Advanced Personal Finance

Every year, I make my ‘tax document checklist.’  It’s crude but effective.

I take out a blank sheet of paper, write ‘Tax stuff’ at the top, then write down all the documents I expect to come my way that I’ll need to file and hope I don’t leave something out.

I should probably have a better system, so this is my effort to improve.  Below I’ve listed the things that are typically on my tax document list.  Yours may be longer or shorter.  If you find it useful, here’s the list in PDF format.

Income

I break the list down into two, not very original sublists.  Income’s the first one.  (Bonus points if you can guess the second.)

• W-2s - Think hard about any second job’s you’ve had during the year.  If you’ve changed primary employment, you’ll be getting a couple as well.
• Bank interest 1099-INTs - This one can be tough if you have accounts all over the place trying to ‘optimize’ your banking.  Me, I just do everything at USAA.
• Stock dividend 1099-DIVs.  Whether through a mutual fund, or by owning individual stocks.  You get one from each fund company or brokerage house.  What a pain.
• 1099G for state/local income tax refund
• Miscellaneous income - Again, tricky.  It’s easy to forget some of these.  Just a few: prizes, scholarships, jury duty pay, unemployment benefits.

Expenses

• Mortgage interest statement
• Real estate tax statement
• Student loan interest paid
• Gifts to charity
• Education expenses (post-secondary education)
• Child care expenses
• Miscellaneous expenses - Could include moving expenses, expenses related to looking for employment, volunteer work, tax prep, home office (if you’re taking that deduction)

I’ve left off stuff from this list because it’s my list.  But since I’m a regular kind of guy, I think it suffices for many people.  Besides, if you’re claiming farm income or trust income, you probably aren’t doing your own taxes anyway.  That said, if there are any glaring omissions, please leave a comment and let me know.

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Increasing identity theft. Government agencies losing personal data-rich laptops. Hackers breach retailers and data merchants. Is it time for a credit freeze?

What a credit freeze is

A credit freeze is used by someone to prevent their credit files from being shared with others. It places a certain level of security on your credit report by preventing most new accounts from being opened in your name. I say most because it’s possible for a company to extend credit without a credit check.

The prohibition against new credit is even for new accounts you authorize. That is, for you to open new credit lines, you must unfreeze your file.

A credit freeze involves informing the credit bureaus of your intent and, most likely, paying a small fee (typically $5 to $15). You also pay a fee to ‘unfreeze’ your file when you really do want a new account opened in your name.

As of August 2007, 32 states allow consumers to freeze their credit. Eight more make freezes available in 2008.

How to put a credit freeze on your information

The actual logistics of putting a freeze on your account varies by state. Consumers Union maintains this list of each state’s laws and instructions for freezing and unfreezing your file. By the way, I think it’s a freakin’ crime that the federal government hasn’t stepped up with uniform rules that apply across the nation, but whatever.

Why freeze

The benefits of a credit freeze are self-evident. Since no one can get new credit in your name, your identity cannot be stolen for that purpose. This doesn’t preclude the abuse of your stolen credit card account number, but it does stop credit unknown to you from being extended.

Obviously, it’s a pain in the butt to unfreeze and freeze your account when you really do want new credit. I say that’s a small price to pay. When 2008 rolls around (I live in a state where a law hasn’t yet taken effect), I’ll be freezing my file.

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One of Suze Orman’s constantly-preached pillars is that you should have a revocable living trust. I was wondering if they’re really necessary for regular people like me. I’m not trying to spend money on unnecessary legal fees.

I’m not a attorney, by my understanding of a living trust is that it is trust that holds an individual’s assets until death, when the assets pass to the trust beneficiaries. The trust remains under the complete control of the grantor (the person who owned the assets). That is, he/she is the trustee until death.

Orman cites the following reasons to get a revocable living trust:

• It allows you to designate a successor trustee to take care of your financial matters should you become incapacitated

• You get explicit direction over how your assets are divided among heirs if you’re divorced and remarried

• It speeds transfer of assets after your death and may avoid fees associated with probate

I’m not convinced. She always gives specific examples that make her point, but the situations are usually pretty esoteric and uncommon.

I’m looking for input from readers. Does anyone have one of these? What do you think of Suze Orman’s urging us to get one?

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