Tax time hurts. No matter how tall last year’s pile of cash was, getting cut down to size every April 15 is not just a painful side effect of capitalism but a nauseating ritual that can leave you questioning the very tenets on which this country was built.

So if our forefathers went astray in giving us the IRS–you can blame Lincoln, who appointed the first Commissioner of Internal Revenue in 1862–why not just seek out different rules to play by, preferably ones that don’t ask for almost 40 percent of your income?

Fortunately, such rules exist, and they can be found in places like Bermuda, the Cayman Islands and tiny Vanuatu, as well as in Switzerland and its little cousin Liechtenstein.

The words “Swiss bank account” conjure images of tax-free windfalls, untouchable millions, and a safe place to store the extra scratch you have coming from any extracurricular deals. Moving money offshore means it’s out of the government’s hands–no taxes, no regulations, and no prying eyes watching over your every financial twitch.

Or so myth would have it. Though your identity is supposed untraceable through a “numbered” account (one that carries only a password as identifying information instead of your Social Security number or your mother’s maiden name), the reality is a bit more transparent. Tyco chief Dennis Kozlowski allegedly sidestepped more than $1 million in sales tax and shifted around far vaster sums–until banking regulators homed in on questionable offshore transfers involving Tyco accounts, which were based in Bermuda. The CEO was indicted for a cornucopia of offenses, but the offshore shell games didn’t help.

The good news is, you can profit from other countries’ banking laws–even if they’re not as generous as Kozlowski’s Bermudian fantasies might have led you to believe. Just remember that any income earned by a U.S. resident is taxable by the U.S. government. So if you’re trying to hide something, the thinking goes, you’re either fudging on your taxes or sheltering ill-gotten gains–and the government is likely to look into your affairs.

If you decide to roll the dice, it takes more thanjust opening an account. You won’t find an offshore banking section in most bookstores, but a quick surf of Amazon turns up a long list of titles, including how-tos like The Complete Guide to Offshore Money Havens by Jerome Schneider and The Offshore Solution by Terry L. Neal. Problem is, Schneider and Neal were both indicted late last year on tax-fraud charges. Offshore tax dodges and their dodgy promoters are at the top of the IRS’s “dirty dozen” list of tax scams.

Numbered accounts have taken on “a really unsavory character,” according to Don Weigandt, a managing director at , because of their association with filthy lucre like Mobutu’s booty and hidden Holocaust cash. “Whatever protection they might have offered in the past,” Weigandt adds, “it’s been eroded significantly.” The United States has been signing Tax Information Exchange Agreements that give the IRS access to information about U.S. holders of offshore accounts–even in places like the Caymans.

If you don’t mind coming clean, one of the most popular offshore techniques is what’s called private-placement life insurance, according to John Bergner, a wealth-preservation attorney with the Dallas law firm Winstead, Sechrest & Minick. Through an offshore bank, the client–that’s you–sets up a trust, an account you’ve given up control of and which is manged by a trustee, usually a bank officer. The trust negotiates a large policy directly with an insurance company. The company invests the premium with an offshore portfolio manager and kicks the returns back–tax-deferred–to the trust, from which the client can borrow tax-free.

The “gravy on top,” says Bergner, is that there are asset protection advantages. If you’re sued, your money may be harder to get at. Even if you lose a case in U.S. courts, your creditors will have to sue you in, say, Bermuda if they want to have a chance at your stash, because offshore trusts are governed by the laws of the country in which they’re established. (Although U.S. courts have been known to hold defendants in contempt if they fail to move their money back to the States so it can be handed over to plaintiffs.)

Access to offshore hedge funds and other foreign investments is another advantage of establishing an offshore trust. Funds that accept U.S.-based investments are subject to U.S. securities regulations. In order to avoid such hassles, most funds outside the States don’t take U.S.-based cash. But because the money in an offshore trust technically belongs to the bank that’s managing it, foreign funds can accept it as an investment without a thought to pesky U.S. regulators.

