Use This Savings Calculator to Help You Meet Your Short- and Long-Term Financial Goals

Nelson Smith |Aug 7, 2019
This savings calculator will help you figure out how much money to put away each month and for how long in order to meet your savings goals.

Use This Savings Calculator to Help You Meet Your Short- and Long-Term Financial Goals

Nelson Smith |Aug 7, 2019

Building Your Savings

Succeeding at personal finance is less about the physical steps to get there and more about why you’re saving. In other words, it’s a mental problem, not a physical problem.

Let me explain. Making smart choices, spending less or saving up money are pointless without a reason why. Working toward a specific goal will always be more motivating than saving up because it’s one of those things you “should" do. These days, financial independence is a common goal, with many people willing to create a big savings rate in exchange for being able to retire a couple of decades before the usual age.

Others don’t want to wait nearly that long. These folks are saving for various short- to medium-term goals. Maybe they want a new car. Perhaps they have a dream trip in mind. Or maybe they’ve always dreamed of place they can truly call their own, and are focusing on saving a down payment.

It doesn’t matter what the goal is. It can be as serious or frivolous as you’d want. All that matters is the goal is important to you. It needs to motivate you when life gets a little tough.

Most money goals aren’t easy. But the result is worth it. There’s no better feeling than knowing you’ve saved up for something and paid for it using your own money. And like with any goal, extra-difficult money ambitions feel extra good when you pull them off.

We’ve built a savings calculator that can help make all your monetary dreams come true. Let’s take a closer look at how it works.

The Inputs

This calculator will show you the wonders of consistent saving. Here are the various parts of the form you’ll have to fill out:

Initial Amount

This is the easy one. This is exactly how much money you’re starting out with. It can be as little as $1 if you haven’t started saving. Starting out with more will make the ultimate goal much easier, but don’t sweat it. What you do going forward is going to determine your savings path.

Monthly Contributions

This is how much you can expect to save each month. The more you can save, the better.

A word of caution before you fill out this amount. Many non-savers will find a calculator like this and suddenly proclaim themselves as frugal champions, able to put away $1,000 per month or even more. Don’t fall into that trap, or you’ll find yourself deprived in no time. Pick an achievable savings goal for best long-term success.

Perhaps gradually working toward your savings goal is best. A few months of feeling deprived is a formula for failure. It’s exactly why crash diets don’t work.

Interest Rate

Simply put, this is the rate of return you can expect from your investment.

Different investments will deliver vastly different rates of long-term returns. Remember, risk and potential reward are related. An investment with a great deal of risk has the potential to be more profitable than a safer one. Just remember that a risky investment could easily lose money, too.

For example, a savings account at a bank is guaranteed by the federal government, up to a maximum of $250,000 per depositor per institution. Since the principal is 100% guaranteed, these accounts don’t give much interest. Investors who put their cash in a savings account are more worried about keeping that money safe versus earning much on it.

High-yield savings accounts are offered by certain banks as an attempt to lure depositors to that particular company. These are typically offered by online banks that don’t have any physical branches, which is a big downfall for some folks. These accounts offer much better rates than regular savings accounts, usually in the 2-3% range. They also come with the same principal guarantee, meaning you’ll never need to worry about the security of your bank. The cash will be there.

Many people will keep their emergency fund in a high-yield savings account, a nice compromise that allows them to earn a little interest off their money while keeping it easily accessible.

Another relatively safe investment choice is bonds, which are instruments used by governments or companies to borrow money. These are secured either by specific assets or, more commonly, the general credit-worthiness of the issuer. The yield depends on the security of the issuer. An ultra-safe bond will pay around the same as a high-yield savings account, while riskier ones will offer 6-8% returns.

Real estate and stocks offer the best potential returns, but both come with a great deal of risk. Both of these asset classes tend to offer approximately 8-10% total returns annually over the long-term, but with individual years fluctuating wildly. For instance, in 2013, the S&P 500 delivered a 29.60% return. Yet just a few years before that, in 2008, that same index fell more than 38%.

These kinds of volatile returns are fine if you’re willing to hang on during downturns. The stock market will inevitably go up over time. Short-term concerns eventually become nothing but a distant memory. Just make sure to hang on and not sell at the bottom of a correction. If anything, that’s the time to buy.

Real estate itself tends to move a little less than stocks, but the asset class still has risks. A landlord renting out a house has many different threats that could cause the investment to temporarily perform badly. A tenant might move out and slow economic times mean there are few replacements looking for a new place. Or the property can be damaged, either by a natural disaster or a disgruntled renter. All of these things can temporarily depress returns, which is made all the more risky by borrowed money.

Number of Years

Another simple category. Just input how many years you plan to save.

I’d encourage savers to play around with this category to see the impact of compounding over time. It’s amazing how large your savings can become over a few decades, especially if you’re getting 8-10% long-term returns. Financial independence may be closer than you think.

How to Increase Your Savings

It takes a long time to save up for an expensive goal if you’re just putting $100 or $200 per month away. Here are some easy ways you can dramatically increase the amount you’re able to save.

