The only love money (lots and lots of it) can buy

Free Money Finance has been regularly blogging about the cost of having a pet, which he at one time calculated could run as high as $48,000 over a pet's lifetime. Unless you're housing a pet elephant, that number is absurd, but the idea of a cat or dog coming with a five-figure price tag isn't.

Our cats are young, healthy, and so far relatively inexpensive. We go through about $10 a week buying litter and dry kibbles. (Frugal cat that she is, River actively dislikes wet food. Kea loves it, but also loves even better whatever we have for dinner. The sneaky little thief gets so much in the way of table scraps, frequently stolen right off the plate of whoever let their guard down for a second, that I feel no obligation to buy much wet food for him.) It's about another $100-$150 each for annual vet checkups ... which puts our annual, routine pet expenses in the $800-$1,000 range.

But multiply that out across an average cat lifespan (say 15 years), and your per-cat cost can easily hit about $9,000 -- and that's before you run into the big expense, serious vet bills for aging pets. My dad fielded a $2,000 bill for surgery for my childhood kitty, Max, when he developed a hyperthyroid problem. I know of almost no pet owners that escape such giant medical bills as their pets grow into senior-citizen pets.

(Even small pets aren't immune to the giant-vet-bills risk. My sister and I once spent Christmas Eve at an emergency vet clinic with her hamster. The critter had somehow managed to put one of his teeth through his cheek. I think it cost around $100 in vet bills to fix up the $6 pet.)

We'll probably end up spending about $15,000 on our two kitties over the course of their lifetimes. Of course, I think they're worth the money. And hey -- cats or dogs are still a lot cheaper than kids!

Blogrolling and feeds

I'm finally starting a blogroll of other personal finance blogs I enjoy reading. Links are going up in a sidebar. It's a small collection for now; I'll expand it as I come across others that catch my interest. PFblogs.org is an aggregator I've used to browse through a bunch of them.

One specific-to-personal-finance-blogs problem I'm hitting, though, is sheer add-cluttered ugliness. The granddaddy of personal finance blogs seems to be PFBlog.com. I checked it out a few times, but my eyeballs kept shutting down in horror over the ad bars in the middle of posts. I suppose that's a good way to maximize AdSense revenue. It's also a good way to scare off readers. There is pretty much no content I consider so valuable I'm willing to slog through that kind of clutter for it. (I suppose I could get around the problem with a syndicated feed, but enh. Too Much Hassle. I'm a dinosaur that prefers to read content on its original host site.)

Other websites and blogs can certainly be ad-laden, but this seems unusually prevalent with PF blogs. Which, I suppose, makes sense; finance-oriented bloggers are pretty likely to want to profit off their blogs, and to do it in a way that delivers maximum financial results. But I'm a journalist at heart. I want my blog read, and I'll happily give up some incremental revenue if it'll make life easier on my readers. (This is why I am a comparatively impoverished reporter rather than a rich media baron. I could make a lot more money if I were more entrepreneurial. Being entrepreneurial would make me want to reach for hemlock each morning when I woke up, however. Fundamental personality/job mismatch.) Right now, I'm leaning against AdSensing this blog; if I ever do add advertisements, though, they will be banished to the corners of the layout, far far away from the content. And I would only do it if there were some significant advantage in doing so. $10 a month in AdSense revenue is a stupid reason to mess up my readers' experience.

I've also been put off by the huckerish tone of several personal finance blogs, and of personal-finance writing in general. It annoys the hell out of me that most of the field's "experts" are Personalities with Branded Lines of books, seminars, audio tapes, financial organizing systems, frozen dinners, etc. Several people recommended the book Smart Women Finish Rich to me. The title put me off immediately. I gritted my teeth and picked it up anyway. I've only made it through a few pages so far. They contain some solid, useful advice. The useful bits are broken up by constant references to the author's seminars, which makes me want to fling the book into our (unfortunately non-working) fireplace. I want personal-finance writing that makes me feel like the author's primary interest is in conveying solidly researched information, rather than in hooking me into his personality cult and selling me more "personal finance product."

