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Thread: basic advice for an EXTREME dummy?

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    Featured Member needtodance's Avatar
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    basic advice for an EXTREME dummy?

    I feel phenominally stupid for even ASKING.....


    I'm trying to put together a financial plan and goals for myself. I haven't been stripping very long, and its been a slow season, so my income is still relatively low. I haven't had to pay taxes.

    So questions.

    How do i find a good accountant, and how much would that probably cost? Any portland girls have recommendations? I've already been saving reciepts and tallying EVERYTHING about my income-tipout, net, cab fares, etc.

    The way I usually operate my finances is I have my checking and savings for bills and the like-and i have a "rainy day" savings that i've unfortunately had to touch and nearly deplete. I want to do just a certain "allowance" for myself-enough for living expenses, and maybe a little for miscelaneus things. The rest would go into the rainy day fund. However, I know there only needs to be a couple months worth of expenses in that account... So I'd like to remove money when it gets big enough to put in either another account with higher interest, or some sort of investment(which I know NOTHING about!!!) Am I on the right track? Where do i even START!?!

    I feel REALLY stupid right now... But i know that treating money that way DOES help---I worked through high school putting anyhting in check form in the bank, and keeping cash payment(tips, piano lessons) for my spending money-and depositing it if it wasnt spent(which it mostly wasn't). I ended up paying 6 months worth of living expenses with it once I hit college.

    I just don't know what to do to keep it apart from myself, and keep the goal going.

    So yeah... advice?

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    Banned Melonie's Avatar
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    Default Re: basic advice for an EXTREME dummy?

    one really easy way to 'keep it apart from myself' is to start investing your rainy day money into CD's. Every bank and credit union sells them, as do lots of online banks (which typically pay higher interest rates).

    From your own description, putting money into CD's rather than a regular bank savings/checking account would probably help with your financial discipline. Every CD is purchased with a preselected maturity ... typically 3mo, 6mo, 9mo, 1yr, 2yr etc. The longer the term that you agree to, the higher the interest rate the bank pays on your CD. The disciplinary help comes in due to the fact that CD's carry an early withdrawl penalty - meaning that if you attempt to withdraw the CD money before the CD matures the bank will usually hit you with an early withdrawl penalty charge. Thus if you eventually buy a bunch of, say, $1000 6 month CD's, you will think twice before cashing in one before the maturity date and paying a $50-$100 early withdrawl penalty.

    For my own 'cash reserve' I usually maintain six 6 month CD's, with each CD maturing one month apart. That way if something nasty were to happen, one CD will mature every month for the next 6 months providing me with X dollars per month in extra cash to meet necessary monthly expenses. But if I were ever to be tempted into wanting to cash in all six CD's at the same time in order to buy a new car or something, the issue of having to pay five early withdrawl penalties would really make me thing long and hard before doing it.


    haven't been stripping very long, and its been a slow season, so my income is still relatively low. I haven't had to pay taxes.
    If you have earned more than $700 as a dancer since the 1st of the year, you DO owe 15.3% Self-Employment taxes on whatever amount that you did earn - even if the total amount you earned is low enough to avoid having to pay income tax. Because you are a self-employed business person rather than an employee, you get the 'privilege' of paying both the employer's 7.6% share and the employee's 7.6% share of Social Security/medicare tax hence the 15.3%. Also, since you are your own employer, you also get the privilege of withholding this tax money from yourself and sending in an estimated tax payment check to the IRS and to the Oregon Dep't of Revenue every 3 months (actually, on April 15th, June 15th, Sept 15th and Jan 15th).

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    Featured Member needtodance's Avatar
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    Default Re: basic advice for an EXTREME dummy?

    With the CD's what happens once that time is up? Do you just buy more time with them"? IS there a minimum amount to be stored in them?

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    Gypsy74
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    Default Re: basic advice for an EXTREME dummy?

    Quote Originally Posted by needtodance View Post
    With the CD's what happens once that time is up? Do you just buy more time with them"? IS there a minimum amount to be stored in them?
    and do you pay taxes on them?

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    Default Re: basic advice for an EXTREME dummy?

    Accounting major here

    I suggest instead of CD's getting a Mutual Fund, https://www.fidelity.com/frameless_pr_B.shtml, being my personal fave and my accountant professor's as well. They would like checking accounts but have much higher yields than a typical CD. You are investing in the stock market and government bonds and the such but you can get your money out with no penalty when ever you need it. You don't have much risk as you arnt putting in a really high percentage of cashola into one stock or bond or so. What they do is pool lots of holders money (we are talking about thousands) and investing in a ton of different things to ensure you dont lose your money (by a ton I mean up to a million different stocks, bonds and annualites (that isnt spelled right but I have been up for a while please forgive )

    Unlike a checking account, you don't get a debit card, but some places do offer checks but get pissy if you write to many. You will need at least $1500 to get started by they pay out alot more these days. Its how I saved for my first house. They also work off of compound interest.