The most important thing to remember is that there are three main expenses, costs that will usually eat up at least half of your budget. If you can get your housing, transportation and food expenditures down, that’ll immediately help increase your savings rate in a big way.

Housing

Let’s start with housing. If you’re comfortably saving money each month, then it’s okay to spend a little extra on a nice place or one with extra room. If you’re struggling to get ahead, it’s time to slash this expense. You’ll either want to move to a cheaper part of town — closer to work, ideally — or get a roommate to help offset some costs. Yes, this is a sacrifice, but you’ll free up hundreds of dollars each month.

Transportation

Transportation is another big one. Moving closer to work is a great option, since that’ll cut down on transport costs and free up time. You’ll also want to explore public transport. If your city doesn’t offer acceptable bus or train schedules, look at splitting commuting costs with a coworker. You’ll both save money and have company for the long ride to work.

Food

Food is usually an easy category to slash. The solution is simply cutting back on restaurant meals and eating more at home. Drinks are also a budget killer; it’s easy to spend $100 on a nice meal out with a few drinks. You can cut that by 80-90% by making your own meals and enjoying drinks at home. If drinking alone doesn’t appeal to you, feel free to invite your friends over.

Cutting back on groceries isn’t hard, either. The key is to plan your meals around sales — especially those on the front of the flyer — rather than planning your meals and then buying whatever you feel like.

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Buy Less Stuff

Aside from these three categories, another simple way to cut back on expenses is to buy less stuff. Before putting new clothes or some upgraded electronic device in your cart, ask yourself if you really need it. If the answer is no, delay the purchase for a while.

Experts agree that a 10% savings rate is the minimum you should strive for.

Taxable versus Non-Taxable Accounts

Where you save your money matters. Some accounts offer the ability to shield taxes, while others will force you to report any profits to the IRS.

A taxable account is one without any special tax privileges. You’ll be forced to pay the tax man his share on any of your gains each year. Note that you’ll have to pay taxes on both earned income from the investment (like interest or dividends) as well as on any capital gains when a profitable investment is sold. The good news is that capital gains are taxed at a favorable rate, something the feds put in to encourage investment in the stock market.

As a general rule, any long-term saving — like for retirement — should be done in tax-sheltered accounts. You’d use a taxable account for any short-term goals, remembering that you don’t want to take major risks with money you’ll need right away. This cash is usually kept in savings accounts.

There are two main retirement accounts you’ll use for long-term saving: Roth IRAs and 401Ks.

Roth IRA

Let’s start with a Roth IRA, which is a retirement account that is funded using after-tax dollars. Any amount put into a Roth can be withdrawn without a tax penalty, but the earnings on those contributions do carry a withdrawal penalty if you’re under the age of 59.5. You’ll also have to wait until your Roth account is at least five years old before you can withdraw any earnings without penalty.

A Roth IRA offers nice flexibility. You’ll just have to be a little bit careful making sure you follow the rules.

Roth IRAs are limited to a $6,000 annual contribution, and some high-income earners make too much to be eligible for the savings account. The limit for single folks is just over $120,000 per year, with the maximum for couples at just under $200,000 per year. These folks can still contribute to different kinds of IRAs, but they’re shut out of Roth IRAs.

401K

The other main tax-deferred savings account Americans will use is their 401K, an account that is funded by pre-tax dollars. Employer-sponsored 401Ks are common, with some employers contributing 5% (or more) of their worker’s salary as a 401K match.

Savers also get an immediate tax break when they contribute to their 401K account. Here’s how it works. If you make $70,000 and contribute $5,000 to your 401K, the government will tax you like you made $65,000. This usually translates into a tax refund, which is always a nice bonus. This tax refund can then be immediately reinvested — like into a Roth IRA — to really help give your savings a boost.

There’s just one catch. You’ll have to pay taxes on 401Ks when you withdraw the cash. The strategy works best when you contribute during high tax years and take cash out slowly during low tax years. A little planning during your golden years can really help bring the overall tax bill down.

The Bottom Line

Having the desire to save up for a big purchase is great. Most people wouldn’t save without this motivation. It doesn’t matter what you’re saving up for, as long as it’s important to you. It can be as frivolous as you desire.

But dreaming can only get you so far. At some point you’ll have to execute your vision. That’s where this calculator really shines. It shows you just how much you’ll need to put away every month to follow your dreams. Some of you might use the calculator and realize you’re right on track to accomplish your goals. Others might need it to provide a much needed kick in the pants.

Go ahead and live your life. Just pay for it first. A life wallowing in debt isn’t a lot of fun.

