Plug Your Money Leaks and Save Hundreds of Dollars Painlessly

It’s not even Thanksgiving yet, but the tax year is rapidly drawing to a close. In less than two months we’ll starting 2010 so if you’re planning on making some year-end tax moves, now is the time. Unfortunately, most people wait until their W-2s and 1099s start coming in before seriously thinking about taxes, but by then you’re left with very few options to correct the current tax year mistakes. By planning ahead you can get a jump on some things that could significantly improve your tax situation in just a few short months.

First-Time Homebuyer Tax Credit

This probably goes without saying, but if you bought a new home this year you’ll want to take a look at this generous tax credit. Originally, it was meant only for first-time buyers who haven’t owned a home in the past five years and closed on their purchase before December 1st. Those who qualified would receive a nice $8,000 credit. But Congress has extended and expanded this credit to include even more people, so you still may qualify for something even if you didn’t under the old plan.

The new rules took effect on Nov. 6. The provision is a true dollar-for-dollar tax credit of up to $8,000 for 10% of the cost of a home. The credit is also refundable, meaning that even if a buyer doesn’t owe $8,000 of tax, they can claim the full benefit and receive a refund check. The new law also authorizes a similar $6,500 credit for buyers who already own a home. It too is a refundable credit for 10% of the purchase price of a house costing no more than $800,000. To qualify the buyer has to have owned and lived in the same home for five of the eight years preceding the new home purchase, and the new home must become the buyer’s principal residence.

Now, don’t rush out and buy a home just for the sake of the credit, but think about any home purchase you already made this year or were planning on making. This is a huge opportunity if you happen to qualify and you want to make sure you’re getting everything available to you.

New Car Purchase Deduction

Did you know there’s also a tax deduction if you buy a new car before the end of 2009? It didn’t get as much attention as the homebuyer tax credit, but there’s still some money out there for you to take advantage of if you happened to buy a new car this year. Honestly, I think you can still save more money buying a used car vs. new, but this tax break can help take some of the bite out of that new car purchase. This allows you to deduct sales and excise taxes and other fees on as much as $49,500 of the purchase price.

Again, since we’re only talking about deducting the sales and excise taxes on the purchase don’t go and run out to buy a new car just to get the tax credit. But if you are already in the market for a car and planned on buying a new one anyway, just make sure you try and get it purchased before the end of the year so you can qualify for the tax break.

Charitable Gifts and Donations

If you haven’t given to charity yet this year you still have time. Remember that these gifts follow a calendar year so you need to make those donations before the January 1st. As the holidays approach it can be a crazy time and people often forget about making their donations until it’s too late. So, don’t wait, and start thinking about what you’ll donate this year. If you’ll be taking clothes or other items to a place like Goodwill or the Salvation Army, begin collecting those items now and take them in before the holiday rush. If you usually give money to one of the charities each year you should make a call and get the ball rolling on that to make sure it qualifies for this year’s taxes. As always, make sure you keep receipts for all of your donations!

Adjust Your Tax Withholding

Even though we only have a few weeks left in the year you can still make changes to your employer’s tax withholding. If you are in a situation where you’re expecting to owe the IRS money come April you still have some time to make a helpful change. You can change your W-4 exemptions and even opt to have additional taxes withheld between now and the end of the year. This added withholding could be enough to offset some of the taxes you’ll owe when it’s time to file. Not only that, but it’s a good idea to review your withholding and make sure you’re not having too much or not enough withheld for the coming year. No sense in giving Uncle Sam a free loan or putting added stress on you to come up with the money because you didn’t withhold enough.

Unemployment Benefits

If you’re like many Americans this year, you’ve been laid off or had a period of time where you received unemployment benefits. As you may know, these benefits are taxed. It stinks, I know, but there is some relief this year. Individuals are exempt up to the first $2,400 this year.

If you didn’t elect to have taxes withheld from your unemployment check you could be on the hook for making a payment to the IRS come spring. Even worse, if you have been collecting all year and haven’t been paying quarterly estimated taxes you may face an additional penalty. If you haven’t had taxes withheld from your unemployment checks you should use this time to calculate how much of that income is taxable and find out how much you might owe. Start saving that money in the coming months so that if you are hit with a tax bill in April it won’t come as a total shock.

