BIDaWIZ Blog » BUDGETING

What Will Lower Oil Prices Mean For You?

The BIDaWIZ Team — Fri, 17 Oct 2014 21:11:45 +0000

The price of oil continues to drop due to concerns of a global economic slowdown coupled with an apparent boom in US oil production. Even more, the recent 20% price drop over the past month is showing no signs of stabilizing. Having said that, consumers and certain businesses stand to benefit as a result of the big drop in oil prices.

How much will the price of oil drop?
Many economists are forecasting that the price of oil will continue to decline into the low to mid $60 range. They attribute much of this forecast to a continued global economic slowdown as well as a surprising boom in US oil production.

How will this impact prices at the pump?
Generally speaking, a $10 decrease in the price of oil will result in a $0.20 to $0.30 drop in the price of gas. With the price of crude oil currently at $80, a $10 decrease to $70 would cause gas prices on average to decrease below $3 per gallon. However, we should point out that 30% of the price is impacted by other other costs such as state taxes, marketing and distribution, refining and of course deflation, which is now an economic risk.

What does this mean for consumers?
Most consumers will benefit from an increase in purchasing power. Specifically, for every one-penny decrease in gas prices, US households will have over $1.5 billion more in annual household cash flow. Thus, if prices drop another 20 cents, US households will have $30 billion in additional household cash flow that they weren’t expecting.

Which businesses will benefit?
Given that US consumers will have more money in their pockets, we expect many big box retailers and other holiday season businesses to benefit. Holiday spending forecasts have already been revised upward or closer to 4% growth year over year. However, that forecast may be conservative if oil prices continue to fall.

Separately, there are many businesses in the transportation space that benefit from lower oil prices. Companies such as Fedex, UPS and other trucking companies will see improvements to their bottom-line as a result of lower fuel costs.

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2013 Holiday Air Travel Tips You Need To Know

The BIDaWIZ Team — Fri, 20 Sep 2013 21:58:38 +0000

The holiday travel season begins in nearly two months. Airlines are beginning to gear up for a jump in holiday season travel from prior years as the economy continues to show improvements and consumer surveys indicate momentum. What do you need to know to lock-in the low fares?

Purchase your ticket now
The earlier you purchase, the cheaper the price of the ticket. Air travel during the peak holiday season will already be higher than during normal periods of traffic, but the price will begin rising quickly. If the forecasts hold, there will be less inventory this year than in prior years. Thus, it’s likely that the price you pay this year for similar travel, will cost more than in the prior years.

Book and fly on a Tuesday
Airfares are cheapest when you book on Tuesday. Every airline is different and pricing can be dependent on many factors such as the airline, time of year, and travel route. However, on average the sales begin late Monday night and are matched by competitors on Tuesdays. The savings varies, but can be as high as 15 to 20%. The worst days to book are on the weekends because the airlines rarely reset pricing then. The cheapest times to travel are at the crack of dawn (best) or after dinner. The mid-morning and mid-afternoon flights are usually the most expensive.

What about for Thanksgiving travel?
Book your departure on a Tuesday as the price can be 20% less than on Wednesday or another day. Christmas fares can fluctuate significantly as they are highly dependent on the route and the carrier.

Other options to consider
We know most people prefer to fly direct. If that’s the case, you can still save money by flying out of a different airport that you may not have thought of flying out of in the past. There are many smaller regional airports that may still fly direct to your desired destination. The same logic applies for using different carriers. It’s certainly possible to end up with a cheaper overall flight by using multiple carriers for the different legs of your trip.

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Should I Pay With Cards Or Cash When Traveling Overseas?

The BIDaWIZ Team — Wed, 03 Jul 2013 06:47:01 +0000

We are now in the peak season for travel abroad to popular destinations such as Europe. In the past, paying with travelers checks was de rigueur when traveling overseas, but these days they’re overshadowed by credit cards and ATM machines. Should you use cash or cards when paying for purchases overseas?