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5 of the Best Investment Apps for Beginners

Stephanie Colestock | August 7, 2019

Make Investing Simple Whether you’re putting away your first $1,000 or have been saving for the future for years, you’re going to want to consider investing your funds at some point. Doing so will allow you to maximize returns and exponentially grow your savings. Unfortunately, the investment process can be pretty intimidating, especially if you are starting out on your own. It’s hard to know how to begin, where to invest, how to balance your portfolio and even what sort of fees you should expect to pay along the way. That’s where the convenience and ease of today’s best investment apps can come into play. [youmaylike] What are Investment Apps? Once upon a time, your only choice for investing was to pick up the phone and call your stock broker to initiate a trade. You were charged for the service, either based on commission or as a flat fee per transaction. While stock brokers are still an option, you can take investing into your own hands these days, without ever needing to talk to another human. And it’s all thanks to investment apps and platforms. Today’s apps offer a range of services and features. With them, users can: Research funds and individual stocks. View fees and expenses related to investment choices. Invest funds on the go, and even automate regular contributions. Automatically reinvest earnings on current investments. Adjust portfolio for personal risk tolerance. View performance projections. Choose funds or individual stocks that align with personal beliefs, through portfolios based on socially-responsible missions. The best part? Investing through trusted apps is usually cheaper and faster and you’ll have instant access to your portfolio/reports at any time of day. Not only that, but you’ll also be able to set your investment risk tolerance, rebalance your portfolio and even reinvest earnings automatically. Who are Investment Apps Designed For? Whether you’ve been playing the market for ages or are ready to invest your first $100, the right investment app is worth considering. For those new to the stock market, apps will simplify the process and put the power of investing at your fingertips… literally. From your phone or computer, you can easily see portfolio recommendations based on your own goals, savings plans and even risk tolerances. The right app will tell you upfront how much you can expect to spend in fees throughout the year, and can even allow you to automate many of the more confusing aspects, such as picking well-performing stocks or even rebalancing. While investment apps are ideal for beginners, newbies aren’t the only ones who will see the benefits. Even seasoned investors will find the process easy to use, and may even learn that these platforms can maximize returns (and save them money in fees) along the way. Not to mention, many investment apps offer additional insight into specific funds, so you can choose to invest in companies that align with your own passions and beliefs. Now that you know why you should consider using an investment app for your own savings, let’s take a look at some of the best ones available today. Best Investment Apps Great for Beginners: Acorns Fees and expenses: For investors with less than $1 million invested, fees are between $1-3 per month depending on the account option you choose. Acorns is also free for college students. Beginning investment requirement: At least $5 to start Types of investments available: ETFs (exchange-traded funds) Portfolio options: Conservative, Moderately Conservative, Moderate, Moderately Aggressive, Aggressive Automatic investing?: Yes Automatic reinvesting?: Yes Automatic rebalancing?: Yes If you want an easy, hands-off approach to investing that won’t leave your head spinning, Acorns is a great first choice. This app not only simplifies investing for beginners but allows investors to completely automate the process from start to finish. After connecting the app to your debit card, the app will “round up” each of your daily purchases, putting the savings into an investment holding account. Once you reach the minimum required, Acorns will invest this money on your behalf, based on your account preferences. The app will also reinvest your earnings, as well as rebalance your portfolio when necessary. Great for Truly Free Investing: Robinhood Fees and expenses: Robinhood is a free investment platform in every sense of the word, pledging to never charge company fees or commissions to customers. Beginning investment requirement: You’ll need $2,000 to get started. Types of investments available: ETFs, stocks, cryptocurrency and options. Portfolio options: Interest-based options such as Fashion ETF, Tech ETF and Energy ETF, as well as a standard S&P 500 ETF, all with personal risk tolerance settings. You’ll also find “collections,” which are individual stocks grouped according to specific interests — such as companies with female CEOs or that are in the social media sector. Automatic investing: No. Automatic reinvesting: No. Automatic rebalancing: Yes. A great option for beginners and experienced investors alike, Robinhood makes the process both easy and affordable. How affordable? Well, it’s entirely free. By offering a truly free experience, Robinhood saves investors some serious cash over time. Additionally, the platform makes it easy to choose individual stocks or ETFs based on personal interests. If you want to invest in cryptocurrency or options, you can also do so through Robinhood. One of the biggest limitations of the platform, though, is its automation. While you can set up automatic deposits into your account, you will need to manually invest those funds and then reinvest (or withdraw) your dividends. Stash Fees and expenses: $1 per month fee for those with less than $5,000 invested, or $2 per month for retirement accounts with less than $5,000. For users under 25, fees on retirement accounts are waived. If you have more than $5,000 invested, your fee will be 0.25% annually. Beginning investment requirement: You’ll need at least $5 to begin investing (fractional shares are available) Types of investments available: ETFs (exchange-traded funds) and fractional stock shares Portfolio options: Too many to name, ranging from things you Want (portfolios that are conservative to aggressive mixes), things you Believe (such as groups of companies that believe in clean energy, LGBT rights, etc.), and things you Like (tech, retail and social media companies). Automatic investing: Yes. Automatic reinvesting: No. Automatic rebalancing: No. The closest competitor to Acorns, Stash seeks to make investing easy for everyone, regardless of your goals and passions. They have three account options to choose from, allowing you to manage your investment and retirement accounts, or even a child’s education savings through custodial accounts. With Auto-Stash, you can set any number of automatic investment options and transfers. However, Stash will not rebalance your portfolio for you, nor will they reinvest dividends on your behalf. Wealthfront Fees and expenses: 0.25% annually. Beginning investment requirement: $500 minimum initial investment. Types of investments available: ETFs (exchange-traded funds), individual stocks, retirement accounts (401k, IRA), 529 savings plans and trusts. Portfolio options: 11 asset classes to choose from, including natural resources and real estate. Automatic investing: Yes. Automatic reinvesting: Yes. Automatic rebalancing: Yes. Wealthfront’s investment platform is designed to be friendly for users of all experience levels. If you’re a seasoned investor, you’ll enjoy all of the options available to you, including the ability to manage your retirement accounts, education savings and even non-profits or trusts. If you’re a newbie, their free financial expertise center is the perfect place to learn all about investing and your future. TD Ameritrade Fees and expenses: The managed, automatic portfolio investment option (called Essential Portfolios) is available with a 0.30% advisory fee. Beginning investment requirement: $5,000 minimum for managed portfolios (no minimum requirement for traditional trading). Types of investments available: Stocks, ETFs, options, mutual funds, futures, bonds/CDs, Forex and cryptocurrency. Portfolio options: Essential Portfolios (EP) offer investors a range of options from Conservative to Aggressive, based on your passions, preferences and tolerances. Automatic investing: Yes, with EP. Automatic reinvesting: Yes. Automatic rebalancing: Yes. A more traditional brokerage app, TD Ameritrade is one of the most recognizable names in the industry. You can easily educate yourself on all things financial, thanks to their free videos and posts. If you want a traditional experience, you can choose your trades and pay per transaction. Prefer a more streamlined, automated approach? Opt for their Essential Portfolios, a hands-off investment option (robo-advisor) that charges a flat monthly fee and requires little-to-no oversight from you. Plus, their app makes the investing process easier than ever with a user-friendly interface, price alerts and no minimum to get started. If you prefer a desktop experience, this is also available to you through TD Ameritrade. Bottom Line Getting started with investing can be intimidating. With all of the terminology and account options out there, it’s easy to want to run and hide. Thanks to some of today’s best investment apps, though, you can not only get started with your first portfolio but also watch your money quickly grow… no matter how much of a beginner you may be! It’s important to choose an app that offers you the portfolio options and features you want most, with fees and deposit minimums that match your financial needs. The five apps above are our favorites for beginners, making that first foray into investing easier than ever before. The hardest part will be choosing the one you love most!

