Latest Newsletter Edition
Are You Paying Too Much for Car Insurance?
Auto insurance, for many individuals, has gone up in price to an alarming amount. There are many reasons why the cost of insurance has gone up, such as the increased cost of repairs due to the technology and safety features vehicles now offer. There has also been an increase in accidents in the past few years. In addition to these factors, according to Kiplinger, people are more likely to sue and be awarded large sums of money because of a motor vehicle accident in recent years which has also driven up car insurance rates.
Although car insurance is going to be inevitably expensive, there are ways to cut down the cost. The first and most important way is to shop around. Although this process can be time consuming, rates vary substantially form one company to another. A less time-consuming way to save is to call your insurance company and find out if you are eligible for any discounts. If you can, pay for minor repairs out of pocket. In the long run you will save money by minimizing the number of claims you have. If you have more than one vehicle or the ability to borrow one, it may be wise to drop your rental coverage. If your vehicle is older, and does not have much value, consider dropping your collision coverage. If you can keep money, put away for potential accidents, increasing your deductible may pay off in the long run as it will lower your monthly costs. There are many ways to lower the cost of auto-insurance, all of this information and more can be found on Kiplinger Website.
Planning for the Unknown in Retirement:
Retirement is as terrifying as it is exciting. Having a contingency plan to combat some of the unknowns to come can help when struggles come your way. Planning the future is difficult in an ever-evolving world, ensuring your savings for retirement is structured to weather these difficulties is important. A few challenges one might face is potential changes to social security, health/medical related expenditures, inflation and, unfortunately, the death of a spouse.
An article in Kiplinger talks about five steps an individual can take to create a contingency plan so when one of the above changes occurs, you are prepared. The first step one can take is to have a well-established emergency fund. This fund should be able to cover you in the event of loss of income, car or home repairs as well as unexpected medical expenses. The second step is to ensure your portfolio is well balanced and diversified. Managing risk becomes very important in the retirement years and a portfolio may need restructuring to mitigate some of that risk. The third step is to plan for healthcare costs. The average life expectancy continues to climb, and with that, so does the cost of healthcare in an individual’s later years. An emergency fund is a good option for an unexpected medical event; however, you should plan on having some form of insurance, etc. as your primary way of paying. There are multiple options out there, it is important to figure out what plan makes the most sense for you. The fourth step is to have more than one revenue stream. Relying solely on a pension, or social security is never a good idea. This goes back to having a well-diversified portfolio, ensuring you have revenue coming to you from multiple places is crucial. Finally, take into account inflation. Investing in areas that can withstand inflation is important. The cost of living 10 years from now is almost guaranteed to be higher than it currently is , the wrong investment strategy does will not be able to keep up with this higher cost of living.
The Average 401(k) Balance by Age Range:
Most individuals with a 401(k) have wondered how theirs stacks up against others. Comparing what you have put away against others is not a good benchmark of your readiness for a comfortable retirement, but it can give you an idea of where you’re at. Fidelity produced a report at the end of March this year that shows the average 401(k) balance by generational age range. These numbers were produced by using the statistics from over 23 million accounts.
- Gen Z (age 12-27) – $11,300
- Millennials (age 28-43) – $59,800
- Gen X (age 44-59) – $158,00
- Boomers (age 60-78) – $241,200
It is important to note that comparing what you have saved should not be how you measure your readiness for retirement, it leaves out too many variables. Looking at these numbers alone does not consider how long you will live, how the markets will affect your investment return, what your salary is and at what age you will retire. A general guideline of how much money you should have saved is one times your pay when you’re in your 30’s, three times your pay in your 40’s, six times your pay in your 50’s, and eight times your pay in your 60’s. So, if you are making $50,000 a year, you should have $50,000 saved in your 30’s, $150,00 saved in your 40’s and so on. The goal is to have 10 times your pay saved up when you retire, which for most is at 67. Depending on where you are, both age-wise and savings-wise, will determine how and where you should be putting your money away.
Please do not hesitate to give our office a call if you have any questions about your retirement or anything else.
