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Archive for November, 2008

I love Black Friday

November 28th, 2008 at 09:45 am

So I got my student loan check for the Fall semester & just put $5000 towards paying down DH's car.

And, as an Xmas present to myself - I just bought $500 worth of clothes online.

I feel no remorse. I know I desperately needed new clothes. But most times I don't get anything cause DH and the kids need stuff.

I have one pair of sneakers that we bought almost 2 years ago. Yes, it is my only pair of sneakers. I have boots & heels, but I wear the sneakers the most and I've worn a hole through the heel since I wear them almost daily.

Most of my bras I've had since 2006, the underwire has now broken through. Other shirts of mine I've had since 2005 and they've started to get holes through them.

I realized I had finally had it when we walked into Target and my kids all said "Mommy, we need new shoes." Umm... no, we bought them shoes last month.

So I took off my shoe and showed them the inner heel & said "We bought you shoes last month. Look at Mommy's shoe, do you need them THIS badly?"

DH has gotten the hint too that I'm frustrated on how much I need of new clothes. We finally agreed, its time I got new clothes & with being Black Friday I figured it would be a great time.

I bought 3 pairs of shoes, 2 pairs of jeans, 3 tops, 8 pairs of underwear, and 3 bras from NY&C, JCPenney, and VictoriasSecret for $500.

Everything was on sale and I got free shipping. I even got a free scarf from Victorias Secret. The jeans from NY&C are normally $50/each but they had a buy one get 75% off sale. I saved at least $300-$400

So I feel good knowing I can finally toss out these old shoes & have jeans that really FIT now because for some reason, over time the length on my jeans shrink even though I'm 5'7" and buy talls - they still rise up to my ankles when I sit down after awhile.

Paying off debt by restructuring

November 22nd, 2008 at 04:15 pm

So I am getting more of a student loan than I need. I needed some of a student loan in addition to the subsidized one in order to cover my tuition, but I'm getting some in addition.

Essentially what I'm going to be doing with the extra is paying off DH's car. Then we'll pay off one credit card in February with our tax return and it should still leave some left over to pay down our other credit card & finally pay it off in June/July.

So in a little over 6 months we should owe on only 1 car, the HELOC, and my student loan.

How that affects us monthly is, it reduces our monthly payments by $790/mo. And even when I have to start paying on my student loans in January 2010, the total I'll owe is about $28K with half of it at 1.65% and the other at 6.8%. SO I'm estimating my payments around $300 for the student loan which is my undergrad loans AND graduate loans. I don't figure thats too bad to have a Master's Degree in Accounting and only owe $28K

So right now we pay:
$435/month to DH's car
$225/month to DH's CC
$130/month to my CC
$630/month to my van
$255/month to the HELOC
Then in January 2010 around $300/mo to my student loans

All this should help us in today's economy to be less dependent on my income. My goal is to reduce our monthly expense/increase our monthly income to where we no longer have to rely on my income in case I don't have a job.

In addition to all this, in June we won't have to pay my son's preschool anymore ($375/mo) since he'll be starting kindergarten

Accidental landlords & Sole Proprietorship

November 19th, 2008 at 10:49 am

Here is the first part of my paper. I hope to finish the section on Partnerships later tonight. I'm actually not as bored writing the paper as I originally thought.
..........................
Legal & Tax Considerations in Establishing a Rental Property

Historically, real estate has been considered a safe investment vehicle yet the recent decline in the housing market has begun to challenge this idea.

Many homeowners in the years of subprime lending and easy credit purchased homes with little to no money down based on the notion that real estate would generate a guaranteed profit.

When the markets began to decline, many of those same homeowners found themselves owing more on their mortgage than the house was worth. Homes that were initially purchased as an investment to “flip” began sitting on the market longer and longer. Some homeowners have been forced to relocate due to job constraints. With the inability to make two housing payments many homeowners have decided to rent out their property to help off-set the cost of the mortgage, even if it means operating at a loss to ride out the market. The idea of renting a vacant home out can be a preferred alternative to a homeowner that may otherwise have to come to the closing table with thousands of dollars, foreclosing, or short-selling.

