photo credit: Paul Keleher

You just received your 2008 tax refund, do you have an eye on the new 24″ iMac or will you put it towards your emergency savings account? Will you use the tax refund to pay off credit cards, save for a vacation, or maybe start investing in the stock market? I wonder if the current economic recession will cause people to set money aside for a rainy day or start an emergency savings account that can pay for car repairs or doctor bills. Maybe you will use the tax return to fund your child’s 529 college savings account this year. Here are several changes my family is making in 2009 with our tax refund:

1. Change tax withholding amount. We have received a refund for the past two years and we need to adjust our return so that we don’t continue loaning the government “free” money.

2. Add funds to our emergency savings account. Our goal is to have 1-2 years of savings in our ING Orange account for emergencies in case we lost our jobs for an extended period of time.

3. Add additional funds to college 529 plans. We chose Vanguard for our 529 college education plan as they have low fees, great funds, and an easy to use website. Since our children are young they can benefit from the current prices of S&P 500 stocks.

What is tempting to do with our money:

1. Buy a new imac 24″ computer for my home office. Yes, I love macs and have had my eye on the new imac for several months. I’ve visited our Mac store several times and asked dozens of questions, and I think I’ve impressed my wife that I still didn’t buy one. My plan is to convert my Powerbook into a desktop by finding a separate LCD monitor and external mouse. Total savings $2,000

2. Buy a new vehicle. It’s tempting to upgrade to another SUV or minivan that would give our family some more legroom, but it just doesn’t make financial sense right now. Many of our friends swear by the Toyota Sienna, but we have yet to make the purchase. Our vehicles run great and they both have over 100,000 miles, but are both paid off. It’s hard to make another car payment just for a little extra leg room.

3. Buy a new refrigerator. Kind of strange that I would even put this down as one of the things I would buy with our tax return, but our fridge is driving me crazy. Each time a guest comes over to our house, they say that it’s annoying to open up. When we bought our first home our GE refrigerator fit perfect, and in our current home it’s not a counter depth model. It sticks out a good 4″ and the right door hits our kitchen door each time you open it. Very annoying, but our refrigerator works fine. How can I justify spending $800+ for a new one?

So how will you be using your 2008 tax refund? Emergency savings account or 24″ iMac?

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This isn’t the game Monopoly where grandma would give you a written IOU if you couldn’t afford her red hotel on Park Place, this is reality in 2009 where a California tax refund could be paid via IOU. What does this mean for Californian’s? We could be receiving an IOU or note from the state government that will be paid when funds are available. How long could this take? We don’t know, as the state doesn’t have a budget and county workers are having to take unpaid leave in order to bridge the budget deficit. According to an MSNBC article, back in 1992 the State of California went through a similar IOU with state workers. In 1992 the workers were paid back the salary and it also included a 5% interest rate. Sounds good, right? My ING Orange account is only paying 2.4%. But wait, how will California’s pay bills that are due? You can’t write an IOU for your rent or mortgage. And last I checked, Costco doesn’t take an IOU either.

What are your options right now?

1. Hope that California passes the 2009 budget within the next few weeks.

2. California receives emergency funds from the U.S. Government.

3. You start or add funds to your emergency savings account.

4. Buy a California lotto ticket.

5. Borrow money from a relative to pay bills.

6. Charge bills to your credit card.

7. Ignore your bills.

8. Get an extra job or increase hours.

Of the choices above, the only one that I am counting on is #3 and #8. I’ll keep adding funds to my emergency savings account and continue to find ways to cut expenses each month. Trying to find additional sources of passive income will also help in the long term. I sure hope this budget mess is resolved quickly in California and we can again focus on growth.

You are probably also wondering why someone would provide a tax free loan to California and receive a tax refund. Well, some taxpayers would rather receive a refund than owe the state. Maybe you received some additional income or did not adjust your exemptions after having a child. If we receive an IOU from the state, I can guarantee that we will be updating our exemptions immediately.

What measures are you taking to ensure you have cash available through the tax refund season? Do you count on a refund each year?

