finances

Credit card sneaks

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It was inevitable, of course. I’ve enjoyed a 5.9% APR on my Fidelity MasterCard since I first got the thing about six years ago. When I called them a couple of years ago to ask them a question about the card, I made a point of telling the customer service representative that I really appreciated them maintaining that same low APR for so long, and he said something to the effect of, “Oh, as long as you keep paying on time and maintaining good credit, we won’t change the rate.”

Even back then, I knew that wasn’t necessarily true. You don’t have to read the fine print to know that APR’s are at the mercy of the issuing company, and that they could change them at any time. Every now and then, I would check the statements to see what the rate was, and each time I would smile and think, Good, they’re not changing it.
Well, that was a good ride while it lasted. I recently recieved one of those thick, official-looking envelopes in the mail from the company, and although I normally just glance over the contents to see if there was anything that required my immediate attention before tossing it in the shredder, this time I actually took the time to read the whole two-page document that accompanied the privacy manual and a couple of ad flyers.
In short my credit card company is now raising my APR as of June 1, 2009, to 11.99%. Still not a bad deal (my Wells Fargo VISA, which I only use once every few years, is a crazy 14.99%, and they refuse to lower it, even after I’ve asked and pointedly told them I would not use it until they do), but it’s still double what it has been. They also raised the APR on balance transfers and cash advances, as well as the late fees, although since I’m never late in my payment and I never do either transfers or cash advances, I didn’t pay attention to what the new terms are. And here’s the thing: the new rate applies to new purchases and existing balances.
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Here’s the interesting part, though: The notice also offered the option to reject the new APR, with a caveat. In order to reject the new rate, I had to call this number or send them a written notice. In addition — and here’s the kicker — I can’t use the card anymore, whether for purchases or balance transfers or even those automatic payments for things like subscription services. The moment I do, the new APR kicks in, applying not only to the new purchase but to all existing balances.
B. and I weighed the options and decided to reject the APR. We’ll pay off the current balance and then decide whether or not we want to continue using the card. One of the things I really like about the card is that I’ve had it for a long time, and along with the Wells Fargo VISA (which I’ve had for six years), it gives me a good credit record. I pay on time, and a couple of times I’ve paid the full balance off. (The VISA hasn’t had a balance in a couple of years.) They’ve always been pretty decent, especially with the APR, although occasionally they’ll play that awful trick of changing the due date, sometimes by as much as a week. That’s one of the reasons why I never do automatic payments for anything, even for utility bills. I like to be able to control when I pay bills, and since I keep a close eye on our outstanding bills and pay them weekly, I’m never late.
Another reason we like the card, of course, is that it allows us to get things like rental cars and hotel reservations worry-free. The card does have a rewards program, and right now we’re expecting a $350 check from it, but it’s not as good as, say, the American Express or Discover cash back programs.
We’ll probably look into other cards with lower interest rates, but for now I think we’ll just pay off the card and then use it only for things like the aforementioned travel expenses, paying the balances as soon as they incur so that the rate doesn’t kick in at all. I don’t like having too many credit cards — I have two, the MC and the VISA, while B. has one — and I loathe applying for more. Still, it might be a good idea to start shopping around once we pay this one off.
If you have a credit card with a low rate, or even a not-so-low rate, make sure that you start monitoring any correspondence you receive in the mail or electronically from the card issuer. It may come in a formal letter like mine did, or it may be buried in fine print among many other documents they send you, but with the Obama administration considering legislation that will impose restrictions on the ability of lenders to amend credit card terms, you can bet that banks are going to be scrambling to make changes now, before any new laws take effect. Even if you’ve been paying on time for the entire life of the card, and even if you’ve rarely used the card, definitely keep an eye on it. You might be in for a big surprise.

It’s April 13th. Do you know where your W-2’s are?

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I totally do not mean to sound smug at all, but I did my taxes way back in February. As in 2007 and 2008, I pretty much started doing my taxes almost as soon as all the W-2’s landed in my mailbox solely for one reason: I knew we had a big refund coming to us, and we needed that money badly. Badly. That will overcome an procrastination tendencies I may have to put off filing the return until, say, the evening of April 15th. I’ve done that nearly every year since I started doing my own taxes way back when.

