7 Money Lies We Tell Ourselves

Do you think you’re telling yourself the truth about money? We may think we know the facts about our finances. But our beliefs can often overshadow the facts.

Our wishes, hopes and fears can tip the scales away from the truth. This makes it easier for us to believe what we want to about money — and it can happen without us even realizing it.

The “money lies” we tell ourselves can change the way we think and act when it comes to finances. And since most of us rarely talk about money with our friends and family, the money lies we tell ourselves stick around. That can lock us into destructive beliefs and reinforce poor financial habits.

But no matter what money lies we tell ourselves, it’s never too late to set the record straight. Let’s look at some of the most common money lies we all buy into at some point — and the truth behind them.

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1. I’ll be happier when I have $_____.

Bundles of money stick out of a bucket.Bundles of money stick out of a bucket.

“With $___ in the bank (whatever amount you think is ideal), many of my problems would go away, and I’d be happier.”

Does this sound familiar?

Goals and target numbers for earnings, savings and budgets are great. But if you make the mistake of thinking some magic number will flip a happiness switch for you, think again.

When we tell ourselves this money lie, we put too much emotion into a single number. And we may be setting ourselves up for disappointment — both if we never get $__, and if we do get $__ and realize it doesn’t make us as happy as we thought it should.

The good news? Studies show that making progress toward our goals can be incredibly satisfying, regardless of whether we hit the target.

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2. I deserve it, regardless of whether I can afford it.

A woman holds many shopping bags and looks miffed.A woman holds many shopping bags and looks miffed.

“I work hard, and I don’t treat myself often.”

“I could kick the bucket tomorrow (YOLO).”

“I’m getting a great deal!”

These are just some of the rationalizations we use to convince ourselves that it’s OK to buy something.

Whatever legs this money lie stands on, it’s usually used to soothe the sting of expensive purchases — those that aren’t really essential — and perhaps items we know, deep down, we don’t really need.

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3. I have strong financial willpower.

A woman chooses between an apple and a huge hamburger.A woman chooses between an apple and a huge hamburger.

When faced with temptation, most of us lie to ourselves that we’re great at resisting it. But, when was the last time you chose not to buy something you really wanted? When was the last time you made an impulse buy?

The average American spends at least a couple of hundred dollars a month on impulse purchases.

And we’re more likely to buy on impulse and spend more when we’re stressed. That’s probably why impulse spending shot up about 18% in 2020.

Plus, those of us who are shopping with credit cards are probably spending more on the regular basis than we realize. The average credit card shopper spends about 10% more with their cards than they would with cash. And that’s not even counting the cost of interest if the balance isn’t paid in full.

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4. I’ll save more later.

A piggy bank with a sad face lies on its side.A piggy bank with a sad face lies on its side.

Most folks focus on buying what we need and want now, and we tell ourselves we’ll start saving for the future later. If we save anything at all, it’s likely to be whatever we have left over. In fact, fewer than 1 in 6 of us are saving more than 15% of our income, and 1 in 5 aren’t saving any money.

No matter the reason, when we tell ourselves this money lie and put off saving, we’re prioritizing the present over the future.

That can catch up with us on a “rainy day” or whenever we do start thinking seriously about retiring. By that time, there can be a lot of heavy lifting to play “catch up” with our savings — or it may even be too late.

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5. I have plenty of time to plan for my financial future (& I don’t need to think about it yet).

A drawing of a clock in the sand of a beach is washed away by waves.A drawing of a clock in the sand of a beach is washed away by waves.

The future can seem really far away when we’re looking 10, 20 or even more years out. When we feel like we have a lot of room between now and then, it’s easy to make excuses to not plan or save for it.

This money lie is an excuse for procrastination. It’s the rationale we use when we have a hard time managing our negative feelings or uncertainties about our financial futures. And it makes us turn a blind eye to the years of interest that we lose out on when we don’t plan.

Benjamin Franklin may have spoken best about the truth behind this money lie when he wisely said, “by failing to prepare, you are preparing to fail.”

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6. There is good and bad debt.

A piggy bank with slips of IOUs sticking out.A piggy bank with slips of IOUs sticking out.

We tend to assign moral value to debt, thinking of mortgages and student loans as “good” debt, and considering credit card debt as “bad.”

This money lie gets us to think the wrong way about debt. All debt comes with some cost, and it’s critical to understand how every loan affects our current and future selves.

Instead of focusing on whether debt is “good” or “bad,” concentrate on the total cost of the interest over time (it’s often higher than you think) and on deciding whether the loan is really helping you achieve your goals.

About half of us seem to already be on track with that thinking, saying that we expect to be out of debt within one to five years.

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7. Wanting more is bad.

Ladders lead up into the clouds.Ladders lead up into the clouds.

While I think we can all agree that obsessive greed is wrong, it’s not a bad thing to want more for you and your loved ones.

When we tell ourselves we shouldn’t want more than we have, we agree to settle for less. And we may be tricking ourselves into thinking it’s OK that we’re not doing something (or enough) to improve our financial situation.

This money lie holds us back and can make it hard to improve our financial behaviors.

When we frame wanting more as a positive motivator, it can be easier to take the chances or do the work needed to get to that next financial level we may want.

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How to Stop Losing Out to Costly Money Lies

Hands holding one-hundred dollar billsHands holding one-hundred dollar bills

How many of these money lies sound like something you’ve told yourself?

At some point, I think we’ve all tricked ourselves with at least one of them. Maybe we were rationalizing a decision, or we were trying to make ourselves feel better about what we wanted to do with our money. And we probably didn’t make the best financial choices as a result.

Here’s the truth: Honesty goes a long way with finances.

What we tell ourselves and what we believe about money influences our financial behaviors. If we’re not telling ourselves the truth, our money lies won’t just drain our wallets. They can affect our financial awareness and inflate our confidence. And they get in the way of maintaining or growing wealth.

When we recognize the money lies that we believe, we can reset our thinking, change our mindset and start taking action. And that sets us up to make better choices and make more progress toward our big financial goals.

P.S.: Sign up for my emails to continue the conversation. My subscribers get my best insights! Just email me at ian.maxwell@revirescowealth.com, and put SUBSCRIBE in the subject field.

This material is for information purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. The content is developed from sources believed to be providing accurate information; no warranty, expressed or implied, is made regarding accuracy, adequacy, completeness, legality, reliability or usefulness of any information. Consult your financial professional before making any investment decision. For illustrative use only.
Investment advisory services offered through Virtue Capital Management, LLC (VCM), a registered investment advisor. VCM and Reviresco Wealth Advisory are independent of each other. For a complete description of investment risks, fees and services, review the Virtue Capital Management firm brochure (ADV Part 2A) which is available from Reviresco Wealth Advisory or by contacting Virtue Capital Management.

Founder & CEO, Reviresco Wealth Advisory

Ian Maxwell is an independent fee-based fiduciary financial adviser and founder and CEO of Reviresco Wealth Advisory. He is passionate about improving quality of life for clients and developing innovative solutions that help people reconsider how to best achieve their financial goals. Maxwell is a graduate of Williams College, a former Officer in the USMC and holds his Series 6, Series 63, Series 65, and CA Life Insurance licenses.Investment Advisory Services offered through Retirement Wealth Advisors, (RWA) a Registered Investment Advisor. Reviresco Wealth Advisory and RWA are not affiliated. Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. Past performance does not guarantee future results. Consult your financial professional before making any investment decision.

Source: kiplinger.com

10 Ways to Save Money on School Uniforms for Kids

According to the National Center for Education Statistics, 1 in 5 public schools required students to wear uniforms as of the 2017-18 school year. These can be anything from identical outfits marked with the school’s name or logo to a basic color scheme, such as plain white shirts and tan pants.

According to 2011 research from the University of Nevada, Reno College of Education, a school uniform policy can have many benefits for students. It can make it easier to get ready for school, boost self-esteem, reduce bullying, and improve classroom discipline. But it has one big downside for parents: the cost. According to CostHelper, a school wardrobe of four or five uniforms can cost anywhere from $100 to $2,000.

One reason uniforms often cost more than regular clothes is that parents have less choice about where to buy them. If you can only get your kids’ school wardrobes from the official school store, you must pay whatever that store charges. However, you can get around this problem with the right shopping strategies. The first tip to try: shopping secondhand.

Ways to Save With Secondhand School Uniforms

Clothes are one thing it nearly always pays to buy secondhand if you can. With school uniforms, that’s doubly true.

Since young children grow so fast, their outgrown uniforms can still have lots of life left in them. Naturally, these previously worn uniforms don’t look brand-new, but neither do most school clothes after a few weeks of wear. Secondhand school uniforms cost much less than new ones, and in some cases, they’re free.

1. Try Uniform Swaps

If you have two children attending the same school, the younger kid can wear the older one’s hand-me-downs. But if you have only one child or your kids go to different schools, you can end up with clothes in good condition and no one to hand them down to.

