6 Reasons Why Living in New York, California, And Illinois Does Not Make Sense

Living in New York

Every year, thousands of people in the US pack up their bags and move from one state to another.

While some people move to attend school or start a new job, others move due to things like the high cost of living, bad weather, and lack of employment opportunities.

According to the Mises Institute, some of the states that saw a massive exodus of its residents between 2016 and 2017 include New York, California, and Illinois. Recently, the New York Business Journal reported that the state is the top in the US where people migrate from.

Between 2015 and 2016, the Big Apple’s population dropped from 19.5 million to 19.3 million. A report released by the US Census Bureau in December last year highlighted the same disturbing trend.

Between 2017 and 2018, New York was ranked the top state where people were moving out of with a population loss of about 48,510. Illinois followed closely in second place with about 45,116 people moving away. See ya! Just remember why you are moving – socialism does not work!

In this article, we’ll look at six reasons why people are moving away from New York, California, and Illinois.

  1. Difficulty Finding Jobs

One of the reasons why people are moving out of these states is due to difficulties finding jobs. It is not that jobs aren’t available, but since a lot of people have to compete for the few available positions, many people are left out.

In 2017, Illinois ranked 42nd in the country in terms of job growth. While the situation may be somewhat better today in Illinois as well as in New York and California, highly skilled workers are in a better position to take advantage of employment opportunities.

  1. High Taxes

Another reason why people are migrating from these states is taxes. New York, Illinois, and California are among the states with the highest tax burden in the country. California is even losing football teams and the A’s should have left at least 10 years ago.

We all know that taxes can be a headache for Californians – even wealthy people are moving away for this reason. Meanwhile, a study published in 2018 by WalletHub revealed that Illinoisans pay more taxes than people living in other states in the country.

The situation is no different in New York. Recently, Gov. Andrew Cuomo noted that high taxes in the state is forcing people to migrate but he does nothing about it!

New York even kicks out corporations who are about to hire 25,000 citizens! Genius! Amazon – have you heard of Phoenix? Atlanta? Dallas? I have no idea why you are even in Virginia or even considered locating to another location in the northeast.

  1. High Cost of Living

The high cost of living in New York, California, and Illinois is also driving people away. Apart from taxes, people have to contend with the fact that it is hard to find affordable housing in these parts of the country.

The housing market is more affordable in Illinois than it is in New York and California, but even the median home price of $172,000 in the Prairie State is a lot to contend with.

  1. Weather

The unforgiving winter in cities like New York and Chicago is one more reason why people are opting out of these states. Many people from these states are moving to warmer states like Florida and Texas.

While California has temperate weather, the drought, earthquakes, and frequent wildfires can be a major put off on top of the crime, smell of urine in the cities, homelessness, and low quality of life.

  1. High Population

If you’ve ever experienced rush hour, then you’d understand why people would want to move away because of the high population density in some states in the country.

California, New York, and Illinois are among the top states in the country with the highest population with a headcount of 39.5 million, 19.8 million, and 12.8 million respectively (but many of these people don’t work). Most families with small children prefer to stay in places that are not densely populated.

  1. Crime Rate

If you want your family to live in a relatively safe part of the country, New York, California, and Illinois are unlikely to be part of your options. These are some of the states in the country with the highest crime rates. On the other hand, states like Maine, Connecticut, New Jersey, and Virginia have a much lower crime rate.

Texas, Arizona, and Georgia – Three Winners

New York, California, and Illinois continue to be decrepit places to live. Hey though, if you live in California you can hope for a high speed rail train that will pick you up when you don’t want to leave and take you somewhere you don’t want to be. Outstanding!

How You Can Benefit From Itemizing Your Tax Deductions

tax deductions

It is tax season again, and everyone is preparing their taxes before the April 15th deadline – well, everyone that works and cares about this country. While filing your taxes, you have to decide whether to itemize your tax deductions or go with the standard deduction.

Most taxpayers tend to settle for standard tax deductions. After all, it is much faster, and the figure keeps climbing every year – especially now with the amazing and job creating Tax Cuts and Jobs Act. However, itemizing your tax deduction could allow you to save a lot more money.

Standard Tax Deductions vs. Itemized Tax Deductions

The standard tax deduction rate is defined by the federal government. In 2018 (years after the NBA helped the Lakers win championships in 2000 and 2002 and a few years after Hollywood embarrassed itself with Star Wars The Force Awakens and Captain America I), the standard tax deduction rate stood at $24,000 for married couples filing jointly, $12,000 for single filers, and $18,000 for heads of households.

The standard tax deductions for taxpayers who are 65 years old or blind is $1,300 more. Meanwhile, it is $1,600 more for filers who are 65 years and above and widowed. The good news is that you can enjoy standard tax deductions even if you have no tax credits.

With that said, you may be wondering why you should even consider itemizing your tax deductions when standard tax deductions are available and attractive. Well, the main answer is that you could actually pay less taxes by itemizing.

The Internal Revenue Service (IRS) (which still is dealing with the fact that it employed someone as heinous and morally flawed as Lois Lerner) does not charge taxes on some expenses.