Okay, I take it back. There is another reason why I do taxes early, and this will sound very geeky and goody-two-shoes: I actually like doing my taxes now. Seriously! Yes, I like seeing the refund amount increase and increase and increase as I plow through the different pages of my online Turbo Tax program, but honestly, I actually like sifting through my tax forms and working the numbers. Strange as it may seem for someone who didn’t do well in college statistics, but I actually love working with numbers now. I’m the CFO in my little family, the one who pays the bills and plays around with Quicken and balances the checkbook every couple of days. In a way, we pretty much have to be this diligent because of our limited income, but much to my shock I’ve found that I derive real, perverse pleasure in organizing our paperwork and working through the spreadsheets. I know, it’s weird, huh?

There’s a huge, huge amount of satisfaction in knowing exactly where we stand financially all the time, even if that actually means that we have, oh, $10 in the bank. (No, it’s not that bad, but there have been times in the past, I must admit. Talk about being creative.) Knowing that I have exactly $10.21 in the bank, however distressing that may be at times, is still infinitely better than the terrifying experience of constantly being in the dark, not knowing if I have enough money to cover a check I’ve written. I’ve been in that situation before. It’s not pleasant at all.

So yeah, we got our refund two months ago. It helped us tremendously with our moving expenses and in paying off one of two credit card balances. I’ll do it again next year, too, and begin filing as soon as we get our W-2’s and 1099’s. It’s amazing how easy it is to set up a tax system — I have a single file folder labeled TAXES [insert tax year here] in which I throw anything that I think will be useful and necessary when tax season comes in. Donation receipt from one of a handful of nonprofits that we support? It goes in there. (Not that we’ve ever had to use it, since we don’t itemize enough to surpass the standard deduction, but you never know.) Business-related receipts? It goes in there. (I tape all business receipts on to copy paper and put the latter into the folder. It’s infinitely better than shoving a thick sheaf of small, odd-sized receipts into the folder, where it will inevitably fall out.) Health care receipts for expenses we couldn’t deduct from our Flexible Spending Account? It goes in there.

This year will be a little different, depending on my job situation. If nothing of interest comes up, I may decide to continue freelancing and hope that I’ll be able to double my income, as I did in 2008. With the economy still very shaky (anyone else sick of hearing analysts trying to predict when we’ve “bottom?”), it’s not promising, but I’m nothing if not optimistic. Besides, who knows? Perhaps I’ll finally finish my novel and sell it for a million dollars to Random House, after which I option it to Steven Spielberg (call me, baby, it’s right up your alley!) for an equally jaw-dropping amount. Hey. If you’re gonna dream, you might as well dream big.

It's April 13th. Do you know where your W-2's are?

Standard

I totally do not mean to sound smug at all, but I did my taxes way back in February. As in 2007 and 2008, I pretty much started doing my taxes almost as soon as all the W-2’s landed in my mailbox solely for one reason: I knew we had a big refund coming to us, and we needed that money badly. Badly. That will overcome an procrastination tendencies I may have to put off filing the return until, say, the evening of April 15th. I’ve done that nearly every year since I started doing my own taxes way back when.

Okay, I take it back. There is another reason why I do taxes early, and this will sound very geeky and goody-two-shoes: I actually like doing my taxes now. Seriously! Yes, I like seeing the refund amount increase and increase and increase as I plow through the different pages of my online Turbo Tax program, but honestly, I actually like sifting through my tax forms and working the numbers. Strange as it may seem for someone who didn’t do well in college statistics, but I actually love working with numbers now. I’m the CFO in my little family, the one who pays the bills and plays around with Quicken and balances the checkbook every couple of days. In a way, we pretty much have to be this diligent because of our limited income, but much to my shock I’ve found that I derive real, perverse pleasure in organizing our paperwork and working through the spreadsheets. I know, it’s weird, huh?

There’s a huge, huge amount of satisfaction in knowing exactly where we stand financially all the time, even if that actually means that we have, oh, $10 in the bank. (No, it’s not that bad, but there have been times in the past, I must admit. Talk about being creative.) Knowing that I have exactly $10.21 in the bank, however distressing that may be at times, is still infinitely better than the terrifying experience of constantly being in the dark, not knowing if I have enough money to cover a check I’ve written. I’ve been in that situation before. It’s not pleasant at all.

So yeah, we got our refund two months ago. It helped us tremendously with our moving expenses and in paying off one of two credit card balances. I’ll do it again next year, too, and begin filing as soon as we get our W-2’s and 1099’s. It’s amazing how easy it is to set up a tax system — I have a single file folder labeled TAXES [insert tax year here] in which I throw anything that I think will be useful and necessary when tax season comes in. Donation receipt from one of a handful of nonprofits that we support? It goes in there. (Not that we’ve ever had to use it, since we don’t itemize enough to surpass the standard deduction, but you never know.) Business-related receipts? It goes in there. (I tape all business receipts on to copy paper and put the latter into the folder. It’s infinitely better than shoving a thick sheaf of small, odd-sized receipts into the folder, where it will inevitably fall out.) Health care receipts for expenses we couldn’t deduct from our Flexible Spending Account? It goes in there.

