Are You Putting Your Life On Hold To Save For Retirement?

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In her new book, “Generation Earn: The Young Professional’s Guide to Spending, Investing, and Giving Back” (Ten Speed Press), the author Kimberly Palmer recommends that young adults try to save at least a quarter of their annual income.

This is a tall order for young or old to accomplish. But for the author and her husband they actually saved one-third of their joint income. Ms. Palmer, who is now 30 and writes the Alpha Consumer blog and column for U.S. News & World Report, said she recommended the one-fourth figure rather than one-third in her book because “it’s more realistic for people” in the current economy.

So how did they do this? They lived in a one bedroom apartment and basically never upgraded their college lifestyle. The daily meals consisted of inexpensive non-meat meals costing $120 weekly. They never upgraded to new cell phone models and never got cable.
Let's fast forward to the present. Today they have a mortgage, a child, daycare costs and are only saving 15% of their income. There goal is to get back to the 25% level of savings, but that's going to have to wait a while,

What are the reasons for this radical shift, the answer is babies. A family takes a lot of your income. And not just for a little while. For this family the next 25 years will be a time for sacrificing savings for a family . If more children come along then the money needed, will be multiplied.

I know many couples who have chosen to not have children. They enjoy more freedom and can retire sooner if they were good savers.

I received a comment on another post called "Do I Rent or Own When the Kids Are Gone?". It was from a couple who were in their mid 50's who had retired. They answered my question by telling me they live in a apartment and feel they can move to any city they want if they so desire. They do own a vacation home in the country where they go enjoy outdoor recreation activities. These people are set with a sustainable life style that can be enjoyed for the next forty years.

Did they put their life on hold to prepare for this day? Or did they live their lives along the way. The young author sacrificed before the child arrived and is sacrificing, in a different way, after the child came.

The extremes on either side of savings must make you move to the center and convince you to live your life along the journey

Related articles

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Who's in your Corner When the I.R.S. is at your Door?

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What strikes terror in the hearts of the individual like a letter from the I.R.S. I know because I received a couple in my day. You feel like Luke Skywalker facing Darth Vader in battle for the first time. Maybe not that bad but close.

If you have never dealt with the I.R.S. count yourself lucky, it's an experience you can do without.  In my case I claimed a deduction I shouldn't have and got busted. They offered me a payment plan. I took it and it was over. 

I was lucky with my minor scrape with the I.R.S. but some people have been audited and charged fines and late fees. They have had to hire lawyers and meet multiple times with an auditor. Many months of correspondence fighting the problem is exhausting.

What happens if your not getting anywhere with the I.R.S., it feels like they are so powerful and intimidating. There is help, someone to stand up to them and be in your corner. Where do you find them? Well, there at the I.R.S. Believe it or not the I.R.S. has something called the Taxpayer Advocate Service. It's an in house advocacy group that will stand up for you, all you have to do is ask.

Their mission statement is:

Taxpayer Advocate Service (TAS) Mission: As an independent organization within the IRS, we help taxpayers resolve problems with the IRS and recommend changes that will prevent the problems.

Here are seven things every taxpayer should know about TAS:

1. TAS is your voice at the IRS.

2. The service is free, confidential, and tailored to meet your needs.

3. You may be eligible for TAS help if you have tried to resolve your tax problem through normal IRS channels and have gotten nowhere, or you believe an IRS procedure just isn't working as it should. 

4. TAS helps taxpayers whose problems are causing financial difficulty or significant cost, including the cost of professional representation. This includes businesses as well as individuals.

5. TAS employees know the IRS and how to navigate it. They will listen to your problem, help you understand what needs to be done to resolve it, and stay with you every step of the way until your problem is resolved.

6. TAS has at least one local taxpayer advocate in every state, the District of Columbia, and Puerto Rico. You can call your local advocate, whose number is in your phone book, in Publication 1546, Taxpayer Advocate Service -- Your Voice at the IRS, and on the website at Contact Your Advocate. You can also call the toll-free case intake line at 1-877-777-4778.

