Now that we are a full week into 2012, it is time to start thinking about the dreaded tax season. Taxes don’t have to be difficult. For most of us, they can be a quick and painless process.

Gather Your Tax Forms

This is both the hard and easy part of taxes for me. Most of what I need just shows up in the mail, but I have to be patient and diligent to get everything I need.

Your employer will supply you with a W-2, which is the most important input on an annual tax filing for most people.

Your banks and brokerages will send you 1099 forms for interest and investment income.

Companies that paid you money, such as freelancers and online advertisers, may be required to submit a 1099-MISC or related form.

Schools and student loan servicers provide you with forms for deductions on education expenses. Schools give you a 1098-T and student loan providers give you a 1098-E.

If you have a mortgage, you will get a 1098 to list your mortgage interest deduction.

If you itemize your deductions, gather receipts from donations to eligible charities so you can list those as deductions. You can add those up to be input on one line on your form 1040.

Compile Everything by Category

As my files come together, I throw them in a big manila envelope by my file cabinet, but as it gets thicker, I know it is time to sort.

I organize my forms by income type. I create a bundle with my work income (W-2 forms). I then create a bundle with my banking and investment income and another bundle for 1099s for freelance and online income.

Behind that, I put my deduction information into bundles by category for education, home, and donations.

If you own a small business that has pass through income to your 1040, you have to create a unique income statement for each business with supporting documentation. I put those in separate folders with the income statements on top for easy reference.

Get the Files to Your Accountant, or Do It Yourself

Now that everything is easy to sort through, I fill out a form for my accountant. This summary allows the accountant to quickly move simple totals to my 1040 (saves him time and me money) so he can focus on the more complex parts of my filing.

If you have a simple and easy financial setup with only one job and few deductions, you can easily use an online program to save money. Just make sure that you are very thorough and accurate if you do it yourself.

Submit and Move On

After all those hours of compiling, adding, filing, and filling out your forms, it is time to submit. Double check your return to make sure there are no surprises. If all goes well, you will be able to file online and get a refund directly deposited to your account.

Questions

If you have any questions about organizing your taxes, let me know in the comments. I will make sure to answer everyone.

Image by MoneyBlogNewz.

Tax Time Strikes Again – Preparing for Your 2011 Taxes is a post from: Narrow Bridge

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There is a famous saying that money does not buy happiness. I have heard it dozens of times. But is it true?

The Fallacy

Money doesn’t buy happiness is something poor people say to get over the fact that they are not wealthy. I am not implying that just being rich is enough to suffice for your being happy, but it certainly does not hurt.

Let’s look at some examples:

If you can’t afford to feed your family, you will be unhappy.

If you can’t afford to buy your children presents during the holidays, you will be unhappy. (Not buying presents when you can afford it just makes you cheap.)

If you have a car and can drive places on your own schedule, you will be happier than if you have to take public transportation. (In most cities in the United States – there are exceptions)

If you really want a shiny new laptop and you can’t afford it, you will be unhappy. If you buy it, you will be happy.

The Counter

There are certain things money can’t buy. It can’t buy health. It can’t buy you love. It can’t buy you a wonderful family. It can’t buy you a feeling of satisfaction with your life.

However, it doesn’t hurt.

Does More Money Mean More Happiness?

A study from Princeton says that money can buy you happiness, but only up to $75,000 per year. Up to that amount, earning more money every year has a measurable impact on life satisfaction. Beyond that, people do not become incrementally happier earning more.

The psychology behind the study is interesting. Low income levels correlate to higher stress and lower happiness overall. Higher incomes have less stress in their personal lives and report feeling more positive overall.

Beyond $75,000, the study authors found that people have enough disposable income to pay for what they want in life. That is where the wealth effect ends and interpersonal relationships and other parts of your life drive incremental happiness.

What Do You Think?

I think making more money makes me happier. I can do what I want, buy what I want, and experience what I want if I have more money. Of course, money is not everything, but it doesn’t hurt.

