Free Money Finance

8 Ways to Consolidate Debt, Part 2

Here's part 2 of a series on ideas for consolidating debt from Market Watch. The ideas are from Greg Pahl, co-author of "The Unofficial Guide to Beating Debt," and Virginia Morris, co-author of "The Wall Street Journal Guide to Understanding Money & Investing," (one of the books I'm giving away free). Here's their next suggestion:

Home equity loans. They're inexpensive, relatively easy to obtain and they may offer a tax deduction for the interest portion of the loan. The downside is that the collateral for the loan is the house. "A home equity loan can be an extremely useful strategy if it's used properly," Pahl says, "but people need to have their eyes open and understand the implications."

The other disadvantage is the low-pressure repayment terms. "Most lenders aren't in a hurry for you to pay it back. The leisurely repayment schedule isn't part of your goal," he says. "Your new monthly payment should be at least as large as your previous monthly payments -- if you want to really make progress. If you can pay more, you should, because you'll pay it off faster."

In the world of bad choices (which is what debt consolidation is), this isn't a bad one if you just need a bit of wiggle room to get out of trouble. Don't get me wrong, I don't like the option, but it's better than many of the other alternatives.

Click here to read part 3 of this series.

Russia, Day 2

On Tuesday, November 15, the ladies went to a meeting while the guys walked around Red Square and then found a mall with a web cafe. Here's the owner of my company, Wally Blume, checking his email. He's watched closely by the Moose Tracks moose. (Click the photo to enlarge it.)

Why It Pays to Live Within Your Means

If you've been reading this blog for more than two seconds, you know that I'm an advocate for spending less than you earn. So when I saw this article on living within your means, I just had to post on it. Here are the key thoughts from the piece:

I definitely inherited some of [my parents'] caution [about minimizing debt], but I don't think it's unwarranted, even if we never again face [their] economic disaster of the 1930s. Consider two rational fears: Unemployment and illness. Between 2000 and 2003, nearly one in five workers was laid off from a job. For those with only a high school education, it was about one in four, according to research from Rutgers University. Meanwhile, a Harvard study released earlier this year found about half of all bankruptcies in 2001 resulted from expensive illnesses. Three-quarters of those who declared bankruptcy had health insurance at the onset of illness.

Or think about two other factors: College costs and retirement. Last year college tuition rose at double the rate of inflation, and the average student graduated with $15,500 in loans, according to the College Board. What's that going to look like in 15 years, when my youngest starts college? Meanwhile, among women 35 to 55 years old, between one-third and two-thirds will be impoverished by age 70 due to inadequate retirement savings, according to research by the National Endowment for Financial Education and the AARP. Given the rise in longevity in the U.S., that could be a long stretch in the poor house.

But it's not just fear that keeps me living within my means. It's a profound respect for opportunity. Being debt-free is like going to college: It takes discipline and effort. You don't know exactly where it will lead, but you trust it will open many doors. The decision I made at 20 to stay out of debt gave me the power to change my work life in my late 30s, to balance career and family in a way that made me happy. Debt is a dead-end road that narrows your options in life.

And unless you're an expert in denial, living within your means is essential to your mental health. According to a survey by credit counseling firm Myvesta.org, about 40 percent of people with problem debt reported symptoms of severe depression. (By contrast, studies have shown that 9.5 percent of the general population is clinically depressed.)

I recognize that it's counter-cultural to preach the virtues of living within one's means. The rise of easy credit, cheap auto loans, interest-only mortgages, and the like have allowed Americans to improve their standards of living substantially over the last few decades by borrowing from the future.

And why expect average Americans to live within their means when their government won't? In October, Senator Tom Coburn, a freshman Republican from Oklahoma, had the wisdom to suggest Congress eliminate some pork-barrel spending -- including $450 million for two bridges in Alaska -- and redirect some of the money to rebuild the damaged bridges on Interstate 10 outside New Orleans. This is what any sensible family would do. When the boiler explodes, you cancel the new windows and spend the money to fix the problem. Common sense being in short supply on Capitol Hill, the provision was defeated by a vote of 86-13. With role models like this, it's no wonder some people think living within your means is for suckers.

A few thoughts from me:

1. I am certainly an advocate for this philosophy. I've been debt free for eight years or so. It's wonderful to be freed from monthly payments, worries about creditors, and so on.

2. It took discipline to get debt free. We spent far below our income, saved all gifts and bonuses, and started a side business to pay off our mortgage early. It took years to do this.

3. Money is not an issue we fight over in our house -- there's no need to, it's not a point of stress like it is for many. Imagine what it would be like if there were no arguments, quarrels, or hurt feelings over money in your house.

4. Once you get debt free, I encourage you to really start to give and help out those less fortunate. It's a privilege to do so and you'll get much more out of it than you sacrifice.

5. For a few more of my thoughts on this issue, see these posts:

• Tough Financial Choices, Part 1: Investing versus Paying Off Debt
• Millionaires in the Making: Cash Only Please
• 10 Easy Ways to Stash Away Thousands
• Know and Control Your Spending

7 Tips to Make the Most of Your Holiday Spending

Here are some ideas from MSNBC for making the most of your money this holiday season:

1. Use a credit card that offers a cash rebate. Put all your holiday purchases on the same card and pay it off when you get the bill. Do not let it slip into next year.

2. Use the Internet to shop smart. With the boom in online shopping comparison sites like www.shopzilla.com, www.froogle.com and www.shopping.com, there’s no excuse for paying more than you have to for commodities; and that includes electronics, books, music, kitchen goods, home furnishings and other gift items. Once you know how much you want to pay for an item and who has the best price, get there via one of the rebate sites like www.ebates.com, www.butterflymall.com, or www.consumerclub.com for an additional savings of 3 percent 25 percent.

3. Want to shop locally? Check out www.cairo.com before you get in your car. It lists sales at your local stores. You can put in a holiday gift list and it will notify you when the items on your list go on sale.

4. Gift cards can be fun, but keep them in their place. They are best for teens and pre-teens who love to shop but never have enough money, and who don’t want you picking out their clothes anyway. And if you’ve got the kind of credit card that offers 3 percent or 5 percent back on grocery purchases, buy your gift cards at the grocery store.

5. Stop shopping when you’re done. That may seem obvious, but it’s the things you buy after you’ve bought everything else that really put your budget over the top. Use a list, and when you’ve filled it, don’t go to the mall.

6. Do some do-it-yourself. You don’t have to make all of your gifts, Martha Stewart style. But one day of family baking, sewing or candle making can create the spirit of the holidays and save money. You can enhance the effect by giving useful tools or small appliances as gifts.

