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Plan NOW for your 2007 tax return!

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Head’s up folks – your 2007 Federal Income Tax return is due April 15, 2007, a little more than 9 months from now! Get ready now!

So how many of you think I’m nuts to tell you to start preparing now for your 2007 return? It may seem nuts to think about taxes now considering a child conceived today would be here before your return is due, but the advantage in thinking about taxes now is that you have time to do something about it.

Your biggest decision is going to be around whether to itemize deductions. If you incur deductible expenses but end up just taking the standard deduction, you get no tax benefit from those deductible expenses. What is the standard deduction going to be? For tax year 2007, the standard deduction will $5,350 for singles or married filing separately and $10,700 for married filing jointly or widow(er) with dependent child. Limits vary for seniors and the blind, as well as those filing as head of household.

Think about what deductions you’re likely to have at year-end. Charitable donations, mortgage interest, and state and local income and property taxes should be the biggest items on this list. Also included are uninsured casualty and theft losses, medical expenses, and unreimbursed job expenses, although these can be severely limited based on income, so be careful when adding these to your calculations.

If these amounts for you are minimal, great! Just take the standard deduction and be done with it. It is about as easy as you can get with taxes.

If these amounts well exceed the standard deduction for your filing status, just add everything up for your itemized deduction. A little more difficult, but a pretty easy decision.

Where it gets tricky is when you are relatively close to that standard deduction amount. You don’t get much advantage if any from itemizing deductions. However, if you can time your deductions to occur in one year or the other, you get the best of both worlds by itemizing in one year and taking the standard deduction in the next. It is a technique known as “bunching” of deductions, and it can save you a bundle on taxes.

Here’s an example to illustrate the point (using 2006 deduction amounts). Say you are married filing jointly and have a 25% marginal tax rate. You plan to give $2500 per year to charitable organizations, have to pay property taxes of $3500 each year (bill mailed in November due in January), and pay about $4000 per year in mortgage interest on your home.

Without trying to time the deductions, you have $10,000 of deductions each year. Your standard deduction is $10,300, so you don’t itemize on your taxes. At a 25% marginal rate, the benefit to you each year is $2,575, or $5,150 over two years.

Now let’s try timing the deductions. You know you’re going to give $2,500 for each year, so you go ahead and give $5,000 this year and don’t plan for any additional giving next year. You also go ahead and pay your property tax that is due next January before December 31, so you have the $3,500 you paid in January and the $3,500 you paid later in the year for a total of $7,000 in property tax paid. You can’t really time mortgage interest, so you still have the $4,000 in interest paid this year and another $4,000 paid next year.

In year one you have a total of $16,000 in deductible expenses ($5000 charitable, $7000 property tax, $4000 mortgage interest). As this is more than your standard deduction you itemize, yielding a tax benefit of $4,000. In year two you only have the $4000 in mortgage interest, so you take the standard deduction of $10,300, yielding a tax benefit of $2,575. Total tax benefit over the two years is $6,575, or $1,425 more than if you didn’t bunch the deductions.

As always you should do your homework and consult an adviser if necessary to make sure it will work for you, but unless you get ensnared by the Alternative Minimum Tax or some other landmine in the tax code, this is an effective way to minimize the amount that Uncle Sam steals from you each year.

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July 31, 2007 Posted by | Taxes, Tips | Leave a comment

The Cost of Leaving Computers on Overnight

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There is an interesting article linked today on Kiplinger’s entitled “Wasting Money While We Sleep”. The article discusses the costs to businesses of workers leaving their computers on overnight after they go home. Lots of us do it and don’t think anything of it. The article says that about 49% of us confess that we “never”, “rarely”, or only “sometimes” shut down. I do it too, both at the office and at home, mostly because I don’t like to wait for the machines to boot back up when I need to use them. My work computer is a crappy HP, so I feel justified in that.

Anyway, the actual cost of leaving the typical PC on all night: $55.13 per year assuming an electric rate of 8.68cents per kilowatt hour. Of course rates that low are a pipe dream here in Texas. Assuming a cost of 13cents per kW hour, that cost spikes to $82.57 per year for my PC that is never shut down at home.

At the 8.68cents rate, the cost to a business with 10,000 PCs total is about $165,000 per year if 60% of PCs are left on. For the entire country, the cost to business is estimated at $1.72 billion.

July 24, 2007 Posted by | Tips | Leave a comment

Off-topic: The Harry Potter Release Freak Show

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OK, this is a little off-topic, but still pretty funny. Last Friday night I went with my wife, brother-in-law, and a friend to Barnes and Noble for the release of the last Harry Potter book. I’ve gone with the wife before to these releases and although I’m not a Potter fan, I always thought the parties they have are kind of cool. However, this last one was a freak show on par with the opening night for a Star Trek movie, complete with people in costumes everywhere. I will give them some credit since most of them dressed up as characters other than Harry Potter. There were so many people there that were carrying around sticks thinking they were wands, and it seemed like quite a few of them believed that their sticks held some type of magical properties.

