Tips for Saving Money on Your Cell Phone

Presented by Tim Traub 

These days, pretty much everyone has a cell phone—some people even have two! As cell phones get faster and smarter, new product launches can rival the fan frenzy of Beatlemania, and it’s easy to get caught up in the excitement.

Because the initial cost and ongoing monthly expenses can be substantial, make sure you don’t get so carried away that you overpay for your phone. Whether you’re looking for the hottest new toy or just want to cut back on your monthly costs, there are plenty of ways to trim the overall cost of your cell phone. Follow these simple tips to save money and stay connected:

Evaluate your needs

·         Look closely at your monthly usage. If you only use 200 minutes of voice per month and are paying for more, you should downgrade your voice plan. Conversely, if you regularly use more than your allotted texts, it may be cheaper to upgrade your texting plan and avoid the overage charges.

·         Review rollover packages. If you use more voice minutes during certain times of the year, the right rollover plan can save you money. You can pay for the average month, not the high-usage month, by rolling unused minutes from the slow months to the busier ones.

·         Do you really need an Internet plan or a data plan? Be honest with yourself. If you don’t travel much and spend your days at a computer, how much do you need a phone to check your e-mail? Or if you have a phone with a small screen, how much will you actually use it to browse the Internet?

·         Is a smartphone right for you? Do you need a phone that surfs the Internet or checks your e-mail throughout the day, or do you just need one that makes it easy to text? Don’t buy a phone just because it’s popular. If you’re looking to save money, there are lots of cool phones that can meet your needs without emptying your pockets.

Avoid costly calls

·         Toll-free 800 calls are not free on cell phones. You will be charged for calls to 800 numbers made from your cell phone.

·         Calling 411 will cost you money. You can be charged up to $1 per call for using 411 directory assistance and being connected to the number you requested.

·         Use free online directory services. If you have a data plan—or access to a computer—use an online directory service like www.411.com or www.whitepages.com to find a number.

Avoid extras

·         How necessary are ringtones, software, video streaming, games, and other downloads? Although these items can add to your experience, they aren’t necessary for the phone’s functionality, so think twice before purchasing them.

·         Only buy the accessories you really need. Add-ons like phone cases, car chargers, and other accessories can tack on unnecessary costs.

Stay up to date on new offers

·         Shop around. Carriers buy phones in bulk from manufacturers like Apple and Nokia and then offer them at reduced costs in exchange for customer contracts. The carriers may price their offers very differently, so be sure you know what you want in advance and shop around till you find the best deal.

·         Check out different contract terms. Contract prices change according to length of commitment, so signing a longer contract may save you money in the long run.

·         Timing can be everything! When a new model is first released, it can be much more expensive than it will be a few months later; coincidentally, the old model will likely become cheaper, and it may have everything you really need.

·         Make sure the plan you’ve always had is still the plan you need. Although many cell phone users keep the same plan for more than five years, the prices of these plans change frequently. Your carrier will not retroactively change the price you pay, so be sure to check the contract price before you renew.

Consider pay-as-you-go plans

·         Pay separately for minutes and texting. With a pay-as-you-go phone, you purchase a phone and pay separately for only as many minutes or texts as you think you’ll use. Keep in mind that these phones become expensive with heavy usage because the per-minute price is higher than it would be with a more traditional contractual plan.

·         Budget control. Pay-as-you-go phones help you control how much money you spend and are a great option for light users or people who only want a phone for emergencies.

The customer is always right

·         Don’t be afraid to ask for a better deal. If you feel like you are paying too much, call your carrier. Many cell phone companies offer special customer-retention deals if they think you might leave the company.

Being aware of how much you spend on anything is a good idea. And with cell phones, it’s easy to check your bill every month to ensure that the charges are correct and that you need all the services you’re paying for. Be realistic. We can get so caught up in the excitement surrounding the latest gadget that we forget to look at what we really need our phone to do. Even if you just make a few seemingly small changes to your monthly cell phone usage, you can save yourself a good deal over time.