What do you think? Can money make you happy? Can you buy happiness? Please share your thoughts in the comments.

Image by stevendepolo.

Does Money Make You Happy? is a post from: Narrow Bridge

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While they are not in all the headlines anymore, the Occupy movement is still going strong around the country. From Occupy Wall Street in New York to Occupy Denver in my neighborhood, the movement has gained media attention and thousands of supporters, but what are they really doing and what are they all about?

Why They Are There

There is a lot of confusion, even among some of the protestors, about what the Occupy movement stands for. As far as I have been able to draw out from the New York, Denver, and Boston websites, they are there because they are mad and frustrated.

Distribution of Wealth – The occupy folks are mad that the top income earners make such a large share of income and hold such a high percentage of wealth. The growing inequality is a primary reason for their anger. The top 10% of Americans hold 80% of all wealth in the United States. The top 20% of Americans earned 49.4% of income in 2010 while the bottom 15% earned only 3.4% of the income in the country. Over the last five years, studies have shown that the United States has one of the top income inequalities of comparably developed countries.

Corporate Greed – The movement has been vocal about corporations gouging the middle class for higher profits. While many banks are making record profits, they are evicting people from their homes. The protestors have gone so far as to ask for the banks to forgive debt to some people that can’t afford their payments.

A Clear Goal?

While we know why they are protesting, the movement has been slow and unclear about clear goals. They are mad at banks and rich people and politicians, but they lack a clear message and direction.

Like the Tea Party protests in 2009, the Occupy movement has potential to make an impact in the United States. In the most divided political time in recent memory, the far right is well represented in the government but the far left is not. To make an incredibly nerdy reference, they have potential to “bring balance to The Force.”

My Opinion

I absolutely hate the Tea Party and I don’t hate the Occupy movement. However, I do not agree with everything they have to say. I do support freedom of speech and both groups’ rights to speak their mind and peacefully assemble. Free speech, a First Amendment right, is a higher law than any municipal ordinance or state law, and these people have a right to be on public land to make their point.

I do support higher taxes on the top 1% (people who make over $550,000 per year can afford it) as a way to help balance our budget. I do support higher taxes, but not as dramatic, on the top 2% (about $200,000 and up).

I do support a simplified corporate tax code that would bring our corporate taxes back in line with the original rates. There are so many deductions and write offs that some of the biggest companies do not pay any taxes at all. We have one of the lowest effective tax rates in the OECD, and you can see what that has done to help our deficit.

I do not support a Robin Hood steal from the rich and give to the poor scenario. Income disparity happens, but life is not fair.

I do not support a debt forgiveness program. People signed the papers to take out a loan. If they signed up for something they could not afford, it is not the bank’s fault. The banks were stupid to give out loans to people who could not afford them and they deserve some losses, but they should not should the cost of stupid people’s homes.

Where It Is Going

I don’t think anyone knows exactly what is going to happen next. I watched live (on TV) as 24 protestors were arrested six blocks from my home for being in a park after hours. These people are not going away without a fight.

If they were smart and really wanted to impact the banks, they would close their accounts and move their money to credit unions or just start a bank of their own. Some are closing their accounts, but unless they act as a whole they are not going to make an impact.

I do expect that the “99%” will press for a unified voice in government. Just as the Tea Party holds a caucus, the Occupy movement will likely see more structure going forward. However, unlike the Tea Party, there are not a ton of millionaire supporters that are going to pay for the campaigns of its members.

I hope this group is able to establish a single voice and make progress toward a more logical tax system for both people and companies. I do not want to see such dramatic change that businesses are wiped out, but the excesses we see today while wealthy Americans and corporations pay such a disproportionate share of the taxes relative to their income needs to come to an end.

What Do You Think?

Do you support Occupy America? Are you part of the 99%? Do you think the 1% should be treated differently? Why? Why not? Please share your thoughts in the comments.

