It’s that time of year when the sun comes out, birds start chirping and you start to thinking about cleaning. Does your garage need to be organized or does you closet have too many clothes that you haven’t worn in over a year? Many of us have spring cleaning goals for our house, but have you ever thought of spring cleaning your finances. I am not saying you should clean out your bank accounts and donate all your money. Instead, you should periodically review your finances in order to keep them clean.
You may be asking yourself what does he mean by keeping my finances clean? Over the course of a year, or even six months, we can develop bad habits that will derail us from our financial goals. These bad habits include going out to eat more often or buying coffee instead of making it at home. This can lead to less savings or increased debt. Periodic reviews of your finances can catch these bad habits before they spiral out of control and your finances are in trouble. Ignoring your finances is like your car breaking down because you put off getting your oil changed.
Life can get in the way sometimes, but don’t let it stop you from reaching your financial goals. The longer you allow the mess to accumulate, the longer it will take to clean it up. Consistently reviewing your finances will help you eliminate one more of life’s concerns.
Do you review your finances periodically? If so, does it help you stay on track?
“Always keep your home presentable, assuming you keep a home for purposes of presentation.” ~Robert Brault
I was talking with a friend the other day about how to simplify our lives and somehow we got on the topic of automatic payments for our bills. He explained that he was scared to give companies his account information because they could possibly use it for unauthorized charges. I told him that they had his information every time he sends in a check to pay a bill. I support automatic payments because it has made my life much simpler and less stressful. Here are 5 steps you should take when setting up automatic payments and how to keep your information safe:
1. Get Your Finances in Order – If you are living paycheck to paycheck it may be difficult to do automatic payments, but not impossible. You need to make sure you will have enough money to cover your bills on the dates you have designated for the payments. Choose payment dates that fit your pay cycle. I have found that many companies will work with you on payment dates.
2. Choose Bills to Auto-Pay – Write down all the bills you pay each month and check to see if they offer auto-pay. Choose which of those bills you don’t want to worry about paying online or by check. This can be all your bills or a select few. The only bills I don’t have on auto-pay are magazine subscriptions. I like the deals they try to entice you with when your subscription is about to run out.
3. Keep Records – Document every company you give your account information too, their contact information and the date of the auto-pay. This way if you move or need to cancel an auto-pay you have the information easily available. This will keep your information secure because you will always remember everyone you gave it to.
4. Review Bills – Once you have setup auto-pay this doesn’t mean you can ignore your bills. At some point each month make sure the amount of the bill is matching what is withdrawn from your account. This is the best way to make sure your account information is properly used.
5. Credit Cards – I don’t recommend setting up your credit cards to auto-pay the outstanding balance because this could overdraft your account if you had a large expense on the credit card. Instead setup your credit card to auto-pay the monthly minimum balance. You won’t have to worry about paying the bill on time and you will never incur late charges.
Automatic payments have helped simplify my life and they allow me to spend more time doing things I enjoy. It will save you time and you will never have to worry about incurring those pesky late charges. Are you scared of doing auto-pay? If you do auto-pay, are you happy with it? Let me know in the comments below.
“There’s always something to be thankful for. If you can’t pay your bills, you can be thankful you’re not one of your creditors.”
Today is Earth Day and you may be asking what do Earth Day and finances have in common. Earth Day is a worldwide event used to create awareness and appreciation of the Earth’s natural environment. Many of the things we do can be changed to not only make the Earth a better place, but they can also save you money. Here are a few things you can do to save money and the Earth:
Change Driving Habits – Simply braking sooner and accelerating slower could help you increase your gas mileage by up to 37% . Driving the speed limit and using cruise control can increase your gas mileage by up to 14%. These are not only substantial savings, but you are also using less fuel which is always better for the Earth.
Install Solar Power – Yes solar does have a high initial cost but there is a 30% federal tax credit available and many states also offer incentives. If you plan on staying in your current residence the payback can range from 10 to 15 years depending on the cost of electricity in your area. Here is a calculator to help you estimate your payback time on solar. Solar will not only eliminate your power but you are helping Earth because most electricity is either produced from coal or nuclear reactors.
