Personal Finance Blog


Is Leasing a Car a Better Deal than Buying a Cheap-o Junker?

About once or twice per year, most auto manufacturers put together special lease deals to try to entice people to buy up last year’s stock, or get into cars that may not necessarily be a company’s hottest sellers. That generally means a good deal for the buyer, so long as you’re in a position to take advantage of the deals and have a good enough credit score to qualify. If that’s the case, then you might just be made in the shade. Of course, not everyone is. At that point, it boils down to a question of whether you should spring for the new-car deal, a used car, or just suck it up and buy another clunker that might get you through the next year or two, then junk it and pocket the scrap value. Any of these can be a great deal, but unfortunately, they can also be bad deals, so you have to go to the dealership armed with knowledge and be prepared for them to try to sell you everything under the sun that may not be right for you. For the sake of simplicity, though, let’s talk about those incredible lease rates compared to used cars that may be worth only a year or two of use, since many of those great rate leases are only for 24 months, rather than the more usual and more expensive 48-month terms.

Let’s take a look at those lease offers. They’re usually really good deals, but at the same time, they’re often on vehicles that the buying public may not think is a particularly good car. That’s not to say that it’ll break down the first time it goes over a speed bump, but it may have a few less amenities, or a less powerful engine, or even just be less attractive and comfortable than some of the manufacturer’s other offerings, which they’ll offer at higher lease rates or purchase rates. That isn’t always the case, but more often than not, that low, low price is designed to get you into the dealership and looking, where you might opt for a more expensive vehicle that better suits your needs. Happens all the time, and while it used to be called bait-and-switch, these days those cars will usually be available, but they aren’t usually what people are looking for, so only the really budget conscious will go for them.

These leases require extremely good credit scores, generally better than the credit scores of most of the customers who will be looking at a vehicle in that price range. That leaves the second option- going with a car or truck that might be on its last legs to get you through.

Opting for this is usually the lower-cost option, particularly when you consider that you can junk the car and possibly make as much as $1,000 on the sale. Could you live with spending $1,000 to drive a car for two years? Most people would say yes, that they would. In some cases, you could even make out of the car what you paid into it, especially if you take care of it, and then sell it to someone else. The issues you’d have to deal with, obviously, are wear and tear on the car or truck, essentially how far gone it is. If it’s really rough, you may be rolling the dice and not get what you’ve paid out of it. Compared to the lease, which is for a new car, buying an older car can be tough, but the reality is that you may spend much, much less for an old car than you would for a new car, even if it is one of those great lease rates that seem to be too good to be true. At the end of the day, only you can decide which is right for you, but if you do your homework, both can be a great deal to the right buyer.

Posted in:  Budget & Savings, cars, Financial Planning
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What You Should be Doing Right Now to Reduce your Taxes

Income taxes are troublesome, to be certain, but for all our grumping as a society, it’s fairly clear to most people that they’re a necessary evil to ensure that society runs smoothly, and that our streets are clear when the snow begins to fly. Obviously, taxes do a lot more than that, and to be certain, some uses of taxpayer dollars are more acceptable than others, but that doesn’t mean that you should pay more than your fair share of the national tax bill. Now, that has been a bit of a contentious issue in the last few years, but realistically, the reason that rich folks don’t often pay much in taxes (presented as a percentage of income, rather than fixed dollar amount,) is that they make the right financial moves that decrease their tax bill. Rather than getting mad about it, we should all take a page out of their book, and decrease our own taxes, rather than hoping that some politician will do it for us.

So, that being said, we then have to take a look at some of the best ways to legally avoid or reduce your taxes. The IRS tax code gets pretty complicated, all told, so don’t expect this article to go over every aspect of reducing your taxes. That can really only be done with a team of tax lawyers and a few million dollars to spare for time and effort.

There are things you know about that reduce your taxes, and chances are there are some you don’t know about. Others might be a bit blurry. Just about all of them in some form or another require that you reduce your taxable income, so be warned on that level from the start.

The Individual Retirement Account, or IRA, as well as 401-k programs, are just about the best way to reduce your income taxes. You’re entitled to sock away up to $17,500 (as of 2014) in addition to $5,500 (as a catch-up amount) into any tax-deferred retirement account, and if you’re like most Americans, you aren’t putting away anywhere near that. Maybe that’s possible for you, maybe it isn’t, but let’s look at an example for a moment. Let’s say you’re set to make $37,000 this year. If we don’t include any other deductions in your taxes, you’re looking at an effective tax rate of 25%. However, if you were to put back $5,000 into your 401-k, then your taxable income is just $32,000, which is below the threshold to get you into the 15% tax bracket. Now, that doesn’t cost you a dime, you’re putting money aside for retirement, and you’ll save hundreds of dollars! What isn’t to love about that? Max out your retirement contributions instead of going out to dinner every other day, and you’ll save a ton of money on your taxes.