How to Protect Your Inheritance:
Many individuals are set to receive an inheritance, whether large or small amount, from their parents and grandparents. Regardless of the amount, it is important to protect the assets to keep as much of it in your pockets as possible. If you expect to receive an inheritance, or already have, here are a few things from a Kiplinger article that is recommended.
The first thing to do is take things slowly. If you are receiving an inheritance, it is likely because a loved one has just passed away. One way to proceed slowly is to park the money in an insured savings account and allow yourself time to grieve and then figure out what to do with the money. Something to avoid doing is spending the money before you receive it. Circumstances can change and the money you receive could be significantly less than what you anticipated because of many different factors.
Although the federal government, as of right now, does not charge an inheritance tax, depending on the type of asset you will inherit, you could still be surprised with a large tax bill. It is important to understand how your inheritance and any potential income you make the same year you receive the inheritance will be affected. Asking a financial advisor for help is a vital step in receiving any inheritance of sizable value. A financial advisor will also be able to help direct you with how to make the most of your money. It is important to have discipline in not spending the money all at once, while balancing out the fact that it is okay to splurge and spend some of the money you have received. The key to success and having the money last is to have a plan.
Spring Clean Up for Your Money:
Spring is a great time to clean up and organize ourselves and our homes. While we typically focus on decluttering our basements or garages, it is advantageous to add finances onto the to-do list. Kiplinger released an article recently on a few key areas of interest to check in on for financial spring cleanup.
Spring is a great time to assess your investment portfolios. Many individuals have recently filed their taxes for 2023 and may want to reduce their tax liability for 2024. Contributing more to retirement accounts is a good option to do so. Additionally, reviewing your investment portfolio to determine if you are being too aggressive or not aggressive enough to meet your financial goals for retirement is important to do on a semi-annual basis.
Budgets should be reviewed often; Spring is the perfect time to do so as we head into summer and plan “fun” activities that typically are associated with spending money. Our financial home front should be like a business with every dollar, past present and future, accounted for to make a well-informed spending plan. A good spending plan is like a diet, to be successful, it needs to be balanced. You need to strike the balance between planning for the future, paying for the essentials, having cash reserve for emergencies, all while using some to enjoy the profit of your hard work. Physically writing out your budget is a great way to remain accountable.
Organization is important when it comes to financial success. Keeping your financial documents organized not only makes your life easier, but it is also important should you need to retrieve them. The IRS recommends keeping Tax returns for seven years, though we think you should hold onto them for as long as possible. Paystubs should be kept for at least a year, bank and credit card statements should be kept for at least three years. With most records being electronic, these documents are easier to retrieve than years past, however, it is still a good idea to see what your bank or employers’ policy is on keeping this information as they may not keep it for as long as you should be. Now is a great time to start the practice of organizing your financial documents to ensure you have them if the time comes when you need them.
Common Mistakes Retirees Make with Their Money:
Individuals work most of their life to have a comfortable retirement. Once reaching retirement, many make mistakes in dealing with their finances. The first mistake retirees often make is not identifying their financial goals, and furthermore, not adjusting their asserts to achieve their goals. Another mistake people make is not updating their estate documents as their net worth changes. Even if your net worth hasn’t increased or decreased significantly, changes in tax codes and other potential outside factors should be a cause to review your estate documentation.
One of the largest expenses older individuals are faced with is healthcare associated costs. Whether it is day-to-day appointments, long-term care facilities or anything in between, a big mistake people run into is not factoring healthcare costs into their financial planning. Avoiding end of life discussions with your family is understandable, however, it only makes things more difficult. Having these discissions not only informs them of what your wishes are, but how and why you want them carried out. This Financial information and more can be found on Kiplinger’s website.
HSA Misconceptions:
HAS accounts have become borderline controversial, unfortunately, many individuals do not fully understand what the account is capable of leading to frustration and misinformation. The truth is, if money is put into an HSA account, by no means is it “stuck” or wasted if you don’t use it in time. There are many myths about these accounts that have led individuals away from utilizing them. Below are a few of the most common myths believed about HSA accounts.