Should you use cash?
Typically, the cheapest method to pay for purchases is by obtaining the foreign currency at your local bank. This is due to the high likelihood that you’ll be able to exchange money at wholesale currency rates, with minimal if any fees charged. This compares to changing currency at the airport or another retail location, in which they charge a very high convenience fee. For instance, exchanging American Dollars for Euros at the wholesale rate of $1.31 compares to the retail rate of $1.50 Dollars for every one Euro. This .15 to .20 spread can certainly add up. If you do decide to exchange money at a retail location such as a Travelex, be sure to understand that any waived foreign transaction fee for changing large amounts of money is still embedded in the foreign currency rate they offer.

Please also note that if you withdraw from an ATM machine, make sure you find out the fee because they can be high and above the amount listed on the machine since it is an international withdrawal. In most places you’ll want to have local currency on hand for small purchases, or to use at places where credit cards aren’t accepted.

The main drawback for bringing a lot of foreign currency on hand is the lack of security. You’ll be traveling in a foreign country where tourists being targeted by pickpocketers isn’t all that uncommon. If you do decide to travel with a lot of cash, keep some in your pocket and the remaining amount in a safe in your hotel. Most hotels provide this feature for travelers visiting from abroad.

Are there any costs if I use my credit card or debit abroad?
Many banks charge fees for the purchases you make or the money you withdraw from your account when you are abroad. When you call your financial institutions to notify them that you’ll be traveling abroad, ask about the foreign transaction fees they charge. It’s not uncommon to be charged up to 3 percent of the purchase price. But certain cards carry no foreign transaction fees. If you don’t have a lot of cash on hand, using cards for large purchases can be very convenient and relatively cost effective since you’ll get the wholesale rate. As far as whether you should use a debit or credit card, we recommend the latter. Credit cards provide more security against fraud as there isn’t direct access to your cash account at your bank as is the case with a debit card.

What is the best credit card to use when traveling abroad?
The credit card you use to make purchases matters. Capital One, Discover and American Express Platinum cardholders are not charged a foreign transaction fee. Regular American Express cardholders are charged a 2.7% fee and then Chase, Citi, Bank Of America, Barclaycard, HSBC, Wells Fargo and US Bank all charge a 3% fee.

Notify your bank or credit card issuer of your travel plans
Otherwise they might suddenly start seeing charges from London and Lisbon popping up, and shut down access to your account, fearing it’s a matter of fraud.

More Questions? Browse answers or ask your finance questions online. Also, you can explore our tax research services online.

Have You Noticed That Food Prices Are Rising At The Market?

The BIDaWIZ Team — Fri, 22 Feb 2013 14:00:36 +0000

Inflation is beginning to take hold as food prices are rising at a greater rate than in the prior year. In addition, the core inflation reading, which excludes food and energy, increased at the highest rate in a year. While the actual core inflation data provided by the government suggests just under a 2% rate year over year, anyone that’s been to the grocery store lately will notice higher prices. Will this trend continue throughout 2013?

Why the increase in food prices?
Many of the agricultural rich states have experienced a severe drought, which has resulted in shortages in food supplies (i.e. soybeans). Supermarket chains have responded by purchasing overseas and passing the higher cost on to the consumer.

Other food prices will rise too
Food supplies will not be the only category to rise in price in 2013. Across the board, food prices will rise on average $0.05 to $0.20 per pound/container. Some foods will experience a greater increase such as milk/cheese and vegetables. This is largely due to higher feeding costs and the chains resorting to overseas importers for over half of the demand. When accounting for these costs, you should expect to pay 3%-5% more on groceries this year.

What can I do to offset the rising prices?
Food manufacturer’s coupons are often available in the Sunday newspaper. Many grocery chains run their sales Wednesday through Tuesday, and as Sunday falls in the middle of that sales cycle, items such as canned goods, cereals and other pantry staples are likely still available and on the shelves, and can be purchased for a discounted price with the Sunday coupons. Also, if you go to the store in the late afternoon or early evening, you will often have access to reduced prices on other items (like meats and baked goods) that need to be sold that day. You may also explore buying dry food items in bulk online or through one of the discount food chains such as Costco.

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When Should I Purchase My Airplane Ticket for 2013 Travel?

The BIDaWIZ Team — Fri, 21 Sep 2012 14:00:34 +0000

The increasing number of mergers and acquisitions being executed in the airline industry should gain the attention of frequent travelers. Industry consolidation has historically preceded a lengthy period of higher fares. It’s not always just oil prices. What can you do to find the best price for your next flight?

