Financial Advice

Alternatives to the Lottery

Are you a closet lottery player? There’s no need to hang your head in shame. If you regularly play your state lottery, you are not alone. Forty-three states now have lotteries; revenue from these lotteries has been successful in funding government programs, including education. There seems to be a bit of irony in this idea! A CNN report states that the low cost of a lottery ticket, often only $1, is what seduces people to “invest” in a lottery ticket. Sadly, the people who truly cannot afford to play any of the lottery games are the very people who are attracted to it.

A report in BusinessInsider.com commented on a PBS study stating that households with annual incomes of less than $13,000 make up nine percent of state income on lottery tickets. And Reader’s Digest reported that 70% of the winners of games with the really large payouts lost all that money within five years. Fox News interviewed a winner of $550 million dollars from the Powerball Game. This person confessed that if you don’t have tremendous discipline with lottery winnings, you will go broke.

Maybe you justify playing the lottery, because you only play $1 weekly, or you play larger amounts, but not very often. Well, listen up! Financial author David Bach called it the “latte factor.” Banks call the concept “compounding.” That $3 coffee doesn’t seem like much of an expenditure when enjoyed as an occasional indulgence, but stop at the coffee shop or fast food drive-up line every day and it really does add up. That $3 daily turns into over $1000 annually. Oh, the things you could do with that money!

Alternative Uses for Your Money Instead of the Lottery

Granted, interest rates are lower now than they have been in a very long time. But, the few saved pennies here and there really do add up. Your local credit union may offer higher interest rates than your bank or savings and loan. Make some calls to inquire about rates, and use the same discipline you used to stand in line at the grocery each Saturday night to buy a lotto ticket to instead put money into your new account.

– Reduce your debt.

It may only be a few dollars each week, but by adding it to your monthly payment you’ll reduce your debt more quickly and earn a good return on your money.

– Increase your child’s allowance.

Teach your child about saving money. Depending on their age, they may have something that they would like to buy. Help them budget and plan so they can purchase their desired item. This is a much better investment than playing the lottery, with far greater odds of coming out ahead in both the short and long term.

– Try a new food.

Make the commitment to buy one fruit or vegetable that you have never tried. Pomegranates, though a bit of a challenge to eat, are loaded with valuable vitamins and minerals. Edamame makes a great addition to any meal, but also is a yummy snack item. Buy some dried fruits and nuts and seeds and create your own trail mix to pack in your child’s school lunch box or for you to enjoy at your job.

– Fix something broken at home.

Maybe you no longer notice the burned out light bulb in the garage or the torn window shade. Visit your home improvement center or hardware store. Walk up and down each and every aisle and start making a list. Quite often, simple home repairs cost very little money. Think how satisfied you will feel when you finally get something fixed.

– Plant something edible or ornamental.

So, maybe you don’t have any room in the yard for a real garden. It’s amazing what you can grow on the edge of the lawn or even in large pots. A rooftop with some large pots to grow tomatoes can help supply your family with one of their favorite and versatile foods. Herbs require very little space and are great in salads and cooked meals.

– Give a teacher a gift.

Your child’s teacher works harder than you might imagine, putting in endless evening and weekend hours to plan lessons and grade papers. They will appreciate the surprise of an unexpected gift. You don’t have to spend much money to make your child’s teacher smile.

This article by Lee Doppelt first appeared on The Dollar Stretcher and was distributed by the Personal Finance Syndication Network.

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Financial Advice

Exploring Net Worth

Ever since my wife and I got married (and even a bit before that), I’ve really felt like we’ve been on the right financial track. In addition to being frugal in our day to day lives we’ve also made a number of what I believe to be sound monetary decisions. This includes contributing to multiple retirement accounts, setting money aside for emergencies, and using credit cards purely to our advantage. However, while I knew we were doing something right, I was never really sure how we measured up to others our age and in the same earning bracket.

A few months ago I (finally) did a review of the personal finance site Mint. In using that site, I got my first clue into how our overall finances looked by calculating our net worth. Obviously the next question I had after knowing this figure was, “Well, what should it be?”  

About net worth

Before I share what I’ve learned on that front, I should back up and explain a bit. If you aren’t familiar, your net worth is essentially the total amount of money and assets you own minus the number of liabilities and debts you have. In the case of Mint, they tallied up all of our bank account balances and retirement accounts as well major assets like our car. And since we pay off our credit cards monthly, there were no liabilities to subtract.

