Many of us have heard of the Roth IRA, but not many of us know about the man behind the name. William Roth, Jr., an Army vet and graduate of Harvard business and law, represented Delaware in both the House and Senate in DC for more than 30 years. Though best known for the retirement account that bears his name, he was also recognized as a virulent combatant of wasteful government spending. Mr. Roth passed away about 5 years ago, but his name and legacy lives on through is baby, the Roth IRA.

The Roth IRA is an individual retirement account that taxpayers may establish independent of any other employer sponsored retirement accounts. The Roth IRA offers tax benefits to its account owner. Initially becoming available in 1998, the Roth IRA differs in several ways from its predecessor and counterpart, the Traditional IRA. And in most situations, the Roth IRA is a more effective tax sheltering vehicle than the Traditional IRA.

The differences between Roth IRA and the Traditional IRA are quite simple. However, the implications of those differences are not as simple.

The Major Differences and Implications

1 - In a Roth IRA, contributions are made with post tax dollars. In a traditional IRA, contributions are mare with pre tax dollars.

Implication - Your taxable income is not reduced by the amount of your Roth IRA contributions. Your taxable income is reduced by the amount of your Traditional IRA contributions. Therefore an immediate benefit may exist with the Traditional IRA, as your contributions have the potential of reducing your tax liability in the current year.

2 - Your principal contribution in both accounts grows tax free. However, withdrawals from Traditional IRA are considered taxable income. But because Roth IRA contributions are originally made with post tax dollars, withdrawals are not taxable income.

I guess this can be construed as a pay now or pay later scenario… either way, you have to pay. But there is one gigantic caveat… withdrawals consist of principal and interest. When withdrawing from a Traditional IRA account, the interest earned on contributions is also considered taxable income. Quite the contrary is true with Roth IRAs; interest earned is not considered taxable income.

Implication - In a Traditional IRA, both principal and interest earnings is taxable at the point of withdrawal. In a Roth IRA, neither principal nor interest earnings is taxable at the point of withdrawal.

So which account is better? Well it depends… in some situations it may be more advantageous to have a Traditional IRA and in other situations it may be more advantageous to have a Roth IRA.

A Traditional IRA might be right for you if…

- You are looking for ways to reduce your tax liability today

- You like the idea of paying taxes on the back end

A Roth IRA might be right for you if…

- You like the concept of paying taxes on the front end

- You expect your income tax bracket will be higher in retirement than it is currently (This way your contributions will be taxed at the lower tax rate)

- You do not want to pay taxes on the interest earned on your principal contributions

- You like to simplify your tax reporting (with a Traditional IRA, your have to report contributions and withdrawals on a 1040)

With that being said, for most people the Roth IRA is a better deal. Both types of IRAs have advantages, disadvantages and limitations. But don’t let the fancy tax talk hinder you from taking action. Regardless of the retirement savings tool you use, it works best when you take advantage of your options early. The sooner you start, the better.

Do you use your vehicle as a part of your business? If yes, then you can save hundreds or even thousands on your tax bill. The IRS gives you two a choice of options to claim the business use of vehicles. You can deduct either the actual expenses incurred or you can use the standard mileage rate.

Actual Vehicle Expenses

Just as it implies, it is the actual expenses you incur while using the vehicle… gas, oil changes, brake repair, tire rotation, insurance, towing, parking fees, lease payments, depreciation and any other vehicle expense you can conjure up.

Standard Mileage Rate

In lieu of claiming each and every vehicle expense; you can simply claim the mileage. The deduction is based on a set reimbursement rate. As it stands now, that rate is 58.5 cents per business use mile.

But when using this method, it is important to understand what encompasses a business mile. Basically, business miles accumulate any time your drive your vehicle for anything that is business related.

So if you need to run to Office Max to pick up a red Swingline stapler for your business, then you’ve got yourself some bona fide business miles.

- Need to take your business receipts to your business accountant who lives across town… business miles

- Gotta drive to an important meeting with some potential clients… business miles

- Heading down to the bank to make those hefty business income checks… business miles

- Got to run to the copy store to get 500 brochures printed… business miles… round trip, each way.

Now let’s say on your return trip you decide to stop at the grocery store that is right next to the copy store to pick up some salmon for dinner. So, is your return trip still business related? No… not unless you plan on having a client over for home cooked salmon at 8 o’clock… other than that your return trip just turned personal. No mileage deduction allowed.

And here is another one that people sometimes confuse… your commute to and from your office is not business related miles.

Say you are a self employed architect and you rent an office downtown. Getting to and from your office is considered your daily commuting miles… not business miles. But if you are at your office and you need to deliver some blueprints to a client who is 30 miles away… business miles.

