You would be thinking OMG tax year is behind us, so why this article on taxes, but the reality is that you would be better prepared for filing your taxes this year if you started early and this is a good time to begin. So here goes!
Don’t get euphoric over tax refunds; curb payments instead
Getting a tax refund may be a joyous and welcome event but just think for a moment – “am I not getting back the money that I had no business parting with in the first place?” If your refund averages around $2,550 that’s a kind of heavy overpayment don’t you think?
Uncle Sam obliges you to pay your taxes, period, but he does not insist that you pay him a cent more than what is due. The better approach would be to take a copy of your latest tax return and use a pencil to key in the figures as they can be roughly estimated for the current year. Use the IRS Withholding calculator software and run your numbers through that to get a clearer picture of what you owe the government and pay only that amount.
Look at the overall withholding for the previous year and calculate whether your withholding amount is correctly calculated; you might be overpaying. In that case ask the HR guys to reduce the withholding this year. Repeat the same process with your state taxes.
If you get a windfall payment use it to boost retirement savings
Don’t rush to the nearest mall after landing your refund; plough that amount into a retirement savings plan like the 401k or IRA where you get tax benefits.
If you are employed you there are 401k and Roth IRA plans, the difference between the schemes being the way taxes are treated. Remember that in the traditional plan you are deferring taxation till after retirement by accumulating tax advantaged savings today. The Roth IRA moved here is just the opposite – you agree to pay necessary taxes today while you build the fund and take away tax free withdrawals when you retire. Basically, people that are high income earners will opt for traditional plans that allow them to postpone paying their taxes in the present so that more money is available for current expenses.
Pumping money into healthcare plans
Combining a health insurance plan and a health savings account (HSA)
This is a viable option; the insurance plan you select should have low premiums but high deductibles and then you can use the HSA to save funds for meeting those deductibles and miscellaneous expenses. Remember that the HSA is beneficial as it brings down taxable income.
Using a Flexible Spending Account (FSA)
The FSA gives the same tax benefits as the HSA but there are restrictions like maximum annual contribution of $2,500 and only $500 being allowed be carried over, so one has to estimate in advance the amount that you need for healthcare treatment (a bit tricky no doubt).
Consider buying a house
It’s a no brainer that renting is a stress free option for Americans but buying a house brings the twin benefits of asset accretion and tax savings. Remember that for homes mortgage interest and property taxes are both deductible. Grab a copy of your IRS Schedule “A” sheet and do the calculations to find out whether your cash flow is impacted unfavourably compared to renting. This will help you decide whether it is more affordable to rent a home or to buy one.
An emergency fund is useful for meeting retirement blues
Retirement will be full of anticipate and unexpected expenses. Stop thinking of your retirement fund as the emergency fund in your life; you need another fund that will stand by you when things get messy. Early withdrawals from retirement plans that violate rules will result in the imposition of stiff penalties. At that moment when you grab retirement money unthinkingly for urgent needs the situation could become financially tricky unless you have back up funds to push you through.
Grab the 529 plan to save taxes on education savings
If you are aiming to push your child through college you can’t do without a 529 plan. In some states they allow you to take deductions on your education oriented savings and a few others offer tax credits.
As you may have surmised there are myriad ways in which an intelligent and conscientious person can promote savings and secure his future while managing his taxes brilliantly. From now on, whatever you do you will be reassured knowing you have made an informed choice.
People often carry the impression that one has to be simple and frugal in living or one chooses to live a hyperactive or expensive lifestyle and that both styles of living are poles apart – it’s always one or the other, never together. The end result is that many live a deeply frugal life confining themselves to bare essentials, becoming isolated from life’s joyous pleasures. Others live life to the hilt drinking its elixir to the last dregs so to say and land up ruining their finances after a lifetime of excess. Which lifestyle would you prefer? Not so surprisingly many people would say – neither situation is helpful if pursued alone.
We can illustrate the dilemma with an example; let’s say you have accumulated a gargantuan debt; a credit card outstanding that could put your ancestors to shame, and you are suddenly forced into a life of extreme frugality to generate funds to repay that debt. Your life changes dramatically, you switch off the A/C occasionally, you are mindful of purchases, you completely avoid extravagances and you probably continue doing that and more till the debt is over. But what happens after the debt mountain is flattened? http://www.qikcartitleloans.com/why-bank-loans-are-fast-losing-ground-to-car-title-loans/ Nine on ten you emerge a wiser individual choosing to live frugally where necessary, but bringing leisure and entrainment and travel back into the family itinerary.
Perhaps that’s the lesson we ought to learn – the lesson of living life frugally, yet smartly as the situation warrants. Here are some tips to help you on that humble path:
Being smartly frugal for revving up your retirement fund
Freak out on one or maybe two days in a week but devote the remaining days to aggressively lowering your bills in ways that are practical but not back breaking. Those days live a steady normal life not the fast paced frenetic type. By practicing a frugal life you may have eliminated some debts; immediately divert those loan payments to a vibrantly diversified retirement plan that takes care of your future while you work hard and enjoy the present.
