10/24/2011
Increase Wealth and Decrease Tax by Planning Your Tax-Deferred Withdrawals
Want to preserve more of your money while decreasing your exposure to tax? The best way to do that is by strategically planning how you withdraw money from your tax-deferred accounts.
For most accounts - including savings accounts and investment portfolios - you are required to pay taxes during the year that you receive income (from interest or dividends, for example). But with a tax-deferred account, you put off the payable tax until you withdraw the money from your account. You're not taxed on the money you've earned in the account. Instead, you're taxed on the money you take out of it.
A savvy accountholder will time their withdrawals to reduce the amount of tax they owe and thus increase the amount of money they get to keep. They do this by withdrawing money during a year when their income is low (such as during a period of unemployment or retirement). This puts them into a lower tax bracket so they pay less tax on their withdrawals.
Compare this to someone who is earning six figures and withdraws money from their tax-deferred account. Because they are already in a higher tax bracket, their withdrawal adds more money to their taxable income.
The only time to consider taking the higher taxes is when you can put that money to work in an investment that will earn back far more than you expect to lose from the added tax.
You work hard for your money and saving for the future in a tax-deferred account is smart. Protect your wealth and reduce the taxes you owe by making sure your withdrawals coincide with times when you are in a lower tax bracket.
8/16/2011
It's not a sin to live within your income. And if living within your means comes to not buying certain things that others can easily afford (or charge), you haven't done anything wrong.
It's ok not to have enough money to buy everything you'd like. It's ok to save up and wait until you can afford things. And it's ok to use credit responsibly.
Next time you feel uncomfortable making excuses to your spouse, your children, your friends or your co workers, take a deep breath, smile, square your shoulders, and say with confidence: "I can't afford it!"
8/11/2011
Talk About the Credit Union Difference
Chances are, no matter how young your child is, they know (at least in a basic way) what a bank is. But do they know what a credit union is?
Spend a little time discussing both the similarities and the differences between banks and credit unions in a way that your child will understand. Explain the difference between being a member/owner and being a customer. Explain the services that are offered by both, how profit works, and that credit unions are not-for-profit.
Growing up with a clear knowledge of the differences and the benefits of credit unions will help your child make informed decisions when choosing a financial institution as an adult.
8/2/2011
Back-to-School Budgeting
Author: Michelle Izmaylov
While the holidays are infamous for devouring your hard-earned greens, there's another time each year that blesses your money with wings to find new roosts in the pockets of store owners. That's right: back to school season. Unfortunately this year, college students who are typically hovering on the edge of debt are even more pressed for cash as the global economy struggles to rebound. If you're living on a dime and looking for supplies for the upcoming school year, check out these tips about how and where to shop on a back-to-school budget.
Start Shopping in the Attic
Cobwebs and your grandmother's old knick-knacks don't sound like they make the most appealing atmosphere when it comes to shopping. But you'll be surprised what's hiding right at home! This is an especially great strategy for big-ticket items like furniture for your dorm room or off-campus apartment. Maybe your parents have a nice sofa they're planning to part with. Grab it! You can also reclaim pens, binders, unused notebooks, and all sorts of other goodies just by checking out your old stuff. Do you have any older (or even younger) siblings? Ask them if there's anything on your shopping list that they have and would be willing to donate to your cause!
Shopping Equals Splurging?
Not when your budget's on the line! And that means it's important to make sure that what you're buying is what you're going to be using. For instance, did you ever walk into a department store and see the cutest-but rather expensive-must-have bedding set, complete with fluffy pillows and a quaint rug? Before you buy, consider this: do you really need the fancy extras? If those pillows are just going to host your dust collection, think about buying a smaller set that includes just the essentials. And that goes for computers, electronics and just about anything you need; don't buy the most expensive model if a cheaper one can satisfy the same need at an affordable price.
Budget Book Buys
And by books, we don't mean just fun reads. With another academic year comes another round of shelling out cash for college textbooks, many of which you'll discard as soon as your classes are over (if not before). But there's no rule saying you have to buy books at full price! Local used bookstores will often carry textbooks at deep discounts. Plus, you can visit online retailers or search the Internet for Websites offering books on a budget. Finally, don't underestimate the value of word-of-mouth shopping. Find a friend or classmate who has already taken the class that's on your schedule next semester and buy their books!
