Announcing the 2008 Tax Makeover Guide

February 29 17 Comments latest by Ramit Sethi

Today, I’m announcing a new eBook that covers all the basics of taxes. It’s called the 2008 Tax Makeover Guide (buy it here).

It’s written by Todd Doerr who, over the last three days, has written posts covering most of the major events in our 20s and 30s:

• What to do before you file your taxes this year
• How college students can save their parents tax money
• What to do, tax-wise, if you’re recently engaged or married

To put it all together, he’s written an eBook that covers taxes from beginning to end. The 2008 Tax Makeover Guide is 59 pages of tax tactics and tips for getting started with your home, wedding, business, and investments. He even has specific sections on tax strategies if you live abroad, just had a child, or just don’t know how to get started.

I love simple guides that help people get started. They don’t have to include the fanciest, sexiest tax strategies, because those are irrelevant to 99% of us. But when I see something that is a well-written, basic guide to getting started, I pay attention. And that’s why I wanted to feature his eBook here.

Take a look at some samples.

Lots of samples
Todd’s posts earlier this week are a good example of what he knows. But what’s in the eBook itself? (Click to enlarge.)

The Table of Contents

Even more Table of Contents

Sample: Understanding tax brackets

Sample: Preparing for a new baby (tax-style)

Those are just short excerpts of the full 59-page guide.

Buy The 2008 Tax Makeover Guide now
So, look guys. This is not a hard sell. The reason it’s a “Special I Will Teach You To Be Rich” edition is that I got Todd to agree to offer it to iwillteachyoutoberich readers for 33% off the normal price. That’s how I do it, Punjabi-style.

The 2008 Tax Makeover Guide costs $19.99 until April 10th, 2008 (buy it now). After that, the price goes up. The whole point of this eBook is to use it right away.

100% satisfaction guaranteed: As always, if you don’t love the eBook, just send me a note and I’ll return 100% of your money, no questions asked. Last time, I sold hundreds of 2007 Ramit’s Guide to Kicking Ass and had about 4 people ask for returns (which I immediately issued).

What do you have to lose? We spend $20 going out for a couple of drinks or at one dinner. The whole point of iwillteachyoutoberich is to be conscious about our spending. Would it be worth it to pay $20 and figure out how to optimize your taxes? If you make a salary of $50,000, could this book save you at least $20.01? I think so. With this eBook, you should make *many times* your $19.99 back. If you don’t, send me an email and you’ll get your money back.

So treat this as an experiment. If you like the eBook, keep it. If not, get a refund and keep the eBook anyway. I’m pretty sure you’re going to like it, though — that’s why I’m featuring it on iwillteachyoutoberich.

Buy the 2008 Tax Makeover Guide, sit down and read it for 2 hours, and get your taxes in order for this year and the rest of your life.

Buy the 2008 Tax Makeover here

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17 Comments latest by Ramit Sethi

Guest Post: Just got married? Here’s what you need to know.

February 28 17 Comments latest by DSPF » Blog Archive » Guest Post: Just got married? Heres what you need to know.28…

[From Ramit: Today is Todd Doerr’s 3rd and final guest post. Earlier this week, he wrote about what to do before you file your taxes this year, and how college students can save their parents money.

This post is written for newly married couples. The closest I’ve come to writing about this was my long post on weddings, so it’s about time.

Notice how Todd’s tips below have no secrets: They’re very similar to most financial advice about starting early and setting priorities. But the way in which he frames it really does make you think.

Stay tuned tomorrow for something cool.]

* * *
Guest post by Todd Doerr

Congratulations. What an exciting season of life.

Maybe you are newly engaged and in the middle of planning your wedding day and honeymoon.

I would like to share some time-tested ideas with you to strengthen your marriage, to help you build wealth together as a team, and to help you avoid common financial pitfalls of married couples. (Learn from my pain!). This article will give you a specific game plan to start on TODAY.

By the way, this advice is for the bride and the groom. Building wealth and avoiding financial pitfalls is a team sport – one person cannot carry the financial load for both (unless you do not want to thrive financially)!

I need to admit something to you before we start. I absolutely enjoy coaching newly married couples. Why? Because you are sitting in one of the most fantastic wealth building seasons of your life. You have the most potential because time is on your side. If you work together, the sound habits and choices you make today will impact your marriage for years to come.