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Tim Traub is a financial consultant located at Tim Traub, LLC 167 Cranberry Highway in Orleans, MA. He offers securities as a Registered Representative of Commonwealth Financial Network^®, Member FINRA/SIPC. He can be reached at (508) 240-0848 or at timtraub@timtraubllc.com.

 

© 2012 Commonwealth Financial Network^®

American Taxpayer Relief Act of 2012 Creates Planning Opportunities

Presented by Tim Traub

The American Taxpayer Relief Act of 2012 was passed by Congress on January 1, 2013. The act provides a mixed bag for taxpayers, extending or modifying many of the tax provisions that were set to expire on December 31, 2012¹, while letting others terminate. Where do we stand now? Let’s take a closer look at some of the changes that have occurred and how you may take advantage of them.

Individual income tax rates

For taxpayers with annual income less than $400,000 (individual) and $450,000 (married filing jointly), the act made permanent the current marginal income tax rates of 10 percent, 15 percent, 25 percent, 28 percent, 33 percent, and 35 percent. For taxpayers with taxable income over these thresholds, the act restores the 39.6-percent tax bracket.

Planning tip: Business owners may wish to examine their current entity structure to determine whether or not it remains beneficial under this new legislation. S corporations and LLCs historically have been favored over C corporations due to the ability for the business owner to report business profits on his or her own personal return. Now, however, the C corporation’s highest tax bracket is lower than the highest personal tax bracket. The spread may provide opportunities to defer compensation.

Capital gains and qualified dividends

Taxpayers with income above the $400,000 (individual) and $450,000 (married filing jointly) thresholds will see an increase in the long-term capital gain and qualified dividend tax rate from 15 percent to 20 percent. The 15-percent rate will remain in place for taxpayers below these income thresholds. (For taxpayers in the 15-percent or lower tax bracket, the 0-percent capital gain rate will remain in place.)

Important note: The new Medicare surtax resulting from the 2010 Patient Protection and Affordable Care Act will also play an important role for higher-income taxpayers in 2013. Starting January 1, certain taxpayers will be subject to a 3.8-percent surtax on the lesser of net investment income or the excess of modified adjusted gross income (MAGI) over $200,000 (individual) and $250,000 (married filing jointly). This is on top of regular capital gain taxes. The following types of investment income will be affected: taxable interest, capital gains, dividends, nonqualified annuity distributions, royalties, and rental income. Exceptions include distributions from retirement accounts, pensions, 401(k), IRAs, and municipal bonds, although these distributions will impact the MAGI calculation.

As a result, the effective top rate for net long-term capital gains for many higher-income taxpayers is now 23.8 percent.

Federal estate, gift, and generation-skipping transfer (GST) tax

The act retains the annual inflation-adjusted $5 million estate tax exclusion but increases the maximum estate tax rate to 40 percent. The lifetime gift tax exemption remains unified with the $5 million exemption. Portability between spouses also becomes permanent, and the act extends the GST tax-related provisions, including the inflation-adjusted $5 million exemption.

Portability allows the surviving spouse to apply any unused exclusion of the deceased spouse to his or her own transfers during life and at death (if the proper elections are made). Portability should bring with it flexible planning strategies for high-net-worth estates.

Planning tip: The $5 million exemption amounts offer greater flexibility for high-net-worth individuals to transfer assets during life or at death—potentially gift and estate tax-free. With the “permanency” of these provisions, taxpayers are encouraged to take time to execute well-thought-out estate plans, instead of trying to implement changes at the last minute, before legislation expires.

Qualified charitable tax-free IRA distributions

Congress restored the Qualified Charitable Distribution (QCD) provision for 2012 and 2013. The QCD allows taxpayers age 70½ and older to transfer up to $100,000 from an IRA directly to a qualified charity to avoid recognition of the income and to partially or fully satisfy the required minimum distribution (RMD) requirement. For 2013, the QCD must be made prior to December 31, 2013.

Planning tip: A QCD may still be made for the 2012 tax year under the following conditions:

1.       An individual may make a direct transfer from the IRA to charity prior to February 1, 2013, and characterize it as made on December 31, 2012.