The aforementioned types of homeowners that have found themselves becoming a landlord are a growing trend of accidental landlords. A survey conducted in 2007 from CompleteLandlord.com found that 20% of landlords did not anticipate renting out their property when it was initially purchased .

Many accidental landlords, however, do not understand the complexity that can be involved in establishing themselves as a business. There are legal and tax considerations to evaluate in establishing a rental such as the type of business entity the property will fall under in addition to tax planning. This paper will discuss these different aspects that a prospective landlord should consider before deciding to get into the residential rental property business.

Sole Proprietorship

A sole proprietor is a single individual who is responsible for the ownership of the business. This form of entity is the easiest to set up because taxpayer can simply use his or her social security number as their tax ID number. Therefore, no paperwork is required to set up an organization under sole proprietorship. Due to the ease of establishing a sole proprietorship, this form of entity is also among the fastest growing forms of business entities.
Entities established under sole proprietors are not taxable organization.

Income and deductions for a sole proprietor are filed under Schedule C of the owner’s individual 1040 Form when filing. If a sole proprietor owns multiple businesses, a separate Schedule C is required for each business unit.

Income from sole proprietors is subject to self-employment tax which is levied to cover a self-employed individual’s Social Security and Medicare benefits. In 2007, self-employment tax to cover Social Security was 12.4% of self-employment income up to the $97,500 ceiling amount plus another 2.9% of total self-employment income to cover Medicare . This equates to a total self-employment tax of 15.3% on sole proprietors. To help offset taxes to sole proprietorship entities, self-employed individuals can deduct one half of the self employment tax rate from net earnings .

Another consideration that must be taken into account when establishing a sole proprietorship is estimated tax payments. Quarterly payments are required when a self-employed individual has an estimated annual tax that is $1000 or more . The estimated taxes owed must be paid in four installments throughout the year. If a taxpayer under-estimates his or her tax liability a non-deductible penalty may be applied to the amount of tax that was underpaid.

An individual with one rental property may be particularly attracted to sole proprietorship if he or she does not plan to be a landlord for very long or only wishes to have a few properties at most. Many individuals who became accidental landlords in the current housing crisis don’t intend on continuing to be a landlord once the housing market recovers. Instead, they have chosen to rent out their property as a way to off-set mortgage expenses in a down market .

However, this form of entity also has unlimited liability for the sole proprietor. If an individual wishes to sue the business, the personal assets of the sole proprietor can be included in a judgment if the court finds in favor of the plaintiff. This means that the sole proprietor’s personal home, vehicle, and bank accounts can be seized in the event of a lawsuit.

An accidental landlord who is not well versed in landlord tenancy laws for his or her state can find themselves liable for damages if certain laws are not adhered to. For example, under Virginia Code §55-248.23, a landlord must supply heat, water, hot water, and other essential services to a tenant. If a landlord fails to do and respond to the tenant in a timely manner, the tenant can recover damages in terms of the fair rental value of the dwelling or secure substitute housing. The tenant may also be entitled to attorney’s fees if proceeding under that section of the State of Virginia’s Code where a written notice is supplied .

The costs of litigation for a landlord as a result of not being well-versed in state and federal laws regarding residential rental units can be more expensive than an individual realizes. Therefore, an individual interested in establishing a rental property under sole proprietorship must carefully consider his or her risk tolerance and insurance policies when considering this form of entity because of the unlimited liability that accompanies it.

Rental properties can be extremely risky for accidental landlords that do not have the capital necessary to withstand repairs to the property and natural disasters. An accidental landlord can find themselves in a dangerous financial situation not only professionally but also personally if they are not adequately insured and protected with enough equity to cover the rental unit’s operations.

The legal and tax ramifications of a rental property

November 17th, 2008 at 07:37 pm

That is the topic I have chosen to write my tax paper on.

My only problem is, aside from referencing the U.S. code and tax law - what other sources should I use (other than my text)?

