Zen Penny

Seeking the Path to Financial Nirvana

The End is Nigh…

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Only seven more days to file your taxes. Are you ready?

Here are some online resources to help kickstart the process and avoid trouble with the IRS.

MSN Money has some fantastic guidelines for filing your taxes and finding those deductions you may not have known about. You’ll also find information on upcoming changes to the tax code as well as ways to reduce your tax liabilities; a little late for this year but keep them in mind as you prepare for your taxes next year.

Yahoo Finance is a great place to go for tax advice and has some detailed “how-to” guides that cover everything from withholding income to the finding a professional tax preparer that’s right for you. You’ll also find some neat and useful tax calculators.

Believe it or not, the AARP is a great place to turn to when it comes to taxes. Regardless of your age you can use the website to find a local IRS trained volunteer to provide one-on-one counseling and tax preparation assistance, free of charge. You don’t even need to be a member of the AARP to use this service.

1040.com is a very simple site where you can find any Federal and State tax form, all available for download as a PDF.

I’ve used FreeTaxUSA.com to prepare and file my taxes for the last few years. The website is easy to use and there is no software to download. You can probably have your tax forms prepared and filed in under 30 minutes. Their customer service is excellent too. It’s free to file your federal taxes in most states using this site and state taxes can be filed for as little as $9.95.

Finally, the official IRS website is incredibly useful, and unlike most government websites, it’s fairly easy to navigate. Right on the homepage you’ll find links to the most popular forms and a drop down menu that will help you find information on the most basic tax issues. You won’t find much in the way of tax advice on the site (other than to pay them, not evade them) but there are a wide range of tax related topics covered here that most people will find informative.

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Written by Zenpenny

April 10, 2007 at 6:44 pm

Posted in taxes

The Greatest Free Open Source Apps. Did I Mention They’re Free?!

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What is Open Source Software?

Open Source Software is software whose source code is available to the public. The advantage over proprietary software is that anyone can copy, modify and redistribute the software without paying any licensing fees.

Why Open Source Software?

Open Source software leverages the power of community contributions and peer review to create fantastic applications that are equivalent, and often superior, to their proprietary alternatives. Best of all, they’re free!

Here are my five favorite open source apps.

5. KeePass: So many passwords, so little time. Keep them out of your head, and off your Post-It notes with KeePass. KeePass stores and encrypts all your passwords. It also has some neat features, like a timer you can set to remind you to change passwords at regular intervals, a random password generator, and in some cases, it can even launch the application/website and enter in your password automatically. There are multiple encryption options and you can even protect your KeePass database with multiple layers of security

4. Gimp: Forget about that leather clad freak in Pulp Fiction; Gimp is a great photo/image editing program. It retains much of the functionality of it’s pricey alternative, Photoshop. While it can be a little unwieldy for beginning users, there are many fantastic resources and tutorials on the web that will help users get the most out of this powerful program. You can even download Gimp Portable, a version optimized to run off a USB thumbdrive.

3. OpenOffice.org: OpenOffice has everything you would expect from a commercial office suite and then some. You can be confident when making the switch to OpenOffice because it is fully compatible with every Microsoft Office format. Plus it has a few features you won’t find in other suites, like the ability to export a document as a PDF or a presentation as a flash movie file.

2. VLC Media Player: Confused about codecs? Frustrated because that funny video your friend sent you won’t play on your computer? Well, those days are over because of VLC. This little program plays just about every audio and video format under the sun, even DVDs. It’s incredibly easy to use and it won’t bog down your system like other media players.

1. Mozilla Firefox: Firefox is the 800 pound gorilla of open source software. In the span of a few short years this web browser has gone from being an obscure project from those “Netscape guys” to a household name. Usability, stability, and security have been high priorities during the development of Firefox and it shows. It’s one of the most innovative software applications out there and it’s functionality grows on a daily basis with some fantastic user created addons.

Written by Zenpenny

April 5, 2007 at 10:31 pm

Posted in 2007, free, open source, software

Taking The Fringe Out of Fringe Banking

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The payday loan industry has exploded in the last decade. According to a report by the Center for Responsible Lending, the industry now exceeds $28 billion a year. Of course, traditional brick and mortar banks are looking for a piece of that pie as well.

Wells Fargo offers a payday service called Direct Deposit Advance. They will “advance” you up to $500 and upon your next direct deposit, they will deduct the principle plus the fee of $2 for every $20 borrowed from your checking account. That’s a really nice way of saying this loan has an APR of 120%. Assuming a bank patron used this “service” bi-weekly for an entire year, it would cost them $1300 in fees. I don’t need to tell you what you could do with that money had you saved it and not spent it on fees.

The requirements to use Direct Deposit Advance are a little steeper than your typical strip mall check cashing joint, but not by much. To qualify, you must have a Wells checking account with a direct deposit $100 or more every 35 days and the account must be in good standing. If you meet these qualifications, it’s as easy as a mouse click or ATM visit away. Convenient and easy-to-use bank services are usually a big plus, but in this case, it makes it all too easy to fall into a payday loan trap.

