washboard abs is only a call away

Flipping through the current issue of Money magazine. The focus is on Baby Boomers, and to reinforce some of the attributes of that generation, there's a feature story on how to look younger.

There's stuff about hair transplants, teeth whitening, Botox, etc. What caught my eye was the part about fat and, particularly, abdominal etching. I had never heard of this but there's now a procedure where a doctor can suction out your fat via lipo, and then sculpt "grooves in the remaining fat layers to give you washboard abs without the work."

I'd sign up, but then again, the cost is $3k-$10k on top of standard lipo, which (according to the magazine) is $2k-$15k. I don't think that'd be a great use of my retirement money. =P

speak up, get free hotel night (or the equivalent of)

This past Friday, I went up to Boston to meet a client for dinner and a show (he's a comedian and part of an improv group). I got up there in mid-afternoon, and after checking in, called down to the hotel's concierge to arrange for a cab.

When I went downstairs at the pre-arranged time to meet my cab, no one was there. I asked the concierge if the cab had been confirmed and while she said it was, it actually turned out not to have been the case. Long story short, no car ever showed up, I had to flag down a regular cab (who also tried to scam me, but that's a story for another blog), and I ended up leaving the hotel 45 minutes after I planned. Thankfully, the client was understanding and there were no ill effects on that relationship.

At the end of the night, when I returned to the hotel, I decided to speak to the manager to voice my displeasure. I recapped the story, and the manager was very sympathetic. So much so that she decided to give me enough points for a free night at their hotel (I'm a member of the Starwood Preferred Guest program). Needless to say, I was very happy.

The concierge showed poor customer service (after I asked her to re-confirm the cab reservation, she asked me to give her a minute and she took that time to help two other guests make dinner reservations, even though I was already very late). Her manager, however, showed tremendous commitment to service, and was able to turn an unhappy customer into one who's sharing the "win" on his blog. =)

My moral of the story: It pays to speak up. You may get a free night out of it.

the obligatory post on tax deductions

Tis the season to do your taxes, or find an accountant. Thanks to two moves last year, working in three different states and pure joy at the thought of having a professional wade through the mess that is our tax code, I'll be going the latter route.

Whether you're hiring someone or doing it yourself, here is a list of deductions to remember (courtesy of the March issue of Money):

• Phone tax credit: Congress recently repealed a 3% long-distance excise tax, allowing people to take a one-time credit covering what you paid between 3/1/03 and 7/31/06. My unprofessional and non-liable advice, take the standard amount ($30-$60), instead of itemizing.
• Job search expenses: Looked for a job last year? You can deduct stuff like resume paper, travel costs, etc.
• Investment fees
• Unreimbursed work expenses: Such as joining a professional association on your own dime.
• Subscriptions for career-related publications
• Tuition payments: Also, don't forget about interest paid on your student loans.
• State tax: You have the option of deducting state and local income tax you paid or the sales tax you paid, whichever is higher. If you didn't keep receipts, use the sales tax table in IRS Publication 600.

chinese new year brings new carnival

Happy Chinese New Year!

The latest Carnival of Personal Finance is hosted by Stock Market Beat.

Some cool articles include another on credit card arbitrage and a warning on the perils of penny stocks. My own how to guide on opening an IRA is also listed.

bai-boo

Came in to work today and when I saw my stock ticker, I almost had a heart attack. Baidu had dropped 10%. I looked up news of the company, fearing that the world was falling apart (at least in China).

Appropriately enough, the headline of the first article I read said something along the lines of "Baidu collapses." I read further, and found out that Baidu reported soaring profits. In fact, the company's earnings per share of $0.45 beat analysts' estimate of $0.36. So why the drop?

The company lowered their forecast for Q1. This apparently, was the third such disappointing guidance in a row, and that caused a couple of brokers to cut their ratings (one went to reduce, the other to sell) on the company. Damn Wall Street.

