by Dayana Yochim
Procrastinators, rejoice! I’m not going to bombard you with an all-inclusive list of year-end financial housekeeping chores. Instead, I’m going to present the absolute must-dos — the four top-priority tax-related tasks that even world-class foot-draggers can’t put off. Legally, at least.
Once you get rolling, you may be motivated to seek extra credit — and a little more breathing room before next April. If you’re so inclined, I’ve also included some other tax-related chores that will eventually need your attention. No pressure. Just sayin’.
1. Slash next year’s out-of-pocket health-care/dependent-care expenses
During open-benefits enrollment, you not only have the opportunity to tweak your health-care coverage but also to secure savings of 25% or more on all of those out-of-pocket medical and dependent-care expenses.
This cost-cutting technique is possible with flexible spending accounts. FSAs come in two flavors — medical and dependent-care. In a nutshell, you fund FSAs with pre-tax dollars taken out of every paycheck. When you incur expenses not covered by your health-insurance plan, or if you write a check for dependent care, then you submit a receipt and get paid back with the money you set aside. See your plan pamphlet for eligible expenses.
Your must-do: Sign up. Not enrolled in your employer’s FSA program? Dude! Do it now. If you contributed $1,200 (about the national average) to a medical or dependent-care FSA and are in the 25% tax bracket, you’ll save about $420 annually, including federal and Social Security taxes paid, or $35 a month. To nail the contribution amount, use the worksheet from your plan or fiddle with the Health Expense Calculator at planforyourhealth.com.
Blow-off-able (for now): Using up last year’s FSA dollars. If you already have an FSA but haven’t used up all your dollars, don’t rush off to buy extra pairs of bifocals just yet. Many plans have extended the allowable time frame to incur expenses by two and a half months, so you may not have to scramble to spend the cash you’ve already set aside. (Check with your HR folks to be sure.) And for help managing all those receipts, ask your vendor for a hand. If you buy your prescriptions at one place, ask for an annual rundown of what you’ve spent. Many drugstores can easily provide that information for you.
2. Minimize next April’s tax tab
Time and money are short around the holidays. But saving strategically to minimize your April tax hit is the best gift you can give yourself. Right now, see whether you’re on schedule to max out your employer-sponsored retirement plan. Contribution limits this year are $16,500; if you’re 50 or older, you may be eligible to contribute $22,000.
Your must-do: Bump up your retirement-plan contributions. Since the remaining numbers of pay periods before the deadline is dwindling, opportunities for maxing out your 401(k) or other employer-sponsored plan are limited. Find out whether your plan lets you defer a heftier chunk of your final 2009 paychecks — some allow up to 100% of your compensation. It may be painful to pass up the pay, but giving up the compounding tax-deferred income is worse. What’s more, socking away money in a traditional retirement plan reduces your taxable income. If you’re in the 25% tax bracket, you’ll shave $250 off your federal tax bill for every $1,000 you contribute to your 401(k).
Blow-off-able (for now): Fully funding your IRA. If money’s tight, allocate any extra dollars to your company’s retirement plan instead of to your IRA. You have until April 15, 2010, to fully fund your IRA; but, again, the deadline for work-retirement plan contributions is Dec. 31, 2009.
3. Prioritize your final paychecks
Once you have the year’s final pay stub in hand, don’t just gawk at the size of Uncle Sam’s take. Strategize a few last-minute tax-time maneuvers.
Your must-do: Put off collecting income, if you can. It’s hard to postpone pay, particularly during the spendy holiday stretch. But deferring some compensation — such as a bonus, or, if you’re retired, a retirement-account withdrawal — for one more month may be a better long-term financial move. Also note how your remaining paydays might affect your eligibility to make deductible IRA contributions, both this year and next.
Blow-off-able (for now): Withholding. More than 70% of Americans overpay their taxes every year. Sure, a refund is nice, but it’s even nicer to earn interest on your money instead of giving the government a free loan. Check your withholdings with the Form W-4 Assistant at paycheckcity.com. You can change your withholdings at any time of the year, so no deadline is looming. Still, you may be inspired to put this item on your “must do” list when you realize you’re letting Uncle Sam borrow money that you’d just get back anyway.
4. Pretty up your portfolio
Yeah, it’s been a lousy year on Wall Street, but the IRS kindly offers a little salve for those who have taken a hit. You can reduce the capital gains taxes you owe on any investments held and sold for a profit in regular, taxable accounts by offsetting the tab with capital losses from stocks that have declined in value. So if you’ve seen big losses, getting a tax break is at least a little bit of good news.
Your must-do: Sell your losers. Get rid of floundering investments and either put the money in another (but not identical) investment or wait 31 days and buy the investment back (to avoid breaking the IRS’s “wash sale” rules).Tax-loss selling must be completed by Dec. 31. But don’t do it willy-nilly: If you bought a stock at multiple cost bases, sell the most expensive shares first. If you don’t have capital gains in your taxable accounts to offset the losses but you still have investments worth less than what you paid for them, you can use capital losses to reduce your ordinary income by up to $3,000 a year. If you’re in the 25% tax bracket, doing so will reduce your taxes by $750.
