How to get the IRS to pay you hundreds of dollars to make a Roth IRA contribution

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Between now and April 15, 2018 there exists a unique opportunity to save hundreds of dollars on a Roth IRA contribution that we may never see again in our lifetimes. It is caused by Trump’s tax cut, and whether you are for the tax cuts or not, it has created an odd tax loophole that you don’t have to be rich to exploit.

How it works

The basic idea is similar to the one I wrote about in an article last year called What the Roth IRA tax calculators won’t you. To understand how this loophole works we need to start with the basics.

First you need to know about the basic IRA.  This is a retirement savings account that let’s you save money with pre-tax dollars. In other words when you contribute to a regular IRA account, you get a tax deduction.  Then that money grows and grows until you withdraw it after you have retired.  Because you didn’t have to pay tax on the money you put in, you have to pay tax on the money when you take it out.

Next you need to know about the Roth IRA, which kind of works in reverse.  In this retirement account you don’t get a deduction for contributing money today, but when you pull the money out in retirement you get to take the money out tax free.

Finally, you need to know that the IRS allows you to convert a regular IRA to a Roth IRA.  The catch is since you got a tax deduction when you put the money into a regular IRA, you have to pay that deduction back when you transfer your account to a Roth IRA.  But, in some circumstances, you may not have to pay as much for that deduction as the benefit you originally got.

For example let’s say in year 1 your tax rate is 25% and you contributed $100.  You just saved yourself $25 in taxes.

Then let’s say your tax rate goes down in year 2 to 10%. During year 2 you convert your $100 regular IRA to a Roth IRA. On your year 2 tax return you basically have to declare that $100 as income.  So you declare that $100 as income and your tax bill goes up $10.  Did you catch that?  In year 1 you saved $25 in taxes, but in year 2 you only had to pay $10 back!  You saved yourself $15 more than if you had simply contributed to a Roth IRA to begin with.

How to take advantage

In addition to the various circumstances you might be able to use this trick I wrote about last year, the Trump tax cuts for 2018 has created a unique opportunity to use this between now and April 15th, 2018.

For most people, the tax rate is decreasing from 2017 to 2018.  The last piece of information you need to know is that even though 2017 is long gone, you can still make an IRA contribution before April 15, 2018 and report it on your 2017 income tax return to get the deduction on your 2017 taxes.

Here are the steps you need to do:

  1. Contribute to an IRA account. The broker you open your account with will have all the information you need on how to do this and the limits.
  2. Report that IRA contribution on your 2017 tax return that you file by April 15, 2018. You will save money on this tax return by taking a deduction. Already filed your 2017 return?  That is OK, you can file an amended return.
  3. Convert your regular IRA to a Roth IRA in 2018.  You can do this immediately if you want.
  4. Report your conversion on your 2018 tax return. You will have to pay extra money on your 2018 tax return, but it will hopefully be less money than you saved from your 2017 deduction.

Things to keep in mind

There is no benefit to doing this if your 2018 tax rate won’t be lower than your 2017 tax rate. For example, if you make a bunch more money in 2018 than you did in 2018.

This is not personal tax advice for you. Your financial situation and your taxes are unique and this won’t work for everybody.  I recommend you discuss this with your CPA or personal tax professional.

This is not personal investment advice for you. While contributing to a retirement fund is generally a good idea, your financial situation is unique.  I recommend you discuss this with your broker.

How much could you save calculator?

Just how much could you save?  To find out, you can use this calculator.  First you will need to know your 2017 tax rate, which can be found here.  Next, you will need to know your 2018 tax rate, which can be found here.  Finally, fill out the calculator below to see just how much you can save.

 

Turn a raspberry pi into NES classic, SNES classic, and Sega Genesis classic for cheap

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How to make your own Classic NES-Classic SNESand classic Sega Genesissall for as low as $25

If you think you would like a NES classic, SNES classic, or Sega Genesis classic, you are wrong. Sure those are great systems and you will have great memories of playing them when you were a kid, but if retro gaming is what you want there is a better product that costs less.