Which is a longwinded way of saying that I will attempt to only link blogs that are solidly informative, and that don't strike me as primarily a vehicle for the blogger's grander dreams of Making $$$ Through Blogging.

(Also, I currently have XML and Livejournal feeds set up for Birds & Bills. If anyone wants any other feeds, feel free to request 'em and I'll get them set up.)

Sometimes, it's the little things

I am kicking myself for not thinking of this sooner: Get a separate wallet pouch for storing affinity cards.

I had pretty much stopped taking advantage of store membership cards, purchase stamp/punch cards, store credit cards with discount offers, and whatnot because I can't keep track of them. I feel particularly silly for not thinking of this sooner because I already carry multiple wallets. I've always used two: one zip pouch for bills, coins and most-important plastic like my driver's license, primary credit card, and subway card; and a second zip pouch for the zillion other bits of plastic I have, like phone cards and little-used credit cards. Adding one more pouch for affinity cards seems a useful way to keep them accessible without further cluttering my primary wallet.

(Also, totally unrelated but too funny not to mention: "H&R Block gets its taxes wrong.")

Plastic matchmaking

Credit cards can be insidious. If you're on a bare-minimum budget or have wildly variable paychecks, I think they're a bad idea. I just recently killed off the last of my college credit-card debt, and I suspect I ultimately paid as much in interest charges as I did on purchases. For several years it was a very good idea for me not to have access to any plastic other than my Visa check card.

However. If your monthly budget is working relatively smoothly and you're not inclined toward massive impulse spending, credit cards can be not only convenient but fiscally prudent. Lenders are fighting like crazy for business, and now that no-fee cards are the norm, there are some fun offers available.

At my previous job, I was issued a green corporate Amex for which I paid the bills directly. Personal use of the card was encouraged, since the company got some sort of kickback benefit on funds slushed through the corporate cards. Between business and personal spending, I ran thousands of dollars each year through the Amex. Eventually I realised that I was having no problems paying the bills on time, and that I should check out rewards programs and whatnot that would give me a benefit off all that credit-card spending.

Amex wanted $75 or so to hook my corporate card to its Membership Rewards program. I wanted something free, so I started browsing offers. For any still clinging to a classic green Amex, or any other fee-bearing card, SmartMoney has a nifty article explaining why you're being screwed.

My dad swears by his cash-back Discover card, and cash-back cards have an obvious appeal. They also have an obvious drawback: cash is the most expensive rewards currency for lenders to deal in, and they naturally want to minimize payouts. All the restrictions, caps and fine print associated with such cards made my head hurt. Still, for those who want to go that route, there are some helpful guides available to the various offers, including Credit Card Goodies list of cash-back rewards offers. Amex Blue Cash seems to be leading the list of cards various bloggers are recommending right now. MyMoneyBlog has a pile of posts about various cash-back cards.

Mile cards are popular, but I already have a million frequent-flier miles I have trouble using. Again, too much hassle.

So I decided to take a look at my spending, figure out where big chunks of my money go, and look for rewards cards targeting those areas. My theory is that since goods and services don't have the same hard costs as cash, credit-card companies will be more generous with those rewards. And hey, if I'm going to take my $100 cash back and spend it on books, I might as well get $100 in books credit directly.

Because books and food/entertainment are my biggest discretionary spending categories (beyond travel, and I already ruled out miles cards), I focused on those areas. Amazon's Visa card terms didn't dazzle me (basically, a $25 Amazon certificate for every $2,500 in spending on the card), though in retrospect, they seem to be par for the course. The average across most companies seems to be rewards valued at around $100 for every 10,000 in accrued points (usually accrued at the rate of $1 in spending = 1 point).

So I ended up getting Amex's In NYC card, which has no annual or rewards-enrollment fee and offers points redeemable for theatre, dining and music gift certificates in the city. For me, it's been a great deal. I don't understand Amex's formula, but I seem to be accruing points much faster than $1=1, and so far I've cashed in points for free spa services (which is the only price point at which I can afford such things) and several $100 dining vouchers.