Use Less Water – Taking shorter showers, lowering the time you water your lawn, use less dishes to save on dishwasher water and turning off the water while brushing your teeth will all help decrease water usage. This will not only save money on your water bill, but it will help Earth by conserving water in those areas that are at risk of droughts.
Energy Efficient Bulbs – If you can’t justify spending the money on solar energy, replace all your bulbs with energy efficient bulbs. They use 25% to 80% less energy, which will lead to substantial cost savings on your electric bill. Just like solar, this helps the Earth by lowering electric consumption, which leads to less pollutants.
Earth Day is a great day for awareness, but we should be protecting Earth on a daily basis. I am not a tree hugger, but I love the outdoors and want many generations below me to be able to enjoy the outdoors as well. Are you doing anything for Earth Day? Is there anything that you make a conscious effort to do to save money and help the Earth?
“The Earth is what we all have in common.” – Wendell Barry
Tomorrow is the day I finally setup my 3 month old baby girl’s college fund. It is crazy to think that I am setting up a fund for my daughter’s college almost 18 years prior to her going to college. I don’t even want to think about her going to kindergarten some day, let alone college. I guess if it has to happen I better be prepared. So prior to meeting with my financial planner, I have researched my college savings options. I will discuss Nevada’s college fund options, but many states have the same or similar options. Here is a great resource to research what your state offers. Nevada offers the following options:
- Pre-Paid Tuition – This is a great plan if you anticipate your child going to an in-state university or college. Instead of actually saving money you are paying for college credits at or near their current price instead of the price it will be at the time they go to college. Resident tuition has historically increased 6% and 4% a year over the past 13 years for Nevada universities and colleges, respectively. The current credit cost for an undergraduate at the University of Nevada, Reno is $189. If this trend continues in 18 years a college credit will cost $540. If you pay a lump sum for a newborn now youe contract rate per credit would be $184 when they go to college, this is for the 120 credit plan. You can use this plan for out-of-state schools, but it will only pay the contract amount per credit. You are responsible for the remaining cost per credit.
- 529 College Savings Plans – Nevada actually offers two different 529 plans. The SSgA Upromise 529 and the Vanguard 529. They are similar plans but the Upromise has some matching benefits from the state. A 529 plan is a college savings/investment account. The money you save is diversely invested in various funds and equities. The tax benefit to this plan is that all gains are not taxable as long as withdrawals are used to pay for eligible college expenses. The downfall is your account can lose value because it is invested in the market. If you choose to close this fund and not use it for college expenses then you will incur taxes and penalties.
There are other options available to save for your child’s college such as the Coverdell Education Savings Plan or Uniform Gifts/Transfers to Minors accounts. These two accounts can be used for other education expenses besides college. The most common accounts are pre-paid tuition and the 529 plans. Make sure you do your research prior to starting an account. The cost of college is expensive and that is a burden I don’t want place on my children. Have you had any experience with any of these accounts? If so, how do you like them?
“A college degree is not a sign that one is a finished product but an indication a person is prepared for life.”
-Reverend Edward A. Malloy
The day has finally come. Taxes are due today and the feeling I get when they are done is a weight off my shoulders. I am sure you are getting tired of hearing about taxes so this will be my last post on the subject for a while. If you have not already started, now is the best time to start preparing for 2012 tax year. If you are looking to lower your tax liability or be more prepared, there are steps you can take now to help you out. Here are a few tips to make your life easier:
- Collect Documents – It’s inevitable, every year I am running around the house searching various piles of papers for tax documents. This year I am going take anything that I think might have tax implications and I am going to file them in one folder. This will definitely relieve some of the stress during tax season.
- Previous Tax Return – Keep a copy of your previous year tax return with all your tax documents for 2012. This way you remember to look back at what you deducted so that you are less likely to forget something the following year. For example, I almost forgot to include a donation that I had done last year as well.
- Spring Cleaning – One of our most hated and favorite times. We all hate to spring clean our house, but it is so great once you are done. This provides you the opportunity to dispose of unused items and donate them to a local charity. This will provide a great donation deduction for your 2012 tax return. Make sure to file the receipt.