7. More than three out of five Americans (62 percent) say they are thinking of giving family members a savings-friendly gift like a bond or piggy bank this year. That’s good thinking. For older kids, you could give starter shares in a stock or mutual fund or a certificate promising to match personal savings up to a certain level.

Here are my comments on these:

1. I use a card that gives me cash back -- and I wouldn't have it any other way. I've earned about $400 so far this year.

2. I LOVE the web for shopping. I spend lots at Amazon (and most of my money Christmas present suggestions are from Amazon). Also, Circuit City has a cool feature where you can order online and pick it up in the store (no waiting (you go to a special desk) and you get to see/feel/touch the item before buying it for good).

3. Good idea!

4. Gift cards are great for kids -- especially those you know like video games, Legos, etc. but can't remember which ones they have and don't have.

5. Duh!

6. We do this a lot. People love gifts made by our kids. I've posted about it before -- see Money Saving Tip: Save on Gift-Giving for details.

7. This is why I recommend Emigrant Direct. If I can get more people to stop spending and start saving, I think I've done them a great service.

Free Money Finance in Four Carnivals This Week; Hosting Carnival of Debt Reduction Next Week

Free Money Finance is part of four carnivals this week:

• Carnival of Debt Reduction includes my post on Nine Ways to Pay Off Debt
• Carnival of the Capitalists includes my post on 13 Ways to Live Well on Less
• Carnival of Personal Finance includes my post on The Typical American Millionaire
• Carnival of the Vanities includes my post on Tough Financial Choices, Part 1: Investing versus Paying Off Debt

Stop by these carnivals to read some great posts!

In addition, Free Money Finance will be hosting next week's Carnival of Debt Reduction. If you'd like to be included, here are all the details:

You can submit a post by emailing me the following:

• Name of Your Blog
• Title of Post
• Post Permalink URL
• Post Trackback URL
• Why it should be in the carnival

Deadline for submission is Sunday, December 4 at 6:00 pm ET.

Per my usual policy, I'll be listing the posts in the order that I receive them. There's a benefit to being early -- see this post to find out what it is!

Looking forward to some "great" submissions!

8 Ways to Consolidate Debt, Part 1

I'm not a big fan of debt consolidation loans since what usually happens is that they give the debtor a bit of breathing room that allows him/her to keep on spending at their current rate. A few months later, they are in more debt and in worse shape than ever. That's why I recommend such loans only when the root problem (usually rampant spending) is dealt with.

However, I realize that in many cases, consolidating debt may be the only option for a person who wants to get on solid financial ground without declaring bankruptcy. As such, I'm going to start a series on ideas for consolidating debt that I found at Market Watch. The ideas are from Greg Pahl, co-author of "The Unofficial Guide to Beating Debt," and Virginia Morris, co-author of "The Wall Street Journal Guide to Understanding Money & Investing," (one of the books I'm giving away free). Here's their first suggestion:

Credit card transfers. Rate surfing only makes sense if you can pay off your outstanding debt within the time frame of the low introductory rate. "By the time you do all the transferring, the introductory period is over," Pahl says. "I get this stuff in the mail a lot. You really have to read it carefully. The change of a word or two can change the whole thrust of the promotion."

I'd give this a 5 on a scale of 1-10. It's not a bad idea, but not great either -- though I've known people who've seemingly put off debts forever using this method. My final word is to heed their advice and read the fine print very, very carefully.

Click here to read part 2 of this series.

Free Money Finance recommends Emigrant Direct for its 4.0% yield.

Russia, Day 1

For those of you who want to see some pictures, I'll be posting off and on for a week or so about my recent trip to Russia. For those of you who don't care, simply ignore these posts.

We arrived in Moscow, Russia on Monday, November 14 after 16 hours or so of plane rides (three in total). After a brief rest, we went over to the apartment of Pastor Rick Renner (he blogs at RennerWorld) and had dinner. Here's a picture I took of the gang and the Moose Tracks moose. (Click the photo to enlarge it.)

Help for a Blogger

I just received this email from a friend of mine, Paul Chaney, and wanted to share it with all of you:

I'm a man on a mission today, and I want to make a request of you. A small business blogger needs our help. Please take a moment to read the following...

The very first blog I developed was for a jeweler in my hometown of Tupelo, Mississippi, Patti Thompson, owner of Way-fil Jewelry. Patti is an expert jeweler and jewelry appraiser, as well as a wonderful writer. She was intrigued by the notion of blogging and agreed to let me design a blog for her.

On November 1st, just at the beginning of the holiday sales season (a time crucial to jewelers) her store caught fire and was literally gutted. You can only imagine how devastated she and her husband Stephen must have felt. A store she has owned for years, her livelihood, now burned to the ground.

But, Patti and Stephen are courageous people. They have made the best of a bad situation and are reopened in a temporary location - a room in an adjacent building owned by a tire shop. In fact, before Patti moved it was a storage room for tires! The tire shop owner graciously moved the tires to another location and made it available for Patti and Steve. They have worked long and hard over the past few weeks to make it presentable and are now open.

Here's the kicker - Patti is blogging the entire story! In fact, the very day following the fire she talked about it on her blog and is keeping her readers up-to-date chronicling the rebuilding process via her blog, DiamondDivaOnline. To me, this represents not only one key way blogs can be used effectively as a communications medium, but also represents the highest ideals to which we bloggers aspire, that of transparency, honesty and authenticity.

Here's my request -- help Patti tell her story. Let me ask you to write a post about what she's doing with her blog in telling her story in such an honest open way, and link to her site.

I owe Patti and Steve a great deal. Not only was theirs the first blog I developed (I might mention they have since redeveloped the blog and gone with a more basic design.), but they gave me invaluable business advice and enormous moral support. I might not be in business today had it not been for their help and encouragement. This is just one small way I can repay their kindness.

For those of you in the holiday spirit this morning, please stop by and visit Patti. Check out the pictures while you're there (looks like it was a bad fire) and leave her a comment of encouragement.

An Alternative to Increasing Income Taxes?

Here's a creative idea for raising revenues that doesn't involve additional taxes:

States and cities have a new way to raise money: "For Sale" tags on the Interstate Highway system. On Sept. 28, Indiana Governor Mitch Daniels announced plans to put 157 miles of I-90 up for bids. Daniels also wants to invite private outfits to help build and operate a 142-mile extension of I-69 as a toll road.

Meantime, governors of New Jersey and Delaware are urging lawmakers to privatize nearly 400 miles of combined tollways, including some stretches of I-95. The first experiment in a privately owned Interstate shows bright promise: At the start of the year, a Spanish-Australian joint venture paid $1.83 billion for the Chicago Skyway, a 7.8-mile stretch of I-90. The deal took a money-losing toll road off the city's hands, filled a budget deficit, and endowed a rainy-day fund.