Book Your Flight on Tuesday Afternoons
We’ve analyzed data over the past year looking at price fluctuations throughout the week. On average, airfares are cheapest when you book on a Tuesday afternoon. Every airline is different and pricing can vary, but on average the sales begin late Monday night and are matched by competitors on Tuesdays. The savings varies but can be as high as 15 to 20%. The worst days to book are on the weekends because most of the fares start to rise when booking on Thursdays and the airlines rarely reset pricing during the weekends.

Book at least three months in advance for domestic flights and 6 months for international
It’s not rocket science, the earlier you purchase, the cheaper the price of the ticket. However, don’t be alarmed and rush to purchase your tickets immediately because of industry consolidation or rising oil prices because it will take time for those costs to be reflected in the pricing. Most of the time, you’ll be able to get a low priced ticket three months in advance, but you may have to book even further in advance for travel during the holiday season. The other option is waiting until the vary last minute when enough inventory remains for the airline to severely discount tickets. However, booking within 14 days of the flight can be very expensive unless it’s the very last minute. Also, remember that if you purchase far in advance, many airlines such as the low cost carriers (AirTran, Alaska, Southwest, & JetBlue) offer a refund if the price drops at any point prior to the flight.

What day and time is the cheapest to travel?
It’s cheapest to fly on Tuesday, Wednesday and then again on Saturday but it can vary by airline and route. The cheapest times to travel are at the crack of dawn (best) or after dinner. The mid-morning and mid-afternoon flights are usually the most expensive.

What about international travel?
It’s difficult to predict pricing for international flights because of the many variables involved. However, we looked at airfares from New York to London and noted that October is the cheapest time to fly during the fall/winter period. Fares go up a bit in November but really start to rise during December. In addition, make sure you book travel well in advance.

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What Happens To My Frequent Flier Miles When I Pass Away?

The BIDaWIZ Team — Tue, 28 Aug 2012 22:30:25 +0000

When we think about estate planning, what usually comes to mind is transferring your home, investments, and life insurance policies to your beneficiaries. However, most people have valuable positions that include many other smaller ticket items. What happens to the thousands of frequent flier miles that you’ve accumulated over the years when you are longer around?

Can I include frequent flier miles in my will?
In most cases, you can include frequent flier miles in your will. Luckily, this doesn’t mean that you’ll have to complete any airline forms and provide the names of your beneficiaries. Your will just needs to be very clear in that it states which miles are to be transferred to which beneficiaries.

What if the terms and conditions on the airline frequent flier program state no transfers?
It’s true that many frequently flier programs may state that you cannot transfer miles even in the case of death. However, most policies will include language that allows a transfer for accrued travel miles in the case of death when accompanied with a will.

Do the airlines charge a fee for the transfer?
Unfortunately, certain airlines may charge the beneficiaries for the transfer. The beneficiaries may also need to provide a copy of a death certificate as well as a signed affidavit from the executor of the estate.

Which airlines have the most generous policies?
Delta and US Airways have the most attractive policies for those travelers with intentions to bequest their miles. American also allows transfers, but the fees can be high. Some of the other major carriers such as United and JetBlue do not offer travelers the ability to transfer miles, even in the event of a documented will with detailed instructions.

Are frequent flier miles included in the estate?
As of now, the IRS and tax code doesn’t address the issue if frequent flier miles are taxable. More specifically, the IRS has always treated rewards in the form of miles or points similar to a discount or coupon; not taxable (reference Internal Revenue Bulletin No. 2002-10). The only instance that they may be taxable if they are offered as a premium for signing up for an account, but that is not the case here.

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2012 Sales Tax Holidays Start Next Week For Many Shoppers

The BIDaWIZ Team — Thu, 26 Jul 2012 20:00:06 +0000

‘Tis the season for state sales tax holidays for many back to school students and other shoppers. We’ve compiled a list of states offering a sales tax holiday for consumers with information related to the items that qualify. Find out if your state is temporarily dropping sales tax next week or in the near future.

There are restrictions
It’s not a free for all. Many states offer a specific tax exemption by product and up to a certain dollar amount. For instance, Texas offers a sales tax holiday for clothing, footwear and school backpacks that are less than $100. This does not include accessories, athletic or protective clothing or rentals. Also, even though state sales tax may be temporarily dropped, local sales tax at the city level may still be in effect.

