For many, the dream of being financially secure is nothing more than a mirage. This is mainly because a common misconception equates financial security with having a million dollars in the bank. While having a hefty bank balance does not hurt, it is only part of the story.
Many top earners are learning this the hard way recently, as the economic uncertainty has left them on the hook for expenses they can no longer afford to pay. However, this does not have to happen to you: here are five ways to be financially secure.
When considering how to become financially secure, your priority must be to ensure that you have enough income to cover your expenses. If you cannot pass this hurdle, then you should reconsider your lifestyle. Granted, this might be harder for some people, but even if you can put away $10 per week, this will help you to have the emergency funds you need to weather times of uncertainty, such as the COVID pandemic.
Managing your finances requires discipline, which means that you need to have good habits, as this is the only way that you can keep yourself from falling into traps. One way to do this is to keep your credits cards at home when you leave the house, as this will keep you from splurging on impulse buys. You might also want to think about getting a separate bank account for your daily spending needs, because this will limit the funds available to you at any given time.
Having good spending habits means that you need to be disciplined. However, if there is a large expense that makes sense and you have planned for it, then you should consider making it.
Another healthy financial habit is to always do your due diligence. For example, according to reverse mortgage expert Michael G. Branson, you can leverage the existing value of a property you own as a senior citizen with a reverse mortgage—but that doesn’t mean you shouldn’t research the pros and cons. Anytime you take out a loan (whether it’s a mortgage loan, personal loan, or a payday loan), open a new credit card, or finance a new car, always look at the fine print. Pay particular attention to interest rates, penalties, annual fees, and APR.
Or better yet, sell your car. This is especially true if you are living in a city or a town where all your daily needs can be filled from shops within walking or cycling distance. Not using your car means that you can save money on gas and maintenance, and getting rid of your vehicle altogether will eliminate monthly payments for your auto loan and insurance.
If you need a car for just a day or two, then you should consider renting or using a ride-sharing app. You could also consider purchasing a “new to you” vehicle as they will usually cost less than a new car.
Exceptions to this might be if you need to use your car for work. In this case, you are using your vehicle to make money, and as such, it might be considered an investment. However, if you are using your car to make money, then you want to make sure you are accurately tracking your expenses. Not only will this help you to get any tax advantages, but it will give you the basis to determine if the money you are spending on your car is yielding the return you expected.
While the rules might vary depending on where you live, you want to make sure that you take full advantage of any pre-tax contributions you can make. While doing so means that you will be taking home less money, it also means that you will be paying less in tax while putting money away for your future. As such, this approach is a big win for you and your financial future.
Having the right life insurance policy can help to protect you and your family when the time comes. As such, you want to make sure that you have enough life insurance to look after your family and to cover funeral expenses. Also, some policies can be used as collateral for loans.
While going into debt is usually not recommended when trying to become financially secure, using it to buy revenue-generating property or business might be an excellent way to get closer to your goal. As such, having insurance could help you down the road.
Just like you go to your doctor for an annual checkup, you should regularly review your financial health. Doing so will give you an idea of where you stand and what additional steps you need to take to reach your goals. If you want to become financially secure, then you want to make sure that you check your financial health (e.g., budget, savings, etc.) at least once a month.…
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In response to the ongoing coronavirus emergency, the Internal Revenue Service (IRS) is offering federal tax relief to Americans. It’s part of emergency declarations that were enacted due to the Stafford Act. This response will undoubtedly help citizens and businesses cope with the crisis.
But what you may not know is that changes to the tax deadline affect several aspects of your financial life. In this post, I’ll explain what coronavirus tax relief is and 10 ways it affects your finances.
The central feature of tax relief during the coronavirus pandemic is that the due date for filing and paying your 2019 federal taxes is postposed from April 15, 2020 to July 15, 2020.
You don’t have to be sick or negatively impacted by COVID-19 to qualify for this federal tax postponement. It applies to any person or entity, such as those who are self-employed, an unincorporated business, a corporation, estate, or trust that has 2019 taxes due on April 15. It doesn’t matter if April 15 is the original date for your return on an extension date you previously filed for—your new due date is still July 15.
There’s absolutely nothing that taxpayers need to do to take advantage of this relief.