According to Antoine Bernheim of HedgeFundNews.com, the sorry state of US equity markets has led investors at home and abroad to turn to offshore hedge funds lately, and has even led fund managers to accept investors at slightly less than the $1 million buy-in that’s usually required. Most US advisors won’t set up an offshore account that’s less than seven figures. You can fly to Belize and do it yourself, but the experts, not surprisingly, don’t recommend it. “Get with a knowledgeable planner who knows about international tax planning before you undertake any of these activities,” says Larry Campagna, a tax-controversy lawyer with the Houston firm Chamberlain, Hrdlicka. Handing your cash over to a Bahamian with a business card is a different matter from walking into a century-old Swiss institution like Bank Julius Baer.

But the benefits can be very real. Bergner moved $40 million into offshore hedge funds for a client last year–at a cost of $150,000. “His income tax savings covered the transaction costs and the cost of insurance,” he reports. “It’s a no-brainer.” Bergner prefers established jurisdictions like Liechtenstein, Bermuda, and the Channel Islands.

Once you have money offshore, it doesn’t mean you don’t have to report any income your funds are making. The IRS estimates that about 1 million Americans have unreported offshore accounts that are accessed via credit cards linked to them, and it is moving quickly to crack down on the practice. The bottom line is that the legitimacy of offshore credit cards and similar arrangments should be checked out through lawyers who are specialists in the field.

“There have been some promoters who have enticed U.S. taxpayers to undertake offshore planning techniques that simply aren’t legal,” says Larry Campagna, the Texas tax-controversy lawyer. “Most taxpayers don’t have the expertise to determine whether these schemes are legal or not.”

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I finally realized how bad my credit was one Sunday morning when I picked up the phone to hear a recorded voice saying, “This is an important message from your credit-card company.” I’d gotten calls like that on weekday afternoons, but it was only when I started getting them on weekends that it dawned on me I might be screening my calls for years to come.

Take it from me: bad credit can wilt your manhood faster than a beefcake photo of Alan Greenspan. It could make it impossible for you to get a lease, a mortgage, or an auto loan. And everything’s tallied and preserved in a personal credit report that more people than ever are looking at. Your health-insurance company might be setting your premiums based in part on your credit score, and employers may weigh an applicant’s credit during the hiring process. It can hit even closer to home: “For people who are thinking of getting engaged, it’s the AIDS test and then the exchanging of credit reports,” says Dayana Yochim of the personal-finance Web site Motley Fool. “Your credit report is either your badge of honor or a measure of your shame.”

For most of us, bad credit creeps silently in on a current of late payments, loan defaults, and maxed-out cards awash in Christmas gifts, CDs, and plane tickets. “I had a profound misunderstanding of what a credit card was,” says one chagrined borrower in his thirties who charged computers and trips to India. “I don’t want to think about how much money I’ve spent between interest and late fees,” he groans.

As far as I’m concerned, he’s an amateur. After a decade of profligate irresponsibility that featured, marriage, divorce, a little globe-trotting, and some department-store sprees, my last card was cancelled even though I’d been making my payments on time. (I’d been late on some other accounts.) Now I survive on my debit card and the good graces of American Express–paid in full every month.

Bad credit can also arrive like a slap in the face. After letting his wife handle all the banking and bills, another guy I know, now divorced, found himself holding the bag for six figures’ worth of bank loans and credit-card debt. “It wasn’t even me borrowing,” he says. But in the eyes of the law, it might as well have been. “There are the people who write down every penny they spend and are masters of Quicken,” says Yochim. “And then there’s the rest of us.”

To find out just how tarnished your honor has become, pay the $30 or so to get your report from all three big credit-reporting agencies, in case one contains a mistake the others don’t have (Equifax, Experian, TransUnion). Then find out your FICO score, a kind GPA of creditworthiness that’s used to make lending decisions.