When itemizing your tax deductions, you basically list out all your costs in the past year that qualify as tax-free. However, there is one catch which has nothing to do with that pitiful baseball movie Trouble With The Curve or a pass from Montana.

The IRS reserves the right to investigate your reported tax-free expenses and may actually demand records from you to support your claims. On the other hand, with standard deductions, there are no questions asked.

Ultimately, if you choose to itemize your taxes this year, you are not bound to do so next year. You can freely choose to go with standard tax deductions.

What You Need to Know About Itemizing Your Taxes

As indicated above, itemizing your tax deductions could mean that you could pay less taxes. The IRS permits deductions on many expenses under Schedule A of Form 1040.

Some tax-deductible expenses include medical bills, charitable donations, mortgages, and state income, real estate tax, sales tax, gambling loss, miscellaneous expenses, and so much more. You basically need to add up your tax-deductible expenses during the year and total them up to get your itemized tax deduction.

The fact is that itemizing may work better for some people (such as homeowners) while going with the standard deduction works best for others. It’s crucial to mention that standard tax deduction is only available for citizens of US non-residents and foreigners working in the US must itemize their tax deductions.

There are a few issues with itemizing your tax deductions. Obviously, you need to spend time preparing your taxes which does not take too long anymore if you do it online (though the system should be simpler – how about that flat tax?). Also, you need to support your itemized tax deduction with records (like receipts and other documents) to support your claims.

Most importantly, you need to understand the laws regarding itemized tax deductions. For example, with some expenses, you can only deduct an amount that exceeds a certain percentage of your gross income.

Key Takeaway

You can choose either standard tax deductions or itemized tax deductions when filing your taxes – not both. While it is time-consuming, it pays to run the numbers. If you find that the standard tax deduction rate you are entitled to is less than your itemized deductions, then you should itemize.

However, if your itemized tax deduction is less, then you should, by all means, go with the standard tax deduction or else you’d be paying more taxes than you have to and even people like Bernie Sanders who want to create a nanny state don’t even want to do that.

For example and moreover, if you are the head of a household (which Walter White from Breaking Bad no longer is since he destroyed his family) and your itemized tax deduction for 2018 adds up to $24,000. You are better off itemizing your taxes as you would be paying $6,000 less than the $18,000 standard tax deduction for heads of households.

Married couples who are filing their taxes jointly must choose one method. This means that they must both choose the standard deduction or itemized deduction – not both.

Software Saves Lots of Time

It usually takes a lot of time and calculation to figure out your itemized tax deduction rate. However, today there are many apps (or websites) that you can use to add up your taxes and determine how much you’d be paying if you go with itemized deduction or standard deduction.

Top Accounting Software For Small Businesses

Numerous software solutions for accounting are available in the market, each with its unique features, and which cater to the specific needs of small and medium businesses. This has made the accounting software development industry a highly competitive one and any standard modules includes general invoicing, ledger management, as also payment processing.

This software is vital in America since America still has a tax system that is ludicrous and puts people in boxes and divides this country up. OK, let’s get back on track here….

These key features apart, the ones that claim top position in the market do so by virtue of their integration and compatibility; ease of use; and more importantly, security. For smaller businesses particularly, using a cloud-based software is more advisable.

These accounting software allow you to customize processes, integrate third-party apps and also scale pricing based on the business’s current needs. These accounting solutions are moreover, helpful to all small businesses during times of regulatory upheavals.

For example, when the FASB or Financial Accounting Standards Board and/or the IASB or International Accounting Standards Board finalize any new revenue standard from contracts with your customers, most accounting systems need updating to match such freshly set standards. With a cloud solution, the vendor takes care of the system upgrade. The following are the leading accounting software for small businesses:

Freshbooks: By far the most popular leader among small business accounting software solutions. Reasonably priced and comes with great customer support. Known for its scale depth, Freshbooks also comes with expense management and time tracking.

It has also cloud invoicing, payment processing and reporting among its features as also an extremely reliable API with add-ons for tax management. A highly responsive, clean interface mobile app makes it accessible to iPhones, Android and users of the mobile web. You also get the most advanced security tools like HTTPS and data backup for multiple locations. A free trial plan is also available.

QuickBooks Online: Yet another vastly popular accounting software for small businesses. Its intuitive interface along with multiple scalable functions makes end-to-end accounting operations much simpler and more than a few million users will vouch for that. The system is empowered to automatically sync the business’s total finance profile to a single dashboard. This enables multiple users to view in-depth accounts and reports of the company.

It also creates trading and profit & loss accounts and invoice and billing solutions that are completely mobile compatible as also print friendly. You get over forty reports that include the cash flow statement, profit & loss account statement, balance sheet, budgeting capabilities and inventory management. However, its only drawback is ample customer support and a QuickBooks-certified accountant may be required to optimize the software.

Xero: In terms of its virtues, Xero is somewhat similar to QuickBooks Online, particularly as far as the feel and interface are concerned. Xero’s greatest advantage is its ability to integrate with a Mac.

