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$10 for Opening HSBC Free Checking Account

I originally posted a $50 Bonus for opening a free checking account with HSBC. If you did follow those instructions, and you did so just for the bonus, you may want to cancel that account opening. There were some stipulations that were confusing, and you most likely did not select what was necessary. However, that $50 bonus page has been updated, and you can receive the bonus if you open a Smart Package checking account. The process is much more simple. However, you can also open a free checking account with HSBC and get a $10 bonus. Follow the normal free checking account application, and use the promotional code of "check", without the quotes.




Looks like another $10 to the savings pot, as this can be opened in addition to the other offers. I will keep $1 in the account to keep it active. After a period of time, I will close one of the checking accounts just to keep things simple.



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$50 for Opening HSBC Smart Package Checking Account

I recently had to go through talking with customer service at HSBC in order to add my bank for bank-to-bank transfers for my online savings account. They were sending me information on opening a Smart Package checking account. I am glad that I found this promotion first! It expires March 16th, so get it while you can. Go to HSBC and start a new application with the promotion code of "GET50", minus the quotes, and you will receive $50 within 45 days. It has a minimum opening deposit of $1, and you must keep the account open (meaning you must keep $1 in the account, the same HSBC representative told me they would close the account in 5 days if it had a zero balance) for 180 days. In addition, there are some stipulations. First, there is a $3000 balance requirement to avoid fees. This can also be waived if you use direct deposit. I have heard rumors that doing a "push" ACH transfer from an ING Direct account would qualify as a direct deposit.




I used my online savings account with HSBC to fund the account. So, I used the original $1 that I used to fund that account and received $25 for opening it. I have since added some more funds and accumulated a few cents in interest. After I get the $50 here, I am transfering it to my online savings account. A total of $75 for opening great accounts with a great international institution. And, at least it is helping to get me to my $6000 in 2006. I am falling behind, and I would be falling behind further without these free monies.


As a note, I have been paid three times this year. My plan was to deposit $250 per paycheck into a fund where I would save for some investment. My goal is $1 Million in ten years, and I needed $6000 this first year, along with some aggressive returns. So, I should have $750 by now. Well, I am officially at $61, combining my HSBC online savings accounts ($31.06), and my credit union account at work ($25). I am not counting my liquid funds in my normal checking account. Plus, I am sure I earned a few cents on my my credit union account, but that is small change.


On the expenses front, however, I have made good progress thanks to my tax refund. I paid off mine and my wife's two credit cards (each had a balance of ~$400), and a table we had financed ($650), as well as many medical bills. The credit cards and the table reduce our monthly expenses by about ~$150 per month, which we can apply to some other medical bills that we have on a payment schedule.


And in even better news, I found out that I qualify for the LASIK vision correction surgery as advertised! You always see those ads for $299 per eye... and I actually qualify for that. I wasn't sure how they calculated the pricing, but it is just on how bad your vision is. To qualify, through the LASIK Vision Institute, your vision has to be -2.00 or better, and you must have minimal to no astigmatism. This is being covered through my flexible spending account, and is about $600 less than I have planned on spending. So, my wife may do her LASIK vision correction this year too! (She wanted me to be the guinea pig, as we do not know anyone who has had the procedure). So, there is another expense I will be able to do without from here until at least my 40's. No more glasses! My glasses usually cost me about $400 a year, plus I usually spend about $200 a year on disposable contacts and supplies. That covers my LASIK in one year! What an investment! And no more freaking glasses!


If you missed the original $25 for opening an HSBC Online Savings account, goto this application and use the code "start", minus the quotes.

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$50 Free and the Chance to Begin Investing

I was checking out the Finance forum on FatWallet.com, and I found a promotion code for opening a brokerage account with Sharebuilder and getting $50 for free, plus an investment guide. I thought that it would be interesting for everyone to see.




My interest in Sharebuilder peaked after reading this simple guide on a RichDad.com forum. I am not sure how this would work out, but it looks promising as a simple way to start understanding stock trading. I am going to give it a try. Unfortunately, trading does not pick back up until Tuesday because of our great combined holiday of President's Day (Because apparently, Washington and Lincoln are no longer important enough to be recognized individually). Anyhow, I am going to analyze some stocks over the weekend and see if I can find something to pick up. I am a technology guy, so I may go with a what I have a gut feeling on (which I will first verify through analysis), which is AMD. Otherwise, I may look into some of the companies that I think may benefit from the new Medicare Prescription Drug Benefit.



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Saving for Retirement: The Younger the Better

Yesterday, in the post entitled Kids and Money, I discussed the tax advantages of hiring your children. Today, I went in search of more tangible information regarding this insight. The Boston Globe has an article entitled The Tax Benefits of Hiring Your Children.


