Kill two birds with one stone.  Go green while saving green.  There are many ways to save money and the environment.

• Use CFLs (compact fluorescent lightbulbs) – While the initial cost is somewhat higher than standard bulbs, CFLs use less energy.  If you install CFLs in your most-used fixtures, you can easily recoup their initial cost.

• Bricks aren’t just for building – Consider putting a brick (or something similar in mass) in your toilet tank.  Because this displaces some of the water, each flush will use slightly less water.  You won’t notice a difference in your flushing but you will save water and money.

• Unplug unused appliances – Do you leave your hairdryer plugged in all the time?  Appliances draw power even when they’re not in use.  Unplug small appliances when you’re not using them.  You’ll soon see a difference in your power bill.

• Invest in power strips for items such as TVs and computers – One benefit is protecting your equipment from electrical surges.  Also, you can turn off the power strip (reducing energy usage) when you will be away from home for long periods of time.

• Use a rain barrels – Rain barrels can be purchased or constructed very cheaply.  By collecting rainwater to use for gardening or other outdoor need, you can reduce the amount of water that goes to waste as well as save on your water bill.

• Install an attic fan – If you live in a particularly warm climate, summer cooling bills can be high.  Attic fans draw out hot air which helps lower the ambient temperature in your home.  This decreases the load on your air conditioning unit, saving power and money.

Q:  What is the difference between investing in stocks and investing in mutual funds?

A:  When you invest in stock, you only have ownership in one company.  A mutual fund is a collective of various stocks that allows you to have ownership in several companies.  Because mutual funds are diverse, they are generally less risky than owning individual stocks.  For first-time or novice investors, mutual funds can be a safer alternative to stocks.

Q:  I sometimes sell items on eBay for extra money.  Do I have to pay taxes on this money?

A:  The answer is…it depends.  If you sell items for more than their original retail value (for example, vintage toys), you’re supposed to declare that income.  If you’re merely selling clothing or household items for less than what you paid for them, you’re in the clear.   While a lot of people don’t declare or underreport this type of income, it’s better to be safe than sorry.  If the IRS comes calling, more than just your current year’s income tax return will fall under scrutiny.

A lot of people make a big fuss about Valentine’s Day.  While I can definitely appreciate the sentiment, you don’t have to spend a lot of money to show someone you care.  Here’s my top five list of frugal, yet romantic, dates.

1. Instead of going out to dinner, cook dinner with your Valentine.  In addition to avoiding the crowds and saving money, you’ll have quality time together.

2. Make it a Blo.ckbuster night - Rent a movie and snuggle on the sofa together.  Bring your own popcorn and candy if you like.

3. Read poetry to each other.  If you’re a guy, you’ll definitely get bonus points for this romantic gesture.

4. Instead of giving a gift certificate to a spa, give her a massage instead.  Bring some body oils, candles and CDs and turn his or her room into a spa retreat.

5. Think outside the “romantic” box.  If you are both kids are heart, perhaps do something fun like go to the circus.  It won’t be as crowded as a “romantic” outing and it will definitely be a night to remember.

What are your plans for a frugal Valentine’s Day?

There are a number of changes in the tax code for 2007.  Below I’ve highlighted the ones that will affect the most people.

• AMT exemption - The amount for AMT exemption has been raised for one year only.  The new limits are $66,250 for married filing jointly, $33,125 for married filing separately and $44,350 for single and head of household.

• Charitable contributions - Now documentation is required for ALL donations, cash and non-cash.  This can be in the form of bank records or a receipt from the recepient organization.

• Mortgage forgiveness - Now, up to $2 million of debt on a primary residence can be forgiven ($1 million for married filing separately).  This is in effect for debt forgiven during 2007, 2008 or 2009.

• Personal exemptions - Exemptions have increased to $3400 for both the taxpayer and any qualified dependents.

