How Much Should Your Home Be Insured For?

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Homeowners insurance sounds like it should be simple. Unfortunately, that isn’t always the case. A lot of that comes from common misunderstandings, but the truth is that homeowners insurance is so much more than just something that pays you when you house burns down. Once you have the right home insurance deductible amount figured out, you need to figure out how much of your house’s value needs insured. Home Replacement Value Many people mistakenly assume that the amount of homeowners insurance they need is equivalent to the market value of their home plus the value of the contents. This is a good thought but not how it actually works. In most cases, no matter what happens to your home, whether it’s a fire, a falling airplane, or an errant bulldozer, the land beneath your house is seldom destroyed along with the home.  That means that there is no point in insuring the value of the land your home sits on. Additionally, the foundation of the home survives most events intact. This can actually make your home insurance cost more or less than a similar value house located elsewhere. In popular locations where land values are high, a $500,000 home may be …

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Will IRS Really Settle Tax Debt for Pennies on the Dollar?

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The latest radio commercials claim that if you owe the IRS $10,000 or more in back taxes or delinquent tax, that there are government programs that will help you settle that tax debt for pennies on the dollar. They go on to say that, with this company’s help, of course, you can make you tax debts go away, including fees and penalties. Sound too good to be true? It probably is. How IRS Settles Delinquent Tax Debts In many ways, the IRS is just like any other creditor. If someone owes them money, then they want to get paid that money. However, in many other ways, the IRS is unlike any other creditor out there. For most companies, collecting on a delinquent debt is a cost-reward calculation. The amount of possible debt recovery is compared to the cost of getting that money. For a very large debt from someone with the means to pay it, it is worth it to engage lawyers and go to court to seize assets and garnish wages. For smaller debts, or for debtors with no assets, the cost of collecting the debt isn’t worth it. There comes a point where trying to collect the debt …

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Good Enough Checking From Your Bank or Brokerage

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I was going through my stack of mail to look at (separate from the stack that has things that actually need taken care of) and came across an offer for Fidelity’s mySmart Cash Account.  Intrigued, I decided to take a look at the Fidelity checking account that they were so proud of that they included a glossy little flier to advertise it.  The result?  What the—? Regular Bank Checking Sucks This Bad? The Fidelity myCash account boasts exactly two features that do not count as minimum basic features for a checking account.  First, it pays interest.  How much interest?  Well, this is where Fidelity gets a little weasel-ish.  The flyer says that I will “Earn three times the national average…”  Um, OK.  How much is that?  Folks, it isn’t even in the fine print, that’s how much the rate must be worth! A visit to Fidelity’s website reveals the depressing answer.  A balance of less than $5,000 in a myCash checking account will earn a whopping 0.20% APR.  Whoo hoo!  But wait!  Maybe if you have over $5,000 it is worthwhile?  Survey says? 0.20% again.  Yes, go through all of the steps and take the time to open a Fidelity …

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Amazon and TurboTax Refund Special

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So, I haven’t had a chance to dig through all the details yet (I will soon), but there is a new wrinkle in the tax software refund game. Consider this your, “Wait, there might be a good option here before you buy,” post, not your go for it post. For several years, there have been various offers about what to do with your tax refund. For example, H&R Block got into trouble a few years ago by directing refunds into IRA accounts that had fees and charges that made them a bad deal. This year, TurboTax has an interesting new twist for Amazon shoppers. Amazon Gift Card Bonus from TurboTax TurboTax is one of the most popular tax software packages. (Look for full details and review of TurboTax and Tax Cut coming soon on Finance Gourmet.) There are tons of ways to buy TurboTax including online, via direct download, and of course, via boxes of software in stores. The first rule of buying TurboTax is never pay full price. There are always sales, and deals, and bundles of software that make buying TurboTax cheaper. The most common offer bundles Quicken, which is also an Intuit product with the tax software, …

