Financial Planning Truths

I often write about the need to pay yourself first and the benefits of long term, saving, planning and investing. I don’t want anyone to think I was the first one to coin this phrase or to preach the need to plan and invest in order to have a secure future. Most of this knowledge is pretty well known. You can find several articles out there to help remind you what you need to do, and I continue to write about this to remind and educate people. Once is a while I like to share some of these articles written by others, with my readers, so that you are not only hearing from me. Today I am sharing two articles that I think go hand in hand. The first is about what it takes to become a 401 (k) millionaire . You will see a very common theme in this article, my writing, and those of other financial planners. Start early, and contribute consistently and the math and the markets will do most of the work for you. The good news is, it is really quite easy to become a millionaire . The bad ne...

The deadline for filing your 2017 tax return is April 17, 2018. That’s right all you procrastinators you get two extra days this year because the 15 th falls on a Sunday and the 16 th is a Holiday in Washington D.C. Putting things off to the last moment is rarely rewarded in personal finances and can often cost you. When it comes to tax returns this is certainly true. Information is powerful and helps you with your planning so the sooner you know how much of refund you will get or how much money you owe the better. You can plan what to do with the money or how to pay the bill. You can also use the information to help you plan for next year’s taxes. If you have a refund coming putting off your taxes just means you have let Uncle Sam collect interest on your money for that much longer . If you owe money you should still do your taxes early, but can wait to actually file them until the deadline. Some electronic filing systems actually let you file now but designate the date yo...

There were twins bothers, let’s call them Matt and Marc. Their uncle encouraged them to start saving and investing at an early age. Matt jumped on this advice right away and at age 21 he started contributing $5,500 to his Roth IRA every year. He did this for 10 straight years until he was thirty. He then decided he had enough saved for retirement and wanted to spend more money on his family. He did not contribute anymore to his retirement fund. His brother Marc waited ten years to act on his Uncles advice but at age 31 he began putting $5,500 a year into his Roth IRA and did so every year until he retired. Both brothers retired at age 65. Marc had taken a total of $192,000 out of his hard earned pay over the span of 35 years and put it toward his retirement. Matt only took a total of $55,000 out of his pay to put toward his retirement over a ten year period. They both got good advice from their uncle on how to invest the money and enjoyed an average rate of return of 8% over ...

The answer to this question depends on the person. As a general rule, if you pay off you balance every month and you are disciplined enough to not buy anything you would not buy anyway , a credit card is significantly better that debit card and both are significantly better than cash. If you have decent credit you should be able to get a no fee credit card, possibly with cash back or some other perk without any annual fees. You just need to shop around. First and for most: credit cards offer more and better protection than debit cards. Debit cards are governed under the Electronic Fund Transfer Act, (EFTA) and while that act provides you some protection there are holes in it and the timing of when you are get protected and getting your money back can present problems within itself. If there is a fraudulent transaction the money comes out of your account (usually checking account) right away. It can often take up to one billing cycle or more to get it back even if you prove t...

Not many people like doing their taxes, and our tax code doesn’t always make it as easy as it should be, but the key to reducing your stress during tax filling season is maintaining good records and knowing where to find then when you sit down to do your taxes. You should have received your W2’s and 1099s by now. 1099 is the form your bank and brokerage firms will use to report any income (over $5.00) they paid to you. This income is reported to the IRS and you are sent a form. (If you did some work as a subcontractor you may also receive one from someone that paid you for work you did). They are supposed to be in the mail by January 31 st which means you should have received them by now. If you have not, check first to see if you signed up for electronic delivery and if so they may be waiting on line for you. While the payer is responsible for getting them to you, you are responsible for reporting all income on them and cannot use the excuse “they never sent me one” as a reason ...

I am asking my loyal readers to please help me spread this Warning.   The Credit Karma Tax software has at least one Major flaw in it . Please share my blog post with others you know via Twitter and Facebook. Hopefully if this gets passed around enough someone’s friend of friend will know someone at Credit Karma that cares about their reputation and they will fix this. In the meantime we can warn as many people as possible and avoid them paying more in taxes than they have to. The issue I spotted appears to indicate they do not know how to interpret the tax code and even when an error is pointed out they have no one on staff to review how the tax code is written. As most of you know the tax laws and instructions for filling your taxes can be quite complicated. Many of us rely on tax software to help us file our taxes and we count on it being correct. However we are all responsible for the tax returns we file. I am an attorney and financial planner so I am more likely to ca...

It is tax time, and around this time last year I recommended Credit Karma tax preparation software to my readers. I used in last year, found it easy to use and had no problems with it. It is free for all users. Unfortunately this year I found a major flaw in the way their software is written. Their software does not recognize the right of unmarried people over 55 to make a $1,000 catch up contribution to their HSA accounts. This particular flaw will only affect those unmarried people over 55 that take advantage of the catch up contribution. While that is probably a pretty small percentage of the population those that do make the catch up contribution and do not catch the flaw could end paying more than $300 extra in state and federal taxes. For those that do not have to worry about that flaw I would still have concerns of about using this software since if they missed this what else might they have missed? Perhaps more importantly is my opinion that they have virtually no cus...