7. You can learn about your rights and responsibilities as a taxpayer by visiting the online tax toolkit at www.taxpayeradvocate.irs.gov . 

This advocacy at a government institution is a breathe of fresh air. It's hard enough to deal with a bureaucracy normally, a helping hand and a kind face is what's needed in government. A little customer satisfaction goes a long way. 

Related Posts:

The I.R.S. has an App to Track Yor Refund

File Your Tax Return For Free - Here's Where to do it

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Are Extended Warranties Worth the Money?

If your like me have you noticed the deluge of ads for big screen TV's. You know it's Super Bowl time again when you get that yearly itch to get that new LCD or plasma TV. Why don't they have the Super Bowl around Christmas so I have a good excuse to give my wife a new set. You know it would be for her.

Marching down to Best Buy to get a new set is bad enough, but when you finally check out the clerk asks you if you would like to buy an extended warranty. You freeze, like a deer in the headlights. There is nothing like having to think in a split second to spend the extra money on something you haven't thought through while the burly guy behind you is waiting to make his purchase and the clerk is staring at you.

The debate over extended warranties is never quite over. We are offered these warranties for everything now a days. I bought a $50 voice recorder and was offered a extended warranty of 2 years for $10. Would it make sense to purchase it or pass it by? I don't know I'll have to do the math and get back to you.

I can see maybe getting a warranted on things $500 and up. On items that you know are expensive to repair. Not things that are necessarily throw away items like a voice recorder.

So what do consumer agencies say about extended warranties?

• Most products don't break during the warranty period. If they malfunction right away, they're covered by a store return policy or manufacturer warranty.
• The cost of the warranty is almost as much as the cost of a repair. So, buying a warranty is like paying for most of a repair, whether you need one or not.
• You can self-insure by setting aside the same money in a repair fund. If the item doesn't break, you get to keep the money.
• As a general rule, you shouldn't buy insurance for little things, only for financial disasters. If a repair cost won't wreck your finances, you probably don't need the coverage.
• Some higher-tier credit cards will extend the manufacturer warranty for free if you purchase the item with the card.
• The benefit of a warranty is mitigated if you have to pay a deductible.
• A warranty might call for replacement with a refurbished unit, not a new one.
• The extended warranty usually starts when you buy a product, largely duplicating the manufacturer warranty for some length of time.
• You know warranties are a bad deal for consumers because electronics retailers make a huge share of their profits from them.

On the other had the warranty industry has their arguments:

• Warranties extend your protection, providing peace of mind for typically 10 to 20 percent of the cost of the item. If a warranty costs more than that, make sure there's a good reason.
• Extended warranties usually offer service and protection a manufacturer warranty does not. That includes in-home repair or replacement, generally quicker turnaround for repairs, around-the-clock and weekend technical support, coverage for damage caused by power surges and the ability to transfer the warranty.
• If you regret buying a warranty, you can cancel, typically within 30 days, for a full refund, not a prorated one.
• Repair prices are often more expensive than warranty costs. An LCD television costing $550 would typically have a service-plan cost of $55 to $110, while the cost of repairing a main system board, for example, might cost $375.
• A self-insure repair fund is a good idea, but, as a practical matter, consumers won't set aside money for repairs.
• Some extended warranties cover accidents. As electronics become smaller and more portable, there will be more dropped laptops and cell phones in the toilet. Manufacturers typically don't cover accidental damage.

The bottom line is, the statistics and math say that buying an extended warranty is a bad move if you want to save money. Warranty companies are in business to make money and if they were paying off on the warranty contracts they would be out of business. They know the chances of your item needing repair is nil, thus they make money. Use that same data in your decision to purchase an extended warranty. 

There is one other thing that warranties provide that is not in the fine print. That is warranties give piece of mind. The value of that is hard to quantify.