In the end, Wells Fargo would much better serve themselves and the community at large by steering these folks toward bank products that encourage financial responsibility. Perhaps they could require that every customer who uses this service open a savings account and then refund some of that interest into the account, like the North Carolina Employee’s Credit Union did. At the very least, mandate that customers who want to use this service must attend some sort of orientation or counseling session at their local branch to go over the fine print and the pitfalls of payday loans.

The purpose of this post was not to single out Wells Fargo as the only major bank using this questionable lending tactic. I am sure there are many other banks out there that do this in one form or another. But I can speak from experience as I spent over $500 in fees last year towards this very service. Thankfully, I have finally broken myself of this destructive habit. 

Written by Zenpenny

April 3, 2007 at 6:15 pm

Kick Start Your Savings With Microdeposits

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We live in a world of microtransactions. Vending machines, convenience stores, the check-out aisle at your local supermarket, and even video games, we are constantly being bombarded with convenient ways to part with our loose change. To counter this, I have begun making microdeposits into my savings account.

My Orange Savings account with ING makes it fast, easy, and free to transfer money from my linked checking account. Everytime I end up spending money buying something small on a whim, I try to deposit that equivalent amount in my checking account. I set my minimum deposit to be around $2 regardless of whether I spent that much or not because it’s nice to see the tangible difference a couple bucks here and there can make.

This method works even better if I preemptively deposit money anytime I am tempted to run out for a candy bar or a greasy value meal. This act alone forces me to take a few seconds to reflect on whether I absolutely need whatever it is I want to buy. The answer is usually no but it doesn’t always prevent me from buying it anyway. But at the very least I made a small contribution to my financial future.

Microdeposits offer three great benefits to me:

1. It’s a great way to supplement my savings account.

2. It often serves as a preventative measure against making small purchases.

3. I don’t feel like I am denying myself because I can get away with a few impulse buys as long as I pay myself first.

Of course, this process is not meant to replace an automatic savings plan. Also, this can be quite time consuming and requires a bit of discipline. So I will probably phase this habit out once I have a better grip on my budget. But so far it has served as a great way to kick start my savings.

Written by Zenpenny

April 1, 2007 at 2:55 pm

Dr. Zen Penny or How I Learned to Stop Worrying and Love The Sound of One Hand Clapping.

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Before I continue to make any kind of progress on this blog, perhaps it would be wise to begin a discussion on financial nirvana. I am not Buddhist nor I do not claim to be an expert on Buddhism, Zen or otherwise. But Zen ideals do have a lot of practical applications in the financial world. (And to be fair, more than a few that totally contradict the goal oriented methodology of personal finance. But for now, let’s stick to the affirmative.)

To me, financial nirvana is enlightenment. Not enlightenment in the sense of knowing how to pick the right stocks or how to become a millionaire selling real estate. It’s more like enlightenment as a state of mind or an awareness of what must be done to meet your financial needs and know how to go about it. It also represents the death of the cycle; the cycle being anything from living paycheck to paycheck to endless revolving debt.

For me personally, I believe the cusp of financial nirvana will arrive if/when my return on investment exceeds my expenditures. Having the freedom to do what I want will certainly tell me a lot about who I am.

What are your thoughts? Do you agree? Disagree? Do I not have a clue what I’m talking about? Leave a comment and let me know.

Written by Zenpenny

March 30, 2007 at 10:22 pm

Be the Master of your Financial Destiny

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After reading Anxious to Please, a fantastic book on building self-esteem that will be covered in a future post, it dawned on me that that I needed a clearly defined set of personal ethics. Without them, I knew I was doomed to continue behaving in ways contrary to my beliefs and goals. Thus began a period of reflection and self-actualization that was born out of the desire to improve my personal and professional life. But in short time I saw the beneficial effects this process was having in my personal finances as well. Below are seven guidelines developed during this process that have improved my financial outlook.

1. Be Accountable – It is critically important to be honest with yourself and loved ones when it comes to your finances. Unless you can be open and honest your financial future will be shaky at best. Stop blaming your parents, your boss or the credit card company for the poor financial situation you’re in. You, and only you, are responsible for your financial well-being regardless of your circumstances.

2. Be Forgiving – When reflecting on the past, difficult emotions, guilt and regrets are bound to arise. Do not let past financial indiscretions hold you down. You only have control over what you do from this moment forward. Show some grace to yourself and others. The sense of relief you feel will help you make more positive decisions with your money now and in the future.

3. Be Proactive – Remember, it is never too early or too late to start preparing for your future. Every day you don’t have a financial plan in place, you lose money, whether it’s due to poor spending habits, high interest fees on your credit card or even lost returns on your investments. Take action and start today even if you can only contribute a few dollars a month.

4. Be Patient – Rome was not built in a day and neither will your fortune. Don’t try to time the market or participate in risky qet rich quick schemes. Planning for the long haul will secure your future and allow you to take advantage of new opportunities that you wouldn’t have had otherwise.