The article outlines some specific criteria for hiring your children and discusses under what circumstances you can avoid FICA and FUTA taxes. Also, it exposes the limits to the tax free money your children can earn, and sheds a very understable reason for this.




So, how can you pay your children money and avoid payroll taxes? Well, if you employ them via a good legal entity (Corporate, LLC, LP, etc), then you are out of luck. Further, if your business is a unicorporated partnership, the partnership must be 100% owned by the children's parents. If you avoid these situations, congratulations, you do not have to pay Social Security, Medicare, or Unemployment taxes to hire your child! If you do fall into one of these categories, however, there may still be hope. As with any risky business, I would always recommend that you use good legal entities to structure your business. But, how can you do this and still bypass FICA and FUTA? You can personally run a sole-proprietorship that provides services to your legal entity. This is still pretty safe, if you only provide services for your entities, and do not solicit business elsewhere. For instance, your sole-proprietorship could provide staffing for your entities. Your children would be an employee of your sole-proprietorship staffing agency, and they would perform work for your legal entity. The entity would pay your sole-proprietorship, and you would pay your child from your sole-proprietorship.


So, now that you have established that you can find a way to hire your children and receive great tax savings, you must determine their pay. First, and foremost, the IRS has stated that you must pay a reasonable amount to your children to perform the work. What would you pay an outsider to perform the tasks? You better be in the right ballpark. Further, you had better abide by child employment restrictions. For instance, they must not work beyond the limit for their age and whatever hourly restrictions are in place when school is in session.


Now that you can hire them, and you understand your obligations, how much can you pay them without having to fork over income tax? We look to the standard deduction for this. Simple, eh? In 2005, the standard deduction was $5000. And since it is adjusted for inflation, this amount will continue to rise. For 2006, the standard deduction for an individual is $5150. So, if your child earns less than this, and does not exceed $250 in unearned income (dividends and interest), then your child has no tax liability. And, if your child contributes to a Traditional IRA, then that amount increases by up to $4000 per year, through 2007, and $5000 a year beginning in 2008.


So, how do you pay your child? For purposes of legitimacy, regularly. If you pay hourly employees bi-weekly, then pay your child bi-weekly. If you only employ your children, then setup an appropriate schedule for payments. Some states have various guidelines, such as a minimum of semi-monthly. If the IRS notices a lump sum payment at the end of the year, this could signal that you are avoiding taxes, which is legal, but the IRS may want to get into your business.


So, where should your children's money go. Remember, you are a parent and you are not subject to your child's will. However, give them a little freedom, and teach them well so that they can make good decisions on their own. If college is in your child's future, a Coverdell ESA is a good place to stick some money. This is an IRA-style account that mimicks a Roth. You use after tax funds to seed the account, which means nothing since your child's tax liability is zero, and withdrawals are tax if used for qualified educational expenses. These can be for college, or even earlier. The limit in 2006 for a Coverdell ESA is $2000 per beneficiary. Beyond that, a Roth IRA is a very good place to sock away funds. Getting your child in the habit of retirement investment is very good, and the earlier savings are started, the longer compounding has to work its magic. Further, contributions can be withdrawn for any purpose, however earnings must remain until age 59 1/2. This means your child could buy a home after college, all with funds that were never taxed.



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401(k) Battleground: Traditional vs. Roth

Since January there has been a new option made available in 401(k)'s, the Roth IRA. Most likely, you have heard about it if you pay attention to personal finance options. Essentially, it is like its IRA cousin, the Roth IRA. Contributions to the Roth 401(k), as with the Roth IRA, are made with after-tax funds and you do not pay any taxes on the earnings as long as withdrawal guidelines are met. Like Traditional 401(k)s, they have the same contribution limits (for 2006, you are limited to $15,000). But, this is where the similarities end. You have several decisions to make when you plan for retirement, the first of which is whether or not to take action. That should be an easy choice. However, the other choices are not always so cut and dry.


I would recommend that you contribute up until your employer's match limit. There is no sense in not doing so, considering that it is free money. So that should at least some insight into the next question, how much to contribute. I would advise against contributing more unless you are already maxing out other retirement accounts and you still want to contribute more money to your retirement. Once you meet the match, I would consider other retirement opportunities such as IRAs, HSAs, and Coverdell ESAs for your childrens education.




A popular match plan is employers matching your contributions at 50% for the first 6% you contribute. This means, if you contribute 6% of your pay, and that equates $2400, then your employer will contribute $1200. So, at the minimum, and preferable not more to your 401(k), contribute to that match limit.


