Buyer Beware: 4 Tips For Shopping At Going-Out-Of-Business Sales

Big-name retailers like Sears and Kmart are closing doors around the country, and niche shops like Delia’s are shutting down entirely. That means the newspapers and email boxes are littered with “going-out-of-business” ads. New products are going to be available at deep discounts.

The prime season for going-out-of-business sales is now.  In January, retailers that are going out of business are facing down a new set of bills without a major spending season until at least April. Now is the time they start shutting their doors and liquidating their merchandise.

It may seem like these sales represent a golden opportunity. Retailers have bills to pay and are desperate for cash. Meanwhile, consumers can buy stuff they need at a serious savings.

But it’s not that simple. The owner of a store that’s shutting its doors is still going to be responsible for the bills they owe. They’re trying to minimize their losses by selling goods as fast as possible. They’re also not counting on a lot of repeat customers, so they have little incentive to be truthful or honest. Watch out for the following tricks:

1.) ‘As-is’ merchandise

One of the first things most retailers do when they begin a liquidation sale is change their return policy. They’re trying to get inventory out the door, and having it come back in prevents them from doing so. They won’t take returns for any reason.

This little change can free them up to sell damaged, broken or otherwise defective merchandise at retail. Under ordinary circumstances, they’d never put the item on the shelf. Now, though, there’s no reason to keep it in the back.

If you’re buying fragile goods, like electronics or dinnerware, ask if you can open the box to make sure everything’s there. If a store employee seems unwilling, think twice. You might be on the verge of buying a lemon.

Beyond damaged goods, retailers may attempt to do the same thing with mislabeled products. At clothing sales, stores may counting on impulse decisions to drive volume. Since the price is so steeply discounted, many people will be tempted to purchase without trying on first. This is a great way to end up with a dress that doesn’t fit.

Also, don’t count on a warranty. Manufacturers will try to direct you to your retailer to honor your warranty. They’ll use this blame-shifting tactic to get out of paying for new merchandise. Expect the product you buy at a liquidation sale to receive no support.

2.) Discount gimmicks

There’s so much money to be made from going-out-of-business sales that a new kind of company has emerged. So-called professional liquidators run these sales on behalf of companies. The first thing they’ll do is mark up the prices of every item in the store by 20-30%.

Because of that, when you see “10% off everything in the store,” you should really be reading “5% increase on everything in the store.” The first weeks of a liquidation sale are an exercise in manipulative consumer psychology. The advertised discounts and the appearance of scarcity will drive consumer spending.

What keeps stores from running these kind of “mark-up/mark-down” sales all the time is reputation. When a store is going out of business, though, those concerns are the first thing out the door. “Everything must go” includes the brand and any integrity they’ve established with their customers.

While the discounts will come, they’ll come much later in the sale. They’ll also be on a much more limited selection of goods. Most of these firms increase their discounts weekly. By the second or third week of the sale, prices may be below retail.

3.) Buy now!

Liquidation sales rely on scarcity to create a sense of urgency. The limited time frame and small quantity of desirable goods can lead to impulsive decision-making. You can pay more for goods you don’t really need if you’re not careful.

Businesses may be desperate, but not quite in the way they’re portrayed. They’re desperate to make money now. The owners of these businesses have bills piling up and need cash. They’re not afraid to make long-shot claims about the features or effectiveness of their products.

This sense of urgency is most palpable during the first week or so of the sale. This is when most firms plan to make the most of their money. Holding off will mean less selection, but it will also mean less pushiness from salespeople.

4.) How you pay matters

Obviously, if you have gift cards, use them or lose them. Competitors aren’t going to honor those. Laws also provide little protection for gift card holders. Bankruptcy law treats them as creditors, meaning you’ll have to fight for repayment with credit card companies and other lenders. In general, once the merchandise is gone, the card is worthless.

Paying cash for large-ticket items to a desperate business can also be a poor choice. If you’re not leaving the store with your purchase, a cash deposit can leave you out of luck if they close before delivering your goods. You can sue, but the company doesn’t have assets to pay your damages.

Your best bet is to pay with a credit or debit card. These instruments frequently have refund policies that exist independent of retailers. If the goods never show up, you can get your deposit back by calling your issuer. Leave as small a deposit as the retailer will allow to protect yourself as much as possible.

Shop liquidation sales like you shop everything else: cautiously. Consider your options and shop around to find the best prices and make sure you actually need something before you buy it. Liquidation sales can be a great way to score some savings, but be cautious on the way.

How To Choose A Tax Preparer (And Why You Might Need To)

It’s tax time!  As you’re gathering your pay stubs and receipts in preparation for your annual headache, it might be worth considering whether you need professional help this year. A few things have changed.