If I weren't a fancy-restaurants junkie, other cards would make more sense. But with so many options, there's a good card out there for pretty much any financial profile. Finding yours can be a great benefit.

(Young and Broke recently mentioned a card I hadn't heard about which sounds really intriguing: American Express One, which funnels 1% of purchases into an interest-bearing savings account. That could be a nifty way to jumpstart an emergency fund.)

Generation 'my monthly loan payments will be what!?!?'

I started this blog because I didn't see a lot of personal-finance writing out there aimed at twentysomethings, people who are more worried about paying off student loan and credit card debt than about diversifying their stock portfolios. One book I keep running into is Generation Debt: Why Now Is a Terrible Time to Be Young, by Village Voice columnist Anya Kamenetz. Salon has an interview with her up today.

I'll have to check out the book. It's an issue I have mixed feelings on. I have plenty of friends who have been caught in the kind of economic turmoil Kamenetz describes, of low-wage, no-benefits jobs and little chance to grab hold of any kind of corporate ladder. On the other hand, I also know plenty of people like me, who moved from college into fairly stable corporate jobs, get treated decently, and have never been laid off. (I also worked at a dot-com, a company with poor management and a dicey future. I saw the writing on the wall and left before the layoffs started.) And then there's the next level up, of my college companions who went into i-banking or high-end consulting and landed starting salaries that would make anyone's head spin.

It's easy to tut-tut about "mistakes" people make. The one thing I did in college that locked me in for a fairly stable future was intern like crazy. I knew I wanted to go into journalism; I knew journalism jobs turn on clips and experience; I knew those would matter more for my future career than grades or other academic credentials. That made it much easier for me to work in a field where jobs can be hard to come by. (Though not so hard as advertised, in my view, if you're willing to work in trade or other niche areas of the media world.) I still believe strongly that anyone with the foresight to do some planning and the willingness to consider a range of jobs can come out of college with bright career prospects, in nearly any field, no matter how competitive. I also think my future would have been a lot trickier if I hadn't been lucky enough to know off the bat what field I wanted to go into.

I'll agree, though, that there are some distinctive challenges facing our generation, starting with rising college costs and too-easily-available credit. Yes, personal responsibility means it's your own damn fault if you sign on the dotted line for money you can't immediately repay, but I would also like to see strong curbs on how heavily credit card lenders can push cards with sky-high limits on those with paltry paychecks.

College costs are the more insidious problem, because the numbers involved are so scarily high. It's utterly absurd for liberal-arts colleges to be charging annual tuitions higher than what their average graduates will be making in post-graduation starting salaries. Again, yes, there's a personal responsibility angle, and yes, people can choose to go to public and other lower-cost institutions, but even those are falling prey to tuition creep. I don't know what the answer is on that front. I'm just very grateful I don't have kids' college tuition's to worry about.

I honestly don't know if we have it worse than our parents. My sense is that we have less security but more flexibility. That's a great trade for those who make good choices and catch lucky breaks, and a bad one for those whose missteps or misfortunes take them to the edge of the cliff.

Your good name: Priceless. Insuring it: $25.

Apparently identity theft is the new fad fear. An assortment of companies are offering ID theft insurance policies, generally charging $25 to $50 a year for policies that cover the cost of long-distance phone calls, lost wages and legal fees associated with untangling a stolen identity case. This week, the AP and the Washington Post have chimed in on the trend.

I've never been a victim of formal identity theft, but I've twice had my bank account/debit card hacked, once in a particularly odd (but, apparently, increasingly common) way -- someone was able to create a copy of my ATM card, complete with its PIN number, and use it to withdraw money. Sometimes this is done with phony ATMs and modified front-ends, but it can also happen at totally normal-looking machines that are running stealth skimming software.

Recovering my missing cash was a pain, involving hours on the phone and time off work to trek over to various police stations to fill out reports, but I don't see that having insurance would have been terribly helpful. Claiming reimbursement for the (relatively small) financial costs of the incident would have been just one more bureaucratic chore to slog through, at a time when I had quite enough red tape to deal with. For a full-fledged ID fraud case, the horror stories you hear about people mistakenly arrested because crooks with arrest warrants are using their names, it might come in handy, but those cases still remain lightening-strike rare.