Unlike other accounting solutions that come only with a plugin, Xero comes with a Mac module for connecting natively with a Mac UI. Its other assorted features are an integrated payroll module, bank reconciliation, dashboard, expense claims, inventory, financial reporting, invoicing, and balance sheet. However, Xero doesn’t relate directly with US-based banks but offers a free trial nevertheless.

Wave:  By far the most popular basic accounting software for consultants, freelancers or any small business with a staff of nine or less. Wave is being widely used for recording daily office processes as also simpler financial reporting issues.

This includes preparation of the profit & loss account, balance sheet, receipts and invoices. It is also capable of managing direct deposits and payroll. It is however, somewhat handicapped to handle cash management because it lacks the ability to report cash flow or track payments and bills. It’s so basic by nature that complex transactions would need other accounting software to be tackled. Nevertheless, a salient freemium for businesses with really tight budgets.

Zoho Books: The popularity of Zoho Books is growing among micro-businesses because its app is well equipped with numerous basic accounting tools including customizable templates.

The most notable features of Zoho Books are: automatic payment notifications and bank feeds, facilities for online customer collaboration, reconciliation, invoice and time tracking, inventory management, API as also automated workflows. The Zoho business and productivity suite is an added advantage which natively integrates with more than 25 Zoho apps. Great customer support is also available by way of phone, knowledge base, online, and video tutorials. No free trials available.

It’s the commonality of their ease of use, android and iPhone compatibility, reasonable rates, sterling customer support, and security features that have singled out the above mentioned five accounting software solutions for small businesses in the current year.

How And When Do You Start Retirement Planning?

There is no one particular time to start your retirement planning. You can do it from the day you start working or from a later age. It is your proclivity. But the sooner you start, the better. In your early years, it is easier to always think that retirement is far away.

However, time flies and one day we all realize that the time to hang up our boots and jackets has finally arrived. And those folks who chose not to plan well for retirement earlier on are most likely to find themselves in financial trouble and extremely stressed out because their best working days are behind them and they still have many more years left on this planet to live. So start planning early!

It is pretty hard to forget about but it is easier to ignore when you are younger. The thing is, the longer you put this off the more you are going to have to save later on which could be difficult for a number of reasons. The simple fact is, if you do not save for retirement you may not be able to. Not everyone can perform so terribly in their job like Lois Lerner and Barney Frank did and be able to retire comfortably. Though most people are more honest than those two but this is another topic.

And do not think you are going to end up with boat loads of cash like Louis Winthrope III and Billy Ray Valentine did the hilarious movie Trading Places. That is just illogical!

Now is the Right Time

As you work and pay off loans and bills you need to contemplate how much you should be saving for retirement. As life changes, your plans too can change. But staying on track is vital. Once your familial responsibilities set in (you will most likely have a family), you still need to continue saving.

How much is needed to retire?

The thumb rule is to put aside 10 to 15% (according to CNN Money and do not worry about this being fake news since this information by CNN is also supported by other sources) when you are in your 20s but you should save as much as you can. This harkens back to what was said before, if you do not start saving early you are going to have to make up for it later on in your life.

You also have to maintain favorable credit rating (unless you are one of those strange ducks like me who just pays for everything in cash and does not go out much but since most people are not like this, play the game and maintain your credit) and manage your debt burden if any, carefully. A poor credit score can prevent you from obtaining reasonable loan rates, leaving you with less amounts of money to save.

Planning Your Future Finances

If your current employer offers you a 401(k) plan, sign up for it and have contributions deducted automatically from your monthly paycheck. If your employer matches your contribution with the same amount, you only stand to gain in the long run. It pays off when you accept superannuation.

If you are changing jobs, consider rolling over your 401(k). You can transfer your employer-sponsored 401(k) funds into an IRA or Individual Retirement Account as you switch jobs. This will give you a clear picture of how much you have in reserve after working for so many years and what needs to be done to enhance it further.

For those in their 50s, retirement isn’t far off (though it could be which is the point here!). It’s time to take a look at your retirement savings and to evaluate whether you are on the right track or if you should begin to start tucking more away. If you need a qualified financial professional to advise you on reducing your tax burden so that you can save more for retirement then you should consider getting one. This financial advisor can also offer you salient advice on how much you should be investing and what you should be investing in.

You could even ask your employer to deduct more from your pay as your earnings go up, provided they are willing to match your contribution every month. Moreover, catch-up contributions are always useful for making up for any shortfalls you may have in your portfolio. Evaluating your monthly expenses is also critical. You do not want to be spending too much on a car or a home and so on. You also have to pay attention and consider any interest rates on loans that you are contemplating taking on via a house or car and you should never borrow to pay for furniture. That is a terrible move to make!

Clear thinking and clearer vision are the two main facets for successful retirement planning. And the sooner you start, the better. There’s no greater relief than knowing that you are well provided for as you put your feet up and relax knowing you made the right moves in life.

How Much Do You Need to Retire Comfortably On?

In order to retire comfortably, the first thing you need to know is how much income your retirement funds are going to generate when you’re no longer going hard at it. That’s a moot point though. In fact, there isn’t a one-size-fits-all formula to work this out.