Occupying America is a post from: Narrow Bridge

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I am on the “every other Friday” payroll, as with many people around the United States. This year, September is the second of two months where I get three paychecks. Because I am used to two paychecks per month, it is like a bonus check.

What do I do with my bonus money? Great question! Here are my ideas for the best use of a third paycheck.

Extra Loan Payment

I often write about paying your loans bi-weekly rather than monthly. There are a couple of reasons for this. First, you match your income stream to your expenses. If you don’t get paid monthly, why should you get hit with a giant loan payment monthly?

Second, paying every payday saves you mortgage interest. Loan interest compounds daily, so paying more often will lower the compounding effect and save you money.

But, twice a year, you will make an extra half payment. That equals one full extra payment per year. That helps you pay down the debt faster, build your equity faster, and save a ton of money on interest over the life of the loan. If you want, you can even round up your payment for a faster payoff.

Extra Savings

You can save up to $5,000 per year in a Roth IRA. Most people do not do that. With two extra paychecks, you can make a big dent.

Do you have an emergency fund saved up? What if you were fired tomorrow? How long could you survive? If the answer is less than three months, you should put that extra paycheck into a savings account for a bad day.

Life Experience

I have a long life list with big goals on it. Many of them involve international travel. Some involve taking up new hobbies or skills that require expensive equipment or classes. An extra paycheck goes a long way toward a flight to Europe or a set of DJ turntables.

Your Ideas

What do you do with the third paycheck if you get one? If not, what would you do with it? Please share in the comments.

Image by Mark Strozier.

Also, a quick thanks to Kevin at Invest it Wisely for including Narrow Bridge in this week’s Carnival of Personal Finance.

3 Paycheck Months is a post from: Narrow Bridge

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In Colorado, there is no shortage of gambling opportunities. Just 45 minutes up the road in Blackhawk and Central City, we have large casinos that rival most Indian reservations. We have legalized bingo halls all over town. But the dream is to win the lotto.

Where the Dream Comes From

I think everyone has a list of “if I win the lotto” ideas. One of my friends told me that winning the Power Ball is his retirement plan. He also owes me a 1968 Cherry Red Chevy Camaro if he wins.

After recent epic winnings in the Power Ball, I got to thinking about my lotto list.

Dreams of Unlimited Money

If I had virtually unlimited money, what would I do?

Homes

I would buy a massive mansion in my hometown, Denver, or a giant Penthouse downtown. I would have a vacation home in the mountains, probably in Beaver Creek. I would buy a beachfront home in Miami overlooking South Beach. I would buy two apartments in the Old City in Jerusalem (one for Passover, one for the rest of the year). Oh yeah, and I can’t forget the Manhattan penthouse.

Cars

I always talk about my practical car, which I love, but who would want a McClaren F1? That is the top of my list. I also want a Tesla Roadster, 1968 Camaro, a James Bond decked out Aston Martin, a shiny new Ferrari Scaglietti, and a Bugatti (not too picky on the model).

Luxury

Honestly, my many homes would be empty most of the year. My real home would be the entire world. I want to travel and see every place that I can safely see that I have never been. I would love to be able to hop on a plane at my leisure to visit the most beautiful and cultured places in the world.

What I Would Really Do

If I really were to win a windfall lottery income, I would probably be a little more thrifty with my money than the list above.

I really would have a comfortable home in Denver and an apartment in Jerusalem. The others are negotiable.

I really would have to buy a McClaren F1 if I had over $100,000,000, but beyond that I would probably stick with a luxury sedan for my daily driving and an SUV for the Colorado winter.

I would really travel the world. I want to see everywhere, and having an extra nine figures in the bank would make that dream come true.

I would also donate generously to the organizations that have given me so much and ones that help people who really need it. I would also make sure my parents and sister lived incredibly comfortably for the rest of their lives.

Most importantly, I would invest and secure my fortune in a way that ensured I would have enough money to live comfortably for the rest of my life.