First, the IRS is losing funding. If you were counting on getting help with the forms from the IRS, you might be in for record wait times. The IRS budget has fallen by 10% in the last five years, while costs have increased. Staff reductions of around 8% have mostly affected customer service and fraud protection, while training budgets have been cut down to almost nothing. Even if you do get through, the person you’re talking to will  be less likely to help you. One taxpayer watchdog group claims 47% of calls going to the IRS this year won’t get answered. Those who do will have to wait an average of 34 minutes to talk to a human.

The IRS maintains a “priority” line for tax professionals, which is the first reason you should consider hiring one. While the wait times there will be just as long, it won’t be you who has to do the waiting.

Second, this will be the first year the IRS has had to implement the tax credits and penalties of the Affordable Care Act. There will also be new rules for foreign taxpayers thanks to the Foreign Account Compliance Act. This will be the most complicated tax return many consumers have ever filed, according to Charles McCabe, president of Peoples Tax Income.

Third, the IRS will have less ability to enforce and investigate tax returns. This means you can be a little bolder in claiming a deduction or credit you might be entitled to, but it also means you need to streamline your return for easy processing. A tax professional will be able to help you accomplish both those goals.

The problem, though, is that tax returns have become an increasingly common target for fraud. Criminals file bogus returns on behalf of identity theft victims. Unscrupulous tax preparers may also file negligent returns designed to get big refunds deposited into their own accounts. This can leave you robbed of your return and facing serious IRS penalties.

When you choose a professional, you need to be sure you’re getting someone who will keep your best interests at heart. You need to do your homework and only entrust your financial information to a certified professional.

Here are three steps to help you find one.

1.) Do it by the numbers

For the first time, the IRS doesn’t have the authority to regulate tax preparers. In 2014, all professional preparers were required to obtain a PTIN (preparer tax identification number) which meant they were regulated. A recent federal court decision, though, ruled that the program overstepped the IRS’s authority.

The IRS Return Preparer’s Office came out with a compromise program. While preparers are no longer required to have PTINs, those who are serious about being transparent can complete a voluntary continuing education program to receive one. If you’re going to sit down with someone and reveal all your financial secrets, make sure they’ve gone through the program.

2.) Get references

In the same way you’d ask your friends to refer you to a hair stylist or a contractor, you should ask around to see who uses a tax preparer. Hiring help with tax returns is done by 60% of Americans; so the odds are good you know someone who does. If all of your friends file their own taxes, consider asking the owner of a local business you frequent. Small business tax preparation is incredibly complicated, but a good preparer can save a small business owner good money. They may be willing to refer you to their preparer.

You can work backward, too. Before you sit down with a preparer, ask him or her for the names of happy clients. If you don’t get any, think twice. Tax professionals work on the same reputation-based advertising that drives other service professionals. Someone who’s not willing to talk about success stories may not have any.

3.) Consider going big

If all else fails, consider going to a big corporate preparer. H&R Block and others like them have been around forever and they don’t stay in business by robbing customers. Their size and stability can provide some safety.

That size, though, can also create problems for them. Their training programs are not as rigorous as the education that independent preparers usually have been through. They also tend not to retain employees for very long, leading to a lot of inexperienced preparers. Be sure you ask critical questions about the moves they’re making.

Long-Standing IRA Rollover Interpretation Changed January 1, 2015

If you’re considering rolling over your IRA assets to an existing or new IRA, you need to be aware of a recent change that affects IRA rollovers.  The IRS changed its interpretation of the one-per-12-month rule following a recent U.S. Tax Court ruling in Bobrow v. Commissioner.

The court ruled that a taxpayer is limited to one rollover per 12-month period, regardless of the number of IRAs he has.  The limit will apply by aggregating all of an individual’s IRAs, including SEP and SIMPLE IRAs as well as Traditional and Roth IRAs, effectively treating them as one IRA for purposes of the limit.

The IRS for decades stated that you could rollover one IRA distribution per 12-month period for each IRA that you own.  The IRS applied the tax court’s new interpretation starting January 1, 2015.

These actions by the IRS will not affect the ability of an IRA owner to transfer funds from one IRA trustee directly to another, because such a transfer is not a rollover and, therefore, is not subject to the one-rollover-per-year limitation of Internal Revenue Code Section 408(d)(3)(B).  See Rev. Rul. 78-406, 1978-2 C.B. 157.  For assistance with completing an IRA direct transfer to NASA Federal, please contact our Member Services Team at 1-888-NASA-FCU (627-2328).  For additional information on the new rollover interpretation, visit http://www.irs.gov/Retirement-Plans/IRA-One-Rollover-Per-Year-Rule.

Apple PayTM and Chip Cards

We always appreciate hearing from our members, because it helps us to improve upon the services that we offer. We have several projects underway to further enhance your experience with NASA Federal and to help protect the security of your account information. To answer a few of the questions we have received from members, we wanted to share an update on two projects that are currently underway.

