Got this email from a PDITF reader a few days back…

Do you recommend getting an accountant for pretty much everyone making a decent wage? Currently my wife makes $50,000 a year and I make $70,000. We live in the Washington, DC area. We do no active trading, only W2 pay from our employers, a small amount of unemployment benefits from my wife, 401k and 401k roth contributions, nothing out of the ordinary.

We are new to our city, so I’m not sure if I should just do our taxes online or actually find someone more qualified.

Thoughts? Seems like a wise investment, but I’m really not sure where to start.

That is a good freakin’ question sir. One that I’m not sure I am qualified to answer. All I can do is tell you how the Ninja household operates…

I finished college back in 2007. I got a big-boy job, and for the first time in my life, was faced with the grim reality that I now had to file my own taxes (apparently my mom wasn’t willing to do it anymore ). Since I only made $38,000/year and hadn’t done much in the way of managing my money, everything was pretty straightforward. I filed through a website called Tax Act in about 30 minutes. It didn’t cost me a dime and I was stoked to get a $400 refund back from the IRS.

Obviously, things have changed quite a bit since then. I got married (dual income!). Moved 1,200 miles for a job (unfamiliar deductions). Our income is much higher than it use to be. We tithe. Could take mileage deductions for some stuff. blah. BLAH. BLAH.

Even though our situation has become a little more complex over the years, we still file our taxes online. Every year I think “This will be the year I finally pay someone to do my taxes for me!” but I never freakin’ do it. It’s probably because I’m frugal. No scratch that, it’s definitely because I’m frugal.

I don’t know if this next statement is completely accurate (any tax people want to verify accuracy?) but my understanding is that itemizing deductions is only worthwhile if those deductions total a greater amount than your standard deduction would. As a married couple our standard deduction is $11,600. Our itemized deductions would be very close to that amount so I don’t see a reason to itemize. I could either show Uncle Sam all the things I’ve done to earn a $12,000 deduction, or I could just take the $12,000 deduction they already offer.

I would totally pay an accountant to do our taxes if we owned a house (thus getting to deduct mortgage interest) because then we would have $30,000 in itemized deductions. But since we have no kids, don’t own a home, aren’t making $500,000/year, and don’t really have any investments outside of standard retirement accounts, things are still pretty simple. I don’t think hiring an accountant is really a bad idea, but until our life gets more interesting we will probably steer clear.

How bout you all? Do you pay someone to do your taxes or do you do them yourself? Was my understanding of itemizing and standard deductions even correct? Should I pay someone to do our taxes this year?

PDITF is a single author blog. Ninety-five percent of the articles are written by me, the other 5% are guest posts. Today, I thought I’d mix it up even more and allow a few unsuspecting people to hijack today’s post. My article about student loans being forgiven has quickly become one of my most popular. It currently has 87 comments, and counting. I thought I’d share with you a few of them.

Let’s get right to it….

If you forgive one type of debt, you kind of have to forgive all debt. Who’s to say that one debt is greater or more important thus needing forgiving then another. It’s just all so stupid. If in the end you can’t pay for something, don’t sign the paper work in the beginning stating you can.

Pretty reasonable first line right? The banks were bailed out so students should be too. WRONG. The banks shouldn’t have been bailed out, and students shouldn’t be bailed out. Goes back to the age-old adage “Two wrongs don’t make a right.” You do realize if your student loan is forgiven the balance doesn’t disappear in to space. No, instead YOUR student loan balance now becomes MY headache (via taxes). I don’t want to pay for your student loans any more than I wanted to pay for my neighbor’s house.