Voice in head says, "Buy AND hold, buy AND hold." =)

index funds are not the same

JLP over at AllFinancialMatters has posted some great information on how not all index funds are equal. This is a good read because everyone, myself included, usually assumes that throwing your money into an index fund makes the most sense. The research shows that you need to be mindful of the expense ratios because even among mutual funds that are supposed to easy/passive, some are more expensive than others.

step by step guide to opening a fidelity IRA

To facilitate the recharacterization of my Roth IRA contribution from last year, I had to open up a traditional IRA at Fidelity. Even though I had four separate accounts with Fidelity at that time, I actually never went through their online account opening process. I was surprised and pleased just how easy it was (disclaimer: I'm not getting paid for this endorsement, though I wouldn't mind ).

The process literally took fewer than 10 steps, and they were very, very easy. (Also, it was great to have the option to save my application at any time, and return to it later if needed.)

Step 1:

First, I logged into my online account, and then clicked on the "Open Account" link up to. On the screen that showed up, I selected "Traditional IRA."


Step 2:

After selecting the type of account I wanted to open, Fidelity gave me a "prep" page that told me the type of information I'd need to complete the process. Most of it is stuff you should know off the top of your head (e.g., social security number, employer information, etc.) but some stuff you have to dig out -- for me, that stuff included driver's license, beneficiary information and bank account information.

Step 3:

The next page that popped up was for my personal information. Luckily, since I was already logged in, most of the fields were already populated. The information I filled out included social security, citizenship, driver's license and addresses.


Step 4:

After my personal information was in, I was then asked to fill out information about my employer, and whether or not I was affiliated with a brokerage, NASD or served as a corporate officer in a public company. Nyet to all of that.

Step 5:

With that stuff out of the way, Fidelity then asked me to choose my investment profile. This involved providing my income, net worth and investment objective. The latter is where you indicate if you're a cautious investor (can't stomach huge risk), or if you're more aggressive. Since I'm relatively young, and I like the idea of big gains (no risk, no reward, right?), I checked off the "most aggressive" box. Keep in mind that you're not bound by your selection here -- I think its just a way for Fidelity to understand the type of investor you are.


Step 6:

This was really the only step I wasn't sure about. The section is called Key Account Features, and this is where you put in your beneficiary information and choose whether to go paperless. Neither of those things confused me. Rather, it was the question on how much I wanted to start the account with.

Since I was recharacterizing, and not really putting in "extra" money, I wasn't sure if I could put in the amount I was transferring over, or if I had to put in something other than that. I gave Fidelity a quick call, and they told me I could put anything, as long as it was over $2,500. Again, the answer here wasn't binding (at least not immediately).


Step 7 & 8:

(Yes, they were that easy I decided to combine them.) In these two steps, I basically verified the information I had entered, and checked off the appropriate boxes to indicate I understood and agreed with Fidelity's terms.

Step 9:

Voila! My account was created, and my new account number appeared right away. Since I was already set up with an online account, my new IRA also showed up on my portfolio within minutes. Very impressive.

Overall, the process of opening up a traditional IRA for the recharacterization was very easy. I also spoke with Fidelity's customer service reps to ask some questions about the recharacterization form. There was some trickiness with question 1c (basically asking what holding within the Roth IRA I wanted to transfer from), but other than that, it was as smooth and painless as the account opening process. The total number of questions on that page was less than 3, if I remember correctly.

After that was done, I signed it, and walked the document over to the Fidelity office one block away from where I work. If only everything in personal finance could be that easy. =P

**I completed this Friday afternoon, so the transfer hasn't been fully completed yet. I'm keeping my fingers crossed that there'll be no hiccups -- if there are, you'll be sure to know about it! =)

prepare for roth IRAs in 2010

I had mentioned this earlier, but here's a great write-up in Fidelity's Investor Weekly newsletter about putting money into a non-deductible traditional IRA, and then converting that into a Roth in 2010. This is great for people who find themselves currently unqualified for a Roth.

carnival of personal finance #87 is up!

The latest Carnival of Personal Finance is up at 2 million's blog. There are a couple of good tax-related posts ('tis the season), including one on overlooked deductions and relief of tax headaches. My post about going over my IRA limit was also included, though buried deep down. =)

Definitely check it out !

good tax help hard to find

Thanks to my friend's recommendation, I went to see an accountant today for help on my 2006 taxes. Man, was the wait long. It was actually the second time I went to see the guy, but the first time was around lunch time, and there really was no hope to get in within a reasonable time period.

Today, I thought I'd be smart and get there by 10. I was smart, as it only took an hour before I got in front of the guy. Alas, things were not to smooth all the way.