4/26/2011
Easy, Inexpensive Home Improvement Ideas
Need ideas for home improvement that don't cost a lot and don't require the experience of a skilled craft lover? Try these!
1. Candles. These inexpensive, scented or unscented accents can really change the ambiance of your home. Spend time choosing both colors and scents that lift your mood and invest in some pretty candle holders. Use precautions when burning candles anywhere in the house, especially if young children are around.
2. Potpourri. The appealing scent and look of potpourri is always welcome in closets and in the bathroom, but get creative. The hallway, over the phone, in a small dish on the windowsill...anywhere that works for you.
3. Slipcovers. Tired of your furniture, but not ready to invest in a whole new living room set? Get a quick new look with slipcovers. Be sure to pick something that doesn't clash with everything else in the room unless you want to repaint and change the pictures and other decor.
4. Borders. Instead of papering an entire room, a border is an inexpensive way to pull a "look" together attractively. Traditionally placed on the top of the wall close to the ceiling, borders come in a variety of patterns and widths. Some designs can give your rooms a shorter appearance, so test before putting them up. You can also experiment with placing borders in the middle or third of the wall to "divide" the wall. Consider painting the upper and lower halves of the wall different (but coordinating) colors or shades.
5. Window treatments. These do not have to be expensive, custom-made curtains. Visit your local fabric store, find a fabric that will fit in with the rest of your decor, and ask the salesperson for advice on how to drape it and which hardware to use. Flat sheets give you lots of yardage at a low price, so consider them an option for window treatments, too.
6. Lamps. Like candles, lamps can add to the charm of a room. Find them in department stores, chain stores, or yard sales.
7. Recycle old furniture. Anything goes, so take the picture from the bedroom and put it in the hallway. The wrought iron bench from the garden can look chic in your foyer...use your imagination!
8. Flowers. Whether it's a single rose in a stem vase or a colorful bouquet in a glass vase, silk flowers can look real and appealing. Watch for a sale in your local craft store and have fun creating a bouquet you can display for years.
9. Clear the clutter. Too many knick-knacks can detract from a room and can mean a nightmare when it comes to spring cleaning. Get rid of what you don't like or can do without and put away as much as possible. A small collection of one type of item is more attractive than an unorganized variety of "things." Less really is more.
3/29/2011
Choosing a Tax Preparer
What qualifications do you legally need to prepare someone's taxes?
Unless you live in California or Oregon, none.
You read that right. Anyone can set up a desk in the local supermarket and offer tax preparation services for a fee. That's important to know, because you don't want to assume someone knows what they're doing simply because they're charging you for their services, while in reality, they could end up costing you thousands of dollars in fees, and possibly worse.
It's a good idea to have a professional prepare your taxes, especially if you've gone through a life change (marriage, divorce, etc.) received an inheritance or are self-employed. However, you need to know what to look for when shopping for a tax preparer.
If it seems safe to work with one of the large tax-preparer companies consider this: many large chain-store type of places sometimes hire high school graduates who run though a questionnaire, virtually the same thing you can buy for about $50 at Staples or do on-line for even less. While a professional accountant will be more expensive, missing a deduction because you're working with someone who wants the seasonal employment rather than a true professional can be much, much more expensive than an accountant's fees. Before working with a large company, be sure to find out the qualifications of the person who will actually be preparing your return.
You can be sure you're working with someone who knows what they're doing by selecting a CPA (www.nsacct.org) or an 'Enrolled Agent', a federally licensed tax specialist. Since many Enrolled Agents are former IRS employees, they're knowledgeable and competent. Find one at www.natptax.com.
If your situation is relatively simple, you can prepare your own return using one of the software programs available. If not, you might want to ask trusted friends, relatives, or coworkers if there's a tax preparer they've been happy with. Nothing beats a referral from someone you know. You might want to ask the preparer what they guarantee. If there's a mistake on the tax return, will they cover penalties, fines, and interest? Some do, but some don't, so don't take it for granted that you're protected.
Also consider 'free file' if you're income eligible. Check out the IRS website for details. Low and moderate income filers can qualify for the federal VITA program that offers free assistance in filing your returns, and anyone can call the IRS for help at 800-829-1040.
3/9/2011
Get More Spring Break . . . For Less!