What’s smart about using net worth as a financial measurement tool is that it really gives you a snapshot of where you stand. Of course, for younger adults, the number may not be very impressive based solely on the fact that your savings — and thus your net worth — should grow over time. Which brings us back of to the question of what your net worth should be at, say, age 30.

Net worth at 30

According to Barbara Friedberg of The Balance, a good rule of thumb for 30-year-olds like yours truly is to have a net worth about equal to half your annual salary — or really what your annual salary was leading into your 30s. For example, if you’ve been making $50,000 a year, she suggests you should strive to have a net worth of $25,000 by age 30. More specifically Friedberg says you should have that amount in your retirement account, which is a bit different than your net worth, but the overall point remains the same.

Looking nine years down the road (for me), Friedberg also lays our a goal for age 40: a net worth of double your annual salary. This time around, though, she really means net worth in the traditional sense. Notably this would mean that, if you were to buy a home, the equity you earn in that will help boost your overall worth (remember: although the debt you owe on your house would count against your net worth, the value of the home will hopefully put you back in the black).

So what about me?

Well, that’s a bit complicated. For one, neither my wife nor I have had the type of job where our annual salaries are so predictable. That said, based on that formula, I thought for a hot minute we were well ahead of the game… until I realized the number Mint was providing me was for both of us and should really be cut in half. Damn it.

Despite that minor setback, I nevertheless maintain that we’re in good shape on the net worth and retirement fronts. More importantly, we continue to up our retirement contributions, which make up a large percentage of our net worth as is. So while I’m still a little hazy on whether we’ve met Ms. Friedberg’s rule for age 30, we’re well on our way to knocking the goal for age 40 and beyond out of the park.

This article by Kyle Burbank first appeared on Dyer News and was distributed by the Personal Finance Syndication Network.

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Financial Advice

Using Opportunity Costs to Live a Happier Life

Sometimes it’s helpful to take a concept out of its original environment and see how it fits someplace else. Today we’re going to examine an economic theory and see how it might apply to our personal lives.

The Economist website defines ‘opportunity cost’ as “The true cost of something is what you give up to get it. This includes not only the money spent in buying (or doing) the something, but also the economic benefits that you did without because you bought (or did) that particular something and thus can no long buy (or do) something else.”

To put it simply, for everything you get, you give up something else. That’s an important concept. Let’s consider an easy example. If you spend $15 on a pair of jeans, you do not have that money available to buy a pizza. The “cost” of the jeans is not only $15. It is also giving up a pizza.

Another way to look at opportunity cost is the amount of time we give up working to buy a product. Suppose you make $12 per hour. Our tax rates are all different, but you can pretty much expect to pay about 1/3 in Social Security and federal, state and local income taxes. That leaves you with $8.

Let’s further suppose that you go out to lunch with co-workers every day. And a typical lunch costs you $6. Add a tip and sales tax and that lunch brings the total to $7.20. So you give up 54 minutes of your life every day to work just to pay for lunch.

How about a different situation? Remember that an opportunity cost is what you give up by making another choice. For instance, suppose that you choose to spend $100 on a credit card knowing that you’ll pay only the minimum when the bill comes due. In effect, you’ve given up about $140 in the future to make that purchase today. That’s because finance charges will be added to the cost of your purchase.

We face opportunity costs with our time, too. I can choose to spend an hour watching TV. But that’s an hour that I won’t be talking to my wife, playing with the kids, doing home projects or sleeping. Of course, watching TV might be the best use of that hour. Still, it’s a good idea to think about it before you spend the hour.

Sometimes the difference between choices is surprising. Suppose you spend $1 at break time five days a week. No big deal. Right? But if you didn’t spend that dollar every day and put it in a bank at 3% interest, you’d have $3,000 in ten years. Or $7,100 in 20 years. Or $20,000 in 40 years. So by choosing that $1 snack each day, you’ve given up a new car when you retire. A good trade-off? Only you can decide.

There’s also the possibility of trading money today for time tomorrow. For instance, you could use the money from those work day snacks to allow you to retire 3 or 6 months earlier than you would otherwise. Is it unusual to think of “banking” a few minutes each day towards an early retirement? Perhaps, but it does give you a new perspective on spending.

But, what about credit cards? Don’t they make it possible to buy the things that we want? Yes, you can use your plastic to do that.

But credit cards are deceptive. They lead you to believe that you can spend more than you make. And, for a short time, that’s probably true. But eventually you get to a situation where you can only afford the minimum payment each month. Once there, you’re back where choosing to spend on one thing prevents you from buying something else. And, you’ve also made the choice of paying interest to the credit card company on the monthly balance instead of having that money for other uses.