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Is the Facebook Bubble Coming?

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Recently Goldman Sachs valued Facebook at an incredible $50 billion dollars. That's incredible for a company that produces revenue of between 1 and 2 billion dollars. With Goldman Sachs getting in the middle of this, I am sure it will end badly.

The Goldman Sachs deal consist of an investment of $1.5 billion dollars, roughly 3% of Facebook's accessed value. The shares are to be traded on the secondary market and are not for the general public.

To put Facebook's supposed valuation in context, consider this: $50 billion is roughly equal to the size of the economy of the Dominican Republic. The Gap has a market cap of $13 billion. McDonald's market cap is only $83 billion. So based on the current deal, Facebook is worth nearly 4 times as much as the Gap, and nearly two-thirds as much as McDonald's.

Inflating the value of a company by Goldman Sachs is only more of the same techniques of puffing up values for their own devices. They may be doing this because eventually Facebook will go public and having a foot in the door will only put them first in line to making 100's of millions of dollars in the eventual IPO.

Social Networking is a bubble like email was a bubble. It's a core technology that changes the way we communicate. But investors get carried away and drive valuations way up till the day comes where it's as common as email and the legs are kicked out from underneath it, and the the stock plummets. It's like the dawn of AOL, a high flier, that got it's wings clipped when one day it was only one of many email and data portals.

Other dot.com companies are in the news with high valuations. Google recently offered to pay $6 billion for coupon social networking company Groupon, which is less than 2 years old and has well over a dozen competitors doing the same thing. Though the offer was turned down, Groupon believes they are worth much more.


Look at a cloud computing company Salesforce.com. It rents out, via the internet, software that helps sales people track leads and customers to enhance productivity. At the beginning of 2010 it was at $62 a share. It ended 2010 at $150 a share. Hungry investors are looking to munch on some tasty dot com's and not using normal valuation techniques before investing. With a P/E of 96, investors are becoming speculators, an action that will cause another Dot.com bust.

It's time to be careful out there and not get caught up in another dot.com bubble. Over valuation and hyping of these popular companies will get us in a feeding frenzy. The ones that do the hyping will profit in the hundreds of millions, but the small investors will be the ones that get hurt the most. Didn't someone say.

"Progress, far from consisting in change, depends on retentiveness. When change is absolute there remains no being to improve and no direction is set for possible improvement: and when experience is not retained, as among savages, infancy is perpetual. Those who cannot remember the past are condemned to repeat it."

The full quote from The Life of Reason (1905-1906) by George Santayana

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The I.R.S. has an App to Track Yor Refund

The I.R.S. is trying to make itself more helpful by giving us an app for our phones. The most disliked department in our government is keeping up with modern times. This new app will not help you to avoid taxes, but it will at least keep track of your refund.

The IRS2Go app, introduced on Monday, lets filers check on the status of their refund from their phone and get daily tax tips. The free app is available for the iPhone and phones on the Android system.

I think it's great the stogy old I.R.S. is taking advantage of modern technology to be a little helpful to us. The app is pretty slick with a nice interface. I checked out the iPhone version and it's pretty easy to use. It has 4 buttons consisting of a Get your refund status, Get tax updates, Follow online, and Contact us.

To check the status of their refund through the app, users enter their Social Security number, which is encrypted for security. They then select the filing status they used along with the amount they expect to receive in their refund.

People who file online can check the status of their refund 72 hours after they receive an e-mail from the I.R.S. confirming that it has received their tax return. Those who file paper returns must wait up to four weeks.

Additionally, users of the app can sign up to receive tax tips it promises will be in “plain English,” about topics like child tax credits and education credits. They can also sign up to follow the I.R.S. Twitter feed.

Isn't that special, the I.R.S. is on twitter. I hope they go on Facebook because I can't wait to add them to my friend list.

At the present time there is not an app to file your return by the I.R.S. Though Intuit does have such an app, but only if your using the 1040EZ form.