The first and arguably most common myth is that you must use the money in your HSA by year end or it’s gone. One strategy individuals use to maximize their account is to allow it to grow over the years and use it after retirement for Medicare expenses. Along the same lines, if you do decide to use it for medical bills, there is no time frame in which you need to do so. Another myth about these accounts is that you can only get them through your employer. Any HSA-eligible insurance policy will allow you to have one of these that you can get through various banks or financial institutions.
A third myth is a two-fold topic, and that is that many people believe that you can’t contribute into an HSA after turning 65 and that you can’t use it after Medicare. The truth is, you can continue to contribute after turning 65, however, you cannot contribute after enrolling in Medicare. That being said, whatever money you have in the account can continue to be used after you enroll. Many individuals do not know that HSA accounts don’t need to be in a savings accounts, it can also be put into mutual funds for long term growth to maximize their use.
All this information and more on HAS accounts can be found on Kiplinger’s Website. With a greater understanding of how to use an HSA well, you can significantly lower your tax liability without having that money tied up for years.
Tax Planning Tips for Retirement:
To maximize the amount of money an individual plans to retire with, they must consider more factors than just putting away as much as they can. Kiplinger recently put out an article about mistakes to avoid when planning retirement, particularly regarding tax planning. This step is often overlooked but is one of the most essential pieces of creating a maximized retirement portfolio.
The first mistake the majority of individuals make is not maximizing their contributions to retirement accounts. Per the article, about half of working individuals do not have access to a retirement account through their employer. Additionally, only 12% contribute money on their own into an individual retirement account. Taking advantage of these tax deferred accounts will enable you to contribute pretax, and then grow tax deferred until the time you decide to withdraw those funds.
The second mistake is to invest exclusively into pre-tax accounts like a 401(k) or IRA. This may seem to contradict the above advice; however, the point is you should be diversifying your portfolio. In the event that an individual has exclusively invested into pre-tax accounts, it is hard to know exactly how much money they are working with as it will be taxed upon withdrawing it. Opening a Roth IRA is a good way to balance out your diversification. One way to fund these accounts if you do not have extra cash to put into it would be to roll over a Traditional IRA or a previous employer’s 401(k).
The final mistake is one that confuses many folks and that is not having your withholdings properly adjusted. During tax season, getting a massive refund is always exciting, however, all it means is that you paid in too much throughout the year making that money dormant as the federal government held onto it interest free. Ideally, you should owe or get a refund of about $100 one way or the other. If your money is tied up in extra withholding all year, that is less money you have to be investing and gaining interest or you throughout the course of the year. Proper tax planning can help you maximize your investment potential as well as eliminating stress during tax season.
Is Identity Theft Protection a Good Idea for You:
Identity theft is not a new problem; however, it is becoming an issue that affects individuals with greater frequency. According to Kiplinger, over one third of U.S. citizens have encountered their identity being stolen in some form or another. What is even more shocking is that this amount is projected to increase over time. Fortunately, there are steps you can take to protect yourself from identity theft.
We live in a day and age that is approaching not if your information will be hacked but rather when. It is important to protect yourself as best as you can from this happening. Most individuals utilize software such as Norton, or McAfee to protect themselves, but this really is just a starting point. In addition to using these services, you should be monitoring your all your accounts for fraudulent activity and frequently changing passwords. Using a credit card instead of a debit card also tends to be a safer option. Prevention is always going to be the best form of protection, that being said, if and when your identity is stolen in some form, it is important to have a protection plan that will help you through the process. Not all plans are created equal, so it is important to find the one with a good reputation that suits your needs.
Does a High Yield Savings Account Make Sense for You?
If you are tired and frustrated with earning a low percentage on your traditional savings account, a high yield savings account is likely a good option. A high yield savings account is very similar to a traditional savings account with the exception of having a significantly higher annual percentage yield (APY). Many traditional savings accounts offer an APY of less than a 0.03% according to Kiplinger, whereas high yield accounts are typically between 3-5%. These accounts are a great option for short-term savings goals or emergency funds as you do not have to have your money tied up for a determined amount of time before it becomes available to you again. They are also often insured by the FDIC.