Charitable giving has always been a great way to save on taxes, to shave a few bucks off to put you into a lower tax bracket, and of course, help people at the same time. Did you know, though, that some states offer dollar-for-dollar charitable donation tax credits? That sofa you gave away might not save you much on your federal taxes, but your state taxes will get knocked for a loop right away! Check with your local tax authority to determine your eligibility, and of course, keep ALL your receipts for what you give away. That way, you’ll get as well as you give!

Going back to school isn’t really an obvious way to save on your taxes, but under the right circumstances, you’d be surprised how far it can go! Various credits are available under state and local income tax rules that can help you pay your tuition and ensure that you always keep learning!

Always be sure to get a leg up on your taxes well before April rolls around. That way, you can be on top of any and all changes that come up through the year. After all, knowledge is power! (or in this case, money!)

Posted in:  Budget & Savings, Taxes
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Tips for Setting a Vacation Budget

As the last vestiges of summer pass us by, it’s certain that some folks are paying off their vacations, and others might still be looking forward to their off-season recreation. Either way, vacation budgeting is probably right there at the forefront of your mind, right? No? Oh. Well, okay. But it should be! More so than slipping on those swimming suits and touring museums, you should keep not just your household budget in mind, but also a travel budget. Above all, avoid the temptation to lay aside your budget for even a moment! So, what’s a travel budget all about you ask? Well, as you might have guessed, I’m going to tell you all about it.

A travel budget is simply what it says. You set aside a certain amount for your vacation, and avoid spending outside that amount. Now, you might think that’s too tough to do, since there’s so much that you might want to do that isn’t necessarily on your itinerary, but for those who are stuck paying those credit card bills now, after the joy of the vacation has worn off, and you’re looking forward to next year’s time off, you might just be asking what you could have done differently (or what you can do differently next year!) That’s easy enough, but it does require a little work!

So, think about vacations in terms of tiered expenses. Obviously, the top tier, the most expensive, is going to be the destination expenses. It may be a hotel room, or a resort property. It may be a cabin on a cruise ship, or it could be a hacienda on the water. Whatever the case may be, its lodging, and it costs money. Assuming you’ve swindled the best imaginable deal you could through coupons, internet specials, and that travel agent friend of yours, this is where most of your cash is likely to go, so spend wisely. This is also an opportunity to fix a certain number to your vacation budget. For instance, if you’re staying six nights at a place that’s $175 per night, then you know outright that you’re spending $1050 on lodging. The same goes for Cruise ships. The price is set when you leave, so there isn’t much more you have to worry about.

Next comes entertainment. After all, you’re not really planning on listening to your kids whine about going to Disney land while you lie on the beach for your whole vacation, are you? Nope. Thought not. Entertainment can either be at the top of your expenditures, or below lodging, but realistically, there’s a lot more danger here of overspending than there is with lodging. Anyone who’s ever visited a theme park and had to pay $10 for a bottle of water can surely attest to that. The trick here, of course, is to plan ahead. If you know the area you’re going to, you should have a pretty good idea as to what you’re going to want to do. Allot enough of your budget to cover the places you’re going to go, or do yourself a favor and buy an all-inclusive pass, such as is available in many major cities. In Atlanta, for instance, you can purchase a pass that grants you access to many of the tourist attractions in the area, and can even help you skip long lines for tickets! It’s important to keep in mind here, though, that leaving yourself a little elbow room will help out a lot. Budget in at least 10% over expenditures so that you don’t have to resort to pulling cash out of savings!

Finally, don’t forget to factor in your dining expenses! You’re probably not going to want to eat fast food every night, are you? If that’s not the case, then put it in the budget, but don’t be afraid to go cheap, either. After all, some of the best deals on the best food for vacations is at local places that aren’t necessarily in the guidebooks.

Sure, vacations are expensive, but budgeting for your vacation is easier than most folks give credit for. If you’re careful, and you keep an eye on what you’re spending, you’ll be sure to enjoy your vacation while at the same time not regret having taken that vacation when you get home!

Posted in:  Budget & Savings
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