The Raspberry Pi is a tiny $35 low powered computer that you can use as a computer for a variety of projects. Last week I wrote about how I used one as a home computer. It isn’t powerful enough to run the latest and greatest games, but has plenty of power to run games from older game consoles you might have had as a kid such as the Atari, Commodore 64, Nintendo, Super Nintendo, Sega Genesis, and even the N64.

As simple as using a Raspberry Pi as a home computer is, it is even simpler to use as a classic gaming console. We will get back to that in a minute, but first let’s cover the legality.

Is it legal to create your own game console?

Well… probably not. There are two parts to making your own game console. The first part is an emulator which is the software that pretends to be the old game system. That is all perfectly legal.

The second part is the software that runs the games, which are called ROMs. These are easily available on the internet for free from a variety of sources.  I am no lawyer, but from the research I have done it appears that in most cases downloading ROMs is a violation of copyright laws. In case your curious I also did a couple of searches to see if anyone had ever gotten in legal trouble for downloading ROMs and was unable to find anything.

So, this whole thing isn’t really legal. I am  not advocating illegally downloading ROMSs, but just in case you figure out a legal way to get ROMs, I’ll go ahead with the rest of the article.

What you will need

First you will need all the stuff to make the Raspberry Pi run, which are a Raspberry Pi version 3 model B, a charger, a case, a TV/monitor with a HDMI connection, a keyboard and a mouse. See my article on using the Pi as a home computer for how to get all that stuff set up.

In addition to the computer stuff, you will need 3 more things.

A controller

You have to have something to control the games of course. You will need a controller that plugs into a USB port. An XBox 360 controller will work for all systems if you happen to have one laying around.  If you don’t I recommend checking your local game store. If you cant find one anywhere else here is one rated 4 stars on Amazon for $20.

If you want a more classic feel you can get 2 NES controllers for $13.  If you go this route you should be aware this controller doesn’t have enough buttons to play games from other systems such as the SNES.

With these 2 SNES controllers for $17 you have all the buttons you need to play games on many more systems.

If you are a Sega kind of person, here are 2 Sega controllers for $9.

A Micro SD card

Just like you need a micro SD card to run your Pi as a computer, you also need one to run as a game system.  No, you can’t use the same one for both, you need 2. The good news is once you have each micro SD card set up your machine can switch from plain old computer to game system and back in seconds. Amazon has a 8GB micro SD card for $8.

A USB drive

Remember that the Pi has no harddrive, so we need somewhere to save those game ROMs to.  If you don’t have a USB drive laying around Amazon has a 16 GB drive for $5.

How to set up your game system

It is easy to do.  Just head over to retropi.org and follow the directions. The good folks at retropi won’t tell you how to get the game ROMs because of the whole being illegal thing and nether will I.  I have heard of a website called google where these kind of questions can be easily answered, though.

That’s all there is to it

It is as simple as that.  If playing old video games sounds like fun getting a system up and going really is that easy. If you already have a Pi as a computer, the whole thing is super cheap.  If you don’t, it is still cheaper than buying the official Nintendo products.

 

 

You might want to go shop for Turkey right now

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Happy Discount Turkey Day!

This is a warning that you might want to head over to your local grocery store and check out the turkey aisle, because you might find huge discounts.

I was strolling through my local grocery store (Kroger) today and didn’t even have turkey on my list.  But when I saw it was on sale for $.44 per pound I had to stock up.  I bought 1 whole turkey that we will use for Christmas and 8 smaller packages of turkey drumsticks or turkey thighs.  In total I bought 33 pounds.

If the grocery store’s receipt is to be believed (doubtful at best) the regular price of all this turkey would be $93, but I only paid $14. By stocking up I saved $78 or 84%.  Even if Kroger embellished the amount I saved I still got a pretty good deal. I am now pronouncing the weekend after Thanksgiving as Discount Turkey Day on artofbeingcheap.com.

Happy Discount Turkey Day everyone!  Now do me a favor, if you have any recipes for Turkey drumsticks or thighs could you leave them on my facebook comments?

How much did Clark Griswold spend on Christmas lights?