The Pitfalls of Instant Fortune

I have read stories of people winning $300 million jackpots and struggling with drug addiction and bankruptcy just a few years later.

The best example of this is Jack Whittaker. Whittaker was a successful construction manager with a great family life. One day, he walked into a store for a sandwich, gas fill up, and a lottery ticket. He won the largest lottery in United States history ($315 million) and took home a lump sum of $113.4 million.

Within four years he was robbed several times, arrested, sued, and been implicit in the death of his Granddaughter and two of her friends (separate incidents) related to drug use. After a string of legal problems, nearly ending up in bankruptcy, and burying his grandchild, he said that “if he could do it all over again, he would have just filled up his tank, bought a sandwich and gone on his merry way.”

My Plan to Win the Lottery

I am going to win the lotto, I should probably buy a ticket. Doing the math, however, shows that putting money into an index fund has a much higher rate of return than the predicted average income from the lottery. I will put my dollars into a sound investment instead. I guess this is one dream that will never come true.

Fair Usage Image (c) The Walt Disney Company

When I Win the Lottery is a post from: Narrow Bridge

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The following is a guest post from Barbara Friedberg, MBA, MS, who is editor-in-chief of Barbara Friedberg Personal Finance.com, where she writes to educate, inspire, and motivate for wealth in money and life. This post is part of the Yakezie blog swap. You can view my post at Faithful with a Few and see a post from Money Talks at Barbara’s blog. Be sure to check out all of the blog posts in our swap. We shared this topic: “You’re homeless/poor, how would you change your situation?”

A BIT ABOUT ME

I confess. I’m a worrier. I think I was born this way. Although I’m determined to be a “glass half full” girl, I always have a “what if” plan.

What if we lose our jobs?

What if the market tanks?

What if we have to lower the price on our “for sale” home (already happened)? What if the house burns down?

You get the idea.

I’ve thought about the “what ifs” of a financial catastrophe and how I would make ends meet. With the proper confluence of events, anyone could become poor. After all, look at the recent tsunami in Japan.  In California, earthquake insurance is prohibitively expensive, as is flood insurance in the Midwest. A bad earthquake or flood could cause widespread ruin.

You can plan as much as you want, but, bad stuff happens.

INSPIRATION

Before I go on with my response, I must give a shout out to two inspirational simplicity figures; Jacob Lund from Early Retirement Extreme and Tom Shadyac the famous movie director of Liar, Liar, Bruce Almighty, and The Nutty Professor (to name a few). Jacob saved most of his income for several years, and left the conventional work force. He lives what might be called an inexpensive minimalist lifestyle.

Shadyac, a wealthy Hollywood figure who previously owned multiple mansions and other trappings of the super rich, drastically changed his lifestyle. After selling all of his multimillion dollar mansions and firing his extensive staff, he now lives in a double wide 1,000 square foot trailer in Hawaii. By Hollywood standards, he is definitely roughing it!

Both men are living the simple life by choice.

These choices aren’t the same as being forced into poverty by situations outside your control. Yet, they illustrate how most of us are living lives with way more than we need.

Although I try to be mindful of waste and excess, I acknowledge that I own and consume lots more than I need!

POVERTY

What if simple living is not your choice, you are just poor? Then what?

Here’s what I would do if I lost it all.

• I’d remember to be grateful for what I already have; my health, friends, and family.
• Short term, I’d sell whatever I could to raise cash; car, furniture, stuff.
• Next, I’d take a room at the YWCA to cut living costs.
• I’d eat as cheaply as possible; beans, rice, peanut butter, and whatever veggies were on sale.
• I would get a job FAST to bring in money immediately while I looked for a career job. My top employment choices would be Lowe’s, Home Depot, and fast food. Why? I love the hardware/home improvement stores. Fast food is always looking and they pay more than minimum wage.
• When I wasn’t working, I’d relentlessly call, write, and contact anyone who might help me find a career job.
• Every single expense would be cut to the bare bones, no exceptions. Shop for necessities at the dollar stores, haircut at Super Cuts, no new clothes etc.
• Every day I would wake up and problem solve ways to generate cash.
• I would ask my place of worship or other social service agencies for help, if necessary.

