Zero Gravity Financial, LLC

Personal Financial Planning

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How to Freeze Your Credit and Protect Your Identity

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Nearly half of all Americans may have had their personal information- Social Security numbers, names, addresses and dates of birth- stolen in the massive Equifax data breach revealed last week.

Why should you be concerned about the Equifax data breach and identity theft?

Identity thieves may attempt to use your credit cards,  access your accounts, or open new accounts or credit in your name. It can be hard to notice that you were a victim of identity theft until you review your reports or statements and see charges you didn’t make, or are contacted by a debt collector about a debt that you don’t recognize. Fraudulent activity may not happen immediately after a data breach and can happen months from now.

How to protect yourself from identity theft

  1. Set up free credit monitoring. Your credit cards may offer this service for free. If not, go to creditkarma.com to sign up for a free account and credit monitoring. You will receive an alert if there is any suspicious activity on your credit, and also see your credit score and get tips on how to improve it.
  2. Freeze your credit with all 3 credit bureaus.

What is a credit freeze?

It prevents criminals from accessing your credit report and opening new credit, loans or services in your name.

How much does a credit freeze cost?

Anywhere from free to $10 per credit bureau based on your resident state, so up to $30 total. Here is a list of states and their fees. This is a one time fee compared to paid credit monitoring which is ongoing monthly fees. Credit thaws also are free to $10 per credit bureau.

Who can see my credit report?

  • You can see it and request a free annual credit report from each credit agency
  • Your existing creditors can see it- credit cards, loans, etc. So when you request a credit limit increase, you do not have to thaw your credit.
  • Government agencies with legal authority

What if I want to finance a new cell phone or rent an apartment?

Ask the creditor which credit bureau they need to access your credit report. You can then thaw your credit at just the requested credit bureau for a brief time period.

How do I setup a credit freeze?

Here is a walkthrough of how to freeze your credit at each of the three credit bureaus:

Equifax:

TransUnion:

Experian:

Best Savings Rates for Your Cash

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CashIf you are looking for the best savings rates for your cash, online savings accounts win and it’s not even close. Online savings rates are over 1.1% now due to the Feds raising rates 3 times in the past 6 months. Have big banks increased their savings rates too? Nope. Interest rates at the 4 big banks remain at a microscopic .01% APY.

Do you have more than $1,000 cash in a checking or savings account at a big bank? If so, you are losing money by not moving it to an online savings account that paying 1.1% APY.

$120 > $1

For the puny $1 per year that Chase/Citi/BofA/WellsFargo pays for the $10,000 in your checking or savings account, you could be getting paid $120 per year in an online savings account. Take a look at the numbers:

What about CD rates? There are a few drawbacks to consider. One, CDs are not as liquid as a checking or savings account. Your cash is locked up for 6 months, 1 , 3, or 5 years. Two, CD rates are paying close to the same rate as online savings accounts. At Ally Bank, a 1 year CD is 1.35% APR while a 3 year CD is 1.6%. For most situations, you should have your cash in an online savings account for a period of five years or less.

Take the time now to open and move your extra cash to an online savings accounts. Here are my top 3 online banks that consistently provide high interest rates without the limited offer gimmicks:

Disclaimer: These are not affiliate links and I do not receive any compensation from recommendations. My advice is objectively provided here based on rates from July 2017.

How to Save Money on Your Cell Phone Bill

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Save Money on Your Cell Phone Bill
Looking to save money in 2016? Here’s an easy way to reduce your monthly expenses. Take a look at your cell phone bill, see how much you are using and paying per month and change your plan or carrier to a lower rate.

1- Consider cell phone reception

Providers continue to improve network speed and reliability. Before you change cell phone carriers for better rates, check your cell phone coverage at home and work and find out which carrier has the right coverage for you.

2- Are you on a contract?

If your phone is on a 2-year contract, then you may be stuck with your carrier until it’s paid off. Look for special promotions from rival carriers offering to pay off balance. Check phone compatibility- certain phones work on limited networks.

3- Find your data sweet spot

Most cell phone plans offer unlimited talk and text, so log in to your account and check recent data usage. If your phone is not on a contract, take a look at prepaid plans as they may offer more data at a lower rate. Average cell phone data usage is 2GB per month. I have a prepaid plan with T-Mobile, and use around 2GB of data per month:

Data Usage

4- Compare carrier plan and rates

Review your carrier’s cell phone plans. When I signed up with a prepaid plan with T-Mobile, I got 3GB of data for $50/month:

Cell Phone rates

When T-Mobile dropped their prices recently, they did not move me down to the $40/month plan even though I use less than 3GB data per month. Instead, they kept me at the $50/month plan and increased my data limit to 5GB, which is more than what I need. It took just a few minutes to change my plan online to $40/month and save $120 in annual expenses.

Other Tips:

  • Avoid 2-Year contracts: Pay for the phone up front or do a no-interest payment plan
  • If you’re not under contract, see if there is a lower prepaid plan with your current carrier or switch to another one (check phone compatibility)
  • Save even more money by switching to low-cost carriers: Straight Talk, Boost Mobile, Ting, Project Fi, Metro PCS & Cricket Wireless
  • Consider family plans to bundle phones & tablets with shared data

 

Save Money on Your Cell Phone Bill

Federal Tax Withholding Explained

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W4“I got a big tax refund! My tax accountant is great!”

“I got a refund!”

“Why didn’t I get a refund? Why do I owe money?”