The basic calculation

However, the general thumb rule is that about 80% of your income in the pre-retirement period will allow you to maintain a comfortable lifestyle after retiring. So, the first thing to do is to multiply your present income by 0.8 and make appropriate adjustments according to your preference to live frugally or lavishly after retirement. You can live moderately as well, of course!

The next step involves subtracting your other assorted sources of retirement income. You can calculate your social security benefit amount by visiting www.ssa.gov to view your latest statement. Take into account any expected annuities and/or pensions also. The figure that you get from these is the income required from your savings.

Then there’s 4% rule that will help you estimate how much is required in terms of savings to generate this income sustainably. Multiply your need for savings income by 25.

But do bear in mind that this step gives you a retirement figure in today’s economic scenario. Keep inflation at the average rate of 3% per year in the back of your head too. To work out the inflation factor, take 1.03, raising it to the power of the number of years you have until you retire. If it’s 15 years, 1.03 raised to 15 (1.03 ^ 15) will give you 1.56 (yes, you will have to find that funny button or sequence using your smart phone to determine this). Multiply this factor of 1.56 by the figure achieved from the previous step that will give you an appropriate idea of what your target for retirement savings ought to be.

More art than science

Contrary to popular belief, figuring out your retirement corpus is more of an art than mathematics or science. Your corpus will depend largely on your plans after retirement as also certain unpredictable and uncontrollable factors like health issues and future performances of your investments. It’s vital to know that those with a definite goal for retirement savings retire more comfortably than those who don’t have a sound goal kind of like America which is only damaging itself as it continues to pile on debt year after year (the previous president doubled our debt for example).

Finding your multiplier

The average retiree needs to save about 11-12 times their current salary for retirement to be reasonably confident that sufficient funds are available at the time of retirement. However, the fundamental problem with this method is that you may not have an exact idea of what you’ll be earning at the time of retirement. Thus, multipliers may be used based on your present income and age.

This in other words means you should already have put aside 1.4 times your current annual income when you are 35 years of age (so if you make $50,000 a year you should have $70,000 saved by this point, for instance); 3.7 times the then annual income when you are 45; 7.1 times the annual income at the time when you are 55 years of age and 12 times the income when you are aged 65 years.

However, if you haven’t reached your target already, don’t despair. Enhancing your savings rate may help you make up for any lost ground. If you live on 70% of your annual salary or work for a few extra years, you can cut the required savings levels to reach by 10% to 25%.

Experts opine that 70% of your annual pre-retirement salary put aside will allow you to live comfortably, provided mortgages have been paid off and you are in good health when you call it a day. However, should you plan to build that dream home or even go globe-trotting, 100% of your last annual income or maybe even more could be required.

You do not want to waste money like those irresponsible people did in that 90s show Party of Five! Wow, how can a group of people be so clueless?

Superannuation sums

Thus, making realistic and objective estimates about your would be expenses during retirement is absolutely necessary. Review your current expenses category and then work on how they are likely to change. According to average calculations, a couple could expect to have a ‘comfortable’ retired life if they have a superannuation sum of $535,000 at least, based on an ROI (return on investment) of 5% annually along with a Part Age Pension.

Should the ROI be 7%, then a superannuation sum of $400,000 at least would be required along with Part Age Pension. If a couple decide to invest more conservatively, a superannuation sum of $720,000 at least would be required if the ROI is on an average 3% per annum.

For someone who’s single, a ‘comfortable’ life is most like assured under the following circumstances:

  • Superannuation sum of $490,000 at least, assuming that investment returns will be 5% annually along with Part Age Pension.
  • Superannuation sum of $370,000 at least at 7% annual returns along with Part Age Pension.
  • A lump sum of $650,000 at least at 3% annual returns from more conservative investments.

True Cost of Owning a Car in the US

As a car owner, you are perhaps aware that the sticker price of your car doesn’t give out the accurate figure about its ownership cost. Buying a relatively less expensive car is likely to save you a penny initially but may burn a huge hole in your pocket later by way of expensive repairs.

On the slip side, buying an expensive SUV could make your gas bill spiral. That’s why you need to keep the sticker price in abeyance to identify a truly reasonable car.

Factors on which owning a car in the US and its cost depend

To begin with, you have a sticker price, which of course, is not the prime factor. However, it affects the overall ownership cost, particularly insurance rates and sales taxes (and all working Americans know that taxes are too high but this is another topic) which you need to pay. If the car is financed, you’ll have to work out the interest rate. This again will vary on your individual credit score.

For instance, new cars come with reduced interest rates and long-term loan will always have lower interest rates but do not let that fool you since this means it will take you longer to pay off that car so that means a $28,000 car will perhaps cost you $33,000 by paying it off over the years to the financing company. Something to think about!

Depreciation in cars happens at an average of 15%-20% per annum for the first 5 years. The more expensive vehicles, however, tend to depreciate faster as do sub-compacts.

In addition, while it’s almost impossible to predict how much you will be spending on repairs in the future, you can scour its reliability scores through consumer reports or locate common problems with the car to work out the repair costs.

