I’ve Paid For This Twice Already…

Frugal living and debt reduction tips for a better financial future. This is one family’s story.

Archive for the ‘savings’ Category

Bonds Cut Both Ways

Wednesday, January 15th, 2014

Bad news: The government is up to its ears in debt.

Good news: The government is up to its ears in debt!

While it may seem strange to get excited about your government’s overspending, it actually can be a boon to investors. Many people don’t understand the basics of government debt. A government doesn’t simply overdraw its bank account, nor does it sell itself to the Chinese as some pundits claim.

When a government needs money, it issues bonds. Those bonds are famous for many purposes, particularly war efforts and for a huge array of construction projects. So when you hear that a government is bonding a project, it is creating an investment opportunity.

And many people don’t even realize that they are buying government bonds. Savings bonds aren’t just long-term savings accounts. They are borrowing tools of the government.

So bonds are all around us, and we have many opportunities to buy them. As a result, if you use good bond investment tips to make educated choices, you can take advantage of the government’s expenditures.

It’s actually parallel to borrowing by individuals. If you need something and don’t have the cash for it, you can pay with a credit card. Of course, the big difference in your borrowing and the government’s borrowing is interest rates.

Your credit card is going to charge you a whole lot more interest than the government will pay on its bonds. That’s why consumer debt is bad.

The government is essentially the rooster in charge of the hen house: It sets the interest rates that it will pay to those from whom it’s borrowing money.

Try that with your mortgage.

So although you’ll never get a very high rate of return on a government bond, they are a good investment for several reasons. First, they are secure. If you want to escape the volatility of a stock market, with a 12% gain one year and a 12% loss the next, you can safely ensconce your money in bonds. You won’t make tons of money, but you will not lose any.

Second, they are readily available. A little time online and you can purchase bonds for yourself, or even give them as a gift. Bond purchases are also simple. You make the transaction and you can access your bonds electronically at any time. Upon their maturity, you can redeem them for cash.

Finally, there’s a positive social cost with bonds. You’re not day-trading somebody out of their retirement funds. And you’re doing something positive to help your community. The money you invest in municipal bonds might be financing a school, bridge, or government facility that will benefit you. And you’re helping make it happen.

Somebody makes money on every type of debt. If you buy bonds, you’re the lender. You have taken over the bank’s role, and you get the privilege of receiving money in return for letting someone else use your money for a little while.

Bonds hold appeal to investors because they are secure, simple, and socially beneficial.

7 Lesser Known Methods to Pay Less in Taxes

Monday, November 18th, 2013

For any individual running a small business, quarterly tax time is approaching and it’s time to look at the year and assess what you’ve earned. Collectively, Americans will claim over $1 trillion in itemized deductions over the tax year. Those who miss out on deductions are leaving money on the table. If you’re looking for methods to push your deductions past the standard, here are a few less utilized ways individuals manage to do so.

Job Hunting Expenses

If you were one of the millions without work this past year, you can claim the expenses you incurred hunting for employment. This includes printing costs for your resume or business cards, transportation costs incurred getting to interviews and any charges you take when your search takes you away overnight. You can claim up to 2% of your total income in job hunting expenses, so save those receipts!

Remember that as long as the expense qualifies as a deduction, you can claim it whether you landed the job or not. That’s more motivation for you to keep putting yourself out there.

Moving Costs

Did you move during the course of the year for employment purposes? If so, you can deduct those costs from your overall income for the year, but there are a few rules to keep in mind. You must have a job that is at least 50 miles away from your current location, but if you qualify for this deduction you can take it regardless of whether you itemize. You can also deduct the cost of using your car to move to the new destination, great for cross country moves.

Tax Prep Fees

The cost of preparing your tax forms can be deducted from your income for the year. You can also deduct any convenience fees that may come from paying with a credit or debit card. Services like H&R Block or Turbo Tax all count toward this deduction. It’s usually a small deduction, but when you’re itemizing everything counts and they all add up.

Charitable Mileage

In addition to any charitable contributions you make throughout the year, you can deduct supplies you use for charitable purposes. This includes the mileage of your car when you drive for charity (like delivering supplies or dropping workers off at a site), but you can deduct supplies you use as well. Say that you bake a cake for your school’s booster club or volunteer to make juice for your local women’s club. These non-profit contributions toward charity all count as tax deductions.

Retirement Savings

Contributions toward your retirement savings can be deducted from your income for the year. Contributions toward a Roth IRA can be withdrawn without taxes later in life. The lower your income, the higher the deduction you receive from the saver’s credit. This also works for 401k plans, which are now open to individuals. Start saving for retirement – it literally pays for you to do so.