There’s absolutely nothing that taxpayers need to do to take advantage of this relief. The postponement will happen automatically for any amount you owe or any installment payment you were asked to make on April 15.
Of course, many Americans are expecting a tax refund. When you overpay taxes during the year, the IRS settles up with you during tax season by issuing a refund.
If you’re owed a tax refund, never wait to file your tax return. The sooner you send it in, the faster you’ll receive your money back. Getting a direct deposit is always faster and safer than a paper check. So, be sure to include your banking information with your return, so you receive your refund electronically.
As a result of the postponement of the due date for filing and paying federal income taxes until July 15, 2020, you’ll get a pass on interest and penalties if you pay up by then. However, the extra fees will begin to accrue on July 16, 2020.
Depending on where you live, you may have to pay state income taxes, which have not been postponed. However, it’s possible that the states affected the most by the coronavirus could enact relief measures of their own.
Depending on where you live, you may have to pay state income taxes, which have not been postponed.
Seven states don’t charge income tax, including Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming. Additionally, New Hampshire and Tennessee don’t tax earned income, but they do tax your investment income.
If you live in any of the remaining 41 states, plan on filing and paying your state taxes as usual. Check with your state’s tax agency or Department of Revenue to learn more and stay as up to date as possible.
But what if July 15 comes and you need more time? Individuals and businesses can request an automatic extension to delay filing federal taxes. However, this doesn’t give you more time to pay what you owe, only more time to submit your tax form.
To get a federal extension, individuals must submit IRS Form 4868 on IRS.gov, using tax software, or through your tax professional, before the July 15 deadline. Most incorporated businesses must file IRS Form 7004.
If you choose to file an extension request, that would give you until October 15, 2020, to file your 2019 return.
If you choose to file an extension request, that would give you until October 15, 2020, to file your 2019 return. But again, to avoid interest and penalties on any outstanding tax liability, you must pay an amount you estimate is due with your extension request.
If you need a state tax filing extension, check with your state’s tax agency to see what’s possible.
If you’re ahead of the game and already filed your 2019 taxes and scheduled payment to occur on April 15, you have options. If you don’t want your payment to go through, you can reschedule or cancel it until two business days before the payment date.
In other words, April 10 would be the last day to make a tax payment change. However, I wouldn’t wait until the last minute if you plan to reverse or modify it.
To make a change, visit the tax payment portal you initially used and follow the instructions. If you authorized an electronic funds withdrawal from your bank account, contact a U.S. Treasury Financial Agent at 888-353-4537 to request a cancellation. And if you scheduled a tax payment using a credit card, contact the issuer to cancel the card payment.
Most businesses make estimated tax payments each quarter. The 2020 schedule is:
So, the first estimated payment that businesses need to make this year will be due on June 15, 2020.
What about information returns that must be filed by certain types of businesses, or taxes that are due on other dates, such as May 15 or June 15? Unfortunately, individuals and businesses that have filing or payment due dates other than April 15 don’t get any relief at this time.
Again, the assistance only applies to federal income tax returns or payments due on April 15, 2020.
If you or your business owe tax other than income tax, such as sales tax, excise tax, payroll tax, gift tax, or estate tax, you must file and pay them as usual.
You typically have until April 15 to make health savings account (HSA) contributions for the prior year. Under this relief, you can now make HSA contributions for 2019 at any time until July 15, 2020.
To qualify for an HSA, you must be covered by a qualifying high-deductible health plan that you get through work or on your own. In early March, the IRS issued a notice that a high-deductible health plan may cover the cost of COVID-19 testing and treatment before your deductibles are met. Also, just as before the coronavirus, you can pay for medical testing and treatment using funds in your HSA.
Just like with an HSA, you typically have until April 15 to make contributions to a traditional IRA or a Roth IRA. Because the tax filing date is postponed to July 15, you can make IRA contributions for 2019 at any time until July 15, 2020.
However, for most workplace retirement plans, such as a 401(k) or 403(b), the deadline corresponds to the calendar year. So, December 31, 2019, was the last day to make 2019 contributions for accounts offered by an employer.
While this tax relief may not be enough to buoy many people and businesses that have been affected most by the coronavirus pandemic, it’s just one measure. There will be broader fiscal relief enacted to minimize the economic impact of this ongoing health crisis.…
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