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Christmas Vacation

Image credit: Warner Brothers

It is almost time to put up your christmas lights. In the classic Christmas movie National Lampoon’s Christmas vacation, Clark Griswold’s mother-in-law nags Clark for spending so much on Christmas lights calling them a “…a silly waste of resources…” I have embedded the scene below in case you would like a refresher.  This got me wondering, just how much did Clark spend on all those Christmas lights anyway? What about LED Chistmas lights, would those have saved Clark money? If you are a fan of Clark Griswold and pointless math then lets figure it out together.

The lights

Clark used 250 strands with 100 bulbs per strand, similar to these best selling Christmas lights on Amazon for $7.86 (AL- see disclosure below) per strand.  Buying 250 of those suckers would have run Clark $1,965.  Ouch, that’s a lot.

The movie shows the electric meter spinning wildly when the house is finally light up, but in reality it’s not nearly that bad.  In this article on clarkhoward.com last Christmas, I figured a strand of lights would run a heavy user about $1.11 per strand for the whole Christmas season.  That isn’t as bad as the movie depicts, but that is still going to run old Mr. Griswold $277.50 in extra electricity bills for the Christmas season.

So it costs Clark Griswold $2,242.50 in the first year to have his Christmas lights.  A silly waste of resources?  Well…. maybe.  But maybe it is worth it for the joy it brings his neighborhood.

What if Clark has used LEDs

Clark using high efficiency LED Christmas lights would have kept him from blacking out the rest of the neighborhood, but would it have saved him money?  This set of 100 LED Christmas lights (AL) will cost you $18.59 per strand on Amazon or $4,647.50 for 250 sets. While the upfront cost is higher, the energy savings are significant.  Instead of $1.11 per strand for regular Christmas lights, LED Christmas lights will only cost about $.06 per strand for the whole Christmas season or about $15 for all 250 strings of light.

That brings the total cost of LED lights for the first year up to a whopping $4,662.50. The LED lights would have cost a net total of $2,420 more the first year.

That’s just the first year, what about the long run?

If you look at the long run however, the answer completely flips. During the second year Clark is going to have to shell out another $225 in electricity for the regular bulbs or a mere $15 for the LEDs. So, the LEDs are starting to catch up.  Where the LEDs really catch up though is in longevity.

One of the great things about LED bulbs is how long they last compared to old fashioned bulbs.  How long do regular Christmas lights last?  Three years maybe?

LED bulb manufacturers claim their bulbs will last almost forever, but that’s overly optimistic in my opinion. Lets assume with the wear and tear of taking those lights up and down every year they last 9 years.

If those assumptions are true, Clark would have saved a ton of money over those 9 years with the LED bulbs. Replacing incandescent lights 3 times over a 9 year period would have cost Clark a whopping $5,895!  The electricity costs would have really added up too.  The power bill would have been $2,498 over those nine years.  That is a total cost of $8,392.50 over nine years, or an average of $932.50 per year.  When you put it those terms, maybe Christmas lights aren’t such a silly waste of resources after all.

The LED bulbs on the other hand, would have been practically a steal.  Those 250 strands of LEDs would have stayed at $4,647.50 in expense over the 9 years, and the electricity for the whole 9 years would be a tiny $135. That means the average cost of LED Christmas lights amortized over a nine year period is a fairly reasonable $531 year.  Over the course of 9 years Clark would have saved a total of $3,610.

What would you do?

So it seems like LEDs are the smart way to go, but $531 per year is a little much for me.  I usually go with 2 strings of lights which is enough to stretch across the length of my home.  Over a 9 year period LEDs will cost me a mere $4.25 per year Vs $7.46 per year if I go with regular Christmas lights. For a little Christmas cheer, $4.25 per year is a bargain.

Now, to get everybody in the Christmas spirit, let’s enjoy Clark’s light show.

Disclosure- Links marked AL are affiliate links. 10% of all revenue from affiliate links goes to a charity picked annually by artofbeingcheap.com readers.

How to get a new home computer for $35- The Raspberry Pi

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Pi

For the last six months all of my home computing has been done on a $35 computer called the Raspberry Pi. My family and I have surfed the web, checked my email, written articles, run this website, done graphic design work, run accounting software, used spreadsheets too large for Google Drive to run, planned vacations, played games, done online classes, done homework, run 4 side businesses, and did my taxes.  Just about anything you would want your computer to do. In this review we will look at whether the $35 Raspberry Pi is right for you, what it can and cannot do, and what you need to do to make it work.