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photo credit: nedrichards

Starbucks announced yesterday that they will be closing another 300 stores as demand for the pricey coffee continues to decline. According to a memo sent out by Howard Schultz, Starbucks continues to be challenged in this tough economic time. I have written a couple posts about my Starbucks addiction and how I was spending over $2,000 a year on coffee. I guess more customers have taken business to Dunkin Donuts or now do what I do and brew Costco Starbucks beans. It’s actually more convenient to brew my own coffee as I don’t have to wait in line or drive to a local Starbucks. My beverage of choice back in 2007 was a cafe Americano which is espresso and hot water. I’ve downgraded a bit, but still love saving a ton of money by brewing my own morning Joe.

Are you a Starbucks addict? Will you miss your local Starbucks if it closed?

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My wife has a friend coming over tomorrow to discuss our personal finance goals for 2009 including life insurance and I believe our investments as well. I’ve never heard of Primerica, did a quick google search, and found that they have been in business for years selling life insurance policies. Primerica also is part of Citigroup, so I’m surprised I’ve never heard of them before. My wife did not give me any other info other than we are meeting with her to discuss financial goals. Since I’m a “hand on” personal finance type, I’m curious what she will want to discuss. Since it’s the beginning of 2009, I figure now is a good time to review our insurance policies for home, autos, and life. Not sure what she can do with our investments, but won’t hurt to ask.

Has anyone used Primerica for life insurance or investments?

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Can Mint.com solve one of my personal finance goals for 2009? I’m a little late with one of my goals for 2008, so it’s now become my new 2009 goal. Finding a free or relatively inexpensive software program to track personal finance transactions and establish a budget for my wife and I. Since transparency seems to be the catch phrase of 2009 with banks and financial institutions, I thought it would be important to focus on this same issue with family finances. I seem to be the keeper of passwords, bank accounts, and financial records, so it was important to find a way to share this info efficiently with my wife. It also helps that she has an iphone for work and has access to one of the coolest applications ever.

Yes, Mint.com has an application for the iphone that allows you to see your daily net worth and track your spending plans. It’s actually killing me that I don’t have an iphone right now, so I’m trying hard to justify why I need one. One word, I don’t. Can I afford $70 a month for cell service? Yes. Should I spend $70 on cell service? Nope. When can I purchase an iphone? When I create another stream of passive income that nets at least $70 a month.

Time to put the iphone out of my mind for now. Mint.com has the ability to track all of your bank accounts, investment accounts, credit cards, car loans and more. I was even surprised to see my paypal account and Prosper.com account could be linked to Mint. The most powerful part is the ability to track daily transactions through credit cards and bank accounts. Mint will even give you suggestions for saving additional money on credit card offers or higher interest rates through savings accounts. This is how Mint makes money on this service, and it’s an option that you don’t have to accept. I’m perfectly happy with one of my banks, but I could choose to open an HSBC account and earn slightly higher interest. Is it worth jumping from bank to bank, chasing higher interest rates? It could be.

I did have one major issue when trying to link my ING Orange account with Mint. I kept receiving an error message that an invalid username or password were used. I finally reset my 5 personal questions on ING, answered them, then saved. In a separate web browser I answered the same 5 questions on Mint in the same order and pressed enter. Success, finally the ING Orange account was linked to Mint.

I’m still working on establishing a budget through Mint and creating user defined categories for transactions. Many of the categories I had on my Excel spreadsheet can be utilized on Mint. Easy to create custom categories for things like 529 savings plan or Preschool tuition.

What do I wish Mint had? More reports for financial planning. Reports that showed future growth of savings at current interest rates or growth of my retirement account. I realize this can be done on other investment sites as well, but would be nice to have in one place.

What’s the best feature of Mint? The fact that my wife and I can have access to the same personal finance information in real time is amazing. Total transparency and the ability to have access to this information quickly is priceless. Many hours I have spent trying to manually update our budget spreadsheet and transactions are now available for more family time.

Have you used Mint or another personal finance software for your family budget?

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