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You might find your paychecks get slightly larger, but be careful if you and your spouse file jointly, you have more than one job, or a number of other exceptions — you might get more than you’re entitled to, and that would be a hellishly rude awakening come tax season 2010.

Suggestion: make like your paychecks are the same amount and put the difference into a savings account every month. Come April of next year, if you’ve been given just the right amount, you should find yourself with an extra couple hundred bucks and any extra that you can give back to the government without even noticing you ever had it. Keep it in savings, buy a new refrigerator, take a spa day, throw it at your IRA and hope some of it sticks — who couldn’t use an extra $400 or $800 at this time of year?

(Yes, I know this completely defeats the purpose of the “stimulus” bill, but any who thinks and extra bit of change a paycheck is going to turn this country around is fooling himself. This is just a trick to inspire confidence that the government is doing something to help us out — take it, make a bit of interest off it, and don’t let it cause you any panic in the future.)

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(This information comes courtesy of Consumerist Morning Deals, who got it from Slick Deals.)

Step (1): Apply for a Sony Card Visa by March 14. (Note: your application must be approved immediately. Additional processing voids this offer).

Step (2): Within 45 days, make a single purchase worth at least $349 (clever fine print — your purchase MUST exceed $349, so you can’t just run up a balance of $349 with several small purchases, and balance transfers don’t count).

Step (3): $200 statement credit automatically applied to credit card 8-12 weeks (be sure to mark on a calendar when that period is up to ensure that they don’t forget about you, and print out the fine print as evidence should you have to argue your case — I’ve never had an issue getting promised rewards from credit cards, but I have from opening checking accounts coughbankofamericacansuckitcough).

Step (4): Use statement credit judiciously for everyday purchases.  Alternatively, buy me this chair for my new home office.

Are you community oriented?  Do you take pleasure in lending people money, but don’t trust your friends to pay you back?  Would you like to make a little more than 2 effing % interest on your hard-earned savings?  P2P lending may be right for you!

If you have some extra money hanging around — after you’ve established an emergency fund, paid off your debts, maxed out your Roth IRA and your employer-match for your 401k, and taken a well-earned vacation — peer-to-peer lending is going to be your best bet for interest rates.  P2P lending involves giving a loan to a specific individual for a specific amount of time.  The interest rates depend on the quality of the borrower’s credit score, and you can pick how risky you want your investment to be.  I’d recommend spreading it out over a few different levels, but that’s just me.

Note: This is NOT something you should do if you need your cash monies to be liquid.  This is NOT where you should keep your emergency fund.

There’s a chance your borrower will default, but, you know, there’s also a chance that an alligator will burn down your school.  You just don’t know what life has in store for you. This is going be be a less volatile investment than straight stocks, but riskier than an FDIC-insured savings account.  I’d much rather have a 7-20% return than peace of mind, but I’m greedy like that.

How do you know you’re going to get your money back? Well, you don’t — there is no guarantee, just like there is no guarantee that your shares of Coca Cola are going to be worth anything tomorrow. However, all of these microfinance companies screen borrowers strictly and have a very low rate of defaults. Still, it’s a risk, but it’s a more reliable return than, say, the fucking stock market (which tends to average out to around a 7% return, with more fees and way more migraines than I’m prepared to handle).

There are a few different businesses that provide this service for borrowers and lenders alike.  Lending Club is probably the most popular — there a good overview at debtkid (full disclosure: he does some work for them; I do not). If you want to sign up, leave a comment with your email address and you can get a $50 bonus (fuller disclosure: and I get a $25 bonus, which you can also get if you get your buddies to sign up. Lending Club puts their advertising budget towards this word-of-mouth marketing maneuver. Everyone wins!)

You can also become a borrower if you have a good credit score (above 660, I believe) and want to consolidate your credit cards, get a loan for a car, or just feel like paying for the privilege of having money. I don’t recommend this.

If you’re a feel-good sort of person, Kiva is the same p2p idea, except instead of gaining interest, you get to sleep better at night and you may possibly up your karmic levels by helping out entrepreneurs in developing countries (though there is a rumor going around that Kiva is coming to the US). You select which entrepreneur you’d like to assist, and your money is paid back over time. Remember those commercials — a dime a day could help this child eat, and you get pictures of the kid whose life you saved? It’s like that, except you get your money back, and you’re promoting capitalism, if you’re into that sort of thing.

My Money blog has a review of MicroPlace, where you can earn 5% if you can live without some money for two years, or 6% if you’re willing to give it up for six years. It’s sort of a combination of Lending Club and Kiva — earn interest, help out the impoverished. Mmm, capitalism with a side of philanthropy. Delicious!

If you read one financial blog, it should be Get Rich Slowly. This is a great introduction to money management. Don’t get overwhelmed by the avalanche of information; JD Roth goes over a lot of the same concepts every once in awhile. Just add it to your RSS feeder and read the latest ten posts when you have a half hour to spare.

Darling Slegg Queries:

“Hey, let’s say that you got around $10,000 tomorrow. What would be the best way to make that grow in a year’s time?”

monopoly

The Non-Answer:

The correct question is, what do I want to do with the money in a year’s time?

The Short Answer:

CDs.

The Long Answer:

That depends on a number of factors. Do I have any debt? Do I need the money to be liquid for the duration of that year for any reason? Am I expecting to make any big, unavoidable purchases in the next year (car repair, dental work)? How’s my job security? Do I have a lucrative college degree?*  Ever the skeptic, why do I suddenly have $10,000 and do I owe anyone — aka, THE MAN — anything for it?