Scores range from 300 to 850, with 720 about average and anything under 600 starting to smell funky. The obvious boners: late payments, tax liens, bankruptcies, foreclosures, and even things like doctors’ bills that have gone to collection agencies. Your score can take a hit if you co-sign someone else’s lease or loan. How long you’ve been at a job or an address, whether you rent or own, have been sued or arrested–it all goes into determining how likely it is that you’ll pay back your debt. And credit agencies have a longer memory than you do; a single delinquent payment can stay on your record for seven years. Think you’re in too deep? What you do now counts most. “Recent late payments, even if they’re very small, could count against you more than a 90-day delinquency five years ago,” says Gerri Detweiler, author of the how-to The Ultimate Credit Handbook.

If you find yourself buried under a pile of cancelled credit cards and THIS IS AN ATTEMPT TO COLLECT A DEBT letters, don’t panic–but do grab a shovel and start digging yourself out.

First, make sure the information in your report is accurate. Up to 75 percent of credit records contain errors, says Yochim, and at least 85,000 people in the United States were victims of identity theft last year, according to the Federal Trade Commission. Errors range from misspelled names to fraudulent accounts a stranger has opened after getting hold of your social-security number. If you do find a mistake, write to the agency (don’t call), and send the letter by return receipt, so you know it got there.

Next, negotiate with lenders to get your interest rates and monthly payments as low as possible. Insist they match the low-interest balance-transfer offers you’re getting in the mail. If they don’t, apply for one of those offers. (One trick: Don’t automatically close your old accounts. Lenders look at the ratio of your debt to the credit you have available. Closing debt-free accounts–even if you’re not using them–means you’re carrying the same amount of debt on a lower total limit. Not good.)

If you’re broke and have to miss a payment, Detweiler recommends skipping one that won’t show up on your credit report until it goes to collection, like your cable bill. If you’re having trouble paying both rent and bills, ask for help–but be careful. “When you have really bad credit,” Yochim warns, “there’s a whole host of people that come from the underbelly of the lending industry to ‘help’ you,.” She recommends a service like Myvesta or Consumer Credit Counseling Services.

Even though the party’s over, you don’t have to take a vow of poverty. One day soon, you’ll be able to open your bills without breaking a sweat. “The only way to *fix* your credit,” says Yochim firmly, “is to prove you’re mature enough to *handle* credit.”

01 – The average credit-card balance per household is $8,400.
02 – At the end of the first quarter of 2002, Americans owed about $660 billion in credit-card debt.
03 – There are about 500 million bank credit cards (VISA, MasterCard, Discover, and American Express) in circulation in the United States.
04 – In 1999 there were more than 1.3 million personal bankruptcies declared.
05 – There are approximately 120 million platinum cards in the United States.
06 – The average American carries eight pieces of plastic (debit, credit, and retail cards).
07 – More than 40 percent of U.S. families spend more than they earn.
08 – Americans paid out approximately $65 billion in interest last year.
09 – Only 40 percent of active accounts are paid off immediately.
10 – In 2001, Americans charged $1.3 trillion to credit cards.

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It’s time. You’ve got the job, the wife, the kid (or maybe you’ve only got the job). You’ve finally moved the bed off the floor, the books off those milk-crate bookshelves. No more Queen posters, no more stroke mags. You’ve lost all your wisdom teeth, and your virginity is but a fond memory. You’ve been bar mitzvahed and confirmed and learned the Sun Salutation and memorized your mantra. You’ve been through every rite of passage you thought a guy could go through, but now it’s time to get serious: Go buy a house.

You’ve already noticed the subtle signs: That sixth-floor walk-up studio just isn’t cutting it anymore. You casually drop the fact that you’ve never had to pay a four-figure rent, but then the guy next to you lets slip that his mortgage broker found him a 40-year fixed at one point above prime. Even if your new mortgage is more than your old rent, paying any rent at all is just throwing good money after bad: When your lease is up, the only thing all that money has earned you is a couple of pennies of interest on your security deposit. Meanwhile, the first ten years of most mortgages are tax-deductible. In other words, you’re getting money back.