There are many high yield accounts to choose from on the market today, the right account may look different for everyone, but there are a few things to pay attention to, to quickly decipher a good account from a bad one. First and foremost, you want to look at what account is going to offer the highest APY, around 5% would be considered exceptional. After that you want to pay attention to the terms and conditions, there are enough to choose from that you should stay away from any with monthly fees. Similarly, choosing one that does not require a minimum balance to be carried would also be a good idea. There are plenty that don’t require a minimum opening deposit, however, for some this may not be an issue depending on how much you are looking to put into it.
Kiplinger has listed some of the accounts with a high APY and favorable terms and conditions. A few of those accounts include Mili Bank at 5.50%, Western Alliance Bank at 5.32%, and UFB Direct at 5.25%. Some more common Banks would be Citizens at 4.5%, Discover at 4.35%, and Capital One at 4.35%. It is important, as mentioned before, to compare these options and determine what makes sense for your financial situation and goals.
When Can/Should You File Your Federal Tax Return:
The IRS will begin processing tax returns on January 29, 2024, that being said, you can submit your tax return now which may push yours to the front of the line if you are anticipating a refund. This may, however, not be a good idea for everyone as some pertinent tax documents are often not distributed until late January- February. In addition to this, according to Kiplinger, Congress is currently in the negotiation process for a new funding deal which would include changes to the child tax credit.
Any changes to the tax code should take place before the 29th. If these changes take place, and your return has already been submitted, an amended return will be required. The deadline for taxes this year is April 18th, unless you file for an extension which would push this back into October. For most individuals, it will be a good idea to wait until after Jan 29th to ensure all changes have been made.
Year End Financial Moves:
The end of the year is quickly approaching, which is the perfect time to assess where you are and where you want to be going. Although it is a busy time of year, setting aside time to create goals and strategize on how to achieve those goals is helpful in the long run. A recent Kiplinger article highlighted five financial moves to consider as the end of the year approaches.
The first step Kiplinger lists is to assess where you are financially. Look over your account balances to determine your cash position and compare that to your credit card balances or other debts you may be carrying. Identify whether your current financial situation is on par with the goals you have previously set, and if it is not, determine what is causing the issue. The second step listed is to revisit your benefits. This time of year is typically open enrollment for benefits. These benefits, such as retirement, insurance, and equity are big parts of your financial life even if you don’t see their effect every day. Having a full scope of what plan you’re currently enrolled in is important and what is equally important is to have a good understanding of what all your employer offers.
The third step Kiplinger listed is to make your finishing year end moves to improve your tax situation. Although the year end is close, there is still plenty of time to make strategic moves to improve your tax situation. This can ease the financial burden when it comes time to file your taxes. The fourth step is shorter term, and that is to plan your holiday spending. Depending on which source you look at, many put the average American spending at about $1,000 on Christmas gifts. Not only is this a large amount of money, but it is also one that individuals often do not plan on. Consider giving non-traditional gifts such as time or other non-monetary gifts. The fifth and final step Kiplinger discusses is to seek professional help with these decisions. Navigating the world of investments while trying to consider how it may affect your taxes can prove to be difficult and especially time consuming. Seeking help with making these decisions can relieve some of the pressure around the situation as well as creating the best outcome.
Kiplinger’s what to do with $1000:
A recent Kiplinger article came out with suggestions on how to use $1000. One of the first things an individual should do if they have a thousand dollars is to pay off debt, especially those debts with high interest rates. If you are debt free but do not have a money reserve for emergencies, it would be a good idea to put some aside for unexpected expenses. High-yield money market accounts are a great option for this type of savings. If you have the debt and emergency fund covered, consider investing. Whether you are contributing to an existing investment, branching out and diversifying, or starting to invest for the first time, making that money work for you is always a good option. Although the market may be unfavorable as of late, there are numerous decent bond options to buy.