Medical billing error tally: $1900 and counting ...

I had heard that the medical system is rife with billing errors. But good god. So far, from The Big Hospital Adventure, we have:

-Received a bill for the ambulance that was an attempt at double billing -- we got one, and the insurance got one. When I called Aetna to ask if I should send the ambulance bill I had received their way, the agent said oh, hey, we already got it, but good thing you called, because it was processed wrong. Aetna initially processed it as 80% covered when our plan apparently calls for 100% coverage. Not that I would have known this, because none of the papers I've been able to get hold of address ambulance coverage. So, yay inadvertently catching the error?

-Received a bill sent to us with the note that the insurance company denied coverage. Why was coverage denied? Because the doctor's office billed the wrong insurance company.

-Almost left unchallenged $500 we weren't liable for after all. Apparently it's normal for doctors who visit you during a hospitalization to bill you (well, your insurance) directly, separately from the hospital's bills. One of the doctors who passed through was out of network. I was prepared to grump and suck it up and pay the higher out-of-network change (we've already hit our out-of-pocket limit for in-network expenses), until I mentioned it offhand to my new company's HR manager, during a chat about FSA options. She said that during hospitalizations, when you're not exactly in a position to doctor-shop, most insurance companies will cover out-of-network hospital-staff personnel as though they're in network. Hrm.

So I rang Aetna again today. Not only did that pan out, it turns out they had a precertification on file (two, actually) for this doctor's services. So, they had already approved in-network-rate coverage, but that information never made it to their claims department.

Aetna so far is not dazzling me with their competence at processing all this stuff, but at least it's been easy to clear up mistakes when I've called. I suppose I'm learning the frustrating way that once you get tangled up in the American medical system, be prepared to scrutinize and challenge every scrap of paper sent your way. And put your insurer's customer-service number on speed dial.

Saving with FSAs (even if you're healthy)

Until now, I've avoided paying any attention to medical Flexible Spending Accounts (FSAs), a standard benefit available to corporate guppies like me. I lack kids or chronic health issues, the two factors that seem most prone to generating high healthcare bills. I'd never before tracked my annual medical expenses, but I'd bet that in an average year they total less than $200. The use-it-or-lose-it nature of FSAs made them seem more of a hassle than a benefit for casual medical spenders like me.

Then came The Big Hospital Adventure of '06, which has spawned promises of ongoing monthly healthcare expenses and a pile of bills with scary numbers. (Total bill sent to our insurance company for a weeklong stay: $20,484. Twenty thousand dollars. And this was basically a monitoring trip, no surgery or anything intensive like that. Daily shared room and board appears to have cost $1,950 -- for that rate, we could have checked ourselves into the Mandarin Oriental and booked a private nurse. Plus hourly caviar deliveries.) Our insurance eats most of it, but as insurance companies do, Aetna is finding ways to kick a sizable chunk back our way. So, suddenly this FSA idea sounds really appealing.

Especially since I saw the power of taxable income adjustments at work this year with my tuition deduction, which resulted in $4,000 of taxable-income reduction cutting our tax bill by $1,000. If I can use the FSA to reduce our taxable income by a few thousand, that will make a noticeable dent in our taxes and effectively reduce the cost of the whomping bills we'll be getting.

The big danger of FSAs is that you lose any unspent money left in the account at the end of the year. (You have a few months' grace period to actually claim reimbursement, but the expenses all have to be incurred by the end of the calendar year.) They're a bad gamble unless you have a pretty clear idea of at least the minimum you'll be shelling out.

However, there's a less-publicized flip perk I hadn't known about: your employer is required to let you claim reimbursement at any time during the year for the maximum amount you've elected to contribute -- even before you've actually made those contributions. In addition to the tax advantages, you're essentially getting a free credit line.