So how can you use opportunity costs to help you live a happier life? By thinking of the alternatives before you spend your time and money. Even though something looks good, if you stop to compare, you might find something else that you’d prefer to spend your time or money on.

This article by Gary Foreman first appeared on The Dollar Stretcher and was distributed by the Personal Finance Syndication Network.

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Financial Advice

Scams in the Name of Charity

Scammers are creative, cunning and cruel — and they often mix in a little truth to spice up their big lies. This scheme shows just how low they can go.

Government imposters claiming to be with the FTC, or another agency like the fictitious “Consumer Protection Agency,” are calling to inform people they have won a huge sweepstakes from the Make-a-Wish Foundation, a well-known charity for very sick children. To get the money, the callers say, the “winner” must first pay thousands of dollars to cover taxes or insurance on the prize. The call may even come from a 202 (Washington, DC) area code to appear credible — since the headquarters for the FTC and most federal agencies are in DC.

This is just a scheme using the well-known names of Make-a-Wish and the FTC to rob thousands of dollars from people. Once you wire money or send banking information, you will never see their money again.

Here are a few facts and tips to protect yourself and others:

  • If someone asks you to wire money or provide your bank account information over the telephone, it’s a scam.
  • Anytime you have to pay to get a prize, it’s a scam.
  • The FTC doesn’t oversee sweepstakes and no FTC staff is involved in giving out sweepstakes prizes. We do, however, go after sweepstakes scams like this one.
  • If an FTC case results in refunds, you can find the details at ftc.gov/redress.
  • The Make-a-Wish Foundation has information about this specific scam on its fraud alerts page.
  • If you encounter this or other scams, report it to the FTC at 1-877-FTC-HELP or ftc.gov/complaint.
  • Talk to your friends and family about scams. Visit FTC.gov/PassItOn to find out how.

This article by the FTC was distributed by the Personal Finance Syndication Network.

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Financial Advice

Fake Loan-Matching Site Put Consumers at Risk

Some scammers build and market websites that claim to offer loan-matching services. The sites convince people to share personal information, but instead of delivering help, the operators scoop up people’s information and sell it for their own profit. The FTC settled with one online operation that followed this pattern. Blue Global, LLC hosted dozens of “loan matching” websites that invited people to give detailed personal and financial information to be matched with a lender. The websites claimed to offer a secure online application, but the FTC says the websites didn’t protect information as promised. The sites also said the business would search for the lowest interest rate based on the person’s request. Instead, each loan application was sold to the first buyer, even if the buyer wasn’t even a lender, according to the FTC. In one period, the websites took 15 million applications, and only 2% were matched to a lender — and many of those people didn’t get a loan.

The company agreed to:

  • stop making misleading claims about its services, and
  • share a person’s sensitive information only after it checked-out a buyer and the person has given consent to have the information shared.

The FTC and the company also agreed to a court order restricting what the company tells consumers about its services, and who may receive loan applications.

If you get calls or emails from companies you don’t know, it might be because someone sold information you provided online. Before you fill out an online form or application, check out the company. You can search online for the company name plus the words “complaint” or “review.” Does the company explain how it will protect your information? Find out who will get your information before you share your Social Security number or financial details. If you’re thinking about an online payday loan, shop and compare offers from other kinds of lenders first. If you have trouble with business or your information and has been misused, tell the FTC.

This article by the FTC was distributed by the Personal Finance Syndication Network.

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Financial Advice

How Millennials Can Achieve Financial Freedom

It is always best to work on your financial freedom while you are young. But what is financial freedom, exactly? Financial freedom is not the same with merely “earning,” because the aim here is to maintain your chosen lifestyle without worrying when your next paycheck would come in.

So basically, this means that you should not just be living from paycheck to paycheck. Sometimes, millennials associate being financially free with being flexible – like they can still earn while travelling and enjoying one place from another.

This is not always the case however. As long as you can sustain your needs, wants, and can afford to relax or go on vacation in a regular basis, then you are basically financially free. Being a young professional who just got started earning a livable income is just the first step towards becoming financially free – there are still certain habits that you need to maintain in order to achieve that fully.

1. Try to generate some extra income.

Even though you are locked in a 9 to 5 job, try to find some time to pursue a passion that can also generate you extra income. You can also accept project-based tasks online (you can try exploring Upwork and Fiverr) that you can easily do during your off-days.

2. Build up your emergency fund – rapidly.

An emergency fund should be at least equal to six months-worth of your salary. This should be set aside to be used only in cases of sudden job loss, accidents and other unforeseen events. This will act as your cushion in times of difficulties and unplanned moments, so that you can easily bounce back after such disaster.