Is it more advantageous to use the actual expenses or standard mileage method?

Well it just depends. If the cost to operate your vehicle is very expensive… then the actual expenses may be better. But if not, the standard mileage is better. You or your accountant will have to make that call.

But recently, the IRS has made using the standard mileage deduction much more attractive. Last year, the rate was 48.5 cents. At the beginning of this year it increased to 50.5 cents. Then in an effort to keep up with escalating fuel costs, the IRS raised the standard mileage rates to 58.5 cents. This new, higher rate took effect on July 1^st. 58.5 cents per mile can add up really quick… 1700 business miles can reduce your tax liability by almost $1,000.

But regardless of which method you use… keep good records. Be sure to either keep all of your receipts (neat, orderly and categorized) or get a mileage log book to keep track all of your miles. You can use a plain notebook or get a book that is specifically designed for logging miles. Or if you like to track stuff a little bit more new agey… then you can download this real simple mileage log Excel template for free courtesy of Microsoft.

Well, that is all for now folks! Happy Driving!

Hybrid cars have become a hot item over the past few years. In 2000, the number of hybrid cars sales barely toppled 9,000 units. In 2004, sales had reached 88,000 units. And in 2005 a huge explosion…. 205,000 units were sold. Coincidently this sudden burst of hybrid vehicle sales occurred the same year in which the feds passed Energy Policy Act of 2005.

As a part of the Energy Policy Act of 2005, consumers could receive a tax credit of up to $3,400 when they purchased a fuel efficient car before December 31^st of 2010. Nearly all hybrids fall under the category of fuel efficient. But not all qualify for the credit. Other factors were taken into account such as gross vehicle weight rating and the vehicle inertia weight class.

And there was another small caveat… only the first sixty thousand qualified cars produced by each manufacturer were eligible for the credit. And also, the credit began phasing out depending on when the vehicle was purchased.

Here is an example of the phase out schedule for the popular Toyota Prius:

If purchased between 1/1/06 and 9/30/06… $3,150 tax credit

If purchased between 10/1/06 and 3/31/07… $1,575 tax credit

If purchased between 4/1/07 and 9/30/07… $787.50 tax credit

If purchased after 10/1/07… does not qualify for a tax credit

In 2006, 7 different makes and 15 different models qualified for the credit. In 2008, the list dwindled to only different makes and 4 different models.

It has been known since the beginning that the credit would be a temporary tax incentive, but now I’m left to wonder… without the incentive, are these hybrids worth the trouble?

The based price for a 09 Toyota Camry is $21,495 and it gets 31 mpg (highway)… for the hybrid version, the cost is $25,650 with 34 mpg (highway). For the 2007 models, you could have gotten up to a $2,600 tax credit for buying the hybrid Camry. but for the 2009 model, there is no credit.

I think that it would hardly be worth it to spend an extra $4,100 to get an extra 3 miles per gallon. But I’m not sure, so I’ll do the math right quick.

Let’s say you drive 12,000 miles a year, in the regular Camry, that’s 387 gallons of gas… in the hybrid, that’s 353 gallons of gas. You save 34 gallons of gas by driving the hybrid. At $4 a gallon… that equates to a whopping $136 savings per year. To get back the extra $4,100… you’ll need to drive the car for more than 30 years!

Ok 12,000 miles a year is a bit low… but even if we double the miles to 24,000 a year (which is on the high end), it will still take 15 years to recoup the hybrid premium. So, is it really worth the extra strain to your pocket? You can use some of the suggested found here and you’ll save that much and possibly even more. So from a strictly consumer finance perspective… it is definitely not worth it.

But there are other reasons people chose to drive hybrids. Aside from the perceived fuel efficiency… another reason is that hybrids are less damming to the environment. And though more expensive than regular cars, they are far less expensive than other eco-friendly alternatives.

I am not saying, don’t buy a hybrid car… An Inconvenient Truth scared me green. But I think that you should take the whole picture into account when evaluating the benefits of the hybrid.

Children grow up so fast. My son is 14 and is about to embark on his freshman year of high school. This is an exhilarating time for him… football games, pep rallies, proms, girlfriends, driving. Here is yet another example of where his excitement translates into my horror.

High school means that in four short years, he’ll be off to college. Mothers have all kinds of reservations when their youngins fly the coop. Will he remember to put on his seat belt every time? Will he remember to wash down the counter after prepping raw meats? Will he remember to pay the electricity bill? Will he remember that certain things that college kids experiment with, like binge drinking and unprotected sex, can be lethal? That and so much more. I am mother… it is my job to worry.