Let me begin by sharing what happens with many couples after the big day. Every couple has a unique story, but often newly marrieds take a similar path. You will probably see some of yourself, or better yet, your spouse, in this story.

Honeymoon Lifestyle

Eric and Shelby had just returned to the “real world” after their honeymoon. Back to their jobs and the daily grind of working. Oh yea, there were lots of thank you’s to write for the wedding gifts. Then the Visa statement arrived with all of the honeymoon expenses.

Then, the vicious cycle began. The best way I can sum up their first few years of marriage for them: Consumer Debt Death Cycle. They both had good paying jobs, but even those did not cover their “honeymoon lifestyle”. They were the king and queen of eating out. They both drove new cars that they financed and leased. Clothes – they bought pretty much whatever they wanted. Travel – the honeymoon was just the beginning – they traveled to Europe, Mexico, and throughout the U.S. They belonged to the health club. They were Starbuck’s Customers of the Year. And they bought their first little cottage house in the quaint part of the city.

They did not have a written budget and did not argue about money. Ignorance was bliss.

Then, Shelby got a big bonus at work. PRICELESS. They paid off some of their credit cards and felt so good about themselves. Then….

They bought that really nice home theater system and the cycle continued to build momentum. Sound familiar?

About this time, they were ready to start growing their family (i.e. have children). I’m sure you have some sense of what it might cost to raise a child. Baby formula, clothes, diapers, doctor visits (about 6 the first year of life), hospital and delivery charges, child care, baby furniture - It adds up! Oh yea – that cute little cottage house was no longer big enough. And they decided that they had to have the (dreaded) mini-van. (I can’t bring myself to that personally!)

You’re probably thinking – yes, Todd, but their income went up. Yes, incomes increased. But somehow the expenses “magically” keep right along with their raises. Sound familiar?

Fast forward a few years – their second child was on the way. The honeymoon was long over. Eric and Shelby were tired – both working full-time and raising a 2 year old. The lack of sleep was catching up. Money was really tight and argued often over money. Eric questioned Shelby about every little expense. Shelby became resentful and began to have “I deserve it” trips to the mall. They “kinda” had a budget, but they only looked at it every 3 months.

Eventually they met with a financial coach who gave them enough “tough love” so that they could wake up and stop this cycle. They worked as a team over several months to build a realistic budget (it doesn’t happen overnight). Fast forward 18 months later, after many decisions and sacrifices, they were consumer debt-free and had an emergency fund for the first time in their lives.

All of the money that was going to car payments and Visa was now available for saving and having some financial breathing room. They kept on the same “game plan” and their daily money fights became rare.

I tell many of my clients “It’s not always easy or pretty, but it always works.” I really mean it. With years of bad habits to break, making major habit changes is tough, but worth the sacrifice.

As a coach, the best financial advice I can share with you, the newlyweds is this:

Build a foundation for a thriving marriage and future by starting sound and balanced money habits.

Let me share with you some practical ways to make this happen.

The Big Reasons for a Game Plan

Let me show you what’s possible as a couple when you live a balanced lifestyle and save for the future. By the way, I’m not saying to stop all fun and to stop buying nice things – but those have to be taken in moderation.

Let’s say you have no consumer debt and have an emergency fund, and you work diligently to save $300 each month (which is very possible if you eliminate consumer debt), starting at age 25 until age 65 in a retirement account earning 8% each year. At age 65, you could have approximately $1 Million in savings. Even if you are older than 25, you can still make real progress on retirement savings on $300 per month. If $1 Million will not support your desired lifestyle, save even more. Just get started and make it happen.

In the end, it’s not really about the money. It’s about the freedom and choices that it gives you as a family. It’s about the peace of mind that comes from having money in the bank when tough things happen in life. We all face tough challenges at some point.

The Newly Engaged Game Plan

If you are engaged, but not married yet:

• Attend pre-marital classes or counseling at your local church or synagogue. Discuss and explore areas such as finances, children, spiritual issues, parents and extended families, career plans, and dreams and goals in life. It’s better to be wide awake going into marriage!
• Do not go into debt for the wedding or honeymoon. Do not go into debt for a 5 hour block of time. It’s not fun to return from the honeymoon and get the wedding bill on the Visa. If you are already going down this road, pinch and save and pay cash as much as possible on remaining expenses.
• Start living off a budget now. Keep an individual written monthly budget that you update each month. You can work on them together, but keep two separate budgets. Make sure that every dollar of income is allocated to a line on your budget. Don’t let money “slip through the cracks”.
• Keep finances separate until you are married. Don’t combine banking accounts, etc. I’ve seen too many crazy things happen here. You have the rest of your lives to share accounts.