But be warned: Home-buying is a contact sport. Think Xtreme Escrow or the Giant Down-Payment Slalom. It’s all too easy to get burned your first time off the bench. Here, we replay the game tapes of four guys who’ve just trotted off the home-buying gridiron. They’re sweaty, they’re bruised, but the exhilaration of Game Day has left them pumping their fists. They’ve reached the end zone of homeownership.

Although buying a house may seem like an Olympic event, even weekend warriors can play this sport: The only essential equipment is a fistful of cash and a passable credit report (and sometimes not even the fistful of cash). But that doesn’t mean the scrimmage is easily won. Photographer Matt Hranek and his wife spent three years talking to real estate agents and combing local newspapers in search of the perfect piece of property in upstate New York. “You get sick of hearing things like ‘real fixer-upper,’” Hranek says. “We would drive around and pass a completely dilapidated house and look at each other and go, ‘Diamond in the rough, just waiting for a handyman-$450,000.’”

Hranek finally found his dream parcel by accident, as he was walking past the window of a Manhattan broker he hadn’t even known existed. The wait was worth it. “We got there, and it was like, ‘Wow, I think this is it,’” Hranek recalls–even with a “big fat nasty ugly mobile home” on the grounds. But the double-wide was quickly disposed of, and Hranek bought an Airstream trailer that the couple stays in until a dream house is built–using rock from the two bluestone quarries on the property–for another $150,000 or so. “It wasn’t just about investment, it really was about falling in love for us,” he says. “You’re shown these opportunities maybe a couple of times in your life, and you can either embrace them or walk away.”

Even if your perfect house isn’t on the market just now, it may still be a good idea to buy. “Owning a home is the American dream,” says Liz Bayless of Fannie Mae, the government-chartered agency that is Americans’ largest source of home-mortgage financing. “What matters is getting your foot on the rung of that ladder toward building wealth through the appreciation of home value. It’s a financial investment that has done well decade in and decade out, as far back as we’ve been keeping statistics. If you keep that perspective, you needn’t worry so much about whether the countertops in the kitchen are exactly the right color.”

And not everyone dreams the same house dream. Who’s to say that Hranek, in his wide-open space, is any happier then Len Nannarone in his gated subdivision? “This is a really up-and-coming area,” Nannarone says proudly–it’s home to many of the Sacramento Kings. “They say in ten years it’s going to be the next Beverly Hills.” Nannarone, a former M&A lawyer who has also done the legal work on dozens of house closings, relied on his knowledge of the industry to close his own deal. At the county deeds office, he learned that the seller was going through a divorce and had just taken a second mortgage to buy her ex-husband out of the property. Figuring she needed to make a fast buck, Nannarone offered her 10 percent less than list price. She accepted.

Getting to know the seller is a good strategy, but getting to know a good real estate agent can help just as much, as UT psych professor Brad Love found when he left Chicago for Austin and called an agent he describes as “a Texas grande dame” for advice. “Despite all social norms known to me,” he says, “I ended up staying in a spare room at her place for a week and drank beers at night with her husband by their pool. I think I was a surrogate kid. I almost got set up with her wayward niece.” Instead, she set him up with the house he now lives in.

Even if you become fast friends with your agent, make sure you have a lawyer. “It’s funny how many people will actually go out, look at a property, sign the document, enter into all of the legal stuff, put the money down, and only then go find a lawyer,” says Nannarone. “And then find out that everything’s screwed up but they have no way out because they’ve already signed the documents.”

The details of financing–interest rates, closing costs, mortgage insurance, points, ARMs, and equity–can be a dense and forbidding thicket. Bayless recommends Fannie Mae’s Homepath.com, which walks prospective buyers through all phases of the process, complete with glossaries and online calculators that can tell you everything from how much of a monthly payment you can afford to how small a down payment you can get away with.