• Private mortgage insurance (PMI) - PMI is now tax-deductible for mortgages originated or refinanced during 2007.  However, this does not apply for taxpayers with an AGI over $100,000 (or $50,000 if married filing separately).

• Saver’s credit - The income limit has been increased to adjust for inflation.

• Standard deduction - The standard deduction has increased to $10,700 for married filing jointly, $5350 for single and married filing separately, and $7850 for head of household.

• Standard mileage rates - The mileage rate for business use of a vehicle has increased to 48.5 cents per mile.  The mileage rate for medical reasons or a qualified move has increased to 20 cents per mile.

Five states, as well as the District of Columbia, now allow same-sex couples to file joint income tax returns.  Connecticut, Massachusetts and Vermont allowed for joint returns in previous years but 2007 is the first year it’s allowable in California, the District of Columbia and New Jersey.

However, the process can be a bit complicated.  Same-sex couples are not allowed to file joint federal returns.  Therefore, at a minimum, couples will need to file two federal forms in addition to the one state form.  Also, some states require couples to be registered as domestic partners before they can file jointly.

For more information, consult the tax department of your state -

California Franchise Tax Board

Connecticut Department of Services

District of Columbia Taxpayer Service Center

Massachusetts Department of Revenue

New Jersey Taxation

Vermont Department of Taxes

Wachovia Bank has instituted a new savings program. Every time you make a transaction (debit card purchase or online bill pay), $1 is transferred from your checking account into your Way2Save savings account. It’s definitely a painless way to save but I imagine it would make balancing your checkbook a little bit more difficult.

What’s nice about this program is that Wachovia will give you an annual bonus for the first three years your account is open. The first year, you get a 5% bonus. The second and third years, you get a 2% bonus. The bonus is limited to $300 in any given year though.

Click here for more information.

Mint is having a contest.  Confess your financial sins (via video or text) on their site no later than March 15, 2008.  The winning contestant will have their credit card bills (as of December 31, 2007) paid up to $5000.

More information be found here - http://contest.mint.com

I’m always looking for ways to make more money and to spend less money…without lowering my quality of life/standard of living.  So I thought I’d give you guys a sample of the ways I like to save money.  There are some things I don’t mind paying full-price for (like Cirque du Soleil tickets) but those are few and far between.  Therefore, I’ve found ways to do most of the things I like to do for cheaper.

Movie tickets - I am able to get discount movie tickets from my workplace.  Instead of paying $9 to see a movie, I pay $7.50.  Since matinee prices have increased to $7.50, there’s really no way to see first-run movies for cheaper.  I also recently discovered that if you go to the first showing of the day, the price is $5 instead of the usual $7.50.

Cell phone - Once again, it pays to see what discounts your employer offers.  Because of where I work, I get 5% off my bill.  It’s not much but why spend more money than I have to?

Dining out - Check out the Entertainment Book.  They’re sold in most cities (they have local editions) and it pays for itself quickly.  Nothing like two-for-one coupons for your favorite restaurants.

Clothing - Got a favorite store?  Get on their mailing list or sign up for their credit card (only if you’ll pay it in full each month) and they’ll send you coupons and advance notices of sales.

Car insurance - Take a defensive driving course (online for about $45) and your car insurance rate will go down.

Groceries and household items - Wholesale clubs like BJ’s and Costco can be worth your while if you have the space to store items and know what they would cost you otherwise.  Once again, through my job, I got a BJ’s membership for $25.  Both of our cars use premium gas and BJ’s has it for at least 10 cents/gallon less than the cheapie stations.  We also buy non-perishables (cleaning supplies, paper products, etc.) there in bulk.

Shoes - I hardly ever buy shoes for full-price.  Macy’s sales rack and DSW are great.  In addition, I like zappos.com and Amazon’s new site endless.com.

Books - You can get brand new books, CDs, etc. on half.com for a fraction of the price.