SmartMoney has a helpful article on FSAs and a benefits calculator. In some ways, the Big Hospital Adventure was well-timed. It came at the start of the year, and just as I'm changing jobs and will have the option to start up an FSA. If we're going to be contributing to the care and feeding of the medical-industrial complex, I'd like to at least wring out whatever financial advantages we can.

Playing the FICO game

FICO scores, ranging from 300 and 850, are the keys to the credit kingdom. They're also annoyingly mysterious. Everyone has three -- one each from Experian, TransUnion, and Equifax -- and the exact algorithm used to compute the scores is a Fair Isaac Corp. secret. FICO scores are also pricey. Unlike credit reports, which you can pull annually for free, FICO scores remain a premium product. Fair Isaac will sell you access to all three for $40. (As I mentioned earlier, Providian gives card holders free access to one score.)

Fortunately, while the precise calculation is clandestine, you can still get a pretty decent amount of information on how scores are derived and how to tug yours upward. Fair Isaac explains the basics of what goes into your score: payment history (35%), amounts owed (30%), length of credit history (15%), number of newly opened accounts or inquiries (10%) -- only those you initiate count, and types of credit used (10%) -- mortgage, retail, installment loans, credit cards, etc.

While the algorithm is universal, FICO scores from each of the three credit agencies differ because each agency considers only the data in its own report. Checking your credit reports for errors is the first step toward making sure your scores are as high as they can be.

What's a good score? Every lender will have its own benchmarks, but 680 is a number I see mentioned frequently as a cutting point. Get into the 700s and you're fairly golden. Fall below 600 and you'll have trouble getting decent credit offerings at good rates.

Obviously, a big part of having a good score is making sure payments are made on time. That's the single most important factor in keeping your score aloft. Lenders start reporting delinquencies after 30 days -- paying a credit-card bill 15 days late won't show on your credit report, but paying it 45 days late will. Lenders report delinquencies in three categories: 30 days, 60 days, and 90+ days. Avoiding falling into the latter group makes a big different. Delinquencies are never good, but one or two late payments won't consign you to FICO hell. A pattern of 90-day-late payments can be hard to shake off, though, especially if it's recent. The further in the past delinquencies are, the less they affect your score.

OK: your credit reports are all correct and you're paying your bills on time. What can you do to bump your score up? (And by the way, scores are shockingly responsive. I've seen mine vary by dozens of points within weeks of something in my credit profile changing.)

-Ask your lenders to raise your credit-card maximums -- and then don't use the extra credit. The notion that it's bad to have "too much" available credit is a myth. Your income isn't in your credit report; lenders worry far more about what percentage of available credit you use than they do about how much available credit you have. Financial experts recommend keeping your credit utilization below 30%. This makes a big difference on your FICO score. Having $5,000 used of $6,000 in available credit will look much worse than having $15,000 used in $50,000 of available credit. When Amex doubled my credit limit, my FICO score jumped 20 points in a month.

If possible, avoid opening new accounts simply to increase your available credit. That can help, but since inquiries are a factor in the FICO score, it can also hurt. (A spate of new-credit inquiries makes the FICO gods worry you're about to go on a credit bender.) Raising the limits on your existing accounts, though, is all to the good.

-Take out an installment loan and use it to pay off your credit-card debt. The FICO algorithm focuses more on revolving accounts (like credit-cards and home-equity lines of credit) than on installment accounts, because how people treat their more flexible accounts better predicts what kind of credit risk they'll be for future accounts. When my friend used an installment loan to wipe out her credit cards, her score went up 80 points the next month.

-Spread purchases across multiple cards. The FICO algorithm not only considers your overall utilitization percentage, it looks at utilitization on each individual account. Maxing out the line on a $2,000 card will hurt you; spreading $2,000 across two or three accounts and keeping the utilitization percentage low on each will help you.

-Only cancel credit cards if you have a zillion -- and don't cancel your oldest card, if you can avoid it. Length of credit history is a factor in FICO scoring. The average American has 13 credit lines, including 9 credit cards, according to Fair Isaac. A wallet full of plastic cards with no balances on 'em is quite typical and not a red flag.

