Monday, April 19, 2010
Thursday, April 15, 2010
Tax Day
It's April 15th, and for many people, this is a desperate day. If you have delayed or put it off or couldn't spare the time or couldn't find the documents, today is the day when you have to act.
Either you file your Form 1040 tax return today or you file a Form 4868, Application for Automatic Extension of Time To File U.S. Individual Income Tax Return. Form 4868 gives you until October 15th, no questions asked, to file your return. There is no penalty for filing within that extended period. Oh, but there is a catch. If you are going to owe taxes, you have to pay them with your application today. Otherwise, you'll pay interest on what is owed and a penalty for late paying, too. The good news is you can file for an extension via the Internet. But you should do it before midnight.
Or, you could just dig in and finish your taxes today.
I know the feeling of being in this final big hurry. One year I was so late getting our tax return together that my husband had to drive to another state to mail it--and he was the last one the police let into the line before they closed the mail drop. I also remember as a kid going in the car with my mother as she drove all the way into DC from the Maryland suburbs to drop the family tax return at the mailbox in front of the main post office near Union Station. Versions of these scenes will occur today. If you are the one heading out late tonight, my condolences.
Maybe next year you could make life easier on yourself and get your taxes finished sooner. There are volunteer sites across the nation where you can take all your tax questions in addition to getting your return prepared free of charge. Free e-file, too. These volunteer sites are not for everyone. If you run a small business and have inventory or employees, you need to look to a paid tax preparer. But if you have a job like delivering pizzas, where you are paid as an independent contractor, you can probably find a free tax preparing site that will handle your return. Even if you have a complicated tax situation, chances are that these sites can help you.
But don't wait until the last minute. That's self-induced stress you don't need. I won't pretend that income taxes are simple; they are not. Every year, the Federal tax rules get tinkered with, resulting in more confusion for us all. Often, state tax laws change, too. Before I do my tax preparer volunteering each year, I train in the new rules and then pass an exam, but I still struggle to remember all the changes.
It's a whole lot easier learning about these new rules in January than it is trying to learn them on the evening of April 15th. Desperation is not the proper mood in which to do taxes. If you handle yours early in the tax season, you'll be relaxed because you have plenty of time. This results in fewer errors. Many people do not realize that they can file their returns without mailing any payment until April 15th. The tax voucher, Form 1040-V, makes separating the return filing and the payment mailing easy. And of course you may pay by credit card these days.
On a day like today when you're down to the wire, it's easy to promise yourself that you won't let this happen next year. You'll get organized by March 15th instead, or maybe even February 15th. I hope you do, because if there's anything we volunteer tax preparers dislike, it's desperate, impatient people who have boxed themselves into a corner and now want that to be someone else's fault. We can't help you if you still haven't found all your documents. Or if you don't know the answers to the standard questions. Or if you have put this off as long as possible and now want us to hurry up and perform a miracle.
Nobody likes paying taxes; we get it. But since taxes are as inevitable as death, why kick and scream and procrastinate? The good news/bad news is that we get a do-over next year. We can aspire to handling our obligations better in 2011. Meanwhile, in only a few hours, the madness of tax day 2010 will be over.
Either you file your Form 1040 tax return today or you file a Form 4868, Application for Automatic Extension of Time To File U.S. Individual Income Tax Return. Form 4868 gives you until October 15th, no questions asked, to file your return. There is no penalty for filing within that extended period. Oh, but there is a catch. If you are going to owe taxes, you have to pay them with your application today. Otherwise, you'll pay interest on what is owed and a penalty for late paying, too. The good news is you can file for an extension via the Internet. But you should do it before midnight.
Or, you could just dig in and finish your taxes today.
I know the feeling of being in this final big hurry. One year I was so late getting our tax return together that my husband had to drive to another state to mail it--and he was the last one the police let into the line before they closed the mail drop. I also remember as a kid going in the car with my mother as she drove all the way into DC from the Maryland suburbs to drop the family tax return at the mailbox in front of the main post office near Union Station. Versions of these scenes will occur today. If you are the one heading out late tonight, my condolences.