This year will be a little different, depending on my job situation. If nothing of interest comes up, I may decide to continue freelancing and hope that I’ll be able to double my income, as I did in 2008. With the economy still very shaky (anyone else sick of hearing analysts trying to predict when we’ve “bottom?”), it’s not promising, but I’m nothing if not optimistic. Besides, who knows? Perhaps I’ll finally finish my novel and sell it for a million dollars to Random House, after which I option it to Steven Spielberg (call me, baby, it’s right up your alley!) for an equally jaw-dropping amount. Hey. If you’re gonna dream, you might as well dream big.

Tax Time

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Finished my taxes this weekend! I’d always dreaded it when I was younger (in fact, I had my mom do it every year, even when I only had to fill out an EZ), but since I got married I’ve been on the bloody ball. It helps when I know that I’ll probably have a refund, and quite frankly, I was tired of the frantic calculations as I counted down the minutes to midnight, April 15th, every year. This way is so much better.

Since my freelance income has increased each year the last few years, I’ve had to really be more careful with my tax forms, organizing my paperwork, keeping track of receipts, etc. Last year was a minor disaster, as I kept almost no receipts from any of my expenses and of course forgot to track my mileage. HOWEVER. This year, I’ve already put together an OpenOffice Calc spreadsheet with invoices and queries, and I’ve also put a notebook and pencil in the car dedicated solely for mileage notes. So far, I’ve been doing pretty well. I expect to make at least five times what I made last year (which wasn’t much anyway), so I’ll definitely need the deductions. Also, with my going into freelancing full-time, there’s really no excuse for me to be dickering around anymore with the business end of the, well, business.

If you haven’t done your taxes yet, you should definitely consider getting Turbo Tax if you don’t already. I got the Home & Business package, which is a little pricey at $75, but if you’re like me and don’t have the luxury of spending hours and hours wading through lots of paperwork and Schedule this and that, you’ll find the $75 to be money well spent. Since I started using it three years ago, I’ve averaged about 1 hour doing my taxes, not including gathering the paperwork (which is really just pulling out the folder marked 200x Taxes from the filing cabinet). I also pay the $30 extra for the State package. Considering that my average refund the last couple of years has been about $3,000, I’d say that $100 is a pretty good bargain to get it all done in an hour, with the refund in my bank within 2 weeks.

If you’re just starting to organize for the 2008 tax year, here’s some handy tips I’ve found to be of great help:

  1. Make a manila folder titled 2008 Taxes. Put a big mailing envelope in it, and whenever you generate a receipt for a purchase related to your business, stick it in there. Take 2 seconds to write down the purpose of the receipt so that you don’t have to rack your brain a year later trying to remember what that $12.95 charge was for at K-Mart. Putting it in a mailing envelope helps to keep receipts from falling out of a loose folder.
  2. Clean out your wallet/purse/pocket at the end of every day and remove all receipts, both personal and business-related. File the business-related ones in the above envelope. Once you have your system in place, it’ll take no more than a few minutes at the end of each day to organize everything.
  3. Whenever you get any kind of correspondence related to your taxes (quarterly statements, W-2’s, 1099’s, etc.), stick it in the folder. When you get ready to do your taxes, you’ll have everything in one place.
  4. Keep a small notebook and pencil in the car to track your mileage.
  5. Keep a spreadsheet in your laptop/PC listing all your invoices, listed in chronological or invoice # order. That’ll help you keep track of which invoices you still need to send out. Mine is combined with my assignment spreadsheet so that I know exactly what’s still pending and how much I’m due. If you don’t have Microsoft Office, check out OpenOffice.org’s full suite of office applications, including a spreadsheet app that I swear is more stable and as easy to use (if not easier) than MS Excel. Plus, best of all, it’s FREE.

That’s it! It should be super easy to do your taxes next year, now that you have a basic system to capture all of those financial bits and pieces required by the IRS. Obviously, as your needs change, your income grows, and your business expands, you’ll want to revisit your accounting needs and may need to consider hiring a professional to do your taxes. If you’re like me, however, and have pretty straightforward income from freelancing with the usual deductions, Turbo Tax’s Home & Business package should work well for you.