Shop Smart: Use the Internet to Save Money

I have to say that I love the internet. Mostly because it saves me money. By combining online discounts and using a cash back service I save a few hundred dollars a month on normal household purchase. I am going to walk you through a recent $91 purchase of mine and show you how I saved over 40% shopping online instead of going to my local store.

First off I saved money by not driving to the store. The store is 5 miles away, my car gets 20 miles to the gallon, so going there and back I didn’t use 1/2 gallon of gas, add the wear and tear on the car and I have saved over $2.

Then I started my shopping at Ebates. Ebates is a website that pays you cash back for all you shopping. And I am not talking about a small amount. I don’t need to shop at special stores, and I still get all the other discounts I am entitled to. Ebates sends out checks quarterly and I usually get a check every quarter. In this case the store I am shopping at is being featured and offering 12% cash back! This unusual, most cash back amounts are in the 3-5% range. On my $91 purchase I earn $11 cash back! Very nice.

Selecting the store is important This time I am shopping for common household supplies. Cleaning products, toilet paper, feminine products, soap, etc. With the aforementioned 12% cash back it is an easy decision to shop at Even without the Ebates cash back they usually have very good prices compared to my local store. They also have their own incentive program. With every purchase I earn “bucks” that I can spend on a future purchase. With this purchase I earn 4 “bucks” but I will use that on a future purchase so I don’t count it here.

I shop the sales and find some really good deals. I save over $20 compared to what I would have spent at my local store. Once again this is a bit unusual, I normally save around 10%. As usual I make sure that my order is over $50 so I qualify for free shipping saving another $5. (First time customers get free shipping with just a $25 order!)

Total savings $2 car expenses, $11 Ebates cash back, $20 saved over local store prices, plus $5 saved on shipping.
My total savings are $38 or 34% of what I would have paid if I had gone to my local store.

That is just one example, but it is not the only one. Using a combination of Ebates and online store discounts I have also save $35 on a pair of $105 shoes. I bought a backpacking tent for $99 that was selling for over $200 at my local store. (That was a clearance purchase with a 20% discount for first time customers combined with a 5% Ebates cash back. )

How much have you saved by shopping online? I would really like to know!

How To Improve Your Credit Score

It is no secret that in general, I think it is best to be totally debt free. Just take a look at my series on Debt Free Forever. However, there are times when credit is necessary, and even if you are on a cash basis, there are times when a good credit score is important.

Here are a few tips from the Federal Reserve System for improving your credit score.

1. Get Your Free Credit Report

Don’t listen to the catchy jingles and the hype. There is only one place you should go to get your free credit report and that is This is the free credit report site authorized by the Federal Reserve and you wont’ need to sign up for anything to get your free report. By law you are entitled to one free credit report from each of the three major credit reporting companies. You don’t need to get them all at once. Spread them out throughout the year and you can keep close tabs on your report.

Once you get your free credit report, then check it carefully to make sure it is correct. If you find anything that is incorrect, or you disagree with, contact the credit reporting agency and they will tell you how you can correct the mistake, or at the very least, add a comment to your credit report stating your side of the story.

2. Don’t Miss A Credit Card Payment

Not only are missed or late payments damaging to your credit report, they are costly! Late payment fees of $29 or more can add up quickly. Through your bank’s automatic bill pay set up an automatic payment for at least the minimum payment on your credit card. Set it to send the payment a week before it is due. That way you know you won’t be late on your payments, and you can always send in extra payments if you want to pay your credit card off more quickly.

3. Don’t Max Out Your Credit Cards

Staying well below your limit not only avoids costly over limit fees, it also improves your credit score. Companies like to see that you have plenty of credit available. It shows that you can control your spending. If you have a credit card that is close to the limit, quit using it and make an effort to make more than the minimum payment and pay down the balance.

Just three simple steps to improve your credit score. It won’t happen overnight, but the results will be worth it.

The Home Buyer’s Tax Credits, Now The IRS Will Help You Buy A Home

Ranch style home in North Salinas, California
Image via Wikipedia

Once again the IRS has extended the First Time Home Buyer credit and now is a great time to buy a house!

What I find really exciting is now you don’t have to be a first time home buyer to get a modified version of the credit.

Here is the scoop. If you are a long time homeowner, defined as someone who has lived in their current home for at least 5 consecutive years, you can now qualify for the long time resident credit and get a tax credit of up to $6,500.

Here is how it works. For both the first time home buyer tax credit and the long time resident tax credit you must enter into a binding contract by April 30, 2010 and have closed escrow by June 30, 2010. Miss the deadlines by even a day, and you miss the credit.

You can claim the credit when you file your 2009 or 2010 tax return, or if you don’t want to wait, for homes purchased in 2009 you can amend your 2008 tax return.

The credit is 10% of the purchase price of the home, up to $8,000 for the first time homebuyers credit and $6,500 for the long term resident credit. The new home must be your principal residence for 3 years, or you have to pay back the entire credit.