Magazines - Google ‘free magazine subscriptions’ and you’d be surprised what you can find.  I have about 12 magazine subscriptions and I don’t pay for any of them.  If you have leftover frequent flier miles that aren’t enough for a ticket and would otherwise go unused, consider redeeming them for magazine subscriptions.  I know that Continental, Northwest and American have this option and other airlines may as well.

Travel (my favorite) - Frequent flier miles and hotel points have saved me MUCH money over the years.  Hubby and I paid a total of $220 for two roundtrip tickets to Mexico and six nights at top-notch Hilton resort for our honeymoon.  I don’t know how much the plane tickets would have cost us but the hotel room was regular $295/night.  If you don’t travel enough to earn lots of miles/points, don’t worry.  We both have Delta Skymiles Amex that allows us to earn miles for all our purchases.  A survey program that I love (e-rewards.com) will give you rewards of Hilton Hhonor points.  Also, keep an open mind.  When we went to Hawaii (on two free first-class tickets), the Hilton we liked would have cost us $2000 for the week.  A little too rich for my blood.  So I went on vrbo.com and found a condo a block from the beach for ~$1000.  Sure it wasn’t as nice as the Hilton but since we spent most of our time out and about, I was more than happy to use that $1000 for spending money.  There are times when we don’t mind splurging and there are times when we don’t mind “roughing it”.

What are some of the ways you save money?

Today’s Q & A is related to this week’s homebuying series.  Here are some common questions and their answers.

Condo/townhouse vs house - which is better? 

Well there’s no definitive answer.  Only you know what’s best for you.  Price aside, the main difference between attached and detached housing is lifestyle.  Do you want to share common areas (and walls) with your neighbors or do you want your own (separate) piece of land?  Do you dream of planting a garden or do you dread the idea of yardwork?

Neighborhoods - how to determine good vs. bad?

One major thing to look at is the school system.  It’s better to buy the worst house in a great school district than the best house in a crappy school district.  If you have children and live in a good school district, you will save money over living in a not so good school district and having to send them to private school.  Also, school district will matter when it comes time to sell.

Also, take a good look at the homes in the area.  Do people keep their homes and yards nice and have pride of ownership or are there broken down cars parked out front?  Drive through the neighborhood during the day as well as at night and on the weekends.  It is fairly quiet most of the time or does it become party central Friday and Saturday with music blaring?

How many houses are for rent or being rented out?  It’s no secrets that owners usually take better care of property and care more about the neighborhood than renters.  I would be leery of a neighborhood with a lot of houses being rented.

New construction vs. older home?

There are pros and cons to both.  My first house was new construction but my latest house was bought as a resale (two years old at the time).  With a new house, it’s nice because you get to choose everything - carpet colors, cabinetry, fixtures, etc.  However that also means that you will have to buy a lot of things that don’t always come standard - blinds, bathroom hardware, etc.  You will have to pay for any upgrades upfront.  Also, all new houses will have little glitches or issues that need to be resolved.  The house will settle over the first year or so, so you may notice little cracks or nail pops.  They are not cause for alarm though.

When buying a resale, someone else has already paid to upgrade everything and the house has already settled so you know exactly what you’re getting.  The landscaping has matured and most likely looks better than with new construction.  HOWEVER, you have to live with (or replace) the choices the previous owner made.  In our case, that meant a pink bathroom, a pink bedroom, a purple bedroom, murals painted on the walls…  It’s not all bad though because it also meant the basement was already wired for surround sound and a projector and they left the custom curtains in the two story foyer.

Ideas to pay off mortgages sooner than 30 yrs?

First off, unless you have a high interest rate, you would be better off (financially) investing any extra money because the rate of return will be much higher than the mortgage rate you’re paying.  In simple terms, if you have a 6% mortgage but earn 13% with your investments, it’s better to invest.  That said, a lot of people want to pay off their mortgage early for piece of mind or to improve their cash flow later in life.  There is nothing wrong with either tactic.  You should determine what your goals and priorities are and do what’s best for your situation.  Don’t let anyone tell you that what you’re doing isn’t the best thing to do.  Only you know what’s best for you and makes you comfortable.