Retirement Savings

Do you contribute to your company’s 401(k) plan? Great! You still have time to contribute even more to your plan before the year is up on a pre-tax basis. If you can afford to it might make sense to increase your deferrals for the remainder of the year to give you that extra boost. Not only does it save on taxes, but you’re doing yourself a favor by putting a little extra away for retirement as well.

Even if you don’t have a 401(k) there is still plenty of time to take advantage of some of the other retirement saving vehicles like IRAs. The best part is that you have until you file your taxes, up to April 15th, to make your IRA contributions for the tax year. That means you still have over five months to make these contributions! If you’re saving in a traditional IRA that gives you $5,000 (or $6,000 if age 50+) in a potential tax break if you make the full contribution.  For most people this equates to about $1,000 of tax savings. That’s nothing to sneeze at. And think about it, with so much time yet to make these contributions even if you haven’t contributed a dime yet this year you can still max out your IRA by saving $1,000 a month before the April deadline.

If you’re saving in a Roth IRA, you won’t be getting any tax break up front for your contributions, but you still have until April to get your 2009 contributions in. Remember, once that deadline passes you can’t go back in time and make contributions for that year. So, make sure you’re taking advantage of your IRA as much as possible. You’re retirement depends on it. If you haven’t even opened an IRA yet, don’t delay. You can open an account for free at any of the online brokerage companies like Zecco and TradeKing.

When it comes to making extra cash, the internet has a lot to offer its users.  Online auction sites provide members with a place to peddle goods and services and social media networks like Twitter and Facebook make it possible to self-promote with ease.  Those individuals with a knack for the written word can find legitimate, paid work-at-home opportunities online.  In fact, those writers wanting to gain exposure and line their pockets with cold hard cash may find the following five websites useful:

1. Demand Studios. Write instructional articles on a variety of topics including: Animals, Arts and Entertainment, Computers, Health and Fitness, Home and Gardening, Sports and Recreation, and Travel.  Paychecks are disbursed twice weekly to your PayPal account and top paying articles are worth $15 a piece.  You can also select revenue share articles which earn significantly more over the course of a year and pay out once monthly.
2. Textbroker. Anyone can write for Textbroker.  Search through their database of available topics and choose the one that best fits your interests and knowledge level.  Write the article, submit it, and elect a payout once your account has reached $10.  Payments occur bi-weekly and are sent to the PayPal account address registered on the site.
3. Quality Gal. Article topics are specific and require knowledge of hypertex, or linking back to educational and governmental websites.  Due to the amount of work involved, Quality Gal pays up to $12 for each article that is approved.  Once weekly, writers submit an invoice and QG submits payment via PayPal.
4. Content Current. Topics usually involve knowledge of Search Engine Optimization and require a specific word count.  Significantly lower in payment than other websites, Content Current offers writers routine work and the chance to participate in Forum Boosting.  Payments are received weekly through the writer’s PayPal account.
5. EDUBook. Unlike other websites, article topics are pre-assigned.  Each member receives four to five articles at a time.  Once that batch is completed, he or she can request additional assignments.  Pay is $5 an article or $25 a batch and compensation is received electronically through PayPal once a week.

Aspiring writers needn’t go broke pursuing their literary dreams. While companies like Demand Studios and Textbroker exist, they do not offer the big payout that feature writers are accustomed to.  They can, however, pay for groceries or generate enough extra money for a rainy day.  Whether you are looking for an additional source of income or researching opportunities to leave the rat race altogether, becoming an independent contractor and working for the aforementioned companies is a wise move in any economy.

Keep in mind that as you become a more established freelance writer you may find many writing opportunities by marketing your services directly on many of the blogging job boards or sites like Elance. But in order market your services you really need to have a solid portfolio of work to show prospective clients, so using the sites listed above are a great way to begin building your online writing portfolio.

Charissa Arsaoui is a freelance writer for ChickSpeak, Buzzine, DisFUNKshion Magazine, Student Stuff, and a guest contributor for Wisebread.  She loves thrift related topics and can spot a bargain a mile away.

Money trivia time. What was the highest value note ever printed by the U.S.? If you guessed $100,000, you’d be right, but not so fast. It wasn’t your typical bill. The highest-value bank note ever printed by the Bureau of Engraving and Printing was the $100,000 Gold Certificate, Series 1934. These notes were not circulated among the general public, but only issued for transactions between Federal Reserve banks and the U.S. Treasury.