Steve Buscemi is the man.

Steve Buscemi is the man.

*Not a non-sequitur.

I suspect what she’s asking me is where I would put the money so that it would create the most passive income, but there are a number of issues that arrive with an arbitrary, hypothetical situation.

If I had $10,000 and needed to access it in a year’s time, I would not invest in anything that is not FDIC insured. Very generally speaking, CDs tend to have the best interest rates for FDIC insured accounts (a quick Google search for CD savings rates brings me to bankrate.com, and right now GMAC bank is showing the best rate — 3.68% with 3.75% APY and a $500 minimum)**. See, the nice thing about CDs is that the rates won’t change — my high-yield savings account won’t promise that, which is why I just transferred my emergency savings account from FNBO Direct (~2.85%) to Dollar Direct (4% intro APY). I’d make a reliable couple hundred bucks. I’m basically being paid a pittance for patience.

**You’ll notice that my savings account has a better interest rate than CDs these days.  That’s why research is key.

The Longer Answer:

$10,000 is a good chunk of money for anyone, but everyone values it differently. This is why it’s important to have goals, both financial and personal, and ideally, your financial goals are set in order to help you reach your personal goals. It’s called “maturity” — not just for Certificates of Deposit anymore!

See, maybe you’re going to be emotionally and financially ready to buy a house in a year — then that $10,000 needs to be worth at least $10,000 to help with the down payment, so you can’t risk it in anything that’s not insured.

Or maybe you’re more professionally focused.  You could put $10,000 towards a degree or a certificate that will make you more qualified and thus worth more money and more valuable in the job market. There is nothing more worth your money than yourself, and educating yourself will increase your lifetime income exponentially. Unless you’re a liberal arts grad student, in which case you’ve already prepared yourself for poverty.

Maybe you have omnipresent student loans, or a car payment, or a few thousand in credit card debt you keep swearing you’re going to pay off.

Maybe you have a higher tolerance for risk, or a greater need for financial security.

The Responsible Anwer:

If I wanted to be really sexy and wise, I’d pretend like the money never existed in the first place and I’d put it all in an index fund and not think about it for fifty years, when it would be like receiving a gift all over again, except it would be something like $50,000 I would have to contemplate spending. Ah, compound interest. How you razzle-dazzle in the face of inflation.

The Actual Answer:

For me, personally, and this applies only to my lifestyle choices, with my current financial and personal goals in mind, here’s what I would do with a $10,000 gift (which, I believe, is the maximum amount before the taxman cometh):

  • I would max out my Roth IRA ($5000 for the year, although I feel like you can contribute to a Roth IRA for the year prior’s tax filing up through April–that’s something to research further)
  • I would pop $2500 in my emergency savings account
  • And I’d spend $2500 on a fortnight in Thailand.  You only live once, yeah?
  • I should probably donate $1000 to something worthy as well, but my altruism varies widely depending on how many BBC headlines I read that day, and today’s were particularly bleak.  Let your desire for karma dictate your tithing.

The “If This Isn’t A Hypothetical Question And You Are Coming Across $10,000 Tomorrow” Answer:

You should donate a portion of the proceeds to me, your friendly, neighborhood, non-professional, distinctly amateur, hobby personal finance advisor.

Hope this helps, slegg.  Xoxo, m

This guy has a lot of great information about advanced traveling (and the philosophies that form when you experience ways of living life that differ from the one to which you’re currently accustomed). His latest offering describes how he spent $500 and a few hours applying for credit cards that gave him an estimated $12000 worth of airline miles.

I’m one of the weirdos who adores the process of flying, so this is a hugely attractive system for me. Again, it’s more based towards the segment of the population with no consumer debt, no interest in consumer debt, and for those of us who pay attention to the excruciating details. I’ll plot my progress as the miles start pouring in.

Open an Ameritrade savings account, contribute $100 once a month for a year, keep the money in there for a year, get $100. You’ll have saved $1300 and, when you squint your eyes and think about it, made about 8% interest on that balance–twice that of the current highest savings account APY available.

You have an extra $100 a month. It’s around $3 a day. What do you spend $3 a day on?

Coffee?  Make your own. I got a really cute french press and mug set at a thrift store and created a morning ritual to replace that of the addictive latte-buying process.  No time, you like the socialization, you just can’t give it up?  That’s fine; try something else, but stop complaining about being broke.

Cigarettes?  Start to cut down, right now. Eliminate the ceremony of one cigarette a day.  If you really want to know how I quit my five-year, pack-a-day habit, I’ll tell you, but it’s a personal process and you’re better off figuring it out on your own.

Lunch?  Bring your own.  Try, for a week, to make the foods you usually buy at lunch.  A week’s worth of lunches can be made organically and healthfully for the cost of one or two days’ worth of eating out.  Recipe suggestions available on request.

Gym membership? Do you use it only for cardio stuff, if at all?  Try replacing driving to the store once a week with walking to the store a few times a week. Save on gas, get exercise, learn about your neighborhood, take pride in your urban exploration.

Movie rentals?  Do you really watch enough movies a month to make Netflix worth it?  Alternatively, start reading–books are free, and libraries often have free movie rentals, too.

It’s altering or doing away with the littlest habits that will have the biggest effect.  Just like a workout regime or any goal-oriented project, this is a long-term process.

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