5. Be Smart – Always do plenty of research before investing. Seek reputable advice; do not trust the “financial gurus” you see in late night infomercials. Diversify your portfolio and then find your comfort level when it comes to risk tolerance. Don’t panic; use dips in the market to your advantage.

6. Be Consistent – Develop a solid financial plan and stick to it rain or shine. Even better if you can make your contributions automatic. Make consistent progress by frequently setting sub-goals and aggressively pursuing them.

7. Be Supportive – Having the support of family and friends will help you tremendously in the pursuit of your financial goals. Encourage others to do the same. We all have the responsibility to help each other out.

I hope these guidelines will help you move closer to achieving your financial dreams like they have helped me. Good luck!

Written by Zenpenny

March 30, 2007 at 4:31 pm

3, 2, 1… Zen Penny

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Welcome to Zen Penny. My initial goal with this experiment is to simply chronicle my journey to financial nirvana. If I can help/inspire/educate anyone else, all the better. Connecting with people smarter and more financially savvy than myself would be gravy. (This shouldn’t be too difficult, as I am a financial newb.)

That being said, I’d like to kick things off by examining my financial goals for 2007.

#1. Budget effectively

I’ve heard nothing will give you a sense of ownership over your financial health like a budget. For the first time in my life, I have one. Right now it consists of a rudimentary Excel spreadsheet, modified from a version originally posted here. I consider it a living document as it is constantly evolving. But so far it has served me well.

Building upon this surge of budgetary momentum, finding key areas where I can significantly cut spending are a priority. Since I am still in the first month of budgeting, I can’t put a firm percentage on how much I’d like to reduce spending but I am already seeing the fruits of my labor. I’m beginning to reign in on the micro-transactions that have slowly but surely eaten away at my livelihood. A budget is a fantastic firewall for those quick $5 trips to the convenience store.

#2. Increase savings & build a 3 month emergency fund

Reducing expenditures is great but it is only part of the program. There must be a plan for the money leftover at the end of the month. I plan on using a large chunk of this money to fund my ING savings account that has sat dormant for much of the last year. They have great rates, an easy automatic savings plan, and have excellent customer support. Highly recommended. My savings goal is to transfer $100 from each paycheck directly into this account. This is will be a real challenge for me as my cashflow is very tight right now. But ultimately this is something I must do to put an end to the vicious paycheck to paycheck lifestyle.

$7,500 may not seem like much money to some people. But to me it represents my first big step towards financial freedom. That dollar figure represents about 3 months worth of my expenditures. It would give me freedom from worry if I lose my job, get sick or injured, or otherwise face some crisis. Having $7,500 in the bank at all times is not likely to be a goal I will achieve this year, but I will be satisfied by laying the foundation of my emergency fund now.

#3. Reduce debt

Poor money management has backed me into some tight corners. This led to some very bad borrowing habits. I’ve gotten into the payday loan trap, heavy credit card debt and was at one time very irresponsible when it came to paying bills. At this point in my life, I now realize that one cannot ignore debt away. Today, nearly all my bills are set up for automatic bill pay through my bank and I pay them weeks in advance to avoid any late fees. Now the real challenge is to pay down my debt. Operation Debt Tsunami is my plan of attack for hitting my high interest $5,000 loan with an extra $65 per month. Any large chunks of cash I should acquire via gift or tax return will go towards paying it down as well. After paying the loan off, I will put that money towards my Mastercard and Capital One cards. These cards are high interest but carry small balances and should be paid off quickly by applying this technique. After that, it is on to my modest student loan that I have been making minimum payments on for years. At my current income, I anticipate being debt free in 4 years.

#4. Expand portfolio

Savings alone won’t do enough to build wealth. Thankfully I had the common sense to fund my 401(k) from day one. My company didn’t match contributions for the first year of my employment and during that time I only contributed 3%, but even that got my retirement account off to a solid start. I quickly realized how tax-deferred savings had a negligible effect on my paycheck so I made an effort to try to increase my contribution a percent or two every quarter. Right now my contribution stands at 9% but my goal is to increase it to 12% by year’s end. Last year, my 401(k) saw a 19% return. Not a bad year by any stretch.

Beyond my employer’s plan, my portfolio has never really gotten off the ground. I’d heard great things about Vanguard, so I decided to do a little research there myself. Vanguard makes it very easy to setup an account and begin investing in ETFs, index funds, and stocks. But for now, I think it’s prudent to start gradually and begin funding a Roth IRA by the end of the year. This will be tough since I’ll need about $3,000 to start but the benefits of tax free earnings are too good to pass up. Another great benefit is that I will be able to withdrawal my contributions at anytime penalty free. Not that I plan on making withdrawals but it will be nice to know it’s there.

So there you have it folks; my 4 financial goals for 2007. I’ve left them pretty broad here but I’ve established a good set of sub-goals to keep me motivated and focused.

Written by Zenpenny

March 28, 2007 at 11:08 am