Before the advent of the Roth 401(k), your next choice was what to invest in. However, now the next question is whether to invest in a Traditional vs. Roth 401(k). With a Traditional 401(k), your contributions are made with pre-tax dollars, and they reduce your adjusted gross income. Further, your earnings grow tax-deferred until you withdrawal. If you are bordering on some limit for AGI, perhaps choosing a Traditional 401(k) is in your cards. However, do you really think that you are going to be in a lower tax bracket when you retire? The trend has been raising taxes. In 1929, total nationwide taxation (federal, state, and local) comprised of 10% of the Gross Domestic Product (GDP). Today, that amount is 30% of the GDP, with federal accounting for 20%, and state and local totalling 10%. While the choice is up to you, I would think chances are taxes will increase in the future.


So, if you decide to utilize a Roth 401(k), you deposit money that you have already paid taxes on. Your earnings are tax-free. But, a question that was looming in my mind was always what happened with matched contributions. If you are paying taxes on your own contributions, they are added to your income. However, if your employer matches, do these funds now count as income? For some, this could considerably raise their tax liability (I know it would for me, as I have a very good 401(k) plan). The answer is that employer matches are deposited within a Traditional 401(k), while your contributions stay in a Roth 401(k). This spells tax diversity! You get free money from your employer, and you can chance the future tax climate with those funds. With your own funds, you take safety in today's taxation.


As with all retirement accounts, you are limited to investments sponsored by your broker. And, if it were not for the free money aspect of a 401(k), I would completely ignore them and stick with IRAs and IRA-like investments like Coverdell ESAs and Health Savings Accounts (HSA). You can choose your broker, and by doing so you open up a much broader choice of investments. As a matter of fact, you could even use these funds to invest in your own business! While you can always roll your 401(k) into an IRA when you leave your employ, your funds are tied up until then.


When I am finally eligible to contribute to my companies 401(k) plan, I will opt for the Roth 401(k). The contributions made to the Tradition 401(k), by my employer, will be used to invest in standard securities, like stock, bonds, and mutual funds. The Roth 401(k) will be rolled into my Roth IRA (after I convert my current Rollover IRA into a Roth IRA, this week), and I will use this for investing in real estate and tax liens.



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Kids and Money

Andrea Coombes, of Market Watch, has a nice article about Young Savers. The advice given sounds awefully similar to that given to adults by Suze Orman: start an emergency fund, consider a Roth IRA, and then consider seeding some money in direct investments in securities. Also, consider saving for college, but remember that savings beyond Roth IRAs weigh against financial aid.


I have a different spin on this, and maybe it will give you some personal incentive to either start a business, or help you to save on your taxes if you already have a business. Do not let someone else employ your child... hire him/her yourself! There are great benefits to doing this. First of all, if you hire your child to work in your family business, you pay no FICA or FUTA, which automatically reduces the costs of employing them. In addition, the child does not pay taxes on these funds, and they reduce your profits, and therefore your own tax burden.




And I would echo most of the statements in the article. Have your child help you and learn the ropes of finances. Teach them about saving and investing. This is one of the most lacking skills that children receive. Definately start a Roth IRA. Consider this, Roth IRAs are funded with after-tax dollars, and earnings are tax-free. If your child funds these now, they will never pay taxes on these funds, ever! In addition, consider a Coverdell ESA for college savings. Combining these two imposes a limit of $6,000 a year. The rest could be used for things like clothes, entertainment, and other expenses for things your child would like to do. Remember positive reinforcement. Show your child that they should do the right thing first, save and invest, and then reward themselves with what is left. So often, we see depravity in personal finance discussions... for longevity, rewards are in order.


And if you are truly worried about financial aid, consider that Roth IRAs are not considered in financial aid calculations, and that withdrawals can be made from IRAs for educational expenses. So, start the Roth before the Coverdell. And, contributions can be withdrawn from Roth IRAs after five years, without penalty! But, if you are setting your child up for this kind of success, chances are your financial house is in order, and financial aid will be limited anyhow.


Also, if you are familiar with the concept of Self-Directed IRAs, remember that Coverdell ESAs used to be called Education IRAs, and for good reasons, they were treated in the same manner, and you can Self-Direct a Coverdell ESA. I am planning on setting each of my children up with a Coverdell ESA, and I will be directing it, just as will my wife's and my own IRA. They can wholly own an LLC, which has no entity-level taxation, like a corporation. Then you can invest in things like real estate and other businesses. My goal is $100,000 for each of my children's Coverdell ESAs, by the time they need them. Also, I would like $1,000,000 in each IRA for myself and my wife, by the time we can withdrawal... in 34 years. This is highly doable. Also, consider the Self-Directed route, and then when your child is of age, he/she can manage the ESA and run a business, letting him/her develop more skills while in college.