If you want to have fun with your money, consider planning a vacation. If booked far enough in advance, an individual can typically find tremendous deals on flights, hotels, etc. This also has the added benefit of giving an individual something to look forward to on the horizon. Make necessary repairs or elective upgrades to your home. If you/your family enjoy watching movies, consider buying a larger TV or better seating to enjoy movies. Finally, consider being generous with your money and donating to a charity that makes sense to you. Whether it is to feed animals in shelters or clothe less fortunate children, there is a dire need virtually everywhere we look.
Are you left wondering what is an acceptable tip in today’s standard?
One recent morning, on my way home from a trip, I figured it best that I stop and get a coffee before beginning my drive down the highway. There was no one in the drive through line as I pulled up and ordered my medium black coffee. When I arrived at the window to pay, the woman already had my coffee and the card machine ready for payment. After handing her my card, she then held it out the window and informed me it would ask how much I would like to tip. My options were 18%, 20%, 25% or no tip. I felt awkward as she gazed down at my selection, so I chose 20%, pulled my card out, took my coffee and drove away. While driving down the road it occurred to me that I have tipped for more things this past year than I recall doing so previously.
While reading through Kiplinger, I came across an article pertaining to this exact topic. The fact of the matter is most individuals feel tipping is getting a little out of hand. It is uncomfortable to decline a tip when an individual is standing there waiting for your choice. According to Kiplinger, people increased both the amount they were willing to tip as well as the places that they would tip during COVID. Because of this practice, organizations have built into their payment an option to tip each time instead of leaving it up to the patron to decide in order to continue this trend.
The article provided the “standard amount” of how much to tip and to whom you should be tipping. First and foremost, many would agree that the best tip you can give someone is treating them well and should be expected in all encounters. If you appreciate someone’s service they provided, tipping is always a good option to show that appreciation. According to the article in Kiplinger, the first group of individuals to tip are the servers at a sit-down restaurant. The standard amount to tip them is 15-20%. The second group is food delivery drivers, 10-15% is the norm for this. When ordering take-out, they recommend using your discretion but include that many individuals tip 10%. Finally, tip jars at coffee shops, ice-cream shops, etc. is something you should not feel obligated to do, but it is always appreciated, especially since many of the individuals at these establishments are young. The article goes on to mention that you should never feel guilty nor like you must tip when the screen turns around with a suggested amount. Instead come up with your own guidelines of what is acceptable even if that is declining the tip.
Tips to Improve Your Financial Well-Being:
The concept of how to build wealth (spending less than we earn) is not too difficult to understand, however, at times it may be difficult to navigate putting that concept into action. Building wealth will look different for all of us as we have varying goals and timelines. Below are a few ways to improve your financial situation.
The first tip may be the most obvious and the most talked about but it is something few individuals sit down to do. Creating a budget is one of the most important steps you will take in reaching your financial goals. The hardest part is once we create a budget, we must stick to it. Living within our means can not only be difficult but confusing when we are faced with things such as “good debt,” and “bad debt.” Knowing how to decipher what falls into each category all while trying to continue to put food on the table and a roof over your head can be a daunting task. Reviewing your expenses on a regular basis can help you stay on track and ensure your budget is up to date with your current situation.
The second tip is to automate parts of your finance. Not only will this save you time, but it also forces you, in a sense, to work towards your financial goals if that money is going to be automatically accounted for. Having part of your paycheck deposited into a retirement account can also help you achieve that goal. Automating your bills can ensure you don’t accrue any late fees. Part of your budget should be creating an emergency fund. Once again, automating a set amount to be going into this fund is a good way to create a cash surplus. Ideally, a fully funded emergency fund should have three to six months of living expenses, but starting small for things such as unexpected car repairs, etc. is a great start!
You should set aside time each month to review your budget, as mentioned before, but also your overall financial situation. It is good to get into the routine of checking on your 401(k), monthly subscriptions, insurance accounts, etc. When reviewing your expenses, such as insurance, on a yearly basis it is good practice to check in and see if you are eligible for a lower rate. Likewise, when reviewing investment portfolio, it is important to make sure it is performing as it should be.