However, the highlight of the evening was after they began selling the books. My brother-in-law and I went and hung out by the front door waiting for my wife and her friend to get their books so we could go home. While we are waiting, this slightly chunky teenage girl comes through the front door and blows a whistle to get everyone’s attention. Of course everyone gets real quiet, thinking it is one of the workers making an announcement, at which time she proceeds to yell out at the top of her lungs “(Unnamed character) dies!” She then runs out the front door, with a mob of about 30 freaks running out chasing after her. The leader of the mob looked just like Harry Potter and was holding a magical “wand”, and it was hilarious to see them all chasing after her. We didn’t see where the mob ended up, but since only a couple of the people of the mob ever came back in the store, we’re guessing that Harry and his mob caught up with her. My guess is that it was the Harry Potter look-alike that got to her first, held up his wand, and yelled “Harry Potter’s gonna go Azkahban on your muggle a$$!”.

July 23, 2007 Posted by | Humor, Off Topic | Leave a comment

Kenneth Cole Shoes STILL SUCK!

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Just a quick update to a posting from several months ago. I had posted in March about a pair of Kenneth Cole men’s dress shoes that I have where the buckle broke off after only about a month of wear. The folks at Kenneth Cole were friggin’ useless, telling me I had to send the shoes back to them via first class registered mail with return receipt requested for them to consider whether there really was a defect in the workmanship. I was put off by the whole thing, and so the shoes sat in my house for a few months while I figured out what to do with them.

Well, I finally decided it was better to shell out some dough to fix the shoes than to let the sit around unused, so I brought them over to Houston Shoe Hospital today. The cost to repair the shoes will be $10.95 plus tax, and I’ll have them back in a week. Much better than sending them to Kenneth Cole for about $14 and waiting 4-6 weeks to get my shoes back (if they even decided there was indeed a defect). Maybe I will send them a complaint letter with a copy of my receipt asking for reimbursement for the repair.

Kenneth Cole shoes SUCK! That’s my story and I’m sticking to it.

July 23, 2007 Posted by | Customer Service | Leave a comment

Got My T. Rowe Price Family Records Organizer!

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I had a nice little surprise sitting in my mailbox today. A couple of weeks ago I wrote about a free CD-ROM that was available from T. Rowe Price that was to assist you in organizing your personal and financial information. The idea is that if anything were to ever happen to you, a loved one would be able to have a complete snapshot of your affairs and be able to more easily attend to the business of your estate.

I haven’t had time to really delve into the program, but at first glance it looks very well put together. Included are sections for investments, banking and credit cards, property and mortgages, other loans and debt, insurance, health, wills, and funeral arrangements. At some point I will give it a test drive to see how well it really works, but my initial impressions are very positive.

If you want to request a copy of the CD-ROM for your family, you can do so here.

July 19, 2007 Posted by | Basics, Tips | Leave a comment

The Web’s New Hot Search Term: Hammy the Squirrel?

Close Encounters of the Cheap Kind has a new home at www.CheapEncounters.com!

The web is always a fascinating place, and what people are searching for is equally as fascinating. Apparently among the ranks of Paris Hilton and Britney Spears is a celebrity of equally great stature. Yes, I’m talking about our old friend Hammy the Squirrel from Over the Hedge. For whatever reason over the last week Hammy has become very popular, so popular in fact that this blog hit a new daily high of 90 hits based largely on searches for Hammy or Over the Hedge (26 total search hits), or some variation thereof. All of this from a simple mention of the character in my posting about gift cards.

July 17, 2007 Posted by | About, Off Topic | Leave a comment

Here’s Your (Dollar) Sign!

Close Encounters of the Cheap Kind has a new home at www.CheapEncounters.com!

In my opinion, one of the funniest comedians out there is Bill Engvall. Bill is probably best known for co-starring with the likes of Jeff Foxworthy in the various “Blue Collar Comedy Tour” shows and movies, as well as his hilarious signature schtick “Here’s Your Sign”.

Well, Smart Money did a profile and interview with Bill Engvall, which you can find here. While I don’t think Bill will be writing any personal finance books anytime soon, the article is an interesting read. You can definitely tell that fortune and fame have influenced his spending habits, but it is pretty interesting to read his perspective on the role of his wife in managing their money. To keep him in check, Engvall’s wife serves as the financial gatekeeper, tracking every penny that the couple spends. “If it wasn’t for her, I think I’d own just a Corvette and a broken stereo,” says Engvall.

I think one of the most interesting quotes is his best money advice. “Never buy any new technology the first year it comes out. Let somebody else be that sucker.”