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Book Review: Millionaire Maker


A few years ago, when I first started college, I read Rich Dad, Poor Dad. That was a book that I am sure many of you are familiar with. It changes your concept of money. Being a business major, I did find his definitions of words inaccurate, but the point was the concepts. Well, I have just finished reading Millionaire Maker, by Loral Langemeier, and it shares the very same concepts but goes above and beyond Kiyosaki by giving practical ways to create passive income from the assets you already own, and then gives you a kick in the pants to start your own business.




Basically, Loral works on people's financial mindset and takes several calculated risks when dealing with common everyday assets, like home equity, retirement savings, and cash. Instead of letting your home equity sit there and under peform, take some of it and invest in an asset that will give you a much better return, like investment real estate. Loral contends, that with as little as $6000, anyone can find a decent investment property that can create positive cash flow of between $100 and $250 per month; that is between 20-50% for a return!


Further, she considers tax strategies, especially real estate. Did you know that you can depricate real estate investment property over 27.5 years? Well, you can. Did you know that you can get a self-direct IRA that you can invest in nearly anything that you like, including real estate?


I thought of this concept after reading the book. Consider this: If I had $50,000 in my 401(k) with my employer (which I will within five years), I could take that money and roll it into an IRA when I leave the company. If I place it into a self-directed IRA with the intent of purchasing investment properties, I could buy about eight of the properties which Loral speaks about. Technically, I would purchase them under an LLC, and the IRA would invest in the LLC. So, let's say that I am personally (or through a trust) a 50% owner of the LLC, and my IRA holds a 50% stake in the LLC. Through the operating agreement, I could stipulate that all profits flow to the IRA (so there is zero taxable income), and all losses flow through to me. So, I could depricate the property and write it off on my personal taxes, and have all the money go into my IRA! That is very exciting. Then, I could have other income producing entities that would be offset via the deprication losses and my tax liability would still be miniscule!. Brilliant!



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Entrepreneur.com: Best Cities for Entrepreneurs

Entrepreneur.com: Best Cities for Entrepreneurs

Wow! This is great news for me! Indianapolis is ranked number five! Time to really get my business ideas off of the ground.

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Made in the USA: Ethanol, Fuel, and You

Well, the annual State of the Union Address, mandated by the Constitution of the United States of America, has come and gone. The address was broad and covered topics ranging from security and the War on Terrorism, to the economy and the need for alternative fuels. President Bush even went as far as to call the American people out when stating, "America is addicted to oil, which is often imported from unstable parts of the world."


While the US economy is growing well, as highlighted in the address, we are in the middle of a great trade deficit. We are buying more foreign goods than we are selling domestic goods abroad. One of the greatest factors in international trade is our dependence on petroleum products. And although there is a heavy emphasis on oil imports from the Middle East, Canada is single largest supplier of oil to the United States, at 2.1 million barrels a day, followed by Mexico at 1.6 million barrels a day. Saudi Arabia is the third largest supplier at 1.5 million barrels a day. Of the top ten importers, only one other is from the Middle East, Iraq with over 500,000 barrels a day.




So what is the answer to our fueling problems? As with investing, I think the best answer is diversity. We need to have many answers to our energy needs. Among the best are resources that are clean, efficient, and heavy in supply. We can lower our usage of coal by deriving more of our energy from solar, hydroelectric, and nuclear power. What about oil? The most immediate answer is ethanol, and it can save us in multiple ways.


What is ethanol? Ethanol is alcohol derived from sugar through the process of fermentation. If you have ever consumed an alcoholic beverage, you have consumed ethanol. Currently, gasoline in the United States is comprised of 90% petroleum bases fuel and 10% ethanol. E85 is a blend of fuel that is 85% ethanol and 15% petroleum based fuel. It is 105 octane, burns cleaner than normal gasoline, and would be created domestically. Not all vehicles can use E85, however. Due to the nature of alcohol, it is corrosive and can damage your vehicle through prolonged use. For some years, automakers have produced flexible-fuel vehicles (FFVs) that are designed to burn E85 in a manner that is acceptable. They can also burn normal gasoline.


Ethanol, or cellulose ethanol, is easily derived from corn, corn-stalks, switchgrass, and nearly any agricultural waste. It is already being sold, in limited supply, throughout the country. Brazil has been using ethanol for years. Plus, our domestic automakers have been manufacturing these vehicles for some time, and are poised to take advantage of ethanol. This gives us a one up on foreign automakers, like Toyota, who do not see ethanol as viable in the US market.


Why stop with E85, though? We should make more FFVs, and we should have hybrid vehicles that are also FFVs! We should embrace biodiesel and E95, both are alternatives to diesel fuel.


This will reduce our trade deficit dramatically, clean our environment, and boost our local economies. Further, we will not be sending funds to unstable regions of the world that may be undermining our freedom and safety.



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