Being smartly frugal to accumulate an emergency fund
Most people tend to forget that they can choose to be frugal for a specific purpose or to attain a specific goal and not let frugality take the spice and cheer out of their lives. Look around you – you may unconsciously be pursuing habits and customs that are basically unhealthy or eco unfriendly or energy wasting and all these activities could be expenditure traps sucking away your hard earned money. Take smoking for example – try dropping the habit five days a week and calculate the money saved. Do the same for other areas and see your savings grow. Next divert these savings every week to the emergency fund. Repeat week after week and watch the emergency fund rise to unexpected levels.
Frugality creates more opportunities for big ticket spending
Now that sounds very contradictory doesn’t it? What we meant is that you can use frugal living to generate savings over time that can be exploited to purchase big ticket items or finance major home renovation for instance. In fact the very act of saving up to buy the items we always wanted is an art that has been forgotten in our “Buy now and pay later” culture. Of course savings will take time to accumulate but making your dreams come true that way becomes a more fulfilling experience. Moreover, you will have a home devoid of excessive clutter.
Frugality is a weapon securing an uncertain future
It’s impossible to foresee what will happen in the future despite being surrounded by all manner of conveniences and comforts and when everything seems so cozy and normal today. But if you adopt a reasonably frugal lifestyle you will realize that there is tremendous potential in the savings that are generated by frugal actions. You will be creating money that can be set aside for the future literally for any purpose whatsoever.
It could be your daughter’s marriage, son’s business venture, home renovation, buying additional property and an umpteen number of things that you may not have thought about deeply. Supposing you suffer a natural catastrophe or a calamity or even a medical emergency, you will need to draw on hidden reserves and it will do you a world of good if you have taken sufficient care to build those reserves.
Whenever one needs to begin a company, there are a number of resources you have to assemble. One important resource is the financing that are needed to begin and run the business. Besides the sources, you need to understand the uses of company financing to prevent getting into waste and instinct use of it.
Some may come from family and friends while some may be loans. There can be sales from services or the merchandise being traded by this business. There are those which sell its finances to increase while some let their companies for an interval that is specific in order to raise some of the cash they need.
Company lending is the procedure for handling the funds that get into the business. In addition, you should understand about assets and the obligations of the business. You should understand about the system’s gains.
Among the primary goals of the earnings brought into an organization for paying for loans borrowed to the business is.
The employees get their wages from the company income also. There are those businesses that give the worker pensions and other types of damages.
This is the apparent and most typical uses of company finance. It contains tools, the materials and overhead price. This may additionally include packaging and transport. The company might have promotions of services and goods that cost them a fortune with the hope of raising its gains. This may be done on half yearly or annual basis determined by the business.
Government revenues for example taxes are paid. Other payments comprise health certificates, insurance and other licenses determined by the kind of company. You might additionally have to pay other stakeholders.
Gains may be used to enlarge companies. This comprises improving the current one or starting other divisions. In addition, it can be used to bring in sister companies or sister merchandise. Some of it may be used to buy machines and equipment which are more complex than the existing one.
The uses of company finance can be many. All this is based on the business. Nevertheless, it’s a good idea to understand the goals and all the spending before you waste it.
One of a business owner’s most essential obligations is to solve problems. A few of these obstacles will be more crucial than others, and prioritizing problems properly might be as important as developing business alternatives. Identifying problem areas correctly in the first place may also make the entire procedure more productive. However successfully difficulties are identified and prioritized, the final evaluation will require that they be solved in a timely and successful manner. But trouble-finding, prioritizing and solving each have an important function in reducing the potential negative impact of business finance difficulties.
Of course some company owners might choose to use the “putting out fires” strategy. With this strategy there is not going to be a perceived need to identify and prioritize issues. Instead there will be a reactive action taken to each difficulty (the “fire”) as it appears on the scene. Nevertheless, as larger businesses continue to go after another through one downsizing round, this practice is slowly creeping into the vanguard in more company scenarios because of fewer and fewer workers to manage everything. This may also turn out to be what the majority of businesses are compelled to do by default, while it might represent problem-solving in its least favorable light.
Just as each supervisor probably has a different tolerance for risk, there are numerous ways to approach problems. Ultimately it can be viewed as an evaluation of just how to manage resources that include both money and time. Creativity can play a significant role because the old alternatives are frequently not the finest alternatives. Creative strategies to problem solving can also help to minimize the impact of price and time constraints. Business imagination can be especially helpful in rapidly-changing circumstances which create new problems requiring new solutions.
Finding the issue areas is likely an under-rated direction function. This particular endeavor takes on a brand new degree of significance when the internal and outside environments both are changing in ways which are not familiar to even the most seasoned managers. The terrible news is that’s exactly the disorderly kind of fiscal and economic circumstances which seem to be affecting most businesses currently. Does that mean that many issues are now unsolvable because of what might seem to be unforeseen changes?
The most blunt response is a qualified “Probably not”, although it should be admitted that a “moving target” is likely to be harder to hit than a stationary one. Businesses will increasingly need to consider a wider range of alternative problem-solving strategies as the challenges become more complex and unpredictable. Even the look of unpredictability shouldn’t dissuade business owners and managers from continually searching for a better solution. Peter Drucker once observed that “The ideal way to call the future is to plan it” because he believed that effective business preparation could beat even the unknown components that may impact companies later on. With this mindset, the direction aim would change from “putting out fires” to anticipating the fires and avoiding the fires.