This activity was both uplifting and confronting. Having a “worst case scenario” plan makes me feel in control and able to handle anything. I empathize with those in need and even feel a bit guilty for my good fortune. In fact, I frequently feel that I could do more for others.

As Albert Ellis, the great psychologist once said, “Except death, every other problem is at worst, 100% inconvenient.” No matter what the challenge, I try to keep this mindset and maintain a solution oriented attitude.

How would you handle poverty or homelessness?

Photo by BlatantNews.

You’re Homeless… Now What? is a post from: Narrow Bridge

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In Fight Club, Tyler Durden famously said that “the things you own end up owning you.”  I have written about how hard you have to work for your possessions once before, but I decided to take it a step further and find out how much time I have to work every month to pay bills.

It turns out that I spend nearly 75% of my time at work for recurring bills, including rent, student loans, and utilities.  That means only about ten hours every week are for the things I like to do, such as eating and entertainment.

Click to See Full Size

You can also build a calendar like this.  I have put together a free spreadsheet on Google Docs to help you figure out how much of your paycheck goes to fixed bills.  From that spreadsheet, I created a second Google Calendar that I used to input the work days per month.  It turns out that my biggest fixed expenses are taxes, rent, and student loan payments.

This was an eye opening exercise.  Take a run through and let me know how it goes in the comments.

Make a Bills Calendar to See What Owns You is a post from: Narrow Bridge

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In the recent past, my company announced that it is being sold.  It is a large public company, so it made pretty big news in the industry and locally, as it is the biggest private employer in the state.  For the sake of privacy, I am not going to disclose the name of the company I work at as long as I am an employee.  (I’ll just say that I work in one of the buildings in this picture)

At the time the “merger” was announced, we were told that the deal is expected to close in the first half of 2010.  Based on that knowledge, I figure that I have a year or so left at this company.

I recently asked the readers whether they would focus on saving or loan payments in the short term.  One astute commenter, Suba from Wealth Informatics, asked if I expected my financial situation to change in the near future.  That clearly is a yes.

I expect that I will receive a 3 month paid severance at the time I am let go.  That will be after March 31^st.  There are a lot of questions surrounding my team’s position in the merger.  I am in the treasury department, but my specific group does not have a counterpart at the new company, so our value to the company would not be duplicated.  I would say I have about a 20% chance of not being laid off at all.  My employer told me that I should have notice of three to six months before the layoff occurs.

I have been thinking about building up my savings a bit more for safety’s sake.  I have taken solid steps to do that.  While it is not automated, I am taking $200 per paycheck and stashing it away in a savings account.  I have maintained my $250 per paycheck student loan payment and paid off my car completely.  My only big fixed costs are rent ($615 per month), utilities ($150 per month including TV and phone), car insurance ($120 per month), and eating.

Having just finished an MBA, I am not too worried about finding a job.  However, there is always a risk that it will take time.  I am hoping to be able to spend a month backpacking in Europe and two months job hunting with the severance pay.

So, now that you know more about my future financial situation, what would you do to keep on top of things with the knowledge of a pending layoff?

Preparing for a Layoff is a post from: Narrow Bridge

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This is a Sponsored Post written by me on behalf of IZEA. All opinions are 100% mine.

This week I signed up for the paid blogging service SocialSpark.  I plan to use the site to supplement my income from this site and my Israel blog.  I was contacted by the company in February and finally got around to signing up this week.

So far, I am impressed with the site.  It is affiliated with respectable bloggers and has a very strong Code of Ethics policy.  It offers pay for post and affiliate marketing as a primary source of revenue for partnering blogs.  This post is actually my first paid deal from the site!

