Smart Money Says – Pay Down Debt
Debt is something we can never get away from in one form or another. This is especially true of financial debt. Except for those rare exceptions almost all of us owe money to someone – usually this is in the form of credit card debt.
Credit cards are a godsend – at least depending on who you ask. For many, it made life easier because you can now buy a lot of things without the need to bring a lot of cash. And because it has a payment plan you don’t have to pay all of it at once.
That being said, if you only pay what is needed every month you do pay interest for it. After all, you basically borrowed money from the credit card provider in order to pay for your purchases. Obviously, these institutions will charge interest because that’s how they make money.
The thing is, if you have credit card debt you are basically putting a lot of money just to pay off the principal loan and the interest that comes with it. The longer it takes you to pay that amount you used the higher the interest you also pay which means that for a long time to come you will be tying up your money just to pay off the debt instead of using it for your benefit.
A way for you to free up income and lower your debt is to be aggressive with your payments. How can you do that? Well for starters pay more than just the minimum payment that is posted in your statement. That means that if your minimum payment required is only 200 dollars pay more by adding an extra 50 or even 100 if you are able.
What does this do? This does a couple of things for you. It lowers your debt pretty drastically since you are paying more of it. It also lowers the time needed to pay for that debt since you are paying more of it. Finally, it lowers the interest you have to pay since you’re lowering the principal amount and at the same time shortening the time needed to pay it off.
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Time To Put Your Budget On A Diet
We all have financial goals. That’s a given of course. After all, we want to be able to live the rest of our lives in a comfortable way and the best way to do that is to become financially stable both now and in the future. This means attaining all the financial goals you have set your sights on so you can do anything you want and have the means to do so.
One of the ways to do that is to set a budget for yourself. Now for many, even just hearing the word budget is enough to send shivers down their spine. They don’t want to hear or have anything to do with such a financial abomination that supposedly curbs you spending to the point that you won’t be able to do or enjoy anything.
Of course, this type of budget is an extreme and a good budget can let you have your cake and eat it to. That said, there will come a point in time when you wonder why even if you have a budget planned out you’re not meeting your financial goals. When that happens maybe it’s time to put your budget on a diet.
Now diet is another word that many don’t want to hear even if it’s not meant for them but if you want to succeed financially this is something you need to think about. This means trimming off the expenses that can be trimmed off without forcing yourself into “starvation” mode.
For example, you can simply cut down on that daily cup of coffee that you like so much. Instead of spending $6 for that special latte just stick with a $1 cup of regular coffee. The $5 savings may not seem like much but it can add up.
Also, if you are going to buy stuff that are necessary don’t be extravagant. If you need a car to get to work just get one that has all the basic amenities and not one that has a lot of stuff that you probably will not use. Those extras may look nice and all but they are an extra expense and you need to cut that in order to get your financial plans back on track.
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Refinancing Boo-Boos To Not Make
Refinancing is a good idea for a lot of people because it can help then get rid of higher interest rates and at the same time help them pay off more of their loan so they wind up paying a lower principal. With the way interest rates have been dropping you’d be foolish not to give refinancing a go especially if you are paying higher rates from before.
That being said, you shouldn’t just jump right in without doing some work. Refinancing is not just a matter of signing away your home as collateral – it’s also a matter of knowing what needs to be known in order for you to get the most out of your home so you don’t get hosed in the process.
One of things you need to look at is the value of your home. Yes, in some cases property values do go up so your home now is worth more than what it was 5 or 10 years ago. However, it could also happen that the property values have depreciated which means that no matter how high the value of your home back then it’s not worth that today.
What does this mean for you? If you keep on pushing for a higher value than what your home is worth not only will you find it difficult to find a refinancing option but even if you do you will wind up paying a lot in fees and interest rates which defeats the purpose of refinancing.
Speaking of fees and the like please do not turn a blind eye on these things. Surprisingly, not everyone takes a closer look at these things. They are all enticed by the low interest rate that they disregard the added costs such as the closing amounts, the points being used and the other fees that you have to pay out of pocket.
Not locking the rate is not good. The reason you’re refinancing is to get a lower interest rate (at least it is the reason for most of those who refinance). However, if you hold off locking the rate because you think it will still go down is deluding yourself. While it can go down there’s also a chance it will go up so you may wind up paying more in interest if you keep on floating.
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Investing Needs Risk Assessment
Everything we do in life has some type of risk involved. Some have less; some have more. Regardless of the level risk will always be there. This means that if you are planning on investing your money you will be facing risks and depending on the type of investing you are planning on doing you may wind up facing a lot of it.
This means you have to be sure that you are willing to take those risks. Therefore, you need to ask yourself just how big of a risk you’re willing to take. That’s because by knowing this you will be able to undertake an investment plan that will take into account the level of risk that you are willing to take so you get the most out of that specific investment.