With repair costs come insurance costs, which again can vary largely for competing models even. The insurance premium payable and the coverage that comes with it is fully dependent on your driving skills and habits, history, your own age, and personal credit score (it does not depend on whether or not you have seen Transformers 5 but you should since that movie is amazing with an incredible submarine scene to boot, but this is another topic!). Older cars usually attract lower premiums, while the newer models with state-of-the-art safety features could get you some hefty discounts which you should consider too.

Fuel costs matter and the less you drive, obviously the less you spend on fuel. That’s why taking your car’s MPG into account is essential when deciding which car to buy.

There are also characteristics that reduce car prices. For instance, while most cars come with 3-year warranties for 36,000 miles, carmakers like Kia and Hyundai offer 5-year warranties for 60,000 miles with other benefits such as roadside assistance. Some eco-friendly models also qualify for tax credits that offset higher purchase prices.

Calculating the cost

The calculation for owning your own car is simple. The operations cost of an average American vehicle is around $0.60 a mile. A new car in the US costs about $33,000 on average, making buying one an important financial exercise.

Another crucial aspect to consider and remember is not to go by the sticker price or monthly payment but take other costs in to account as well. This will give you a fairly accurate figure about the real cost involved in owning a vehicle; the components that in their totality go into the total ownership cost; and comparison costs with various models that also includes the standard five-year cost.

Going by published statistics, the average loan payment per month for a new car in 2014 was around $482. If you drive your vehicle over 15,000 miles per annum, the total ownership costs comes to about $8,698 per annum, according to the American Automobile Association’s study on driving costs in 2015. That works out to about $725 every month.

Further studies have revealed that operational costs also vary by vehicle types. Small sedans recorded an average cost of $6,729 a year or $561 on a monthly basis. An SUV four-wheel-drive, costs around $10,624 yearly ($885 monthly), making the cost spiral by almost 58%.

Since the real cost of owning and driving a car includes fuel, maintenance & repairs, tires, license & registration fees, taxes, depreciation, insurance premium & interest on financing, figures recorded by the American Automobile Association show that average fuel costs amount to $1,682 per annum depending on premium or regular gasoline used and the mileage achieved by the vehicle. Over a five-year period, the fuel costs for an SUV could be $18,000 as compared to $11,000 for a sedan.

Your new tires could cost you around $147 along with installation charges ranging from $60 to $100 or even more. Similarly, repairs and maintenance comprising of tire rotations, oil changes, testing and battery inspection cost about $767 per year. Your fees and taxes amount to $665 every year, says the AAA report.

In order to own a cost effective vehicle, you need to work all of this out. Moreover, you also need to look at a higher resale value. So it’s essential that you look beyond the sticker price and also at the EMI or equated monthly installment. Your research on the ongoing costs of operating and maintaining a particular model will give you a true picture of its affordability.

First Time Home Buyers Guide

It’s your dream come true. A permanent roof over your head, an asset for life and you very, very own – the first house that you buy. A home that allows you the unparalleled and sheer freedom to live the way you want to.

However, do keep in mind that buying the first home of your life is a somewhat time consuming and tedious process and takes about a year from the time you think of buying one to finally closing the deal and taking possession. The first time home buyer’s guide will tell you how to sidestep mistakes, such as paying excessive interest on your home loan or picking the wrong home.

Your personal credit score needs checking: Most of us buy our first home on a loan. That’s why our credit reports matter. Moreover, it’s also seen that almost 25% of credit reports contain errors, which could possibly lead to your paying higher interest rates on the loan you take. Thus, take ample time to check your score before you take out a loan. Also ensure that the credit report is absolutely error free unlike the movies Meet the Parents II and III which were horrendous and prone with all sorts of errors but this is another topic.

Budget: Your final selection of your first house will obviously depend on your budget. That’s why you need to take a hard look at what you can actually afford. A lender will usually consider a full debt load of a maximum of 43% of the gross income per month and will also include all future mortgages, car & student loans, or credit card outstanding debts.

Therefore, first work out what is affordable to you and reduce your debt-income ratio to the furthest extent possible. Making a down payment of at least 20% will also reduce your loan cost substantially, also getting you a lower interest rate. Additionally, try and keep stable funds in your personal bank account for sixty to ninety days before you apply for the loan. This will increase the banker’s confidence in you.

Prioritize: Every first time home owner has certain expectations from his new home. Therefore you need to very clearly ask yourself what you need from it most. Is it a closer proximity to the workplace or a large backyard that you want to develop as a garden later?

Do you want it designed on open floor planning? Do you prefer a quiet neighborhood? Once you’ve prioritized these demands, it’ll be much easier for you to start short listing. Another vital issue is to know beforehand what trade-offs you can make.

Research: Based on your shortlist, start visiting neighborhoods and prospective open houses or even start gathering information about them. You can use sites that list properties so that you get some idea of the neighborhood and public transport available. Visits to open houses will give you some ideas about homes within your affordable price range and the neighborhoods that appeal to you strongly. This will also help you reduce your debts & save for the down payment.