These few tips can help achieve the reason for all of this and that is to have fun with your finances. When we budget well and live within our means, we can begin to put money aside for recreation. If our money is designated for this purpose, we can enjoy that money without it causing detriment to our day-to-day living expenses.
A few estate planning priorities:
Our health can take an unfortunate turn and decline unexpectedly. At times, this health decline may lead to death. Poor planning can result in loss of control over your affairs while you are still alive, it is important to document and communicate your desires to your loved ones and those you trust. The list of items you should include on your estate planning list is extensive, however, there are a few that should be prioritized.
According to Kiplinger, the first item on your list should be to document your healthcare wants, this includes a few things. Assigning a healthcare proxy for to make medical decisions for you in the event you can not make them yourself is important. Forming a living will can instruct others what level of life saving treatment you want and what kind of long-term care you desire. Making arrangements with a funeral home and cemetery can save your loved ones a lot of trouble in the event of your death, ensure that these arrangements are documented well. Next, you should choose an executor of your estate. This individual will be in charge of dividing up and distributing your assets. Protect your assets by assigning a power of attorney over your finances. Additionally, you should assign one or more successor trustee. Finally, create a file of need-to-know information. This document will likely be extensive but is very important. It should include things like your legal documents of your power of attorneys, copies of your life insurance policy if applicable, banking information, where to find vehicle titles, deeds, usernames and passwords, etc. This is one of those documents that almost can’t have too much information. Planning all of this should be done regardless of your age or level of wealth.
Recent ‘IRS letter’ Scam to Watch Out For:
In previous years, avoiding a scam was easier as you could follow the principle that the IRS will never initiate communication through e-mail, text, or social media which are the most common platforms that scammers use to reach their victims. However, there have been recent reports of letters through the mail being sent to individuals that are a scam. These letters appear to be real as they are printed on IRS letterhead and will include contact information for you to reach out to. They will often be seeking sensitive information such as phone numbers, routing numbers, social security numbers, photo of driver’s license, etc. A claim will often be made that to receive your refund, you must send the information requested back to the sender.
A letter that is fraudulent will often include poor punctuation, awkward wording, and inconsistencies in deadline dates. A true letter from the IRS will always include a section about your rights as a taxpayer, part of your tax ID, and a notice number somewhere near the top or bottom of the page. If there is any question on the legitimacy of a letter you receive, you can always contact the IRS directly using the contact information on their website (www.irs.gov).
Your retirement plan should not be based solely on social security income:
Social Security is typically the beginning cornerstone of one’s retirement plans, however, it also tends to be a misunderstood topic. There is ample misinformation about Social Security that tends to scare individuals into make decisions without examining the truths. One of the most common myths about Social Security is that it will go “broke” and disappear. Although the number of retirees has increased, individuals and employers are still paying into the system. For Social Security to run out of money, the entirety of the workforce would need to stop paying in. An additional misconception is that you must be 65 to begin collecting. According to ssa.gov, you can begin collecting at the age of 62, it will just be a reduced amount. For some individuals it will make sense to begin collecting early, others may want to hold off until full retirement age to collect the full amount. Finally, many individuals think that Social Security will not be taxed if they keep working. Depending on your income level, your Social Security will be taxed which is one reason it makes sense for some to defer receiving the Social Security income until full retirement age. On the other hand, some individuals have been made to believe that you can not work at all if you plan to receive Social Security which is also not true.
Regardless of any myths or facts surrounding Social Security, one thing that we believe to be true is that it should not be what you rely on solely for carrying you through retirement. According to Kiplinger, 74% of Americans said that they are relying on Social Security benefits for their retirement. Although it will not go away, the Social Security benefits can change depending on who is in office, if it changes enough, it can alter your retirement plans. Utilizing IRAs, company pensions, etc. are a much better was to take control of your retirement and use the Social Security to bolster your income verses having it be your entire income.
Have you had a financial conversation with your aging parent?