But not only do I worry about his well-being… I also worry about how I’m going to pay for his college education. He has long told me that he wants to be a medical researcher and that he wants to go to college in California. To me this equals… room and board, tuition, meal tickets, out of state fees, travel back and forth to home… do you understand my horror? It’s sticker shock!

Over the past year I have been reinforcing to him that high school is his time to shine. If he does well enough he can get a scholarship to pay for college. But scholarships are very competitive and they still won’t cover all of his needs. Getting a college education is expensive… and that is putting it mildly.

Since he was 5, I have been stashing money away in his 529 savings account. But there is not nearly enough in his account to pay for out of state fees. Out of state fees can sometimes be 3 or 4 times the cost of in state tuition. So either I have to increase my contributions or he needs to get a scholarship. Or else he’ll be forced to stay instate.

Because the cost of a college education can nearly be the same as the cost of buying a home, the IRS offers tax incentives to encourage parents to save for college. There are two qualified tuition plans which are authorized by Section 529 of the IRS Code. One is the prepaid tuition plan; the other is the college savings plan. Both plans have unique features and different eligibility requirements. This very detailed chart that I found on fool.com shows the comparisons.

I selected our state sponsored 529 college savings account many years ago for my son. And because I’d always planned to further my education, I also opened an account for myself as well. There are many options when choosing a 529 plan. There are more than 80 state sponsored college savings plans available. And nearly all of them are open to non state residents. They all offer both federal and state income tax benefits. And many of the plans have no set maximum contribution.

Which one should you choose? All of this information can be a lot to sort through. But Morning Star and Bankrate has simplified the process for us. Morning Star issued a best and worst list based on benefits and expenses. And Bankrate ranks the best performers based on investment return.

If you have children, start saving from day one. The cost of college is expensive. But preparing early and making use of a 529 plan can lessen the distress when the bills start piling in.

Every year thousands of people leap into entrepreneurship. I was one of those people. Six years ago I decided to start a small business. I set up an online shop through eBay. I figured this would be cheaper than renting a brick and mortar location. And plus my customer base would not be limited to the folks in my area.

I called my store Orange Blossoms. My product line consisted of designer perfumes and colognes. I figured I would keep it basic to start. But eventually, I added more items like perfumed soap and shimmery, scented powders. Sales orders began coming in faster than inventory. I was actually turning a decent profit. Sounds good, right?

Well I thought so too, but unfortunately, I ended up in another group of people… those entrepreneurs who tried and failed. So where did I go wrong?

I’ll get to that part in a minute. But first I’d like to say… yes I am going to spew out some advice to ya’ll. And you may be thinking… how is she qualified to give advice when she failed? Well… I’ll tell you.

While is it advisable to take suggestions from people who are successful in their entrepreneurial endeavors, it is also sensible to take suggestions from those who failed as well.

Those successful entrepreneurs can tell you what to do to succeed. But you also need to know what not to do so that you won’t fail. Successful entrepreneurs can’t tell you that, because apparently they did every thing right.

So… it is ok to seek advice from those who made it… they can teach you what to do. But it is also ok to seek advice from those who did not make it… they can teach you what not to do. (And here is where I fit in.)

Alright now that I’ve convinced you to listen to what I have to say… I’ll continue.

Where did I go wrong? I was a horrible record keeper.

I had invoices, sales orders, purchase receipts, fee bills and all kinds of little pieces of paper coming out the wazoo. And all I did was toss it all in a big box. I was too busy doing something I enjoyed… buying and selling perfume and other frilly foo foo stuff. Who had time to track every nickel and dime of every expense and sale? My plan was to sort through it all at the end of the year.

And for three years, my plan worked for me. When it was time to file my taxes, I’d grab the box. Then I separated the contents into two piles… a revenue stack and an expense stack… totaled them up, figured the profit or loss and threw the number on a tax form.

In addition to reporting my business income, I also itemized so I could maximize all the typical business deductions… like asset depreciation, mileage, home office, yada, yada, yada.

Well after the third year in business, I got a notice in the mail. It said… this is nothing to worry about it…but your tax return has been selected at random for further review and verification. All we need you to do is send copies of this, this and that.

So I made copies of this, this and that and sent it off. Nothing to worry about, right? (Here is where I scoff at that idealistic notion.) A week later, I get another notice saying that based on the documentation I provided, further investigation is warranted, i.e. I’m about to be audited by the IRS!!! (Here is where I scream.)

I scheduled an appointment with the auditor. On the day of my appointment I moseyed on down to the IRS office with my box of papers. The auditor asked me a few questions… like how I got that number and where are the records to substantiate this claim. I answered as best I could and left her with my box.