Now I have to restrain myself a bit here since I'm a natural huckster and could see my company's logo plastered over all sorts of publicly-owned water towers, roads, bridges, parks, and on and on. And none of us wants our country to be plastered with logos and ads all over God's (and man's) creation. However, if done with reason and taste (I know, the government rarely has either of these), it could be an acceptable form of additional revenue. And it may be a better alternative than the current proposed changes to the income tax system.

If this idea doesn't work, my other brilliant scheme is for the federal government to force the NCAA to have a college football playoff to determine a true national champion and confiscate the funds that would be generated from TV rights, corporate sponsorships, ticket sales, and the like. It could probably wipe out half of the current budget deficit. ;-)

4 Habits of Successful Investors

Here's an interesting piece from Money Central that covers the four habits of a successful investor. There's really a lot included, but here's the important stuff:

1. Keep a diary.

2. Keep score. Here are four key steps you have to take.

• Step 1: Pick the right time frame.
• Step 2: Be brutally honest.
• Step 3: Pick the right yardstick.
• Step 4: Start keeping score.

3. Read extensively but selectively.

4. Take stock once a year.

My thoughts:

1. I don't keep an investment diary. That's because my investments are pretty much on auto-pilot since I have a large part of my portfolio in index funds.

For more on these funds and my philosophy for using them, see these posts:

• Where the Pros Stash Their Own Dough, Part 1
• Don't Give Up on Index Funds Yet
• The Case for Indexing

2. I use Quicken to help me keep score, others use Money. I've posted on Quicken versus Money and received comments that many people aren't happy with either of them. That's why I recommend an alternative called You Need a Budget. However, it only works for budgeting, not tracking investments. And for my basic needs, Quicken is fine.

3. I actually use 12.5% annual compounded growth in NET WORTH as my overall benchmark. I've done this for years and am far ahead of this goal as of now.

4. The end of the year is when I review everything. It allows me to get ready for the next year as well as make any year-end buys/sells that are needed.

Pet Spending Purring Along

In the grand tradition of pet-related posts here at Free Money Finance like How Much Would You be Willing to Spend to Save Your Pet's Life?, 10 Things Your Veterinarian Won't Tell You, and Cost of a Pet is $48,000!!!, here's an article from Business Week on how pet stocks make great investments. (Translation: People spend a lot on their pets and they are going to spend more in the future.)

Here are the highlights:

S&P equity analyst Michael Souers is bullish on the stocks of three companies that serve pets and the owners who love them. Why? The numbers paint a very enticing picture. According to the American Pet Products Manufacturers Assn. (APPMA), sales of pet products topped $34.4 billion last year, more than doubling the level seen in 1994.

Based on a recent survey, more than 69 million U.S. households, or 63%, own a pet. Of course, one isn't always enough -- 45% of those households own two or more.

The dog remains the most popular nonhuman companion, with more than 43 million households owning one. In 2004, households spent an average of $1,571 on Fido. Cats follow close behind, with almost 38 million homes cleaning up furballs. However, since they usually come 10 to a tank, freshwater fish are the most populous pet in the U.S. The APPMA estimates 139 million of them are swimming in 14 million homes.

"Pets are being considered more like family members than ever before," Souers says. "As a result, we think sales of pet products should be somewhat insulated from the economic pressures weighing on other consumer-discretionary items." In other words, a choice between new shoes and taking your sick dog to the hospital isn't really a choice at all.

According to industry data, consumers spent more than $18 billion on animal health-care services in 2001. Souers expects that number to rise consistently as diagnostic testing for animals increases in popularity and expands in scope.

I don't think I need to say much more than is already highlighted other than reiterate that you should add up the costs before you decide to get a pet (or another one).

Get the Best Online Deals

Here's an article from Money that promises us "5 ways to make the most of the Internet this holiday season." Here are the tips and a brief summary of each of them:

1. Don't trust the security lock icon that appears in a web address that once meant the site was secure. Avivah Litan with Gartner Group said it isn't reliable anymore because cyber thieves are copying and forging these lock icons. To make sure the Web site you're on is legitimate, download a toolbar from www.trustwatch.com, a Web site run by ID verification company GeoTrust. Microsoft also has an add-in filter for its toolbar. The add-in will warn you of suspicious sites and will block you from sharing your personal info with a fraudulent Web site. Go to http://addins.msn.com.

2. To find the true deals with shopping bots, which are online shopping comparison Web sites, you should sort your search results by price instead of relying on the default search option. That's because some shopping bots sort the results by how much the merchants pays for placement, rather than by whether you're getting a bargain. At Shopzilla.com the top five slots go to the stores that bid the most, as long as they meet customer standards.

3. The longer you wait, the more deals may just pass you by because the holiday season started earlier this year, at least online, according to Patti Freeman Evans of Jupiter Research. She says it may be because retailers want to get you shopping before you see your energy bill. So take advantage of their jitters and shop while they're still aggressive and there will be sales just about every weekend. If you're buying electronics, it's especially important to get shopping. If you wait too long, your coveted flat screen TV or MP3 player may be out of stock.

4. Does it always seem like you're the last one to know about online sales? If you don't mind filling out a personal profile, check out the new Web site www.ShopittoMe.com. This is a free service that scans different Web sites and lets you know when clothing goes on sale.

5. The most important part of shopping online is making sure your gift arrives undamaged and on time. For starters, you'll want to look at how retailers rate when it comes to customer satisfaction. Check out the customer reviews at www.pricegrabber.com.

As you might imagine, I do quite a bit of my shopping online. I HATE the crowds at stores this time of year plus shopping online often gets you a great (if not the best) price. When I know exactly what I want or need something I don't have to see/feel first (like clothing, which I insist on trying on -- I dislike sending it back via mail), online is the way to go.

And if you're looking for some great holiday gift suggestions, don't forget my list of money Christmas present suggestions.

The Best Personal Finance Magazine: December, 2005

In August, I started a comparison among the big three personal finance magazines: Money, Kiplinger's Personal Finance, and Smart Money. My methodology was simple: the magazines got one vote for each article that I found useful -- either for me, someone I knew or for this blog. I continued by reviewing them in September, October, and November.

