Farnoosh Torabi's Blog, page 56

Why the “Fiscal Cliff” Matters

With the election finally behind us, Americans have a new imminent concern ahead of them: the pending “fiscal cliff”. The media’s been throwing around the term, stirring mostly a lot of confusion, but the fact is, this issue could have tremendous impact on our pocketbooks.Here’s what you need to know.

“Fiscal Cliff” Explained

Our federal government faces a Dec. 31 deadline to decide on the economic future of the country. It sounds like hyperbole but it’s not. The fiscal cliff, as it’s been dubbed, is the date by which the Budget Control Act of 2011 will go into effect. The act is a combination of expiring tax cuts and cuts to government spending that will begin Jan. 1. It’s enough to take a “bite” out of GDP and spike unemployment according to Bankrate.com Senior Financial Analyst Greg McBride.

Learn More: Obama’s Win and Your Money

According to a report by the nonpartisan Congressional Budget Office, while that bite would have the immediate effect of reducing the deficit by $560 billion, it would cut GDP by four percentage points in 2013 and cost the economy nearly two million jobs – sending the U.S. back into recession.

Its Effects On You

“If we go into a recession in 2013, unemployment would rise, income and worth would go down,” says McBride. “If we don’t see substantive progress to avert it by Thanksgiving, financial markets and consumers will grow increasing y nervous and you’ll soon begin seeing negative effects.” McBride says that as we enter the critical holiday shopping season, businesses are already holding back on investing and hiring because of the threat. He predicts that, as we get closer the end of the year, companies will continue to hoard cash. Likewise, official projections from the CBO say anxious consumers are likely to hold back on spending, which could lead to a half-percent reduction in GDP for the second half of 2012.

Get Your House In Order

Averting the fiscal cliff will happen only if our elected and newly re-elected officials can compromise. In the meantime, Americans should hope for the best, while planning for the worst. “I would caution people against preemptive investment moves because you never know what will happen,” warns McBride. His suggestion: Build an emergency savings account that can last at least six months in case of disaster, but also hold onto cash in a savings account for investment opportunities, in case crisis is averted and the economy grows.

Photo Courtesy,  Glyn Lowe Photoworks.

Obama’s Win & Your Money

[image error]President Barack Obama has won a second term in office. What will the next four years mean for our finances? From housing to student loans, health care and taxes, here’s what’s in store for American consumers.

Continuation of Bush-Era Tax Cuts

The President supports extending (again) the George W. Bush-era tax cuts – but only for individuals making no more than $200,000 a year or no more than $250,000 for couples. [Governor Romney proposed keeping the cuts for Americans of all incomes and drop taxes further]. In Obama’s second term, those in a higher income bracket may face a bigger income tax bill for savings and investment gains, as well as an elimination of the mortgage interest deduction.

The tax cuts were set to expire at the end of this year. President Obama already extended the tax provisions in 2010 as part of his massive tax and economic package.

Ongoing Aid – and Forgiveness – for Student Borrowers

With student loan debt surpassing $870 billion, financial aid was a hot-button issue for voters, especially younger Americans. President Obama has made this issue a top priority the past four years by raising funding for federal student aid programs (such as the Pell Grant), nationalizing the student loan market and creating a “Pay As You Go” repayment program for struggling borrowers. During his campaign, Obama proposed extending the American Opportunity Tax Credit, set to expire in January.

More Mortgage Malaise

Unlike in 2008, housing was not a major topic for debate, despite the fact that millions of Americans continue to be underwater and home prices have failed to strongly rebound across the country.  While the President has spent the last four years creating various programs – HAMP, HARP and the more recent HARP 2.0 – to assist struggling home owners, critics argue it hasn’t been enough. This year, he made a number of new proposals, including providing unemployed borrowers with 12 months of mortgage forbearance and increasing incentives for underwater mortgage modifications. These proposals are slowly being implemented.