The thought of our loved one’s aging can be difficult to face but is something that should not be ignored. According to the National Caregiving Alliance, over 11 million Americans are caring for an adult family member at home while also raising children. There are many uncomfortable topics to cover with our loved ones, but if we do not cover them, it can become burdensome. Per a Wells Fargo survey, almost half of Americans with aging parents have not had a financial discussion about the current, or future, financial plan. Here are a few tips on the things you should know about your aging loved one’s finances.
First and foremost, knowing the assets they have is crucial, any retirement/investment accounts, real estate , etc. should be well documented. Additionally, knowing what debts they carry such as a credit card debt or mortgages is equally as important. Any source of income should be discussed as well, whether it be from social security, pensions, or part-time work. Ensuring they have an up-to-date estate plan is also very important. According to Caring.com, over half of Americans 55 years of age and older do not have estate planning documents. The next step would be to plan for potential healthcare costs. Unfortunately, many individuals do not plan for healthcare associated costs when in reality, they can add up to thousands of dollars, especially if considering a long-term care home. Finally, be vigilante about potential financial scams and abuse directed towards the elderly. According to the FBI, in 2021, individuals 60 years of age and older were victim of over 1.7 billion dollars of fraud. Although the topic is not pleasant or easy to talk about, having open and honest conversation with your aging loved ones can save a lot of hardship down the road.
At what age should you stop financially supporting your children?
According to a survey from savings.com, 45% of parents are currently supporting at least one adult child. The monthly price tag for this works out to be approximately $1,400 a month. Some of the main contributors to this dollar amount are things like car payments/insurance, cell phone bills, subscription services (cable/internet, Netflix, etc.), credit card bills, groceries, and a large one being housing cost (mortgage/rent). Many individuals will support their children through their younger years and lose sight of the many things they are paying for or adopt the mentality that paying the way for their children will put them ahead in life.
Supporting your children for a long time truly is a double-edged sword. On one side, it is consuming money that you could be investing or using for your own leisure, and on the other side, it is preventing the children from learning fundamental money management skills. One issue often seen is that there comes a time where the parents either do not want to or cannot support the children anymore. When this occurs, the children are cut off cold turkey and do not know where to begin on making ends meet. Although there is no set age when you should have your child fully supporting themselves, a general rule of thumb would be that as soon as they start making money, you should be forming financial goals with them and having them help out. One of the main goals should be to gain financial independence, and working towards that will allow a smooth transition from being supported to being independent.
Is your credit score hurting or helping you?
Credit scores are something we here all about. The concept is frequently advertised on TV and brought up whenever looking to purchase larger items or open a credit card. What exactly is a credit score and why is it important? Put simply, a credit score is a number that provides information on a consumer’s creditworthiness. According to Kiplinger, this number will typically range between 300 and 850. Most lenders use the FICO scores, and some may additionally take into consideration the VantageScore. If an individual is borrowing money or opening a credit card, a good credit score will allow for significantly better rates which leads to saving money in the long term.
For the FICO score, above 670 is good, above 740 is very good and above 800 is excellent. To achieve these numbers and continue the pursuit of bettering your score, you can start by utilizing these four simple tips. The first would be to pay your bills on time and if possible, in their entirety. Although this may seem obvious, plenty of people forget the due date or struggle to pay the bill in full. The second tip is to keep your credit usage low, ideally, under 30%. Increasing the credit limit on a card may initially impact your score negatively, but will quickly recover if you use that increase to keep your usage lower. Third, do not close old credit card accounts out. If you find yourself “stuck” with an annual fee, contact the company and see if they will roll the account into one similar that does not have a fee. Even if your card has no activity, that will be significantly better than closing it out. Finally, periodically check your credit score, many apps, such as credit karma, will inform you of what your score is and on ways to improve or maintain your score.