Maybe next year you could make life easier on yourself and get your taxes finished sooner. There are volunteer sites across the nation where you can take all your tax questions in addition to getting your return prepared free of charge. Free e-file, too. These volunteer sites are not for everyone. If you run a small business and have inventory or employees, you need to look to a paid tax preparer. But if you have a job like delivering pizzas, where you are paid as an independent contractor, you can probably find a free tax preparing site that will handle your return. Even if you have a complicated tax situation, chances are that these sites can help you.
But don't wait until the last minute. That's self-induced stress you don't need. I won't pretend that income taxes are simple; they are not. Every year, the Federal tax rules get tinkered with, resulting in more confusion for us all. Often, state tax laws change, too. Before I do my tax preparer volunteering each year, I train in the new rules and then pass an exam, but I still struggle to remember all the changes.
It's a whole lot easier learning about these new rules in January than it is trying to learn them on the evening of April 15th. Desperation is not the proper mood in which to do taxes. If you handle yours early in the tax season, you'll be relaxed because you have plenty of time. This results in fewer errors. Many people do not realize that they can file their returns without mailing any payment until April 15th. The tax voucher, Form 1040-V, makes separating the return filing and the payment mailing easy. And of course you may pay by credit card these days.
On a day like today when you're down to the wire, it's easy to promise yourself that you won't let this happen next year. You'll get organized by March 15th instead, or maybe even February 15th. I hope you do, because if there's anything we volunteer tax preparers dislike, it's desperate, impatient people who have boxed themselves into a corner and now want that to be someone else's fault. We can't help you if you still haven't found all your documents. Or if you don't know the answers to the standard questions. Or if you have put this off as long as possible and now want us to hurry up and perform a miracle.
Nobody likes paying taxes; we get it. But since taxes are as inevitable as death, why kick and scream and procrastinate? The good news/bad news is that we get a do-over next year. We can aspire to handling our obligations better in 2011. Meanwhile, in only a few hours, the madness of tax day 2010 will be over.
Tuesday, April 6, 2010
Insurance Woes, the Happy Ending
[See my post of March 12 for the back story.]
My friend’s claim was paid by Access America. He’s jubilant, and he ascribes the quick settlement to the power of blogging. I am glad that Access America paid attention to my blog post about the hazards of trip insurance, and offered to cut through the red tape involved in settling this claim.
Now I must point out that despite my friend’s happy ending, we each of us still have the responsibility to investigate in advance any insurance we buy. No more buying a pig in a poke. As the Romans said, “let the buyer beware.”
One of the pleasures of blogging is its potentially infinite reach, but sometimes we wonder if anyone is paying attention. This time, someone was, and we have a happy ending.
My friend’s claim was paid by Access America. He’s jubilant, and he ascribes the quick settlement to the power of blogging. I am glad that Access America paid attention to my blog post about the hazards of trip insurance, and offered to cut through the red tape involved in settling this claim.
Now I must point out that despite my friend’s happy ending, we each of us still have the responsibility to investigate in advance any insurance we buy. No more buying a pig in a poke. As the Romans said, “let the buyer beware.”
One of the pleasures of blogging is its potentially infinite reach, but sometimes we wonder if anyone is paying attention. This time, someone was, and we have a happy ending.
Wednesday, March 17, 2010
A Financial Fast
My friend rails against another debt-reduction plan, Michelle Singletary’s 21-day financial fast, which she details in her book, The Power to Prosper. Although I have not read the book, her excerpt from it in the Washington Post was interesting and made sense to me. Lots of us tend to throw money away daily without noticing where its going. So I checked out what people thought on Amazon about the book. A lot of readers were turned off by Singletary’s specifically Christian religious tone. She originated the program and beta-tested it, if you will, within her own church circle. Some readers could not get past this, and so for them all the rest of the sound advice in the book was dead. You can check out the book for yourself, but meanwhile, what can we take away from the idea of a 21-day financial fast?First, three weeks is short enough that most of us can commit to it. Singletary calls this a fast, and she is right to position it like the jump start for a diet. It’s not the way we can live every day, but if we are sick of excess, a fast is a good counter. What is the purpose of the fast? It’s to make people stop their automatic behavior and examine it piece by piece.