    Ok that was my 2 cents

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    Member monicapenix's Avatar
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    Default Re: basic advice for an EXTREME dummy?

    and for both cd's and mutual funds YOU MUST PAY TAXES but usually the dividends are more than enough to cover them. What ever I get paid as an IC (i do phone sex and web cam) I put 20 % in a Mutual fund just for taxes so I can build money off my tax cash (then the dividends i get to spend )

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    Default Re: basic advice for an EXTREME dummy?

    Quote Originally Posted by Gypsy74 View Post
    and do you pay taxes on them?
    At the "end of that time," usually, you will have the option to roll them over to another term, or do something differnt with them.

    You will have to pay income tax on any interest earned from your CDs.

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    Default Re: basic advice for an EXTREME dummy?

    When you do your taxes you'll notice the section in income reporting where you put in interest earned, be it on savings accounts/CDs/money market checking/etc. When a CD matures you can take that money and do what you will with it or put it into another CD.

    NTD, I seriously doubt your finances are so complicated that you need an accountant. All you need is Quicken or Money for your computer, which will make it very easy to track your spending in tax-related categories, and a folder for your receipts.

    For short-term savings that you will need access to in case of an emergency, ING Direct has really excellent rates and if you don't get an account with a debit card it is a good deterrent to impulse spending -- but should you need $500 for a car repair or something, you can transfer it into your checking within 1-2 days.

    For longer-term savings and investments, well, those are highly personal choices in which you have to consider what you have to invest as well as your personal risk tolerance and you're probably better off at that point doing a thorough reading of the Motley Fool website. There's CD laddering, mutual funds, etc. as have been mentioned here, and then of course once you have a bunch to invest you can start checking out the stock market. That is the point where I would rather have professional help, but everyone is different.

    One thing at a time, though. The first thing is to have that cash reserve as Katrine is always talking about, the 3-6 months in living expenses in reserve. Sounds nice, eh? You experienced the usefulness of that already.

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    Default Re: basic advice for an EXTREME dummy?

    holy crap yes, that SAVED me, having that much saved up for emergency.... It drove me crazy having to use it when I was unemployed. So i DO want to get that saved up again, but I also want to be thinking longer term, hence figuring out what to do for my plan...

    Quicken or Money aren't tax software? I'm trying to figure out what i would need to figure out the taxes on my own(I always get soooo scared of making a mistake)

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    Default Re: basic advice for an EXTREME dummy?

    Quicken and Money are both software. It does the calculations, but you still need to enter everything into it.

    This is software that half the country uses, as long as you don't make a mistake entering your info, it's not going to make a mistake spitting out your tax returns... No need to be scared of them.

    I don't personally use them (I have an accountant because I have some not so basic things going on) but I did my mom's taxes with quicken this past year and it was a piece of cake. After I did it, I didn't understand why I was so scared...

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    Banned Melonie's Avatar
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    Default Re: basic advice for an EXTREME dummy?

    Actually, Quicken has a sister program called TurboTax ... which imports all of your financial data from Quicken, figures out your taxes, and prints or e-files your tax return.

    One other note on mutual funds / money market funds etc. which ostensibly offer the 'same thing' as bank accounts and/or CD's but with higher interest rates. The reason that these mutual funds / money market funds are able to generate higher rates of return is because they sometimes invest in riskier instruments - potentially shaky corporate paper, mortgage backed securities, CDO's etc. Any problems developing in these underlying instruments could potentially trickle backwards to the mutual funds / money market funds that own them.

    Mutual funds / money market funds do NOT have FDIC insurance against loss of principal in the event of a shock to the financial markets, as bank accounts and CD's do. Mutual funds / money market funds also do NOT have any FED backed guarantee of liquidity, as bank accounts and CD's do. In fact there have been some recent anecdotes where some of the more 'exotic' funds have refused to immediately cash out investor money, because doing so would force the fund to liquidate investments at a loss.

    Mutual funds and money market funds do have their place in the grand scheme of things, and do have a history of providing better returns under the typical financial conditions of the past 10-20 years. However, so did real estate ! The point is that just like real estate, there are no guarantees that if/when the economy takes a big hiccup that the traditional high rate of return and the traditional liquidity of mutual funds / money market funds won't turn in the wrong direction. All involve risk. With the hiccups in the world economy, it is no longer a trivial matter to make the assumption that these investments will always increase in value as well as always having a ready market of buyers should the investor wish to cash out at a profit.

    In contrast, bank accounts and CD's are risk free ... or at least as risk free as the US taxpayers backing FDIC insurance and the US taxpayers backing the FED and US banking system can make them. So the question really boils down to a risk vs reward equation. IMHO in exchange for an extra one percent return which is not guaranteed, I'll stick with my CD's for my 'emergency fund' versus a money market fund.