Turns out that my company made a mistake on my W-2. I had worked in another state for 8 out of 12 months last year, but my company put all of my annual income as wages in my current state. That is exacerbated by the fact that my original state had no state income taxes, and my current one does. The tax hit would be significant based on the incorrect information.

So now, my task is to track down my payroll department to issue a corrected W-2 before the end of the month (since I'll be out of town for pretty much all of March). The alternative is to provide the accountant with all of my paystubs, starting when I first worked in New York, and he could make adjustments accordingly. It'll be more of a hassle (and I suspect, more time-consuming and expensive) but it's good to know there's a fallback option in case my payroll rep isn't as responsive as he/she needs to be.

One other nice surprise -- turns out my company accounted for my relocation expenses in such a way that they were the ones who got to deducted the full amount from their taxes, not me. That leaves me with a miniscule deduction (hooray for my company -- bastards). The accountant said it shouldn't be a problem assigning the relocation income to my original state, which has no income tax. My fingers remain crossed. =)

recharacterizing my roth ira contribution - continued

Due to my need to recharacterize my 2006 Roth IRA, I had sent Fidelity an email asking how to go about that. Below is their response:

Yes, you can recharacterize the $4,000 Roth IRA contribution to a non-deductible Traditional IRA.

There are no tax implications for recharacterizing to a Traditional IRA before April 17, 2007. With a recharacterization, Fidelity would transfer your 2006 Roth IRA contributions, plus any earnings the contributions have made this year, and move to a Traditional IRA account as your 2006 contribution. Since you do not have a Fidelity Traditional IRA account, you would need to establish a Traditional IRA. While the deadline is April 17, 2007, Fidelity needs to receive your Recharacterization request no later than April 10, 2007 in order to complete process by April 17, 2007.

If you timely file either a Federal tax return or an extension request, the IRS automatically provides a 6-month extension to process a recharacterization for the prior year.

To establish a Traditional IRA account, you will need to fill out a Fidelity IRA application. You can fill out the application online and submit it electronically, or I can mail a new account application to your home.

To access the new account application online:
1. Please go to http://www.Fidelity.com
2. At top of page, click the link "Open an Account" and then the "Open Now" link.
3. On left hand side, choose the "Traditional or Roth IRA" link
4. At this point, you will be asked to either fill out and submit the application online or fill out, print, and mail application to Fidelity.

Please fill out the "Fidelity Request for Recharacterization Form" to request the recharacterization. Upon receipt we will recharacterize your Roth IRA into a Traditional IRA.

You can download this form at our Web site:
http://personal.fidelity.com/retirement/pdf/crechar.pdf

Please complete the form and return to Fidelity for processing. You will have your confirmation letter within three to five business days of Fidelity receiving your request.

Please note that non-deductible Traditional IRA contribution and recharacterizations are both normally reported on IRS Tax Form 8606.

Sounds easy enough, right? Now, it's time to execute. It's nice to find out that as long as I file my taxes on time, I'll have an extension to get this recharacterization completed correctly. It wasn't that exciting, however, to see that yet another IRS tax form will be needed. =\

annuities = bad

Thanks to a post by AllFinancialMatters, I was reminded of an article I read recently about annuities. The article came in handy, as it helped me resist falling into the tangled web a financial advisor was weaving to bring me into his lair.

Anyway, the gist of the article, by Kiplinger, is that annuities are a rip off. Given that some of my friends are/have been/will be talking to the same advisor, I definitely recommend this as a must-read!

five things to get audited on your taxes

Who wants to have their tax returns audited? I do!

Just kidding.

Anyway, a nice article on CNN Money about tax audit red flags.

On an side note, it's getting really depressing to know that I've exceeded the income threshold that'll increase the odds of my getting audited -- depressing because I didn't even really make that much in 2006. Stupid relocation costs! =P

over my roth ira income limit

Thanks to two relocations in 2006, as well as a signing bonus, a merit bonus, a raise and a salary adjustment, I was in for a shocker when I received my W-2 a week and a half ago.