When is Apple PayTM coming to NASA Federal?

Depending on Apple’s approval, we hope to introduce Apple Pay to our members within the next few months. We are excited to offer this service to our many iPhone 6 users who we know are also very excited to use the service on their new phones.

When Apple Pay was first launched in October, only a select few, larger financial institutions were a part of the release. NASA Federal is a part of a small group of other financial institutions that are approved to begin the process of fully testing Apple Pay with our systems in preparation for making it available to our members in the next few months.

For more information about Apple Pay, visit https://www.apple.com/iphone-6/apple-pay/.

When will NASA Federal begin issuing chip cards?

At NASA Federal, we’re constantly looking for ways of giving you more with your NASA Federal credit cards.  To provide you with greater flexibility and enhanced security, we are working to offer chip cards within the October- November 2015 time frame.

Over the next year, more merchants will begin to install chip-enabled terminals. The embedded chip in our new cards will enhance card security, giving you peace of mind when you use your card at chip-enabled terminals.

Once our new cards are issued, using your card at the chip-enabled terminals will be easy. Simply insert your chip card and sign to authorize the transaction.  For merchants who are not yet equipped with chip-enabled terminals, swipe the magnetic strip and sign your name as usual.  When making transactions over the phone or online, nothing changes. Simply provide your credit card number, and complete the transaction as you do today.

While we’re working on enhancing the security of your cards, rest assured knowing that you have the benefit of Visa’s® Zero Liability for unauthorized transactions on your NASA Federal Credit or Debit cards.

Cash Flow Budgeting

A Fast, Flexible Way To Fix Your Finances

You’ve heard it from a million places: Budget your money! Make a firm plan and stick with it. It’s the pathway to prosperity!

For many people, though, that advice just doesn’t resonate. They feel constricted by a budget. Keeping cash in separate envelopes makes them feel like they can’t have a life. It takes too much planning and too much rigid denial. They break their budget and sometimes wind up in serious financial trouble.

Other people have an inconsistent cash flow, making creating and keeping a budget difficult. Maybe they’re freelancers who work gig-to-gig. Maybe they’re in commissioned sales. Maybe their hours fluctuate month-to-month. Whatever the reason, it’s hard to make a detailed plan when your bottom line changes every month.

The answer isn’t to give up on budgeting. The collective wisdom, that monitoring your expenses and income streams is the way to stability, still holds true. It might just require a different approach to budgeting: cash flow focus.

Cash flow focus is the strategy used by most businesses. They pay their fixed costs, and whatever is left is used to grow the business. You can manage your finances the same way.

Just follow these four steps:

1.) Automate your savings

Even if you disregard everything else in this article, implementing this one tip can be life-changing. Figure out how much of your income you can save, then take that out as soon as you get paid. You can set up monthly transfers from your draft account to your savings account. You can also divide the money between the accounts on a per deposit basis. How you choose to do so is less important than doing so.

Like the saying goes, pay yourself first. This savings provides you the flexibility to cover big expenses or make major purchases on your schedule. It’s the single most important step in any budget, but it’s even more important with cash flow budgeting.

When you automate your savings, you remove the money you saved from consideration. You can’t spend it; you’ve already spent it on savings. The importance of this kind of savings will become more clear once you see this budget in action.

2.) Pay your needs and your priorities

Make a list of your essential expenses each month. Include your rent or house payment, your car loan and your utilities. Also include your student loan payments, your insurance and other necessary expenses. These are your “fixed costs.” They get paid after your savings contributions are made.

Next, make a list of your priorities. Include your charitable contributions, vacation savings and retirement account contributions. These are your “growth expenses.” They get paid after your fixed costs.

If you don’t have enough money to make these bills, you don’t need a better budget. You need to lower those bills or increase your income. No amount of spreadsheet magic will change that bottom line.

It’s helpful to automate savings for these expenses, too. That way, you never get caught short on these bills. Transferring this money to a check-only draft account can be a helpful way to ensure you don’t spend it.

3.) Spend the leftovers

This message may sound peculiar for personal finance advice. Remember, though, that you’ve already automated your savings. What you’re spending here is the leftovers – the extra that’s left at the end of the month.

Spend this money however you like – don’t worry about putting this much in entertainment and that much in travel. Just keep track of how much you’ve spent so you don’t accidentally overdraft your account.

This approach allows you to go out or indulge in a latte. You don’t have to worry about including it in your budget. Your spending habits might change as the month goes on, just like a business. If you know there’s a big outing before you get paid again, you may want to save some money for that. You don’t need to say that you can’t go because you didn’t budget for it.

4.) Roll over what’s left

If you’ve worked in a big business, you’ve seen departments desperately spending at the end of the fiscal year. Departments buy cases of pens and paper, knowing that they’ll lose whatever they don’t spend. Fortunately, you’re more flexible than a big business. You don’t have to spend it all. If you have money left over at the end of the month, then you have more to spend the next month.