This is my first tax/legal paper that I've ever had to write and its supposed to cover a topic of interest to business entities or those interested in entering into a business.

I tend to do better writing about what is near and dear to my heart. So, since I have a rental property - I've decided to write about that.

I figure I could cover the different types of ownerships and their advantages & disadvantages regarding liabilities and taxation. Then go into the different tax classifications to consider.

This needs to be 18-20 pages, so I'm hoping to find 18-20 things to discuss and do around a page on each topic.

I don't know though.

I'm in the final stretch of the semester. I got a 98 on my Midterm so I need to do the paper in order to KEEP my 'A', if I don't do it I get a 'B'.

I'm struggling in my International Accounting class... there is something so foreign about derivatives and hedging to me. But I'm studying and have a little less than a month before the final, so hopefully I'll ace it.

I have 3 weeks to do 2 finals (one take home final) and a 20 page paper.

Next semester I have to take 3 classes. I'm not excited about it, but I'd rather endure 3 1/2 months of being a bookworm than the alternative if I don't have my master's degree and DH has to move before I'm done.

After the May things should get much more relaxed. I only have to take 1 more class during the summer and 2 in the Fall and this time next year I'll be getting ready to graduate with my M.S. in Accounting.

Planning out December

November 16th, 2008 at 09:38 am

I'm doing the budget for December and for our living expenses, we should be in the black that month.

BUT with Christmas, my friend's coming to visit, DH's birthday, our 9th anniversary - you can see it'll be easy to find opportunities to spend.

The silver lining is - DH is taking a trip to Tampa for a convention so he should make a couple hundred dollars from that so we can get some Xmas presents for the kids (but it will be last minute since he won't get back till the 18th and then it takes a couple days to get the money).

We're also still waiting on the tax refund from Hawaii $243

After this month's deficit, we have $900 in our savings account. I shouldn't HAVE to touch that money in December but I also have my tuition due in Dec/Jan so that is about $1000 I'll either need to take out another student loan to cover it or put it on my 0% card.

I'm not sure what to really think of the economy right now. Jim Cramer said that he can see the Dow going down to 6000 if GM fails and while I'm not heavily invested ($6K is in the market/$13K is in Government backed funds) the economy is affecting my job and if my job goes away... everything else would crumble.

But I guess its not all doom and gloom. Just because my job goes away doesn't mean I can't get another. It would be tight, I might not be able to finish my master's degree, and we'd have to start paying childcare... but I am sure if I think about it, there are opportunities. I can always work at DFAS as an accountant or do work auditing.

Hopefully all works out though.

But for things I haven't included in the budget yet are:

1) A dress for my daughter's Christmas performance
2) Double date night with my friend and her hubby
3) Drive on the boardwalk (Cheapest thing so far $7 per car)
4) Christmas... which I'm not sure how we're going to do... we're writing out the list for shopping and we're going to have to lower our expectations or something cause the list is upwards of $1000 because the kids want video games and we don't have the consoles for the ones they want.

Maybe I could check out Craigslist or something. My oldest wants a Nintendo DS, but I think she'll have to suffice for Leapster games since she already has a Leapster. My son, well we're getting him a new bedding set and maybe a SmartCycle game since he already the bike. Not sure what to do for my middle daughter. Maybe get more Vsmile games for her.

I'm in a hurry to get things done...

November 14th, 2008 at 07:18 am

I rush and rush till life's no fun...

I think that song must reflect my life, or at least DH's effect on it

The course schedule for Spring 2009 came out and there are four classes being offered (they only offer the courses once a year). So in order for me to graduate by December '09, I need to take 3 courses in the Spring, 1 in the summer, and 2 in the Fall. Plus work full-time, hubby in the Navy, four kids, you know - life

It would be easier on me if I could graduate in May 2010. Then I wouldn't be in a rush, but DH REALLY wants to leave here. He hates this state and is always wanting to go back to the West Coast.

His orders are up here in January 2010 so I'm trying to explain to him that if he can extend at his command till June it would help out a TON! Its also better for us financially the longer we stay here because of both houses.