2.       If an individual took an RMD after November 1, 2012, and before January 1, 2013, the individual may treat the distribution as a QCD if the amount (up to $100,000) is transferred to charity prior to February 1, 2013. Please note: RMDs taken prior to November 1, 2012, are not eligible.

Education Incentives
The American Opportunity Tax Credit is extended through 2017. This provides for a 100-percent tax credit of the first $2,000 of qualified tuition and related expenses and 25 percent of the next $2,000, for a maximum credit of $2,500 per eligible student. The credit applies to the first four years of a student’s post-secondary education.

The Qualified Tuition and Related Expenses “above the line” deduction (meaning you don’t need to itemize to claim it) is extended until December 31, 2013, and was retroactively extended for 2012.

The Student Loan Interest Deduction is a $2,500 “above the line” deduction. The act makes permanent the suspension of the 60-month time limit.

Coverdell Education Savings Accounts received a permanent maximum contribution limit of $2,000. Distributions must be used for qualified higher education expenses while attending elementary, secondary, or post-secondary educational institutions.

Planning tip: A taxpayer cannot claim the Qualified Tuition deduction in the same year as he or she claims the American Opportunity Tax Credit or the Lifetime Learning Credit. Nor can the tuition deduction be claimed for a student in the same tax year if anyone else claims the American Opportunity Tax Credit or Lifetime Learning Credit for the same student in the same year.

Alternative minimum tax (AMT)

The last AMT “patch” expired at the end of 2011. The 2012 act permanently extends AMT amounts to $50,600 for individuals and $78,750 for married filing jointly. These amounts are retroactive for the 2012 tax year. The exemption will be adjusted for inflation in 2013.

Planning tip: In previous years, the AMT patch was not released until the year after the previous tax year, making it difficult to plan without knowing the exemption amounts. Now that the AMT has been given a more permanent fix, planning should be easier.

Itemized deductions and personal exemptions

For tax years 2010–2012, itemized deductions and personal exemptions were not subject to phase-out. The new legislation revives phase-out rules for 2013 at these applicable thresholds:

• $300,000 for married filing jointly
• $275,000 for heads of household
• $250,000 for single filers
• $150,000 for married filing separately

The itemized deduction rules reduce the allowable itemized deductions by 3 percent of the amount by which the taxpayer’s adjusted gross income exceeds the applicable threshold. The itemized deduction cannot be reduced by more than 80 percent. Certain items, such as medical expenses, investment interest, casualty, wagering, and theft losses, are excluded.

The total amount of personal exemptions that may be claimed by a taxpayer is reduced by 2 percent for each $2,500 or portion thereof (2 percent for each $1,250 for married filing separately) by which the taxpayer’s adjusted gross income exceeds the applicable thresholds listed above.

Planning tip: For taxpayers with a higher income and larger deductions, the itemized deduction and personal exemption limitations may create a “stealth” tax on tax liability, effectively increasing the marginal rate. Taxpayers may wish to recognize income or deductions in certain tax years to help minimize the impact.

Payroll tax cut

The act did not extend the 2-percent payroll tax cut, which temporarily reduced the social security tax withholding rate from 6.2 percent to 4.2 percent for tax years 2011 and 2012. The tax withholding rate will return to 6.2 percent for wage bases under $113,700, which will have an immediate impact on take-home pay.

On the whole, although Congress did act to stop the sweeping tax increases that were set to take effect as a result of the fiscal cliff, taxes may go up for some taxpayers. We will continue to work with you—as well as with your legal and tax advisors—to help you pursue your financial and legacy goals in this new tax environment.

¹Bush-era Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) and the Jobs and Growth Tax Relief Act of 2003 (JGTRRA), both of which were extended under the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010.

Commonwealth Financial Network^® does not provide legal or tax advice.

IRS CIRCULAR 230 DISCLOSURE:
To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein.

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Tim Traub is a financial advisor located at Tim Traub, LLC. He offers securities and advisory services as an Investment Adviser Representative of Commonwealth Financial Network^®, Member FINRA/SIPC, a Registered Investment Adviser. He can be reached at (508) 240-0848 or timtraub@timtraubllc.com.

© 2013 Commonwealth Financial Network^®