-If you have no credit history, it's useful to get one! When we first started renting apartments, landlords were flagging David (newly immigrated from Australia) as a credit risk because he had no available score. Even worse, I then messed up his score by making him an authorized user on one of my cards -- an IKEA retail card -- that I once paid 30 days late. That barely affected my credit profile, but since that card was the only item in his, my late payment tanked his score. We eventually fixed this by adding him as a user on my Amex card, which has a high credit limit and no history at all of late payments. A year later, his score had climbed into the high 700s.

-And finally, needless to say, those "fast credit repair" services that splash ads all over the Web are scammy. There's legally nothing any third party can do to change your score, short of handling for you the hassle of seeking out incorrect items in your credit reports. All the steps that will actually affect your score, like those mentioned above, are steps you can take without paying anyone for "assistance."

Sharing lives, and credit

A friend recently posed a question about joint credit accounts: isn't it unfair that the account affects both partners' credit scores? A $10,000 credit card debt on a joint account shows up on both parties' credit records. A very cursory glance would make it appear that the couple was carrying twice the debt they actually were.

In practice, glances aren't that cursory. In situations where the couple's combined debts and income would be considered, like mortgage applications, potential lenders will recognize that they're seeing the joint account listed on each party's report. From the creditors' perspective, listing the debt on both reports makes sense, because it's a potential liability against each: either party can strand the other with the entirety of the debt.

However, if you're in a precarious financial situation, it can be worthwhile to safeguard at least one partner's credit. Once an account is listed jointly, getting it switched to an individual account can be tricky. Creditors can change the account status at the request of either or both parties, but they aren't required to. Legally, they can insist that the debt remain a joint one.

One way around the problem is to open only individual accounts, to which you add the other partner as an authorized user. Lenders are required to report the account's history on the credit reports of authorized users, but only the individual account owner is legally liable for the debts. The account owner can at any time cut off the authorized user.

For married partners, the shared-accounts issue is trickier in community property states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. These states treat all property, and all debt, acquired during a married as joint economic activity. If you're a Louisiana resident who discovers that your wife has a covert, maxed-out Visa card, you can be on the hook too -- if the debt was incurred while you were married. However, no one can be held liable for debts their partner incurred before the marriage. In all states that aren't joint property states, no one is liable for debts solely in their spouse's name.

CNN has a good article on handling credit-mismatch issues in a relationship. Sometimes the problem isn't irresponsibly managed debt, though. It's simply that there's a lot of it. Next post: tips for boosting your credit rating.

Taking questions from the floor ...

My personal-finance exposure is pretty much limited to the accounts and strategies I'm personally using. Which means there are bunches of areas it won't occur to me to write about. However, even when I don't know about stuff firsthand, I enjoy geeking out on research :) So, if there are ever topics you, Dear Readers, would like to see blogged, just drop me an email or a comment and I'll add it to the to-blog list.

Filing systems, online and off

Today's gripe: Why are all filing cabinets ugly? Even Design Within Reach couldn't come up with a non-ugly cabinet.

I'm looking for a filing cabinet because I'm finally attempting to organize my ancient one, which is utterly overstuffed. (And ugly.) This also reminded me to look up the latest data on how long I should be keeping various financial papers.

An increasing number of my financial intuitions offer paperwork online. My banking statements, credit card statements, quarterly 401k statements, pay stubs and W-2s for up to three years, and phone and cable bills are all available at the providers' websites. Possibly foolishly, this dissuades me from keeping printed copies. Why should I sock away a pile of pay stubs when I can go to ADP's website and print out years' worth, if I ever run into a need for them? I have great faith in the Internet's storage powers.

What I have learned to print and keep, though, are tax returns. TaxAct, and probably all the other providers, regard storing returns as a 'premium' service. You get access for a few months, then poof, no more online return unless you want to pay extra fees.