How to Apply for a Business Credit Card

Myles Leva | August 7, 2019

Paying for Business Expenses Applying for a business credit card is something a small business should seriously consider for itself. Business credit cards can provide a range of benefits to a business. They allow a company to build up credit for better borrowing conditions down the road. They’re also quite easy to apply for. In this article, we’ll go over how to apply for a business credit card and other important points to note. What Is a Business Credit Card? A business credit card is a credit card that is intended for business expenses. These cards are not meant for any individual’s personal use, but they are available to businesses of all sizes. What Is a Business Credit Card Used For? Business credit cards are meant for business expenses, and as such, they come with several perks that you wouldn’t get with a normal credit card. Business credit cards typically have far higher credit limits than normal cards, but they are also harder to qualify for. [youmaylike] As a business phenomenon, business credit cards vary their offers greatly, and certain cards are meant for certain businesses. They are also highly customizable when it comes to individual payment terms. Businesses don't always have consistent incomes like individuals do, and business credit cards handle this problem. These cards are used to gain access to a long line of credit, to control employee spending on business expenses and more. One of their other common uses is to make accounting easier, as putting all business expenses on one separate account makes reporting to the Internal Revenue Service easier. In the end, there are many uses for a business credit card. Why Would I Need a Business Credit Card? You might not need one, but if you run a business, you’ll be leaving money on the table by not at least looking into them. Business credit cards can solve many of the problems business owners face. If you need employees to make purchases for the business, a business credit card is the safest option. These cards can be given to authorized users, a status you can easily give to any of your employees. From here, these cards make it easy to monitor employee spending and spot any discrepancies. You can attach customized user privileges to each card to limit spending and place limits on where the card can be used. As mentioned, if you feel like your credit is too limited, business credit cards are a sure way around low credit. According to the American Bankers Association, the average monthly payment on a business credit card is twice as high as the average payment on a normal one. If you’ve found yourself annoyed with the Internal Revenue Service over the complicated reporting processes for business owners, you’re not alone. This is where a business credit card can solve another problem. Simply handing over your business credit card statements to your accountant will make them love you. It will also provide them with the information they need to predict future spending. Another great use for a business credit card is lifting your liability for debts. Liability for credit card debt is determined by the liability offered by the card. If you’re using a personal credit card for business expenses, you are liable for all debts. On the other hand, if you use a business credit card with commercial liability, your business is liable for any debts, which changes the game. Keep in mind that some cards offer joint liability, which leaves both you and your business liable for any debts. Make sure you know what you’re getting into before signing any paperwork. Lastly, just as personal credit cards offer rewards programs, so do business cards. The main difference here is that business credit card rewards are tailored to your business needs. How to Apply for a Business Credit Card Before you apply for a business credit card, you should make sure you’re eligible. For the most part, you only require the following to be able to apply for one: A legal name for your business. A business structure to apply with, such as a Limited Liability Corporation. An explanation of the nature of your business. You’ll typically be given a list of industry types to choose from. A tax ID number issued by the Internal Revenue Service Your roll in the business you’re representing Various business/financial information including: Annual revenue. Number of employees. Length of time in business. Estimated monthly expenses. If you have this information ready, you can apply for a business credit card. At this point, it would be wise to shop around and find the best option for your business. Your decision on the business credit card you choose will have larger ramifications than your choice of a personal credit card. Applying for a business credit card is much the same as applying for a personal one. There are a few differences, but the main thing to remember is that business credit cards are taken more seriously than normal ones, so you’ll have to face a higher bar of entry. This doesn’t mean getting a business credit card is hard, but it does mean you need to arrive more well-prepared than you normally would. To make things easier, you can prepare for certain obstacles in advance. You may need to sign a personal guarantee that you will pay off any debts. Also keep in mind that if you’re the one applying for a business credit card, and your business doesn’t already have one, they will conduct a personal credit check. It may be best to try to optimize your personal credit if you plan on applying for a business credit card in the future. Some Options at a Glance Here are some of the most popular options for small business credit cards: Chase Inc Business Preferred This is a great option for a few reasons. With the Business Preferred card from Chase Inc, you get 80,000 ultimate reward points when you spend $5,000 with the card in the first three months. The card also provides generic, but highly useful benefits for business owners. Business Platinum Card from American Express The Business Platinum is ideal for businesses that spend a lot on flights and travel. This card offers numerous rewards on flight and hotel expenses and makes sure you get something serious back if you use it for these expenses. Chase Inc Business Unlimited The Chase Inc Business Unlimited offers unlimited 1.5% cash back. While we’ve said enough already, they also offer several other perks that are overshadowed by their first one.