I can't wait to see what they come up with next. Maybe a tax audit app.

More helpful links for tax help:

File Your Tax Return For Free - Here's Where to do it

The New Tax Law: Gifts For All

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File Your Tax Return For Free - Here's Where to do it

It's time to get busy on your tax return. There are several ways you can accomplish this. You can have a professional do it, I have my accountant do mine because it's quite lengthy and I don't mind paying someone to. If yours is very complicated I recommend you do the same. Some people buy a piece of software and do it that way. But the newest way to do it is online.

For simple to average complexity tax returns the online process is the way to go. Best part is that it could at no charge. There are requirements of course. Firstly you can't have an adjusted gross income of more than $58,000. There are other requirements which the individual website will state.

If you have never tried to file your taxes online, don't worry because during the whole process they make it so easy and the price is free, what do you have to lose. Give it a try.

I have compiled a list of the IRS’s Free File Alliance providers. These are providers that have met rigid standards to participate.

As you use the service of these websites you will be asked many times to upgrade to the paying side of the service. For simple to average tax returns this is not necessary. But if you have some out of the ordinary tax deductions you may have to. 

Being that these sites are free you can try more than one or if you have trouble with on there is always another to go to. Don't worry your data during the process is incrypted and safe.

Here's the list:

Free TaxACT: Free federal online tax return preparation and e-file if your adjusted gross income (AGI) is $58,000 or less and you are age 19 through 55. This federal offer is valid in all states. Free extensions.

TaxSimple: Free federal online tax return preparation and e-file if your adjusted gross income (AGI) is $58,000 or less and you are age 66 or younger and you live in one of the following states: AL, AR, AZ, CA, CO, CT, DC, DE, HI, GA, IA, ID, IL, IN, KS, KY, LA, MA, MD, ME, MI, MN, MO, MS, MT, NC, ND, NE, NH, NJ, NM, NY, OH, OK, OR, PA, RI, SC, SD, TN, UT, VA, VT, WI, WV or WY. Free extensions.

OnlineTaxPros.com: Free federal online tax return preparation and e-file if your adjusted gross income (AGI) is between $4,000 and $58,000 and you live in one of the following states: AL, AR, AZ, CA, CO, CT, DE, GA, HI, IA, ID, IL, IN, KS, KY, LA, MA, MD, ME, MI, MN, MO, MS, MT, NC, ND, NE, NJ, NM, NY, OH, OK, OR, PA, RI, SC, UT, VA, VT, WI or WV. Free extensions.

H&R Block Free File: Free federal online tax return preparation and e-file if your adjusted gross income (AGI) is $58,000 or less and you are age 51 or younger. This federal offer is valid in all states.

eSmart Tax powered by CompleteTax: Free federal online tax return preparation and e-file if your adjusted gross income (AGI) is $32,000 or less. This federal offer is valid in all states. Free extensions.

123 Easy Tax Filing, LLC: Free federal online tax return preparation and e-file if your adjusted gross income (AGI) is $58,000 or less and you are age 70 or younger and you live in one of the following states: AK, AR, AZ, CA, CO, CT, GA, IA, ID, IL, KS, KY, MA, MD, ME, MI, MN, MO, NC, ND, NE, NJ, NM, NY, OH, OK, PA, RI, SC, SD, UT, VA, VT, WI, WV or WY. Free extensions.

FreeTaxUSA® IRS Free File Edition: Free federal online tax return preparation and e-file if your adjusted gross income (AGI) is $58,000 or less and you are age 22 through 64 years old. This federal offer is valid in all states. Free extensions.

Free1040TaxReturns.com: Free federal online tax return preparation and e-file if your adjusted gross income (AGI) is $58,000 or less and you are age 72 or younger and you live in one of the following states: AK, AL, AR, AZ, CA, CO, CT, DC, DE, HI, GA, IA, ID, IL, IN, KS, KY, LA, MA, MD, MI, MN, MO, MS, NC, NE, NJ, NM, NY, OH, OK, OR, PA, RI, SC, UT, VA, WI or WV. Free extensions.