Does the consumer ever get the short-end of the stick during a sales tax holiday?
Yes, it happens sometimes. Certain businesses take advantage of the holiday by boosting their margins. For instance, rather than passing the sales tax savings onto the customer when a certain item like a back-pack is in high demand, they’ll actually raise prices to the equivalent of what it would have cost if there was not a sales tax holiday.

States 2012 Dates Max. Cost Per School Item
Alabama Aug. 3-5 $50

Arkansas Aug. 4-5 $100

Connecticut Aug. 19-25 $300*

Florida Aug. 3-5 $15

Georgia Oct. 5-7 $1,500**

Iowa Aug. 3-4 $100**

Louisiana Aug. 3-4 $2,500

Maryland Aug. 12-18 $100*

Mississippi July 27-28 $100*

Missouri Aug. 3-5 $50

New Mexico Aug. 3-5 $30

North Carolina Aug. 3-5 $100

Oklahoma Aug. 3-5 $100

South Carolina Aug. 3-5 Unlimited

Tennessee Aug. 3-5 $100

Texas Aug. 17-19 $100

Virginia Aug. 3-5 $20

*:These states have provide a sales tax holiday for only clothes and not school specific supplies as compared to the other states listed.
**: Georgia recently issued a sales tax holiday for energy efficient and water efficient products for non commercial use.

More questions? Browse answers or ask state sales tax questions online.

The Rising Cost of Raising Children

The BIDaWIZ Team — Fri, 15 Jun 2012 14:00:29 +0000

Children provide parents with some of the greatest joys in life. Unfortunately, many parents underestimate the financial costs of raising children which are on the rise like everything else these days (i.e. college tuition). Let’s find out how much we can expect to pay in child related costs over the years.

The rising cost of raising children
The USDA recently released its annual report on expenditures for raising children which is now at $234,900 ($295,560 if adjusted for inflation) over a seventeen year period for most middle income families earning between $59,410 to $102,870 per year. This translates to $13,817 annually and $1,151 on a monthly basis. For those families earning less than $59,410 per year, the price tag is about $169,080 or $9,946 annually and $830 monthly. Finally, families earning more than $102,870 can expect to spend $389,670 or $22,922 annually and $1,910 monthly. There are many factors impacting these figures which include the family’s geographical location. It comes as no surprise that the most expensive places to raise children are in the urban Northeast, West and Midwest. The cheapest places are in the urban South and rural areas.

Preparing for the rising cost
Start preparing by allocating money in your family budget to housing, clothing, health-care and miscellaneous expenses for your children. The first few months may be difficult to project, but, it is important to track your spending behavior as it will be easier to set a realistic budget going forward. The bigger ticket items such as parties and vacations may be more difficult to predict, but still use the same methodology as described above.

You may not realize it but your employee benefit plan will probably include coverage for your new child. Remember that day when you were electing benefits thinking to yourself, some of this doesn’t apply to me, I don’t have a child? Well, now it does. So be sure to update your elections immediately.

Children come with tax breaks
A portion of the money parents spend on children may be returned to them in the form of tax breaks. For instance, in 2012 the child-care tax credit is 35% of qualified expenses but limited to $3,000 or up to $6,000 for the care of two or more children under the age of 13. Parents with earnings that approach and surpass $43,000 are limited to a tax credit equivalent to 20% of qualified expenses, up to $3,000. In addition, most families with earnings of $49,078 or less last year, are likely eligible for the Earned Income Tax Credit (EITC). Let’s also not overlook the tax deduction for contributing to a 529 plan which is an account for college savings.

More Finance Questions? Browse Answers or ask child care budgeting questions online.

Are You Considering a Prepaid Cellphone Plan?

The BIDaWIZ Team — Fri, 08 Jun 2012 15:00:10 +0000

Prepaid cellphone plans are gaining momentum with some major carriers like Sprint expected to release a package with the iPhone by the end of the month. Still, should you be exploring prepaid cellphone plans?