Budget for home acquiring expenses: When you buy a house, you also have to pay for certain miscellaneous expenses upfront. These could be for title search, home inspection, and property surveys as also home insurance. Costs may vary according to where you live, but a couple of hundred dollars is almost certain. So start saving for that if you haven’t already.

Start organizing the paperwork for your loan: Banks are indeed most particular about mortgage loans and demand all sorts of documentation. These would include W-2 forms or tax returns over the preceding 2-3 years; recent pay slips; credit card statements; recent statements for brokerage accounts; personal bank statements; all past addresses; and statements pertaining to retirement accounts. Start organizing all of this paperwork. You do not want to have your paperwork tossed around in your closet like Peter Le Fleur from Dodgeball did.

Consult a buyer’s agent: The buyer’s agent’s job is to get you the appropriate property, negotiate the deal with the agent of the seller while also guiding you during the deal closing time. Even mortgage brokers will secure for you a more competitive rate on your loan.

Start home hunting: Once the pre-approval on your loan comes through, start visiting prospective properties with your buyer’s agent so that you don’t waste time on unaffordable houses. Once the selection is finally made, put in your formal offer. If accepted, employ a home inspector to look into the property’s physical conditions and drawbacks, if any.

Closing the deal: Keep all financial documents and down payment amount in perfect order before closing. Make an objective review of all mortgage documents and get home insurance, which should be secure before closing. You may pay off the buyer through a cashier’s check or wire transfer, so keep this ready too. Sign on the dotted line of the property transfer form, hand over the money, and be the proud owner of your first home!

And hopefully you get along better with your neighbor than Mike and Phil did in the average comedy Kicking and Screaming!

What is an emergency fund?

An emergency fund is essentially the money that you’ve been setting aside to take care of unexpected expenses arising out of unforeseen events in life such as when a politician like Barney Frank passes laws that devastates your home’s value. When this happens, and it did too many people on a colossal scale in and around 2008, you want to have some money set aside.

You can call this a rainy day fund too!

An emergency fund allows you to survive at least for a few months just in case you suddenly receive the pink slip (job growth will soon be picking up with lower taxes and less regulations but sometimes companies still lay people off regardless) or get into an accident that prevents you from earning for a substantial period of time.

It could also be a leaking roof or a major car breakdown that needs immediate attention. In other words, it’s like an insurance policy, where instead of paying premiums to your insurer, you’re setting aside some money to be used later should any of the following circumstances suddenly arise:

  • Emergency medical bills
  • Mortgage payments
  • Credit card bills
  • Pending taxes
  • Emergency home repairs (we have all seen Transformers 4; some robot called Lockdown may blow up your home!)
  • Unexpected car damage and repairs

The whole objective is not to borrow for these expenses thereby increasing your debts.

Creating an Emergency Fund

The amount that should be kept as an emergency fund depends on your income and status; thus differing from person to person (you may not need as much money as Katy Perry who lives in her bubble land!). The thumb rule is to save about 3 to 6 months’ worth of funds that are required for all non-discretionary expenses. This fund will help you manage any financial crunch if you suddenly find yourself unemployed. With the aid of this fund, you should still be able to pay your household bills till you find employment again.

You may have to find a job though that is different than what you were doing before. You have to be able to pivot in life.

So how much money there should be in an emergency fund? It will vary. For instance, for a couple with kids, around six months of income is sufficient for an emergency fund. If you are single, have a mortgage, auto loan, and no school going children, you may only need three months since single people tend to be able to relocate easier and they do not have children to clothe and feed.

Automate the Process

One of the best methods for creating an emergency fund is a 401(k); buying a new Lexus is not part of this plan! Do not take financial advice from your neighbor unless they are credible! And if your neighbor is Charlie or Alan Harper, do not do what they say! If your employer offers you a 401(k) plan, sign up for it so that the money you earn is automatically funneled out of your paycheck into a separate account. These contributions are pre-tax and you will soon realize you do not have to sacrifice much to make this financial decision.

For instance, if your yearly earnings are $60,000, increasing your 401k contribution from 2% to 5% will reduce your weekly paycheck by $27. That is it! Also make sure to contribute enough to equal your employer’s “match,” because leaving “free money” on the table is unwise.

You can schedule when you want the money taken out of your pay check as well.

Also, a majority of 401(k) plans come with an auto-escalation feature. This enables you to automatically increase the savings rate by any amount of your choice, which is usually between 1 to 3% every year. For external accounts, create your personal semi-automatic-escalation system: keep a calendar alert that reminds you to spike up contributions by one percentage point or two on an annual basis, maybe every time you get a pay increase or on your birthday.

Pay yourself!

What to do After You Reach the Goal?

If you have accumulated the amount that is suitable for you, you can then pat yourself on the back. Now that you are in control of your finances, you can start investing. The point is, you need to keep on investing a part of your income and create another source of income from it. For instance, if you invest in stocks, every year you will earn some money in the form of dividends. But be careful, stock prices can go down.

You can read about the tech bubble during the turn of the century and know all about that!