A uniform swap is a way to expand your hand-me-down family. By pooling resources with other parents, you can pass on your child’s outgrown uniforms to younger students at your school and receive uniforms from older students in turn.

Some schools hold official uniform exchanges. For example, at St. Catharine School in Ohio, you can trade in gently used school uniforms for larger sizes or pick up other people’s trade-ins at significantly reduced prices. Other schools, like St. Stephen’s Academy in Oregon, give parents points for their trade-ins, which they can use for purchases or donate.

If your child’s school doesn’t have an official uniform exchange, hold a clothing swap party of your own. Invite other parents over, lay out all your outgrown uniform items, and see who can use them.

If you don’t have the space to meet and exchange clothes in person, start a social media group where parents can post photos and descriptions of their kids’ outgrown clothes. When you find someone who has the size your child needs or needs the size you have to give, you can contact each other to arrange a pickup.

2. Shop at Thrift Stores

If you live in or near a large city with a large student population, there’s a good chance you can find outgrown school uniforms at local thrift stores. Check the stores closest to your child’s school to maximize your chances of finding them.

Even in smaller cities and towns, thrift stores are an excellent place to look for basic pieces that are often part of a school uniform. Dress shirts, solid-color polo shirts, and chino pants are likely to show up on their racks. You can’t count on finding the pieces you need in your child’s size, but if you do, they’ll be significantly cheaper than new clothes.

To find thrift stores in your area, do an Internet search on “thrift stores” or “thrift shops” with your town’s name or zip code. Also, check the websites of the largest store chains — such as Goodwill, Salvation Army, and Value Village — to find their nearest locations.

3. Find Sellers Online

If you can’t find suitable secondhand clothes for your child’s uniform at local stores, try looking online. Start consulting your local Craigslist and Facebook Marketplace groups in early July, and look for new listings every other day or so. That gives you roughly two months to find all the pieces you need to build a complete school wardrobe for your child. Just be sure to contact sellers quickly when you find something you need so someone doesn’t beat you to it.

Another reliable source for secondhand uniforms online is eBay. You can create saved searches for each specific garment your child needs, such as “navy shorts size 8,” and receive daily emails of all new listings for your saved search. You can pick up pieces one at a time or — if you’re lucky — find a lot of uniform clothing all in the same size.


Ways to Save on New School Uniforms

The biggest downside of secondhand shopping is that you can’t be sure of finding what you need. If the start of the school year is approaching and you still don’t have a complete school wardrobe for your child, don’t panic. There are ways to buy new uniform-appropriate clothes and still keep costs down.

4. Buy the Minimum

For starters, don’t buy more of any component than you really need. Your child may need a clean shirt for school every day, but kids can usually get away with wearing the same skirt, pants, or sweater several days in a row. Jackets and ties can go even longer between cleanings.

How many pieces your child needs depends on how often you intend to do laundry. Mothers discussing their kids’ school wardrobes on Mumsnet generally say they include:

  • Five to 10 shirts
  • Two to five sweaters
  • Two to five skirts or pairs of pants or shorts

On top of that, you can add one or two school blazers and one or two dresses or jumpers if your uniform includes these pieces. And your child also needs at least one pair of school shoes and enough socks and underwear to last the week.

If you shop smart, you can put together this minimalist kids’ wardrobe for less than the $240 average parents reported spending on back-to-school clothes in a 2019 National Retail Federation survey. CostHelper says it’s possible to find pants and skirts for as little as $5 each, tops for as little as $3, and shoes starting at $15. That’s less than $100 for the whole wardrobe.

5. Visit Cheaper Stores

If your school’s uniform consists of basics like solid-color tops and pants, there’s no need to buy them at the official school store. Many major retail chains sell uniform-appropriate clothes for kids at quite reasonable prices. In fact, several retailers offer lines of kids’ clothes designed explicitly for this purpose, such as:

6. Shop Online

If stores in your area don’t carry the school uniform pieces you need at prices you like, try shopping online. Some online retailers specialize in school uniforms, and others have sections devoted to them. Good places to shop online include:

  • Amazon. The e-tail giant has an entire section called The School Uniform Shop. It provides links to uniform-appropriate garments from many popular brands, including Nautica, Izod, and Dockers. Alternatively, you can search for “school uniforms” to find apparel for girls and boys. Check out these Amazon savings tips for more ways to save.
  • French Toast. Online retailer French Toast deals in school uniforms for all ages, which you can search by school or gender. The site also offers two- and three-packs of identical shirts or pants for a discounted price per piece.
  • Lands’ End. The school uniform shop at Lands’ End offers sturdy clothing in all sizes, from toddler to adult. Clothes are covered by the brand’s unconditional lifetime guarantee. There’s even a selection of adaptive garments for kids with disabilities. This apparel combines easy-to-use magnetic closures with decorative buttons for a uniform look.
  • Lee Uniforms. For teens and young adults, the Lee Uniforms store on Amazon offers school- and work-friendly pieces. The selection is limited, but the prices are excellent.
  • SchoolUniforms.com. As its name implies, SchoolUniforms.com specializes in uniform basics, from blazers to plaid pleated skirts. Garments come in a range of sizes to fit children ages 3 and up, including plus sizes.

When shopping for uniforms online, you can save still more by using a mobile coupon app like Rakuten or Ibotta. If you prefer to shop from a computer, install a money-saving browser extension like Capital One Shopping to help you find great prices and available coupon codes.

Capital One Shopping compensates us when you get the browser extension using the links provided.

7. Wait for Sales

If your school has an official uniform store, call that store and see when it plans to offer discounts or promotions. In many cases, uniforms go on sale in October, after most parents have already bought their kids’ clothes for the year. You can save money on school uniforms by buying just enough pieces to get through September and waiting until October to stock up.

If the school uniform is a generic outfit available from many stores, keep an eye out for sales at all the stores in your area. Consider signing up for emails from your favorite local stores to let you know when uniform clothing goes on sale. Sometimes, these emails also provide coupons, which can boost your savings still more.

Timing your purchases can help at department stores too. Clothes often go on sale at the end of the season — for example, summer clothes in September or winter coats in March. If you plan ahead, you can save by buying school uniforms for next year during these end-of-season sales.

If you’re unsure when and where school uniforms are most likely to go on sale in your area, create a Google Alert for the term “school uniform sale” with your location or zip code. Whenever a new sale pops up, you’ll receive an email about it. You can also use the term “school uniform clearance” to learn about end-of-season clearance sales.

8. Check Out Clearance

Even when a department store isn’t having a sale, there’s usually a clearance rack you can check for marked-down clothing. Since school uniforms tend to be plain clothes without a lot of eye appeal, there are often at least a few pieces that don’t sell and end up on the clearance rack.

For example, the frugal-living bloggers at Life Your Way and Joyfully Thriving both report finding uniform pieces for less than $5 on the clearance racks at stores like Gap and Macy’s.

9. Buy Bigger Sizes

If your child is still growing, there’s a good chance the uniforms you buy now won’t fit by the end of the year. However, you can make them last as long as possible by sizing up.

Choosing clothes with an extra inch to spare in the legs and sleeves gives your kid room to grow into them. Some uniform pants and skirts come with adjustable waistbands, so they’ll accommodate your child’s growth in width as well as height.

And if you find a great price on a particular piece your child needs, you can buy next year’s sizes now. Assuming they plan to attend the same school for the foreseeable future, you know they’ll need the same uniform next year, so buying multiple sizes at once lets you get them all at the best possible price.

10. Buy to Last

If your child has stopped growing but still has a few more years of school to go, you can save money by choosing quality clothing that will last. These well-made pieces may cost more upfront than cheaper brands, but they pay off in the long run. A $50 blazer that wears out after one year costs $50 per year, but a $100 blazer that lasts for four years costs only $25 per year.

For example, clothes from Lands’ End come with a lifetime guarantee. If they don’t last your child until graduation (or they outgrow them), you can return them for a full refund. Clothing from Dickies, available at Walmart, is also guaranteed for its “expected life,” though they don’t define the term. Clothes from Target’s Cat & Jack line come with a one-year guarantee.

Another way to make school uniforms last as long as possible is to choose the darkest colors allowed. On light-colored clothes, minor spots or stains show up more vividly, making them unfit for school wear. Darker-colored clothing, such as maroon, navy, or forest green, hides these minor flaws.


Final Word

Saving on school uniforms doesn’t end when you’ve made your purchases for the year. If your kid’s uniforms become unwearable due to rips, stains, or lost buttons, you’ll have to replace them in a hurry — possibly at full price. To avoid this problem, handle school uniforms with care to make them last as long as possible.

Always follow the washing instructions and line dry or dry flat when possible to avoid wear and tear from the dryer. Treat stains promptly, repair rips, and replace buttons.

If your sewing skills are up to it, you can even get another year or two of life out of garments by letting down the cuffs or adjusting the waistband to fit your child’s larger size. Following all these steps reduces waste, so you can also pat yourself on the back for being green.