Continuation of ObamaCare 

With the re-election of President Obama, his Affordable Care Act will aim to continue its course. While many provisions have been implemented, others are not expected to take effect until 2014 , including rules that force uninsured individuals to obtain coverage – or face a tax penalty. Additionally, companies with 50 or more employees must provide coverage for workers, and insurance plans must provide certain preventive care, such as mammograms and colonoscopies, at no out-of-pocket charge to consumers.

Photo courtesy: Neon Tommy’s photostream on flickr

When To Dry Clean Your Suit

We spend billions a year on dry cleaning, and sometimes it’s not necessary. Here’s some insight on how to keep garments fresh between cleanings.

Post-Sandy: Deducting Charitable Contributions

[image error]Many Americans are generously donating to charities and non-profits following Hurricane Sandy, offering money, supplies, food and assistance. Just Friday the Red Cross received more than $20 million in contributions towards relief efforts.

As the year winds down, we’ll hopefully look back and see that we were  a very charitable nation, much like in 2011 when individuals, companies and foundations donated close to $300 billion.

And in addition to being altruistic, annual charitable contributions carry financial benefits to givers, namely in the form of tax benefits. Here’s how to maximize your giving by taking advantage of federal tax deductions. Remember the deadline for eligible contributions in the 2012 tax year is December 31.

Big Givers: Itemize Deductions

Most Americans give around $2,500 annually and should file using the IRS’ standard deduction, which allows individuals to claim a maximum $5,700 – double that for married couples. Itemizing your charitable giving, however, is a better option if you contribute more. Itemize your giving using the “Schedule A” form when your file your taxes. With it, you can deduct a maximum of 50% of your adjusted gross income and anything you give in excess can be rolled over for up to five years.

Make Sure It’s a 501(c) 

Where you give matters. The IRS’ guide to charitable contributions states, “If your goal is a legitimate tax deduction, then you must be giving to a qualified organization…you cannot deduct contributions made to specific individuals, political organizations and candidates.” Qualified organization must be registered with the IRS as a 501(c). Such organization include religious groups, nonprofits,  veterans’ associations and not-for-profit schools. Check GuideStar, Charity Navigator and the IRS’ database to find if a charity you have in mind is eligible.

Cash Isn’t the Only Way to Help

Cash contributions are incredibly helpful in funding the work of charities, especially in disasters where the need is immediate and massive. It’s the most popular method of giving but there are, of course, other ways you can assist. Clothing and household items in good condition are also deductible. For your donation of a sweater, for example, the deduction will be based on its current market value. When dropping off boxes of items to GoodWill or the Salvation Army don’t forget to receive a signed itemized list from the agency.

In September, Farnoosh also reported “unexpected tax breaks” that included; childcare, transportation and other expenses associated with charity work. Not yet sure if you can deduct a contribution? Luckily, Kiplinger has compiled this index for reference.

Track Your Giving

Finally, it’s essential when filing that you keep a paper trail of your contributions. For a cash donation of $250 or more, request a receipt from the recipient. If the contribution was less, document it with any bank or credit card statement where it appears. Also, track non-cash donations up to $500 on an itemized list reflecting the value, description, date and recipient of the donation, among other identifiers. If the value a single non-cash contribution is more than $500, you also must complete and attach the IRS’ Form 8283. To help, tax preparers TurboTax and TaxCut have tools to determine the value of non-cash donation and TurboTax’s ItsDeductible tool actually uses Ebay.com to appraise items.

Photo Courtesy,  dangaken.

6 Cities Best For Buying

[image error]The decision to buy or rent can be a complex one that involves a number of considerations, but researchers at Zillow.com are trying to simplify the process with a new metric called the “break-even horizon.” It’s equal to the number of years after which buying becomes more financially beneficial than renting, and takes into account various costs to owning such as the down payment, purchase price, mortgage, taxes, utilities and maintenance, as well as those costs related to renting.

The data further backs what we always trusted – that the longer you live in a home, the more likely buying is better. And some cities prove more advantageous for buyers than others, offering residents a faster return on their investment. 