If you have a month with slightly higher expenses, you can cover it from a previous month’s slightly lower expenses. Your spending will change from month to month, as might your income. So long as you keep the former smaller than the latter in the long run, you’ll be fine.

That’s what cash flow budgeting is about: flexibility. You don’t have to write your unbudgeted spending purposes in stone. You don’t have to mess with cash envelopes or other strategies. You can spend when you have money and save for when you don’t.

Unprepared for College Tuition? You’re Not Alone!

If you are the parent of a college-bound high schooler who’s starting to look at colleges, but find yourself in the difficult position of not having any savings to put toward the cost of education, take a deep breath.  Sending your child to college without having any savings isn’t going to be easy. It’s going to take more research, more writing and more debt. But, this disadvantage isn’t insurmountable. You and your child are both just going to have to work a little harder to make this happen.

Before you begin planning your course of action, get a realistic estimate of costs. The College Board maintains a utility called the Estimated Family Contribution (EFC) calculator. Using this tool, enter your income, savings, and the number of people in your household. At the end of this, you’ll get a dollar amount showing how much the federal government expects you to pay. You can use this number as a target for how much you’ll have to come up with each year.

As hard as it might be to have this conversation with your child, you ought to have it. At some point, your student will have to read and sign the FAFSA (Free Application for Federal Student Aid), which require your income and savings information. This will also help your child make an informed decision about which school to attend.

Once you have a good understanding of realistic costs, it’s time to start planning. Here are three options to consider as you and your child are planning the next steps:

1.) Choose flexible schools

Encourage your child to apply to and visit a few schools where he or she would likely be among the best students. There’s a dirty little secret in the college admissions world. The quality of instruction at most non-Ivy colleges is the same. What’s different is the environment. What makes your student most comfortable: a small, liberal arts school or a big state school? There are many in both categories at all points on the cost continuum.

Many schools in both categories struggle to attract quality applicants. They will be eager to accept a bright and promising young person who can make their school a better place. These schools may offer extensive grants, scholarships, work-study offers, and other tuition breaks.

If your child is reluctant to consider schools that don’t have an elite price tag, you might want to frame the concern as future debt. Use current examples of people who just graduated and can’t find work in their fields. Encourage them to think about the next five or six years of their life, rather than just the next four.

2.) Take a look at loans

If you have nothing saved for college, the unfortunate reality is that you’ll likely have to borrow at least something. The federal government sets a cap on how much they will lend to students, based on EFC, or estimated family contribution. These loans have quite favorable rates and good repayment terms that will help young people stay out of trouble.

The NASA Federal Credit Union CU Student Choice Loan can help you pay for education expenses. Get competitive interest rates and generous repayment terms. Plus, with our fast online application, get the money you need to pay for college quickly. To learn more about NASA Federal’s education loan options, visit the Credit Union Student Choice Loan Center.

Borrowing for college isn’t the end of the world, but you will need to repay all that money whether there is a degree at the end of the adventure or not. This can be a serious burden for a new graduate, even with income-based repayment programs. Don’t give in to “debt creep,” or the feeling that, since you’re borrowing, there’s no reason to borrow less than the most you can. $19,000 in debt is better than $20,000 in debt. Every dollar not borrowed is compounded by the absence of interest on the other end.

Outside of a mortgage, though, a student loan is the safest investment you can make. The earning potential of college graduates is significantly higher than a high school graduate. There’s no need to be ashamed about borrowing to pay for school. Just use it responsibly.

3.) Consider non-traditional options

There’s no rule that says every 18-year-old has to graduate high school and then immediately enroll in college. In fact, in most other countries, the so-called “gap year” is quite common. Students use this time to work at part-time jobs, volunteer, and build their resumes. The difference between a 23-year-old college graduate and a 22-year-old college graduate is negligible. A student working and saving for a whole year could save $10,000 for college. That’s enough to defer the cost of tuition. Plus, building a resume will make it much easier to find work on the other side.

Community college may also be an attractive option. Most community colleges will offer significantly discounted tuition for exceptional students. These institutions offer the same general education courses for a fraction of the price. It’s not a free alternative: you’ll still have to pay for housing and transportation. Yet, the more flexible schedule makes it easier to work a part-time job while going to school, and it costs half as much or less. No employer or grad school will react badly to  two years of community college. Once your child graduates with a four-year degree, that degree will be the same as a four-year student of that school. Community colleges aren’t free, but they’re certainly not as expensive as a residential college.

Having no college savings does set you behind in the education race, but there are many alternative options. Have a frank, honest conversation with your student, and then do what’s best for you and your family. And don’t forget to celebrate the positive – you raised one smart kid.