Everything You Need to Know About Filing Your Own Taxes

Katie Macomb | August 7, 2019

It's Not Fun, but It Has to be Done Benjamin Franklin wrote a 1789 letter that states, “But in this world nothing can be said to be certain, except death and taxes.” Even at the United States’ early beginnings, federal taxes were a necessary evil to fund various public projects and administrative costs. Today, federal taxes serve much of the same purpose. While virtually no one likes to prepare and file their taxes, it is a necessity if you want to avoid fines and further hassle. It is no secret that preparing and filing your taxes is notoriously complicated. Many people lament that it should not be so difficult to pay the government. However, some of the complications allow people to save money if they discover specific tax benefits. Knowing how to file your own taxes may be a good option if your tax situation is relatively straightforward, or if you are willing to learn the process. Why Do You Need to File Your Taxes Every Year? The short answer is that federal law requires that most individuals file taxes annually. Income taxes are assessed every year based on your income earned during that period. You then pay a percentage of that income to the government, less any deductions, adjustments, or credits that you qualify to receive. If you do not file (and pay) your taxes, then you may be assessed penalties and interest. The Internal Revenue Service (IRS) can even go as far as garnishing your wages and repossessing your property if you do not file and pay as required. The Benefits of Filing Your Own Taxes If you are one of the 43% of Americans that are doing your own taxes, you are certainly not alone. Roughly 53 million people prepared and filed their own taxes in 2018. There are many benefits to filing your own taxes, including: Saving money: Hiring a tax professional is expensive, and many people can prepare and file their returns on their own, completely free of charge. Control: Some people like knowing the exact information that is included in their return and being able to control the data, and for some, knowing precisely how the numbers work out, is comforting. Gain helpful information: When you prepare your taxes, you can see what items saved you money this year or which issues you should address so you can save money next year. While filing your own taxes is complicated, it can be beneficial under the right circumstances. There are several programs online that walk you through the process to help ensure you are taking advantage of all of your available deductions and credits. The Drawbacks of Filing Your Own Taxes In addition to the benefits, there are also some disadvantages to filing your own taxes. These include: Time and effort: Preparing and filing your taxes takes time and work You have to sift through financial information and deal with concepts that you may not understand well. The process can be frustrating and take a considerable amount of time. Error risk: If you do not completely understand how your taxes work, you run the risk of making a mistake because of misconceptions. If that happens, it could lead to underpayment and audits down the road. Questions: Even if you use a tax preparation software, you may still have questions that will remain unanswered unless you do significant research or reach out to a tax professional. For some people, the risk of having a substantial error that triggers the IRS’s attention is enough to scare them away from preparing their own taxes. Preparing for Filing Your Taxes When you begin work on your taxes, you should have information gathered throughout the year. Some of the most common items that you will need include: Social Security numbers for you, your spouse, and any dependents Information about wages, such as W2s or 1099s Investment income information Documents that represent any other source of income Information regarding adjustments to income, such as student loan interest paid, IRA contributions, and health savings account contributions, just to name a few Information regarding potential credits, including, for example, child care expenses, education expenses, or retirement savings contributions Data about any tax payments that you may have made throughout the year Keeping good records will help make tax preparation easier at the beginning of the year. [youmaylike] The Basics About What You Can Claim When Filing You must pay income taxes on all your income earned throughout the year. However, that income is reduced by a few things. The further you can reduce your taxable income, the less you tax you will pay. There are three general categories of tax reduction methods: Standard or Itemized Deductions Everyone can claim either the standard or itemized deductions. Standard deductions are a set amount that is based on your filing status. Itemized deductions are based on actual expenses that you incurred throughout the year. You can choose to use the higher deduction. The higher the deduction, the less tax you will have to pay on your income because your income decreases on paper. Itemized deductions include things like medical expenses, state and local tax payments, and home mortgage interest deductions. Itemized deductions will only decrease your income by a certain percentage, or up to a specific point. Adjustments Some adjustments to your income may also be available. These include things like paying student loan interest or alimony. Adjustments are more valuable compared to deductions because they decrease your income dollar for dollar. Credits A credit decreases your taxable income as well. Some credits are refundable while others are not. For example, you get a child tax credit simply for having children that qualify for that credit, but that credit will not be paid out to you if you do not have any tax obligations. On the other hand, the Earned Income Credit, which is available for low-income filers, will be refunded to you even if you do not owe any taxes. There are a wide variety of deductions and credits available. Take a look at the federal forms and related schedules to determine whether you might qualify for any of these. How to File Your Own Taxes If You Live Overseas If you earned income in the United States as a U.S. citizen or resident alien, you likely need to pay taxes on that income. This is true even if you live overseas. You can still choose to e-file or mail your tax return to the IRS once you have it prepared, just as if you physically lived in the United States. In some cases, you will be taxed on the income that you earned throughout the world. However, you may be able to deduct a portion or all of the revenue that was not made in the United States in some circumstances. Filing Online The IRS offers an online filing option that is free for individuals that have an adjusted gross income below a specific threshold. Generally, your income must be below $66,000 to qualify for this service. You can also file online by using a commercial tax preparation software. Examples of this type of software include: H&R Block TurboTax TaxCut TaxSlayer There are many programs available that will file your taxes for you, often for a fee. Knowing how to file your own taxes can be a great way to save money, but it can be tricky as well. If you want to file your taxes yourself, be sure to read the form instructions thoroughly and get familiar with various tax saving opportunities before you begin preparing your return.