In conclusion, having an emergency fund is having extra security. You might have life insurance coverage, health insurance, auto insurance, home insurance, dental insurance, and critical illness insurance to cover you in case you experience some sort of calamity. But none of these will help you if you lose your job. Well, just not as easily has having a 401(k) or a savings account with money saved away for a rainy day.

Life and critical illness insurance are for most people a waste of time and money but that is another topic!

Here are 9 States that will Save You Thousands if You Relocate

Is your state taxing you too much? If you live in California and New York, it is most likely a yes then, and certainly if you work in the private sector in either of those punishing states.

Here are nine states that will save you thousands of dollars in cost of living expenses if you are thinking of relocating. For each state, you will see an index list which means a normalized average cost of a given class of goods or services. 100 is the normalized average cost, or national average, and the lower the score the better. You can have a score higher than 100. For instance, if a state is 20% more expensive than the score of 100, that state would have a score of 120.

This information was derived from Wikipedia, USA Today, CheatSheet, and Investopedia.

Let’s begin!


This southern state is the most affordable state in the US which is 14 percent cheaper than the national average. Here are some facts:

  • Cost of living: 86
  • Housing index: 68.4
  • Grocery index: 94.1
  • Utilities index: 89.6
  • Health index: 89.9
  • Transportation index: 93.1
  • Miscellaneous: 93.2

The homes are 30 percent cheaper than the national average and we all know how expensive owning a house can be. The median value of a house is around $112,000 while the median rent is around $1,050. Transportation is 6.9 percent cheaper while groceries are 5.4 percent cheaper.

Apart from this, Mississippi is exempt from military, federal, and in-state pension burdens. People pay the least amount of property taxes. All retirement related income, including 401k and IRA earnings, is exempt.

On top of this, there are probably more murders in one weekend in Chicago than the entire state of Mississippi for the entire year.


The rent is slightly cheaper in Indiana at $1,000 while the median cost of a house in the state is $139,000. Transportation in the country is 8.4 percent cheaper while groceries are 7.6 percent cheaper.

Here is a look at the index:

  • Cost of living: 87.9
  • Housing index: 75.8
  • Grocery index: 92.4
  • Utilities index: 91.1
  • Health index: 94.9
  • Transportation index: 91.6
  • Miscellaneous: 92.9


The third spot goes to Michigan. It is particularly cheap when it comes to groceries at 10.4 percent lower than the average, however, housing is also comparatively cheap here. The median listed price is about $147,000 while the rent is $1,000. Michigan is also exempt from military, federal, and in-state pension burdens. Here is the index:

  • Cost of living: 88.2
  • Housing index: 77.1
  • Grocery index: 89.6
  • Utilities index: 95.5
  • Health index: 93.3
  • Transportation index: 97.6
  • Miscellaneous: 91

Just be careful about some parts of Detroit you go into. You may want to avoid them. The fantastic movies Four Brothers and 8 Mile have warned us about this.


Arkansas is particularly cheap in the area of transportation and health bills. The median housing price is $150,000 while the rent is $1,000. Groceries are 7.3 percent cheaper while transportation is 10.9 percent. Here is the index:

  • Cost of living: 88.5
  • Housing index: 77.7
  • Grocery index: 92.7
  • Utilities index: 97.1
  • Health index: 87.8
  • Transportation index: 89.1
  • Miscellaneous: 92.8


Consumers are paying up to 23 percent less for their houses here than the national average with the median home value being at $114,800 and average rent being $995.

Transportation when compared to the national average is 11.9 percent cheaper and groceries are seven percent. Experts on the other hand believe that the cost is going to increase in the near future (problem because this is an energy rich state). Here is the index:

  • Cost of living: 88.6
  • Housing index: 76.7
  • Grocery index: 93
  • Utilities index: 94.9
  • Health index: 93.6
  • Transportation index: 88.1
  • Miscellaneous: 94.1

As just mentioned, Oklahoma is going wild in oil shale which is bringing high paying and more jobs to this outstanding state. This means less money going to the Middle East and more money remains in America to do the same: allow us to have access to the energy we need. Unlike California and New York which have some of highest numbers of unemployment and people on welfare, Oklahoma does not shirk its responsibility by keeping its energy offline.


While the prices of houses are on the rise, Idaho is still one of the cheapest states to live in with several categories that are less than 10 percent of the national average. Groceries are 14.6 percent cheaper while transportation is 6.1 percent. The median home value is $249,000. Here is the index:

  • Cost of living: 89.6
  • Housing index: 77.8
  • Grocery index: 85.4
  • Utilities index: 89.0
  • Health index: 101.9
  • Transportation index: 106.1
  • Miscellaneous: 94.8

Idaho is loaded with fresh crisp air as well. If you love the outdoors, it is hard to beat this state.


Tennessee, also known as the Volunteer State, has the lowest housing index in the country at 77.5. Transportation facilities and health care is also less costly compared to the national average. Groceries are 7.3 percent cheaper while transportation is 10.1 percent.