    If I do want to make a risky gamble with my investment money (which I keep separate from my 'emergency fund' money), I'll choose one that offers a potential 10%-20%-30% return on investment in exchange for the increased risk ! For example, those SDS exchange traded fund shares which I commented on in another thread two weeks ago are up 16% in those two weeks ! . But those SDS shares could have just as easily declined in value. This is the essence of the risk vs reward equation.

    However, the purpose of making speculative investments with an element of risk is an entirely different premise than building / maintaining an 'emergency fund' of rock solid assets which can be counted on no matter what in case of 'emergency'. Remember that with the weirdness in the world financial markets lately, the origin of an 'emergency' does not necessarily have to come from a personal financial issue ... it could just as easily come from an epidemic of hedge fund collapses or a liquidity crisis.

    Also, if I were to pursue a supposedly 'safe' gov't backed bond mutual fund, I would choose one that is entirely comprised of municipal bonds issued by my particular state ... such that the interest earned by the muni bond mutual fund will be exempt from federal, state and local taxes ! This tax exemption can offer the equivalent of a taxable interest rate that is 2-3% higher than the tax exempt interest rate, because the fully taxable interest paid on a standard bond mutual fund will wind up being divided 1/3 for taxes on the interest income and only 2/3 for the investor.

    ~
    Last edited by Melonie; 08-04-2007 at 11:02 AM.

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    Default Re: basic advice for an EXTREME dummy?

    I don't know enough about things to take those sorts of risks.. I think i'd rather just put money into CD's as I can... Did anyone ever say if there was a particular minimum most banks require for them?

    Thanks for all your help, Melonie!

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    Default Re: basic advice for an EXTREME dummy?

    How do you decide on which bond is better than others? What are the characteristics of a decend bond? I am in TX, what bond should I choose? Thank you.

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    Default Re: basic advice for an EXTREME dummy?

    There are many types of CDs and what some banks called a Christmas account CD typically requires no minuimum what so ever but has a lower yield. If you want a higher yield in these relatively safe type investments, I would shoot for what they call stacked CD's (please note not my method of investing). You grab a four year, a three year, a two year, and a one year CD (or less than that this is a meer example) and out about $1000 + in each one. When the 1 year CD matures you roll it into a 4 year (keeping the diviends or not but i suggest not) and you just keep doing that till you reach your goal or you can then purchase a 4 and a 5 year, so on and so forth.

    Also there are some state bonds, I suggest talking to a consultant at your local bank (unless like me your bank isn't local then again I can call them 24 hours a day ) as they would better be able to answer your questions and give you advice. Usually bankers go through bi yearly seminars if not more frequently and can give you the best advice. Investments are different with each bank so just don't stop at your bank treat this like your bargain hunting only you want higher percents and depending on your income lower minimums. Personally I love USAA (I believe you have to at least be related to military to get an account there though), Bank of America and Navy Federal are my personal picks. Also ING ( an online bank ) were good while I had them. (Texas born and bred )

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    Default Re: basic advice for an EXTREME dummy?

    What are the characteristics of a decend bond? I am in TX, what bond should I choose?
    If you are interested in playing the tax minimization game, then a big factor is the rate charged for state and local income taxes where you live. If you live in a state like CA or NY where state and local income taxes can approach 8-9-10%, then you want to look at bonds (or bond funds) issued by your own state ... which are exempt from federal taxes PLUS state / local taxes. But if you live in a state that does not have an income tax like TX or FL, then you probably want to look at federal bonds (or bond funds) which are exempt from federal taxes but not exempt from state taxes. If you want to increase income potential. don't care about avoiding taxes, but want a reasonable degree of assurance that you won't ever lose money on your investment, then you may want to look at bonds from large stable corporations like Exxon Mobil or electric / gas utility companies. If you want to seek maximum income potential, don't care about avoiding taxes, and are willing to risk losing all or a part of your initial investment, then you may want to consider bonds from small start-up companies. As with other types of investments, bonds run the entire spectrum of risk versus reward levels.

    As far as characteristics of bonds, you might want to start at

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    Default Re: basic advice for an EXTREME dummy?

    If you want to increase income potential. don't care about avoiding taxes, but want a reasonable degree of assurance that you won't ever lose money on your investment, then you may want to look at bonds from large stable corporations like Exxon Mobil or electric / gas utility companies.

    Good QuoteMelonie - As much as it angers me paying Outragous gas prices we can either bitch (cant avoid not buying fuel for transportation) or we can at least gain money by investing in what people are guarantied to buy INCLUDING ourselfs.

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    Default Re: basic advice for an EXTREME dummy?