This is some kind of clickbait scam, right?

I realize when I make a claim like you can get a home computer for $35 I have created a credibility problem, so let’s start by fixing that credibility problem.

Let’s start by thinking about the 3rd generation Moto G Republic Wireless phone I reviewed last year.  That phone cost $150 and had similar specs to the Raspberry Pi.  The Moto G was a perfectly fine phone that had plenty of computing power to run all the programs you needed it to run. It had 1 GB of RAM that ran at 1.4 Ghz. The Raspberry Pi is comparible in power with 1 RAM that runs at 1.2 Ghz.

So take your $150 Moto G and take away the most expensive part of it, the touch screen.  Then take away the 2nd and 3rd most expensive parts, the 2 cameras it is equipped with.  Then take away the the 4th most expensive part, the battery. Then take away the microphone, the cell antennae, the speakers, the FM radio, the accelerometer, the case, the software and the operating system.  What you have left is a computer board, a couple of chips, a wifi antennae, and a couple of inputs, which is pretty much what a Raspberry Pi is.

So if you take a $150 phone, take away all the expensive parts, plus most of the other parts as well does it seem reasonable that the device I just described might cost as little as $35? Good.  It’s not too good to be true, and it’s not a scam.

Should the Raspberry Pi be your home computer?

The Raspberry Pi was never meant to be your primary home computer.  It was meant to be a learning tool for kids to learn computing and programming, and for hobbyists to have a cheap computer to experiment with on whatever creative projects they can come up with.

That doesn’t mean it doesn’t mean it can’t be used as your home computer though. As i stated above, I have used one for the last 6 months as my home computer and it has done everything I needed it to do. However, it doesn’t do everything everybody needs it to do.  Here are the things it can’t do:

  • It can’t run Windows- If you absolutely have to use windows you are out of luck. But do you really need windows?  If there is specific software you use that can only be installed on windows, then you need windows.  I don’t really need Windows. The Raspberry Pi runs a simple version of an operating system called Linux with everything I need.  It has a microsoft office clone with, a word processor, a spreadsheet, a powerpoint clone, and a graphic editing program that are almost 100% compatible with Microsoft files.It has a browser that runs all the programs I need it to run.  It has a simple operating system that isn’t windows, but is similar enough to windows that you will be able to run with almost no learning curve if you already know windows. Because almost all the programs I run anymore are in a browser, this is everything I need.
  • Additional software can be installed, but you will certainly have less options than with a Windows machine, and you will probably find the software harder to install. I myself haven’t needed to install any additional software. The Office clone and browser are all I have needed.
  • It can’t run high powered games or other software- If you want to play the latest games, the Raspberry Pi isn’t for you.  It just doesn’t have the computing power or the graphics capabilities to run modern games or other high powered software. I didn’t say you can’t play any games.  I play a lot of games on the Raspberry Pi, but they are older games that a nostalgic 40 year old would enjoy.
  • It isn’t very good at playing video- You can watch youtube videos, but that is about it.  No Netflix, no hulu, and no other streaming TV services. If you do a google search or two you will find articles about how the Raspberry PI makes a great media device for watching video, but don’t believe it.  I have tried that program and I think it is junk. It’s for people who really know what they are doing, and is inferior in every way to all the other devices in your house that play video. So when I want to watch a video I watch it on my TV, Ipad, or phone, and leave the Raspberry Pi for computing stuff.

Who could use the Raspberry Pi for their home computer?

The Rasberry Pi is normally used by computer geeks and people who really know what they are doing, but don’t let that fool you.  It is simple to use and can work as a home computer if your needs are simple.  If you don’t need to install much software, and do all of your work either in Microsoft Office or a browser I think you will get along just fine.

What do you need?