One final tip: Label all your kids’ school clothing with their names. When all the students in a school wear the same outfit, it’s easy for them to grab someone else’s sweater or jacket by mistake. Sewing in a name tag or writing on the care tag with a permanent marker increases the chances misplaced clothes will find their way home again.

Source: moneycrashers.com

5 Ways to Get Amazon Prime for Free

Amazon Prime member holding packages
alphaspirit.it / Shutterstock.com

Shopping on Amazon can be convenient, especially if you are still spending more time at home amid the coronavirus pandemic. You can get anything from frozen pizza to light bulbs delivered to your door at the click of a button.

An Amazon Prime membership is even more convenient. Perks include not just faster shipping but also access to free e-books, music, file storage and more, as we detail in “These Are the 9 Best Benefits of Amazon Prime.”

While the convenience is great, the cost of membership may give you pause. In 2018, the online retailer raised the price of an annual Prime membership from $99 to $119 per year. For monthly subscribers, the cost went from $10.99 to $12.99 per month.

If you want to pay less but still enjoy the convenience of Amazon Prime, there are a few ways to get a free membership.

1. Get a free trial

If you want to try Amazon Prime to see if it’s worth paying for a membership, sign up for a free 30-day trial.

This is an option for people who are new to Prime as well as people who were Prime members in the past but have not been a member in the past 12 months. Just remember to cancel the trial before the 30 days is up if you decide you don’t want to pay for a membership.

Keep in mind that you can’t use a checking account or prepaid credit card to sign up for your trial: Your Amazon account must have a credit card.

However, you can use different email addresses to get multiple free trials, at least according to a 2018 Vice report. Again, remember to cancel each trial before it ends to avoid being charged for a membership.

If you’re a college student, you can sign up for a free Prime Student trial, which lasts six months. A Prime Student membership also costs less than a regular Prime membership if you decide to continue after your trial ends — $6.49 per month.

2. Use free Amazon gift cards

If you keep your Amazon membership after the free trial ends, consider paying for it with Amazon gift cards. There are various ways to get them for free. Check out the options in “8 Ways to Get Amazon Gift Cards for Free.”

3. Use credit card rewards

If you have a cash-back credit card, you could use your accumulated cash back to pay for a Prime membership — which kind of feels like you are getting Prime for free.

If you sign up for the Amazon Prime Rewards Visa Signature card, you will earn 5% cash back on purchases at Amazon and Whole Foods Market, and 1% or 2% everywhere else. If you spend $2,400 in a year at the 5% rate, you will earn $120 cash back — enough to cover the cost of a one-year annual membership.

If you’re in the market for a new card, stop by Money Talks News’ Solutions Center and use the free credit card comparison tool.

4. Switch cellphone plans

Looking to switch cellphone carriers? Some wireless providers offer Amazon Prime as a perk for signing up for select plans.

For example, Metro by T-Mobile gives customers Amazon Prime for free with select plans.

For more help finding the right plan for you, check out Money Talks News’ free cellphone and wireless plan comparison tool.

5. Share an account using Amazon Household

If someone in your household has an Amazon Prime membership, you can ask them to share it with you via Amazon Household.

Each of you keeps your own Amazon account, but the two accounts are linked, giving you access to select Prime benefits. They include:

  • Prime Shipping
  • Prime Video
  • Prime Reading
  • Amazon Photos
  • First Reads
  • Audible Channels
  • Prime Now
  • Other discounts and exclusives

Keep in mind that using the Amazon Household feature means sharing payment methods.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Source: moneytalksnews.com

The 6 Best Ways to Save Money for Kids

If you think higher education is in your child’s future, consider a 529 college savings plan.
Ready to stop worrying about money?
If you plan on covering some, but not all college expenses, you can tweak this formula to suit your situation. For instance, Fidelity recommends targeting a savings goal of ,000 multiplied by your kid’s current age if you plan on covering 50% of college costs and assume your child will attend a four-year public school. The financial institution provides a couple of examples of parents covering different percentages of fees and what that would look like at different ages of their children.
First, assess your total financial picture. Take inventory of your outstanding debt, and create a budget if you haven’t already.
If you want to save money, there are many ways you can go about it. Whether you’re thinking ahead to your child’s college education or just want to set aside a little something for when your child reaches a certain age, you have more than a few options to reach your savings goals.
(Have you picked your jaw up off the floor yet? Good. Keep reading.)
As with all investments, there are fees and risks associated with 529 plans.
There are also plenty of child-friendly bank accounts you can choose from to encourage your children to start saving early and often. A savings account is a good start.

Planning for Your Kids’ College Savings and Future Expenses

Source: thepennyhoarder.com
Now on to the good news: You have many options to start saving for your child’s future today, no matter your budget.
Again, that’s just the estimated cost. And there are grants and college scholarships available to help families chip away at the fees.
With this plan, a saver opens an investment account for the beneficiary’s qualified college education expenses, including room and board. This money can be applied toward universities (and some outside the U.S.), and withdrawals can also be used to pay up to K at elementary and high schools.

5 Ways to Save Money For Your Kids’ College Education

What’s the best type of savings account for a child? We’re glad you asked!

1. 529 College Savings Plans

How much money you “should” save depends on a few factors. For one, there are a lot of variables to consider: How much will a university degree cost in X number of years? How long do you think your child will go to school for? (Two years, four years or more years for advanced degrees.) What amount can you afford to regularly sock away for expenses?
These plans are sponsored by state governments as well, but there are fewer residency requirements. Investments in mutual funds and ETFs are not guaranteed by the federal government, but some bank products are protected.
A Roth IRA is an individual retirement account. You fund it with money you’ve already paid taxes on. So, when the time comes (typically at age 59 ½), you can withdraw your Roth IRA contributions and earnings tax free. However, you can withdraw this money earlier, penalty-free, to pay for higher education costs for your child.

Prepaid Tuition Plan

A 529 plan, or qualified tuition plan, is a tax-advantaged investment account. This means the money grows tax free and you can also take it out tax free. Each state (plus the District of Columbia) offers at least one plan. You can view minimum and maximum contribution limits and other considerations by state here.
With this plan, a saver or account holder can purchase units or credits at a participating university and lock in current prices for future tuition costs for the beneficiary. Typically, this money can’t be used for elementary and high school costs, nor be put toward room and board at college.

Education Savings Plan

While interest rates are low and whatever interest you earn is taxed as income, an FDIC-insured bank savings account is a tried and true (and safe) place to store money — whether yours or your kid’s.
With a Roth IRA, they’ll get tax-free money when they retire. They can also use these funds to help pay for their own qualified college expenses. While your child will have to pay taxes on the earnings, they won’t face an early withdrawal penalty.
You generally have more flexibility with brokerage accounts: You can choose from a variety of investments and make withdrawals at any time. Note: If your child does plan on going to college, the value of this account will be included in financial aid calculations.
There are other online calculators that can help you determine what you should save, depending on what your child’s future education plans might entail (like grad school). Again, a financial advisor or certified financial planner (CFP) can help you plan for college costs in way that accommodates your needs.

2. Roth IRA

Anyone can use a 529 college savings plan (no annual income restrictions!) and you can change the 529 beneficiary to another family member without incurring a tax penalty.
Here are three questions we see pop up time and again when it comes to investing in your child’s future. Oh. And this figure doesn’t even factor into university costs.
Of course, you can invest your money in a few different ways — some combination of a 529 plan; Roth IRA; or, UGMA, UTMA, brokerage or savings accounts — so you have options.

3. UGMA and UTMA Accounts

Sticking with college, here are additional ways to save that you and your child can work toward. Whether you’re a new parent or a year out from sending your kid off to college, consider these opportunities to save money.

Uniform Gift to Minors Act (UGMA)

A brokerage account allows you to invest money in stocks, bonds and mutual funds. Once you deposit your money, you can work with a financial advisor or robo-advisor, or both, to invest and grow your money.

Uniform Transfers to Minors Act (UTMA)

File this under “Things You Already Know” — kids are expensive. What you might not know is the best ways to save money for kids, and we’ve got your back on that.
This account establishes a way for someone under 18 years old to own securities without requiring a trustee or prepared trust documents.

4. Brokerage Account

Here are several ways you can invest and save money for your children, whether you want to open a college savings plan or start a rainy-day fund.
A parent or guardian will need to serve as the custodian, since minors generally can’t open brokerage accounts. Children need to have an earned income (part-time jobs, like babysitting, count) to contribute to it. Like adults up to and under age 50, they can only contribute up to K to the Roth IRA annually. Once the child turns 18 or 21 years old (depending on the state in which they live), control of the account must be transferred to them.
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5. Savings Account

College is an investment, and it can be a pricey one. By saving early (and with the magic of compound interest on your side), you can earn a bigger return on your money down the line.
And, mom and dad, when the time comes, make sure you fill out the Free Application for Student Aid (FAFSA).
There are two types of 529 plans: prepaid tuition plans and education savings plans.
Consider meeting with a financial expert to help you craft a plan that’s best for you.
The cost of raising a child from birth through age 18 is roughly 3,610, according to the United States Department of Agriculture (USDA). To break that down further, that’s around K per year, per kid.

graduation cap filled with money on sidewalk
Aileen Perilla/The Penny Hoarder

Additional Ways to Save Money for College

Save early and save regularly, and you’ll be off to a good start.Contributor Kathleen Garvin (@itskgarvin) is a personal finance writer based in St. Petersburg, Florida, and former editor and marketer at The Penny Hoarder. She owns a content-writing business and her work has appeared in U.S. News, Clark.com and Well Kept Wallet.

