Farnoosh Torabi's Blog, page 51

Fitness Fads That Are A Waste of Money

Remember the Thighmaster, sauna suits, 8 Minute Abs? Some fitness fads, despite their promises, end up being total flops. And it’s all a costly obsession. We spend nearly $30 billion a year on weight loss programs, alone. And now, with so many new trends emerging in the health space, we’ve got a breakdown of some plans that are worth it – and others you may want to skip.

As always, we want to hear from you. What are some fitness fads you love? Connect with me on Twitter @Farnoosh and use the hashtag #FinFit.

The Fiscal Cliff Deal and Your Taxes

In the 13th hour, the 112th Congress voted to pass a fiscal cliff deal to extend significant tax cuts, delay spending cuts and address other tax provisions that were set to go into effect this year. The compromise should end months of anxiety over the future of the U.S. economy, but will raise the tax liability for most Americans.

Here’s how:

Income Taxes Will Increase for Most

Average-income earners will pay around $679 more this year, mainly due to the elimination of the 2% Social Security payroll tax cut.  ”The return of the payroll tax from 4.2% to 6.2% takes away the only raise many lower- and middle-income households have seen in the past two years,” explains Greg McBride, senior financial analyst at Bankrate.com.

Those who earn more than $400,000 a year as single taxpayers (or more than $450,000 as joint filers) will see their marginal income tax rates jump from 35% to 39.6%.

In all, 77% of Americans will pay more in taxes, according to the Tax Policy Center.

Bush-Era Tax Cuts Remain In Tact For Most

The temporary Bush tax cuts that have benefited many Americans since 2001 have become permanent for 98% of Americans (those earning less than $400,000, $450,000 if married.)  For example, the Child Tax Credit worth up to $1,000 per child and Earned Income Tax Credit will be extended for five more years.

Tax Relief For Student Loan Borrowers

For those dealing with cost of higher education, it makes permanent the repeal of the 5-year limitation on the Student Loan Interest Deduction and extends tuition and fees deduction and the American Opportunity Tax Credit.

Interest and Capital Gains Tax Increase for Some

Accountant and financial expert Ebong Eka says the new legislation impacts taxpayers who rely on interest and dividends. Taxes on capital gains and dividends will increase to 20% for American families making more than $450,000 and individuals making more than $400,000. ”The belief is the capital gains tax only affects the wealthy, but there are many retirees and baby boomers who derive their income from interest and dividends,” says Eka. “Many investors will start looking for lower-taxed investment vehicles like muni-bonds and taking funds out of the stock market.”

Other Provisions:

The estate tax will be set at 40% up from 35% for those with estates over $5 mil ($10 mil for couples), indexed to inflation.
Includes a permanent patch fix for the alternative minimum tax (AMT)
New tax law extends the ability to make Qualified Charitable Deductions (QCDs) of RMDs directly (or indirectly) to charity.
Two limits on tax exemptions and deductions for higher-income Americans will be re-imposed: Personal Exemption Phase out (PEP) will be set at $250,000 and the itemized deduction limitation (Pease) kicks in at $300,000.
The full package of temporary business tax cuts will be extended for another year.
Provisions for the doc fix, avoids a cut in payments to doctors treating patients on Medicare.
A nine-month farm bill fix will be attached to the deal.
The pay freeze on members of Congress, which Obama had lifted earlier this year, will be re-imposed.
The sequestration cuts will be delayed for two months. Half of the delay will be offset by discretionary cuts, split between defense and non-defense spending.

Possible Tax Filing Delay

According to IRS reps, another result of the late fiscal cliff deal is that the tax filing season may be delayed until mid-March this year for an estimated 100 million taxpayers who will not be able to the complete their tax returns until then. ”Households that rely on their annual tax refund to pay off holiday debt or just catch up on bills will have to wait a while longer,” says McBride. “This will restrain economic growth in the first quarter of 2013.”

Finally, according to McBride, while the deal is welcome news, we’re not out of the woods yet. “The debt ceiling negotiations may be just as testy as the fiscal cliff negotiations, and would be a headwind to the economy and financial markets if it becomes contentious,” he says.

Photo Courtesy,  Glyn Lowe Photoworks.

GMA: 2013 Financial Advice

Stopped by the Good Morning America set to provide some financial advice for 2013.

