What Will You Do With Your Tax Refund?

It is April 15th and some will receive a much anticipated tax refund.  The average refund is $3,500.  What should you do with it?  Some use this as a savings strategy knowing that money will come in handy about this time of the year.  Thus, they know it is coming and it is already spent.  

My advice to you would be simply to do away with the tax refund once and for all.  Take this last tax refund and spend it however you see fit.  Then adjust your holdings so this never happens again.  Why would you want to give the IRS a tax free gift? 

Instead enjoy the benefit of increasing your after tax MONTHLY cash flow.  It is much better to receive that money throughout the year in the form of cash flow versus a one-time lump sum.  If you still want to save that money, you can still put that additional money into a savings plan each month.

At least afford yourself the flexibility to use that additional monthly income and put it to good use.  If you needed it during the year, wouldn’t you want access to it? Plus, most people tend to not spend lump sums effectively.  They know that they need to pay down debt.  However, they see a vacation in their instead.  It is the emotional pull of the lump sum of cash.

The bottom line is to use your cash flow wisely versus allowing the IRS to benefit from your cash flow.

Good Example of Identity Theft Phishing Scam

I received this the other day.  You can notice how fake the Chase logo looks.  There are several variations of this email going around.

Dear User,

It is strongly recommended that you update your account. There are series of issues about misuse and theft of account informations. We have update our security server for the year 2015 to enhance your online banking security and protect our customers from online fraud.

Click Here, to update your account.

We Are Here For You.

© 2015 JPMorgan Chase & Co.

There are two rules of thumb when it comes to protecting yourself from identity theft.

First, if someone in any capacity (in person, phone call, email, etc.) approaches you requesting you to give or update information, don’t do it.  Always verify before giving out personal information. 

Second, if you have the choice between a credit card and a debit card, use the credit card and cut up the debit card.  When it comes to having your personal information compromised, the question is not about if it will happen.  It is highly likely that it will happen to everyone at some point.  If your personal information was stolen, would you rather a thief have access to a line of credit on a credit card or direct access to your bank account?  If the debit card is your only option, just remember to always be watching your bank account.  

There is one other take away. Debit cards are dangerous. 

I would make one suggestion to the thieves trying to steal information.  IF you are going to go through all of this trouble, use proper grammar and make sure you spellcheck.   

Saving Won’t Get You to Your Retirement Goals

TIAA-CREFF just released a survey on retirement saving.  This survey and how it is presented is illustrative of the problem with the financial services industry.  The compartmentalize retirement planning by leading the reader to believe if you just save enough you will retire well.

Let me explain – This article starts off by giving an example of an individual who was saving for retirement.  The article shows that by saving a certain amount he would have over $700,000 for retirement.  Then they add this:

“That’s a tidy sum to be sure. But look how much more he could have with a more diligent savings effort. By stashing away just two additional percentage points of pay each year—12% vs. 10%—his nest egg at retirement would total just under $890,000. That’s an extra $150,000. And if he can pushes himself to save 15%—the target recommended by many pros—he would be sitting on a nest egg of roughly $1.1 million, fully $360,000 more than its value with a 10% savings rate.”

Is the formula that easy?  Just save money for retirement and you reach your goals?  Of course not – however, that is how all of these articles are written.  The concern is that the average reader walks away with a savings only mentality and that in itself has a low probability of getting you to your dream retirement.

Saving alone will not get you to retirement. Successfully reaching your retirement goals requires a 4 step process.

1)   Saving – obviously you have to commit to saving money.  There is no question.  That is the fuel that makes the engine go.

2)   Invest – More importantly, you have to appropriately invest that money in order for it to grow. 

3)   Manage – Unfortunately, we don’t have the luxury (as the financial services industry would have you believe) to just save money and make sure it is invested.  You have to manage those investments for growth AND risk.  Being a long-term investor (another popular myth told by the financial services industry) is not a strategy that protects you from risk.

4)   Plan – You can save, invest, and manage and still not know whether or not you are on track.  Do you want to know what separates out those who are successful and those are not?  It is this one step.  Doing steps 1 through 3 and leaving out 4 is much like deciding to travel to another city and state, jumping in the car, and just start driving.  You have no idea if you are on track or traveling in the right direction.  What’s worse, you have no idea when you will reach your destination.

To be successful, you have to employ all 4 to insure a successful retirement.  If you want more information on how to make all 4 work let’s have a conversation – bob@prudentmoney.com

Security Changes to Credit Cards – It is About Time!

Visa and Mastercard are requiring major retailers and banks to have implemented the security chip into their credit card program by October 2015. This chip can be found on the front of the credit card.

Credit Card Website, www.CardHub.com just recently released its 2015 EMV Migration Report – which analyzes the smart-chip credit card plans and progress of the country’s 10 largest credit card issuers as well as 55 major retailers.

Here are some findings of the study.

”   All 10 of the largest credit card issuers are in the process of issuing chip-based credit and debit cards and expect the majority of their portfolios to be updated by the end of 2015.

