3 Things You Didn’t Know About Your ROTH IRA for 2013

Written by Sam on . Posted in Education, Inspiration, Retirement. 3654 views.

A Roth IRA is an IRS approved retirement account which allows participants to deposit after-tax money into an account that will grow tax-free.  Once the participate reaches the age of 59 1/2, they may withdraw all funds (contributions and earnings) tax-free.  The potential downside of this account is the early withdrawal penalty of 10% if the funds are taken out before the age of 59 1/2.  Despite this downside, there are several tricks & tips that make participating in a Roth IRA a lot more appealing.

Here are 3 things that most potential participants don’t realize about a Roth IRA:

  1. Withdraw Contributions Anytime.  That’s right, one of the advantages of a Roth over a Traditional IRA is that no matter how old you are, you can always withdraw your contributions, penalty and tax free!  Keep in mind that this does not apply to your earnings (returns made off of your contributions).  Because of this, several investment advisers suggest funding a Roth as your “emergency account” – as you’ll get the long term tax benefits while being able to withdraw the contributions at any time.
  2. Short-term Loan.  Also known as a “Tax-free Rollover”, you can withdraw funds (contributions and earnings) from your Roth IRA as long as you put it back within 60 days.  You’re allowed to do this once every 12 months.
  3. Qualified Withdrawals.  The IRS allows several instances where qualified withdrawls may be made before age 59 1/2.  These include:
  • First-time home purchases, subject to a lifetime limit of $10,000 in pre-tax dollars.
  • Higher educational expenses for you and your immediate family.
  • If you’re disabled.
  • If you use the funds to pay unreimbursed medical expenses in excess of 7.5 percent of your adjusted gross income (AGI).
  • To pay health insurance premiums for yourself, your spouse, or your dependents if you’re unemployed for at least 12 weeks.
  • If you elect to receive your funds on a regular distribution schedule, which the IRS calls “substantially equal periodic payments.”

Interested in contributing to a Roth IRA for 2013 (or 2012 before 04/15/2013)? Here are the latest eligibility requirements for 2013:

If your filing status is… And your modified AGI is… Then you can contribute…
married filing jointly or qualifying widow(er)

 < $178,000

 up to the limit

 > $178,000 but < $188,000

 a reduced amount

 >  $188,000

 zero

married filing separately and you lived with your spouse at any time during the year

 < $10,000

 a reduced amount

 > $10,000

 zero

single, head of household, or married filing separately and you did not live with your spouse at any time during the year

 < $112,000

 up to the limit

 > $112,000 but < $127,000

 a reduced amount

 > $127,000

 zero

There are several other advantages to participating in a Roth IRA.  What are some holdbacks that you’re facing?  Are there any other advantages you’d like to share?  Please feel free to express yourself in the comments section below.

12 Tips on How to Become a Badass Negotiator

Written by Sam on . Posted in Education, Inspiration. 4786 views.

The art of negotiation is both a skill and a game.  The person sitting across the table from you is your opponent. Like most games, the more you practice and prepare, the better chance you’ll have of being a better negotiator.  Let’s prepare.

Before you start negotiating, first realize that there are two types of negotiations: Distributive and Integrative.

A distributive negotiation involves a set prize.  Think of it as $100,000 in the middle of the table that must be divided between you and them – anything that goes to them comes out of your share.  These types of negotiations (think of buying a car) can be more stressful, as both parties are trying to “win” by getting a bigger piece of the pie – and neither side necessarily cares if a relationship survives the negotiation.

Conversely, with an integrative negotiation some interests are aligned.  If the parties work together they can increase the size of the prize.  Think of a company partnering with another – combining their resources effectively could result in greater profits for both.  Each party should be sensitive that the surviving relationship may be more valuable than the results of a negotiation.  For example, why beat up your employer for that extra $1000 if they’re just going to be resentful and fire you a week later?

Don’t approach an integrative negotiation with the goals of a distributive.  Identify your long-term goals for the negotiation.  Also keep in mind that both parties can win under each type. Also, it can never hurt to trick your opponent into liking you.

Now onto the actual negotiation.  An efficient negotiation is comprised of four stages:  Preparation, Information Exchange, Bargaining and Closing.  Follow these 12 steps and you’ll be will on the way to kicking crap out of someone in a negotiation:

PREPARATION STAGE – Size up your competition.