According to this chart, owning becomes financially advantageous after just a couple years in the following markets:

Tampa, FL:  A home can hit it’s break-even point in just 1.6 years here, and in Ft. Lauderdale it’s the same.  In fact, Florida is a home-owner’s dream with several of its cities making Zillow’s list.  Orlando, for example, has a break-even point just slightly higher than Tampa’s at 1.7.  

Las Vegas, NV :  Th city of lights is more than just a tourist trap — it’s one of the fastest growing cities in the nation with ample land to build, an array of jobs serving the city’s popular entertainment resorts and casinos, and plenty of incentives to buy. Break-even Horizon: 1.7 years

Phoenix, AZ:  With median housing prices at about $95,000 and low property taxes, this city is consistently a good buy. Break-even Horizon: 1.7 years

Detroit, Michigan:  When you compare the number of available jobs and the number of currently employed technology workers, Detroit is actually one of the best places in the U.S to settle down.  Bonus?  The cost of living is 20.6% lower than the U.S. average. Break-even Horizon: 1.7 years

Riverside, California:  Unlike most cities, this one has very little variance between the “nicer” parts of town and the “wrong” side of the tracks.  Break-even Horizon: 2.0 years

Pittsburgh, PA:  You can’t go wrong in this affordable metropolis where the median home price is an inexpensive $103,900 and that’s with top Universities, hospitals and sports teams.  Break-even Horizon: 2.1 years

Photo Courtesy: 401(k) 2012′s photo-stream on Flickr 

When to Run Your Dishwasher

One of your home’s biggest money drains can be found in your dishwasher, which accounts for a huge chunk of your home’s energy usage. But, if used properly and maintained, your dishwasher can actually save you money. Consider these tips. Read more here.

As always, we want to hear from you. What are some ways you save using your large appliances? Connect with me on Twitter @Farnoosh, using the hashtag #FinFit.

Spotting a Flood-Damaged Car

[image error]When Hurricane Sandy barreled down the eastern United States, she left billions of dollars worth of damage from wind, rain and flooding in her wake. Much of it was to homes but thousands of vehicles were also caught in the deluge.  Now experts are warning consumers to beware, as those cars could soon find their way onto a used car lot near you.

We all witnessed the images of cars, nearly submerged in water, being swept down streets, as the result of this most recent natural disaster. Now imagine those same vehicles being gussied up and resold like it never happened. It sounds unheard of but the practice is fairly common in the auto industry.

“Once owners of damaged cars settle up with their insurance companies, vehicles are sometimes refurbished and resold, usually to an unsuspecting buyer in a state unaffected by the disaster,” says Edmunds.com Consumer Advice Editor Ron Montoya. Although the car will appear in good condition, Montoya says electrical and mechanical problems can surface long after, leaving the new owner with “an unreliable car and no recourse against the seller.”

Before you’re left out to dry, here are a few tips to avoid purchasing a water-damaged car.

Do Your Research

A comprehensive report from the National Motor Vehicle Title Information System will cost around $7. Reports from Carfax and Experian’s AutoCheck are other ways to determine a vehicle’s history, at about $30 a piece. When it comes to flooding you want to look for specific items on the report. A “salvage title” indicates the car was at one point declared totaled by an insurance company, including due to flood damage. A “flood title,” on the other hand, is a more specific red flag on a car’s report. It means the car in question has sustained damage from sitting in water deep enough to fill its engine compartment. Walk away if you see either of these designations in a car’s history.

Look For Tell-Tale Signs

Odor. The Carfax should be pretty definitive, but there are also small clues on the actual car that there’s been flood damage, starting with the smell. A moldy or musty scent is a dead giveaway, but also beware of cars with strong smells of deodorizer or cleaner, which suggest the seller’s covering something up.


Upholstery. Flooding would have taken a toll on the car’s upholstery so be suspicious of used vehicles with new upholstery and on the look out for differences in color between upper and lower upholstery. Light seats and dark carpet for example could be due to standing water having once been in the car.