July 16, 2007 Posted by | News/Trends | Leave a comment

Buy.com and Connect3D not honoring valid rebates!

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Here is a warning to the world to beware of rebates offered or advertised by Buy.com. Earlier this year, I jumped on three deals for free after rebate memory cards and thumb drives marketed under the brand name Connect3D and advertised on Buy.com. As these rebates are well overdue and there are rumors that Connect3D is out of business, I followed up with Buy.com asking that they honor the rebate. Much to my dismay, here is the response I received a couple of days ago:

Dear Buy.com Customer,

You recently purchased an item from Buy.com in which Connect 3D offered a manufacturer’s rebate. We regret learning that Connect 3D has failed to honor a rebate offered to you.

Reports are circulating that Connect 3D is now insolvent and no longer performing any business functions. We are investigating these reports. Indeed, before allowing Connect 3D rebate forms to be posted on our website, Buy.com took the additional steps of requiring financial statements from Connect 3D and obtaining a contractual commitment from Connect 3D to pay Buy.com directly for wrongly-rejected or extensively-delayed rebates. This contractual commitment allows Buy.com to bypass the rebate center and invoice Connect 3D directly on behalf of those affected customers who have contacted us directly.

Buy.com has submitted demands to Connect 3D to perform on its contractual obligations. Connect 3D has ignored those requests and has refused to pay Buy.com for any of the Connect 3D rebates owed to our customers. As a result, on July 6, 2007 Buy.com filed a lawsuit in Orange County Superior Court against Connect 3D and others (including without limitation, Connect 3D’s principal officers, Marc Levaggi and Mike Walsh, Connect 3D’s distributor, Wintergreen Systems and Connect 3D’s affiliated entities) for failure to honor commitments made to Buy.com and its customers. Litigation is unpredictable, costly and time consuming. However, it’s Buy.com’s belief that Connect 3D and the other defendants in this litigation should be required to honor your rebate.

No assurance exists that Buy.com will be successful in this litigation or in attempting to enforce any judgment that may ultimately be obtained.

We sincerely apologize for any hardship or inconvenience resulting from Connect 3D’s failure to honor your rebate. Buy.com wants to remain your favored internet retailer. While we pursue this matter, please accept the following gift certificate as an indication of our sincere regret.

Sincerely,

Buy.com

You are the recipient of a $10 Buy.com gift certificate from Buy.com Customer Support. You can apply this gift certificate toward any of the over 2 million products at Buy.com.

Hey Buy.com – you want to remain my favored internet retailer? How about standing behind the offers YOU advertised on YOUR website? I’m sorry, but a $10 Buy.com gift certificate is not equal to $100 in cash rebates that I am entitled to. I honestly don’t care what agreement Buy.com had with Connect3D and what litigation is being filed. Buy.com advertised the rebate, therefore it has a legal obligation to honor that rebate since the manufacturer refuses to.

I have already sent a reply to these bastards expressing my displeasure. If I don’t get my money within two weeks, it will be time to submit complaints with the BBB and the CA and TX Attorney General Offices.

Always remember my golden rule: “Everyone is out to screw you!”

July 13, 2007 Posted by | Customer Service, Rebates | 18 Comments

Going on vacation? Put your services on vacation too!

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I found this article from SmartMoney linked off of Yahoo, and thought I would share. It is one of the few items I’ve seen recently that I didn’t already know. Apparently several service providers for cable, internet, and phone service will allow you to suspend your service while on vacation. Policies vary widely, but if you aren’t there to use the service at least you can avoid paying for it. For instance, DirecTV will allow you to suspend service from one week up to nine months without a charge, and T-Mobile will allow you to put your plan on hold for up to 90 days (no charge for holds less than 30 days, afterwards $10 per month).

Seems like pretty easy savings for a phone call to customer service.

July 11, 2007 Posted by | Tips | Leave a comment

Credit card usage promotions for existing cardholders

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I had a few interesting offers in the mail this past week from credit cards we already have. These are all offers (most likely targeted) for bonuses for using our card. We received these three within the last week:

1. Sony Card (Chase): Get a $25 statement credit for spending $100 or more with the card from July 6 through August 2.

2. Citi Mastercard: Make three purchases between July 1 and September 15, receive a voucher good for a free round of golf, a beauty treatment, and a 2-for-1 dining experience at selected locations.

3. AMEX Blue: Make three purchases between July 1 and July 31, earn 2500 bonus membership reward points (good for a $25 gift card).

Update: Received this in the mail today for the Citi Professional Card: Make $300 in purchases between July 1 and August 31, earn 3000 bonus Thank You points.

The common thread between these cards is that all of them have not been used in quite a long time. I guess it goes to show there are other benefits to keeping old cards open besides just the positive effect on your credit score.

July 10, 2007 Posted by | Credit Cards | Leave a comment