Financial Planning Expenses

If you paid any financial advisors to review your books and help keep you in shape, you can deduct those expenses as well. It’s common for small businesses to hire a consultant early in development so that they can plan projections and sales goals properly. These deductions also include attorneys who may prepare a living will or a trust for your family.

A Word on Deductions

Keeping track of your deductions is much easier if you have a system set up to do so. You can utilize a mobile app like Expensify to track mileage and receipts, or do it the old fashioned way with receipts in a filing cabinet. Be prepared to either show proof of expenses or reconstruct them when it comes time to file. Big deductions come to those who save receipts.

4 Good Reasons Why You Should Open and Invest Actively in an IRA

Wednesday, September 25th, 2013

An individual retirement account, or IRA, is one of many possible savings avenues that you can build toward your retirement. IRAs put the investment decisions on the account holder, you, so you’ll need to educate yourself on some investment basics before you start. If you’re under 50, you can contribute up to $5,500 of your income to an IRA tax-deferred each year. Check out Sunwest Trust, Inc., for more information on updated IRA contribution limits. If neither you nor your spouse can take advantage of a retirement plan through your workplace, then any contributions you make are deductible from your tax returns.

You can also contribute to an IRA whether you have a retirement plan through your workplace or not assuming that you have an earned source of include. In general, if you want to help build extra savings for the future, then IRAs are one of the most flexible individual savings plans that you should consider.

1. Liquidity

Most workplaces offer some form of retirement or pension saving plans to go along with other benefits of your employment. If you’ve been employed for most of your life, then your savings might be locked up in a pension account that may have additional restrictive rules limiting when you can pull out your funds for such things as a down payment on a second home or on a new car. Worse yet, you may be locked into a low rate of return and further limited as to where and when you can invest those funds.

2. Self Managed IRA Arrangements

While attempting to grow your nest egg, a self managed IRA arrangement provides you a host of additional non-standard investment options to invest in, so it’s possible to benefit in more ways than one. Since you are not restricted to public offerings, you should research private ventures to see if there are any companies that you like and could be profitable. It’s just like a venture capitalist looking to get in on the ground floor of a brand new business idea, your IRA can help a promising business grow by pumping cash into it early during its lifecycle. If your investment is successful over time and depending on your contractual arrangement and the profitability of the venture, then you may stand to gain a nice return on your investment.

3. Individual Investment Real Estate, Not REITs

Buying an investment property with an IRA may be one of the investments that you would like to do with your retirement funds. It can be a long-term investment that you can sell whenever you’re ready, and you can put money into it to increase its value. With self directed control of your retirement plan, it places you in charge of the direction of the investment activities and opens up the real estate market to you as a possible investment opportunity. You can use the funds not only to buy an investment property, but also you can draw on funds within the account to improve the property. When you’re ready if you have purchased the investment property right, you have done your homework and know the market, then you can hopefully sell your asset for a decent return.

Single-family investment property isn’t the only potential market up for grabs. Assuming you are savvy enough, investing in an apartment complex can give you long term income as you age. Although, you will need to devote IRA resources toward maintenance and repair, you can use the property for rental income to build your retirement savings account.

4. More Diverse Investment Options, Including Franchises

Your IRA can also help you get involved in other alternative investments that are outside the standard model of owning the traditional stocks, bonds, mutual funds and REITs. Investing your funds in a franchise may give you the chance to own an established business in a highly trafficked area, and it can be great for building your retirement savings, so at or after the age of retirement you can build up enough cash to replace your job income. One thing that should be pointed out before investing in a franchise, is that most franchises is that although they are proven, they also can take three to five years for you to see returns, so you must be willing to wait sometime to see a return on the investment. However, if you are patient and are willing to take a risk, then you could wind up as a big winner.

Save Now for the Future

For the forward-looking person, an IRA represents a temporary tax haven during your working years to divert a portion of your personal income into savings on a tax-deferred basis. An IRA gives you lots of options for controlling your money and building for your retirement and hopefully it inspired you to learn more. Can you think of any more reasons to open an IRA? I’d love to hear about them in the comment area.

Staying Afloat Financially in Times of Crisis

Thursday, June 6th, 2013

While it is easy to keep a budget and save when things go according to plan, injury and illness quickly wreak havoc on even the most well-maintained finances. Medical bills balloon out of control easily. And, if injury or illness is severe enough, time off work may be necessary. If you cannot work to maintain a paycheck as you recover, medical bills and day to day living expenses may grow to an unmanageable amount rapidly.