She called me a few times over the next couple of weeks to ask more questions. I did my best to answer. And then for nearly a week… nothing. The calls stopped. Next thing I know… I received a registered letter in the mail detailing the amount of unpaid taxes, interest and penalties that was due. The total sum… over $5,300!

Well that put a quick death to my entrepreneurial days.

I agreed that I owed the money. But the thing is, I was not trying lie or be deceitful on my taxes. All of the deductions I had taken were valid. The only problem is that my record keeping system was so screwy that I could not corroborate any of it.

So here is my advice to those who want to brave it in world of entrepreneurship… keep good records so you’ll be prepared when tax time rolls around.

The IRS is infamous for picking on small business owners… especially home based business owners. So be ready because chances are they will come a knocking.

Here are some things you can do to help ward off failure:

Categorize your receipts, bills, etc. using a logical filing system

Reconcile your books at least once a month

Document all of your business related expenses (and if you plan to claim mileage as an expense keep a notebook in your glove compartment and use it to log all of your miles)

Report all income whether it is taxable or not… if you are an independent contractor, make sure you wait for all of your 1099’s to come in before you file your taxes

Make sure every thing adds up - and I am not just talking numbers here. Let’s say you use a calendar to keep track of your busy schedule of business meetings or trips. Then on August 9^th, you log 43 miles in your mileage book for a business trip. However, August 9^th in your calendar is blank. That does not add up.

Taking on a new business venture can be exciting. Enjoy the process. But don’t let the fun be foiled if the IRS comes snooping. Keep good records, keep the man off your back, and watch your business grow.

This post is a part of the July MoneyBlogNetwork Group Writing Project focusing on the best advice for new entrepreneurs.

So I know a little about McCain’s health plan, now I mine through Obama’s…

What’s the plan?

The plan is to make affordable, quality health care accessible to everyone.

Why Sen. Obama chose this position?

The cost of both health insurance and health care has risen almost exponentially. Because of the rising cost many poor and working class Americans aren’t able to purchase health insurance. Making health care affordable will reduce the number of uninsured and underinsured.

How Sen. Obama proposed to carry out the plan?

The heart of Sen. Obama’s proposal revolves around the creation of a national health care plan. Under this national plan, every American will be eligible for health insurance, regardless of health or income. Premiums will be less expensive than present day rates. And for those who cannot afford the premiums, subsides will be given. Participation in this system will be required for children and optional for adults.

A system of electronic medical records will also be instituted. The database will make a patient’s medical history readily available to professionals, anywhere. This will reduce medical errors by allowing doctor’s to make better informed decisions regarding a patient’s condition and treatment.

The quality of care will be improved through the research, design and implementation of procedures to eliminate medical errors and resolve inconsistency in services.

Finally, the plan involves the formation of a patient advocacy group… or the National Health Insurance Exchange. The aim of this group will be to make sure that the Obama’s plan is coming together as envisioned. The group will battle private insurance and big drug companies to ensure fairness for the insured.

So… what does all this really mean?

The Democratic candidates have been strong proponents for national health care, which is sometimes referred to as universal health care. There are many countries that have a universal health care system. In traditional universal health care, participation is mandatory, everyone pays the same premium regardless of the health and there are mechanisms to help cover the cost of the premium for the poor (in most cases, this means a subsidy). Premiums are usually prepaid through payroll or some other kind of taxes.

In a perfect world, under a universal health care system everyone gets the same quality of treatment despite their financial means. Poor people have the same access as the wealthy. On the flipside, the wealthy are not able to buy their way to better health.

Though Obama’s plan is often likened to a universal health insurance, there remains one big distinction. Unlike tradition universal health insurance, participation is optional… (well, except for children) and private insurance will still be readily available.

This can be both a good and a bad thing.

Here’s how I see it…

The plan is open to anyone, rich, poor, terminally ill or perfectly healthy - Ok, this is can make for a serious issue. I cannot remember the exact term I learned in a public economics course, but basically this will cause selection bias. If participation is optional, people will only sign up when they need it… i.e. they are so sick that they can’t be insured anywhere else or so poor that they cannot afford private insurance. I see the program as being as a hybrid of a puffed out Medicaid program and government funded hospice.

The participation base will be largely comprised of people who are too sick to be insured anywhere else. Therefore the cost of this program will be enormous because there will be proportionally fewer healthy people to balance it out. I mean, really, why get it if you don’t need… and if you do need it, no need to fret… it will be there, open to you at anytime. What insurance company can keep afloat this way?