And then there is my personal favorite, this one came in late last night while I was watching an episode of Pretty Little Liars (warning: the commenter’s thoughts are difficult to follow)…

So… back to the Iphone that was made by worker bees in China…. Did you keep it/are you using it? The answer to that question pretty much illustrates the rest of any of your like mentality. You’re either hypocritical or you’re not. Your response to the whole OWS movement seems based from a pretty “world is roses” and overall very ignorant stance. Somewhat parallel but not as dumb as the dirt poor Republicans who keep voting against themselves. You seem to not realise the point that you cannot truly “function” in society without some/most items made in deplorable conditions (even bums use discarded Starbucks cups and wear Nikes). Protesters include nurses, students, all types of professionals. Just because these are again – a function of modern day society – virtually inescapable in Modern Day America – doesn’t mean that you can’t disagree with how they are made. In fact, it should outrage you more. The corporate greed that has gone into their making at the expense of the natural habitat and the 99% if you will for the benefit of the fattest is what people are making a statement against. If you are outraged about the working conditions in China for a product you buy in America, yet seem to think the protesters are silly and infantile you are just another dirt poor Republican voting against yourself (just on a different scale). You seemed more intelligent than that.

First, please for the love of bacon, learn how to use a freakin’ comma. I had to re-read this garbage a handful of times before I could even understand what it was you were trying to say.

Second, yes I did keep the iPhone (which is probably worthy of a blog post in and of itself). Mainly because of these comments. It seems that just about everything, from the TV I watch to the clothes I wear are byproducts of questionable work conditions. Unfortunately, (almost) everything in America was made somewhere else. Anyone know of a cell phone manufacturer that doesn’t outsource? It was a lose-lose situation. Check out this article for more information.

Lastly….what? Are you drunk, high, stupid, or a combination of all three? What does this sentence even mean “Your response to the whole OWS movement seems based from a pretty ‘world is roses’ and overall very ignorant stance.”? If you are going to insult me and call me things like “a dirt poor Republican” please at least have an agenda or reason for doing so. I’m all for people posting their opposing point of views (Stacking Cash and Larry can testify to this), but at least have some meat and potatoes along with your comment. To the anonymous commenter that wrote the above, click here.

I’m totally glad my post got people thinking and brought both sides of the table to discussion. Although, I do particularly enjoy reading comments from people who agree with me (haha, it’s true). Like this one…

Besides, the inherent “unfairness” of forgiving student loan debt, it just doesn’t make sense as a stimulus. I’m an economist, and here’s how that idea stacks up to me:

A Keynesian stimulus is concerned with short-term spending increases – the usual cutoff is about 24 months. So the question that must be asked of anything that is claimed as a stimulus is: “how much marginal (i.e. extra) money will be in the national pockets if it’s implemented?”

Let’s say that Joe Occupier has $60,000 in student loan debt and has payments of $500 a month. If the government forgives his loan, it costs them $60,000. Assuming Joe spends *all* of the money he saves (which is a crazy ambitious assumption), he’ll put an extra ($500*24)=$12,000 in to to economy. So the federal government is paying $60k for $12k in stimulus.

You’ll never find an economist to back this plan up.

Am I terrible blogger for calling out some of the very people who read my blog? Perhaps. But if you really believe I’m a “dirt poor Republican” I’d rather you just not read my blog at all. At least then it’s a win-win for both of us

Got an email from a lost soul yesterday and I thought we could help put her on the path to eternal riches. Check it…

Hi!

I’m a long-time reader of your blog. I want to start a retirement account for myself. I’m a 23 year-old, soon-to-be-married female with a full-time job. My employer does not provide any type of retirement savings of any sort, and I haven’t been making any contributions to my retirement in my lifetime so far. I’m ready to change that.

I’m not sure where to being and am not really that “seasoned” in stocks/bonds/etc. If you have any tips, words of wisdom, or a direction I could head in, I would appreciate it.

Thanks!
Rachel

Well, first of all I would personally like to thank Rachel McAdams for reading my blog. Loved you in Mean Girls…

Anywhoozle, on to your question. How do you get started with investing when you know nothing about it? Easy. Get out your checkbook. Write a check to Ninja@punchdebtintheface.com. Send on over about $10,000. And I’ll mail you back $5,000 in two weeks. BOOM! You just got $5k. Pretty sweet right?

