|
How to Pay Income Taxes, Part 2 |
 |
 |
Every November, project the amount you'll pay in income tax instead of waiting until April when taxes are due.
Avoid surprises that can show up when you only examine your tax situation just before the April 15 due date. Rather than looking through a rear-view mirror in April, look ahead in November at what you'll owe. This gives you time to carry out strategies such as changing your withholding and tax payments, selling securities so you can take advantage of capital gains or losses, or purchasing needed tax-deductible items before year-end.
Contribute to your 401 (k) plan or other workplace savings plan to reduce your income taxes.
If your debt is under control, and you're ready to start investing, consider using your employer's retirement savings plan such as a 40i(k), 403(b), or 457 plan. You can likely achieve diversification using mutual funds or similar investments that are commonly available under these plans. Some employers will even match a part of your contribution. In addition to increasing your savings, you'll reduce your current taxable income, which, in turn, reduces the amount of federal (and possibly state or other) income taxes you'll owe.
If you run a business, full-time or part-time, always report your earnings to |
|
Read more...
|
|
|
How to Manage Your Debt, Part 3 |
|
|
Pay off the credit card that has the highest interest rate first to minimize the interest you'll pay over your lifetime.
Use this approach to pay the fewest dollars in interest over the long run. For example, a card with a $1,000 balance and a 20 percent finance charge costs you $200 over the course of a year, while one that charges 15 percent costs you $150a savings of $50 if you pay off the card with the higher rate first.
Pay off the credit card with the lowest balance to free up your cash flow and help you feel you are making progress.
Use this approach to create more discretionary income in the short run by eliminating one minimum monthly payment. You may pay more interest over time on your cards collectively, but the relief of getting rid of even one card may be so motivating that it's worth the extra cost.
Don't carry a balance on more than one credit card.
Of course, it's best to pay off all of your cards in full every month. But if you carry a balance on more than one card, it can be easy to underestimate the total amount of your debt. For example, if your |
|
Read more...
|
|
How to Save Your Money, Part 2 |
|
|
Start small.
Like starving yourself to lose weight, saving tons of money all at once can be painful. Instead, start by saving between $5 and $50 from every paycheck. You can always raise the amount as time goes on.
Increase your savings little by little with every paycheck.
If you decide to save $5 every pay period, try to increase that amount by $5 with each succeeding one. If starting with $50 feels comfortable to you, try increasing your savings by $25 or $50 with each pay period that follows.
Congratulate yourself when you "hit the wall."
When you have increased your savings to a point that it feels like a strain, know that you haven't failed. Rather, "hitting the wall" shows how much you succeeded in the previous month. Chances are you've saved far more than ever before. Scale back your monthly saving to the last sustainable level, and make sure to continue building your savings account with every future paycheck.
Put your savings where you can get it, but where you won't see it.
When you take cash out of your wallet, put it in an envelope in a place where you don't usually look for money, like a kitchen cupboard or a medicine cabinet. |
|
Read more...
|
|
|
How to Prepare for College and Retirement, Part 3 |
|
|
Understand the limitations of investments.
Because investing in the stock market is a long-term financial technique, it should be kept in its proper perspective. It's important to understand you can't invest your way out of financial problems such as having inadequate insurance coverage or spending beyond your means.
Keep cash equivalents accessible for your immediate needs.
The money you need for your immediate living expensesyour "I don't need credit cards" money-should stay in highly stable accounts, such as money market accounts or FDIC-insured bank accounts. Put emergency funds into Certificates of Deposit (CDs). You may wonder whether CDs are liquid enough for emergencies. But with CDs, you'll be less tempted to spend the money, and you may earn a little more interest than with bank accounts. If you do need the money for a true emergency, the amount of the early withdrawal penalty is usually inconsequential in comparison.
Put your emergency fund into a "CD ladder" to minimize early withdrawal penalties.
Instead of putting, say, $20,000 into one two-year CD, split it up into four CDs of $5,000 each, maturing in six, twelve, eighteen, and twenty-four months. As each CD matures, re-deposit it into a new two-year CD. Then make sure all four CDs are |
|
Read more...
|
|
How to Plan Your Estate, Part 2 |
|
|
Consider getting a durable power of attorney so someone can sign documents for you if you are unavailable or incapacitated.
If you don't have a durable power of attorney, a court can appoint a guardian for you if you become incompetent. However, this is often costly and time-consuming. If you need someone to look after your affairs, a durable power of attorney can be an inexpensive alternative. Be sure to complete the arrangements ahead of time before the need arises.
Be cautious whom you appoint to act for you under your durable power of attorney.
A durable power of attorney is a "blank check" that will typically allow your designee (called your agent or "attorney-in-fact") to clean you out. That person could have the power, for instance, to empty all your bank accounts and sell your house out from under you. To be prudent, you may want to consider giving this authority only to a spouse or a blood relative.
Understand the difference between a will and a power of attorney.
Your will has no effect while you live, but takes effect at your death. A power of attorney can be used to have someone act for you while you live, but becomes useless when |
|
Read more...
|
|
|
|
|
<< Start < Prev 1 2 3 4 Next > End >>
|
|
Page 1 of 4 |