Also, people who are able to afford private insurance are likely to remain privately insured. One of the biggest complaints about universal health insurance is that the waiting list for treatments can be very long. But those with private insurance won’t have to worry about this. They can buy their way to the front of the line… to sorta speak.

I think his plan is too hopeful. It’s good for those who participate. But I do not see how making a program that is basically geared to the sick or poor will aid in reducing medical costs. I think it will only help to increase costs.

But I do give him props, the man is sexy!

For the past year, I have been bombarded with all kinds of presidential election issues… which candidate lied about what, whose pastor said this, which delegate voted how, whose wife dresses the snazziest. I voted in the primary election, but my vote was based on who sweet talked me the best that day. I hadn’t given much thought to either candidates’ political platform. So as November nears, I think it is time for me to understand where the candidates stand.

Today I’ll look at Senator McCain’s health policy.

What’s the plan?

The plan is to control escalating health care cost.

Why Sen. McCain chose this position?

Controlling cost would unburden the Medicare and Medicaid systems making the sustainability of the programs viable for future generations. At the current pace, the systems would be an insurmountable financial stress by 2019. Also by controlling costs, the health insurance becomes more affordable for families.

Individuals should be in control of their own fates. This plan will give people more options in their selection of health insurance and medical service providers.

Medical providers would be conscientious in the quality of care because more patient options will stir competition.

How will Sen. McCain carry out the plan?

Insurance portability - when individuals change jobs or move across state line, their insurance plan can follow them.

Restructuring tax credit - rids credit for employer sponsored plan and shifts credit to individual household. Provides refundable tax credit of $2500 for individuals and $5000 for families.

Reduce prescription drug cost - increase competition by promoting the use of generic drugs.

Insurance accessibility - insurance would be available for purchase through various civic and professional organizations

Less expensive and more accessible medical care - encourages the delivery of medical service through retail health care clinics which use nurse practitioners as the primary care provider.

Rosy eyed optimism or real solution?

Political and policy analysts often compare McCain’s plan to Senator Obama’s plan. At some point, I will need to compare to compare the two. But first I want to look at McCain’s plan on its own merit (independent of how it stands up to Obama’s plan).

Offering individual tax credits to buy health insurance sounds good in theory. However every family will receive this credit… whether they use it to buy insurance or not is ignored. I do not think this will help decrease the number of uninsured. Most people are uninsured because they can’t afford the insurance premium. If financially strapped families are given $5000, the money is more likely to be used to satisfy immediate needs (such are food, utilities, housing, transportation) and less likely to spent buying protection for the what-ifs. And besides, health insurance costs a lot more than $5000.

Also offering this credit to every family in essence gives a subsidy to people who don’t need it. Most upper middle class and wealthy families don’t need a tax credit to buy health insurance.

By eliminating tax credit for employer sponsor plan, there would be no incentive for employees to purchase health insurance through their employers. This will result in decreased participation and prompt employers to drop these benefits. If employers drop benefits individuals will not only lose the advantage of sharing the cost of insurance with their employers, but they’ll also be forced to find coverage on their own.

Offering medical services through retail health care clinics sounds good on the surface. But there are no MDs at most of these clinics and the level of care is less comprehensive than that given at a regular doctor’s office. Also, most of these clinics are nested inside retail locations that also house pharmacies. Patients will be urged to fill prescriptions at those pharmacies. Though this may be the most convenient decision, it may not necessarily be the most economical.

While the principle behind the plan seems honorable, I’ll have to give its implications more thought before I cast my vote in November.

Rodney Hixon is an ordinary guy trying to make an extra buck or two on the side, and why not? Living in the state of Michigan has never been more financially challenging, so when Rodney discovered that he could buy up slum properties In Kalamazoo with ’stated income’ mortgages that didn’t require him to show any proof of his assets or salary, he jumped at the chance.

Hixon, currently describes himself as ‘a former real estate agent’ who makes ‘a couple thousand dollars a year as the coach of Mattawan High School’s girl’s lacrosse team’. He was the ideal candidate for the creative ’stated income mortgage’ that became so very popular during the housing boom that preceded the sub-prime bust. As a former real estate agent he knew the area, knew the mortgage companies and their policies, knew the ropes, knew he could do it.

So, when a person wants to invest in real estate, the idea basically is to buy low, sell high, right?

Wrong!

In the past 15 months 38 of Rodney’s investment properties went into foreclosure, and it came to the attention of some Kalamazoo city officials that he had overpaid for each of the properties. In fact, Hixon had overpaid alot. On his 38 most recently foreclosed properties, Hixon paid between 2% and 375% over and above the city’s tax-assessed value, for an average purchase price on Hixon’s investment properties of 68% above SEV. Profits (for the seller) on Hixon’s 38 foreclosed properties (all of them in slum neighborhoods) topped out at $2.7 million.