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What Exactly is an Investment Property Loan?

Phil Sykora | August 7, 2019

The Impact of Investing in Property Loans Real estate investment is a great way to create generational wealth – but to buy that fixer-upper property across town, you need a way to get the money. Enter: Investment Property Loan. Investment property loans are conventional, HELOC and private money loans that lenders make, using investment properties as collateral. Each of them is capable of providing the much-needed cash to start construction on your first (or twentieth) real estate investment deal. Different Types of Investment Property Loans How do you know which investment property loan is right for you? The answer will vary based on many factors. According to the Urban Institute, somewhere between 13-16% of investment property loans are declined. By understanding the various types of investment property loans, you’ll be better equipped to choose the right property financing for your next investment and get approved for your next investment property loan. [youmaylike] Conventional Bank Loans When you think of getting a loan, you probably think about banks first. Traditional lenders can be a great option. To secure a bank loan for an investment property, you’ll need great credit (680 or better) and a little buffer time before you need to close. These loans will take longer (about 30-45 days according to Investopedia) to close, but the rates will be more competitive than hard money and private money. Requirements vary by lender, but generally, lenders require borrowers to have the following: 25% down payment. A 680+ credit score. A DTI (debt-to-income) ratio of below 50% (although it depends on the loan type and the income from the property can be forecasted to your current income). Documentation: two years of tax returns, two years of W-2s and two months of bank statements at a minimum. Hard Money Loans Hard money loans are a great way to secure investment financing quickly, especially if your credit isn’t awesome. Because of the quick turnaround and flexible requirements around credit score, you’ll likely be agreeing to a higher interest rate. Many hard money loans only require you to make interest payments on the amount that they give you. This means you keep more cash in hand while working through your project, which generally lasts between 6-18 months. You can make a large payoff once you’ve sold the property or refinanced into a longer-term loan. While hard money loans are more accessible and offer faster closing times, the rates are typically much higher than conventional loans. Hard money loans also typically use the property itself as collateral (or some other type of collateral that you can offer, such as your car or primary residence). If you end up failing to make the payments, the lender can seize these assets, making hard money loans a bit riskier than many other options. Private Money Loans Private money loans are obtained through an individual – usually a family friend or someone in your community or network. Each investor has unique expectations: They may even have no set requirements other than a cool project on a street they like. The investor sets the terms – perhaps relaxed payment expectations and low-interest rates – and can work with you to adjust those as issues come up in the project. Since it’s an individual deciding what to do with their own money, a private money loan can be less reliable than an institution. Yes, they can adjust when your needs change, but may just as quickly pull back their investment when their needs change. The best part is building a relationship. You have the opportunity to partner closely with someone on the project. This brings returns to both you and someone you trust (rather than a large institution). If things go south, it can be easier to reason with an individual, as well. Tapping Home Equity (HELOC or Cash-Out Refi) Tapping into your home equity requires prior investment in your primary property. That could be either through value-add improvements or equity that’s built up over time. You may also be able to tap home equity through a cash-out refi. You essentially take out a new loan for more than you currently owe on your house. The amount beyond paying off the previous mortgage becomes cash in hand to put toward your next investment property. How To Decide Which Type Of Investment Property Loan Is Right For You There’s no one-size-fits-all investment property loan. Talk to trusted advisors, take time to analyze the investment property and think about your exit strategy for the property financing. All of these considerations will impact which loan will work best for you. Take a look at some safe investments for seniors.