Will you need to report your income from third party apps like Venmo and Cash App? :
Initially, it was anticipated that for tax year 2022, any income over $600 would need to be reported on the IRS Form 1099-K for payments made to you through apps such as Venmo, PayPal, Cash App, Square, etc. According to Kiplinger, just prior to year-end, the IRS delayed the “$600 rule” back to tax year 2023. What does this mean for you? The threshold for reported income of these apps will remain at $20,000. If you received income over this dollar amount, you are required to report it.
The $600 threshold will very likely take place in 2023 so it is crucial to be informed about the Form 1099-K and plan your taxes accordingly. It is important to differentiate between what does and does not qualify. The form 1099-K for those over the threshold is sent to you and the IRS so it is important to claim the qualifying taxable income as it will likely be flagged if you do not.
Upcoming Tax Deadlines
July
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10 | Employees Who Work for Tips – If you received $20 or more in tips during June, report them to your employer. You can use Form 4070. |
15 | Nonpayroll withholding – If the monthly deposit rule applies, deposit the tax for payments made in June. |
15 | Social security, Medicare, and withheld income tax – If the monthly deposit rule applies, deposit the tax for payments made in June. |
31 | All employers – If you maintain an employee benefit plan, such as a pension, profit-sharing, or stock bonus plan, file Form 5500 or 5500-EZ for calendar year 2023. If you use a fiscal year as your plan year, file the form by the last day of the seventh month after the plan year ends. For more information on filing these forms, go to IRS.gov/Form5500. |
31 | Federal unemployment (FUTA) tax – Deposit the tax owed through June if more than $500. |
31 | Certain small employers – Deposit any undeposited tax if your tax liability is $2,500 or more for 2024 but less than $2,500 for the second quarter. |
31 | Social security, Medicare, and withheld income tax – File Form 941 for the second quarter of 2024. Deposit or pay any undeposited tax under the accuracy of deposits rule. If your tax liability is less than $2,500, you can pay it in full with a timely filed return. If you deposited the tax for the quarter timely, properly, and in full, you have until August 12 to file the return. |
August
Day | |
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12 | Social security, Medicare, and withheld income tax – File Form 941 for the second quarter of 2024. This due date applies only if you deposited the tax for the quarter timely, properly, and in full. |
12 | Employees Who Work for Tips – If you received $20 or more in tips during June, report them to your employer. You can use Form 4070. |
15 | Nonpayroll withholding – If the monthly deposit rule applies, deposit the tax for payments made in July. |
15 | Social security, Medicare, and withheld income tax – If the monthly deposit rule applies, deposit the tax for payments made in July. |
September
Day | |
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10 | Employees Who Work for Tips – If you received $20 or more in tips during August, report them to your employer. You can use Form 4070. |
16 | Nonpayroll withholding – If the monthly deposit rule applies, deposit the tax for payments made in August. |
16 | Social security, Medicare, and withheld income tax – If the monthly deposit rule applies, deposit the tax for payments made in August. |
16 | Corporations – Deposit the third installment of estimated income tax for 2024. |
16 | S Corporations – File a 2023 calendar year income tax return (Form 1120-S) and pay any tax, interest, and penalties due. This due date applies only if you timely requested an automatic 6-month extension of time to file the return. Otherwise, see S corporations under March 15, earlier. Provide each shareholder with a copy of their final or amended Schedule K-1 (Form 1120-S) or substitute Schedule K-1 (Form 1120-S) and, if applicable, Schedule K-3 (Form 1120-S) or substitute Schedule K-3 (Form 1120-S). |
16 | Partnerships – File a 2023 calendar year return (Form 1065). This due date applies only if you timely requested an automatic 6-month extension. Otherwise, see Partnerships under March 15, earlier. Provide each partner with a copy of their final or amended Schedule K-1 (Form 1065) or substitute Schedule K-1 (Form 1065) and, if applicable, Schedule K-3 (Form 1065) or substitute Schedule K-3 (Form 1065). |
16 | Individuals – Make a payment of your 2024 estimated tax if you’re not paying your income tax for the year through withholding (or won’t pay in enough tax that way). Use Form 1040-ES. This is the third installment date for estimated tax in 2024. For more information, see Pub. 505. |