Exterior. Flaking or rusting on the undercarriage is a red flag, especially in a late model car. So are foggy headlights or taillights. Also look for damage in the car’s trunk, engine compartment and other areas –like the wheelwell – where water could have pooled.


Under the Hood. Finally, the experts at Edmunds suggest having an independent mechanic examine the car’s inner workings for evidence of flood damage. Have them check for dirt and grit in places it shouldn’t be: in alternator crevices, behind wiring harnesses, around starter motors, power steering pumps and relays.

Photo Courtesy,  waitscm.

Hurricane Sandy: 5 Steps to Filing an Insurance Claim

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If you live in one of the 17 states struck by Hurricane Sandy, you most likely woke up Tuesday morning to serious floods, fallen trees and other damage to your neighborhood. Now, in Sandy’s wake, property owners – those lucky enough to have protection – face the daunting and emotional task of surveying the damage and filing claims with their insurance companies. Reports say insured losses could reach as high as $10 billion.

Here’s some critical advice to help you file a successful claim. Keep in mind that time is of the essence. As Business Insider reports, insurance companies handle claims on a first-come, first-serve basis.

Identify What’s Covered

Knowing what’s covered and which insurer to contact is the first step to successfully filing a claim. Grab a hold of your insurance documents and find out what’s included – and what’s not. If you’re not sure – or can’t locate your documents – contact your agent and get them to explain over the phone and resend the documents over email.

The most common damage in a hurricane will often be to your home in the form of broken windows or damaged roof. Your car may have suffered as well from fierce winds, rain, flooding or a downed tree. According to the Insurance Information Institute, coverage varies by state, but overall your homeowners insurance will cover damage from wind and “wind-driven” rain. (You can review state-by-state hurricane facts here). The insurance applies to your property’s structures, the house itself and/or a detached garage. Also covered are the contents of your structures and the cost of removing a tree if it has fallen.

What you may not realize is that standard homeowner’s or renter’s insurance doesn’t cover flood damage. If you have flood insurance, it’s most likely in a separate policy through the National Flood Insurance Program or a private insurer. Lastly, damage to your car is covered in your comprehensive plan with your auto insurer. The NFIP provides coverage up to $250,000 for your home and $100,000 for personal possessions.

Gather Evidence

Hopefully you took some pictures of your property prior to the storm. If not, it’s still important to document and photograph (or even film) all the damage that’s hit your property in the aftermath, as well as the estimated costs. Keep an ongoing list. Any evidence you have to support replacement or repair costs such as receipts or professional estimates will strengthen your claim.

To research the value of your car before the damage, consult Kelley Blue Book.

Contact Your Insurer 

After going over the details of your policy and gathering evidence, reach out to your insurer with questions and/or to begin the claim process. Be patient. In large-scale disasters it could take a few days to get through, but many companies have established hotlines in case of disasters. The Insurance Information Institute maintains an alphabetical listing of major insurers.  You can also reach the National Flood Insurance Program at 888-379-9531. All you’ll need to be connected is your name, the state where you live and zip code.

Make Temporary Adjustments

The III suggests taking reasonable steps to protect your property from further damage in the short term.  For example, secure boards in front of broken windows and try to drain water from a flooded home where you can. You may also need to relocate to a hotel or rent a vehicle in the meantime. Whatever you do, save the receipts for all transactions. Your auto insurer will likely cover the cost of a rental and your homeowner’s policy will usually reimburse temporary expenses up to 20% of your home’s insured value.

Be Patient for Payment

Insurance companies will often send an adjuster to asses the damage to your home and/or vehicle. At that time, they’ll make a rough estimate and perhaps arrange a second visit. Some insurers will also require you to complete a “Proof of Loss” form, a formal statement of the damage and the amount your seeking in the claim. Within an average 30-60 days, you should be sent a check to repair or replace your property. In the case of your home, the check will be issued to both you and your mortgage lender. The money will likely be placed in escrow to pay for repairs.

If your car was totaled and you have comprehensive coverage, your auto insurer should issue you a check for the cash value of the vehicle. For your home, you’ll likely have to pay a deductible on your homeowners insurance of $500-$1000 before the coverage kicks in.