As a reminder, here are the results after four months (the number of useful articles I got out of each of the personal finance magazines):

Money - 48
Kiplinger's - 28
Smart Money - 14

Well, I continued the effort for the December issues, and here's what I got:

Money - 15
Kiplinger's - 4
Smart Money - 1

This gives us a five-month total of:

Money - 63
Kiplinger's - 32
Smart Money - 15

My thoughts:

1. This is why I recommend Money magazine and it's one of my recommended money Christmas present suggestions.

2. I'm declaring Money the champion for this year. We'll start again fresh in the new year.

3. Am I wasting my time on Smart Money?

Comments: Posts of the Week -- October 10; Compounding

Here's a comment a reader who responded to my post on Posts of the Week -- October 10:

I particularly enjoyed the compounding post. I wish everyone knew that starting sooner would make them a lot more money in the end because when you start late, you lose out on doubling your money in the "end" years when you have the most to double.

Oh well. You can't say that we are all trying to keep it a secret...

No, we're not.

If you haven't read the post on compounding, please check it out. Hopefully, it will be the little bit of encouragement you need to save/save more.

Free Money Finance recommends Emigrant Direct because of its 4.0% yield.

10 Financial Urban Legends, Part 10

Here's part 10 of a piece by Money Central that details lingering financial myths:

Myth No. 10: Hotel Bibles often have $100 bills tucked into them. Heard the one that Gideons leave $100 bills in their hotel Bibles to reward folks who turn to the Good Book?

Mikkelson rejoiced when she actually discovered such a treasure during her honeymoon -- and found out a few hours later that her new husband was pretending to be God. The only thing Gideons leave behind is the book.

Still, what's the harm in looking? ;-)

Free Money Finance recommends Emigrant Direct. Its 4.0% yield is no myth.

Free Giveaways Celebrating 100,000 Visitors at Free Money Finance

Before I left for Russia two weeks ago, I announced that Free Money Finance had reached 100,000 visitors and we'd be celebrating with a giveaway when I got back. Well, I'm back, so let the giveaways begin!!!

As a thank you to all of you for reading this blog, I'm giving away a copy of each of the following books:

• The Millionaire Next Door (of course)
• Millionaire Women Next Door
• The Wall Street Journal Guide to Understanding Money and Investing
• Wealth Creators: The Rise of Today's New Rich and Super-Rich
• Money Advisor, 2001: 10 Steps to Increase Your Wealth (yes, an old book, but still has many solid principles)

To win one of these, all you have to do is send me an email with the subject "100,000 Visitors Giveaway" telling me you'd like to win one of these. I'll let the contest go until Friday (December 2) and then draw five names at random. As for rules, they simply are:

1. The drawing will be final and I will be the complete and final judge (don't worry, I'll be fair).
2. U.S. mailing addresses only.

As of now, we're far past 100,000 visitors and the thanks go to the readers of Free Money Finance. I truly appreciate your continued visits to this blog as well as your comments. You're the reason I'm doing this. If you enjoy this site and don't mind, I sure would appreciate it if you'd tell you friends to stop by. As you may have noticed, I've added easy-to-use subscription links on the right side of this blog so anyone can sign up to get Free Money Finance with a few easy clicks. Thanks for your support.

Thanks also to the community of personal finance bloggers. It's so great being part of the friendship and common interest we have.

And thanks goes to those blogs who are much bigger than I am and that have helped me out by providing links to Free Money Finance. These include Instapundit, Business Opportunities, and Scobleizer. Thanks for sharing your readers with me.

So send me an email and enter to win a FREE MONEY BOOK!!!!

7 Big Tax Changes Money Central Wants to See, Part 10

Here's part 10 of a piece from Money Central that lists the seven tax changes they would like to see:

Reform and simplify the rules on tax-favored retirement savings. We have traditional IRAs, Roth IRAs, SEP-IRAs, SIMPLE IRAs (which are anything but), 401(k)s, 403(b)s, profit-sharing plans, money purchase plans, etc -- all with different qualifications and limitations. Then we’ve got a whole industry of people to tell you how and when you can and/or have to take out your own money. Give me a break.

I'm up for this as well. It doesn't have to be this complicated.

Free Money Finance recommends Emigrant Direct because of its 4.0% yield.

Comments: Saving Money on Your Car; Tracking Maintenance

Here's a comment a reader who responded to my post on Saving Money on Your Car:

A good way to keep track of required maintenance on your car is a spreadsheet.  For example, just figure out what your average time between oil changes, and make a spreadsheet function that gives you the next date for an oil change when given the last date that you changed your oil.  I use it, and it works great.

Good idea. I used to use a spreadsheet to track gas mileage (I've since stopped since I wasn't really using the information).

Another use for a spreadsheet it to track mileage -- for both business and charitable trips -- the first to get reimbursed and the second to take as a tax deduction.

Free Money Finance recommends Emigrant Direct because of its 4.0% yield.

10 Big Tax Deductions Too Many People Miss, Part 10

Here's part 10 of a piece from Money Central that details tax deductions that many taxpayers seem to forget:

Retirement tax credit

This one is even better than a deduction. It’s a credit -- a dollar for dollar reduction in your tax -- not just in your taxable income. And, it also can come with a deduction.

Make a contribution into your retirement account. That money isn’t taxed currently. So, it’s like you got a deduction off your income. In addition, you get a credit of as much as 50% of the first $2,000 invested. That’s as much as a $1,000 reduction in your tax.

You get the $1,000 tax reduction as well as the $2,000 reduction in your income. That’s a nice rate of return on a $2,000 investment.

I love tax credits!!! Unfortunately (or should I say "fortunately") I'm above the income limits.

Free Money Finance recommends Emigrant Direct. Its 4.0% yield is something you don't want to miss.

7 Big Tax Changes Money Central Wants to See, Part 9

Here's part 9 of a piece from Money Central that lists the seven tax changes they would like to see:

Consolidate and simplify educational incentives. We’ve got the Hope Credit, the Lifetime Learning Credit, the deduction for Qualified Higher Education expenses, Section 529 Plans and Coverdell Educational Savings Accounts -- all with different rules and qualifications.

Amen to this! It's amazing to me that something as simple as saving for college is so complex in its savings options.

Click here to read part 10 of this series.

Free Money Finance recommends Emigrant Direct because of its 4.0% yield.

Comments: 5 Steps to Getting that Raise; Inequity

Here's a comment a reader who responded to my post on 5 Steps to Getting that Raise:

I used a few of these techniques in my last drive to get a raise and promotion. Another that worked well was comparative inequity. Evaluating others on your team and basing your position on what you believe theirs to be. Basically you can leverage inequities amongst you and your peers to seek raises/promotions. Of course, you would also need to highlight your contributions and actually be a valuable member of the team.

Good addition to the original article/tips.

Free Money Finance recommends Emigrant Direct because of its 4.0% yield.

10 Financial Urban Legends, Part 9

Here's part 9 of a piece by Money Central that details lingering financial myths:

Myth No. 9: You can buy your way out of points on a speeding ticket. If you pay a bit more than your fine actually is, the state will send you a refund check for the difference. Don't cash it and they can't assess points because the transaction isn't complete.