The Newly Married Game Plan

Here are practical steps and habits you should start TODAY.

• Boost your marriage - Build a written budget together, every month. Build a realistic budget that includes setting money aside for those annoying expenses like car maintenance and repairs, house repairs, car insurance bills, etc – these items usually don’t occur each month and generally are the ones that bust your first budget. Note that how you spend money as a couple reflects your values and priorities as a family. Communicating each month and working through differences may be difficult at times, but it will build your “oneness”. Learn about each other’s money personalities. Open a joint checking account together – this has a “magical” way of getting you to communicate with each other. By the way, once you get in a routine, your monthly budget meeting should only take an hour per month (give it 3 or 4 months).
• Rapidly pay off all consumer debt and stop borrowing. How much are your car, credit card, and student loan payments really costing you in your wealth building plan? Total up your debt payments and calculate what they could do for your future. Get motivated!
• Build a 3 to 6 month emergency fund. Want to have some breathing room and margin in life and be able to deal with job uncertainty, car breakdowns, and medical expenses? The emergency fund is the answer. How would it feel if you had $10,000 to $20,000 in a savings account right now? (No, not for the trip to Hawaii.) For most couples, I recommend this goal after you have eliminated all consumer debt. It’s a good idea to have a small emergency fund as soon as possible, but hold off on building a larger one until you are consumer debt-free.
• Rent a modest apartment or home for a few years. Don’t dial up the financial pressure on your young marriage by renting a luxury palace. Save that money for your future home.
• Build fun, travel, and experiences into your budget. Save each month so that you take at least one vacation each year. Life is too short to not enjoy it. Just don’t put it on the credit card!

• Save for a house down payment. This is important: Do NOT buy a house until you have eliminated your consumer debt, have a nice emergency fund, and have saved a down-payment of at least 10% to 20%.
• Drive used cars. This step along may really speed up your wealth building. Not having a $400 per month car payment is HUGE. Here’s an idea for the really motivated: If you both work near each other, share one car for a couple of years and use the extra to pay down debt.
• Simplify and setup autopilot on all savings. Life is busy and we can all get lazy. Setup automatic drafts from your checking account or paycheck when building up your emergency fund, house down-payment, and investments.
• Buy level term life insurance, especially if you plan to have children. This step is not for you, it’s for the ones that you could leave behind. This is a priority. Generally you are healthier in your 20’s, so qualify now for the best rates. Buy 20 to 30 year level term (not through your employer). The general rule of thumb is to buy 10 times your income in coverage ($50,000 salary would mean approximately $500,000 of term coverage). Shop around for the best rates.
• Let the IRS Help your Wealth Building.
  • 401k’s, Traditional IRA’s, Roth IRA’s. Since you are now sharing living expenses, you may have some additional money to invest each month. However, you should hold off on aggressive retirement savings until you have paid off your consumer debt and have built a nice emergency fund.
  • Begin itemizing deductions if it makes sense. Really dig into Schedule A and make sure you are getting the maximum amount.
  • Deduct interest on student loan payments. There is good news if you are paying down your student loans. You may be able to deduct that pesky interest you are paying.
  • Small business opportunities. There are tons of great tax-saving ideas for small businesses. If you and your spouse have the entrepreneur bug, don’t overlook these opportunities. The “Medical Expense Reimbursement Plan” can be very helpful if you can “hire” your spouse. Check with your personal tax accountant on this strategy.
  • Deduct job-related moving expenses. You may be able to deduct moving expenses if you move for a new job.
  • Deduct tuition and fees for job related training. You may be able to deduct the cost of additional education related to your job.
  • Claim the Child Tax Credit on your children. If you qualify, you get up to a $1000 tax credit per child.
• Finally, become a cheerful giver. Giving to others who are in need is a blessing to them, to your family, and to your community. When we learn to give on a regular basis, we develop character and contentment by keeping life’s real priorities in sight each month. My wife and I have seen God bless our family and others through giving. Find an organization in your area and learn about how you can be a part of their mission.

Changing Your Family’s Future

So, there you go. I have shared my top ideas for helping you to start to build a thriving future. I will say this again: YOU ARE SITTING IN ONE OF THE MOST FANTASTIC WEALTH-BUILDING SEASONS OF YOUR LIFE.