  • Ask for gifts toward their education expenses. If friends and family would like to give a gift to your child, ask them to consider putting any money toward their college fund. You can do this for any birthday or holiday, though the earlier you start investing in their education, the better. (Bonus: Your 1 year old doesn’t have the capacity to ask for the latest toy and won’t object to this gift.)
  • Encourage your kid to work and save. Once your child is of legal working age, they can get a job and start saving money for their school expenses. Even saving a small amount per paycheck can help them make a dent in later costs; you might also consider “matching” their savings to incentivize them (for example, give them $1 for every $20 they put away for college).
  • Look to companies and professional organizations. Your workplace may offer opportunities to children of employees looking to earn money for college. Some large companies, like UPS, offer such scholarships. Review your company handbook or ask your HR department about any available opportunities. Professional organizations, like the Rotary Club, are also known to offer scholarships and grants for continuing education. If you belong to any organizations or other clubs, look out for these benefits.
  • Apply for scholarships and grants. Additionally, encourage your high school student to look for scholarships and grants to help mitigate their college costs. Universities typically offer money for students who fit certain criteria — such as transfer students or people in certain majors — and meet other requirements. There are all sorts of weird scholarships, contests and even apps that can help them earn money for school, too. Just make sure they weigh the pros and cons of any entry fees and stay on top of contest deadlines.

If we use the earlier figures from CollegeCalc that forecast what a four-year education will cost in 2039 (5,167.67 / 4 = ,792 a year), it’s recommended you put 1 a month into a college savings plan. This calculation assumes an after-tax return of 7%, an annual tuition increase of 7% and four years of school.

Frequently Asked Questions (FAQs) 

It’s great if you’re able and want to contribute to your children’s future expenses and education fund — student loan debt has surpassed a whopping .7 trillion in the U.S. — but you need to be smart about it. If you put yourself in a precarious financial situation, it can be more difficult for you to course-correct later.

When Is the Best Time to Invest Money for College?

With that said, don’t let getting started “later” deter you from saving at all. It’s kind of like the Chinese proverb, “The best time to plant a tree was 20 years ago. The second best time is now.” You want to save what you can as early and regularly as possible. But if life circumstances prevented you from doing so before, right now is the next best time to start saving.
On average, tuition and fees ran ,411 at private colleges and ,171 for in-state residents at public colleges for the 2020-2021 school year. The estimated cost of a four-year degree, 18 years out?

What’s the Best Way to Invest Money for a Child?

Most prepaid tuition plans have residency requirements for the saver and/or beneficiary, and are sponsored by the state government (and not guaranteed by the federal government). However, not all state governments guarantee the money paid into them, so it is possible to lose money. Additionally, your mileage may vary with this plan if the beneficiary doesn’t attend a participating college, resulting in a smaller return on investment.
First things first: If you have nothing saved for retirement, focus on your own needs before you start saving for someone else. You’re on a more fixed timeline. Plus, you can’t borrow for retirement savings like your child can for their education.
5,167.67.

How Much Money Should I Save for My Child?

Looking for more options that aren’t exclusive to education? You can invest in a taxable brokerage account.
The good thing about putting away money for your children is that there is no one “right” way to do it. You can open a 529 plan for your child early on or later as they get closer to college aid. Or, you can fund a brokerage account so you’re not held to stricter rules about how the money’s spent.
If you want to invest in your kid’s future without choosing an account that’s for education expenses only, look into a Uniform Gift to Minors Act or UTMA Uniform Transfers to Minors Act.
Don’t forget the old standby: a traditional savings account.

The Best Way to Save Money for Kids

This account is similar to a UGMA. However, minors can also own property such as real estate and fine art.
A custodian will also need to be set up for this type of account. Parents can set up a custodial account and then make withdrawals to cover child-related expenses. Once the child is of legal age, the assets are transferred to their name. Since the funds for both UGMA and UTMA accounts are in the child’s name, they cannot be transferred to another beneficiary. <!–

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Where to Find Cheap or Free Tutoring for Your Kids

Whether your kid is struggling to read or to understand advanced calculus, some additional one-on-one instruction can make a world of difference. That’s why parents hire tutors — to boost their kids’ academic progress beyond the constraints of the school day.

But finding the funds to pay a tutor can be tough for a family on a budget. Costs vary, but it’s not unheard of to spend between $40 and $80 … per hour. And if your child is really struggling, chances are you’re going to need way more than one hour.

Here are some alternative ways to get educational assistance, even free tutoring, without breaking the bank.

6 Low-Cost or Free Tutoring Options

1. Get Extra Help With an Online Tutor

Online tutors don’t need a brick-and-mortar building, and they eliminate the need for anyone to commute. Everything is accessible with the click of a mouse. Your screen is your virtual whiteboard.

Some free or low-cost online tutoring websites include:

  • Khan Academy — a nonprofit organization that provides a wide range of free lessons to students all over the world.
  • Learn to Be — a Los Angeles-based nonprofit organization that provides free one-on-one tutoring to K-12 students in underserved communities.
  • Chegg Study — a 24/7 tutoring service for high school and college students where you pay $14.95 a month for expert homework help from a variety of subjects including math, science, engineering and business.
  • Free Tutoring Center — a student-run service that provides free one-on-one tutoring to elementary and middle schoolers from economically disadvantaged backgrounds.
  • UPchieve — a free online tutoring app where volunteer tutors provide academic help in various math and science subjects. This service also offers free college counseling.
  • Varsity Tutors — an education platform that offers free large group classes and free learning tools for self-study. For more individualized help, Varsity Tutors charges for one-on-one tutoring and small group classes.
  • Outschool — an online learning platform that has a variety of classes for kids ages 3 to 18. Filter your class search by price to find offerings for $9 or less.

2. Browse Your Library’s Offerings

If you’re only using your library card to check out books, you’re likely missing out on all the neat opportunities your library has to offer. Some tutoring companies like Tutor.com and Brainfuse partner directly with public libraries to provide free online tutoring to students.

Ask your librarian about what your local branch offers. Outside of partnering with an online service, your library might host free or low-cost test prep or homework help. Your librarian might also know of students or teachers who offer affordable tutoring. At the very least, you can get pointed in the direction of helpful reference books and research materials related to your child’s topic of study.

3. Go Back to School

Sometimes the best place to get help is directly from your child’s teacher. He or she already knows your child’s unique challenges and learning style and is invested in seeing your kid improve.

Schedule a parent/teacher meeting to ask about opportunities for extra instruction. The teacher may be free to help your child during a study hall period, and you can bypass paying for a Saturday afternoon tutoring session.

Also, ask if there’s a peer tutoring program at school where older students or students excelling in a particular subject volunteer to aid those who need extra help.

Consider that the help may come from outside your kid’s individual school. National Honor Society members at the local high school might have an outreach program that would benefit your struggling middle schooler. Community colleges sometimes have academic resources available for high school students at low or no cost.

4. Be Selective About After-School Programs

Until kids are old enough to go home to an empty house, working parents often turn to after-school programs and extracurriculars. While karate practice and dance lessons sound fun, your kid won’t be working on math equations or language arts.

You can save money by choosing an after-school program that includes tutoring services. The Boys and Girls Club and the YMCA are two national youth nonprofits that often provide help with homework or studying for tests.

5. Call on Your Community for One-on-One Tutoring

Don’t underestimate the power of your social circle. Your friends or coworkers may know of organizations in your city that provide free or low-cost tutoring.

Ask the parents of your kids’ friends for recommendations on affordable tutors. An older sibling of your child’s best friend might be a math whiz. You may be able to barter with a classmate’s mom, exchanging tutoring sessions for free babysitting.

6. Give Into Screen Time on YouTube

Now this last one isn’t quite tutoring in the traditional sense, but you can turn to YouTube for almost anything these days — including K-12 subject matter. In most cases, you’ll be able to access instructional videos at no cost.

Has physics or chemistry got your kid down? Check out these YouTube science channels. This list of YouTube history channels may help students master the details of major world events.

The video-sharing platform just might get your kids to see their worst subject in a new light and find learning — dare I say it? — fun.

Nicole Dow is a senior writer at The Penny Hoarder.