”   All chip-based cards issued by major banks will continue to have magnetic stripes – enhancing usability while also mitigating certain fraud protection benefits.

”   All of the major retailers that responded to our survey are on track to meet the October 2015 EMV transition deadlines set by VISA and MasterCard.

”   This one is the most disturbing finding. Retailer transparency regarding the security chip program is surprisingly low given the level of consumer concern about data breaches and financial security. Only 17 of the 55 retailers we contacted provided information about their policies – including just 25% of those that have been victims of breaches. It makes you wonder if retailers are just giving up and not even trying to fight a situation that they think they can’t win.

”   In the event a chip card is not automatically re-issued, consumers can call and request one from customer service.

To check out the full report, please visit:


I asked spokesperson Jill Gonzalez what was so special about this new chip.

Instead of magnetic strips, EMV cards use microprocessor chips, which are almost impossible to duplicate. The cards are tapped or waved about an inch in front of updated terminals — the exact method will vary from retailer to retailer. Each transaction made using an EMV card is approved using a unique authentication code that can only be used once. So, if a retailer falls victim to a payment information breach, that information cannot be used to make additional purchases or create fraudulent accounts – Jill Gonzales

Bottom line – don’t wait around for your bank or retailer to send you a new card. Be proactive, call them, and request that they send the new card to you.

IRS Secrets? You Bet There Are!

Exclusive free webinar with Bob Brooks and Dan Pilla

I wanted to make sure you knew about a free webinar that I am hosting with IRS Expert Dan Pilla. Dan has been a long-time friend of the show and has written 14 books on the IRS. He is considered the foremost expert on dealing with the IRS. In this special presentation, I will be doing a one on one interview with Dan. The problem isn’t the IRS. The problem is that most don’t know the secrets!

In this special presentation, Dan is going to educate you on what you need to know. The information in this presentation is sure to protect you and audit proof your life! Plus, you will get a copy of his Special Report – The IRS Strategic Plan Exposed. This 10 page document exposes the two strategic plans of the IRS. You get the report absolutely free. So, read about the event below and sign up to attend 1 of 2 presentations. With tax deadlines right around the corner, you cannot afford to be without this information. 


Session 1: SATURDAY MORNING, March 28


8:00 am PST; 9:00 am MST; 10:00 am CST; 11:00 pm EST


Click HERE to Register for SATURDAY


Session 2: SUNDAY, EVENING,  March 29


5:00 pm PST; 6:00 pm MST; 7:00 pm CST; 8:00 pm EST

Click HERE to Register for SUNDAY


DAN PILLA is the ultimate “IRS insider.” The Associated Press news service has said, “Dan Pilla knows more about how the IRS works than the IRS Commissioner.” He has frequently testified before Congressional hearings about IRS taxpayer abuse, has authored dozens of books to help taxpayers defend themselves against the onerous Revenue agency, and has help thousands of people solve their IRS and state tax problems over the past 30 years.  

New Changes Could Affect Your Credit Score…For the Good!

The three major credit reporting agencies announced Monday some sweeping changes in the way they report bad debts and it has to do with medical debt.  In an effort to improve credit reporting and relieve pressure from regulators, credit reporting agencies (the 3 companies that hold your credit reports and scores) knew that they had to do something.

Medical debt has been problematic.  Doctors office would automatically report negative ratings without giving the process time to work.  Now, the early reporting won’t have that negative effect.

Now the credit reporting agencies will be required 180 days before reporting medical debt to allow for the insurance companies and doctors to pay.

Also, existing medical debts that ended up in default that were eventually paid will be deleted from credit reports.  That would be a huge boost to a person’s credit score.

These new changes come on the heels of FICO’s announcement last August.  They announced that they would change the credit scoring formula to where negative marks from medical debt will not have as bad of an effect on a credit score.

There were some other changes.  However, I would consider them “fluff.”  Credit bureaus also said people who contest items in their credit reports will receive additional instruction on what to do in the event the dispute didn’t go their way.  They are also going to use credit investigators instead of an automated process to look into disputes. 

Finally, the three credit reporting agencies will get rid of the reporting of debts that didn’t arise from a consumer contract or agreement.  That would include such things as tickets and fines.  

So how can you benefit from this?

As a good rule of thumb, if you have a medical procedure done, double check with every provider and make sure closure is put to all billing and stay organized with billing and who is paying what.   

If you have paid defaulted medical debt that has been paid, go ahead and submit a request to remove it from your credit report based on these announced changes. 

If you have medical debt that you think anything is wrong or in error, dispute it based on these changes.  You have nothing to lose.

If you have ridiculous negative remarks from tickets or library fines, dispute them requesting that they remove them based on these new announced changes.

Finally, how you go about disputing items is now much more consumer friendly once they switch to humans versus an automated process.  Just make sure you present a very detailed case informing them why your item should be corrected or removed.

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