You are at the moment of decision – are you going to bury your heads in the sand and just be like everyone else (nearly broke or just not thriving)? Or will you, as a couple, embrace new habits and a game plan for success.

Blessings,
Todd

Todd Doerr is a personal finance coach. He helps his clients to rapidly get out of debt and to build serious wealth. He tells his clients, “It’s not always easy or pretty, but it always works.” You may reach him at todd_doerr@yahoo.com or at www.taxmakeover.com.

[Update]
1. See the two other articles Todd wrote:

• What to do before you file your taxes this year
• How college students can save their parents tax money

2. Then check out his eBook, The 2008 Tax Makeover Guide

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17 Comments latest by DSPF » Blog Archive » Guest Post: Just got married? Heres what you need to know.28…

Guest post: College students, could your parents save on taxes?

February 26 18 Comments latest by chris smith

[From Ramit: Yesterday, Todd wrote about what to do before you file your taxes.

Today, this article is specifically for college students. I know, I know. You feel guilty because your parents are paying thousands every semester while you’re busy napping all day and trying to spit game at the girl next door. And failing.

Your parents may be able to save on taxes if they follow some of the instructions below. Take a look and send them this article.]

* * *
Guest post by Todd Doerr

Are you in college or about to attend college? Are you in your junior or senior year? Consider sending this to your parents. This article has a lot of with ideas that may help save your parents thousands of dollars each year and may even put some extra money in your pocket.

I can sense it now. You must be feeling some pride (or bewilderment) that your college student is thinking about how to help you financially and how to make your life a little easier. Who would have thought that your student would start to get a financial clue?

I’ve coached many families who already have college students or will soon have at least one child in college. There are ways to successfully navigate the waters of paying for college. In this article, I will share a game plan with you, the parents, to make your life easier and to help your student get off to a strong start in the real world. I will also provide you with some tax-savings ideas that may speed up your progress even faster.

Let’s first look into the financial future of your college student once they graduate.

Post-Graduation Snowball

As you are probably aware, the typical college graduate has both credit card and student loan debt. Recent graduates have an average of over $19,000 of student loans and over $3000 of credit card debt. The typical graduate degree student leaves with $24,000 to over $100,000 of student loans.

So, your college graduate begins the new season in their life and the snowball builds….

Then, your graduate buys the new car (take it from someone who bought the new car one month after walking the stage - it happens a lot). Another $300 per month in payments out the door.

Then, your graduate rents the nice apartment as they are sick and tired of dorm life or the college apartment. Oh yea, that nice apartment makes the college furniture look nasty. New furniture on the MasterCard – PRICELESS.

Then, your graduate starts making payments on the student loans (sure, the interest rate might be fairly low, but the payment still stinks). Potentially hundreds more of outflow each month.

Then, all of their friends start to get married and everyone starts dropping serious cash on wedding gifts, parties, travel, dresses, and tuxes. The numbers here really add up when you multiply by the number of friends.

Maybe it’s none of these events - maybe they spend $300 per month eating out. Maybe it’s buying cool gadgets. I’ve coached many clients in their 20’s. Their stories are different, but the result is generally the same. The debt adds up quickly and the minimum monthly debt payments grow substantially.

About this time the two big “M-words” might sneak up – Marriage and Mortgages. You get the picture.

The good news is that the snowball does not have to claim your graduate. They can thrive financially if they live off a budget, get out of consumer debt, and avoid going into additional student loan debt.

The best financial coaching advice that I can share with you, the parents:
Help your child graduate with as little or no debt as possible.

Why? Because when they are free of consumer debt and student loans, they can really begin to thrive financially and to build a hopeful future for themselves.

Let’s say your graduate didn’t have that “normal” student loan payment, the “normal” MasterCard payment, those 2 payments could can easily add up to several hundred dollars per month. Instead, he or she invested $300 per month from age 25 to age 65 in a retirement account earning 8% per year. At age 65, they could have approximately $1 Million in retirement savings. Obviously the cost of living will go up, so it won’t feel as big. But it gets them off to a great start towards retirement savings.

Winning with College Expenses
Here is the overall game plan I share with my clients. It does take some work, but it is truly worth it to follow as many of the strategies as possible.