Hmmm, sounds good -- a way to circumvent rising insurance rates for a mere $5. But when Mikkelson checked into it, she discovered the popular e-mail advice originated in Australia. Maybe it works for Aussies, but Americans aren't so lucky.

Could be a good idea for states to raise a bit more money. But it would need to be more than $5. I'm thinking 50% of what your insurance increase would be.

Click here to read part 10 of this series.

Free Money Finance recommends Emigrant Direct. Its 4.0% yield is no myth.

7 Big Tax Changes Money Central Wants to See, Part 8

Here's part 8 of a piece from Money Central that lists the seven tax changes they would like to see:

Institute a value-added tax (VAT). Put in a rate of 13% to 14% to replace any lost revenue. If that's too complicated, then up the 25% marginal rate to 40%. Before you start screaming, remember that on a joint return, under this proposal, the first $100,000 on a joint return would be federal tax free.

I don't know enough about a VAT to really comment. But generally, I'm in favor of consumption-oriented taxes.

Click here to read part 9 of this series.

Free Money Finance recommends Emigrant Direct because of its 4.0% yield.

10 Big Tax Deductions Too Many People Miss, Part 9

Here's part 9 of a piece from Money Central that details tax deductions that many taxpayers seem to forget:

Casualty deductions

Last year, it was either too wet (think Hurricane Isabel in the East) or too dry (remember the wildfires in California).

If President Bush declared your area a disaster area, you can claim your loss either for 2003 or for 2002. You can confirm whether you qualify on the Federal Emergency Management Agency’s Web site.

Like the medical deduction, I'd rather pass on this and not have the disaster. But I guess that isn't my choice, is it?

Click here to read part 10 of this series.

Free Money Finance recommends Emigrant Direct. Its 4.0% yield is something you don't want to miss.

7 Big Tax Changes Money Central Wants to See, Part 7

Here's part 7 of a piece from Money Central that lists the seven tax changes they would like to see:

Raise the personal income-tax exemption. Then, tax income above that level at 25%. I would boost the personal exemption to $50,000 for singles and $100,000 for couples. This great idea from Michael Graetz, a Yale University tax expert, would eliminate 100 million tax returns.

Sounds great -- for lower income individuals. But sounds like the rest of us would have to pick up the slack. This doesn't seem too exciting to me.

Click here to read part 8 of this series.

Free Money Finance recommends Emigrant Direct because of its 4.0% yield.

Comments: Problems at General Motors; Globalization

Here's a comment a reader who responded to my post on Problems at General Motors:

I think it's game over.  The sad...sad...sad truth which few want to admit is that China and India are coming into their own. China WILL begin flooding US markets with their cheap cars in a year or two.  They will offer SUVs for $12k and luxury cars for 15k.  The cars will be crap at first but at 12k, you could buy two and throw them away every three years or so.

There is no way to compete with a workforce that is willing to work for 0.50/hour.  Hell, even if you offered $5.15/hour to the average India/China worker most people over there would be considered rich.

TVs, DVDs, VCRs - they all stopped being made in America years ago.  Just add Cars to the list.

On a slight tangent, I saw a feature on 60 minutes where many Americans were flying to India to have their heart operations. Why pay $100,000 for an operation here when you can fly there and get one for 30,000?  Oh yeah, the 30k includes like 4 weeks stay at resort on the beach.  Most of the doctors there were trained and worked in the US for years before going to India.

Welcome to Globalization.

I saw the 60 Minutes piece as well. It said you can get as good care there as in the U.S., you stay in much nicer accommodations, and medical care costs much, much less. What's not to love?

As far as cars are concerned, I'm not as pessimistic as this reader. There will always be demand for higher quality (and thus higher priced) cars. It just remains to be seen if the American auto makers can make them.

Free Money Finance recommends Emigrant Direct because of its 4.0% yield.

7 Big Tax Changes Money Central Wants to See, Part 6

Here's part 6 of a piece from Money Central that lists the seven tax changes they would like to see:

Dump the Alternative Minimum Tax (AMT). Republicans and Democrats agree that the tax, designed to ensure all taxpayers pay some tax, is way out of hand. They've spent the last five years or so talking about how to fix it. It’s almost certainly to be on the agenda of proposals that will come out of the Advisory Panel’s report. But I’m not optimistic Congress will do much about the AMT. Just extending the current increase in the AMT exemption would cost $385 billion over 10 years, and 7 million taxpayers would still be subject to the AMT hit in 2010. If it were repealed altogether, it would cost the government $611 billion over 10 years. If the Bush tax cuts of 2001 and 2003 are extended, the loss of revenue due to the AMT would hit $954 billion, according to the Center on Budget and Policy Priorities. With our current deficit, that’s a lot of revenue to make up.

Yes, it's a lot. But the AMT needs to be fixed/changed/repealed as it's impacting the middle class more and more every year. Maybe a small national sales tax would cover the elimination of this tax?

Click here to read part 7 of this series.

Free Money Finance recommends Emigrant Direct because of its 4.0% yield.

Comments: Best Money Post I've Ever Written, Part 2; Bad Math

Here's a comment a reader who responded to my post on Best Money Post I've Ever Written, Part 2:

As a believer in Ramsey's principles, and an engineer, I can see the conflicts from the math and psychological.  I have followed Ramsey's "baby steps" and this is the only one I've deviated on.  I attack higher interest rate first.  In fairness to Ramsey, he recognizes and states you will pay your debt off in a few more weeks, but also pays more stock to the psychology of the snowball.  I would recommend the snowball method to most that lack the fortitude, but I felt I could handle it, and I did.  I like Ramsey, and believe he's spot on 95% of the time.  This one tenant doesn't suit me, but I think its best for most.

I'm in the "higher interest first" group too, but I can see the benefits of the other option. It still makes me think, though -- does Ramsey think this is really the best way or does he just want to be different. he's a smart marketing guy just as much as he's a solid financial author, so I wouldn't put it past him.

Free Money Finance recommends Emigrant Direct because of its 4.0% yield.

Money Christmas Present Suggestions from Free Money Finance

In case you missed it on Thursday, here are some ideas for great money-related gifts that are highly recommended by Free Money Finance:

• Emigrant Direct has a 4.0% yield -- a great place to store your emergency cash. Open up an account for yourself or someone you love.
• You Need a Budget is a powerful, easy-to-use budgeting system that offers $65 in free offers and a 60-day money-back guarantee.
• The Automatic Millionaire includes simple, practical tips to grow your net worth substantially.
• The Millionaire Next Door gives loads of tips that have made others wealthy -- and can do the same for you.
• The Richest Man in Babylon offers age-old financial advice that worked hundreds of years ago and still works today.
• Money Magazine is consistently rated as Free Money Finance's best personal finance magazine.
• Large Money Savvy Piggy Bank is a great way to teach kids savings!
• Moneywise Kids offers a chance to play a game and learn about money.
• Leather Money Clip Wallet and Credit Card Holder to hold all that money you're saving from reading Free Money Finance.

