Saving $125 in 5 Minutes

by Matt B

As you would probably imagine, the topic of money comes up quite often when you work at a bank like myself. More surprisingly, the financial talk is usually with my co-workers more than the customers. One of my buddies at work (Stanley) has one eye on the stock market constantly. For good reason. He does have a pretty significant amount of money there.

To me, he is a day trader. He invests for the short-term most of the time. Sometimes he takes a decent profit, other times he takes a pounding. One positive about my buddy is that he always does his research. I can not imagine him walking blindly into an investment of any kind, expecting a decent result. He is also very intelligent. (A trait I look for in all of my friends). He is well aware of Financial Methods and comes here frequently to read, although I do not usually tell him much that he does not already know. In my opinion, his overall financial intelligence is very healthy and my help and advice is not necessary to him.

As you may have noticed, I did not post about tax time at all. For me personally, taxes were almost too easy this year. I did not have much interest income or anything that could be considered difficult, so I did not have much to say about it. So, when my friend and I were talking taxes, I was floored with the absolute STROKE of GENIUS that he shared with me. I was at first amused by his story of this year’s taxes and what a hassle it was for him. Basically, he was e-filing and had to manually enter every stock purchase and sale that he had made for the previous year. When midnight on the 15th rolled around and he still was not complete, he submitted what he had to avoid penalty, intending to amend the return later. What had me laughing was listening to him describe how frantically he was moving, trying to get everything in by midnight, only to find out that when he “finished” his return, the timestamp was 9:03pm PST. He was so frustrated! But we are in the Eastern time zone, and the return was being filed by an application that operates on Pacific time!

Well, maybe you didn’t think that it was funny, but I did.

Regardless, this crazy, day trader, nerd-man had a stroke of genius…

Now, I do not recall what year he said that this was for, but Stanley (made up name) had just finished his taxes. He was looking over the “bracket chart” that shows the difference in returns based on income fluctuation. After checking it out, Stanley realized that he was $1 and change away from $130 more in his refund. He was irked, but as I have mentioned, Stanley is a very intelligent man. He knows the in’s and outs of the system.

Since he was so close to a larger refund and he knows how taxable income works, Stanley had the forethought to make a phone call. He called the bank that we both work for to see if there was a minimum investment amount for an IRA. After less than five minutes on the phone, he found out that there is no minimum, and that for associates, there are no maintenance fees on IRA’s.

This information is EXACTLY what Stanley wanted to hear. This simple phone call had just saved him $125 dollars. Even though he did not feel the need to open an IRA, he went ahead and did so. Knowing that just a small, non taxable contribution to this new IRA would bring his taxable income down enough to increase his refund was a stroke of genius. He started the IRA for $5. Five Dollars!!

That five dollars earned him $125, and in just minutes. What is even funnier to me is the fact that this IRA, that he will have surely forgotten about by retirement time, may end up earning him enough money to take some sexy senior out to dinner come retirement.

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