Second, we need new ideas about how to become more mindful of and able to control spending. As a nation we spend too much and we all know it. Unfortunately, marketers are working very hard to come up with new ways to entice us to spend more than we should. Their success is our financial failure. We have to fight back, and personal finance experts provide us with useful tools in this battle.
Third, good financial advice holds true whatever the source. I’ve read sensible personal finance books by fundamentalist Christians before (usually by southern white guys). Although their concepts for a woman’s financial role in a household are not mine, and I personally do not believe in tithing (since I more than tithe to federal and local government through my taxes), any new ideas about how to handle personal finance issues are welcome and can be adapted to individual circumstances. After all, plenty of women head their own households with no man around, so who cares if a particular book says the man should be the boss? The details of how to manage finances are the important part here.
What is Michelle Singletary’s plan? Go on a money fast. Three solid weeks without spending on anything but utter necessities. And no splitting hairs about what is a necessity and what is a luxury. Of course no using a credit card during the three weeks. But more important, no casual, random expenditures on a daily basis. That’s it. Sure, there are more details, but that’s the nut of the plan.
People who tried this regimen have discovered that in a mere three weeks they saved an enormous amount of cash. Several hundred dollars that otherwise would routinely slip away from them on idle pleasures. Sounds like a good experiment, you say.
But my friend refuses to admit it. To some people there is comfort in the daily expenditure of cash. They like it; it makes them feel as if they are functioning adults in the real world. All of us can remember being children and having no control over buying anything. Either we had no money or our parents controlled our every purchase, or both. Childhood was an endless round of negotiations. Being able to spend money without consulting anyone else feels tremendously empowering. That’s why even the idea of following a budget can resonate as another version of a parent saying no to us. For some of us, wanting to feel like “the boss of me” is what trips us up when we are tempted to buy something we don’t need.
Then there are those of us who cannot imagine going through three weeks without needing to buy something unanticipated. But that’s the whole point of the financial fast, to get us to see what we spend our money on. To make us think about every transaction and weigh how necessary each purchase is. And to consider what it does for us and what it does against us.
I welcome this entry in the effort to help Americans gain control of their finances. I just wish so many of us were not already on the financial fast called unemployment.
Friday, March 12, 2010
Trip Insurance Woes
Now I know why MetLife has those ads that say, “Get MetLife. It Pays.” Because other insurers do not.
A friend of mine was planning to fly to Europe and had to bump the date of his tickets because a close relative died. He'd bought trip insurance since it was such an expensive set of flights. His carrier was Delta Airlines, which told him that he must deal with its insurer, Access America. Access America won’t accept the funeral home’s letter. Access America won’t accept the dead person’s death certificate. Access America has demanded the dead person’s medical records. Huh? If my friend comes up with those, no doubt Access America will be demanding the dead person’s high school report cards. Or a permission slip signed by the dead person’s dead parent. People must sit around at Access America and vie with each other to come up with more and more difficult “proofs” that make it impossible for any claimant to get paid. This is so mean and rotten that it is almost surreal.
It makes me ashamed to be an American when companies like Access America can get away with crap like this. Ashamed to be a fellow human, too. How low is our society, that we allow companies like this to stay in business and keep preying on people?
I have proof that Access America has been pulling this for decades. Over 20 years ago, my mother took a Saga Holidays tour of Europe, and one of her suitcases was stolen. Saga bumped her to Access America, which refused to pay for the lost suitcase or its contents. How? By demanding more and more receipts—and only the originals would do—for items that Mom had bought many years before. Mom called. Mom wrote. Finally, Mom gave up.
And that’s what these companies depend on. They wear you out with more and more ludicrous and unfair demands. (Just like the health insurance companies, come to think of it.) They won’t give up until somebody bigger comes along and threatens to squash them like the bugs they are.
My friend has already gone online and found long lists of complaints about Access America. You can read them here. From these sad stories it appears that Access America sells insurance it has little or no intention of ever making good on. And Delta Airlines enables Access America. It can be hard to protect yourself against companies like Access America because it is a reinsurer, like AIG. You might sign up unknowingly with some other company, like Delta Airlines, only to discover after the fact that you have been tossed to the wolves.