Free FICO score with Providian plastic

Providian (now in the process of becoming Washington Mutual) offers a credit card with an interesting perk: free access to TransUnion FICO scores. If you're not totally booked up with plastic, the card (no annual fee) can be worth having just for that feature. I got the Providian card a year or so ago for a balance-transfer offer; now that it's paid off, I'm keeping the card open just for the FICO. It's easy to access, available right on your sign-in page, and keeps an ongoing record of your score, so you can watch it rise and fall and see how various actions affect it. Mine jumped a small bit when I paid down a chunky balance, and then jumped a lot when Amex hiked my credit limit and my utilization percentage dropped down quite low.

TransUnion, Equifax, and Experian all tally their own FICO scores, so having only the TransUnion one is an incomplete view of your complete FICO status, but regular access to one of the three numbers still provides a useful data point.

Emergency funds for the broke

A classic piece of financial advice is 'build an emergency fund of six months' living expenses.'" Suze Orman argues that you need an eight-month fund. For many years, I looked at these sorts of recommendations and laughed. Six months of savings!? My paychecks were covering rent, food and enough fun to keep me sane. They were not big enough to do much of anything in the way of savings. Six months of savings is simply not happening on an entry-level journalism salary.

But the young and broke can still have emergencies, and it’s a good idea to have some backup systems in place for handling them (beyond the traditional twentysomething backup -- "um, hi mom ..."). One of the best pieces of financial advice I heard during the run-up to the dot-com meltdown, when everyone I encountered in "Silicon Alley" worried about how long their company had left before it collapsed, was: get a credit card with a high enough max to float you for several months. Make that your emergency fund. Lock it up where you can't easily touch it, but get it now, while you still have the job and the income to procure high credit. (Obviously, this is not a good plan if you don't trust yourself with credit -- I wouldn't advise giving a high-limit card to a college student, f'rinstance. I think it's a lot harder to be sane about credit before you have regular paychecks and get a better sense of what it's like to work within finite financial resources.)

And don't worry about 'too much credit' hurting your credit score. Applying for a flurry of new credit can affect your score, but simply having a copious amount of unused credit doesn't hurt you at all. It can actually be good for your score, since lenders do pay very close attention to what percentage of your available credit you're using. Having $4,000 used of $5,000 in available credit will set off red flags; having $4,000 used of $20,000 in available credit will impress. When Amex spontaneously added $10,000 to my credit limit, my FICO score jumped 20 points in a month.

Obviously, a credit card isn't an ideal emergency solution. But if you're broke, and especially if you already have credit-card debt, it's a much better idea than trying to squirrel away cash that could instead be going to pay down high-interest debt.

With one exception: like most people, I'm a big advocate of taking advantage of company 401k matches. Even if your company doesn't offer a match, putting some money aside in a 401k is a good idea, since you at least get the tax-savings benefit. If your employer does offer a match, though, take the free money, even if it means paying off debt a bit more slowly. Because 401ks also make great emergency funds. Most plans allow you to take a loan of up to half your balance for pretty much any reason, and if you get really desperate, hardship withdraws are an option. They carry nasty penalties and tax repercussions, but in a genuine emergency, 401ks are at least a tangible asset you can tap.

While I've been emergency-fundless till now (building one is my plan for 2006), it hasn't worried me overmuch because I always knew that if I lost my job or otherwise suffered catastrophe, my 401k would keep me from imminent rent-check-bouncing homelessness.

Not a moment too soon, either. In the past two months, David and I ran into the first genuine financial emergencies we've had -- a sudden trip home for a funeral (a pricey proposition when "home" is Australia), followed by an unexpected hospitalization. Amex is pulling us through till we can collect our tax refund. Yay IRS as emergency fund!

Tax bites

Miscellaneous tidbits ...

-I haven't filed a 1040EZ in years -- out joint income has usually been above the cap. This year, the cap is lifted to $100,000, which will put a lot more people into EZ eligibility. However, there are good reasons in some situations to go the more complex route. This Bankrate.com article does a nice job explaining the different 1040 options.

-The tuition deduction I mentioned yesterday is an adjustment to income. You can claim it even if you don't itemize your return (which I don't).