On one property alone, Hixon saw a 1,837% appreciation in the short three years before the home went into foreclosure. That home, at 722 Egleston Avenue in Kalamazoo, sits in one of the cities most distressed areas and sold for $8,000 in December of 2002. Hixon purchased it in October of 2005 for $155,000. It went into foreclosure in June of 2007.

Hixon’s investment properties are all listed as rentals but few were ever rented, not even briefly. Most sat vacant from the date of sale right up to the date of foreclosure.

The FBI is currently investigating Hixon for mortgage fraud. They suspect that he might have been involved in a scam that goes like this:

A real estate agent, an appraiser, and a ’shill’ buyer purchase a slum property at many times its city-assessed tax value and take out a 100% mortgage on ‘creative’ terms. The shill buyer and the seller then divide the substantial profits amongst themselves, defaulting on the mortgage almost immediately, leaving the mortgage company or lender holding a bad debt on a property worth a fraction of its selling price.

The FBI would probably already have charged Hixon with something if it weren’t so horribly backlogged with similar cases occurring all across the United States. According to figures printed in the Kalamazoo Gazette, in 2002, the FBI investigated 5,623 cases of mortgage fraud that resulted in $293 million worth of losses for lenders. In 2006, the FBI was busy investigating 35,617 cases of mortgage fraud with losses totaling over $946 million. Figures currently available for mortgage fraud in 2007 are topping out at well over $1 billion, and by all accounts, at this point the FBI is not able to keep up with the number of claims in 2008.

In fact, as the chart above shows, the FBI is having no small amount of trouble just adjusting its tables and figures on this topic fast enough. You can look at other tables on mortgage fraud cases by year along with pending cases by year at the FBI’s own website, but that report hasn’t been updated since 2005.

Reading about Hixon, who tops the current list in Kalamazoo of foreclosed property owners, I couldn’t help but wonder what the real scope of this problem is, how deep it goes, and how much of it is institutional versus individual. Lenders often buy back their own foreclosed properties because it makes their books look a little bit better. (That is possible through some magical accounting process that I confess I do not entirely understand… sorry! If you do understand it, feel free to enlighten me here by posting why that works for them!) My question is this:

What (besides the law) would prevent lenders from doing the same thing Hixon is doing so successfully right in my home town? They would have to operate through a shill or third party and rip off some other lender of course, but how can we know that isn’t exactly what is happening as we speak? Kind of a very, very high stakes version of ‘hot potato’ and the one left holding the potato goes under. What a game! It makes Monopoly look positively warm and fuzzy!

Just ask Anthony Mozillo of Countrywide about those kinds of games. Countrywide is such a mess right now it doesn’t even have records that show how deep the mess is, and the records it does have, nobody can quite understand. Fewer and fewer employees remain to even look for those records, and I have no doubt that at some point everyone is going to just throw up their hands and exclaim, “Oh, nevermind!”

Honestly, I don’t want to rain on Hixon’s parade. He just got married after all, and he swears that everything he did is on the up and up and it’s all been very heartbreaking for him, losing all those homes. At least he has a sweetie now to soften the crushing blow.

I don’t know who he’s marrying, but if I were her, I’d want a separate bank account and a pre-nup.

In blood.

Aren’t you getting tired of bad economic news? I know I am. I’ve completely given up the phrase, “Well, at least it can’t get any worse.” Not only that, I’m even getting bored playing Cassandra, and that used to never fail to cheer me up. But here’s some news: My tax rebate check is due to be mailed out by the end of this week, and yippee, I can hardly wait to spend it! I got to thinking, you know what is totally possible here? Double my money! That’s right, I can (nearly) double my money by putting every cent of that rebate into a home energy-saving improvement that qualifies me for a 2008 Energy-Saving Tax Credit.

The limit on the amount of credit the government is currently willing to grant is $500, but that could ( and should) change. Here is what the IRS has to say about it on their own tax credit page:

Energy-Saving Tax Credits

You can take a credit based on what you spend on various energy-saving improvements made to your main home. New energy-efficient improvements qualify, including insulation, exterior windows, exterior doors, water heaters, heat pumps, central air conditioners, furnaces and hot water boilers. The overall credit is limited to $500 and further dollar limits apply to specific components –– for example, $200 for windows. If you took the full $500 credit in 2006, you cannot claim the credit in 2007, even if you made qualifying energy-saving improvements.

Separately, there is a 30 percent credit for the cost of photovoltaic property, solar water heating property and fuel cell property.