A Guide to Gold Investment Companies

Phil Sykora | August 7, 2019

Finding the Best Investments For thousands of years, gold has captivated our attention and has remained a constant high-valued commodity. Since as early as 4000 BC, gold has been seen as a treasure for its unique and appealing qualities. Not much has changed today: gold is still seen as a precious metal that holds value. In modern society, we often hear about stocks, bonds, and real estate investing, but what about gold investing? In this guide, we’ll be covering the basics of gold investing, along with four gold investment companies to consider. What Is Gold Investing? Gold investing refers to allocating capital to purchase and hold gold as an investment. Despite gold having high value for thousands of years, it wasn’t until 1975 that gold investing really took off. Because of the Gold Reserve Act of 1934, it was illegal for individuals and institutions to hold or trade gold titles or certificates. Today, investors choose gold for a variety of reasons, including portfolio diversification and protection against economic uncertainties. Gold has a low correlation to other asset classes, which acts as a great portfolio diversifier since its value tends to increase during times of economic crisis. This is because people tend to turn to tangible assets during times of economic uncertainty to preserve their wealth. On top of that, gold can act as a hedge against inflation due to its intrinsic value. If the purchasing power of the US dollar begins to erode from inflation, the variable cost of gold will increase as a result. [youmaylike] With that being said, it’s important to keep in mind that just like any investment, the price of gold is not guaranteed to increase. Even though it can help diversify your investment holdings, it’s generally recommended to invest no more than 5-10% of your portfolio. How Can I Invest In Gold? If you’re new to gold investing, you might be wondering how you can add it to your portfolio. Since gold is a physical commodity, there are several ways to invest in gold, such as: Physical ownership (e.g., gold coins, bullion or jewelry). Gold exchange-traded funds (ETFs) and mutual funds. Gold futures and options contracts. Another great way to get exposure to the gold industry is by purchasing gold mining stocks, however, these company’s share prices do not directly track the value of the gold itself. To keep your gold investments in a tax-sheltered retirement account, it’s recommended to open a gold IRA through a special custodian or broker. Once you have a gold IRA set up, you can buy and sell any gold-related investments. Although a gold IRA has to be held separately from other retirement accounts, rules regarding contribution limits and distributions still apply. The Best Gold Investment Companies Now that you know the basics of gold investing, we can dive a little deeper. Below, we’ve compiled the best gold investment companies where you can hold a gold IRA. American Hartford Gold For those who are looking for low fees, look no further than American Hartford Gold. This company doesn’t charge any fees for account setups, transfers or annual maintenance. In addition to that, they also offer frequent promotions to waive storage fees and have a no-fee buyback program. American Hartford Gold requires a minimum order size of $10,000 for their gold IRA, which is a relatively smaller initial investment size than other companies, making it more accessible for smaller investors. Though their no-fee business model is certainly appealing, keep in mind that there’s still a $50 fee for the account custodian to establish your precious metal IRA, and the buyback program offers lower prices than the purchase price. Birch Gold Group Birch Gold Group is another gold IRA company that would suit a fee-conscious investor. With full-fee transparency on their website, there shouldn’t be any surprises. They charge flat fees, so no matter how much you have in your account, the fees remain the same. The company recommends investors start with an initial investment of $10,000. Larger investors are not only incentivized by the flat fee but also by a promotion that waives all first-year fees with a transfer over $50,000. Birch Gold Group’s fee structure is enticing for larger investors, however, it may not be as worthwhile for smaller investors since the flat fee will be a larger percentage of your holdings. Augusta Precious Metals If you’re a large investor, Augusta Precious Metals could be a great fit. They offer lifetime customer support and assign each investor a customer success agent for direct contact. Additionally, they offer one-on-one web sessions for investors who hold over $100,000 and have a plethora of educational content in the form of videos and articles. The main drawback of Augusta Precious Metals is the minimum initial investment of $50,000, which requires a fairly large portfolio to meet that requirement. The company also does not list fees on its website and requires potential investors to speak to a representative to obtain that information. Goldco Known for their superb customer service and high client satisfaction ratings, Goldco is another great option to invest in. Similar to Augusta, they have plenty of resources for clients including how-to videos and actionable tips related to gold investing. Investors also get the choice to receive their distributions as physical gold or have Goldco convert it into cash. To open a gold IRA with Goldco, investors need to start with a minimum initial investment of $25,000. Final Thoughts Overall, if you’re looking for a way to diversify your investment portfolio and protect yourself from economic fluctuations, gold investing can be a great addition. Paired with the tax advantages of an IRA, it can be held long-term and included as part of a well-balanced retirement plan. However, just like any investment, the value of gold is not guaranteed to rise. It’s highly recommended to do your own in-depth research or seek the advice of a financial advisor to see if gold investing is right for your portfolio. Check out some investment apps for beginners.

