Tax Thoughts

CalculatorThe April 15 deadline for filing tax returns is fast approaching and I’m not happy to say that we are still working with the accountant on completing our forms. I have been researching on a lot of tax hoop-la and here are some useful links I’ve come across:

Here is a good calculator for figuring out what tax bracket you are in based on your ‘taxable income’. It also shows what your federal tax liability will be including what percentage of your income is that number.

We had a unique case tax-wise this year because my wife was just transferred internationally and started US local work last May. The IRS has what it calls as the Substantial Presence Test which basically helps you figure out if you are a resident or a non-resident for tax purposes.

HR Block has this tax calculator which will help you get a ballpark figure of what your federal tax refund will be. I like their calculator a lot because you do not need to enter in personal information, just numbers.

Here is a list of overlooked deductions which is useful if you are itemizing deductions.

Debt Reduction Calculator

Calculator2008 was not a very good year for a lot of people, including us, in terms of finances. We watched our net worth slowly shrink down due to a variety of reasons. Our 401ks seemingly stopped growing because a large chunk of our allocations where on riskier but higher return investments such as stocks. The DJIA at this point  last year was double of what it is now. The USD which was very strong for several years took a nose dive against asian currencies. Coupled with unforseen circumstances and our relocation last year, we found ourselves with a pretty significant amount of debt.

Thankfully though, I feel we are still on track on paying off our debts and at the same time growing back our savings. Also, we did manage to pay off  our subdivision lot and car back home last Jan, so this cleared some of our income to be dedicated for debt payments. A very nifty application which I am using throughout this process is the Debt Reducation Calculator.

Basically, this excel file filled with an unbelievable amount of macros and formulas will allow you to input several accounts so you can manage your debt payments. It features several strategies on paying of your loans, credit cards, etc. so you can see which is the better way of paying things especially if you have accounts with different interest rates.

This calculator features the Debt Snowball strategy, which let’s you benefit psychologically in paying off your debt. Basically, it is paying off your smaller accounts so that you can build momentum and see a lot of ‘progress’ early on. Other strategies include, high interest first (which I think is the best one really, feeling good does not put money back in my pocket), no snowball, or custom order.

You can download the tool here.

Bit by the recession bug

Recession Bug It felt like the opposite of being ‘touched by an angel’.

I remember my mom  asking if we were affected by all the hoopla about the recession here in the US and I answered, no. I felt confident since both Tin and I work in the IT industry that our jobs were in a way “recession proof”. I guess in these extraordinary times, nothing is a given.

No, we were not laid off or anything like that (knock on wood). We just learned that HP will be implementing an across the board pay cut of 10-15% for executives and 5% for exempt employees, which is a bummer since Tin works for HP. I know this is a far cry from the problems a lot of people are experiencing,  losing their jobs, foreclosing on their homes, unable to find credit for their businesses, etc. but it feels like a step backward in our goals and responsibilities right when we felt we were making some headway.

What to do now?

There are several items I think that we can do to ‘fight back’ and respond:

  1. Start brown bagging everyday – I have been doing this a lot lately but I think I need do it everyday. It potentially saves us $5-$8  a day which translates to a savings of $100-$160 per month (doing the math actually encourages me more), aside from making lunch for me much simpler because I don’t need to go out or think about where to go.
  2. Minimize eating out – We currently try to eat out only on weekends, probably 3-4 times. Bringing this down to a maximum of twice a week is a savings of around $200-$240 per month.
  3. Curb the ‘gadget’ hunger – I am a self-confessed gadgetaholic, I guess this experience will strengthen my resolve.
  4. Look for additional income – You will see this advice in almost all the finance blogs on the net, but the reality is, it is easier said than done. I think I will start with looking for stuff that I am not using at home and selling them off on Ebay or Craigslist.
  5. Increase our value career wise – I recently received a Lotus Notes certification which I guess is a step in this direction. Probably looking for ways to increase our value in the eyes of the employer will be good thing in this economy.

Here is a CNN Money article which I read some time ago that gives some useful tips to recession proof our jobs. And here is a blog that I frequent which always has something to help people be more financially independent.

All in all, I think the key here is to be consistent throughout this crisis and focus on the goals.