I told my friend to go to AARP’s columnist, or to try local action lines, and of course to write a letter to the president of Delta Airlines. I guess contracting with an insurance company that does not pay on claims is Delta’s way of cutting costs. It’s worth telling the president of Delta that we want decent treatment. Otherwise, why not pick some other airline?
Can anything be done about companies like Access America? The insurance lobby in Washington is large and well-funded. (Of course it is, because they aren't paying claims.) Insurance is usually regulated on a state-by-state basis, but if regulation went to the Federal level, no doubt there would be less regulation rather than more. Any way you figure it, we the customers lose.
The moral of the story? If you want insurance for anything, first find a trustworthy insurer. Don't sign up for it blindly as an afterthought without knowing who the insurer is. And if you find yourself caught like this, persevere. Keep fighting until you wear the enemy out. With every insurer there is a moment when it starts to cost the company too much money to keep denying your claim. You just have to keep on until that moment is reached. Hopefully, you'll live that long.
Edited to add: My good friend Ron Fradkin, very experienced in the insurance industry, advises that anyone who has a problem with an insurer contact the state insurance department. State insurance departments have the power to fine noncompliant insurers, even on a daily basis; thus they'll get you quick action. This does vary by state, but it's excellent advice. Don't give up!
A friend of mine was planning to fly to Europe and had to bump the date of his tickets because a close relative died. He'd bought trip insurance since it was such an expensive set of flights. His carrier was Delta Airlines, which told him that he must deal with its insurer, Access America. Access America won’t accept the funeral home’s letter. Access America won’t accept the dead person’s death certificate. Access America has demanded the dead person’s medical records. Huh? If my friend comes up with those, no doubt Access America will be demanding the dead person’s high school report cards. Or a permission slip signed by the dead person’s dead parent. People must sit around at Access America and vie with each other to come up with more and more difficult “proofs” that make it impossible for any claimant to get paid. This is so mean and rotten that it is almost surreal.
It makes me ashamed to be an American when companies like Access America can get away with crap like this. Ashamed to be a fellow human, too. How low is our society, that we allow companies like this to stay in business and keep preying on people?
I have proof that Access America has been pulling this for decades. Over 20 years ago, my mother took a Saga Holidays tour of Europe, and one of her suitcases was stolen. Saga bumped her to Access America, which refused to pay for the lost suitcase or its contents. How? By demanding more and more receipts—and only the originals would do—for items that Mom had bought many years before. Mom called. Mom wrote. Finally, Mom gave up.
And that’s what these companies depend on. They wear you out with more and more ludicrous and unfair demands. (Just like the health insurance companies, come to think of it.) They won’t give up until somebody bigger comes along and threatens to squash them like the bugs they are.
My friend has already gone online and found long lists of complaints about Access America. You can read them here. From these sad stories it appears that Access America sells insurance it has little or no intention of ever making good on. And Delta Airlines enables Access America. It can be hard to protect yourself against companies like Access America because it is a reinsurer, like AIG. You might sign up unknowingly with some other company, like Delta Airlines, only to discover after the fact that you have been tossed to the wolves.
I told my friend to go to AARP’s columnist, or to try local action lines, and of course to write a letter to the president of Delta Airlines. I guess contracting with an insurance company that does not pay on claims is Delta’s way of cutting costs. It’s worth telling the president of Delta that we want decent treatment. Otherwise, why not pick some other airline?
Can anything be done about companies like Access America? The insurance lobby in Washington is large and well-funded. (Of course it is, because they aren't paying claims.) Insurance is usually regulated on a state-by-state basis, but if regulation went to the Federal level, no doubt there would be less regulation rather than more. Any way you figure it, we the customers lose.
The moral of the story? If you want insurance for anything, first find a trustworthy insurer. Don't sign up for it blindly as an afterthought without knowing who the insurer is. And if you find yourself caught like this, persevere. Keep fighting until you wear the enemy out. With every insurer there is a moment when it starts to cost the company too much money to keep denying your claim. You just have to keep on until that moment is reached. Hopefully, you'll live that long.