To learn more, read the Insurance Information Institutes guide to settling insurance claims here.

Cars That’ll Cost You

While there’s a lot of pride in scoring a deal on the car dealer’s lot, what matters most is the vehicle’s true cost of ownership. In other words: how much it’s going to cost you to maintain that car over time. I tapped Yahoo! Autos contributor Lawrence Ulrich for a tour of vehicles that, despite some of their upfront incentives, will likely end up costing you more than you think. Read more here.

As always we want to hear from you. Is there a car that’s been costing you an arm and a leg? Connect with me on Twitter @Farnoosh, using the hashtag #finfit.

New Rules for Dressing Down at Work

[image error]As industries have changed in the United States, so have office dress codes. Gone are the days of dark suits and boring ties for men, pantyhose and other dowdy duds for women. Today, workers are freer to express themselves through their clothing – with limits, of course.

Facebook creator Mark Zuckerberg tested those limits this past summer as he took the company public on the New York Stock Exchange. Instead of meeting with potential Wall Street investors in a suit and tie, the 27-year-old went with his trademark hoodie. “Hoodiegate” erupted as people in the business community took sides on whether Zuck’s fashion statement was a faux pas or completely non-consequential. Because Zuckerberg is a billionaire, it’s probably the latter. But for the rest of us, what we wear to work still matters.

Depending on your industry and the policies of your particular office, you may have the option to dress more casually. A 2007 Gallup poll - the most recent of its kind - found that 43% of workers wore business casual clothing to work most days, 28% wore street clothes, 19% wore a uniform, and just 9% wore formal business clothing. That’s because, studies have shown, you’ll likely feel more productive and generally satisfied with a relaxed policy. But, on the other hand, you’re more likely to be perceived as a quality worker in traditional professional attire.

In a compromise between dressing up and down, here are a few tips to relax your work wardrobe without crossing the line.

Use Fashion to Disguise Comfort

We all want to be comfortable at work. Who wouldn’t enjoy wearing jeans every day? But there’s a right way and a wrong way.  Rule of thumb: Incorporate fashion or some traditional workwear to disguise an otherwise loung-y outfit. For example, best to pair a dark pair of jeans with a blazer or cardigan. You could probably even get away with a hoodie, so long as you wear a collared shirt and tie underneath.  Fashion stylist Dawn Del Russo suggests incorporating trends, patterns, texture and color to your heart’s desire, all while maintaining a professional look with classic shapes and silhouettes. Fellas, feel free to mix and match suits and sport more colorful ties to show off your personality.

Time it Right

Use downtime to take advantage of a relaxed dress code. Identify those days in the week when things slow down and you’re not likely to have lots of interaction to be a bit more casual. In creative offices like PR, advertising, media, design and fashion, it’s becoming more acceptable to dress casually with jeans and fashion sneakers. But interviews, meetings and presentations are all moments when you want to look your best – especially to clients or superiors. If you’re going to dress down in those situations, add polish to your look with individual pieces. Jewelry, a smart jacket or classic shoe are all ways to kick your casual look up a notch. Another tip: Keep a neutral-colored blazer and dress shoes at the office. That way you’re never caught off guard if a moment calls for something more formal.

Remember, You’re At Work

Just because you’re not required to dress it up like a character from Mad Men doesn’t mean you can wear anything. Beware of the slippery slope of fashion freedom. Items like shorts, flip slops, open-toed shoes, tank tops and tattered jeans are generally inappropriate. When in doubt, I think it’s helpful to ask yourself if you were a potential client, wandering into the office, could you tell that you worked there. If not, then change into something that identifies you as a professional on the job.

Follow the Lead

Finally, take cues from your coworkers and higher ups before making any groundbreaking fashion statements. Your company could have a relaxed policy on the books, but your office could still have a more formal culture. In that case, you want to follow the lead of those around you to avoid missing the mark.

Photo Courtesy, Victor1558.