If you do want to pay your mortgage off early, there’s the real easy way and there’s the slightly harder way.  The easy way is to simply round up your mortgage payments each month.  Let’s say you financed $100K at 5.875%.  Your payments will be $591.94.  However, if you pay an even $600 every month, you will pay off your mortgage 14 months early and saved yourself $5000 in interest payments.  And I’m sure you won’t even miss that extra $8/month.  The slightly harder way would be to throw the majority of your extra money at the mortgage each month.  However, I wouldn’t suggest that unless you have a healthy e-fund and are maxing out your 401k and IRA.  That’s just my preference though.  Once again, you have to do what suits you.

Duplexes vs. just sticking with the basics for a first time buyer.

That all depends on whether or not you want to be a landlord and whether or not you can afford the whole mortgage on your own if you don’t have a renter.  Can you deal with collecting rent every month and having people knocking on your door at all hours because the sink is backed up?  Do you have the stomach to evict someone if necessary?  Can you afford to pay the whole mortgage indefinitely in the event you don’t have a renter?  If the answer to all those questions is no, you should probably NOT get a duplex.

How long does it take to build equity in thinking of upgrading houses later on?

How it takes to build equity depends on your interest rate as well as if you make extra payments.  I would say don’t go into your first house with your mind on your next house.  First, if you’re not going to stay in a house for at least three years, you don’t need to buy.  You will most likely lose money on the deal (unless you’re fortunate enough to have bought in DC/CA/NY a few years ago).  Yes, lots of people have made lots of money in the last few years but that was then.  Also, bear in mind that you LOSE a big chunk of your equity when you sell because of realtor fees.  Let’s say you’re selling that $100K house for $110K two years later.  Guess what, you don’t walk away with $10K profit.  You have to pay the realtors which is generally 6%.  So you write a check for $6K and walk away with $4K plus any equity you had.  If you factor in all the home improvements you made as well as the property tax you’ve had to pay, you might have broken even.  From a purely financial point of view, you would have been better off renting.

Hopefully, this information has been helpful to you.  If you have other questions that haven’t been addressed, please feel free to post them in the comments section.

I may come back to saving on discretionary spending but a convo had with a friend last night makes me think this aspect is much more important.  JUST BECAUSE YOU CAN AFFORD A MORTGAGE DOES NOT MEAN YOU CAN AFFORD A HOUSE!  The fact you that you pay $900/month for rent doesn’t mean you can afford a $900/month mortgage.  Why not, you ask.  Because there’s a lot more to it than just paying the mortgage.

When you use those nifty online calculators that tell you how much house you can afford, it only gives you principal and interest (P&I) which may well be $900/month…BUT wonderful homeowner you are, you have to pay property tax and homeowner’s insurance now. Generally speaking, neither one of those is cheap.  Unless you have a downpayment of 20% or more, you will usually have to pay into an escrow account.  This means you pay property tax and insurance along with your mortgage every month and the mortgage company pays those two bills for you.  So you thought you’d be paying $900/month but you’re really paying $1050/month (for example).

Also, if you live in a townhouse or condo (and sometimes for single family homes too), you will be paying HOA fees.  For a nice complex, you can expect $100+/month.  Depending on where you live, this might cover garbage and/or water and it generally covers basic outdoor maintenance.  So now your $900/month mortgage has turned into $1150/month and you haven’t paid any other bills or bought any groceries.

Your utilities will probably go up, especially if you have natural gas heat (vs electricity).  And guess what else?  Houses need stuff.  No, you won’t buy all that stuff at once but for the first year, expect to drain your wallet on “house stuff”.  From lawnmowers to towel racks to blinds, there will ALWAYS be something you need to buy and I’m not even talking about decorating for real.  So you should budget an extra $250/month for increased utilities and “stuff”.  Now a $900/month mortgage has turned into $1400/month of expenses.  Still think you can afford it?