Source: thepennyhoarder.com

7 Signs You are Living Beyond Your Means

When you’ve lived paycheck to paycheck, scrounging up enough money for an emergency fund can feel like a revelation. All of a sudden you’re not living with a dark cloud over your head and setbacks start to seem more manageable. You feel more in control of your life and your finances.

But you can take that even further. Saving for emergencies is just the first step in developing a strong, stable plan for the future. Once you have the foundation laid, it’s time to start deciding just what kind of future you’re trying to build.

That future starts with savings goals. Here are a few examples of how to start saving beyond your emergency fund.

Car Repair Fund

About 18 months ago, my husband and I were driving up for a ski weekend in the Colorado mountains. We were meeting his cousin and wife for a long weekend of winter sports, beer and food. At least, that was the plan.

On the way there our car started making a funny noise. Eventually, that funny noise turned into a persistent whine, and before we knew it the engine was smoking and we were stranded on the side of the road. We had the car towed back to a mechanic, who informed us that it would cost several thousand dollars to repair the damage.

I hadn’t really planned for this. The car had less than 200,000 miles and seemed in good shape. We’d followed the maintenance schedule religiously and had no reason to worry. Luckily, the incident happened just a few days before we received a huge tax refund, so we took the money and bought another car. I learned a valuable lesson that day: always save for a car repair fund.

Since then, I set up an auto draft to a separate savings account solely for car repairs. I picked $75 a month as a starting point but might increase it to $100 in the near future.

I’ve also started a car replacement fund, so I’m prepared for the next time my husband and I need to buy a new car. That account gets $100 every month, and any leftover money I find at the end of the year.

Vacation Fund

Erin Lowry of “Broke Millennial” wrote in a recent post about how she has a separate vacation fund set aside so she can travel more spontaneously. She has at least $3,000 in her vacation fund, so she’s prepared when her girlfriends want to take an impromptu trip or she finds an amazing flight deal to Germany.

If travel is an important part of your life – or you’d like it to be – consider starting a vacation fund. Even if it’s just a long weekend at the family cabin or a short road trip to a neighboring state, giving yourself the option to escape at any time can make the daily grind a little more bearable.

Don’t feel pressured to save aggressively if you don’t want to. Even $300 a month will add up to $3,600 a year, enough for a two-week European stay or a handful of smaller domestic trips. If you keep saving for multiple years, you could end up with enough for a months-long sabbatical.

Personal Goals

When people talk about their greatest financial regrets, they usually reminisce about the investment deal they didn’t take or the house they never bought. For me, it’s the Spice Girls concert I didn’t go to.

The group came to Chicago while I was in college, and a few people from my dorm were carpooling to the concert. They had an extra ticket, which cost $100. I had the money in my bank account, but chose to be “responsible” and stay home. I’ve regretted it ever since.

About a year ago, there were rumors that the Spice Girls were planning to reunite and go on a limited international tour. I live about three hours from Chicago, and I figured the Windy City would definitely be a stop on the tour.

A couple weeks later I got a birthday check from my grandma, which I promptly deposited into a separate Spice Girls savings account. Rumors of a tour have since dissipated, but I still have hope that one day the girls will be reunited. Until then, I’ll be keeping $200 in that account.

It might seem insane to have a whole savings account for one concert that may never happen, but it’s worth it for the peace of mind. If I ever get the opportunity to fulfill this dream, I won’t have to sacrifice a thing. I’ll just pluck the money from my account, close it down and go have the time of my life.

If there’s something you desperately want to do someday, like attend the Super Bowl or run the Boston Marathon, it’s not a bad idea to have the money stashed away for that purpose. If the goal never comes to fruition or you’re not able to get tickets, you can always use it for something else.

Medical Expenses

One of the best ways to save money outside of an emergency fund is in a health savings account (HSA). HSA contributions are tax-deductible, can be withdrawn tax-free and earnings are also not taxed.

You can contribute up to $3,3450 for an individual or $6,900 for families. Once you have more than $2,000 in your HSA, you can start to invest the money like you would for a retirement account. HSAs are only available if you have a high-deductible insurance plan, but don’t have any income limitations.

If you aren’t eligible for a high-deductible plan or it’s just not a good fit, you can still save for medical expenses outside of an HSA. A good rule of thumb is to save as much as your out-of-pocket maximum since that should cover a year of catastrophic medical bills. You can keep this in the same savings account where you have your emergency fund or in a separate one.

The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinion or view of Intuit Inc, Mint or any affiliated organization. This blog post does not constitute, and should not be considered a substitute for legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.
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What Is the 70/20/10 Budget Rule?

Living paycheck to paycheck leaves no room for saving, investing, paying down debt or donating to causes you care about. But a paycheck-to-paycheck lifestyle isn’t always the result of not earning enough money.

A February 2020 survey from Willis Towers Watson found that nearly 20% of six-figure earners lived a paycheck-to-paycheck lifestyle. A lack of a solid money management strategy can often be the culprit.

When you spend-spend-spend without a plan, it’s easy to quickly blow through your money with no relief until the next payday.

That’s where the 70/20/10 budgeting method comes in to disrupt that paycheck-to-paycheck cycle. The 70/20/10 budget is a percentage-based money management style that helps you make room for saving, investing, paying down debt and donating.

How the 70/20/10 Budget Rule Works

Following the 70/20/10 rule of budgeting, you separate your take-home pay into three buckets based on a specific percentage.

Seventy percent of your income will go to monthly bills and everyday spending, 20% goes to saving and investing and 10% goes to debt repayment or donation.

Use 70% of Your Income for Monthly Spending

With this budgeting plan, 70% of your net income (the money you make after taxes and other payroll deductions) will go to expenses such as:

  • Mortgage payments or rent
  • Utilities
  • Phone bill
  • Internet bill
  • Car note
  • Car insurance
  • Life insurance
  • Credit card bill
  • Student loan bill
  • Groceries
  • Gas
  • Dining out
  • Entertainment
  • Clothing
  • Personal care items
  • Child care
  • Medical costs
  • Travel costs
  • Gifts

You don’t have to get into specifics on what percentage you’ll spend in each of your budget categories. If you want to spend a large portion of this money on traveling and eating out, you’re totally free to do so (as long as your bills and necessities are covered, of course).

Set 20% Aside for Saving and Investments

Set up your future self for success. Following the 70/20/10 rule, you’ll divert 20% of your pay to saving and investing. This could include:

If you have little to no money in your savings account for emergencies, ideally you should focus on building up your emergency fund until you have enough to cover three to six months of essential expenses.

However, it’s also okay to save money for multiple savings goals at the same time. You may feel like retirement is a long way away but it’s best to start as early as possible to take advantage of the power of compounding.

Earmark 10% of Your Take-Home Pay for Debt or Donating

The remaining 10% of your income will go to either paying off debt or donating (or both). You might want to:

  • Pay down credit card debt
  • Make extra payments toward your student loans
  • Reduce the principal on your mortgage
  • Pay off outstanding medical debts
  • Repay personal loans
  • Tithe to your house of worship
  • Donate to a cause you care about
  • Give money to your college alma mater

You should be covering your minimum bill payments with the 70% of your income reserved for monthly expenses. This money, however, is for making additional payments that’ll help you crush your debt faster.

If you’ve got multiple debts you’re working to pay off, consider using the debt snowball or the debt avalanche methods. With the snowball method, you’ll start with the debt with the lowest balance. With the avalanche method, you’ll first focus on the debt with the highest interest rate.

If you are debt free, use the extra cash to give to organizations or causes that matter to you. Many budgeting plans don’t specifically factor in donating, which makes the 70/20/10 method unique.

An Example of the 70/20/10 Budget

You do have to do a little bit of math to figure out how much money to set aside for each of these three main categories, but it’s simple.

Just whip out the calculator app on your phone and multiply your monthly income by 0.7 to figure out how much money you can spend each month. Multiply your take-home pay by 0.2 to determine how much you’ll save, and multiply your earnings by 0.1 to find out how much to put toward debt or to donate.

For example, if you made $4,000 a month, your monthly budget would look like this:

  • $2,800 would go to covering your living expenses
  • $800 would go toward savings or investments, and
  • $400 would go toward debt or donations

Once you’ve come up with those three amounts, use the money in each category how it best works for you.

How the 70/20/10 Budget Compares to the 50/30/20 Budget

The 70/20/10 budget is similar to another money management method you may have heard about — the 50/30/20 budget. With the 50/30/20 rule, half your income goes to needs, 30% goes to wants and 20% goes to savings and other financial goals like investing or paying off debt.

These two budgeting methods are both percentage-based budgets. They divide your take-home pay into three broad categories. And they prioritize saving money and contributing positively to your financial future.

However, the 70/20/10 budget rule does not separate needs from wants when it comes to spending. It also stands apart by designating a portion of your pay to go toward donations or giving to others.

The Benefits of the 70/20/10 Budget

There are some great benefits to using the 70/20/10 budget rule.