Anyhow, I hope it all works out. I don't really want to take 3 graduate courses - I feel swamped with just 2 right now and keeping up with life. But I'm not going to leave here without my master's degree.. Not when I'm one semester away.

Sooo if he won't wait for us and I can't graduate by then - well, I guess we'll have to live apart for 5 months while he stays in the barracks or something.

I am nervous about next year. Our tenant's lease is up so I don't know what to do with the rental in regards to the housing market. I plan to put it up for rent or sale and see what happens. And then if we leave here, we'd have to rent this place out cause otherwise we'd have to come up with $50K to sell it. I'm more open to selling the other house and renting out this one because at least if we ever get re-stationed here we can always come back here to live. We'll likely never live in the other house again.

*sigh* Busy busy busy

I hope when I'm in my 30s life slows down. But I'm thinking it may not since by that time I'll have 3 teenagers LOL

What to do when it seems like it never ends...

November 12th, 2008 at 12:00 pm

One of my best friends recently lost her job and they are currenty facing a deficit. My company is doing pay cuts with some managers taking up to a 34% reduction in pay.

It seems like this news is happening all around. You hear on the news how times are tough and you think it won't be you, and then one day it is.

I woke up this morning and just felt a heaviness on me. That overwhelming sense of fear, anxiety, and the unknown.

In the past, whenever bad things would happen to me I'd ask myself "Who did I piss off?" and think of karma

And as I was getting my kids' cereal this morning, I realized the answer was - MYSELF

No matter what happens in the economy, people have an amazing tenacity to survive because they never give up hope.

My boss asked me if I had any questions regarding the economy and what the company was doing. I just said "No"

I think that puzzled him. Shouldn't everyone be scared right now?

So I elaborated and told him "I know that not even the experts know the answers, so we're just all in this together and all I would want to know is how I can help and what I can do."

I didn't think it would be worthwhile to ask him what is going to happen to the economy or the company or my job. I know I'm a good worker, I work for a great company, the rest is out of my hands.

Its like that saying "God grant me the serenity to accept the things that I cannot change and the courage to change the things that I can"

So I turned off the news. I know whats going to be there... my goal now is to continue to find more innovative and creative ways to adapt to the changes in the world. So long as I focus on that, I'll find a way - cause I have hope.

Its when we give up on things and say there are no doors left to open that there is no more hope. But as long as we keep pressing on, no matter what lies ahead or however insurmountable this obstacle we face may be... as long as we have hope, we can find a way.

Hindsight is always 20/20, and I think half of that is because many times we are so caught up with other things on our mind to really see the opportunities at hand are really right in front of us.

I don't know how we'll make it through ourselves, but I'm confident that if I focus on it - I'll find a way.

Car inspections

November 11th, 2008 at 11:46 am

We just had both cars inspected for their annual safety inspection

It cost us nothing because we went to the dealerships we bought them from

I can't tell you how much of a relief that is especially during an already financially tight month

A company's unique way of facing the economy

November 10th, 2008 at 02:45 pm

Last week, the company I work for held a call that we need to cut $140K from our budget next week to remain stable and asked for suggestions from employees. They presented them today.

The company mentioned its solutions to increase its financial stability and if there is a silver lining, its that I feel honored to work for a company that solicited suggestions from the employees before deciding what to do.

As a result, one of the four suggestions I presented was implemented and that was to get rid of the Office Tech Reimbursement and have employees claim that on their taxes.

The four solutions the company decided to implement was:

1) Eliminating "nice to have" vs "need to have" jobs.

2) Getting rid of the Office Tech Reimbursement which was $1200/yr for each employee

3) Having operations work adjusted work schedules instead of laying people off

4) Pay rate reductions. This was the hardest and I waivered over this because I haven't received a raise since March 2007 and I only make $2 more than what I did as a Tax & Audit intern 5 years ago.

When I talked to my boss he said that I won't receive a pay reduction, but the pay cut was skewed more towards upper management with some receiving a 34% cut in pay.

