JoeTaxpayer

A  post aimed at my friends across the pond –

I don’t know if you’ve noticed, but there is currently a huge push on Financial Spread Betting (FSB). Just about everywhere you look, it seems, there is a bright and shiny offer to take the plunge and enjoy the thrills, spills and rewards of riding the market. Don’t tell me you haven’t noticed.

Now, there is plenty to be said about FSB, but no-one seems to be saying anything very much about this all-too visible marketing trend. So let’s do just that; exactly what is going on with FSB right now?

by kenteegardin

Clearly the main players are competing for clients – those of each other as well as new market entrants – but that only moves the question up a level: why are they competing quite so competitively right now?

The evidence of that heightened competitive marketing is there for all to see – not only in the form of banner ads all over the financial press, but in terms of some eye-catching introductory offers – for example, in the UK, Tradefair are offering a 10 per cent top-up to new accounts up to the value of £1,000 plus a referral scheme that values new referrals at £50 a time.

That one example neatly sums up an unresolved issue when it comes to the FSB industry as a whole. Anyone prepared to commit £10,000 to an account that trades in open ended exposures is going to count as a big hitter. Not many of us are going to be willing or able to put that sort of money down, irrespective of that £1,000 boost. But conversely, no one trading at that sort of level is going to go out of their way for a mere £50.

It points to an industry that has reached the limits of its natural market – professional traders and industry insiders looking to play on the periphery of their working lives – and is now plateauing. Indeed, the first nine months of 2013 actually saw an 8% contraction in the overall industry in the UK.

The market-trading conclusion is that recent market stabilisation is bad news for FSB providers as it has reduced the short-term market volatility which is their stock-in trade. The more substantive benefits of holding dividend-paying stock is offered as a reason for traders turning away from FSB as an investment vehicle.

The marketing assessment, in contrast, is that there is only a limited constituency of punters who would rather gamble on relatively complex financial indices rather than more traditional, recreational gambling outlets – especially sport and casino-based bets. Notably, the gambling industry as a whole continues to see a near universal healthy growth.

Neither reading of the situation is good news for FSB providers.

There is an inevitable irony in the FSB industry figures running counter to the prevailing trend. However, it is hard to escape the conclusion that all the current noise surrounding FSB is not so much the heralding of a brave new world of investment, so much as the noisy hunger pangs of an industry that has run out of new clients. FSB will be an interesting area to keep tabs on in the months ahead – but maybe not for the reasons those involved might hope.

Remember New Coke?

Remember Qwikster?

My Spidey senses tell me that Intuit’s TurboTax product is about to have its own moment of marketing mishap. Now. As a tax nerd, I don’t put my TurboTax on the shelf after I file my return. I open it regularly to plan my year. Since one of my goals is to avoid paying more tax than I have to, I use it to plan my stock sales, Roth conversion, if any, and forecast my tax bill well in advance of April 15th. It’s been a ritual of mine to buy the new tax year software the weekend it’s out, usually the weekend after Thanksgiving. This year, as I started to look to see a product release date, I found that the versions offered had their contents revised.

(Right-click to open in new screen)

You can see, the Deluxe version no longer handles any stock transactions, i.e. Schedule D, or any rental property details, Schedule E. Last, with part time blogging income, I need to file a Schedule C, which is now a Home and Business offering.

Here’s my concern – people are creatures of habit. When was the last time you “read the fine print”? We buy what we’ve bought and rarely catch the changes until it’s too late. Unfortunately, in this case, it with be a painful process, realizing your return wont have the forms you’re expecting and you need to upgrade the software (hopefully that option will be available, to pay the difference and move on) or buy the right one for your needs. The 2014 version was just released, and Amazon reviews are already running negative, 8 reviews so far with 7 showing One Star.