Blow-off-able (for now): Dumping every loser from your portfolio. Got more stinker stocks than you can shake a stick at? The IRS allows you to carry over your losses for use in future years. You also may want to live with your losers a while longer, since getting caught up in a logjam of investors who are also selling off their shares may drive prices down even more.
Here is the original:
Don’t Blow Off These Four Year-End Money ‘Must-Dos’
Many people don’t realize that they have a fear of success. For the longest, I thought to myself:
“Why would I fear success when success is my most desirable goal? What kind of crazy person has a fear of success?”
There are plenty of people who have a fear of success. I didn’t realize that I had issues with this until I noticed that there were certain things that I wouldn’t do and I couldn’t figure out why. What was/is holding me back? Sometimes people fear success because they don’t know if they can live up to their achievements. Self-sabotaging behavior will usually occur when we have this problem. It can be defined as procrastination, a lack of motivation, etc.
How do you know you have a fear of success or self-sabotage issues?
Sometimes we will look at someone as being lazy when they have a problem with a fear of success. They will talk about the many things that they want to do with their life. They may have planned everything out and started on their journey, but instead of doing something about it they waste time surfing the net, watching TV or whatever else they can find to waste time. Being “all talk-no action” is a major problem that must be resolved.
Not trying and focusing on the negative is self-sabotaging behavior. This also leads to a fear of failure which is a major topic for another article.
Procrastinating and wasting time on activities that don’t help you achieve your goals is also a sign of self-sabotage. It’s very easy to stay busy with “life”, but if you don’t recognize this issue, “life” will pass you by.
All means of self-sabotage provides an excuse for you if you don’t live up to your own expectations. Instead of facing the fear that we may not be good enough, smart enough, etc.we can blame it on something minor like a lack of time. In order to correct an issue, we need to recognize that the issue exists.
How do we overcome a fear of success?
- Figure out why you have a fear of success – Take a look at your past experiences and how they affected your outlook on life or confidence in your own ability to succeed.
- Failure is your friend – Don’t be afraid to try something new. If you fail, learn from the experience and don’t repeat the same mistakes. How many times did we fall down as a toddler before we were able to walk?
- Self-competition – Don’t beat yourself up if you haven’t achieved the “success” of your peers. Many times what we see is not reality. You may be better off than the person looking like they have it all, but are so deep in debt it’s crazy. Make an effort to push yourself to the next level. If you are a competitive person by nature it’s crucial not to beat yourself up over defeat. Use the “defeat” to push yourself harder.
- Think Positive – This is a reoccurring theme here. Positive thought will outweigh all negative circumstances you may experience.
See the rest here:
Fear of Success
I’ve just finished reading the soft cover version of Robert Kiyosaki’s latest book – authored interactively on the web – Conspiracy of the Rich. I had also read a number of earlier chapters as they were being written online here.
Conspiracy of the Rich: The 8 New Rules of Money
I’ve read a number of Kiyosaki’s books – including Rich Dad, Poor Dad and The Cashflow Quadrant – and he does an excellent job of making finance and investing matters understandable. In fact, perhaps like many people, after reading Rich Dad, Poor Dad I was shocked to discover my own house was not an asset!
I also recall vividly how I wished I’d known this sort of information at a much younger age.
Now Robert Kiyosaki has done it again – an easy-to-read book that I believe is essential reading for anyone seeking to get ahead financially in these difficult times. The book is subtitled “The 8 New Rules of Money” – and elaborating on those rules is what gives the book its structure.
However, this book also breaks new ground by discussing the nature of money, its origins – and much to my surprise and pleasure, also covers the essential facts as to how this current recession developed and why it is not likely to go away in a hurry.
You’ll also read about the origin of Federal Reserve, the nature of fiat money, fractional reserve banking and a host of other fundamental economics and money issues that Kiyosaki obviously has a good grip on.
He states his mission in life is to bring sound financial education to the world, and finishes the book of with a list of things he would teach children at school – if he was running the school system. And just to give you a taste as to what this book is about, here are the topic headings of his suggested 15 Financial Lessons – which he believes to be essential to accelerating a person’s financial intelligence:
1. The History of Money
2. Understanding Your Financial Statement
3. The Difference Between an Asset and a Liability
4. The Difference Between Capital Gains and Cash Flow
5. The Difference Between Fundamental And Technical Investing
6. Measuring an Asset’s Strength
7. Know How to Choose Good People
8. Know What Asset is Best For You
9. Know When to Focus and When to Diversify
10. Minimise Risk
11. Know How to Minimise Taxes
12. The Difference Between Debt And Credibility
13. Know How to Use Derivatives
14. Know How Your Wealth is Stolen
15. Know How to Make Mistakes
Hands up. Who learnt the above at school?