Why is knowing your risk level important? That’s because it can affect the level of return you will be getting. Let’s just put it this way: the more risk averse you are the less the potential rate of return you’re going to get.
I’m not saying that being safe and conservative is a bad thing. Sure, you can get by simply investing in a simple savings account or simple money market or certificate of deposit but at the end of the day will you really be getting the return you expect or need in order to fulfill your financial goals. If retirement is your goal will such an investment be worth it.
Why do I say that? I say that because there are many things that can negate any gains you may have in using such an investment method. Perhaps the biggest one of them all is inflation. Unfortunately, inflation can grow at a much faster rate than interest rates which means that in 20 to 30 years your money will actually cost less than what it was when you started.
At the end it comes down to your capacity and willingness to take the plunge. If you have money you can afford to play around with then maybe you can take higher risks with its higher rate of return. Of course it will depend on whether you are willing to do so, even if you have the capacity to do it.
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Planning Retirement While Self Employed
If you’re self-employed you’re not alone. In this country the people who have started their own business have been rising as more and more of them have discovered the beauty of working for themselves and being entrepreneurs.
Of course, being your own boss is an added bonus. After all, you get to decide your own working hours and how you should do stuff. There’s no one shouting at you or getting angry at you because if there was then it would be you shouting at yourself.
However, there are some things you need to look into when you’re self-employed especially when it comes to retirement. This is because no longer are there company sponsored plans for you to use; now you have to plan it all out yourself.
That said, it’s not like you won’t have options available for you as a self-employed person. There are actually plans out there that cater to people such as yourself and your retirement needs.
Perhaps the most well-known of these plans is the SEP-IRA. Otherwise known as the Simplified Employee Pension plan it’s an easy and low cost plan where you make 100% of all contributions to that plan. What makes this plan popular is that it’s not that hard to set-up and maintaining it is pretty simple – basically it’s not as complex as other plans out there.
You can contribute 25% of your net income of up to $49,000 per (or depending on the cap in a given year based on adjustments for inflation). It’s flexible because you can wait to fund the plan after you have filed your taxes so you can adjust the amount depending on your net income for that year.
Then there’s the Solo 401(k) which is the simpler version of those company sponsored 401(k) plans. Meant for small business owners and their spouses it allows you to put money away for your retirement – actually you can put more away than even the SEP-IRA mentioned above. This can be a good idea if you’re working solely as a self-employed person.
However, if you are also working a regular job which has its own 401(k) plan it may not be such a good deal since you can only contribute a set maximum amount to a 401(k) regardless of the number of jobs you may have. This means that even if you have a regular job and are also self-employed you can only contribute the maximum amount one time, not for every plan you have.
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Plan For Your Long Term Care
Everything gets old. Our cars get old. Our dogs get old. As for us human beings, we definitely get old. That’s not really such a bad thing if you have lived a full and rich life. What’s important is how you will live and how you will be taken cared of once you reach that point in your life.
But it doesn’t have to be that you get old that you will need long term care (LTC). There are other reasons why you may need it such as medical or other such reasons. Whatever the case may be you will need to be ready just in case life brings you an unexpected curve ball.
First off think about what you may need to do if your health deteriorates and you become unable to care for yourself. This is probably a common reason why you may need LTC. While we don’t want to have to deal with it, it is a necessary thing and one that you will need to give serious consideration to while it’s early.
Then there are the legal necessities needed should events require them. That’s because if you become incapacitated no one can make your decision for you and if they do it may not be what you want. That’s why you should set up all the necessary legal documents such as a Health Care Power of Attorney so that someone can take over for you if needed and also a Living Will so that your requirements such as where you want to be placed and such can be followed with no questions.
While you are doing all this you may also want to look at the long care options available for you. Depending on your situation and your finances you can choose to go for home care where caregivers go to your home and take care of you there. If you need more than that you can also opt for living in an assisted living facility.
The long term care option or facility that you choose is based upon your situation. This will be determined by the level of services that you need as well as your own personal preference. Visit them when you can so you see first-hand what they have to offer so you can decide for yourself.
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Is Small Caps Investing For You
Let’s start by defining a few things first. What is a small cap you ask? Basically, it’s a company that has a market capitalization of anywhere between $300 million and $2 billion. Now the amount of the capitalization will vary depending on the broker but this is generally is the range of the capitalization to be considered as part of small caps.
There are advantages of investing in small caps. One of them has to do with competition. Small caps are often overlooked by big institutional investors. There’s a good reason for this – often these types of investors have a cap as to the amount of stocks they can carry of one company in their portfolio they don’t often go for small caps because it won’t really make a big impact considering its value based on the amount they are able to purchase.
