Free Newsletter to Keep you Free From Broke!Name: Email: We respect your email privacyPowered by AWeber email marketing

Using a Roth IRA as an Emergency Fund – Pros and Cons

Roth IRAs are by far my favorite type of investment holding account available.

I love the idea of setting aside $5,000 in after-tax money in order to never pay taxes on the amount ever again.

There are other perks to using a Roth IRA besides never paying income tax on your nest egg.  One of the most prominent: you can withdraw your contributions at any time, even before retirement.  (This isn’t recommended, of course, but it is possible.)  You won’t pay any penalty or taxes for withdrawing your contributions under normal situations.  You will pay tax and penalties if you withdraw your investment earnings, so never do this.

This unique withdrawal capability has some people counting on their Roth IRAs as an emergency fund.

But is this a wise choice or a fool’s gamble?

Should I Use My Roth IRA as an Emergency Fund?

Continue Reading

Is the Curtain Finally Coming Down on the Payroll Tax Cut?

In what seems like an annual rite in Washington, DC, the extension of the social security payroll tax cut—a.k.a., the “payroll tax cut”—is once again up for debate.

The cut was first implemented in 2010 under the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010.  It provided for a 2% reduction in the employee portion of the social security payroll tax, from 6.2% to 4.2%.

The cut was set to expire at the end of 2011, but was extended to the end of February, 2012, and then ultimately through the end of the year.

But this year it’s looking like an another extension of the cut may not happen.

No political consensus to extend the payroll tax cut

With the presidential election and the prospect of a lame duck Congress looming there is little debate on the Payroll Tax Cut extension.  Concern is also centering on the still large federal budget deficits which will be partially reduced through the expiration of the payroll tax cut.  If anyone has serious intentions of extending the cut they’re laying low right now.

Very low.

If things stay as they are on January 1st, 2013 the Payroll Tax Cut will expire.

Why the payroll tax cut is a true middle class tax cut

Continue Reading

Is a Part-Time Job in High School Really the Best Use of Your Teen’s Time?

cash_register

Getting a part-time job is often a rite of passage. 

If your parents don’t shower you with money, that part-time job is your ticket to some financial independence.

My first part-time job was when I turned 16.  I worked at a pizza shop until I was let go after I took an approved one week vacation.  Then I moved to the classic teenage job, McDonald’s.  After being scheduled one too many double shifts, I changed jobs to work at my friend’s grandmother’s dry cleaning business (until my friend tried to steal jewelry that a customer left in the pocket, and I decided I didn’t want to work with her anymore).  From there, I moved to the cafeteria at Montgomery Wards.

On and on it went.

By the time I went to college, I had easily worked 10 to 15 different low end jobs.

Many people encourage teens to take jobs to learn responsibility.

However, I was already a responsible teen and working all of these crummy jobs didn’t teach me much.  (There is not much to learn about following McDonald’s rote directions for every task in the restaurant.)

Maybe instead of encouraging our teens to get low end part-time jobs, we should be encouraging them to spend their time differently.

Detriments of Teens Working Part-time

Continue Reading

What Are REITs? – Earn Dividends While Investing in Real Estate

real_estate_toy_houses

One of the realities that I recognize in my life is that I am really not that interested in being a landlord.

However, the idea of having real estate in my portfolio is one that is of interest to me.

So, how do I go about adding real estate to my investment holdings without becoming a landlord, or needing huge amounts of capital to buy property?

You can use a Real Estate Investment Trust (REIT) to help you out.

What are REITs?

Real Estate Investment Trusts are collections of investments related to real estate.

They have a different structure than ETFs, but they are similar in that you can trade them on an exchange.  REITs are considered equities, even though they represent a collection of holdings related to real estate.  In addition to exchange-traded REITs, there are also private REITs and non-traded REITs.

There are a number of REITs to choose from, each with its own way of doing business.
Continue Reading

What is Social Security Tax?

When you get your first paycheck from a new job you might be surprised to see how many different deductions reduced your earnings.

You’ll see deductions for Federal income tax, state income tax if your state charges it, and a whole host of acronyms of other taxes.

One of those taxes is social security tax.

We’ve all heard of it, but what exactly is Social Security tax?

What is Social Security Tax?

Continue Reading

How to Control Your Emotions When Shopping

When I was a teenager, I went back-to-school shopping with my best friend and got suckered into buying more clothing than I needed or had money for. 

The saleswoman was smooth and knew all of the right things to tell a 16 year old girl who was nervous about going back to school and looking just right.  That saleslady upsold me on everything—I even bought the matching socks and earrings at her suggestion.

An hour later, embarrassed and a bit angry, I returned everything.

I bought my clothes with my own money from my part-time job, and I simply didn’t have the money to buy that much.

My experience was not unique, but unfortunately, many people now don’t return the items or better yet, stop themselves from buying them in the first place.

We don’t think of shopping as walking through an emotional minefield, but many times that is just what the experience is like.

One of the best ways to combat this minefield is to take your emotions out of shopping, which is easier said than done.  However, knowing why your emotions come into play when shopping can help you better control them.

How to Control Your Emotions When Shopping

Continue Reading

Six Essential Health Care Open Enrollment Tips

calculate_health

Fall is here and that means beautiful foliage, football, apple cider and open enrollment forms.

If you have a full time career where health care is provided, each year you are likely given a stack of forms that include the option to change your health care options.

Much like your 401(k), many of these forms come with a memo from your human resources department telling you what to check, where to sign, and some charts that you may not understand.

Of course, not all open enrollment packets are the same but let’s look at some essential health care open enrollment tips to remember. Continue Reading

Free Newsletter to Keep you Free From Broke!Name: Email: We respect your email privacyPowered by AWeber email marketing