As is typical of Kiyosaki’s books, this is a fascinating and easy read. It speaks in plain language, and repeats things often enough to ensure the essential points get into your head. And I believe that if every child were to be exposed to his writings (not to mention late-starting adults!), then the world would indeed be a much different place.
Buy Rich Dad’s Conspiracy of The Rich -
Dan Schwabel interviews Robert Kiyosaki on Entrepreneurship
For most people, each and every day involves some type of financial decision. So how do you feel about your financial decision-making skills?
If you think you are making sound choices, ask yourself this: Have you weighed the consequences of your choices against their apparent benefits?
In many cases, the answer is no.
Let’s take a look at six common financial choices that sound like smart moves, but could leave you scratching your head wondering where you went wrong.
1. Applying for a Line of Credit
Advantages: Starting a line of credit will diversify your credit sources, which is good news for your credit score. It also allows you to access funds you may need for large purchases, like buying a car, without having to scramble to arrange the funds when you decide to buy.
Consequences: A line of credit is too often treated like free money. In many cases, such easy access to funds leads borrowers to rack up consumer debt for things they don’t really need. And there’s nothing free about this cash injection: borrowers have to make minimum payments on the line’s outstanding balance. In addition, a balance will limit borrowing power on other loans, such as a mortgage.
2. Withdrawing From Your 401(k) or Retirement Savings to Pay Down Debt
Advantages: If you have a big debt to pay off, you may choose to either put off contributing to a retirement or savings fund, or to withdraw money from an existing fund. The upside to this is that paying down debt is a good thing, and the sooner it is paid off, the greater the savings in interest expenses for the borrower.
Consequences: By withdrawing funds set aside for retirement, you are robbing yourself of the benefits of compounding. Also, pulling the money out of your savings could leave you in a very bad position should something unexpected, like a job loss, happen.
The earlier you start saving, the more money you will be able to accumulate for retirement. If properly invested, money saved now is almost always better than more money saved later.
3. Choosing Only the Safest Investing Vehicles
Advantages: If you invest in risk-free or nearly risk-free vehicles, the risk of losing your hard-earned cash is extremely low. This can be a viable option, especially if you are nearing retirement.
Downside: However, you are again missing out on the opportunity to have your money work for you. Take into consideration your age and stage of life when deciding your risk level.
Although everyone’s risk tolerance is different, generally speaking, the younger you are, the riskier you can afford to be. This is because you have the time to make up any losses, and also because the higher risk may be warranted because it helps combat the effects of inflation on your portfolio’s gains.
The closer you are to retirement (or to whatever goal you are saving for) the more conservative you should be in order to protect your investment.
4. Avoiding Debt Altogether
Advantages: “Debt free”. It sounds good, doesn’t it? And it can be. Living debt-free is a wonderful goal and is more achievable than you might think.
Downside: However, debt can also be a tool. If, in your quest to remain debt free, you are turning down “good debt”, that is, debt that allows you to leverage your investments, you are doing yourself a disservice. Examples of good debt include taking out a mortgage to buy a house.
This is because houses and property tend to appreciate over time, and owning your home can lower your living expenses compared to renting. Another example would be taking out a student loan for post-secondary education. While student debt can be a huge responsibility, it is also an investment in yourself that boosts your potential earning power.
5. Cutting Your Variable Spending
Advantages: If you are looking to cut your spending, this suggests that you have a budget to modify. That’s great! Often variable expenses (expenses that are not fixed, such as entertainment, dining out and personal spending) are out of line with the amount we earn. An honest appraisal of where your money is going is a great step to getting your budget in fighting shape.
Downside: This seemingly great idea is only great if you include the second part of it: sticking to your new budget. Unrealistic expectations, or treating your budget goals as “guidelines” rather than rules, could leave you spending more than ever.
6. Paying Off a Major Loan in One Payment
Advantages: You’ve been working hard and saving – smart! Before your loans start accumulating interest, or even if they have, you decide to pay them off in one payment. That’s a wonderful accomplishment that will save you months’, or years’ worth of interest.
Downside: If you choose this route, make sure you take a look at your interest rate. Some loans have such a low interest rate that you’d be better off putting your money in a savings account that earns you a higher return and paying off your debt monthly.
Keep in mind this is only a good idea if 1) your savings interest rate is higher than your debt interest rate and 2) you are disciplined enough to pay the debt off on time, every month, and not to spend your hard-earned cash on luxuries instead.
The bonus? Responsibly paying off monthly debt helps you to establish a good credit history. This is especially helpful if you don’t have a credit history (or you are trying to rebuild a bad one).
There’s nothing worse than making a choice you thought was conscientious only to find out it had hidden consequences. Make sure you do your homework and your financial situation will be the best it can be.
Here is the original:
6 Financial Moves That Sound Good — but Aren’t