This could also be easily built once you’ve generated a stream of extra income because by then, you have more money to set aside each month and build up a substantial emergency fund faster.

3. Open yourself up to the world of investing.

Assuming that you can now sustain yourself well enough each day, it’s time to think about the future. To build up your net worth, you need to put your resources in different baskets and make them grow. Investing in the right places will help you make big purchases and build a retirement fund for the future, but you need this to be planned out extensively.

There are many options when it comes to investing too. You can choose to invest in real estate, the stock market, mutual funds, unit investment trust funds from banks, or put your interests in a startup business.

4. Spend your money wisely.

It is well known that millennials are easily attracted to new, shiny things such as that latest iPhone model, that new pair of Air Jordans, or even that hot new beach destination that almost all of your friends are raving about.

Rewarding yourself is not bad per se. Sure, you can still go out and shop or go on vacation, but if you have to incur debts, loans or pay the product in installments just to have them, then maybe it is time to think twice.

As much as possible, young people should avoid racking up debts just to show off the lifestyle they want – this habit will totally hinder you from becoming financially free as soon as possible.

5. Don’t forget to get yourself an insurance.

Whether that be health, accident or life insurance, this is yet another investment that could be part of your emergency fund. This is again, your cushion whenever unforeseen accidents and illnesses could stop you from working for a long period of time.

There’s no easy way towards financial freedom. Like any other kind of success, it is built on wise decision-making, and maintaining a good habit from day to day. Also, don’t worry if you can’t achieve it in just a few years – you can take as much time as you need. Good things don’t necessarily pay off immediately.

This article by Joanne Davidson first appeared on Lowe Guardians and was distributed by the Personal Finance Syndication Network.

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Financial Advice

North Carolina Man Indicted for Obstructing the IRS, Preparing Fraudulent Tax Returns and Bankruptcy Fraud

A grand jury sitting in the Middle District of North Carolina returned an indictment charging a Greensboro, North Carolina resident with corruptly endeavoring to obstruct and impede the Internal Revenue Service (IRS), preparing and filing fraudulent tax returns, bankruptcy fraud and making false bankruptcy declarations, announced Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department’s Tax Division and Acting U.S. Attorney Sandra J. Hairston for the Middle District of North Carolina.

The indictment alleges that, between July 2008 and July 2009, Hassie Demond Nowlin aka Demond Nowlin and Brilliant Knowlin, filed personal tax returns with the IRS reporting fake income and income taxes withheld and seeking more than $700,000 in fraudulent refunds. According to the indictment, between 2008 and 2010, the IRS assessed taxes, penalties and interest against Nowlin related to his 2005 through 2008 income tax returns. After being notified of the assessments, Nowlin allegedly began concealing his assets and placing them in the names of nominee entities. The indictment also alleges that Nowlin made false statements to IRS agents, including that he did not prepare tax returns for clients.

The indictment further charges that between January 2011 and January 2017, Nowlin operated a tax preparation business, and filed tax returns for clients that claimed phony business and education expenses and sought refunds to which the clients were not entitled. According to the indictment, Nowlin did not identify himself as the paid preparer on these fraudulent returns. The indictment alleges that Nowlin caused more than $250,000 in clients’ tax refunds to be deposited into nominee bank accounts that he controlled.

In addition to the tax-related charges, the indictment alleges that Nowlin attempted to cheat his creditors by filing six fraudulent personal bankruptcy petitions between April 2013 and January 2017. Along with five of those petitions, Nowlin also allegedly submitted false financial statements on which he did not fully disclose his income and assets.

An indictment merely alleges that crimes have been committed and the defendant is presumed innocent until proved guilty beyond a reasonable doubt.

If convicted, Nowlin faces a statutory maximum sentence of three years in prison for obstructing the IRS and each count of preparing false tax returns and five years in prison for each count of bankruptcy fraud and making false bankruptcy declarations. He also faces a period of supervised release, restitution and monetary penalties.

Acting Deputy Assistant Attorney General Goldberg and Acting U.S. Attorney Hairston commended special agents of IRS Criminal Investigation, who conducted the investigation, and Trial Attorney Robert J. Boudreau of the Tax Division and Assistant U.S. Attorney Anand Ramaswamy of the Middle District of North Carolina, who are prosecuting this case.

Additional information about the Tax Division and its enforcement efforts may be found on the division’s website.

This article by the Department of Justice was distributed by the Personal Finance Syndication Network.

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