I don't really know what to think. But I can't help but feel blessed to work for a company that is really trying hard to look out for one another and instead of letting people go, find adjustments.

Hopefully things can improve for next year. There is no guarantee that these solutions will be the end all be all fix to our problems, but we are trying our best as a company to tackle this together.

The economy is now beginning to hit us harder

November 9th, 2008 at 07:29 pm

The economy is now beginning to hit us harder and I just have to keep telling myself that no matter what, we have to press on.

Last week Monday our company had a call that they needed to cut their budget $140K next year and they were soliciting ideas from employees on how to help achieve those goals.

I suggested a few & this coming week we'll probably get an idea as to the ideas they will be implementing. I just hope job cuts are not one of them.

I feel like my job specifically is secure, but overall it tends to lower morale if people begin being let go & that can dramatically effect the company. Especially since it will be extremely hard to do more work with less people & the majority are hourly employees that require overtime if they go over 40hrs/week. So I emailed the CFO that I would rather see us forego our Office Technology Reimbursement ($1200/yr) for every employee and encourage employees to deduct their office expenses off their taxes instead if it meant that it could help keep their job.

We'll see.

The election week was tough for us being a military family. Not because we voted for McCain (We voted for Obama) but because a lot of military families say they are concerned Obama will cut their pay.

I guess, from my perspective, I am looking at the prospect that my job (which provides 40% of our families income) or consider whether or not my DH will be getting a 3% pay raise in 2010.

I really hope the economy will turn around soon, or if not soon, that we are fully able to weather the storm.

I had set aside $1700 in our EF, right now its at $1500 and that was to last till February or March when we plan to get our tax return and pay off DH's car.

I don't know if the $1500 that is in there now will be enough.

Our HOA fees on both homes are going up. There are board meetings for both and I'm sure some will contest it, but with our rental - because of the economy, crime rates are going up. The HOA wants to set aside $15K next year to pay for off duty police officers. I actually think its worth the extra $4/mo in HOA fees to do this so that it helps protect our property values.

I don't know... Christmas is coming up and I'm not sure how we'll pay for the gifts. My oldest wants a Nintendo DS, we were going to get our son a SmartCycle Hot Wheels game, and my 2nd daughter wants a Dora thing... meanwhile I just want to get the baby a "Baby's First Christmas" ornament and family pictures since we haven't taken those since May 2007.

My friend is visiting in December and honestly, I'm somewhat nervous. I love her to death but I worry that we won't be able to do much cause we can't really afford anything right now. She's been my best friend since we were 12 and has said she doesn't mind if we just hang out, but I know that we also want to plan a double date with our husbands sometime then too. Its mostly that first week I'm nervous about cause her hubby will be there too & I want to be a good hostess, the second week my DH is going to Florida and her hubby is flying to see his family - so it'll just be her, me, and the kids.

So thats primarily why I worry if the $1500 will be enough till February or March.

If we can get that unclaimed property check before the end of the month (but I'm not counting on it), our EF will be down to $1000. I have some extra points with my debit card so I could probably redeem it for a gift card to help go Christmas shopping.

*sigh*

No matter what, we'll make it through. I have so much to be thankful for. Just have to keep going and be smart with the money we have.

Need to buckle down this month

November 2nd, 2008 at 11:59 am

Right now its looking like we'll probably be about $750 in the red this month

We had to go out and buy new locks for the house. We never changed them when we bought the house last summer, and finally the garage door lock was no longer functioning. We went to Home Depot and we even bought the cheaper ones than what we wanted, but just for the downstairs (we'll buy the upstairs ones when we get additional money) was $428. I had a $25 Home Depot gift card so we only paid $403

Then we bought 3 pairs of jeans for the kids, 3 outfits for the baby, and a jacket for her at Target for $72

So it'll be tight this month. We have enough groceries for another week and a half so maybe I can cut some more there.

Also, if we get that money back from DH's old tax refund that should help out this month.

Good thing we have an EF but I hope we can get to a point where I'm not constantly dipping into it and then refunding it.

At least we aren't using credit cards, so that is good but still there is room for improvement.