2013 Financial Predictons

[image error]Few can be certain what a New Year will bring but strong economic trends do help us forecast what’s to come. With the help of recent data and some of our own interviews with experts on Farnoosh.TV here are five financial changes you can expect in 2013, how they’ll impact your wallet…and what you can do.

1. Interest Rates Will Remain Low

In an effort to spur economic growth, The Federal Reserve has promised to keep interest rates low until unemployment drops below 6.5%. In previous statements, Fed Chair Ben Bernanke also hinted at 2015 as an end date to this low-rate environment, which has encouraged some activity, namely in the housing market, but also frustrated investors looking for safe options in interest-yielding saving accounts.

What you can do: Review your investment portfolio. A balanced portfolio can curb the threat of inflation. But if you’re looking to secure your principle investment, consider savings accounts with online banks or credit unions, where yields are typically higher. You can also purchase liquid CDs. They have on average lower yields but also fewer penalties, allowing you to stay flexible in an uncertain environment.”

2. The Housing Market Will Stay Strong

As we mentioned last week, home sales are likely to increase – encouraged by low interest rates. Real estate experts also forecast home prices to rise by more than 3% in 2013.

What you can do: Prepare to buy your first home in 2013 by getting on strong economic footing. With interest rates around 3% to 4% for a 30-year fixed-rate mortgage, it’s an opportune time for first-home buyers and perhaps even those looking to buy an investment property or vacation home.

3. Taxes Will Increase

No matter what happens with the “fiscal cliff,” experts agree that your taxes are likely to go up. “Everyone needs to be on alert, not just the wealthy,” said CPA Joshua Jenson in our recent interview. According to Jenson, the average household, making $60-$80k a year, will pay more in taxes in just their first paycheck this year as the result of an expired Social Security tax cut.

What you can do: There’s no cheating Uncle Sam. The best option for minimizing the financial strain is to take advantage of remaining deductions. And because your tax liability is likely to change in the coming year, consult with a personal accountant. Tax attorney and writer Kelly Phillips Erb says a visit with a CPA can cost as little as $300-500 but can go a long way in identifying appropriate deductions.

4. Healthcare Changes

Many of Obamacare’s changes are already in place but most are expected to occur in 2014. That means a lot of movement in healthcare for the coming year. The Washington Post has a roundup of significant 2013 healthcare changes. Perhaps the most important is that enrollment for the government provided Health Exchanges will begin in October and private providers will be required to send new, plain-English summaries of coverage and benefits.

What you can do:  If you’re already covered, talk with your provided about what changes you’re likely to see in coverage and cost. If you enrolled in your current plan after September, request the new summary of your coverage from your insurance company. It should look something like this. And a fringe benefit of expanded health care is growth in the industry, which is positive news for jobseekers. If you’re seeking employment in the New Year, don’t leave out the healthcare industry.

5. A Raise In the Minimum Wage

Ten states: Arizona, Colorado, Florida, Missouri, Montana, Ohio, Oregon, Vermont, Rhode Island and Washington all decided recently to raise their minimum wage. So when the first paychecks in January come around, nearly one million workers will get a slight raise that will add up to about $190 to $410 per year on average.  Other employers surveyed across the country also expect to raise wages by 2.9% in 2013 – more than in 2012 and 2011.

What you can do: This is improving news for many workers who need to offset expenses and debt. If you’re expecting a raise of any kind, it’s best to redirect those funds mainly towards debt first, like credit cards.  If you have a handle on debt, consider increasing your retirement savings. Saving his pay raises was a strategy helped Darrow Kirkpatrick, who we profiled earlier in the year, retire before 50.

Photo Courtesy, rjrgmc28.

5 Tips For First-Time Homebuyers in 2013

Concern over the current fiscal showdown in Washington has made lots of investment options uncertain. But with most policy concerning homeownership not likely to change in the near term and mortgage rates at historic lows, 2013 should be an opportune year to purchase a home.

The recovery of the housing market that began in 2010 is likely to continue into 2013. Home buying resource site Zillow recently published their Home Price Expectations survey of more than 100 economists and forecasters. The experts estimate home prices to increase 3.1% in 2013 – good news for homeowners. Those expecting to buy their first home next year are also in luck as the Federal Reserve has promised to keep interest rates low (currently at 3.2% for a 30-year fixed rate mortgage).

