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Do I Need An Emergency Fund? (Part 1) March 29, 2007

Posted by pf in Expenses and Savings.
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– I have been reading and participating in a number of posts regarding this topic and thought I would go ahead and use a bit more space to provide my own views / perspectives and offer an alternative to the conventional approach.

Why You Need “Emergency” Funds

Everyone knows that life includes the unexpected which includes anything from unplanned car repairs to job loss or major illness. Without reasonably available access to funds for such an emergency, you may find yourself in a very precarious position financially.

What Constitutes an “Emergency”?

Honestly, I don’t think you can provide a definitive definition for what is an “emergency”. Depending upon your current financial status and personality, it will vary. For example, an unexpected bill for $500 may create a financial “emergency” for one person while only being a slight annoyance for another. I think each person needs to define what creates a financial “emergency” for them. Once defined, you can then think about what actions are needed to protect yourself from these types of “emergencies”.



Asset Location for Tax-Efficiency March 26, 2007

Posted by pf in Portfolio Allocation, Taxes.

One aspect of my portfolio allocation that I had not considered was how to allocate my investments in the most tax advantaged way.  Typically, someone would need to locate their assets among the following:

Tax Advantaged Accounts: Traditional IRA, Roth IRA, etc.
Taxable Accounts: Brokerage, etc. 

Why does tax efficiency matter?  Although your Traditional and Roth IRAs are tax-advantaged, you can not avoid taxes – only delay them.  Essentially, you can “pay now” with a Roth IRA or “pay later”  with a Traditional IRA.   Similarly, your investments in these accounts are not all created equal from a tax perspective.  Your mutual funds can differ significantly in their tax-efficiency and depending upon the vehicle they are invested in, can have an impact on how much of your investment you get to keep in retirement.


Taxes – The Dreaded…Refund? March 24, 2007

Posted by pf in Taxes.
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Some years ago I hired a CPA to do my taxes for me because my wife had gotten into a side-business which required us to file a Schedule C.  At the time, the rate was very reasonable and the person came recommended from a friend.

Since then, it seems that every year there is a little “twist” with our tax returns where I feel they should be handled by a professional.  As you might expect, each year the cost for these services tended to go up as a result.  The challenging part for me is that I never seemed to know what the cost was actually going to be until the return was finished.  Last year was particularly high and I figured I must be reaching some sort of “limit” for a person of my income.  However, not to be outdone, I just received this year’s return with a tidy invoice for over $300.00 *gasp!*