  1. Assess the situation.  Ask yourself how much is at stake?  How important is a future relationship to you and your opponent?  If a future relationship is important to both parties, each should compromise for the sake of the relationship.  If the parties are not going to continue doing business together, the more aggressively the negotiation may be pursued.  Know what your walking into and if you should error on the side of compromise or not.
  2. Identify which type of negotiator your opponent is.  Chances are your opponent will fit into one of the following five categories: Avoider, Compromiser, Accommodator, Competitor or Problem Solver.  Identifying the strategy your competitor is going to take will help you foresee any obstacles the negotiation will face.  For example, you may be able to get a better deal when negotiating with an avoider if you can appeal to their desire for a lower stress and a more casual negotiation.
  3. Finalize the goal or purpose of your negotiation.  Prior to going into the negotiation you need to get organized.  Write down your (and the other side’s) three most important issues.  Identify areas of conflict which will need to be resolved.  Set realistic goals.  You shouldn’t go into the negotiation to get “the lowest price”, identify a number that you’ll be happy with.  Setting goals will allow you to be able to walk out of the negotiation knowing if you succeeded or not.

    INFORMATION EXCHANGE STAGE – Fill in the blanks.

  4. Question Effectively.  Begin your negotiation by opening an effective line of communication with your opponent.  Avoid yes and no questions.  The goal is to flush out any information you don’t already have – expose a need or weakness which can be played on later.  Don’t get down to the terms of the deal without getting as much information as possible.  For example, does the car dealer have excess supply this month.   Take your time with this process.
  5. Conceal your weaknesses.  Don’t fall into a trap of letting your opponent know if you’re desperate.  Downplay any urgency or needs they may think you have.

    BARGAINING STAGE – Not as important if you’ve performed an efficient exchange of information.

  6. Anchoring.   Look for opportunities to set favorable numbers or reference points to work off of.  Conversely, avoid  being anchored to an opening offer or arbitrary point.  The less distance you have to go up or down, the more successful your negotiation will be.

(The First) Two Investments Everyone Should Own

Written by Sam on . Posted in Education, Investing, Investing for Beginners. 2607 views.

The First Two Investments Everyone Should OwnThe following is intended to be a very general financial overview and is meant to whet the appetite of potential/beginning investors.  Learning about investing in it’s simplest form is a great first step to financial independence and saving a boat-load in fees.

Any investor, whether beginner or expert, will typically own two general asset classes:  Stocks and Bonds.  The proportional mix of stocks and bonds is known as one’s Asset Allocation.    Those with less experience should keep a simple asset allocation and start off owning only two things:

  1. A Total Stock Market Index Fund.
  2. A Total Bond Market Index Fund.
To rewind a little, the first rule for beginning investors should be “Don’t own individual stocks”.  Why?  Owning an individual stock exposes you to “Individual or Diversifiable Risk” (the risk of price change due to the unique circumstances of a specific security, as opposed to the total market).  An investor can avoid the risk associated with individual companies (such as the CEO being involved in a scandal) by investing in a Total Stock Market Index Fund which owns thousands of individual companies (decreasing the risk of one company affecting the Fund price).

7 Ways to Be Seen as an Expert in Your Industry

Written by Sam on . Posted in Education, Inspiration. 8577 views.

Ways to be seen as an expert in your industry

Being perceived as an expert in your industry is one of the Financial Tips I Wish Someone Told Me When I Was Younger as well as a great source of job security and profitability.  As someone who has become an expert in a specific niche, having sold a successful information based resource website to a Fortune 500 company, I’ve seen the benefits of expertise first hand.  I’ve also seen others expand upon their own expertise to create phenomenal entrepreneurial opportunities.  Follow these initial steps to start down the path of becoming an expert in your industry:

    1. Be organized!  I’m a huge believer in organizing your resources and information.  To be perceived as an expert you don’t have to know every answer immediately, you just need to be able to access information in a timely manner.  Throughout the day I have no problem telling a client that I’ll have to call them back – I’ll then review my notes or do additional research and formulate a focused and intelligent response.
    2. Ask for help.  Experts become experts by learning from other experts.  Mistakes can be good, but avoiding them can be better.  Associate with people who share your same level of passion, even if it’s a different niche, and you’ll be inspired to achieve more. Excellent Read: Outliers: The Story of Success.
    3. Get your knowledge out there.  This may be the most important takeaway – get your expertise out there in the marketplace.   I have seen great results, including job offers,  from non-monetized websites, twitter posts or Facebook pages.  Volunteering to speak at a company seminar, submitting a guest article for your industry newsletter or writing an eBook will all work to get you recognized as an expert.

    14 Ways To Trick Your Customers and Co-Workers Into Liking You

    Written by Sam on . Posted in Education, Inspiration. 5945 views.