 

If your New Year’s resolution is to stop paying rent and become a homeowner, here are 5 tips to help you buy wisely in 2013.

Secure the Lowest Rate

Just because interest rates are down, on average, doesn’t mean that you’ll get one for your mortgage. You’ll have to qualify. That decision will be based primarily on your credit with borrowers scoring 740, 760 or better earning the lowest interest rates.  If your score needs repair, the fastest and most helpful way to boost it is to pay your bills on time and to reduce your credit card debt to no more than 10% of your available credit limits. Another tip: pay 20% or more towards a down payment. Banks offer more favorable rates to borrowers willing to put more skin in the game. With your those two factors in place, you’ll be a strong candidate for a low rate.

Find A Great Agent

An experienced real estate agent who understands your needs and wishes – and has a strong track record in your desired neighborhood – can be an immense help in the search and buying process. Start by asking friends and family for recommendations. Sites like Zillow and Realtor  can also help you find qualified professionals.

Widen Your Search…Carefully

Your dream home may not end up being quite like you imagined it.  The only way to know is if you seek many, many properties. Be open to different styles and options – but try to stay focused on what you can afford. Otherwise, after seeing higher priced homes with fancier amenities you may begin justifying spending more money (money, that you don’t have).

Save Up For Closing Costs

Finally, there’s nothing that can throw a monkey wrench into your plans like unexpected closing costs. Few first-time homebuyers prepare for them and, based on where you’re buying, they can vary widely. Be sure to include closing costs in your homebuying budget. They average $3,754 but can be reduced if you negotiate and take a fine toothcomb through them before the sale is final.

Negotiate

Speaking of negotiation, January and February are probably the best months of the year to ask for discounts and free perks. That’s because these two months are the slowest sale periods of the year. If you’re focused on buying in the next 8-10 weeks, you’ll probably have a lot more bargaining power to sweeten the deal with fewer buyers in the market.

Photo courtesy RWCOX123′s photostream on Flickr

Unwanted Gifts: Sell, Swap or Return?

We’ve all received gifts we don’t really need or want, and so as you review your holiday duds this season – and you know you’ve probably gotten at least one – here are some tips to help you easily navigate returns, as well as some other strategies to deal with unwanted gifts. Read more here.

As always, we want to hear from you. What are some ways you deal with unwanted gifts? Connect with me on Twitter @Farnoosh, and use the hashtag FinFit. For Y! Shine, I’m Farnoosh Torabi.

Donating Wisely

Twenty-two percent of all charitable online donations happen in the last two days of the year, and so in honor of the tax – and giving – season drawing to a close, we take a look at how best to select non-profit organizations.

Understand the Mission

First, ensure you understand the charity’s mission and purpose before handing over your tax donation or gift.  See to it that any generic, lofty or idealistic language like “Our organization feeds the hungry” or “We provide job placement for the homeless” is backed up with real-world specifics — as in, how the initiatives are run, what benchmarks have been achieved, how many people are served, etc.  A red flag is if you cannot easily find this information on the charity’s website — however, a quick call can confirm this sort of information from the program manager, who should be able to quote these stats easily.  If he or she can’t, consider yourself warned.

Additionally, most groups mention their religious associations in their mission statements — however, political affiliations may be more difficult to suss out.  Your charity’s annual report should be able to disclose how much money, if any, goes toward lobbying or political action. The Better Business Bureau’s Wise Giving Alliance can help you access spending reports on many national and local charities.

Verify Non-Profit Status

Before you dig into your charity’s financials, you might want to first confirm the group’s non-profit status. Just because your chosen charity’s website ends in .org, does not make it a legitimate  nonprofit.  This one simple step is incredibly easy, yet, it’s the most overlooked and ignored: Simply go to GuideStar.org, a nonprofit database, and enter the charity’s name to find out if it has a 501(c)(3) designation by the IRS.  This tells you that the program’s financial donations are specifically being used for charitable purposes, and that the group is making their financial information public.  But most importantly, you can tell you if your donation is actually eligible as a tax deduction.  In order for the nonprofit to be legit, the org must have a 501(c)(3), or you won’t be able to claim your donation.