- Contribute to Retirement – Instead of making a lump sum contribution on April 14, 2013, make constant contributions throughout the year. If you don’t have a retirement account, open one and the contributions could lower your tax liability.
- Take Classes – Start taking some classes at your local college or university. You will hit two birds with one stone. You will get the benefit of a tax credit from the tuition and you will be increasing your knowledge base. I know people cringe at the idea of school, but you may actually enjoy it.
Well now that tax season is done we can all take a breather until next year. These tips could save you money and a lot of stress for tax year 2012. I just need to follow my own advice and prepare better.
What do you do to make your tax preparation easier? Let me know in a comment.
“The difference between death and taxes is death doesn’t get worse every time Congress meets.”
– Will Rogers
Personal income tax was first imposed by Congress in 1861 to help pay for the Civil War. At that time they collected 3% of all income over $800. Last year the Government collected $2.3 trillion in federal taxes. It is crazy to think that only covered 64% of the $3.6 trillion the Government spent in 2011. So where does all this money go? The Center on Budget and Policy Priorities breaks it down very well. Here are the four main areas your federal taxes are spent:
- Medicare, Medicaid and the Children Health Insurance Program – the Government spent 21% or $768 billion on these programs. They help provide health care services to the elderly, low income children and parents and people with disabilities.
- Social Security – 20% or $731 billion was spent to provide retirement benefits to retired workers and their families. This program also provides benefits to disabled workers and their families.
- Defense and International Security – the Government spent 20% or $718 billion of the budget on such things as funding the Department of Defense and operations in Iraq and Afghanistan.
- Safety net programs – 13% or $466 billion is used to help support individuals and families that are experiencing hardship. These include unemployment benefits, food stamps, low-income housing assistance and many other support programs.
There are many other areas the Government spends our tax money. One area that concerns me is the amount our Government is spending on debt interest. They spend 6% or $230 billion on the national debt, which was based on $10 trillion. The current national debt is $15.6 trillion. So not only are we paying for the interest, but in the future we are going to be responsible for paying the debt.
I think the Government needs to be spending more of our tax dollars on education. In 2011, only 2% or $72 billion was spent on education, I never realized it was this low. This is the one area that is going to decide the future of our country and it is not a priority. This a little disturbing to me, but that is just my opinion.
Now that you know where our Government spends our tax money, what do you think? Let me know with a comment below.
“America is a land of taxation that was founded to avoid taxation.”
– LAURENCE J. PETER
Ahhhhh……the end of tax season nears and for the 75% of taxpayers that received a refund, the thought of taxes has most likely come and gone. For the other 25% of us that have waited until the last minute, we have until Tuesday, April 17, 2012 to file and pay our hard earned money to Uncle Sam. While it would be nice to receive a refund, I am not upset that I owe a few hundred dollars because I know that I was able to earn interest on my money instead of letting Uncle Sam earn the interest. Basically, if you received a refund this means you are withholding too much from your paycheck.
When most people fill out their W-4 at the time of hiring they will usually claim allowances of 0 or 1, which will result in the maximum federal income taxes taken from their paycheck. Did you know you can put as many allowances as you want on your W-4 within reason? Here is a calculator from the IRS to help you figure out how many allowances to claim. The calculator will figure out your deductions and tax liability to calculate an allowance that will get you closer to $0 of taxes due and refunded. This means you are receiving the right amount with your paychecks and you are able to earn interest on that money instead of Uncle Sam.
Many people like receiving that big refund check every year, but they don’t realize it’s their money in the first place. Your withholding allowance should be checked every time you have a life changing event such as a marriage, purchase of a home or the birth of a baby. If you haven’t had a life changing event and feel that you want to start receiving your tax refund with your paychecks, you can change your W-4 at any time. Additionally, that extra money each month may make budgeting much easier. Stop allowing Uncle Sam to gain interest off your money.
If you have any questions about W-4s or withholding allowances to you should contact payroll department or a tax professional.
Have you adjusted your withholding allowances? Do you prefer to receive a larger paycheck or a tax refund? Let me know in the comments below.
“The hardest thing in the world to understand is the income tax.”