    Business relationships matter.  It’s the relationship that keeps your clients coming back and not going across the street to your competitor. The key to starting (and maintaining) a successful relationship is being likable.

    Whether you’re already likeable or a real SOB, if you want to be successful in business you’re going to need to be liked.  For some of us, that means playing dirty.

    Here are some sneaky ways to trick people into liking you:

    1. Jump on a crisis.  People never forget when you help them out in their time of need.  Even small tasks like helping a busy co-worker make copies or filling in when they’re on vacation will make you stand out (and appreciated). Better yet, help a coworker or client who was recently laid off – I guarantee it will solidify a relationship for life.
    2. Bypass technology.  Email is the enemy of effective communication.  With everyone being so damn reliant upon email, most of us have become afraid to meet in person.  A face to face lunch, an impromptu meeting at the office, or even just picking up the phone will go further than years of email communication.
    3. Open up personally.  The more you share your passions, hobbies, and family stories the less likely you are to get fired and more likely you are to get the sale.  People are suckers for a good “My kid started walking for the first time this weekend” story.  Your life is interesting, I promise. Excellent read: “Rework”, by David Heinemeier Hansson.
    4. Show your sense of humor.  Don’t be afraid to tell a cheesy joke or play a prank.  Loosening up a client or coworker can help cut through inefficient formalities and accomplish what you want quicker.   Humor is obviously a sign of tremendous intelligence.
    5. Grow a mustache.  Just kidding…or am I?

    10 Easy Tricks to an Increased Net Worth in 10 Years

    Written by Sam on . Posted in Education, Inspiration, Investing. 3475 views.

    Of course it’s easiest to say “make more money and spend less”, but sometimes that’s not possible or even desirable.  Here are 10 tricks to increase your net worth without increasing your income:
    1. Auto-deduct from your paycheck.  It’s not necessarily bad to spend 100% of the paycheck you receive – just make sure your savings are taken out before you get it.  Most employers who allow for direct deposit allow you to specify multiple accounts.  This makes it easy for your living expenses to go into a checking account and a set amount to go directly into a separate savings account.  If this is not an option for you, automatic monthly transfers from checking to savings can also be effective.  $50 a check can add up quickly.  Recommended best-selling read:   The Power of Habit: Why We Do What We Do in Life and Business, by Charles Duhigg.
    2. Transfer, pay down, then eliminate your debt.  We all know that credit card interest rates are sky high.  If you’ve run up a high balance, consider transferring the balance to a new card (cancelling the old one) to take advantage of the lower, introductory rates.  Follow this up with paying off the balance, then allocating what you were paying in credit card bills to amounts you’re contributing to savings.
    3. Contribute to a Roth IRA account.  Most people do not realize that there is typically NOT a penalty to remove the funds you’ve contributed to a Roth IRA.  Since the government also allows for qualified contributions to be withdrawn for education, housing and medical, why not contribute (get the tax benefits) then withdraw down the road if you need to? See IRS Site for the complete list of qualified distributions*
    4. Pay extra mortgage principal.  A typical new mortgage payment is comprised mostly of interest ($1100 payment can be $960 interest, $140 principal).  An efficient trick is to pay extra principal each month to avoid paying interest on it in the future.  Paying an extra couple hundred bucks per month could allow you to pay your 30 year mortgage off in 15 years.

    4 Keys to the New National 3.8% Real Estate Sales Tax

    Written by Sam on . Posted in Education, Investing. 991 views.

    An often less talked about portion of the massive legislation known as ObamaCare is how the government is going to pay for it. The great majority of the bill pertains to matters that have nothing to do with healthcare. It may surprise you, but some of the needed revenue will come from the sale of real estate – kind of.

    Effective January 1, 2013, a new 3.8% tax on investment income will be imposed. This tax does not affect all real estate transactions, only when certain conditions are met.

    Here’s what you need to know from a capital gain/real estate perspective:

    1. Is your AGI greater than $200,000? The 3.8% tax is on the LESSER of your investment income amount or the amount in excess of Adjusted gross income (AGI) over $200,000 (Individual) or $250,000 (Couple). Therefore, if your AGI (which includes real estate sale gains) is less than $200k (or $250k) you are not affected by the new tax.
    2. Your AGI will include the sale of investment income (or real estate). Say you make $100k salary and sell your vacation home for a profit of $225k – your AGI will be $325k and you’ll be subject to the 3.8% tax on $125k ($325k-200k).
    3. You get a $500k deduction for the sale of your primary residence. If you sell your primary residence for a gain of $550k, you get to deduct the first $500k and are left with a gain of $50k to be added to your AGI.