It’s a pretty simple money management method to follow — similar to the “spend-save-share” money jars for kids. Once you’ve separated your take-home pay into the three categories, you’re free to spend how you like without worrying that you’ll derail your savings goals or debt payoff plans.

While this budget has some structure, it’s not super strict or restrictive. You don’t have to zero in on exactly how you’ll spend every dollar.

Another benefit of this budgeting style is that it prioritizes your financial future. You’ll be building up your emergency fund, investing for retirement, paying down debt and giving back to others consistently.

The Downsides of the 70/20/10 Budget

Despite the benefits of this budgeting style, it’s not for everyone.

If you’re living paycheck to paycheck because you don’t earn enough money, you won’t be able to squeeze out 20% for saving or 10% for extra debt payments. This budgeting method is only for those who can realistically spare using 30% of their income on something beyond essential living expenses.

Conversely, if you’re someone who can comfortably spend less than 70% of their income and you want to use a much larger portion of your income to pay off debts or to save up to retire early, the 70/20/10 budget may not be the most fitting for you.

It’s also important to note that while some people appreciate a budget that isn’t rigid, others thrive better with more detailed guidance on how they should spend their money. They might prefer to set a limit on fun money spending or to have a specific goal for emergency fund contributions rather than setting aside a broad amount for all savings.

If you’re someone who often overspends on impulse buys, you might benefit from a more structured budget, like a zero-based budget.

5 Tips to Help You Be Successful With the 70/20/10 Budget

Put this advice to use to truly excel using the 70/20/10 budget.

1. Use Direct Deposit to Your Advantage

Set up separate bank accounts for each percentage bucket. One account will be for spending, one will be for savings and investing and the third will be for debt and donating. Adjust your direct deposit allocations to match the 70/20/10 rule.

2. Automate Your Bills

Put your bills on autopay with the date set for right after you’re paid. This way, your financial obligations are covered every month before you start spending on takeout or new shoes.

3. Track Your Spending

Since there is no further guidance on how you should spend that 70% of your income, it’s a good idea to track your spending so you know where your money is going. Review your spending periodically to make sure you’re striking a good balance between needs and wants. A budgeting app can help you keep track of your spending with little effort on your part. Using cash envelopes can be helpful to make sure you don’t overspend in certain categories.

4. Tweak the Percentages to Best Fit Your Situation

If you want to save a bit more, you might find value in making it the 65/25/10 budget. If you’re paying child care expenses for multiple kiddos, you might need to do an 80/10/10 breakdown.

5. Split up the 70% Pool When Budgeting With a Partner

After you’ve covered paying the bills and other necessities with your combined income, split the remainder of that 70% with your significant other. It could be a 50/50 split or you may choose to structure it based on how much each partner earns. Schedule regular budget meetings to collectively decide what to do with the 20% earmarked for savings and the 10% for debt or donations.

Final Thoughts

The 70/20/10 budget is a good way to manage your money if you want to put funds aside to better your financial future but you don’t want to be super restrictive about your spending.

By dividing your money using the specific percentages, you’re free to spend 70% of your paycheck without stressing whether you’re contributing enough to your emergency fund or making a dent in your debt.

This money management style is also great for those who are philanthropic and want to share a portion of their earnings with others.

Overall, the 70/20/10 method is a solid budget plan that’ll easily help you break the paycheck-to-paycheck cycle so you can reach your financial goals.

Nicole Dow is a senior writer at The Penny Hoarder.

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Source: thepennyhoarder.com

Guide to Investing in Your 30s

Turning 30 marks the start of a new chapter in life and it can bring a shift in the way you approach your finances. Investing in your 30s can look very different from the way you invest in your 20s or 40s, based on your goals, strategies, and needs.

At this stage in life you may be working on paying off the last of your student loan debt while focusing more on saving. Your financial priorities may revolve around buying a home and starting a family. At the same time, you may be hoping to add (or increase the amount that you’re) investing for retirement into the mix as you approach your peak earning years.

Finding ways to make these goals and needs fit together is what financial planning in your 30s is all about. Knowing how to invest your money as a 30-something can help you start building wealth for the decades still to come.

5 Tips for Investing in Your 30s

1. Define Your Investment Goals

Having clear financial goals in your 30s or at any age matters. Your goals are your end points, the destination that you’re traveling toward on your financial roadmap.

So as you consider how to invest in your 30s, think about the end result you’re hoping to achieve. Focus on goals that are specific, easy to measure and best of all, actionable.

For example, your goals for investing as a 30-something may include:

•  Contributing 10% of your income to your 401(k) each year

•  Maxing out annual contributions to an Individual Retirement Account

•  Saving three times your salary for retirement by age 40

•  Achieving a net worth of two times your annual salary by age 40

These goals work because you can define them using real numbers. So, say for example, you make $50,000 a year. To meet each of these goals, you’d need to:

•  Contribute $5,000 to your 401(k)

•  Save $6,000 in an IRA

•  Have $150,000 in retirement savings by age 40

•  Grow your net worth to $100,000 by age 40

Setting goals this way may require you to be a little more aggressive in your financial approach. But having hard numbers to work with can help you motivate you forward.

2. Don’t Be Afraid of Risk

If there’s one important rule to remember about investing in your 30s, it’s that time is on your side.

When retirement is still several decades away, you have time to recover from the inevitable bouts of market volatility that you’re likely to experience. The market moves in cycles; sometimes it’s up, others it’s down. But the longer you have to invest, the more risk you can generally afford to take.

The best investments for 30 somethings are the ones that allow you to achieve your goals while taking on a level of risk with which you feel comfortable. That being said, here’s another investing rule to remember: the greater the investment risk, the greater the potential rewards.

Stocks, for example, are riskier than bonds but between the two, stocks are likely to produce better returns over time. If you’re not sure how to choose your first stock, you may have heard that it’s easiest to buy what you know. But there’s more to choosing stocks than just that. When comparing the best stocks to buy in your 30s, think about things like:

•  How profitable a particular company is and its overall financial health

•  Whether you want to invest in a stock for capital appreciation (i.e. growth) or income (i.e. dividends)

•  How much you’ll need to invest in a particular stock

•  Whether you’re interested in short-term trading or using a buy-and-hold strategy

Past history isn’t an indicator of future performance, so don’t focus on returns alone when choosing stocks. Instead, consider what you want to get from your investments and how each type of investment can help you achieve that.

Recommended: 6 Investment Risk Management Strategies

3. Diversify, Diversify, Diversify

Investing in your 30s can mean taking risk but you don’t necessarily need or want to have 100% of your portfolio committed to just a handful of stocks. A diversified portfolio with multiple investments can spread out the risk associated with each investment.

So why does portfolio diversification matter? It’s simple. A portfolio that’s diversified is better able to balance risk. Say, for example, you have 80% of your investments dedicated to stocks and the remaining 20% split between bonds and cash. If stocks experience increased volatility, your lower risk investments could help smooth out losses.

Or say you want to allocate 90% of your portfolio to stocks. Rather than investing in just a few stocks, you can spread out risk by investing and picking one or more low-cost ETFs instead.

Exchange-traded funds are similar to mutual funds, but they trade on an exchange like a stock. That means you get the benefit of liquidity and flexibility of a stock along with the exposure to a diversified collection of different assets. Your diversified portfolio might include an index ETF, for example, that tracks the performance of the S&P 500, an ETF that’s focused on growth stocks, a couple of bond ETFs and some individual stocks.

Recommended: ETFs vs Mutual Funds: A Further Look

This type of strategy allows you to be aggressive with your investments in your 30s without putting all of your eggs in one basket, so to speak. That can help with growing wealth without inviting more risk into your portfolio than you’re prepared to handle.

4. Leverage Tax-Advantaged and Taxable Accounts

Asset allocation, or what you decide to invest in, matters for building a diversified portfolio. But asset location is just as important.

Asset location refers to where you keep your investments. This includes tax-advantaged accounts and taxable accounts. Tax-advantaged accounts offer tax benefits to investors, such as tax-deferred growth and/or deductions for contributions. Examples of tax-advantaged accounts include:

•  Workplace retirement plans, such as a 401(k)

•  Traditional and Roth IRAs

•  IRA CDs

•  Health Savings Accounts (HSAs)

•  Flexible Spending Accounts (FSAs)

•  529 College Savings Accounts

If you’re interested in investing for retirement in your 30s, your workplace plan might be the best place to start. You can defer money from your paychecks into your retirement account and may benefit from an employer-matching contribution if your company offers one. That’s free money to help you build wealth for the future.

You could also open an IRA to supplement your 401(k) or in place of one if you don’t have a plan at work. Traditional IRAs can offer a deduction for contributions while Roth IRAs allow for tax-free distributions in retirement. When opening an IRA, think about whether getting a tax break now versus in retirement would be more valuable to you.

If you’re not earning a lot in your 30s but expect to be in a higher tax bracket when you retire, then a Roth IRA could make sense. But if you’re earning more now, then you may prefer the option to deduct what you save in a traditional IRA.