These credits are claimed on Form 5695.

Tax credits are different from tax deductions. A tax credit comes directly off of the tax you owe, not off your taxable income like a deduction does. That doesn’t mean that if you usually get a refund a tax credit is useless to you; what it might mean is that with the tax credit your refund will be much larger.

Different home energy improvements qualify for different tax credit amounts. Here are some eligible improvements:

Below is a table of anticipated tax savings and energy savings for energy-efficient home improvements taken directly from the Department of Energy website:

* Source: ENERGYSTAR.gov

** The IRS will determine final tax credit amounts. As more information becomes available, it will be posted on our web site.

Although using a tax rebate check to get another tax credit is not very sexy, financially it’s the bomb. Not only do you get semi-immediate gratification in the form of a chunk of change coming right off your 2008 tax bill, you also get the energy cost savings of the improvements themselves for the rest of 2008 and for as long as your energy-saving improvements last beyond that.

Once you get done patting yourself on the back for being so financially savvy, write your congresspeople, because what they are doing right now, at this very minute, is letting many of these credits expire while they argue about pork projects and creating new holidays and whether baseball players should use steroids and whether gay people should marry each other and lots and lots of other idiotic nonsense that won’t do one single thing to make life better for 99.9% of us.

Imagine what would happen if these energy-saving tax credits were radically expanded so as to make energy self-sufficiency an attainable goal for every American household? Excellent technology already exists in photovoltaics and personal wind turbines, not to mention biodiesel for both home heating and auto fuel. The problem is that much of this technology is prohibitively expensive to purchase and install.

The US government could instantly create millions of new manufacturing jobs in this country by increasing energy tax credits for builders and individuals, and by underwriting low cost loans for energy overhauls that would make each household energy self-reliant. Not only is this possible, some European nations have already implemented such programs with great success. It goes without saying that energy self-reliance for US homes would also go a long way towards freeing the US up from life-and-money-sucking foreign entanglements over petroleum, and in doing so would provide money for, I don’t know, health care maybe?

I’m off now to research affordable ways to heat our home this winter. I’ll be sure to post what I find out so if you want to live in a warm space come November of 2008 too, you’ll have a few choices for how to accomplish that seemingly impossible goal. In the meantime, plant that Victory Garden, walk to work, recycle, and smile if you can!

As part of the Money Blog Network group writing project, today’s post is a special ten year retrospective meant to show how far I personally have come financially over the past decade. Since most of the other bloggers are doing this, I will take a deep breath and do it too, scary though it may be for all of us.

Maybe, as they say, we will all “learn a valuable lesson.”

Ten years ago, in the spring of 1998, my (now ex) husband had just announced he was going into business for himself. Part of his motivation, I’m sure, was the fact that he had just been fired (again) from the huge nursery and garden center where he had been working successfully for five years as a landscape designer, and where I continued to work happily and successfully as a manager in the perennial plant section.

I did not receive his announcement well. It wasn’t just that, with his termination, the pressure was now on me to quit a job I really liked as a show of my support. (The pressure was from him, not my employers, who liked me and liked my work a lot.) It also wasn’t that with me quitting on top of him being fired, it would leave us with basically no steady income at all. No, my anger and distress was mostly based on the fact that 1) I felt like it was a miracle he hadn’t been fired much sooner, 2) I was upset with him over that, and 3) I knew for a fact he had absolutely no clue about how to handle money let alone run a business.

We were doomed.

Like a lot of men who go into business for themselves (I should say ‘people’ here, not ‘men’, but what I actually mean is ‘men’) his master plan was that I would handle the financial end of it since I was ‘good at that’ and he would do all the genius boy-wonder designer stuff, since he was good at that. I envisioned bankruptcy for both of us within two years, tops, but because I was anxious not to be divorced again (it was a remarriage for me and up until that point it was going tolerably OK), I said, fine, whatever.

The first year the business made a whopping $5000 with me managing the bookwork, estimates, and appointments, payroll, accounts payable and receivable, and with him being flamboyantly himself in every gated community within 80 miles of where we lived. By 2001 the business had grown to six figures and he was spending twice the gross receipts and yelling at me a lot for not giving him even more money to spend. (How? From where?) He also decided to quit paying his income taxes, since in his opinion, the government had no right to encroach on his creativity in that crass, materialistic way.

At that point, the design business owed around $25,000 in taxes just for the first quarter of that year. I was sick of him, mad at myself for not leaving three years earlier, and terrified right down to my toenails. Without even telling him I quietly hired a small accounting firm to manage his books and his tax obligations. After turning everything over to them including the huge tax bill, I hired a divorce attorney, packed my stuff, and moved out.