Edited to add: My good friend Ron Fradkin, very experienced in the insurance industry, advises that anyone who has a problem with an insurer contact the state insurance department. State insurance departments have the power to fine noncompliant insurers, even on a daily basis; thus they'll get you quick action. This does vary by state, but it's excellent advice. Don't give up!
Monday, March 8, 2010
Buy a House When You Can Afford One, Not Before
I just read yet another article about tightened lending standards, and how they could mean potential home buyers would have to come up with 10% as a down payment. The article went on to describe ways to circumvent the new standard.
Are people crazy? Sure, it’s a great time to buy, if you have several hundred thousand dollars in the bank that you will never need for anything else. Otherwise, this is a very risky time to buy, despite it being a buyer’s market and the rates being low, and hype, hype, hype.
If you can’t afford even a down payment for a house, why are you trying to buy a house?
For stability, right? So no landlord can toss you out on your ear. But a bank can do it, too, if you can’t pay your mortgage. People are being foreclosed on all across the country. What makes you think that you can beat the odds if you don’t have enough cash to begin with?
Trust me, I’ve been there. Before we bought our first house, we didn’t have the 10% down payment, either. So we put our furniture in cheap storage and went to live with relatives for a year. Five people had to share one bathroom and two people had to sleep in a basement, but at the end of the year we had our down payment. We thought we had it made. A year later, we were already in debt because of unanticipated but necessary purchases for the new house. The lawn has to be mowed whether you have the cash for a mower or not. And garbage cans really are not optional. You get the idea: Owning a house is more expensive than apartment living. Great big duh.
If you can’t even afford a down payment for a house, why do you think you can manage the day-to-day carrying costs of owning a house?
And then someone lost a job. There was no money to pay the mortgage until a new job was found. When the new job was found, it did not pay anywhere near as much as the old job. Welcome to the new reality for American workers.
If you can’t even afford a down payment for a house, and you don’t have the extra cash for the carrying costs, and then you lose your job, you will lose the house or go deeply into debt, or both.
Put your planned mortgage payment, plus 30% more, into a savings account and attempt to live on what remains. If you can’t, then you can’t afford to buy a house, down payment or no down payment. When employment was stable and lifelong, you could buy a house you could barely afford and gamble that it would become affordable as your income went up. Today, that’s a sucker bet.
Are people crazy? Sure, it’s a great time to buy, if you have several hundred thousand dollars in the bank that you will never need for anything else. Otherwise, this is a very risky time to buy, despite it being a buyer’s market and the rates being low, and hype, hype, hype.
If you can’t afford even a down payment for a house, why are you trying to buy a house?
For stability, right? So no landlord can toss you out on your ear. But a bank can do it, too, if you can’t pay your mortgage. People are being foreclosed on all across the country. What makes you think that you can beat the odds if you don’t have enough cash to begin with?
Trust me, I’ve been there. Before we bought our first house, we didn’t have the 10% down payment, either. So we put our furniture in cheap storage and went to live with relatives for a year. Five people had to share one bathroom and two people had to sleep in a basement, but at the end of the year we had our down payment. We thought we had it made. A year later, we were already in debt because of unanticipated but necessary purchases for the new house. The lawn has to be mowed whether you have the cash for a mower or not. And garbage cans really are not optional. You get the idea: Owning a house is more expensive than apartment living. Great big duh.
If you can’t even afford a down payment for a house, why do you think you can manage the day-to-day carrying costs of owning a house?
And then someone lost a job. There was no money to pay the mortgage until a new job was found. When the new job was found, it did not pay anywhere near as much as the old job. Welcome to the new reality for American workers.
If you can’t even afford a down payment for a house, and you don’t have the extra cash for the carrying costs, and then you lose your job, you will lose the house or go deeply into debt, or both.
Put your planned mortgage payment, plus 30% more, into a savings account and attempt to live on what remains. If you can’t, then you can’t afford to buy a house, down payment or no down payment. When employment was stable and lifelong, you could buy a house you could barely afford and gamble that it would become affordable as your income went up. Today, that’s a sucker bet.