There are some limits, the purchase price of the home must be less than $800,000 and a taxpayers modified adjusted gross income must be under certain limits. Just how much depends on when you purchase the home. For homes purchased before November 7, the credit starts to phase out at $75,000 MAGI, $150,000 for joint filers, and no credit is allowed for persons with Magi of over $95,000 or $170,000 for joint.
For homes purchased after November 6 the full credit is available for persons with MAGI of up to $125,000 ($225,000 for joint) and no credit is allowed for taxpayers with MAGI of over $145,000 ($245,000).
Find out all the details on the Home Buyers Tax Credits at the IRS site.

Now here is where I think it gets really interesting.

Make Tax Free Income From Your Personal Residence

Rich Dad, Poor Dad: What the Rich Teach Their Kids About Money–That the Poor and the Middle Class Do Not!
Robert Kiyosaki, of the Rich Dad, Poor Dad fame, said in his books that your home is not an asset. However, that was before the IRS made owning a home so attractive. Using a combination of the Home Buyers Tax Credits, Mortgage and Real Estate Tax Deductions, and the Tax Free capital gains from selling your home, it is possible to make large sums of tax free income from your home. Here is an example of how it might work.

You, as a first time homebuyer, buy a home for $80,000 on January 1, of 2010. You put 10% down ($8,000) and take out a 30 year fixed rate mortgage for $72,000 at 5%. Your monthly mortgage payments will be $386.51.

The first year, when you file your tax return, you get the $8,000 tax credit, in other words, the IRS just paid your down payment. You will have paid around $3,300 in interest, and maybe another $1,000 in taxes, giving you a tax savings of about $1,000. ( I am using round numbers here just to make it easy.) That is a total of $9,000 you didn’t need to earn, and $9,000 you don’t need to pay taxes on.

Years two and three are not very exciting, you still get the tax deductions and save around $1,000 per year.

After 3 years you decide to sell your home. Let’s assume the market has made a recovery (which is not an unreasonable assumption for 3 years out) and your home has increased in value 25%, to $105,000. Let’s play with the numbers.

First lets see how much cash it took to live in your home. (I don’t include insurance here, because even if you are renting your should be paying for insurance, and renter’s insurance and homeowner’s insurance cost about the same.)

Cash Out

If we add up the down payment ($8,000), the total monthly mortgage payments ($14,000) and the estimated property taxes ($2,400) we come to a total of $24,400 cash out of pocket to live in our home. But then we get to subtract the tax credit ($8,000) and tax savings ($3,000) to come up with a net out of pocket cost of $13,000. Not bad for three years of housing!

Now let’s see how the cash flows when you sell the home.

We sell the home for $105,000, but we have to pay the costs of selling the home ($8,400) and we have to pay off the mortgage ($68,000). That leaves us with cash in pocket of $28,600. Nice! Subtract from that the $13,000 cash out and you are left with $15,600 your don’t have to pay taxes on. Working a job and paying income taxes and social security taxes you would have to earn almost $20,000 to have the same amount of cash.

So by using the tax laws to your advantage you have lived in your house for free for 3 years and gained over $5,000 per year in cash flow.

In my book, that makes my home an asset!

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Why Now Is The Time To Start A Business

I started my first business during a recession, and now, during this recession I am starting another one.
I think recessions are the best times to start a new business, especially a service business, and I am going to quickly tell you why.

#1. Rents are cheap.
You can tell yourself all you like that your clients don’t mind that you work out of your home, but I have found I get more respect, and more money from my clients when I have a professional business office. Right now commercial vacancies are high, and you can find good office space at bargain prices.

#2. Help is cheap.
Sometimes you just can’t do it alone. With unemployment at an all time high, it is easier than ever to find talented, qualified people to help you out. They are also willing to work on a temporary, contract basis, so when I don’t need them, I don’t need to pay them.

#3. It seems that everyone is willing to bargain.
I hate paying full price for anything. But often, vendors will say the price is the price. Recently I have been getting discounts on software and services just by asking. I try to give something back, and nothing talks like cash! My favorite line: Will you take $X for this if I pay you cash right now?

#4. You Have the time!
I was laid off from my job 3 months ago, and with unemployment over 11% where I live I probably won’t be getting a new job any time soon. It doesn’t take long to look and see that there are no new jobs I can apply for. So now I am using my considerable amount of spare time to get the new business rolling.

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Save Money by Going Green

Get Great Yields From Home Conservation Projects

Investments in home-energy conservation can produce extremely-high yields in the neighborhood of 10% to 40%. In addition to the satisfaction that comes from regular monthly savings, we can also feel good about conserving energy and lessening our impact on the environment. The idea is that we treat yearly savings like earnings; we can thereby associate a yield with these home-improvement investments.

The problem that we attempt to solve is these investments tend to be small in size for many investors. With the exception of increased wall and attic insulation, most projects fall in the $100-$700 range. Luckily for us, Berkley National Lab has provided a great table for identifying a large number of the very highest-yielding home-conservation investments that are applicable to most home owners. This table, seen below, contains the estimated costs, savings and yields for the selected home-conservation projects.