A single note worth $100,000 seems like a lot, but do you know how much that was really worth back in 1934? You’d need to print a note today valued at nearly $1.6 million to match what $100,000 was worth in 1934. Wow! So, there’s a little trivia for you today. Now it’s time to increase your financial smarts by checking out these links from the past week.

Relocating To End Unemployment: Ten Things To Consider – Have you been laid off and can’t find work locally? You’re not alone. A lot of people have started looking elsewhere for work and that might mean relocation to a new area. Unfortunately, that’s a big decision that comes with a lot of financial issues to consider. Here’s what to keep in mind before making the leap.

Energy Gal’s Easy Homemade Hummus Recipe – Looking for a frugal and healthy snack recipe? Try hummus. Hummus is one of my absolute favorite snacks and this recipe is virtually identical to mine so I can vouch for its deliciousness.

Funding Your Child’s Post Secondary Education – With college costs continuing to rise how can a parent afford their child’s education? It might not be easy, but if you think ahead and take a few steps early you can put together a nice college fund.

How Our Consumer Debt Problems Got Out of Control – This whole financial crisis stems from people living beyond their means. Whether it was buying too much house or just racking up thousands in credit card debt, the inability to pay has led to a meltdown. So, just how did we get into this problem in the first place?

Should You Buy Life Insurance at an Early Age? – I get this question a lot, especially since I speak mostly to a younger generation. But at what age should you consider life insurance? It actually has less to do with age and more to do with who you have to support after you’re gone.

I-Bond Rate for November 2009 – May 2010 Is 3.36% – For a while there I-bonds weren’t even worth investing in with such low rates. Now, with the latest rate over 3% they have become an attractive alternative to CDs. Learn more about the current rates and how you can take advantage of them.

What is a Dividend Reinvestment Plan? – What is a dividend reinvestment plan (DRIP) and why would you want to use one? If you’re dealing with smaller amounts of money these can be a great way to invest in some companies. Learn more at My Dollar Plan.

College Savings Accounts for a Bad Economy – The economy still has a long ways to go before a full recovery, so what does that mean for college savings? Most people can hardly get by with their day-to-day expenses so saving for college seems impossible. Here are a few options that can lessen the burden.

First-Time Homebuyer Tax Credit Extended AND Expanded into 2010 – Good news about the extension and expansion of the homebuyer tax credit. The bad news is that we still got screwed. We just bought a house a little over a month ago and still won’t qualify for the first-time status or the existing and upgrade expansion. Thanks, government!

How Working Overseas Helps Your Career – Did you know that working overseas could help your career? I haven’t had a chance to work overseas, but I did spend a semester traveling Europe and studying over there in college. I must say, it was probably one of the best things I’ve ever done so I’m sure working overseas for a while could also have profound effects.

In the discussion about income for life and annuities earlier this week a lot of interesting points were brought up. We all know that we need to save something for retirement, but just how much are people expecting to save? You hear all sorts of numbers thrown out there saying you need to have a million dollars by retirement, or save up ten times your annual pre-retirement income, and so on. But these are just broad assumptions and most people’s true needs are going to vary significantly.

So, have you thought about how much money you should have saved up by the time you retire? One way to figure this out is to work backwards. Instead of just shooting for a big number, start with the amount of income you’ll likely need to receive from your investments in retirement. From there, you can then calculate how much you need to have saved up so that you can sustain that income without depleting your nest egg. Here’s an interesting calculator that can do just that. It will take into account your age, expected retirement, expected rate of return and rate of inflation, and then ask you for how much money you’d like to receive each month from your investments. Then, it calculates how much you should try to save by retirement, both adjusted and non-adjusted for inflation.

According to my numbers, after factoring in inflation I need to save up between $5 and $6 million to reach my monthly income goal. Of course, this is based on an early retirement, assuming no pension, no Social Security, and high income since I plan on doing a lot of things in retirement that cost money instead of just sitting at home. It seems like a lot, but it could be doable. Granted, we’re not able to save enough each year to hit that target yet but it gives me a number to shoot for.

So, how much money do you need to retire? Were you shocked at the results?

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