Since I'm single (woe), my ability to contribute the full amount allowed ($4k) for a Roth IRA begins to phase out when my "modified adjusted gross income" reaches $95k. Don't ask me what modified adjusted means, but the amount I'm over is high enough that it doesn't really matter. What stinks is that so much of my "income" from last year was imputed

Merriam-Webster's Dictionary of Law

Main Entry: im·pute
Pronunciation: im-'pyüt
Function: transitive verb
Inflected Forms: im·put·ed; im·put·ing
1 : to consider or calculate as a value or cost (as for taxation); broadly : to reckon as an actual thing <impute a benefit from the use of the car>

from relocation costs and benefits like free gym membership (it was a very nice and large gym). It wasn't really money in the bank, so to speak.

Anyway, so right after the new year, I had put in $4k as a contribution to my Roth IRA, and attributed it to 2006. I also set up regular investments of $333.33 into my account, for my 2007 contribution. Then, like I mentioned, I received my W-2 and nearly had a heart attack.

Now that I'm calmer, I realize I will need to recharacterize my 2006 contribution. I'm hoping I won't need to do anything with the 2007 contributions (since my salary plus any expected raise/bonus should still keep me underneath the income limit), but we'll see. Thankfully, my faithful reading of other personal finance bloggers yielded a nice suggestion on recharacterizing.

I took the first step today by emailing Fidelity, and asking them if its possible (I'm assuming it is, but I'm just hoping that they'll say, "Oh, sure, easy as pie"). I'll keep you updated on this process. Hopefully, I will stay underneath the income limits another couple of years so I can take advantage of the Roth's tax-free benefits. Worst case, I'll just throw my money into a non-deductible traditional IRA, and convert it in 2010 to a Roth. Assuming I don't qualify income-wise, which would be great news. ;)

retirement on my mind

Here are a couple of links worth reading:

• The first is a quick recap of the traditional IRA. This has come up with me recently because, due to two relocations in 2006 being imputed to me as income, I realized I was disqualified from making a Roth IRA contribution (which I already did). Hopefully, recharacterization would be too much of a hassle.

• The second is a write-up on life cycle funds. Many of my friends have been getting into this because they're really not the type to track their investments too closely. They want to save, but with the least amount of attention needed. Life cycle funds are a decent choice, but as you'll read, not for everyone.

shady citibank practices

Cutting-to-the-chase-moral: Keep PDFs of your credit card applications!

I recently started to do an app-o-rama with credit cards, aka credit card arbitrage (aka get a bunch of cards with 0% apr, do a balance transfer and put the money into a savings account to earn interest). There are some good "deals" out there in terms of cards with balance transfer fees waived. One such deal I found was for Citi's PremierPass credit card.

The offer was 15k points after your first purchase, and up to 12 months to do a balance transfer. A BT would run you 3% of the amount transferred, maxed at $75. I just got my card in the mail today, and was surprised to find a few differences from the application I submitted. Notably, the two that caught my eye were:

• No annual fee (the promotion said that there was an annual fee, so this was actually good news)
• Balance transfer fee would be capped at $250, not $75

The last point just wasn't going to work for me in my arbitrage plans -- paying $250 to do a BT would require me to earn even more in interest just to cover that amount. I called customer service and was told that if I had "proof" of the terms I said I signed up for, then I'd need to mail or fax it in to get them applied to my account. It's very annoying that I have to do this at all -- almost feels like a bait and switch tactic to me.

I went back to the URL where I first signed up for the card, and lo and behold, the terms and conditions were different now. So the only way I could prove the offer I agreed to was to have a print-out of the original application. Who keeps a copy of their credit card application? Clearly, Citibank is banking on people just submitting an application, getting approved and being stuck on less than agreed-upon terms just because they didn't print out the actual application.

However, they banked wrong with me!

I have a PDF print-out of the credit card application, with the terms of the offer on it. With this "proof" in hand, I should be able to get Citibank to honor what they had offered in the first place. =)

You may be wondering why I'm so anal to have an actual PDF of the terms and conditions. It's a trick I picked up when I applied for all these airline/hotel rewards cards. A site I did some research on gave that valuable piece of advice. With a PDF print-out, you can ensure you receive the points/miles/dollars/rewards/etc. you were promised. You don't waste any paper with a PDF, and it takes minimal space on your hard drive. And for those situations when you need to prove to the bank what their original offer was, then having it is golden!

beware the variable universal life

I've recently sat through a pitch for variable life, and so have some of my friends. The advisors that sell this stuff are like snake oil salesmen. When you're in the middle of the pitch, you can't help but think everything they say makes total sense.
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Now, I suspect that part of the sales pitch for this VUL policy was the promise of tax-free returns down the road. With a VUL, part of the premium you pay goes to the insurance part of the policy, which pays the benefit, or face amount of the policy, to your beneficiary if you die. But you get to invest the rest of your premium in the policy's "subaccounts," which are essentially the equivalent of mutual funds.