Because the Raspberry Pi is sold as just a bare bones computer board with a couple of inputs you might need to buy a few things to make it work.  Chances are you will have some of this stuff laying around your house, but you will probably need to buy a few things besides the Pi.  All links to Amazon are affiliate links, see disclosure below. Here is what you need:

The Raspberry Pi 3 Model B

–  $35 on Amazon. There are a couple different versions and some are cheaper than $35, but if you are going to use this as a home computer I think you want the Raspberry Pi 3 Model B.

A USB charger

– The Pi doesn’t come with a power supply. Although the power supply looks like your phone charger, there is a decent chance you don’t have a charger laying around your house that is powerful enough and will need to buy one. Look at the label on the charger for the voltage and the amperage. Look for the part of the label that says something like:
DC Output: +5V 2.5A

 

The 5V means it puts out 5 volts, and the 2.5A means it puts out 2.5 Amps. You want the volts to be at least 5 and the Amps to be 2.5.  Chances are an everyday phone charger won’t be powerful enough but if you have a device that is made to power multiple USB cords at once you might just be in luck. I tried to cheat a little and use a charger with 2.1 amps instead of 2.5 and found my Pi ran slower than it should have.

A USB keyboard

– Many people will have one of these laying around the house already.

A USB mouse

– Just like the keyboard, any mouse will do as long as it connects to a computer through a USB.
If you need both a mouse and a keyboard you can get them bundled $20 for wireless.

A monitor with a HDMI input

– You can also use an old TV with HDMI inputs, which is what I do.  If you don’t have an old TV or monitor that will work I recommend checking garage sales or Craigslist where a monitor can often be had for around $20. If you absolutely have no other options you can get a new monitor from Amazon for around $90.

HDMI cord

– If you don’t have one already check your local thrift store.  My local thrift store sells them for $1. A new one costs $6 on Amazon.

Heat Sink

– You don’t need this. It is included in many of the packages but according to the makers of the Raspberry Pi under most conditions this isn’t necessary.  One came with the package I bought, but I didn’t even bother to install it.

MicroSD card

– The Pi has no internal hard drive, so the operating system and all your data live on a SD card that can easily be removed. The minimum size is 8GB and the max is 32 GB. If you don’t already have one Amazon has a 8GB micro SD card for $8.

Case

– The Pi itself is just a bare computer board, so you are going to want to put it in something protective. Here is your chance to be creative, do a google search and you will find relatively easy plans showing you how to make your own case from wood, cardboard, or even legos. 3d printing is also an option.  If you are boring like me, just can just buy a case for $8 from Amazon.

Packages

Chances are you will need some of this stuff but have some of the stuff already, so Amazon has different packages available, hopefully 1 has the combination of what you need.

Pi, Charger, and Case, for $50– This is the package I bought.You basically get a charger and case for $15, which seems like a deal.

Pi, Charger, SD card, and Case, for $57- For $7 they throw in a SD card.  This SD card is preloaded with the software you need so it saves you just a little bit of time.

Pi, Charger, Case, SD card, and HDMI cord for $70– So this basically adds a HDMI cord for $13. You could buy them separate for less. I’m not a fan of this bundle. I don’t think this SD card is even preloaded like the above bundle.

Pi and Charge for $42- If you want to make your own case this is just $8 extra for the charger. Not bad.

Setup

Setting up your Pi takes a little time, but you can do it. It really isn’t very hard. Just follow the instructions that come with your Pi and you’ll be up and running quickly.

Other stuff you can do with your Pi

You can also turn your Pi into a retro game console which is way better than one of those overpriced retro NES or SNES consoles Nintendo is selling like hotcakes. The best part is you don’t even need to buy another Pi. Just buy another Micro SD card and you can switch out SD cards to turn your Pi from a computer to a game machine and back.  I’ll write more about this later.

Other projects you can do with your pi are limited only by your imagination. Make your own tablet, dashcam, baby monitor, or any number of other things.  I like to browse reddit.com/r/raspberrypi for ideas.

Disclosure:

The prices stated in this article were accurate as of the time this article was written, but prices might have changed since that time. It is my opinion that the items linked were the best deal available on Amazon at the time this article was written, but that too might have changed. All links to Amazon are affiliate links. 10% of all revenue generated from affiliate links is donated to a charity chosen annually by readers of artofbeingcheap.com.