If you have a blog, you can sign up for the site quickly and easily.  Once you are accepted, you are given a list of offers based on your site’s traffic and content.  If you qualify and accept an offer, you are given parameters and required links for the blog post.  Once you write the post, you submit the URL and text of your post.  After a quick review by the site’s staff, you are paid via PayPal.

I do not plan to use this service excessively or dilute my content.  However, I am excited to have found a service that allows me to match up relevant advertising to supplement my regular content.  If you have a blog of your own, you might be interested in signing up for SocialSpark.

SocialSpark is a post from: Narrow Bridge

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A while back, I wrote about eBaytrage.  That is my word for buying a product somewhere in the world and reselling it through a website, such as eBay or Craigslist.

I have some research of ways you can become an eBaytrage reseller.  I have found some fun and interesting ways to source your items for sale.  Just a note, there is no guarantee that this will work.  You do put some money on the table to get started.  I have made a little over $100 in my eBaytrage exploits, but I know people who have made thousands reselling.

Craiglist– By far, the best way to guarantee a profit is to minimize your expenses and find a desirable product.  Fortunately, Craigslist is a popular place for people to unload their junk with little effort, which often translates to free.  I once found a desk on Craigslist that I picked up for free.  I left it in my garage for a few months before I found a buyer that wanted it for $50.  Good deal, right?

The tricks to finding items on Craigslist are perseverance, a big truck or van, storage, and patience.  I have two full encyclopedias that I have been patiently waiting to resell.  Every couple of months I give it a shot.  Maybe I should lower my price?  Maybe I just need to be patient.

eBay – People are always trying to sell collectibles and miscellaneous goods on eBay.  If you can find one that is below the market price, you can likely buy and resell.  Just be careful that the item is in new or very good condition and well below the market price.  You often have to beat the market to resell, and you have to beware of thin margins.  You don’t want to get stuck with a product that you either can’t sell or have to sell for less than you paid.  To take advantage of eBay for sourcing when finding products to sell online, you have to be a true expert in the products you are buying.

Woot– If you have never heard of a Woot Off, you are missing one of the finer things in life.  Woot is a discounted product website that gives one deal each day, and you can buy up to three of whatever is being sold.  These products often come at a steep discount, but sometimes do not.  You have to do your research.

Every once in a while, you might be lucky enough to see a “Woot Off.”  A Woot Off is the equivalent of a Las Vegas casino for online shopping.  The site hosts a series of short Woots that last until the item sells out.  Once it is sold out, the next item begins.  This can be an opportunity to stock up on products to resell.  However, Woot reselling is popular and you will have competition, so margins might be low.

Overstock  – Overstock.comhas deals that could lead to a resale opportunity, but actual overstock is even better.  Many websites and companies offer overstock items.  Overstock consists of retail items that were bought in too large of a quantity.  The overstock is sold at a discount in bulk.  If you can stock up on a good deal that is desirable, you might be able to keep going on eBay or Craigslist for a while.

SlickDeals– SlickDeals is one of my favorite deal websites.  It is the deal crowd-sourcing home of the Internet.  Slick Deals is updated constantly throughout the day with new tips.  Most are about some sort of electronic item, but I have seen many exceptions.  I once bought a digital camera through a Slick Deals tip and sold it on Craigstlist for a profit of about $25.

Big Box Retail – Every big store has sales, and that can be a great opportunity to snatch an item quickly.  Wise Bread recently ran a post about buying and selling for a profit from Office Depot with heavily discounted supplies.  Every store needs to sell off inventory to make room for new stuff.  If you can time it right, that can turn into money in your pocket.

Conclusion – Have fun buying and selling stuff to make money.  I can attest that this is a thrilling and fun hobby, but it takes work and has some risks.  I suggest starting small and working up to having a fun business for side income.  If you have had any success, or failure, with this in the past, be sure to leave your tips in the comments.

eBaytrage: Six Tools to Make Money as a Reseller is a post from: Narrow Bridge

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