Okay, now it’s time to get serious. Investing, especially for something like retirement, can seem both daunting and unimportant. Stocks, bonds, REITS, Options, blah, blah, blah. Not only is the subject matter rather boring, but retirement is like eleventy bajallion years away, why the heck should we give it any thought? Answer: Because Ninja said so.

Unfortunately Rachel, I know almost nothing about you except that you are 23, employed, and your name is, well… Rachel. Since I don’t know you, I can’t really recommend an investment strategy for you. That said, I can tell you what I do and if you think it sounds sexy, feel free to copy me.

I invest 5% of my gross income to a 401K plan each month because my employer matches that dollar for dollar. Next I take $5,000 of my take home pay each year and invest in a Roth IRA. Roth’s have some pretty epic long term tax advantages for us younger peeps. Since you don’t get an employer match in a 401k plan, I would focus on starting a Roth. I can’t tell you who to open up this account with. Just make sure pick a company (like Vanguard) that won’t fee you to death.

Since I am relatively young (25), I am fairly aggressive in my retirement investing. That is to say, I only invest in the stock market. No bonds for this Ninja. I go the way of Dave Ramsey and invest in a few different mutual funds. 50% of my cash goes to VTSMX (Big US Companies), 25% goes to NAESX (Small-Mid sized US companies), and 25% goes to VGTSX (Foreign Companies). This investment strategy helps diversify my investments across the entire market. If one company collapses (I’m talking about you Radio Shack), it doesn’t really effect me. It’s also important to invest at least a little in international markets. If the US goes to hell in a hand-basket, it will be nice having something that’s still of value.

I don’t like to get super technical when it comes to investing. My mom messes around with individual stocks, options, etc. She’s crazy to me, but it seems to work out just fine for her. A good place to get familiar with solid mutual funds, stocks, etc is MorningStar. They’ll tell ya just about everything you could ever want to know about a specific stock or fund.

Oh man. I’m pooped this was way more “finance” than I am use to in a one blog post. Moral of the story…

Got this letter from a fellow PDITF reader….

My husband and I own a condo in the SF Bay Area. We bought a 1bd condo at what (we thought) was the bottom of the market (sad face). We’re currently under water on the place about $30-$40K. We recently started snowballing our debt and the only remaining debt is about $3k of student loans due to be paid off in the next 2 months or so. Here’s our dilemma: after building 6 mo. of expenses in savings, should we:

1) start paying off the condo? Keeping with our current snowball amount ($3k) we could have the joint paid off in 2016! Problem is, we also plan on having children in the next few years and the maximum time we’ll live here is about 4 more years (although we’re open to using as a rental property), but we will likely stay in the area.

OR

2) start saving the 3k/investing the 3k? We are embarrassingly naive about investing in general and have no stocks/bonds/MM accounts other than our 401K…

We just don’t want to pour money into a house when we know it’s not our long term home, but we also want to make a savvy financial decision.

Advice from you/your readers would be hugely appreciated! Many, many thanks!

Courtney

The first thing that stood out to me about Courtney’s letter was this: “We are embarrassingly naive about investing in general and have no stocks/bonds/MM accounts other than our 401K”. Girl, it’s time to get educated and start investing. You need to have, at minimum, a basic understanding of the different investment vehicles available to you. That way YOU can decide if you’d rather invest or pay down the mortgage. You can’t make a decision until you know what all your options are.

I’m a fan of Vanguard mutual funds. Some love bonds. Others invest in individual stocks. I’d recommend scowering some PF blogs that really dive in to the ‘meat and potatoes’ of investing, so you and your hubby can choose the plan that’s best for you.

How much should you be investing? The general rule is at least 10% of your gross income, but probably some where closer to 15% if possible. I don’t know how much of your gross income is going in to your 401k plans, but if you’re investing less than 10%, I’d say your first plan of action (once your free of the student loan) should be to up your retirement contributions.