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IRS Mileage Rate 2014

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Note: The latest standard mileage rate deduction amount from the IRS can be found at the updated, current article. Here come the end of year numbers from the IRS for 2014. Recently, the Internal Revenue Service released the official 2014 standard mileage rates. Keep in mind that these are the number for miles driven during 2014. You’ll be using the 2014 numbers in early 2015 when you are filing your 2014 taxes. If you need the mileage rates for 2013 those are the one you use for the income taxes you are filing in early 2014. 2014 Mileage Rate Deduction Standard As always, the IRS allows two ways to deduct expenses associated with tax deductible use of a motor vehicle. The taxpayer may claim either the actual expenses for vehicle, or claim a standard amount per mile instead. To claim the actual expenses for driving an automobile for deductible reasons, the taxpayer must keep complete records of all expenses occurred during the year. Considering how complicated filing income taxes is in the first place, why add another layer of complexity by keeping even more records, and making even more calculations. The 2014 Mileage Rates are: 56 cents per mile for …

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Unemployment Hits 7% for November

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Unemployment numbers for November were released today. The unemployment rate hit 7.0 percent for the first time since November 2008. If your recent economic history is a little fuzzy, that’s right about the time the banking crisis and housing market implosion was a full tilt. In other words, we’ve been over seven percent unemployment since the so-called Great Recession started. I get  a lot of questions about economic news stories. In particular, people want to understand the significance of the various economic statistics that come out better so that they can separate real new from hyperbole. So, let’s take a look at these unemployment numbers and see what the deal is. What Is the Unemployment Range? First, off, it can be hard to overstate how important unemployment (or more accurately, employment) is to the overall well being of the economy. I’ve covered before what makes unemployment numbers so important, so we’ll leave that out for today and focus instead on what is going on here, and why it matters so much. One question I get from time to time is why people get so excited over small movements in the numbers. That’s a good question. It can help to have …

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Bumper Sticker Financial Advice

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Bumper stickers are an interesting way to convey an idea. They aren’t very big, so the message must be small. They tend to be ignored, so the message must be clever. You can’t ask the person driving the car what they mean, so they must be clear in any context. On the other hand, a lot of the information is lost when a message is conveyed as a bumper sticker. Entire political debates boiled down to a certain sounding phrase are one example. In the financial world, bumper sticker financial advice often comes from books where repackaging existing financial ideas in new sounding ways is the fastest way to personal finance stardom. Pay Yourself First What Does It Mean?   One of the most ubiquitous financial planning as a simple phrase is, “Pay yourself first.” What pay yourself first means, literally, is that you should set aside money to be saved or invested before spending money on anything else. The concept works like this. If each week (or month, or whatever) you get a paycheck if you pay yourself first, then you won’t spend too much money and you’ll save for your future. Sounds good, and it is. In practice, …

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Goldman Sachs Report Card Accountability

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There is precious little accountability in the world of stock market analysis. I’ve written before about how Goldman Sachs’ chief market analyst (at the time) predicted an up year for stocks during every single year from before the internet bubble burst through to when she finally stopped making market predictions after again predicting  a higher stock market for 2008. If you’re recent market history is a bit fuzzy, 2008 was a disastrous year for stocks and the start of the so-called Great Recession. Even where there appears to be accountability, it is often easily gamed. Analysts get rankings from various financial groups, but those are often laughable. If an analyst has a “Buy” on a stock and that company reports after-hours that its main product slaughters babies by the thousands, when the analyst cuts his outlook before the market opens, he gets credit for shifting his prediction before the ensuing drop in the stock price. So, it was a little breath of fresh air, when MarketWatch decided to take a quick look at the report card for Goldman Sachs’ 2013 investment recommendations. Goldman Sachs 2013 Investment Calls Report Card Remember in elementary school when the teacher had you self-grade some papers. You …

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IRS Identity Theft Issue

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The IRS holds a special place in the American psyche. The concept of taxes and the taxman are widely despised by many Americans, even though the efficient collection of taxes is a key component of running a modern democracy. Even though the IRS is often cast as the bad guy, it is never cast as an inept one. In fact, far from it, the IRS is often portrayed as a powerful, all knowing, governmental entity that must never be cheated. If that is so, then why is Congress investigating widespread identity theft and tax fraud allowed by the IRS. IRS Tax Fraud via Identity Theft The legend goes a little something like this. An average American taxpayer files his income taxes. When he does so, he submits some documentation, but most of what goes on the typical tax form requires no documents actually be sent to the IRS. Rather, the taxpayer must keep those documents as proof, just in case the IRS comes asking via the dreaded tax audit. Each year, the IRS audits something around one percent of all tax returns. Of that amount, a certain number are just randomly selected for review by a computer. Others, we are …

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