• Save-Save-Save. If you have time before one of your children heads off to school, save aggressively with an Education Savings Account (ESA) or a 529 College Account, or even just a high-yield savings account. My favorite resource for these 529 and ESA plans is www.SavingForCollege.com. If you are just a couple of years away, I would avoid investing in 529’s or ESA’s as the value could go down if invested in stock mutual funds. I would stick with a high-yield savings account in that case.
• Proactive Scholarship Hunting. Get proactive and diligent about applying for scholarships and grants, even if your student is midway through college. Don’t give up!

• It’s possible to find thousand of dollars in scholarships and grants. I recommend Ramit’s postings on these topics. He really knows how to win in this area.
• Hire a scholarship coach. I send some of my clients to a productive scholarship coach. She consistently helps her clients find $10,000 to over $40,000 of scholarship and grant money.

Cash Flow College. As a family, do everything you can to pay for college with cash and to avoid borrowing and credit cards. Here are some ideas to get you started:

Part-time jobs for your student, or even yourself. Part-time jobs are a great way for students to develop life and time management skills. They are not forever, and can provide a significant boost for college expenses.

Drive used cars. This can really boost your monthly savings. It’s not just a lower payment (or no payment at all if you a big bargain) - older vehicles also depreciate more slowly than newer vehicles.

Maximize as many tax strategies as possible for parents. I will cover this in detail later. This step alone can put money in your pocket each year.

Become a bargain hunter on everything. Buy used textbooks, used computers, used furniture, etc.

Hold off on expensive vacations. This could save $1000’s over 4 years in college.

Sell things. Have a massive yard sale. Sell the motorcycle. Sell the piano that no one plays anymore.

As a last resort, Student Loans. I’m not going to slam you for taking a student loan, but let’s work REALLY hard on all of the other steps before we start taking these on. The benefits can be substantial.

Avoid borrowing or withdrawing from your 401k or IRA’s for college expenses. Even though you can withdraw or borrow money penalty free in specific scenarios from some retirement accounts, you are putting your financial future and retirement at risk.

Avoid borrowing on your home to pay for college. Borrowing against your home puts your home at risk, especially in today’s crazy real estate market where people end up upside down on their mortgages.

Review Tax Savings Ideas
Make sure you research every possible income tax savings opportunity - this could save lots of dollars every year of college. By making tax-smart moves, you can free up more money to pay cash for college.

Here is a list to review that may help to boost your plan. Some are best handled by your personal tax accountant.

• Maximize your Hope and Lifetime Credits. These are great credits if you qualify – see IRS Publication 970 for details. The Hope Credit may only be claimed for 2 tax years per child and can only apply to the first 2 years of post-secondary education.
• Deduct Student Loan Interest. If you are already making student loan payments, you may qualify to deduct a certain amount of interest paid on student loans. See Publication 970 for limitations.
• Continue to Keep Your Student as a “Dependent”. This assumes that you continue to provide at least one-half of their support. Refer to Exemptions in the Form 1040 Instructions.
• Hire your student. If you are self-employed or own your own business, hire your child to perform bona-fide work at a reasonable salary. Keep records of time worked, duties, etc. You can deduct their wages as a business expense. This is a more complex strategy that probably would best be handled by your personal tax accountant.
• Buy-off campus housing. This is for wealthy parents only. I recommend that you do not consider this option unless your primary residence is paid for (no mortgage), you have a substantial emergency fund, you have no consumer debt, and have accumulated a large retirement account (Yes, I know this advice is very conservative). You can “hire” your child to be the property manager. You can also potentially deduct the housing property taxes on your Schedule A. This strategy requires a clear game plan – take your time and don’t rush in. Once again, this one is best handled by your personal tax accountant.
• Make sure your student has health insurance coverage. This is not a tax strategy, but important enough to mention as a “protect yourself from a financial blow-up” strategy. One serious trip to the hospital could set you back from $5,000 to $20,000 or more without health insurance on your student.

Tomorrow’s article will outline a financial game plan for the newly engaged and the newly married.

Todd Doerr is a personal finance coach. He helps his clients to rapidly get out of debt and to build serious wealth. He tells his clients, “It’s not always easy or pretty, but it always works.” You may reach him at todd_doerr@yahoo.com or at www.taxmakeover.com.

[Update]
1. See the two other articles Todd wrote:

• What to do before you file your taxes this year
• What to do, tax-wise, if you’re recently engaged or married

2. Then check out his eBook, The 2008 Tax Makeover Guide

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18 Comments latest by chris smith

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