The yields are very impressive. The idea is to start at the top of the list (with the highest yields), and work your way down choosing projects that pertain to your personal situation. For example, you obviously don’t want to replace a brand new appliance; however, if you where going to replace one of the listed appliances anyway, the additional expense of opting for one of the Energy Star products listed can result in a great return.

Other important considerations are the number of years before you sell the home, the increased value of the home that results from the improvement, and the yield that you get on your reinvested savings. The math can get a little messy, so a calculator has been set up where you can enter your personal situation.

There are some important foot notes in the above table that involve taxes, inflation, incremental costs of appliances, and others. In regard to the three appliances and thermostat, the yields apply to the additional cost of opting for an energy-efficient appliance.

John R.

Thanks for the guest post John! To read more about alternative energy and conservation (and how it can save you money) visit

Taxes are Illegal?

The man sitting across my desk had been a client for years. He had come in to tell me that he would not be using my services ever again.

“Why?”, I asked.

He had found a lawyer who had told him that income and social security taxes were illegal. All my former client needed to do was file some forms with the government and he would effectively “untax” himself.
“Anyone can do it,” my client told me. “It is just that the government has everyone believing that taxes are required. All you need to do is file the proper forms, and you won’t ever have to pay taxes again. And it is perfectly legal.”

Unfortunately I never saw him again so I have no idea how the whole scheme worked. But every year I have people tell me that taxes are illegal, or unconstitutional, or only for corporations. And every year I tell them that the IRS has said over and over again that taxes are legal, and constitutional, and for everyone with income.

I was looking at a website today, that will sell you a package to “untax” yourself for the small sum of $700. The package will include all the forms you need to send to the government so you will never have to pay income taxes or social security taxes again.

Judging from the page and pages of double speak, the main argument of this website, is that paying taxes is voluntary. They also state that the 16th amendment was never properly ratified, and that wages are not taxable because they are not defined as “income” in the IRS tax code.

Before you fall for this type of scam, please take a moment to read what the IRS has to say about these frivolous tax arguments(pdf file).

If you don’t like reading IRS documents I’ll sum it up for you here. Taxes are legal, the 16th amendment was properly ratified, and wages are income under the law. You can’t avoid taxes by declaring you are not a citizen, by filing any type of “untaxing” paperwork, or by submitting a zero income tax return.

If you choose to use any of these arguments on your tax return the IRS can impose a $5,000 penalty for preparing a frivolous tax return in addition to any other fines or penalties that may be due for underpayment of tax and failing to file a tax return.

The Top Tax Protester, Where Is He Now?

Irwin Schiff is arguably the most prominent tax protester in the United States. He is the author of two books, has presented seminars and appeared on national television promoting his ideas about the legality of the income tax. Most if not all of the tax protester arguments you will hear today originated with Irwin Schiff.

Today Irwin Schiff is a guest of the United States government, serving over 12 years for his 2005 conviction for filing false tax returns, assisting in the preparation of false tax returns filed by other taxpayers, conspiring to defraud the United States, and income tax evasion. He has also been ordered to pay over $4 million in back taxes, fines and penalties.

If You Told People The Truth About Income Taxes You Would Be Out Of A Job

I can’t tell you how many times I have had people tell me that I must know that paying taxes is illegal, and the only reason I don’t tell people is that I would be out of a job. If only it were true. The truth is, if I knew a way that people could legally earn income without paying taxes, I would be more than happy to share it with all my customers, and I am sure they would be more than happy to pay for that information. In fact, I would be the most popular tax adviser in my state.

Buy a New Car With Help From The IRS

Now is a great time to buy a new car. The recession has hit the major car dealers hard and they are offering great deals on new cars. And to make the deal even getter, the IRS is allowing a deduction on your 2009 income taxes for state and local sales and excise taxes you pay when buying a new passenger car.

There are a few qualifications.
The deduction is only good for purchasing a new car, light truck, motor home or motorcycle. Taxes paid on the purchase of a used car will not be deductible.
You must purchase the new car after February 16, 2009 and before January 1, 2010.
You can only deduct the taxes paid on purchase prices up to $49,500. This doesn’t mean that you can’t deduct the taxes if you buy a more expensive vehicle, the deduction is just limited to the taxes on the first $49,500 that you pay.
The deduction will start to phase out if your income is over $125,000 and you are a single filer, $250,000 for joint filers.
The deduction is only good for your 2009 income tax return.
You don’t need to itemize to be able to take the deductions.

How will this work for you? Well, lets say you purchase a $30,000 vehicle and you pay 10% in state, local and excise taxes, or $3,000. You will get to deduct $3,000 from your taxable income for 2009. That will save you $450 if you are in the 15% bracket and $750 if you are in the 25% tax bracket.

Not enough to make me run out and buy a new car, but not a bad deal if you are going to buy one anyway!