Because of the lower competition prices don’t often reflect the true value of the stock or the company. This means that the price may be lower than the actual value and so if you buy you can expect a windfall once the value attains its true level.
That being said there are risks as well starting with the fact that you are investing in small caps. That’s because companies that fall under this category are often start-ups so this means their risks are higher than say a company with big capitalization that has been around for decades.
While these companies can grow at a faster rate resulting in a faster and perhaps higher return for the shares that you bought they can also collapse just as fast. When this happens the shares that you own will become nothing more than worthless pieces of paper if that.
If you do go for small caps try to go for those companies that have a market capitalization in the higher end of the range. Don’t be misled by smoke and mirrors. Some small caps may seem better than what they are due to fluff so you want to make sure you know the real score before investing in them. Do your due diligence before investing is what this means lest you lose your money in the process.
Invest in information from Deborah Koval.
More Charitable Deductions Possible
We all know that certain charitable contributions can be tax deductible. This means that when you give to charity you can deduct it from your income tax return thereby potentially lowering your tax liability. Of course, it has its limitations.
The Internal Revenue Service allows for such deductions but within reason. Therefore, they have rules that regulate how you can deduct these contributions. One of them has to do with the need for the charitable organization to be recognized and qualified under IRS guidelines.
After that you need to have proper documentation of the amount that you donated which means you need to get a receipt from them that shows their name, your name and the amount of money you gave them. If it’s property you will also need to show documentation from the company that assessed the equivalent value of the property.
But it’s not only this that you can deduct from your return. There are also other things you can deduct while you’re doing something for your favorite charity. One of them is mileage – the mileage you used to do work for the charity.
For example, let’s say you work with your local food bank charity group and you use your own vehicle to help bring meals to the needy. You can deduct the mileage that you use using the standard mileage chart used by the IRS which comes to a little over 10 cents per mile. If you prefer you can just deduct the cost of the fuel you use. You can also deduct all the tolls and parking fees where applicable.
Other than fuel and mileage you can also deduct money that you spent for the organization. That is to say if you used your own money to pay for that organization’s expenses such as buying office supplies and you didn’t get reimbursed you can deduct the amount as long as you have documentation. It will basically be like you donated directly to that charitable organization.
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Don’t Make Filing Mistakes Like These
Since it’s there’s a few days left till you need to file your taxes mistakes are bound to happen. Sure, there are people who do it early just to get it over it but you and I know that a lot of people will do it later in that last minute surge to getting their tax returns done so it can be postmarked by the deadline date. You may be one of them even if you hate to admit it.
Doing things last minute is not so bad if you make sure you’re not rushing things and making mistakes in the process. Mistakes are not something you want to do especially when it comes to your income tax returns. Doing so may result in you losing out or in the worst case scenario – getting audited.
Perhaps the biggest mistake you shouldn’t do is to not put in ALL your income. By that I mean not putting in ALL your income. Sounds simple enough right? As long as you earned it then you should include it. This also means you should have the proper forms and documentation to support it. Make sure you have all the W-2s and 1099s ready to be attached. Missing one can be a bad thing so make sure you don’t miss them.
If you have deductions and exemptions that you can legally put in there do it. A lot of people miss out on this sort of thing and lose their chance to lowering their gross income and thereby lowering their AGI. This includes listing all dependents that they support in order to get their corresponding exemptions.
Finally, make sure you put in the right social security number in your 1040. This is very important because this is how the IRS will know that this is your return so they can file it accordingly. At the same time don’t forget to sign the form at the end. Such a small matter but can mean a lot especially if you are expecting a refund.
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Creating A Living Trust To Avoid Probate
A way to make sure the property that you plan to leave behind avoids probate is to create a revocable living trust. The other way is for you not to die but since that is currently impossible to do I would suggest going with the trust.
What is it exactly? Well, it is a document that sets up a trust using the property you plan to give away. That is to say you set up an agreement whereby you, the creator of the trust, designate a trustee(s) to manage said trust for the benefit of the beneficiary – the person you plan to give the property to.
Under the wording of the trust, you as the creator can still live and use the property (if it is a home for example) and if you designate yourself as a trustee as well you can also do with it as you will like sell it or add to it. Because it is revocable you can change the beneficiary any time you want as long as you’re still alive and mentally competent to do so. At the same time since there is a beneficiary in place once you pass away whoever is designated gets the property that has been put in the trust without having to go to probate.
When you do create a trust make sure you use an attorney to do so. Trusts are as complicated as wills and you should make sure you have the proper wording in it. If you have heard horror stories of wills being disregarded because they were unclear or did not follow proper form the same can be said about trust.
This also means that a trust can be challenged in court by other members of your family that did not benefit from it. It’s normal since a trust is only meant to keep things out of probate.
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