The idea is that these subaccounts build value over time - this is known as the "cash value" portion of the policy - and you eventually tap that cash value when you need it for, say, a house down payment or child's education expenses or even for retirement.

And here's where the real sales hook comes in. Instead of just selling some of your investments and withdrawing money from the policy, you borrow (usually at a very attractive rate) against the policy's cash value. Since loan proceeds aren't taxable, you're effectively gotten a tax-free rate of return. Isn't VUL wonderful?
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Thankfully, if we're smart, we can take a step back, do some independent research and realize -- STAY AWAY FROM ANYTHING WITH "VARIABLE" IN IT (including variable annuities).

Here's a great CNN Money article about the pitfalls of variable life insurance.

google now saves your search history

In its attempt to get more user data and make their search results more personalized, Google has launched a few new services -- most notably, Search History. I definitely recommend reading this post on Search Engine Land for more details.

Basically, the company that claims to do no evil will be defaulting new users to have their search history saved with Google (anyone remember the AOL fiasco?). Current users won't be automatically opted in, but if you click on "Search History" when logged in -- even if you're just trying to read what it's about -- you'll be enrolled automatically.

Definitely read the blog post above for instructions on how to permanently remove that "feature" from your account.

wall street journal article on keeping your miles

With all the recent changes to mileage programs, where airlines are taking away your miles earlier, its nice to see the increase in articles with advice on how to combat that. Here's a free article from the Wall Street Journal on how to save those miles.

The one thing the reporter didn't mention is that if you have an airline credit card, you can keep your account active by making a charge and earning points through that (at least that's how it works with United).

starwood devaluation

For all my recent enthusiasm on earning points in Starwood's Preferred Guest program, this forum thread is a bit of a downer.

yahoo vs. google - a theory

I work in the online marketing space, and I like to think I know my stuff about the industry. That said, I decided some time ago to place a bet on Yahoo. The company's been faltering a bit, and there are many valid doubts about the company's management and monetization technology. However, beyond the short term skepticism, I think the company has the most important components -- audience and advertiser base -- to succeed.

While Google's stock has been doing lights-out since its IPO, its reassuring to see that some other people see the potential in YHOO as I do. Here's an interesting stock analysis that cites a theory about the upside of both Yahoo and Google's stock. If I had the money, I'd also own Google stock as I think its success is for real, and enduring. However, its not that fun to own 8 shares of GOOG in my IRA.

Disclaimer: I'm not a professional stock picker, so follow my investing lead at your own peril!

net worth update

Last year, I paid off the last of my student loans and went debt-free for the first time. This year, I decided to better track my net worth than in the past. Previously, I'd keep one "current" column on my spreadsheet, and while it was great in providing a snapshot of where I was at that moment, it didn't do me much good in terms of seeing my trends.

Unfortunately, I neglected to really get serious about tracking my net worth until a few days into this new year. Therefore, the best I can estimate is that my net worth at the end of 2006 was roughly $35k. Going forward, however, I'll be tracking changes in my assets (stocks, retirement, etc.) and liabilities (mostly credit card debt). Since January ended yesterday, I realized my net worth gained 19%. I won't have true apples to apples comparisons until I can look at February's end amount vs. January's, but I thought 19% is a pretty good jump!

So what's the goal I'm shooting for? Well, I'd like to someday buy a place in Manhattan. Nothing too pricey or big (so of course, you can't get something big without it being pricey), but some place I can feel comfortable in. I don't know if its realistic to shoot for that in two years' time, but we'll see.

Update: Most of the net worth gain came from savings. Not having to pay for rent does wonders for the bottom line. Of course, I'm glad that my investments did decent during the month as well, but the primary driver was increased savings.