And here's one that's blogging related:

• An Army of Davids from one of the premier bloggers today -- a must read from Instapundit.

As a reminder, Free Money Finance has a two-part ad/product policy:

1) I only recommend products I use/believe in.

2) All profits go to charity.

Happy shopping!

Comments: How to Make Sure Your Kids Will Live Better than You, Part 6; Loan Shark

Here's a comment a reader who responded to my post on How to Make Sure Your Kids Will Live Better than You, Part 6:

Personally, Re: #4, I don't have kids yet, but when the time comes, I definitely plan to give my kids an advance before pay-day, but charge commensurate outlandish interest. Hopefully this will teach them the value of saving and paying with money you have, instead of borrowing to pay with money (and interest) that you don't.

I'm interested in seeing if this works. Anyone out there have practical experience with this idea?

Free Money Finance recommends Emigrant Direct because of its 4.0% yield.

Money Christmas Present Suggestions from Free Money Finance

Looking for a great gift for the people on your list? Give them something that they'll not only like, but that also has an almost infinite investment return. Here are some recommendations for great money-related gifts that are highly recommended by Free Money Finance:

• Emigrant Direct has a 4.0% yield -- a great place to store your emergency cash. Open up an account for yourself or someone you love.
• You Need a Budget is a powerful, easy-to-use budgeting system that offers $65 in free offers and a 60-day money-back guarantee.
• The Automatic Millionaire includes simple, practical tips to grow your net worth substantially.
• The Millionaire Next Door gives loads of tips that have made others wealthy -- and can do the same for you.
• The Richest Man in Babylon offers age-old financial advice that worked hundreds of years ago and still works today.
• Money Magazine is consistently rated as Free Money Finance's best personal finance magazine.
• Large Money Savvy Piggy Bank is a great way to teach kids savings!
• Moneywise Kids offers a chance to play a game and learn about money.
• Leather Money Clip Wallet and Credit Card Holder to hold all that money you're saving from reading Free Money Finance.

And here's one that's blogging related:

• An Army of Davids is from one of the premier bloggers today -- a must read from Instapundit.

As a reminder, Free Money Finance has a two-part ad/product policy:

1) I only recommend products I use/believe in.

2) All profits go to charity.

Happy shopping!

Happy Thanksgiving

Just want to wish you and your family a blessed and very happy Thanksgiving. May we all take a break from talking about money and focus on the things that really make us thankful.

Comments: Why The Roth 401(k) Is A "Dud" So Far; Unresolved Issues

Here's a comment a reader who responded to my post on Why The Roth 401(k) Is A "Dud" So Far:

One of the unresolved issues with Roth 401(k) plans is how employer matches, if you have them, are handled. Since the contributions are taxable income, in effect, the employer contributions would also be susceptible to tax.

A good friend that is a benefits and pension attorney is currently recommending that his clients setup a dual 401(k) plan. Use the Roth feature for employee contributions, and stash the matching funds in a traditional 401(k) account so employees don't have to pay taxes on them.

This is one of the reasons my company is taking a wait-and-see position on the Roth IRA.

Shoppers, Are You Ready?

Here's my obligatory "don't spend like a mad fiend this holiday season" post. It's from Smart Money who starts off giving us some stats on shopping:

According to the National Retail Federation, the average consumer plans to spend $738 this holiday season, 5.1% more than last year. Now's the time to create a game plan. You don't want to be paying off this year's bills next year, after all.

That's right where I am -- at least my budget's here. We have $700 budgeted for Christmas, but we usually spend a lot less. As the years have gone on, my wife and I have reduced our giving to each other to only a couple of gifts each (after all, we already have everything we want/need) and we spend most of our funds on our kids, relatives, and friends. However, we don't over-do for anyone, preferring to keep as much focus as possible on the reason for the season.

Smart Money also includes some tips to manage your spending during the holidays. Here are the highlights:

Start by taking a look at last year's bills. Keep in mind that what you spent last year isn't necessarily a benchmark for what you should spend this year. But it should help you remember all those little budget-busters — the last-minute gifts as well as those extraneous costs that come with the holidays, like party garb, decorations and tips.

Arrange spending limits. It's a good idea to settle on spending amounts with the people you'll be exchanging gifts with, says Kays. Gifts tend to become pricier over the years, he says, so before you know it, you're spending $200 on one person when all you can afford to spend is $50. "Tell them, 'I just don't want to spend the money I've been spending,'" he advises.

Plan your attack. Get a few ideas about what you'd like to buy for each person on your gift list before you hit the mall, says Kays. That's easy, thanks to the Internet. Even if you don't want to make purchases online, you can use sites to find sales and average prices for most any item.

Don't wait until the last minute. When the panic sets in and the crowds swell, budgets get chucked out the window. So don't aim to do all of your holiday shopping on Dec. 24. The longer you wait, the more you'll spend.

I can still remember the December 24 shopping-in-the-middle-of-a-snowstorm trip my dad and I took when I was in high school. Not only was price no object, but we about crashed (several times) before we made it home (our normally 20-minute ride took an hour or so, but it seemed like a lifetime as we slid back and forth all the way home). Just another reason not to wait until the last minute -- you never know what the weather will be like.

7 Big Tax Changes Money Central Wants to See, Part 5

Here's part 5 of a piece from Money Central that lists the seven tax changes they would like to see:

Make Congress do its own tax returns. And they’ll have to use a pen -- no computers allowed. That should get rid of some of the complexity.

They hardly do much now -- do we want to grind them to a complete halt? Though this is a tempting idea. It would be fun to see them struggle. And think of the ratings boom for C-Span!

Click here to read part 6 of this series.

Free Money Finance recommends Emigrant Direct because of its 4.0% yield.

10 Financial Urban Legends, Part 8

Here's part 8 of a piece by Money Central that details lingering financial myths:

Myth No. 8: You can now opt out of having credit bureaus give your information to anyone who asks. Just call (888) 567-8688 and give them the Social Security numbers of everyone in the household in a single call, says the message. But hurry -- you only have 60 days to take advantage of this ability.

The credit-reporting bureaus are working hard to debunk this one, if only to stop people from calling that number. It merely connects you to an operator who can help you opt out of receiving pre-approved credit offers. Keep in mind that if they weren't allowed to give out credit information on you, they wouldn't exist.

