Little changes add up
Dear Mary: Last year, you wrote “19 New Year’s Resolutions It Will Pay You to Keep” in the January Debt-Proof Living newsletter. I did not understand item number 16: Write down your car’s mileage on Jan. 1. Can you explain how this will save me money? It was a great article. — Kristi, email
Dear Kristi: Writing down your car’s mileage forces you to focus on how many miles you have put on it, perhaps many of them mindlessly. The more you think about it, the more often you’ll find yourself thinking of ways to not run out for a minor errand. And next January, when you calculate how many miles you’ve driven in 2013, you’ll start thinking of even more ways to drive fewer miles to help make your car last longer. Staying focused and paying attention gives us the freedom to make changes.
Dear Mary: The other day, I was filing copies of my latest tax return when I noticed that I had made a mistake adding up some deductions. When I told my brother, he warned me that I’d have a higher risk of being audited, so now I’m in a panic. Is there any way to fix the goof and avoid hefty penalties? — David, email
Dear David: Relax, you have nothing to worry about. The IRS has created a special form just for the purpose of correcting a return and that should tell you that filing a correction is a common occurrence. Go to IRS.gov to get Form 1040X, or call 800-829-1040 to receive it by mail. This form is simple to complete.
The fact that you file an amended return will not in itself increase your chance of being audited. It’s the nature of the change that could raise a red flag. But in your case, a simple mathematical correction should not cause you or the IRS a bit of concern. By the way, you have three years from the due date of your return to amend it.
Dear Mary: Last summer, I got a $3,000 bonus that my brother helped me invest in a couple of mutual finds. When my quarterly statements come in the mail, I’m totally confused by the pie charts and graphs and tend to toss them out. My brother says it’s really important to track my investments. Is there an easier way to do this? — Erin, Florida
Dear Erin: The idea behind a mutual fund is simple: Lots of small investors pool their money and hire a professional to invest and manage the fund.
Reports can be confusing because you’re seeing details of everything your fund owns. The one number you need to keep your eye on is the net asset value (NAV) — the value of the fund’s assets on a specific date, minus liabilities, divided by the number of shares held by fund members. Compare the NAV each quarter with previous statements to see how the fund is doing. In the meantime, start following investing related websites like Kiplinger.com and SmartMoney.com.
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