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Make Your Cash Worth More

Banking tips to help you cash in

Your cash is parked. Do you know if it’s making or losing you money? For instance, letting it sit in a non-interest-bearing account is a waste of earnings potential. It’s actually losing money if you factor in inflation! Here are some ideas to help you make the most of your banked cash:

Understand your bank accounts. Not all bank accounts are created equal. Interest rates, monthly fees, minimum balances, direct deposit requirements, access to ATMs, other fees and customer service all vary from bank to bank and need to be considered. Start by digging into the details of your accounts. There may be some things you’ve been unnecessarily living with like ATM fees or monthly account charges. Once you have a handle on your current bank, conduct research on what other banks have to offer.

Know your interest rates. As a general rule, the more liquid an account, the lower the interest rate. Checking accounts offer the lowest rates, then savings accounts, which yield lower rates than CDs. Maximizing your earnings is as simple as keeping your cash in accounts with higher interest rates. The overall interest rate earned between all your accounts should be higher than the inflation rate, which is generally around 2 percent.

Make smart moves. There are a couple of things to take into account when making transfers. First, federal law allows for only six transfers from savings and money market accounts per month. Second, if you invest in longer term investments like CDs or bonds, there are penalties for withdrawing funds before the maturity date. So make sure you can live without the funds for the duration of the term.

Stay diligent. Putting together a cash plan is just the start. The key to success is to be persistent. Besides losing out on potential earnings, mismanaging your cash can result in hefty overdraft fees. The more attention you devote, the more your money will grow.

Effective Tax Planning Starts Now!

With summertime activities in full swing, tax planning is probably not on the top of your to-do list. But putting it off creates a problem at the end of the year when there’s little time for changes to take effect. If you take the time to plan now, you’ll have six months for your actions to make a difference on your 2019 tax return. Here are some ideas to get you started.

Know your upcoming tax breaks. Pull out your 2018 tax return and take a look at your income, deductions and credits. Ask yourself whether all these breaks will be available again this year. For example:

  • Are you expecting more income that will bump you to a higher tax rate?
  • Will increased income cause a benefit to phase out?
  • Will any of your children outgrow a tax credit?

Any changes to your tax situation will make planning now much more important.

Make tax-wise investment decisions. Have some loser stocks you were hoping would rebound? If the prospects for revival aren’t great, and you’ve owned them for less than one year (short-term), selling them now before they change to long-term stocks can offset up to $3,000 in ordinary income this year. Conversely, appreciated stocks held longer than one year may be candidates for potential charitable contributions or possible choices to optimize your taxes with proper planning.

Adjust your retirement plan contributions. Are you still making contributions based on last year’s limits? Maximum savings amounts increase for retirement plans in 2019. You can contribute up to $13,000 to a SIMPLE IRA, up to $19,000 to a 401(k) and up to $6,000 to a traditional or Roth IRA. Remember to add catch-up contributions if you’ll be 50 by the end of December!

Plan for upcoming college expenses. With the school year around the corner, understanding the various tax breaks for college expenses before you start doling out your cash for post-secondary education will ensure the maximum tax savings. There are two tax credits available, the American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit. Plus there are tax benefits for student loan interest and Coverdell Savings accounts. Add 529 college savings plans, and you quickly realize an educational tax strategy is best established early in the year.

Add some business to your summer vacation. If you own a business, you might be able to deduct some of your travel expenses as a business expense. To qualify, the primary reason for your trip must be business-related. Keep detailed records of where and when you work, plus get receipts for all ordinary and necessary expenses!

Great tax planning is a year-round process, but it’s especially effective at midyear. Making time now not only helps reduce your taxes, it puts you in control of your entire financial situation.

Get Your Life Back! Ideas to Unplug

With endless movies, TV shows and video games available to us 24/7, it’s become too easy to spend all our free time on electronic devices. If you and your family are looking for ways to unplug this summer, consider these ideas:

  • Turn off notifications. Hey! Guess what? Bill just posted a photo of his dinner! And look at this! Minneapolis just set the world record for the largest pillow fight! Let’s be honest, most alerts you get on your phone are meaningless, yet we allow them to steal our attention several times a day. Review your phone settings and turn off all non-essential notifications to keep you focused on the things that are important to you.
  • Ration your screen time. Limiting time in front of a screen is important for both you and your kids. Setting daily screen limits is a good way to keep your media consumption under control and allow for guilt-free time when you just want to scroll through social media or watch a movie.
  • Make a summer reading goal. Set a goal (with prizes at the end!) for yourself and your children to read a certain number of books before Labor Day. According to the Chicago Tribune, because reading is an active activity (not passive, like watching TV), “it reduces stress, promotes comprehension and imagination, alleviates depression, helps you sleep, and may contribute to preventing Alzheimer’s.”
  • Schedule phone-free activities. Plan a get-together like a picnic or BBQ, but with a catch — phones need to be checked at the door. That way you and your guests can focus on each other without the constant distraction of a phone. If some of the guests don’t know each other, even better! They might leave the party with a few new friends.
  • Start a new outdoor hobby. Getting outside is a great way to separate yourself from your electronics. By finding an outdoor hobby that interests you, like hiking, gardening or camping, you’ll have an activity that takes your attention away from your phone and provides added benefits, like exercise and vitamin D.

By getting your electronic habits to a manageable level, you’ll free up more time and energy to live this summer to the fullest.

Year-End Tax Checklist

As the year draws to a close, there are several tax-saving ideas you should consider. Use this checklist to make sure you don’t miss an opportunity before the year is out.

Retirement distributions and contributions. Make final contributions to your qualified retirement plan, and take any required minimum distributions from your retirement accounts. The penalty for not taking minimum distributions can be high.

Investment management. Rebalance your investment portfolio, and take any final investment gains and losses. Capital losses can be used to net against your capital gains. You can also take up to $3,000 of capital losses in excess of capital gains each year and use it to lower your taxable ordinary income.

Last-minute charitable giving. Make a late-year charitable donation. Even better, make the donation with appreciated stock you’ve owned more than a year. You often can make a larger donation and get a larger deduction without paying capital gains taxes.

Noncash donation opportunity. Gather up non-cash items for donation, document the items, and give those in good condition to your favorite charity. Make sure you get a receipt from the charity, and take a photo of the items donated.

Gifts to dependents and others. You may provide gifts to an individual of up to $14,000 per year in total. Remember that all gifts given (birthdays, holidays, etc.) count toward the annual total.

Organize records now. Start collecting and organizing your end-of-year tax records. Estimate your tax liability and make any required estimated tax payments.