The grain of truth lies in the fact that companies are required by law to inform their customers of their privacy policies. (Remember the flood of confusing legalese that showed up in your mailbox from every department store credit card prior to July 1, 2000?) If you don't want them to sell your personal information, you must call them directly -- one by one -- to halt the practice.

Finally, a bit of a serious note. I opted-out earlier this year and my mail has decreased dramatically (thank God).

Click here to read part 9 of this series.

Free Money Finance recommends Emigrant Direct. Its 4.0% yield is no myth.

Comments: Money Saving Tip: Ask for Free Drugs; Get Coupons

Here's a comment a reader who responded to my post on Money Saving Tip: Ask for Free Drugs:

It's also worth going to the sites of the prescription drugs you're taking. Most of them have discount coupons that you can use. They also offer special discounts from time to time, so it's worth checking freebie sites to see what type of discounts you may be able to get.

Good build upon the original idea!

10 Big Tax Deductions Too Many People Miss, Part 8

Here's part 8 of a piece from Money Central that details tax deductions that many taxpayers seem to forget:

Investment and tax expenses

Many of us forget tax planning and investment expenses because they are part of miscellaneous itemized expenses. Their total must exceed 2% of your adjusted gross income before you get any tax benefit.

Expenses to track include your employee business expenses, tax preparation fees and even the portion of your legal or accounting fees relating to tax planning. For example, in a divorce, the legal time spent relating to the tax aspects of alimony and child support would qualify. So too would the tax aspects of estate planning.

Good points about all the costs that apply toward this deduction.

Click here to read part 9 of this series.

Free Money Finance recommends Emigrant Direct. Its 4.0% yield is something you don't want to miss.

7 Big Tax Changes Money Central Wants to See, Part 4

Here's part 4 of a piece from Money Central that lists the seven tax changes they would like to see:

Hold federal elections on April 15 instead of the first Tuesday of November. Admittedly, it's not a tax law, but if we vote on Tax Day, that will surely get the government's attention! I made this proposal in 1986 when I was invited to the White House to consult on the proposed 1986 Reform Act. Maybe that’s why I wasn’t invited to testify before this panel.

I'm up for this! It would make all those last-minute people unable to vote -- they'd all be huddled at the post office -- and hence my vote would have more impact. ;-)

Click here to read part 5 of this series.

Free Money Finance recommends Emigrant Direct because of its 4.0% yield.

Bernanke's (and Greenspan's) Money

In the past, I've posted on the net worths of now Chief Justice John Roberts and ex-Supreme Court nominee Harriet Miers. So when I saw this Money article on Federal Reserve Chairman nominee Ben Bernanke's financial holdings, I just had to include it. The piece also gives some insight into current  Federal Reserve Chairman Alan Greenspan's finances. Here are the highlights:

Like many Americans, Ben Bernanke, the man nominated to be the next Federal Reserve Chairman, has a large majority of his financial holdings tied up in his retirement accounts, with relatively modest liquid assets.

And as Fed watchers scramble to parse out the differences between Federal Reserve Chairman Alan Greenspan and the man nominated this week to succeed him, one that stands out is the size and composition of their respective investment portfolios. Not surprisingly, Greenspan, 79, who has headed the Fed for 18 years and worked as a private sector economist before that, appears to be quite a bit wealthier than Bernanke, the 51-year old former Princeton University college professor.

Bernanke's maximum holdings would be about $5.4 million if he was near the top of the range listed for each class of assets, but could be as low as $1.1 million.

Greenspan's assets are worth at least $4.2 million, according to his filing, with at least $3 million in Treasuries and bond funds, $800,000 in individual stocks, held directly or in his wife's 401(k) account and other assets worth more than $300,000.

Bernanke was paid $162,100 to be a Fed governor in 2004, and took a slight pay cut to become the chairman of the White House's Council of Economic Advisors earlier this year. He received royalties on one textbook from Pearson worth between $50,001 and $100,000 in 2004, and royalties on another textbook from McGraw Hill worth only between $201 and $1,000. As of 2005 the Fed chairman is paid $180,100.

So, how many of your would like an asset holding that "could be as low as $1.1 million"? :-)

Just a note -- these are asset numbers, not net worth figures. These guys could have tons of debt for all we know, making their net worths a lot lower than these numbers. My guess is, however, that they are both doing ok money-wise.

Free Money Finance recommends Emigrant Direct for its 4.0% yield and You Need a Budget for its power, ease of use, free offers, and 60-day money-back guarantee.

Comments: Money Saving Tip: Ask for Free Drugs; Real-Life Example

Here's a comment a reader who responded to my post on Money Saving Tip: Ask for Free Drugs:

My Dr. does this too. Several months ago I needed a prescription for some sinus medication. My pharmacist said that my insurance wouldn't cover it (they only covered the generic version which my Dr. hadn't prescribed.) Called the Doctor to get the prescription changed, they said just come in and we'll give you samples. Got 20 pills for free (would have cost $30+ to buy them)...

Isn't there a saying somewhere that goes, "Ask and you shall receive"? ;-)

Reminder: Free Money Finance is currently in Russia.

7 Big Tax Changes Money Central Wants to See, Part 3

Here's part 3 of a piece from Money Central that addresses what tax changes they expect and would like to see:

As you have heard me say before, our tax system is broken. The U.S. Tax Code is overly complex and burdensome. It gets amended so often (38 major tax changes in the last 41 years) that it hobbles the competitiveness of small businesses nationwide. You can’t plan long-term if the rules keep changing. It’s also hard to get respect for compliance when most people don’t understand the rules of the game.

It would really help to have a tax code that’s less than 9 million words and rising. Compare that with the Bible, with 773,000 words, the Declaration of Independence with 1,300, and Lincoln’s Gettysburg Address, the document that defined the American nation, with only 272.

National Taxpayer Advocate Nina Olson, and Eric Toder, former deputy assistant secretary for Tax Analysis at the Treasury Department, recently reported IRS statistics from 2002 showing individual taxpayers spending $20.8 billion in actual costs and 3.5 billion hours to file their tax returns.

You - have - got - to - be - kidding - me!!!!!!!! I knew the tax code was a huge tangled mess, but I didn't know it was this bad. Every statistic quoted shows how broken the system is. We certainly do need reform.

Click here to read part 4 of this series.

Free Money Finance recommends Emigrant Direct because of its 4.0% yield.

10 Financial Urban Legends, Part 7

Here's part 7 of a piece by Money Central that details lingering financial myths:

Myth No. 7: You can make a pile of dough by helping a foreigner solve his money problems. "Hello, my name is unpronounceable, and I need to get money out of my country. Will you let me use your bank account?" is the gist of this e-mail plea.

