Robert Kiyosaki Blog

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’

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MAKE IMMEDIATE CASHFLOW WITH ECOQUEST (REAL HOME BASE BUSINESS)

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

Can a couple where both participants have different attitudes towards money and different incomes survive in a relationship with combined finances? 

A differing philosophy or income is not an automatic problem. What’s really important is the goal. If two people agree on some basic principles, there is room for differences in habits.

In a partnership, there are ways each individual keeps the other in check and offers compromises.

Don’t go into the fusing of your finances with the intent on changing the other person’s philosophy. It’s true that he or she will have to be willing to compromise on some issues, but most likely, if you’re reading this, you will be leading the charge. In compromising, you may also have to be willing to loosen your grip, but just a little bit.

Consolidating your finances can be accomplished, but varying philosophies and major differences in income can make the transition difficult. Focus on these thoughts:

What are your goals? Are you looking towards retirement with each other? If so, then saving for retirement must be a priority for both of you. Do you plan on having children? The two of you may not be able to contribute equally towards these goals. Your investment actions, including asset allocation and risk tolerance, should support your goals.

Which accounts should be combined? Any accounts you pay bills from can be combined, with each contributing the amount or percentage of their income that you decide is fair together. Any savings accounts for future couple-related goals, like purchasing a house, can be combined. Do you want to keep separate accounts for some fun money? Some couples do this and use their fun money to “surprise” the other with gifts or spend on singular indulgences.

Who will manage the money? It’s best when only one individual in the couple tends to the details. The family money manager should keep the other periodically (and briefly) informed of the financial state of the union. Even with one money manager, major financial decisions should be discussed together.

Be prepared for sacrifices and compromises. That probably goes without saying, as any relationship requires this. Money tends to amplify the issue. How will you handle disagreements?

What are your obligations? Mortgages or rent, phone bills, cable, and insurance are only the start. Will you be expected to take care of an aging relative? Does your partner have outstanding student loan debt, or will you be supporting him through medical school?

Working together as a team towards shared goals can help to overcome other differences, allowing spenders to work together with savers and high-earners to work together with low-earners. Accept the other for whom he or she is, and everything is easier.

See the rest here:
Combining Money With Your Honey

Allowance: do you give one, if so how much and why? There are so many questions regarding allowance it’s difficult to know what to do.

Do you give your teenager a credit card? Some parents do. Do you give your teenager an allowance based on the chores they do? Most do. Do you give your teenager an allowance even after they get an outside job? Some still do.

What’s right and what’s wrong? Well, if you ask me there is no right or wrong in this question, merely what serves your family and what will not.

How much? It’s hard to know how much to give your teen and there are many different philosophies. One common rule of thumb is to give them one dollar for every year of the child per week.

At that rate I’d be giving out $42 per week which is larger than my monthly gas and electric bill – I’d soon be broke myself! Some parent give a credit card to their children that the parent pay off – if this works for you fine. Some suggest to provide pre-loaded money cards so the amount is limited.

To read about different levels of allowance NewYorkMagazine.com has an article where teens themselves explain their personal situation. A very strong argument for giving an allowance to teens is they are at the stage of child development where they are struggling for their independence and identity. Giving them some financial independence may support this very normal development.

Why? What is it that determines whether or not we give an allowance to our teens? Money for chores: this is an age old argument. For every expert that touts giving money for chores to teach financial responsibility and management, there is one that will argue that point.

Robert Kiyosaki, author of “Rich Dad, Poor Dad” writes, “Allowance and chores are a dangerous combination. Gratitude in children doesn’t depend on whether kids have to do chores in order to get an allowance.” The trick with giving an allowance as a reward base for chores is you had better make sure that the reward is good enough, or the chores will never get done. And what happens when your kids “go on strike?”

Our children don’t generally learn from us (including money management) by those things we say to them. They learn from those things they see us doing and they learn from their own mistakes. What works for me and my family may not work your family.

The bottom line is giving an allowance is part of your own personal financial budget. Working this out with your children is showing them how to work with a budget and spend appropriately. So no matter what you decide to do regarding an allowance, make sure you share that decision making process with your children.

See the original post:
Allowance: How much is too much?