    Oppenheimer Rochester Muni Bond Fund, if its open at the moment. That shit kicks ass!

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    Default Re: basic advice for an EXTREME dummy?

    ^^^ yup, the Rochester National Muni has some of the most secure bomd revenue sources that ever were, are, or ever will be ... 30 year Tobacco Settlement revenue anticipation bonds !

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    Default Re: basic advice for an EXTREME dummy?

    ...and put your rainy day account into www.emigrantdirect.com or www.ingdirect.com (which offer almost the same rates as most CDs).

    And read some books, maybe? The Beardstown Ladies book and the Motley Fools Investment Guide have been helpful for me, but I'm not sure how good they are in the bigger picture.



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    Default Re: basic advice for an EXTREME dummy?

    Are you talking about Oppenheimer Rochester National Muni A traded under symbol ORNAX? They seem to have Rochester National Muni A (ORNAX), Rochester National Muni B (ORNBX), and Rochester National Muni C (ORNCX) funds there.

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    Default Re: basic advice for an EXTREME dummy?

    I was speaking of the national muni A ...

    Rochester national muni B&C have essentially the same sort of bond holdings as muni A. They appear to only differ in the proportions. However these three funds do differ hugely in matters of front end loading, back end loading and expense ratio.

    Obviously if you are 'rich' enough to cover the $5000 increments, you could save a significant amount of money on both an up-front and ongoing basis to simply buy a tobacco revenue anticipation bond yourself. Of course to get any real diversity you would need to buy say 10 different bonds at $5000 minimum each ...

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    Default Re: basic advice for an EXTREME dummy?

    Hey lady!

    I use a CPA firm in SE. Very nice and the woman was professional in dealing with me. not patronizing when she talked about things like giant shoe deductions, which I was a bit nervous about. It was $125 to get my taxes prepared (which you don't need to do right now?) but PM me if you want. You can probably call them and prepare to make sure you have all of your paperwork next year.

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    Default Re: basic advice for an EXTREME dummy?

    Also, ING DIRECT is super easy to use. It only took about 10 minutes of setting up on their website, waiting a couple of days for things to confirm, and bam, now I have a high-savings acct that can be accessed easily. (It was so obnoxious to use my us bank savings account and see it yielding less than fifty cents a month!)

    Also... excel document recording how much you bring home and night and how much you DEPOSIT daily for your living expenses.

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    Smiley Re: basic advice for an EXTREME dummy?

    I always tell people if you are a beginning investor ask a lot of questions and to start with CD's. There are so many scam artists out there. It is best to save and learn about different investments at the same time. That way when you do walk into a financial planner's office; you know about the basics and are less likely to get scammed.

    Even with CD’s ask a lot of questions. Interest rates and how long the time frame of the CD aka term are very important. The interest rate that is quoted to you is for one year. For example if you have $1000 in a 1yr CD with an interest rate of 5% the earnings at the end of that year is $50. But lets use the same numbers but change the CD term to 6 months. Even though the interest rate is the same at the end of the 6 months you have only earned $25. This sounds elementary. Many banks will offer large interest rates on short term CDs making people feel they are getting a huge return. When in fact that return is only half.

    Also ask about penalties for early withdrawal. You never know when something bad is going to happen and you may need to get at the money immediately. Some banks will let you withdraw a portion of the CD and only charge you a penalty on the amount you took out. Other banks will make you break the CD and charge you a penalty on the whole amount of the CD.

    Never let anyone else determine your risk factor for you. The bench market I use if I can sleep at night. If I am too worried about my money then I am taking too much risk. Mutal funds are wonderful only if you understand the dynamics. I have heard people say “oh I would never invest in the stock market that is too risky” . But they have mutal funds that are 90% stocks. Why? Their 401k website said that the fund was a moderate risk.

    Always do a lot of research. I always recommend Suze Orman. She is great at explaining the basics and giving a real world approach to money management. This month on PBS she has a wonderful seminar called Women and Money. I own a lot of her books. She is a great resource. She really advocates having your credit cards paid off and any other debt before ever saving a dime.

    Granted it all seems overwhelming at first. It is a lot of work. But after you understand the basics it will get a lot easier over time.
    Lastly check out credit unions. Credit unions are a lot less hassle and a lot less in the fee structure. They are a great way to save without paying huge fees. They are less likely to sell you something you do not need and more likely to explain to you all the details.
    Good Luck!

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    Default Re: basic advice for an EXTREME dummy?

    The only debt I have is student loan debt. I'm not sure how much offhand-but its only for 1 1/2 years of school, so i doubt its a whole lot.

    Anomar, Id love teh name of your accountant! I really am nervous about this whole thing, i dont know if its worth it to get my own software, or just go see her. If the costs are relatively close, I'd prefer to just go see her so i can know its being done right. Is the 125$ per quarter? Or per year?

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