EfileTaxReturns.com: Free federal online tax return preparation and e-file if your adjusted gross income (AGI) is between $4,000 and $58,000 and you live in one of the following states: AL, AR, AZ, CA, CO, CT, DC, DE, GA, HI, IA, ID, IL, IN, KS, KY, LA, MA, MD, ME, MI, MN, MO, MS, MT, NC, ND, NE, NH, NJ, NM, NY, OH, OK, OR, PA, RI, SC, SD, UT, VA, VT, WI or WV.

ezTaxReturn.com: Free federal online tax return preparation and e-file if your adjusted gross income (AGI) is $58,000 or less and you live in one of the following states: AL, AR, AZ, CA, GA, IL, LA, MA, MI, MS, NC, NJ, NY, OH, PA, VA or WI.

TaxSlayer: Free federal online tax return preparation and e-file if your adjusted gross income (AGI) is $58,000 or less and you are age 25 or younger, or age 65 or older. Free for all Active Military with AGI of $58,00 or less. Also your return is free if you qualify for Earn Income Tax Credit or if your AGI is 10,000 or less regardless of age. This federal offer is valid if you live in one of the following states: AL, AZ, AR, GA, ID, IA, KY, MI, MN, MS, NY, NC, ND, OK, OR, RI, SC, UT, VT, VA and WV. Free extensions.

Online Taxes at OLT.com: Free federal online tax return preparation and e-file if your adjusted gross income (AGI) is $58,000 or less and you are age 51 or younger. This federal offer is valid in all states. Free extensions.

1040NOW.NET: Free federal online tax return preparation and e-file if your adjusted gross income (AGI) is $58,000 or less and you are age 64 or younger and you live in one of the following states: AL, AR, AZ, CA, CO, CT, DC, DE, GA, HI, IA, ID, IL, IN, KS, KY, LA, MA, MD, ME, MI, MN, MO, MS, MT, NC, ND, NE, NJ, NM, NY, OH, OK, OR, PA, RI, SC, UT, VA, VT, WI or WV. Free for all Active Military with an AGI of $58,000 or less. Also qualify if your AGI is 9,000 or less and you live in one of the following states: AK, FL, NV, SD, TX, WA or WY.

ICANFREEFILE: Free federal online tax return preparation and e-file if your adjusted gross income (AGI) is $31,000 or less or if you qualify for the Earned Income Tax Credit. This federal offer is valid in all states. Free extensions.

TurboTax® Freedom Edition: Free federal online tax return preparation and e-file if your adjusted gross income (AGI) is $31,000 or less or if you are active military with an AGI of $58,000 or less or you qualify for the Earned Income Tax Credit. This federal offer is valid in all states. Free extensions.

FileYourTaxes.com: Free federal online tax return preparation and e-file if your adjusted gross income (AGI) is between $10,000 and $58,000 and you live in one of the following states: AL, AR, AZ, CA, CO, CT, DC, DE, FL, GA, HI, IA, ID, IL, IN, KS, KY, LA, MA, MD, ME, MI, MO, MS, MT, NC, ND, NE, NJ, NM, NY, OH, OK, OR, PA, RI, SC, SD, TN, TX, UT, VA, VT, WI, WV or WY. Free extensions.

Before you begin...

• Free File companies have their own eligibility criteria, but none offer Free File to taxpayers with an adjusted gross income of more than $58,000.
• Other eligibility criteria may include your: age, state, eligibility for the Earned Income Tax Credit, and military status.
• Check the company's website for details because the companies' offers may differ. For example, some companies charge a fee for state tax returns and some may not support a particular form you need to file.
• Remember to begin your Free File return on IRS.gov or you may be charged a fee or asked to buy additional products and services.

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