Then consult a mortgage broker about your credit history. If you do qualify for a mortgage, make sure to get pre-approved. “When you offer a bid on a house,” says the Motley Fool’s Robert Brokamp, who’s responsible for much of the Web site’s Home Center, “the seller will find it more appealing that you can actually get a mortgage.” One common mistake of first-time home-buyers, according to Brokamp, is to let a bank or mortgage broker dictate how much house they can afford. Bayless agrees: “Many lenders may tell you that you can qualify for a mortgage that’s larger than you would actually be comfortable paying,” she warns.

While a good rule of thumb is to keep your total housing nut below 30 percent of your gross income, Brokamp says, the industry is no longer guided by such strict ratios. In some cases, a mortgage need not be pegged to your income at all. Bond trader Ted Murphy, who recently closed on a $2 million Hamptons party palace, got a “low-documentation” loan that required no disclosure of his income. In return, Murphy took on a higher-rate adjustable mortgage and plunked down a whopping $500,000 instead of the 20 percent that’s the norm. (Of course, there’s always an escape clause: refinancing.)

Many first-time buyers aren’t aware of the variety of mortgage alternatives that exist. “The goal,” says Len Nannarone, “is to buy as much house as you can and keep the payment as low as you can.” Nannarone put 20 percent down and got a “jumbo loan” that carries a lower monthly payment but which must be paid off or refinanced after only 10 years instead of 30. “I figure in 10 years I’ll have made enough money to pay it off.” If not, he’ll pay what he can and refinance the rest.

Murphy’s down payment alone would buy two entire houses in middle America, where the average price of a home is nearly $200,000. But home buyers with more modest bank accounts can often find ways to avoid coming up with the usual 20 percent down payment. After saving for almost a year, Brad Love realized there was no way he was going to be able to come up with the $47,000 down payment on the $235,000 house he wanted in Austin. He came up with a 10 percent down payment and, to avoid the private mortgage insurance he would have had to buy as a result, got a second mortgage for the other 10 percent. He has since consolidated the two at a lower interest rate, reducing his monthly payment by more than $350.

As far as a home being a good investment, that depends on how long you plan to stay there. “You shouldn’t buy a house unless you know you’re going to be somewhere for about three years,” Brokamp says. Plan to stay put until your property appreciates to its purchase price plus whatever fees and interest you paid–usually three to five years.

“When you see how much you’re paying for a mortgage and how much other people are paying in rent, you’ll be happy,” Brokamp says. “And if the market continues to go as it is, you’ll be very happy when you hear how much your neighbors’ houses are selling for.” Just remember Hranek’s words before you begin cruising the listings: “If you start looking, you’re going to find it,” he cautions. “So be prepared.”

#1 – Wild Kingdom
PROPERTY: 130 undeveloped acres in Sullivan County, upstate New York, including a double-wide trailer on property with working plumbing, septic, and electric
PRICE: $150,000
DOWN PAYMENT: 20 percent ($30,000)
MORTGAGE: $120,000
TERMS: 20-year fixed
INTEREST RATE: 7.5 percent
MONTHLY PAYMENT: $1,661.44
CLOSING DATE: July 2001

BUYER: Matthew Hranek
AGE: 35, married
PROFESSION: photographer
ANNUAL INCOME: “In the six figures.”
CURRENT LIVING SITUATION: floor-through apartment in Greenwich Village
RENT: $1,700
COMMUTE: “The process of getting to a place for me is intensely important. When I get on the Long Island Expressway to visit friends in the Hamptons, it’s like someone’s dropping salt in my eyes. This way, we drive north on these pastoral roads and all this decompression happens, and then you get there and you open up the gate and it’s time to drink beer and pee outside.”
I HAVE A DREAM HOUSE: “More than owning a house, more than saying, ‘I have equity,’ we love the idea that we have this piece of wild America, that we have the control to keep it as pure and as untouched as possible. Fifty or 100 years from now, I really hope that it stays as wild and unchanged as it is right now.”