It sounds cheaper but is it really?
It depends on the cellphone user. The prepaid cellphone plans vary in how the pricing works. Some plans offer unlimited voice, text, and data usage which are more pricey ($50-$60/per month) than those with set limits ($30-$40/per month). For low volume users, some plans offer a daily rate for using your phone such as T Mobile’s $3 per day program which translates to $90 per month if used throughout the month. Any plan with limits on usage should be reviewed carefully as the overages can be significant, defeating the purpose of the coverage in the first place. If you are interested in a prepaid plan but are currently under contract with your service provider, you also need to factor in at least a $250 early termination fee.

Don’t overlook coverage issues with some providers
Most of the major carriers offer a prepaid option which should provide similar coverage to what you experience with your current plan. However, certain providers may be small and leverage off of other networks which could limit service in certain areas. If being connected is very important to you, then this is probably not a great option unless the plan is through a major carrier’s network.

The price of the actual phone matters
If you plan on signing up for Sprint’s prepaid plan option with the 16GB iPhone 4S, be prepared to shell out at least $400 versus $200 for those under contract. This high cost could be a deal breaker for those that are addicted to relatively new phones.

How can I compare cellphone providers?
You might want to check www.billshrink.com, where you can get an idea of the cost of cellphone plans and compare to your current plan.

You can also go directly to the source and visit the cellphone service provider’s website (i.e. Verizon, T-Mobile, AT&T, Sprint). However, navigating through each website and comparing plans can be somewhat cumbersome which is why Bill Shrink might be a better alternative. Even Verizon, which offers the best site navigation provides so many options to choose from that it makes it difficult to compare to other providers.

More personal finance questions? Ask a personal finance expert online.

2012 Back To School Money Saving Tips

The BIDaWIZ Team — Tue, 05 Jun 2012 15:00:59 +0000

In a couple of months, students will be scrambling for new pens, paper, erasers and other school supplies. You can be the parent that waits until the last minute or you can save time and money by planning ahead for the back to school season.

Take inventory of last year’s supplies
Many students still have supplies from last year (pencils, pens, notebooks) but they tell their parents they need all new stuff. Make sure your child takes a full inventory of their supplies to assess what they need.

Build a list of needed supplies
It is important to put together a comprehensive list of all the items your child will need. Include items such as backpacks and clothes to get the best deals for the year.

Set a Budget
Set limits on the amount you can spend on each item. If you aren’t sure about cost, you can search online to get a sense of prices as well as coupons. Also, try to figure out how much you spent last year by reviewing your credit card or debit card statements from last August and September or review old receipts if you used cash.

If this is not your first time creating a budget for back to school purchases, then you have the benefit of analyzing your budget from last year. You can use prior year’s information to optimize your budget by eliminating items that were rarely used and looking for more inexpensive alternatives. Back to school shopping can really add up, so do yourself a favor and create a budget and compare to last year.

Where to Shop
Strategically plan your route based on the list of items you created at the prices you are willing to pay. It is easy to just start at the local CVS and go from there, but you’ll likely be stuck making multiple trips and driving all over town or surrounding towns. Don’t forget that Supermarkets are one of the best places to look for basic supplies. Check weekly circulars for pencils, erasers, loose-leaf paper and other goodies at the same time you get your weekly grocery shopping done.

Shop During a Tax Free Holiday to Save 4% to 9%
Many state sales tax holidays occur during the summer months, usually during the first week of August and include back to school supplies and clothing. If your state has a sales tax holiday and school supplies is on of the list of exempt items, you’re in luck. Savings will typically be in the 4% to 9% range. Below we’ve provided a list of States that have announced their sales tax holidays and offer an exemption for back to school supplies. If you don’t live in one of these states, perhaps a relative or close friend that you visit often does. If you are curious about your specific state, ask one of our tax professionals and we will research the specifics for you.

States 2012 Dates Max. Cost Per School Item
Alabama Aug. 3-5 $50

Arkansas Aug. 4-5 Unlimited

Florida Aug. 3-5 $15

Louisiana Aug. 3-4 $2,500

Missouri Aug. 3-5* $50

New Mexico Aug. 3-5* $15

North Carolina Aug. 3-5* $100

South Carolina Aug. 3-5* Unlimited

Tennessee Aug. 3-5* $100

Texas Aug. 17-19 $100

Virginia Aug. 3-5 $20

*:These states have not officially released the days for their sales tax holidays but we’ve estimated based on last years holiday.

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