It's called the Nigerian bank scam, and it's among Mikkelson's favorites, mainly because the number of people asking about it is huge. "It is impossible for the average person to figure out what is going on unless they know there is such a thing as a Nigerian scam," she says.

For one, the back-story changes constantly to reflect current events. Expect a new variation every time a foreign leader dies or is deposed. Presently, Yassar Arafat's widow is supposedly seeking help moving his secret bank account out of enemy hands, and the sergeant who found Saddam Hussein's hidden gold wants help keeping it out of insurgent hands.

You mean that nice widow I've been helping out isn't really related to Yassar Arafat? ;-)

Click here to read part 8 of this series.

Back in the States

Just a quick post to let you all know that I'm back in the states after an amazing trip to Russia (I'll give you some details over the next few weeks) and an agonizing series of flights on Delta that left me stranded in Cincinnati last night. (but I'm over the bitterness by now). :-)

I'm off to pick up my kids tomorrow, so blogging will remain "automated" until next Monday when I'll be back in the saddle full time.

5 Audit Red Flags

Here are five things that can trigger an audit (from Money magazine) :

1. Itemized deductions. The IRS is more likely to scrutinize returns with itemized deductions than those that take only the standard deduction.

2. Hobby losses. If you are holding down a full-time job but are running a side business, you may be targeted for an audit if your pet project posts a loss year after year.

3. Home office deductions. If your place of business is also your residence, be careful with that home office deduction.

4. Casualty losses. The rules regarding casualty losses are very specific.

5. High income. Not only are your taxes higher, you are chances of being audited are 1 in 20 if you earn $100,000 or more. "Higher income earners are more likely to be audited because there is more tax money at stake," Tyson said.

Yikes!!! Three of these apply to me. However, I have an accountant do my taxes every year (it saves me tons of time and headaches) and we're pretty conservative. Besides, I keep very good records, so I feel I don't have much to worry about.

Comments: 10 Things You Should Ask Yourself About Retirement, Part 1; Save for Retirement

Here's a comment a reader who responded to my post on 10 Things You Should Ask Yourself About Retirement, Part 1:

Interesting article. This is certainly a topic of conversation with the "Empty Nester" crowd. One of the things that I have noticed in my practice is that the baby boomers define retirement completely different than the previous generation.

Every single person that I have talked to described a more expensive lifestyle than they one they currently have while working. This was largely due to travel, and the desire to have two homes in retirement.

I suppose most won't achieve this goal because of poor financial planning. But many still can. Once a couple hits the empty nester stage, their ability to save sky rockets.

I have found that only about 3% have any idea how much cash it will take to drive the lifestyle they want. I can tell you from personal experience. A million dollars isn't what it used to be.

They moral to the story? Find your magic number, (how much cash will it take to drive the lifestyle you are looking for?), and save cash like crazy!

Yes! Great advice. Calculate your number today then start saving for it immediately.

Reminder: Free Money Finance is currently in Russia.

10 Big Tax Deductions Too Many People Miss, Part 7

Here's part 7 of a piece from Money Central that details tax deductions that many taxpayers seem to forget:

Clean fuel deduction

You can get another above the line deduction of up to $2,000 (dropping to $1,500 for 2004) of the cost of buying a clean fuel vehicle. That’s a car that uses a significant source of energy other than gasoline.

Plus you get all the fuel savings for the life of the car!

Click here to read part 8 of this series.

7 Big Tax Changes Money Central Wants to See, Part 2

Here's part 2 of a piece from Money Central that addresses what tax changes they expect and would like to see:

What to expect from Congress

Look for a proposal to flatten out our rate structure, with tax brackets being eliminated. Congress tried this in 1986 and then spent the next two decades reversing the simplicity. Remember, we’ve had over 14,000 changes to the Tax Code since 1986.

Expect lots of changes in the investment area, including the possibility (better make that the “fantasy”) of eliminating the tax on capital gains. Investment income, especially dividends and interest, will be subject to a lower rate than earned income. Qualified dividends already have a 15% maximum tax. This is all part of President Bush’s goal to stimulate investment and savings. He’ll try to do this by shifting the tax burden to earned income and consumption.

President Bush also wants to completely end the estate tax. Read my lips -- “Not gonna happen.” We’ll probably end up with a lifetime exclusion of about $5 million. That’ll wipe out the tax for all but the super wealthy and defuse a lot of heat. Between husband and wife, that means no tax unless the estate is worth more than $10 million.

New incentives for long-term savings. I expect increased contribution limits for IRAs, 401(k)s and profit-sharing plans. Private retirement accounts will be suggested. Think “ownership society,” and you’ll get the direction and agenda of the report to come.

A low-rate consumption tax will be suggested to pay for the above breaks. It will most likely be a national sales tax rather than the more complex value-added tax. I expect a 5% to 10% rate. I also expect the Democrats to go ballistic over the regressive impact of the tax on the poor.

If all of these things happened, I'd be happy. The higher exclusion limits would take the estate tax far out of my range and the rest of the ideas would be a win for someone like me -- someone who spends little, saves a lot, and puts that savings in investments. The chances of this all happening -- not likely.

Click here to read part 3 of this series.

Free Money Finance recommends Emigrant Direct because of its 4.0% yield.

Comments: The Typical American Millionaire, Part 2; Live Below Your Means

Here's a comment a reader who responded to my post on The Typical American Millionaire, Part 2:

It's not the job that's important.  What's important is spending below your means.  You can become a millionaire doing almost any kind of work.  If you can save about $500 a month at 6% growth, you will be a millionaire in 40 years.  Or $1,000 a month gets you there in 30 years.

You KNOW I love this comment. ;-)

See my thoughts on the issue at these posts:

• It's Not What You Make, It's What You Spend
• It's Not What You Make, It's What You Spend Part 2
• It's Not What You Make, It's What You Spend, Part 3

Reminder: Free Money Finance is currently in Russia.

10 Big Tax Deductions Too Many People Miss, Part 6

Here's part 6 of a piece from Money Central that details tax deductions that many taxpayers seem to forget:

Student higher education expenses

For 2004, if your adjusted gross income isn’t more than $65,000 ($130,000 on a joint return), you can get an above the line deduction of as much as $3,000 for any higher education expenses you paid.

See if you qualify for the Hope or Lifetime Learning Credit. The Hope credit is worth $1,500 per student subject to income limits. The Lifetime Learning Credit is worth $2,000 per return. Compare, and go with the one which gives you the biggest benefit.

Another good deduction. It's great to reward education in this way, though a degree will easily pay out even without the tax savings.

Click here to read part 7 of this series.