Are you taking full advantage of your spending accounts at work? If not, you should. Flex and qualified transportation accounts allow you to put aside pre-tax money to pay for qualified medical, dental, and dependent care expenses.

Let’s say you have a $20 co-pay for a doctor’s appointment and you’re in the 25% federal marginal tax bracket. Since you would also be saving on Social Security taxes at 7.65%, if you pay for that appointment out of your Medical and Dental Reimbursement Account, your cost is only 67.35% of $20, or $13.47, because you paid pre-tax. It’s as if you are getting a 32.65% discount on your medical expenses. The same tax savings also apply to Dependent Care accounts.

http://podcast.com/show/3161/

Her interview is at 34:40.

It’s October 28th, and already there are holiday decorations in the stores.  Are you ready?  What happened to your wallet last year?  Did you spend more than you planned?  A few tips:

• Think about non-cash gifts.  Does a family member need help more than a new sweater?  Give gift certificates for shoveling the driveway or shopping for groceries.
• Gift cards are looked down on, but my family likes them for books.  One of the kids wanted a gas gift card one year because she was driving so much.  For family members on fixed incomes, they are now available for everyday items like groceries. 
• Shop with a list and stick to it.
• Look for what you think people would really enjoy, not what you think you “owe” them.
• If you have trouble with credit cards, leave them at home and stick to cash.
• Stop spending when you’ve reached your budget limit.

My husband Joe and I are on vacation in Germany this week.  There’s a lot on the news here about “Energie Sparen” (saving energy).   With the price of oil near record highs, winter on its way, and the publicity about Al Gore’s winning the Nobel Peace Prize, it’s a subject on everyone’s mind.  Stacey and I want you to know that making a start is not hard.  An easy first step?  Replace your incandescent lightbulbs with fluorescents as the old ones burn out.  Not only do fluorescents use a fraction of the energy of the old light bulbs; they are much cooler to the touch. 

Here’s a link to the article:

http://www.creditcards.com/credit-card-holiday-tips.php

Stacey just sent me an article from the Wall Street Journal that talks about an increase in 401(k) loans.  401(k)s and their cousins, 403(b) and 457 plans, can offer loans to participants.  The cost of the loan is generally something like the prime rate plus a percentage or two.  Even better, the interest charged normally goes back into your account.  Looks great, right?  Well, the article quotes my good friend and former boss, Bill Arnone, a partner at Ernst & Young.  Bill talks about the hidden double taxation of loans like this.  You see, money you put into a 401(k) is usually pre-tax.  You do not have to pay tax on your contributions.  It’s one of the great advantages of these plans.  But when you take out a loan, you have to pay the money back after taxes are taken out.  Then you pay taxes again when you withdraw the money in retirement.  Who wants to pay taxes twice?

For money you need quick access to - for emergency funds and other liquidity needs - you generally want the highest interest rate you can find with the least restrictions.  But since most savings accounts are taxable, your tax bracket should also be considered.  For people who are in high tax brackets or who live in areas with high state taxes, muni money market funds may also make sense.  Those are accounts invested in municipal bonds of state and local government and have built-in tax advantages.  A New Jersey muni money market fund, for example, is exempt from New Jersey and federal taxes.  Let’s say your bank offers you a savings account with an interest rate of 4%.  If your federal and state combined marginal tax rate is 30%, then you net 2.8% after tax.  If you can find a muni money market fund for your state that pays more than that, you are better off in the muni fund. 

Let’s say that you stop to buy a muffin at the health food store every morning on the way to work.  It’s a good muffin, and it costs $2.00.  If you buy that muffin 5 times per week, and 50 weeks per year, your annualized muffin cost (AMC) is $500.   How much would it cost you to bake 250 muffins at home?  Maybe 5 cents per muffin?  That’s a per-muffin savings of $1.95, and it reduces your AMC to $12.50.

If I had a nickel for every time someone asked me that… 

I don’t think the markets are predictable, except over the long term.  In the short term, I believe the ups and downs are more indicative of the psychology of investors than they are of global economic health. 

So, how are YOU reacting to the wild swings you’ve seen over the past quarter?  The answer may tell you a lot about your own risk tolerance and the way you should be investing. 

On September 24th, Stacey and I had a launch party at the Cornell Club in New York to celebrate the publication of the book.  Here’s a picture of us with our editor from Wiley, Debra Englander.