 

These are common things heard during the tax season. Why is it that some people get a big refund while others end up owing money? One of the biggest income tax myths is that refunds are a result of your tax preparer. Credit may be taken by some tax preparers who advise in tax planning and understand the tax code. However, tax refunds are mainly due to one core concept that people do not understand and get wrong when filling out W-4 payroll forms: Federal Withholding Elections.

Here is an illustration of 3 single employees who make $75,000 in 2015. Each employee selects different federal withholding- 0, 1, and 2. When they file their income taxes in 2016, all of them owe the same federal tax: $11,975. What is different?

Employee #1 elected 0 Federal exemptions and received less money in his semi-monthly paycheck of $2,300 because more money was being withheld for Federal taxes. When Employee #1 files their income taxes in 2016, they will get a larger refund of $1,985.

Employee #2 elected 1 Federal exemption and received more money in their semi-monthly paychecks of #2,347 and will get a smaller refund of $975.

Let’s take a look at Employee #3 who had 2 Federal exemptions. They were receiving more money in their paychecks, $2,389 because less money was being withheld for Federal Taxes. When they file their taxes next year, they will owe $45 in taxes.

This is important enough to repeat again: They all owe the same in Federal Taxes- $11,975.

What is the best Federal Withholding election? It depends on what your preference is. If you elect 0 exemptions, then you will have a smaller paycheck and will learn to live and save within your means. Then, when you have a larger refund the following year, you will be able to allocate some of that money towards your saving and retirement goals. On the other hand, some people prefer to elect 2 exemptions because they want larger paychecks to save and invest the money now. They also understand and are prepared to pay taxes owed the next year.

Understanding this concept will prevent tax surprises and help you understand that there is a mathematical reason for a large tax refund.

Fed Tax Withholding

Free Tax Return Preparation for Qualifying Taxpayers

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1040 Form: Income Taxes If you know someone who is age 60 and older, made less then $54,000, with disabilities, or limited English communication and needs assistance with their income taxes, the Volunteer Income Tax Assistance (VITA) program offers free income tax return preparation with electronic filing to qualified individuals. VITA volunteers are IRS-certified.

Another free program for those aged 60 and older offering free tax help is the Tax Counseling for the Elderly (TCE). TCE volunteers are IRS-certified and are often retired individuals themselves who are associated with non-profit organizations that receive grants from the IRS. The TCE program specializes in questions about pensions and retirement-related issues unique to seniors.

Click this link to get more information from the IRS’ website.

Retirement & Health Insurance for Freelancers

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Retirement & Health Insurance Freelancers

Is it possible for a freelancer making $60,000 in New York City to save for retirement and have health insurance coverage? The biggest difference between W-2 employees and freelancers is that freelancers don’t have existing HR benefits and therefore do not enroll in health insurance or retirement plans. While W-2 workers have access to established employee benefits and group insurance plans, freelancers do everything themselves: sales, marketing, operations, techonology and bookkeeping. For a freelancer, there is no time leftover to setup retirement accounts, research and signup for insurance, and enroll in other tax advantaged benefits.

Let’s take a look at 2 different scenarios of a freelancer in New York City who made a net profit of $60,000 in 2015:

In the first example, the freelancer did not contribute to a retirement plan or have health insurance coverage. They ended up paying $21,000 in Federal, New York State and City Income Taxes, including a $900 penalty for being uninsured.

In the second example, the freelancer gets NY Silver Plan health insurance coverage for the entire year, and contributes $1,200 to a Traditional IRA. As a result, they paid $3,000 less in taxes, going from owing $21,000 to $18,000. Saving for retirement and having health insurance coverage would normally cost $475/mo. However, because these benefits provide a tax deduction, it lowered the cost to $225/month.

If you are a freelancer, make time in your calendar now to do these 3 things:

  1. Review your budget. What monthly expenses can be reduced or removed by $225, how can you increase your income, or a combination of the two to make up the difference?
  2. Review health insurance plans and sign up for coverage.
  3. Open a Traditional IRA account, and setup monthly transfers of $100 to your new account.
Retirement Planning for Freelancers
Retirement Planning for Freelancers

Keep your investment accounts away from Big Banks

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Bank Fees

Do you know how much you are paying in advisory services and fees to a big bank managing your investment or retirement accounts? The answer will surprise you. A study from Personal Capital compared the costs of investing your money with big banks compared to lower-cost providers like Fidelity or USAA.

Take a look at a $500,000 account and how advisory services and fees impact the portfolio over 30 years:

Total Fees

Having an investment account at Merrill Lynch is 45% more in total costs than Fidelity! Also, if you do business with a company like Merrill Lynch, there is no fiduciary duty to you. In plain English, that means your financial advisor is working for Merrill Lynch, not for you or in your best interest.

Take action by opening accounts at lower cost providers like Vanguard, Charles Schwab, or Fidelity and transfer your investment or retirement accounts there. Or find a fee-only financial planner who charges a retainer fee and not an AUM fee for managing your account.

h/t to Personal Capital for the survey. Full whitepaper here.

IATSE NBF Oct 2015 Update

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Iatse

 

Highlights from the Oct 2015 letter:

 

  • No CAPP account charge increases for the next 9 months. The new CAPP account charges that went into effect for Q4, Oct-Dec 2015 will not increase in the next 2 quarters through the end of June 2016.
  • Use it or lose it. Don’t lose employer contributions for your health insurance coverage. If your CAPP account is inactive more than 24 months, the balance will be forfeited.
  • Time to get married or lose health insurance coverage. Domestic partner coverage is coming to an end. As of Jan 1 2016, you must be married to receive health insurance benefits.

 

Full letter is here.