Don’t count out taxable accounts either for investing in your 30s. With a taxable brokerage account, you don’t get any tax breaks. And you’ll owe capital gains tax on any investments you sell at a profit. But taxable accounts can offer access to investments you might not have in a 401(k) or IRA, such as individual stocks, cryptocurrency or the ability to trade fractional shares.

5. Prioritize Other Financial Goals

Retirement is one of the most important financial goals to think about in your 30s but planning for it doesn’t have to sideline your other goals. Financial planning in your 30s should be more comprehensive than that, factoring in things like:

•  Buying a home

•  Marriage and children

•  Saving for emergencies

•  Saving for short-term goals

•  Paying off debt

As you build out your financial plan, consider how you want to prioritize each of your goals. After all, you only have so much income to spread across your goals, so think about which ones need to be funded first.

That might mean creating a comfortable emergency fund, then working on shorter-term goals while also setting aside money for a down payment on a home and contributing to your 401(k). If you’re still paying off student loans or other debts, that may take priority over something like saving for college if you already have children.

Looking at the bigger financial picture can help with balancing investing alongside your other goals.

The Takeaway

Your 30s are a great time to start investing and it’s important to remember that it doesn’t have to be complicated or overwhelming. Taking even small steps toward getting your money in order can help improve your financial security, both now and in the future.

An easy way to start investing is by opening an account on the SoFi Invest® brokerage platform, you can add individual stocks and ETFs to your portfolio, test the waters with cryptocurrency or invest in small amounts with fractional shares. The sooner you get started investing in your 30s, the more time you’ll have to mold and perfect your financial plan.

Photo credit: iStock/katleho Seisa


SoFi Invest®
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . SoFi Invest refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
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3) Cryptocurrency is offered by SoFi Digital Assets, LLC, a FinCEN registered Money Service Business.

For additional disclosures related to the SoFi Invest platforms described above, including state licensure of Sofi Digital Assets, LLC, please visit www.sofi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform. Information related to lending products contained herein should not be construed as an offer or pre-qualification for any loan product offered by SoFi Lending Corp and/or its affiliates.
Investment Risk: Diversification can help reduce some investment risk. It cannot guarantee profit, or fully protect in a down market.
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Source: sofi.com

16 Tips to Save Money on Back-to-School Supplies & Shopping List

Back-to-school time has become its own shopping season, falling just behind back-to-college and Christmas in terms of family expenditures, according to the National Retail Federation. In 2020, the NRF reported record back-to-school spending, with parents spending an average of $789.49 per child, up from the previous record of $696.70.

And that’s just for elementary through high school. If you have college students in your family, the NRF estimates you’ll spend about $1,059.20 on supplies. (But you can access your own list of college back-to-school saving tactics.)

That’s almost as much as an average mortgage payment, and each year, costs continue to outpace inflation. Multiply this amount by two or three (or five) children, and it’s easy to see why many parents start sweating in mid-July, when the barrage of back-to-school fliers and ads start appearing.

But these back-to-school saving tips can take some of the stress out of the season.

How to Save on Back-to-School Supplies

If you’re stressed out about this upcoming drain on your bank account, take a deep breath. There are plenty of ways to avoid spending $1,000 per child at the start of the new school year. If you start early and plan ahead, you can put your kids back in the classroom for a fraction of this amount.

Keep in mind that back-to-school sales start a bit earlier each year. Staples now puts out its back-to-school section in late June, with many products already on sale to entice parents to buy.

You can save by purchasing one or two things at a time throughout the summer. Spreading your purchases out can also prevent a significant hit to your monthly budget.

1. Do a Supply Sweep

You probably already have plenty of last year’s school supplies you can reuse this year. Closets, desk drawers, and basement bins could hold hidden treasures that can save you money.

Start by rounding up all of the office and school supplies you already own. Put them in a central location, such as a plastic bin or the dining room table, so you can make a list of what you have and a shopping list of what you need.

Keep this list in your purse or car to avoid forgetting it when you shop for school supplies. You can also take a picture of your current supplies to refresh your memory when you’re shopping.

Next, go through your kids’ closets and start sorting. Donate or toss clothing kids have outgrown and timeworn clothing. Once you complete this supply sweep, you’ll have a clearer picture of what you need to buy. Ideally, the sweep will prevent you from buying something you already have on hand.

2. Plan a Supply Swap

Coordinate with your friends and neighbors and host a school and office supply swap before you head out shopping.

For instance, you might have reams of loose-leaf paper you bought on sale, but you’ll never use it all. Meanwhile, your friend might have several packs of pencils or a pencil case they’d be willing to trade for some of that paper.

Talk to friends and family members with school-aged children and see if they have extra supplies they’d be interested in trading.

3. Shop at Garage Sales and Thrift Stores

Garage sales can be a treasure trove of deals for back-to-school supplies. You can find backpacks, gently used shoes, clothing, and even school supplies there for a song.

Start hitting up garage sales for everything you need. It takes time, but you can score some incredible bargains by doing so, and it’s an economical way to save money on back-to-school clothes. You can also ask friends and family members to keep an eye out for you when they shop at garage sales.

There are fantastic bargains at thrift stores too. Clothing is very affordable there, and many stores run sales specifically for parents shopping for back-to-school items. But start early. Other shoppers will have picked over the selection by the first day of school.

Your best bet is to start your kids clothes shopping in the middle to end of July when there are plenty of clothes to choose from. Of course, if you let them wear them immediately, the novelty will have worn off by the first day of school. Put these clothes away until school starts so they’ll feel brand-new to your kids.

4. Check Consignment Shops

Consignment shops are excellent places to find gently used clothing because they’ve already vetted everything they offer. So unlike at the thrift store, you don’t have to paw through blouses from 1975 to find designer or name-brand clothing on a shoestring budget.

If your area has several consignment shops, find out if they’re planning a late-summer sale. Many consignment shops organize a seasonal sale, especially during the back-to-school shopping season. Several shops might even host a mega-sale in one location, pooling all their resources together.

You can find consignment shops in your area by Googling “kids consignment stores near me.”

5. Check the Dollar Store

You can get some incredible bargains on school supplies at the dollar store, where you can find basic supplies like notebooks and pencils as well as classroom supplies like facial tissue and sanitizer, all at bargain prices.

Start shopping in the summer months because you never know what products stores will order or how long they’ll stay in stock. Just note that there are some things you should never buy at the dollar store, such as batteries and tape.

6. Shop Through Rakuten

Online cash-back shopping venue Rakuten acts like a shopping gateway. The website allows you to shop online or through the app at over 2,500 major stores and brands like Amazon, eBay, Walmart, Gap, Barnes & Noble, Dell, Kohl’s, DSW, and Macy’s, all while giving you cash back on your purchases.

How much you earn typically varies from 1% to 6% of your total purchase price. However, many retailers offer short-term rebates of 10% or more and exclusive sales for Rakuten shoppers.

Rakuten says its 12 million users have earned over $1 billion in cash back using the mobile coupon app, which they can then use to buy back-to-school supplies.

See our Rakuten review for more information.

7. Install the Capital One Shopping Browser Extension

Capital One Shopping is a useful browser extension to have when you’re shopping online. For example, each time you’re browsing on Amazon, Capital One Shopping searches hundreds of other retailers to see if there’s a better price available.

They also automatically apply any available coupon codes at checkout to help you save money. Wikibuy has a database of thousands of retailers, so this extension can likely help you find a better deal somewhere.

Read our Capital One Shopping review for details.

8. Shop on a Sales Tax Holiday

Many states have sales tax holidays when shoppers can buy merchandise without paying sales tax. On these days, you can pick up clothing, computers, and school supplies tax-free.

Find the date (or dates) of your state’s sales tax holiday and determine what products are eligible online. Most states have a sales tax holiday during the first week of August, although some have tax holidays in July or toward the end of August.

9. Follow Stores on Twitter & Facebook

Many companies send their loyal followers coupon links and advance notice of sales. If you plan to bargain-hunt this year, monitor your favorite stores’ Twitter and Facebook feeds to find deals.

You can follow these popular stores on Twitter, for example:

10. Compare Prices

Most parents have to buy some sort of electronics for their kids for school. You can save on these by keeping an eye on Amazon’s ever-changing prices.

The website CamelCamelCamel tracks the price range history for every product sold on Amazon, including historical highs and lows. You can sign up for price change alerts for specific products and get a notification every time their prices change.

There are also plenty of apps to help you save money by comparing prices across different retailers. One is ShopSavvy, which is available for iOS and Android devices.

To use ShopSavvy, simply scan the bar code of the product you’re interested in, and the app tells you if a lower price is available at another store or website. For the app to work, you also need to download a bar code scanner, which you can get for both iOS and Android devices.

Last, don’t forget to look to your grocery store or neighborhood drugstore for bargains on school supplies. Check local circulars starting in midsummer. You might be surprised to find that some products are actually cheaper when they’re on sale at these stores than at big-box stores.