The median listing for house is $175,000 while the rent is $1,195. Local and state tax is about 7.6 percent which is the sixth lowest in the country. There is no income tax but only interest income and tax dividend.

  • Cost of living: 89.8
  • Housing index: 77.5
  • Grocery index: 92.7
  • Utilities index: 91.8
  • Health index: 90
  • Transportation index: 89.9
  • Miscellaneous: 97.5


Kansas is another state where the median cost is about 10 percent below the national average making it a favorable destination for people looking to settle there. Media rent is about $1,050 while the houses are priced at $124,400. Groceries are 6.4 percent cheaper while transportation is 7.5 percent. Here is the index:

  • Cost of living: 90.4
  • Housing index: 77.4
  • Grocery index: 93.6
  • Utilities index: 97.3
  • Health index: 97.1
  • Transportation index: 92.5
  • Miscellaneous: 96.1

Yes, these states may not be as glamorous as living in San Francisco, LA, or New York but you will also not have to worry as much about seeing homeless people defecate in public which is what happens in San Francisco all the time. If you want to be accosted by a homeless person and smell urine all the time all the while spending massive amounts of money on living costs and taxes, San Francisco is your place.

San Francisco is also in the midst of a properties crimes epidemic. LA and NYC are violent, expensive, and chaotic. Perhaps nice places to visit once in a while but not to live. You may see someone get mugged or shot though. If that is the environment you want to live in while being mistreated by the tax policies in those cities, it is your decision.

How to Stop Living Paycheck to Paycheck and Start Saving

Are aware that around 38 million American households live paycheck to paycheck? And no, these are not low-income families. Families even with salaries above $100K per year are caught in this vicious lifecycle. The moment the paycheck arrives, most of it goes in settling the bills and couple of days of respite followed by a zero bank balance.

This is not impressive and it does help that electrical prices rose higher in the years from 2009 to 2016 which is another reason household income growth did not rise at all in those same years as well. Hopefully that changes in the next couple of years. This will mean less people will be living paycheck to paycheck.

So why even are wealthy people failing to save money or take control of their finances? Irrespective of the income bracket that you are in, there is always a way to save some portion of your income for investment and savings, you just need to start somewhere.

Prepare a Budget

The first and most vital aspect that needs to be done to improve your finances is to understand how you are spending your money. Start whenever you want, but religiously track every penny you spend for a month. Ideally, it should be the start of the month when all your bills are due.

This will help you in covering the entire month and track your expenses accurately. If you do not have time to do expense tracking at the micro level, smartphone apps can make this job easier. Remember, the first thing to do is to understand the root cause of the problem, which in this case are unchecked expenditures.

Find Expenses that You can Cut

Tracking your expenses will enable you to identify the expenses that you can do away with. For example, the expensive cable plan you have subscribed to can be trimmed down to a bare minimum (do you really Direct TV for instance?). Switch to online streaming service providers. Scourge the Internet for discount coupons while buying anything, you may be surprised how much money you can save this way.

Check your credit card bill for subscriptions and memberships you no longer use or do without (how often do you attend that gym; can you not exercise in your home or run around the block a few times?). There is no need to walk into Starbucks every day for that caffeine dose either. Stop or cut down going to fancy restaurants or restaurants at all. You can buy TGI Friday’s frozen food at supermarkets, for example. You would be surprised how making these small changes to your spending habits can help you save money.

Do you really need life insurance? You know that is one of the biggest scams in America. Well, unless you are afraid of dying broke and we here are trying to get you in a better financial place so that does not happen.

Moreover, the savings then can be channelized towards investments or savings. That is making those spending decisions compound for you. If you are a smoker, cut down on those cancer sticks (that is what they are!). Not only you will be healthier, but also save hundreds of dollars a year.

Do Side Gigs

The Internet has made it easier to find side gigs that pay well or pay something. There are numerous dedicated platforms out there which you can use to find gigs such a web design, online accounting work, virtual assisting, consulting, research work, and so on. If you are not proficient in any of these, try something simpler like dog walking. Your home is full of things you don’t need or do not use any longer. Sell these on Craigslist or eBay. Extra cash you earn this way can be utilized in a productive way.

Consolidate Debt

If your debts are unmanageable and that is one of the primary reasons you live paycheck to paycheck, it’s time to think about debt consolidation.

In debt consolidation, all your debts are paid off by a debt consolidation firm. Then you have a single payment to make towards your debt that is optimized based on your financial profile. Though it may be an extreme measure, nevertheless it’s a percipient and prudent strategy to get out of debt trap and start fresh.

Create an Emergency Fund 

Life is full of uncertainties and you should be prepared for anything that life throws yours way. Research indicates that you need at least six months of expenditures saved up just in case the you know what hits the fan. The emergency fund should be sufficient enough cover all your bills for six months should you be out of work or in bed due to an accident or an illness.

The emergency fund should be impenetrable so do not dip your hands into it (have more discipline than most politicians!). If your emergency fund is piled up high, simply channelize it towards other purposes that are vital, such as a nice mutual fund. And no, going out to Pizza Hut is not wise. Do not sink back into bad habits!