Research Spending Ratios

After you’ve verified your nonprofit is the real thing and it’s supporting a cause you believe in, you might want to check to see just how much of your donation will eventually make its way directly to the cause.  The most efficient organizations spend 75 percent of their budget on the essential programs and services, and only a quarter on administrative costs.  CharityNavigator.org is a site where you can find out a nonprofit’s spending ratio, to tell if your donation is actually going to make a difference in the lives of its benefactors — or if most of it will go toward this year’s new office printers and holiday party instead.  One exception is if your nonprofit is in its start-up years — then the organization may be in its capital improvements phase and can be excused from the “75 percent” rule.

Real Simple Charities

Still stumped?  According to Real Simple’s carefully vetted list of charities that truly make a difference, here’s a few worth checking out:

Partners in Health provides healthcare services to the poor, and some of their best work has been in Haiti.

Scholarship America provides college scholarships and financial aid to U.S. students who need it.

Conservation International studies how economic and human development affect natural habitats around the world.

Action Against Hunger feeds malnourished children around the world and helps communities grow their on food.

Remember, generosity doesn’t have to come in the form of a year-end tax donation — to make the most impact, experts recommend seeking  out ways to volunteer your time and resources year round.  But, if you do decide to donate this year, do your part to make sure it ends up in deserving hands.

Photo credit:  www.paypalobjects.com

Brands That Will Likely Disappear in 2013

What do JC Penney, Mitsubishi Motors and Martha Stewart Living magazine all have in common? Well, each is likely to disappear next year. Along with financial news website 24/7 Wall St., I compiled a full list of brands that will likely disappear in 2013. Read more here.

And, as always, we want to hear from you. Which of these brands would you like to see survive in 2013? Connect with me on Twitter @Farnoosh and use the hashtag #finfit. For YF, I’m Farnoosh Torabi.

Avoid “Deceptive” Card Practices

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Just in time for the holidays, credit card customers are receiving a gift – of sorts – from the credit card industry.

Some Discover, American Express and Capital One customers will receive refunds to their accounts as the result of a settlement brokered by the Consumer Financial Protection Bureau. The issuers will have to pay out  $435 million in refunds to nearly 6 million customers by March for what have been deemed “deceptive practices,” including: charging increased fees, withholding rewards and charging for bogus protection plans. Eligible customers will receive their refunds in the form of credits to their accounts and former customers will get checks in the mail.

It’s a scenario that, unfortunately, could happen again in the future, so here’s how to curb these “deceptive practices” and protect your money.

Watch Out For Third-Party Marketers

The current situation credit card issuers find themselves in began with marketing firms deceptively promoting the benefits and services of the card companies that hired them. After signing up, customers soon found they hadn’t received the benefits, leading to losses and billing headaches. Avoid the whole mess by only discussing promotions, billing and account changes with your issuer. If you receive promotions by direct mail, email, even via social media (which is increasingly popular,) follow up with a call to your company instead of signing up directly.

Monitor Fees

One of the biggest card complaints is the fees. Card companies charge various fees at different rates, so it’s no surprise that many of the customers they’re now refunding didn’t skip a beat when bogus nominal fees appeared on their accounts. One way of combatting this is to keep a close watch of fees you’re charged by setting alerts with budgeting software like Mint or Manilla. Also consider signing up with BillGuard.com, a free security service that alerts you to hidden charges, billing errors, misleading subscriptions, scams and fraud on your credit card. With alerts, you’ll receive email or text messages whenever you’re charged. And while most fees are legitimate, you should look out for others – including activity and payment protection fees, according to CreditCards.com. Investigate with your issuer if they show up on your account.

Report Discrepancies

Finally, in the case of some discrepancies on your account, you’ll have to file a complaint. It may seem tedious but remember that complaints led to this settlement. The CFPB suggests first contacting your credit card company but it that goes nowhere, file a complaint with the agency. They maintain and track consumer complaints to insure action is taken and the problem resolved.

Photo Courtesy,  401(K) 2012.

Best Financial Advice of 2012

So far this year we’ve shared financial advice on everything from minimizing laundry to wasting less food, saving big at the outlet mall and the pump, and even traveling on a budget. And as 2012 draws to a close, we present a holiday gift to you, our Financially Fit audience. It’s a roundup of our favorite savings tips from our collection of experts, editors and gurus- all meant to help you stick to your financial resolutions. Read more here.

As always, we want to hear from you. What was your favorite Financially Fit of 2012? Connect with me on Twitter @Farnoosh and use the #finfit.