I’ve been a user of TurboTax since filing my first return in 1985. We’re having our 30th anniversary with this next purchase. For the last decade, I’ve taken advantage of the ability to produce multiple returns, using my copy to print returns for my daughter, mother-in-law, sister and sister-in-law. I’m not going to quibble over a change that I read about and can adjust to. But I’ll sit back and watch how the reviewers are already having their say and see how my friends at TurboTax respond.

Update (11/22) – The reviews on Amazon continue to mount –

The one star reviews are all focused on the price increase. Unfortunate, I hope TurboTax jumps on this to stop the potential loss of customers.

The 2015 tax rates have just been announced by my friends at the IRS. If you’ve been reading this blog for a while, you know how taxes work, more or less.

The tables aren’t the actual tax you pay on gross income, but on taxable income which is gross less a number of items, including the personal exemption which rises to $4,000 in ’15 and the standard deduction for single $6,300 or joint $12,600.

I’ll be referring back to this article over the next year whenever the tax table is part of the conversation. Check out the new rate table and start planning for 2015.

This post has been in the works for some time, nearly two years. Talk about a bit of writer’s block!

Attending FinCon14 (The Financial Bloggers Conference) gave me a chance to share my story, and hear so many people encourage me to write and share it with my readers as well.

Two years ago, shortly after my 50th birthday, my wife and I were both let go in a company layoff. 30 years, working for the same company, had come to an end. We both had our eye on our number and we had already agreed that she could retire as soon as she was ready to. The numbers all pointed to me taking a bit of an early retirement by 55 or so. Our jobs were in high tech sales, and I started out really liking it, but the last 10 years or so, I grew to dislike it more and more. So much so, that when I got word I was getting let go, I had a sense of relief. The real question is why I stayed so long at a job I grew to hate. And a great question that is. The money was good, but any lateral move in the industry would have replaced the salary. In fact, depending on the economy, there were times I could have landed a higher paying job. Familiarity. Fear of change. Stockholm syndrome?

Regardless of why I stayed, it was over. On the ride home, I told my wife it was time to move on, and do something completely different. Neither of us were in too big of a rush, as the severance and unemployment benefits were enough to float us for a full year without needing to tap our savings. Many times in life, one observes that timing is everything, the layoff was in late 2012, and in 2013 the market had its best year since 1997, returning over 32%.

S&P Oct’12 – Dec’13

Had the movement of the market been different, I might have felt pressure to go in another direction. As 2013 moved along, our number seemed much closer to achievement. We sat down with our money manager software online, reviewed our budget, and found that our spending was a comfortable 50% or so of our last few years’ income. On a side note, the rules about 80% replacement rate are rules of thumb and little more. What really counts is what you spend, not what your final gross income was.

One interest I’d always considered was a career as a math teacher. I took the qualification exams for both middle and high school math. Despite what they say about the lack of teachers, in my area, every position had a line of dozens of teachers applying. If I were hiring, I’d look for someone with experience, too. Just as I was pondering the idea of simply being retired, I was contacted about a position as a math aide. The job was part time, just 2 days a week, and the responsibilities included giving exams to students, tutoring students to help them catch up on missed classes, and helping them study for upcoming exams. The key things missing were any required interaction with parents, prep for lectures, and any paperwork. Even for this position, there were multiple candidates. Whatever I said during the interview must have made an impression. A combination of fondness for my own study over 3 decades ago, sharing how I was helping my daughter, an 8th grader at the time, and feeling that I could make a difference in his department. The next night, I had an email saying the job was mine.

By coincidence, a neighbor was expanding his own business as a real estate investor and developer. He approached me and asked if I’d like to come work for him. I started both jobs the same week and within two months, I had my real estate license. Both jobs started as trial positions, and as it turned out I am having a blast in both fields. Both of my bosses asked me when I planned to work for them full time. For now, the two jobs are ideal for me. I’ll share some stories of my days at both jobs, and why I wake up with a smile at 5:15 AM when I swore I wasn’t a morning person. I’m also investing in real estate again, an endeavor I’d given up on over 20 years ago, but I’ve now been given a second chance.