Wednesday, March 3, 2010
Not Buying It
Judith Levine’s Not Buying It made a splash a few years ago. It appears in a trade paperback edition suitable for book club discussions, including questions at the end of the book. I happen to be in a book club and we read this book. Well, some of us did. Others sneered at it for not being interesting; some members like a meaty story, and the tale of one year in a New York City freelance writer’s life during which she and her husband undertook to not buy luxuries simply did not appeal. Others did not finish the book because from the title they had expected it to be funny. “Not buying it” taken to mean that the narrator will comment humorously on some aspect of our culture. But an utter lack of humor characterizes this book. What does Levine attempt to show in her diary-entry style posts from a year of trying not to purchase anything but necessities? First, she is honest about her own frailties, about the arguments with her husband over whether wine is a necessity or not, and about how queasy she felt being out and about with friends and not able to spend money. This is a peculiarly acute situation in New York City because little in that town is free. Oh, sure, you could stroll through Central Park or other parks, but everywhere else you are expected to pony up in order to rent a place to sit down. I distinctly remember how unequal I felt going out to lunch with a college friend years ago when she had a job and I did not. I was living on a shoestring, and the ordinary amount she could afford to spend on a hamburger was above my budget. Levine’s personal and professional life in the city was fraught with decisions about spending, or more often, not spending on social entertainment. She even got into an argument with a friend about seeing a movie.
Her half year in the Vermont countryside was easier, because the buy-in to a homemade meal is easier when everybody has a house and a car, and driving over for dinner isn’t a big deal. But she still managed to wring some angst out of petty issues such as her SmartWool socks. They may be wonderful socks; one of our book club members swears by them. But Levine’s obsession with trivial possessions really annoyed me.
Here’s why. She is an influential writer. She has the ability to put her ideas out to a mass market while synthesizing the thoughts of major scholars and thinkers. She is not rich, but compared to all the women who have ever lived, she has vast amounts of disposable income, and enviable personal freedom. And until her year of Not Buying It, she frittered it away on garbage. On trendy new fashions. On expensive trifles. On acquiring too many possessions. Her saga might resonate with other women who have found themselves casually slipping into poor financial habits, daily feeding their amour propre with retail therapy when they could be using their money, and thus their influence, more mindfully. But to me—someone who has known relatively hard times, albeit briefly—reading about a person who is profligate about money is offensive. This woman has been wasting her life and her power.
She seems to get it during the course of the year. She seems to reconnect with the political activism of her youth. And to want to live more purposefully. All to the good. But her book was not well received in our group. We’ve made much harder choices about buying or not buying than she does in her essentially frivolous year of attempting to be non-frivolous. And I don’t think the poverty that forces people to make draconian decisions about spending is likely to show us our authentic selves, as Levine suggests but also does not agree with. Our desperate selves, maybe.
And here’s another funny thing. Levine reports that as a collateral event, her nearly $8,000 of apparently permanent credit card debt was paid off early in the year. She’d carried this debt, adding to it and subtracting from it in the typical manner, for who knows how long. In a year of not buying, and without any overt intention of doing so, she easily eliminated her debt. Where is the “Well, duh?” here? Doesn’t Levine understand that there’s a cause and effect when it comes to random spending? I found this wonderfully naïve for someone who is such a successful elite writer. Almost as naïve as Barbara Ehrenreich was when she bought clothes for her Nickel and Dimed adventure. Levine buys fashionable shoes that Parisians won’t disdain, which is a whole different level from Payless or Nine West.
So, yes, some of my reaction to this book was simply scorn at the upper-middle-class artiste follies of the author. But at least she presented them for what they were, and this made for a very big difference in tone from the typical personal finance book. Levine is not prescribing; she’s describing. Toward the end there’s a bit of preaching about getting involved in civic causes. But basically what happens is that for a year the author had to live as people of lesser means do all the time, making compromises, having to deny themselves luxuries, feeling awkward in financially unequal social situations, and more. It seems to have had a salutary effect on her. Perhaps her story will help others to see their own relationships with commerce in a new and different light. One hopes. I find it extremely frustrating that a newly empowered class, women, wastes that power. Even if only the power to control themselves.
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