenants and collapsing housing markets than it does dreams of financial independence.



    My own house that I now live in dropped so much in value shortly after buying it that it took a good six years just to cross back into positive equity territory. For all of those years I felt more like the house owned me rather than vice versa.



    [quote]<strong>My goal is to have enough monthly income being cleared from my rental properties to match what I take home from my job. I figure having an additional salary to invest on myself wouldn't suck.</strong><hr></blockquote>



    That would definitely Suck Less&trade;.



    [quote]<strong>As for the shuffling money around part, it seems to me that the biggest financial disasters occur from pyramid schemes and companies or individuals that radically over-leverage themselves.</strong><hr></blockquote>



    I'm not only talking about things going wrong as badly as Enron. For instance, some guy brokers the merger between two giant companies and walks away with $100,000,000. It takes him a year to do this, but he's working on other things too so this represents say three months of his time. Is the "work" that he does schmoozing with investors really 8000 times more valuable than the $50,000/year QA guy who makes sure the new company's products work right?



    If the QA guy misses too many product flaws, he gets canned and might have a hard time finding a second job. If the merger of the two companies fails in a few years, however, the broker still has his $100,000,000 and may even make more money the next time.



    Take your own case... Which do you think is more valuable to society in the long run? Your work as a teacher, or your investments in real estate? Which, however, gives the greatest reward in relation to the effort expended?



    I don't expect capitalism to magically produce some utopian ideal of social justice, of course. But things are pretty far out of whack.
  • Reply 20 of 20
    maskermasker Posts: 451member
    The story of masker...



    in 2000 i had a job that frankly, I didn' think i would ever have. i was the head of my department (out of 5 depts) in a company that was nationally ranked 25 th in it's industry among thousands of competitiors.



    I was making good money, but not a killing, had avanced as far as I would be able to advance in the company even long term, (only 2 people above me) and I worked about 45 hours a week and it was fun.



    Then I got the opportunity to work for another company for one year, and and at the end of the year, i could leave with whatever clients I served. This seemed like a great way to go so i did it. I submitted my resignation on Septemeber 7th, and it was my last day with company A. Septemebr 10th I was at Company B making calls to meet some very big clients the next day (VP's etc of billion dollar company)



    The next day on the way to work a few planes fly into buildings and the 911 effect happens. i work the entire year and make good money but only to see my clients cut budgets and downsize into shadows of their former selves.



    So my year contract comes up in September and I form my own company, luckily I land some good new clients the week i am leaving and that saves me. I have a great SEPT, OCT but NOV and DEC were off. January had a slow start but looks to be a good. Ah the joys of sel-employment (or is it self-unemplyment?)



    Am I making money? no. But i hope to! All in good time. I'm treading water and making ends meet. i think if I make through the next 12-18 months, I'll be hiring people to work for me.



    I no longer believe in giving my money to others to make money for me. i own stock but I don't plan on buying any more unless I gain a lot of wealth and need to stick some money somwhere.



    /bio off



    MSKR
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