How to Use a 529 Plan to Help Cover Education Costs

Tedra DeSue | August 7, 2019

Saving for Further Education Putting a child, or even yourself, through college has become increasingly financially burdensome as tuition costs continue to outpace incomes. If you or your child are planning to pursue higher education, there is financial help outside of scholarships and loans available. One popular option is the 529 savings plan. This is a savings plan packed with tax advantages that encourage people to save for their educations. Let's take a look at the 529 college savings plan. Sponsored by states, state agencies and/or education institutions, the plans have the blessings of the IRS whose Section 529 code authorizes them. Here, we’ll go over the basics of 529 plans to help you determine if they are right for you. 529 College Plans in a Nutshell 529 plans can be used to save for certain educational expenses for any student. These educational expenses include: Tuition. Room and board. Mandatory fees. Books. Computers. Software. You can invest in any state 529 plan that has approved them, and that’s most of them. The plans cover costs at any college as long as it qualifies under the plan’s rules. You could reside in Georgia, invest in a Colorado plan and send your child to a post-secondary institution in California. SavingForCollege.com notes: "In most plans, your choice of college is not affected by the state that sponsored your 529 college savings plan. You can use your 529 plan at more than 6,000 U.S. colleges and universities and more than 400 foreign colleges and universities." To find out if your preferred institution is eligible under the 529 rules, visit its website. Two Options 529 savings plans come in two forms: a prepaid tuition plan and an education savings plan. Every state and the District of Columbia sponsor at least one of them. Let’s start with the prepaid plan. Prepaid Plan These plans allow people to set up specific accounts they can use to prepay all or part of their tuition costs. Funds in these accounts can cover the costs of in-state tuition, or be converted to cover tuition and other costs at out-of-state colleges and universities. Prepaid tuition plans have some caveats. These include: Residency requirements. Restriction on where the credits can be redeemed. What the credits can cover, which is usually tuition and mandatory fees. If, for some reason, your child doesn’t attend a participating college or university, the prepaid tuition plan may pay less than expected, according to the U.S. Securities and Exchange Commission (SEC). It oversees and regulates securities, such as stocks and bonds. The SEC states that only a small amount could be paid based on the original investment. When considering a prepaid tuition plan, you should understand the restrictions and limitations of the plan, including the extent to which your money is guaranteed and what happens to your money if the beneficiary doesn’t attend a participating college or university, according to the SEC. [youmaylike] Education Savings Plan Next, we will discuss education savings plans. Like prepaid accounts, they allow people to open investment accounts to save for their children’s futures. The plans cover the same things as prepaid plans. However, education savings plans are not limited to covering higher education costs. They can also cover tuition for elementary schooling, such as private schools. An additional feature of education savings plans is that they can be used to pay up to $10,000 per year per beneficiary for tuition at any public, private or religious elementary or secondary school. The SEC also points out that savers using this plan can choose from a range of investment portfolio options, which often include mutual funds and ETFs. It states: "If you are using a 529 account to pay for elementary or secondary school tuition, you may have a shorter time horizon for your money to grow. You also may not feel comfortable taking on riskier or more volatile investments if you plan on withdrawing the money soon. Because of these things, you may consider different investment options depending on when you plan to use the money that is invested." All education savings plans are sponsored by state governments, but only a few have residency requirements for the saver and/or beneficiary. State governments do not guarantee investments in education savings plans. Understand that investing in an education savings plan doesn’t qualify for federal guarantees. As with most investments, investments in education savings plans may not make any money and could lose some or all of the money invested, the SEC also points out. Unique Circumstances You could be one of those fortunate 529 savers who still have money in their account after your student graduates. Be forewarned that if you use the money for purposes other than paying for qualified higher education expenses or tuition for elementary or secondary school, you could be hit with a penalty. Specifically, the earnings portion of any non-qualified withdrawals will be subject to federal income tax as well as a 10% penalty, according to the SEC. Also, understand you could face penalties for failing to use the money in your 529 account for qualified higher education expenses and/or tuition. This applies regardless of the plan you choose. Withdrawals can be subject to state income tax if you claimed a deduction or credit for your contributions. If a scholarship was accepted, you may have to pay taxes on any income earned. In its bulletin, “Investor Bulletin: 10 Questions to Consider Before Opening a 529 Account,” the SEC states: "You may be able to avoid paying any penalties and taxes if you change the beneficiary of the 529 account or transfer the assets to another 529 account, in both instances to a person in the same family. Or you could keep the savings in the 529 account if your student is considering graduate school. Make sure you understand the tax implications of investing in a 529 account and consider whether to consult a tax adviser." Time Is of the Essence No matter which type of 529 plan you choose, you should start saving as soon as possible. One of the benefits of 529 plans relates to the earnings potential that grows over time. The SEC states: "The longer the money is invested, the more time it has to grow and the greater your tax benefits. You will lose some of these potential benefits if you withdraw money from a 529 plan account within a short period after it is contributed."
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