Emergency Fund

Though it is never easy, maintaining sound financial footing in times of crisis is possible. You will need to create an adequate savings throughout your life to safeguard against unexpected expenses. While it hurts to draw funds from your retirement savings on unanticipated expenses, having an emergency account to pull from in times of crisis helps avoid incurring heavy debts.

Social Security

You pay into social security with the intention of getting paid upon retirement. However, if you become injured or mentally ill, you may be able to claim your social security benefits early. Approval for SSDI and SSI claims vary on a case by case basis, but generally you need to prove the existence of an impairment, either physical or mental, that prevents you from working.

Life Insurance

Like Social Security, some life insurance policies will pay out in the case of traumatic injury. Check and update your life insurance policy to ensure that you are covered in case the unthinkable occurs.

Workers Compensation

If you experience injury on the job, you might be entitled to Worker’s Compensation. Worker’s comp insurance provides wage replacement in the event that an on the job injury prevents you from continuing to work.

Secondary & Supplemental Insurance

Primary healthcare insurance will cover a large portion of your medical bills, however secondary insurance companies like Aflac also provide insurance money to pay for cost of living expenses like food, rent, and utilities in the event that you are temporarily out of work due to injury. If you participate in high risk hobbies like skiing or motorcycle riding, carrying supplemental insurance can keep you afloat should you incur a severe break or knee injury.

Negotiate Bills

While medical bills easily grow out of control, most hospitals have payment programs and grants to help those who cannot pay out of pocket beyond their insurance coverage. Before condemning yourself to a lifetime of medical debt, call the hospital bursar to see if arrangements may be made to pay over time or if costs may be reduced.

Do negotiate your bill ahead of surgery if possible, or at least promptly once an invoice arrives. Late fees can easily double and triple your medical cost if bills are not resolved in a timely fashion.

Once your invoice arrives, be sure to check it for accuracy. You may be able to reduce your out of pocket costs by making certain your are not overcharged for procedures and that your medical coverages has been appropriately applied.

If the unthinkable happens and you become unexpectedly injured or ill, take care to exercise all of your financial options. Quick response and research of your financial options give you the opportunity to keep your financial situation up right even during trying times. The sooner you address your financial challenges the less likely you are to incur penalties or find yourself under water.

Take proactive steps to insure that you keep your finances in check. If you find yourself struggling to understand terms or procedures, enlist the help of a professional to help you stay on course.

4 Smart Ways to Spend Extra Cash

Friday, April 19th, 2013

So you finally went ahead with the decision of putting yourself on the budget and you see that extra cash trickling in each month. Now depending on what type of financial goals you have in your budget, there are many, many options. Each of these options could be good or bad to you in their own way. So what do you do? How do you avoid the confusion? Let’s look into a few constructive ways to use that extra money effectively…

#1: Pay Down Your Credit Card Principle

You know how it’s super-annoying to keep paying on a monthly basis and still not see your credit card debt disappear? So instead of just sticking to that, use your extra cash go above and beyond your minimum monthly payments. Every little step that you take towards your debt-free goal will help you achieve it sooner. Remember, the extra money you have should be used constructively so that you’re able to live a life with peace of mind.

#2: Start Your Own Rainy Day Fund

There are times and situations when things happen unexpectedly. It could be you losing your job, facing any life emergencies or having your car break down. By having savings saved with you, you actually make things easier for yourself. Your rainy day fund typically should be able to pay your living expenses for at least 6 months. It’s okay if you already don’t have that much saved at the moment because it obviously takes time/effort. However, considering that fact that more than 25% American works don’t even save anything, you’re already ahead by saving whatever little you are right now.

#3: Do Some Minor Home Repairs

Upping the value of your house should be one of your topmost priorities. Regardless of what your goal is in the long run, you should do things to improve the house’s value in the long run. And carrying out some small home repairs and fixing around your home will definitely help in increasing its value. But besides this obvious benefit, there could be other reasons too. For example, when you fix your leaky window casements, it can help you save cash on your utility bills. This is a good way to put your money to effective use, without having to worry that it’s getting wasted.

#4: Carry Out Smart Investing

A lot of people tend to ignore the power of investing. It’s a smarter way of saving. Just the way car insurance helps you get peace of mind, the extra money you have can be put to good use and help you get returns if you use it properly. Right from sending your extra cash to your 401(k) to opening a Roth IRA, you can do some intelligent investing and improve your chances of having a financially secure future. Even investing in a mutual fund works great. All of this helps in contributing each month. And as always, consistent saving over time will definitely pay off big time.

There you go! Simple and easy ways to not only spend extra cash that you might have and get the best returns on your investment. So what are you waiting for? Go ahead and start spending the smart way!

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