-I'm getting very fond of Bankrate.com. It has a nifty article laying out other income-adjustment deductions available to those who don't itemize. Traditional IRA contributions, student loan interest, money spent by educators on classroom supplies, and moving expenses are among the items you can use to adjust your income downward -- which, as I found out, can dramatically affect your tax bill. The Bankrate article is two years old, but the IRS's website has an index of explanatory documents on various income adjustments.

-My friend Fahmi points out that anyone with a brokerage or other financial services account should check out what deals are available through their provider for tax-prep services. Fidelity offers TurboTax discounts; I'm sure other firms have similar deals. For those who really, really don't want to pay for prep software, H&R Block's TaxCut will let you do both your state and federal return free if you take your refund on a prepaid Visa card. (If that link doesn't show the offer, go in through the IRS's FreeFile site. It's a semi-hidden/limited offer.)

-Note for freelancers: Companies are required to send 1099 forms to any contractor they've paid more than $600. The deadline for sending those out is Jan. 31, so watch your mailbox.

-I think this is my last year with TaxAct. The interface is pretty clunky and buggy -- with Firefox 1.5, using TaxAct's 'back' button to rewind to the previous screen consistently brought up a screen full of blank data fields. After a few minor heart attacks thinking I'd lost all my entered data, I caught on that it's actually a display bug: If you go back, then forward, you see the data. Weird. More annoyingly, when I tried to research questions about the tuition credit (like 'can I deduct tuition fees I'm paying with loans?'), the built-in question system generally had little to offer. Thankfully, a few minutes with Google and the IRS's website answered all my questions.

So, TurboTax/TaxCut users -- how do you like your interfaces?

Milk your tuition expenses

Throughout January, I collect tax documents that show up in our mailbox and toss them in The Tax Pile. We don't itemize, have investment income, or do anything particularly complicated -- we each have one W-2, I have a few 1099s from freelancing, and I have a 1098-E each year for student loan interest. That's it.

So it rarely occurs to me to look for tax deductions for which some financial institution has not sent me a form. But as I was buzzing through TaxAct, the screen on tuition expenses caught my eye. Well, hmm. New School never sent me any forms, but I have tuition expenses in spades thanks to the endless Finish My Degree project. So I started researching what I can deduct.

I don't appear to qualify for Hope or lifetime learning credits, but I do nail the tuition and fees deduction, which allows you to lower your federal taxable income by up to $4,000. You can still claim the deduction on expenses you're using student loans to pay. Score! Claiming this got me nearly $1,000 extra back on my refund. New York State also let me deduct tuition expenses -- up to $10,000, this time. That notched my state refund up a few hundred.

If you're eligible, make sure to claim 'em. Maybe the memory of the deductions will ease the pain a bit next time I hand New School another of its gigantic tuition checks.

Taxing times

My mom was a bookkeeper, and I think something got genetically passed down. I geek out at tax time.

For the past few years, I've done my taxes through TaxAct.com, because it's the cheapest of the Big Three tax software packages -- $16 to prepare and e-file federal & state returns. (It looks like you can knock that down to $13 if you avoid their extra-help features.) This year, TaxAct.com is offering free federal returns. If you're the lucky resident of a state without any state income taxes, you can do your whole tax prep and filing for free through TaxAct's system.

Why isn't all e-filing free? Because the government is running in circles to protect tax software companies. We're all shocked, I know.

Before I return to TaxAct each year, I like to read through the latest reviews to see if I should be considering any other options. For those who like the boxed software, PC World has a detailed rundown on what's new (and what's gone: rebates).

The Web programs tend to be much cheaper, and I'm too impatient to muck around with boxed applications. TaxCut seems to want $45 to file a standard (non-EZ) state and federal return online. TurboTax appears to be either $45 or $25 -- I honestly can’t tell whether the $25 fee includes both state and federal prep costs or not. All of the sites are horrendous about giving bottom-line prices. "Free e-file!" -- which they all tout -- is an utterly disingenuous claim if you have to pay for the service before it will allow you to e-file.

For those who feel like wading through a zillion options, the IRS has a lengthy list of online prep sites. It looks like I'll once again be going with TaxAct -- even if the one review I found of it from this year is pretty brutal.