#2 – Love Shack
PROPERTY: two bedrooms, one bath, 1,100 square feet, near University of Texas campus, Austin
PRICE: $235,000
DOWN PAYMENT: 20 percent ($23,500 plus $23,500 from a second mortgage)
FIRST MORTGAGE: $188,000 in a 30-year fixed at 8.375 percent
SECOND MORTGAGE: $23,500 in a 15-year fixed at 9.150 percent
CONSOLIDATED MORTGAGE: $206,900
TERMS: 30-year fixed
INTEREST RATE: 6.5 percent
MONTHLY PAYMENT: $1,307.75
CLOSING DATE: February 2001

BUYER: Brad Love
AGE: 29, single
PROFESSION: professor of psychology, University of Texas
ANNUAL INCOME: $70,000
LAST LIVING SITUATION: a “squalid” apartment in Austin
RENT: $500 a month
COMMUTE: Rides his bike (10 minutes), walks (25 minutes), or rides the bus (15 minutes) to campus. “It’s like a little socialist country here. The buses are free if you’re going to the school.”
I HAVE A DREAM HOUSE: “Everybody wants to have some independence and not be hassled. It’s nice to have a place you can take pride in; when you really clean something well or replace it, you don’t feel like you’re being a sucker. In Austin, it’s stability too. Rents go crazy and up and down here [because of the tech boom and bust], and it’s just nice to be able to count on a place.”

#3 – Suburban Gothic
PROPERTY: four bedrooms, two baths, three-car garage, 3,200-square-foot ranch house on a quarter-acre in a gated community, greater Sacramento area
PRICE: $332,500
DOWN PAYMENT: 20 percent ($66,500)
MORTGAGE: $266,000
TERMS: 10-year jumbo loan (fixed)
INTEREST RATE: 6.1 percent
MONTHLY PAYMENT: $1,680
CLOSING DATE: April 2002

BUYER: Leonard Nannarone
AGE: 33, married, one baby boy
PROFESSION: CEO of Millennium Partners Management LLC, a dental-practice management company
ANNUAL INCOME: $250,000
LAST LIVING SITUATION: shared a 900-square-foot apartment in Manhattan with his wife
RENT: $3,200
COMMUTE: “Since I’m the CEO of a company, I can go into work when I want: I go in at like 10:00 a.m. and stay till 6, so I avoid traffic. The commute’s really easy. It’s a 30-minute drive into Sacramento.”
I HAVE A DREAM HOUSE: “It’s great! You have your own yard, you have your own house, I have a little workshop in the garage. In an apartment, you live by somebody else’s rules: you can’t do this, you can’t do that, you can’t park here, you can’t park there. When you have your own house, it provides you with so much more freedom and so much more of a relaxing atmosphere. If you want to knock down a wall, you can do it. Owning your own business and having your own home–that’s like the ultimate American dream.”

#4 – Beach-Blanket Bond Trader
PROPERTY: eight bedrooms, five baths, two-car garage, two ponds, heated pool, tennis court, on 7.7 acres in Bridgehampton, Long Island
PRICE: $2 million
DOWN PAYMENT: 25 percent ($500,000)
MORTGAGE: $1.5 million
TERMS: 40-year adjustable
INTEREST RATE: 5.476 percent
MONTHLY PAYMENT: $6,222
CLOSING DATE: June 2002

BUYER: Ted Murphy
AGE: 33, single
PROFESSION: mortgage-bond trader
ANNUAL INCOME: “Put it this way: To qualify for the mortgage, I had to be north of $300,000 a year.”
CURRENT LIVING SITUATION: shares an apartment with a married couple in Tribeca.
RENT: “My rent situation makes it compelling for me to continue renting in Manhattan versus buying.”
COMMUTE: He just sold a 1995 Land Rover to buy what he calls “the ultimate beach vehicle,” a custom-restored 1975 Land-Rover 101 Forward Control.
I HAVE A DREAM HOUSE: “I have a pile of gear I’ve been shoehorning into a Manhattan apartment. Now I have a place I can put eight windsurfers, four surfboards, three or four bikes–and actually use all that stuff, which is kind of neat.”

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