Spring Break -- two simple words that, to most college students preparing for or recovering from midterms and the daily stressors of life, mean a much-anticipated escape to paradise for a long week away from worries and responsibilities. While, momentarily ignoring the research paper due the day class resumes, Spring Break does sound nice. But where are you planning to go? Lolling about on sandy beaches and parties galore may sound like a dream to some, but tourist destinations can get too pricey too quickly for the average student budget. For a truly unforgettable experience, get creative with your friends and consider these ideas, which won't blow a fortune.
Raging Road Trip
Regardless of where you live, there's bound to be a scenic countryside that is just waiting to be explored. Fortunately, the art of the cheap road trip isn't tough to master. Grab a ride and pile in your friends to share the cost of gas and overnight stays; you're bound to enjoy a memorable vacation and a chance to relax with your best pals. Plan to cook some of your own meals instead of snagging snack packs and fast food meals for a budgeted bonding experience. Innovative online tools like GasBuddy.com can also help you locate cheap gas in any location. And if even inexpensive hotels sound like a splurge, creative international ventures like CouchSurfing.org can help your crew find free indoor lodging with friendly hosts.
Creative Camping
If you love the outdoors, crawl the web to check out local camping sites for a Spring Break on the cheap. And if you're not completely up for connecting with nature in terms of tents and sleeping bags, camping doesn't have to mean just blankets and sleeping beneath the stars. Cabin rentals tend to be less expensive in the spring than the busy summer season, so gathering a group of friends to rent a great deal on a lake may make an inexpensive yet enjoyable vacation.
Volunteering on Vacation?
In recent years, a sweeping trend for college students is the Alternative Spring Break, which offers a meaningful experience by encouraging volunteering on your vacation. The movement for opting out of stereotypical trips to sparkling beaches is led by the national nonprofit organization Break Away, which focuses on connecting communities by promoting alternative break opportunities. For a truly unforgettable experience, consider an international volunteer trip to help build housing in impoverished nations or help tutor children and assist the elderly.
3/1/2011
Charitable Giving: What You Can and Can't Deduct
Helping others financially is a wonderful thing in and of itself, and the tax deduction is a nice benefit too. But don't assume that just because you've donated to a worthy cause, everything you donate is tax deductible. It isn't.
The only way your donation is tax deductible is if the recipient is a 501(c)(3) organization, or a registered public charity. It's not enough that an organization is a not-for-profit, tax-exempt entity. Your donation needs to be to a registered public charity in order for you to be able to claim a deduction.
Often, a charitable organization will thank its donors (or encourage them to give in the first place) by providing a gift, dinner, or premium. The value of whatever you receive in return for your donation should be deducted from the amount you claim on your tax return. While an iPod or similar product might be easy to put a dollar amount to, other gifts, such as a dinner you attend, are not so easy to evaluate. Instead, ask the organization to provide you with a letter stating the value of anything you've received from them.
Keep receipts for everything you've donated, and never give cash, which is hard to track or show proof of if you are audited.
Many charities solicit donors for not only cash, but cars, boats, stocks and bonds, furniture, and any other goods that have market value. If you've donated non-cash items, you can't just decide what they're worth. Instead, you need to establish the fair market value, meaning what a buyer would pay for them. If the item or items you're donating has a value of more than $500, it must be professionally appraised. If it is under $500, you're on your own, but remember that the replacement value is not what you're looking for, but actual market value. Clothing and household items must be in good condition if you want to qualify for a tax deduction. E-Bay (or a thrift shop) is a good place to go to get an idea of what fair market value is for the items you're donating. You'll also find a guide to what clothing and other things are worth at www.salvationarmyusa.org.
The value of a donated car is determined not by the Kelley Blue Book or NADA Guide, but by what the charity sells it for. The only times you can use the full Blue Book or NADA value is if the charity doesn't intend to sell the car, plans to fix it up before selling, or plans to sell the car to a needy person at a discount.
For stocks (and other financial products) you can deduct 100% of what that stock is trading for on the day of your donation. This is a great deal if you have a security that appreciated significantly since you purchased it. By donating the security (rather than selling it and donating the money) you've bypassed capital gains tax and can still claim the full amount as a tax deduction.
Our Newsletter Requires Adobe Acrobat Reader. Just click the "Get Acrobat Reader" below to download Adobe Acrobat Reader or if you already have the Adobe Acrobat Reader plug-in, just click on the edition you want to read.