Unfortunately, I can’t really tell you what you should do with your discretionary income (save or pay down mortgage), because I have no clue what the real estate market in S.F. will look like in four years. If you think the markets are going up, up, up…it makes sense to pay down the mortgage a bit and let your equity appreciate. If you think the market is going down, down, down…it’s probably better to put your cash in the bank so it doesn’t lose value.

It doesn’t really sound like you are too sure what your life is going to look like 2-5 years from now. You may have a kid (you might not), your condo might go up in value (it might not), you might rent out your place (you might not). Until you really have a solid idea when you’ll be moving and when you’ll be having kids, I’d recommend putting your discretionary income in the bank. Cash gives you flexibility. If at any point down the road you decide you’d rather pay down your mortgage, you can always pull cash from your savings to do so.

I’m just one man though, and I’m definitely no real estate (or investing) expert. Let’s see what other PDITF readers would recommend doing in your situation. How bout it y’all, what do you think Courtney should do? Pay down the mortgage or build up cash savings?

I love getting mail from PDITF readers. It makes me feel like I’m important, even though I’m really not. Well, it’s time we help another Debt Puncher out and share our two cents on his situation. His email says…

I just paid off the first of my 9 (yes…credit+retail) cards. It’s a huge achievement. I’m currently following the high-interest method to keep motivation high. My top priorities are:

*Paying off credit card debt
*Establishing a buffer in checking

Would you apply all your monies to paying credit card debt first or vice versa? Or set-up a plan so both can be achieved albeit at a slower pace. According to my projections, I can reach both these goals within a year.

Well, Mr. Anonymous Reader Guy, if I were you I would stop paying your credit cards, forget about savings, head to Vegas, and bet it all on black. Thanks for stopping by, hope I helped

Haha, I’m only kidding (unless you’re feeling lucky then GO FOR IT!). I’ll answer your question by sharing a little bit about my journey. As you may already know, I started my PF journey with $28,000 in student loan debt, and just a few hundred dollars to my name. Making the decision to save vs pay down debt is not an easy one. In fact, I wrote this post, this post, and this post about it.

Personally, I hated the idea of not having any liquidity. Dave Ramsey suggests saving up $1,000 in a checking account and throwing all discretionary income at your debt. It’s not bad advice, but it’s not what made me feel comfortable. I totally would have lost sleep knowing I couldn’t even write a check for next months rent if crap hit the fan. You can’t pay rent with a credit card so I needed to have money in the bank.

That said, I would not recommend doing what I did and OVER save. At one point I had $20,000 in the bank,  but only $17,000 in student loans (you can read about it here). If I could go back in time, I would give myself a swift backhand to the face for that one. I totally perverted my enthusiasm for saving and kept that student loan around longer than I should have. I was a very bad Ninja.

So my advice to you is probably going to be the most incredible advice you have ever heard in your entire life. Go get a pen so you can write it down. Ready? Don’t Drink and Bike, you might spill your beer. Oh wait, that was advice I gave to my alcoholic friend.

What I meant was, you should probably save some predetermined amount ($2K, $5K, or whatever) while making minimum payments on your C.C. But the second, and I mean the second, you’ve accomplished that goal, pay down those CC’s like there’s no tomorrow. It may not make the most financial sense to keep your CC balances a little longer, but if you’re like me it makes a lot of PERSONAL sense. Besides, it sounds like you are gonna knock out both goals pretty quickly anyway, so the difference in interest paid is probably relatively small.

That said, I realize I am only one voice in this PF world, so I’d like to turn the soapbox over to the PDITF readers and see what they would do. How much did you put in savings before attacking your debt? Anyone else out there like me and OVER save? How do you balance financial sense (paying down the CC ASAP) with personal comfort levels (saving up a decent chunk in savings)?

If you have any questions, comments, or just a funny YouTube video you want me to check out, feel free to shoot me an email.