Harsh? I guess it was harsh. But SOOOO many women sink this way. I was determined not to be one of them, however stupid I might have been in my past choices. A year later the divorce was final. My settlement paid off the divorce attorney with $1500 left over to start my new life. Ouch. I was 48 and I had $1500 to my name. I also had my clothes, a 10 year old MacIntosh computer, my car, and $30,000 in unsecured marital debt, much of it business debt I had foolishly put on my own charge cards in various attempts to put out supplier fires.

Hey, I warned you this would be ugly. But stick with me here; The happy ending part is coming…

I was hired (at last) by a multinational insurance company to work in their US phone center. The job paid pretty well and came with full benefits including a pension (I was hired in the last year they offered pensions), plus I was able to get a lot of training and an insurance license at no cost.

I moved into a small apartment, and started whittling down the debt. I had to buy everything new to start over, even spoons and towels and so forth. (My ex was a tad frosty after I left so I didn’t get my stuff back, ever.) Even so, I considered myself lucky to have escaped at all. My attorney got me out of the federal tax obligation by pointing out that if I was obligated to pay half the business taxes, then by law I was also entitled to half the current value of the business. The day after she floated that particular idea, my ex quickly signed divorce papers taking the full tax obligation on himself, which actually was the right thing to do all along, plus it was the cheaper option for him by far.

Knowing that my credit was trashed was one of the hardest parts of the divorce, but within two years I’d paid off two cards and gotten the rest of the debt down to the point where I was able to get an auto loan to replace my dying car. A year after that, I found a house and obtained a decent mortgage on my own and bought it. I became interested in stocks and finance and started to read up on both, not just because it helped me in my insurance job, but also because I didn’t want to go through anything that negative ever again.

Not long after buying the house I met a nice man. (No, seriously, he really is a nice man! Really!) We bought a house on an acre in Michigan and I rented out the small house I bought after the divorce at a small profit. I got a job at the corporate center of a huge bank, where I try to talk people into investing their money in fairly decent CDs and really awful home equity lines of credit. I am in the process of leaving that job right now, partly because I can make more money writing, and partly because I want to do something that is a bit healthier and more enjoyable.

So, here I am, ten years later. I own two homes, two cars (both cars are fully paid), and I have my own 401k, pension, and investment plans, as well as my own bank accounts, both savings and checking. I run a successful small business writing web copy and freelance articles in addition to blogging for PFA. I live with a nice man who has his own money and does not tell me what to do.

So, ten years ago: Needed spoons. Now: doing pretty well, thanks.

While you won’t read about this much in financial blogs, most financial experts and attorneys are well-aware that one of the biggest financial mistakes anyone can make is marry someone who is financially self-destructive and then stick by them no matter what. We don’t hear this because it’s not very romantic. There’s no greeting card for it. (Although that may well be an untapped market just waiting for the right web-preneur: “Still married to that greedy dope? Dump that clown and get some hope! Go girl!”)

One writer I know describes it as “financial abuse syndrome.” Are you an FAS victim? Ask yourself a few key questions:

1 -  Does your spouse demand to use your credit card because he/she can’t get one on his/her own?

2 -  Does your spouse make part of the money but demand to make all the financial decisions?

3 -  Would your spouse consider a separate bank account (yours) a betrayal?

4 -  Does your spouse feel entitled to know how much you spend on everything you buy?

5 -  Does your spouse insist on pooling your two incomes leaving you with little or no cash of your own?

6 -  Does your spouse refuse to open or pay bills and explode when you bring that up?

7 -  Does your spouse hide material pertaining to his or her financial past?

8 -  Does your spouse expect your to pay off his or her debts?

9 -  Does your spouse have a pattern of being fired from jobs for being ‘unappreciated’?

10 -  Does your spouse steal from work and consider it normal?

If you answered yes to any of these questions, take a hard look at your joint financial life and ask yourself if you are being controlled in subtle or not-so-subtle ways by a person with money issues. If you are, address those problems immediately before they escalate into something overwhelming. Get help if you need it, both financially and emotionally. If you can’t fix the problem, get out. Fast.

In my opinion, every woman (and man) should have a ‘mad money’ account with at least two months rent in it, and preferably at bit more. That way, if you get mad, you have some money. I will leave the symbolic meaning of money in a relationship to Dr. Phil and Oprah. The main point I want to make with my retrospective here is that you earned the money you make, it’s your money, and anyone who shames or abuses you verbally for taking care of yourself financially doesn’t love you. It’s really that simple.

The good new is, you can turn that boat around. And things get better a lot faster than you might expect!