Additionally, many stores have reward or loyalty programs that enable you to earn points or other loyalty currency when purchasing goods there.

11. Focus on Saving on Big-Ticket Merchandise

When you’re back-to-school shopping, it’s easy to get paranoid about the cost of glue at Target compared to Walmart. We’ve all been there. But while it’s vital to watch prices on small items, you only have so much time and energy.

You’re better off using this limited time and energy to save money on bigger-ticket products, especially electronics like computers and tablets. Saving $300 on your high schooler’s new laptop means more to your budget than saving $5 on your middle schooler’s lunch box or 25 cents on a bottle of glitter glue.

Focus on saving money on your most significant expenses first, and let the glue take care of itself.

12. Make Your Kids Work for Their Supplies

What do you do if you’ve set spending limits for specialty or high-end goods, and your kids still clamor for expensive back-to-school gear? Make them go to work.

Assign them chores or send them out into the neighborhood to earn the money they need. My parents did this to me, and I lived through the experience. It also made me examine in a very real way how badly I wanted to buy some “must-have” gear.

Most of the time, when I had to spend my own money on something — money I had to use my own hours to earn — I discovered I didn’t really want it as badly as I thought I did.

13. Save on Uniforms

School uniforms used to be the hallmark of attending an elite private school. These days, many charter schools require students to wear uniforms, and The New Yorker reports that one-fifth of all public schools now require a uniform.

And these uniforms can be costly, with prices ranging from $150 to $250 or more for a mix-and-match wardrobe. However, there are plenty of ways to save money on school uniforms.

One strategy is to see if your school has a uniform exchange. During the year, some schools ask parents to donate any uniform pieces their children have outgrown. They then offer these to parents on a tight budget, often for free or for a small donation.

Another way to save is to check local thrift stores. For example, if your child’s uniform includes basic navy or khaki pants, you can usually find them in high quantities at a thrift store or consignment shop.

Last, check retailers like Gap and Old Navy. Both companies sell school uniforms and often run sales during the middle to end of summer. You might also find better deals if you shop in the early summer when most parents aren’t yet thinking about buying uniforms for the upcoming school season.

14. Hold Off on New Clothing

Every child wants new clothes when they head back to school. And while retailers do put clothing on sale for back to school, Kristin Cook, managing editor of price-tracking site Ben’s Bargains, told Consumer Reports before school starts isn’t the best time to buy a new wardrobe for your kids. Prices typically go down in September after the big clothes-buying rush is over.

A better strategy is to buy one new outfit for your kids to wear on the first day and then do most of your shopping when prices drop further in September or October.

Another way to save is to scour thrift stores and consignment shops. If you live near a larger city or are willing to travel, you can often find high-quality clothing at dirt-cheap prices there.

15. Save on School Sports and Activities

You have a daughter who wants to play softball and soccer, another daughter who wants to join the school band, and a son who wants to play hockey and baseball. You’re looking at a potential investment of $10,000 or more in fees, instruments, and equipment for this year alone.

But don’t start hyperventilating just yet. There are plenty of ways to save money on extracurricular activities for your kids.

First, think about limiting your children to one after-school activity apiece. By limiting their choices, you allow them to focus on what they’re most interested in. That also forces them to make a choice, and when they take ownership of that choice, they’ll likely feel more dedicated to what they’re doing and really put their heart into it.

UC Berkeley’s Greater Good cites a 2014 paper published by the American Psychological Association and a 1999 study published in the Review of General Psychology among the “mountain of research” proving teens who have the freedom to make their own decisions tend to be more self-driven and have greater self-discipline.

Sticking to one activity will also help you avoid having an overscheduled child and give them more time for academics, family time, and friends.

If you’re looking to save money on sports equipment, one strategy is to buy used. You can find used gear on SidelineSwap, where you can also sell your own equipment once your child has outgrown what they’re currently using. Locally, you can usually find some bargains at Play It Again Sports.

If you’re looking to save money on music lessons or band participation, your best bet is buying or renting a used instrument. You can search on Music Go Round for used instruments listed on the site and instruments listed locally in your area. You can also look on Craigslist and eBay.

16. Just Say No

Going back-to-school shopping with your kids can be a fun bonding experience. It can also add hundreds of dollars to your shopping bill if you cave to their requests for designer jeans and a new backpack.

To save money, tell your kids before you leave the house that you’re sticking to the school list and won’t consider any extras while you’re out. Of course, I have two kids of my own, so I know saying no isn’t always easy.

A better idea might be to go school shopping on your own. Consider buying your kids just what they might need on their very first day, and while they’re in school, you can hit the stores to knock out the rest of the list by yourself. Not only is it less stressful, but you’ll also likely save more money.


Final Word

Few parents want to think about shopping for the coming school year, especially amid high summer. But back-to-school shopping can creep up on you quickly, so it pays to start shopping early.

That way, you can take advantage of every deal and coupon that comes your way. And stocking supplies slowly can help ease the impact on your monthly budget.

Source: moneycrashers.com

9 Reasons to File a Tax Return Even If You Don’t Have To

Filling out tax forms is a pain in the you-know-what. So why on earth would anyone file a tax return if they don’t have to? Well, actually, there’s one very important reason why – you might get a big, fat check from the government.

People with income under a certain amount (see table below) aren’t required to file a tax return because they won’t owe any tax. But if you qualify for certain tax credits or already paid some federal income tax, Uncle Sam might owe you a refund that you can only get by filing a return. Think about that for a minute!

If you want to know more, here are 9 reasons why you might want to file a tax return even if you don’t have to. Even though dealing with taxes can be a real drag, it’s probably worth it if you wind up with a much fatter wallet in the end. (Note that the IRS won’t penalize you for filing a late return if you’re getting a refund.)

Federal Tax Return Filing Requirements (2020 Tax Year):

Filing Status and Age at End of 2020

Income Required to File 2020 Return

Single; Under 65

$12,400

Single; 65 or Older

$14,050

Married Filing Jointly; Both Spouses Under 65

$24,800

Married Filing Jointly; One Spouse 65 or Older

$26,100

Married Filing Jointly; Both Spouses 65 or Older

$27,400

Married Filing Separately; Any Age

$5

Head of Household; Under 65

$18,650

Head of Household; 65 or Older

$20,300

Qualifying Widow(er); Under 65

$24,800

Qualifying Widow(er); 65 or Older

$26,100

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Withheld Taxes

picture of IRS Form W-4picture of IRS Form W-4

If an employer withheld federal income taxes from your paycheck last year, or taxes were withheld from other sources of income in 2020, you might be entitled to a refund if you file a 202 tax return.

If you don’t owe any tax – and, therefore, aren’t required to file a return – then it only makes sense that any taxes you already paid should be refunded to you. But you won’t get that money back if you don’t file a 1040 form.

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Taxes Paid

picture of lettered blocks spelling out &quot;Estimated Tax&quot;picture of lettered blocks spelling out &quot;Estimated Tax&quot;

Withholding isn’t the only way you could have already paid taxes for 2020 to Uncle Sam. For instance, if you received income as an independent contractor or were otherwise self-employed, you may have made estimated tax payments last year. If you filed a 2019 tax return, you may have applied your refund from that return to your 2020 taxes (it’s optional).

If you paid 2020 taxes in advance in one of these two ways, make sure you file a tax return even if your overall income is below the applicable filing threshold amount. That will allow you to get that money back.

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Earned Income Tax Credit

picture of a woman delivering pizzapicture of a woman delivering pizza

The Earned Income Tax Credit (EITC) is for lower income working people. If you qualify for the credit, then you definitely want to file a tax return. The credit is “refundable,” meaning that if it’s worth more than the income tax you owe, the IRS will issue you a refund check for the difference. (With a “nonrefundable” credit, you don’t get a refund because the tax you owe isn’t reduced below zero.) The EITC is the first of several refundable credits that we’ll discuss.

For 2020 tax returns, the maximum EITC ranges from $538 to $6,660 depending on your income and how many children you have. (For your 2021 return, the range will be $1,502 to $6,728.) So, it’s well worth the time it takes to complete a tax form if you qualify for the credit.

The income limits to qualify for the EITC are fairly low. For example, if you don’t have kids, you can qualify if your 2020 earned income and adjusted gross income (AGI) are each less than $15,820 for singles and $21,710 for joint filers. (For 2021, those income limits rise to $15,980 and $21,920, respectively.) If you have three or more children and are married, though, your 2020 earned income and AGI can be as high as $56,844 ($57,414 in 2021). Plus, you can use your earned income from 2019 to determine the EITC for the 2020 tax year if it results in a higher credit amount. There are many exceptions and other rules, but the IRS has a handy online tool to help you figure out if you’re eligible for the credit.

For temporary changes to the 2021 EITC, see 6 Biden Stimulus Benefits That Pack the Biggest Punch.

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Child Tax Credit

picture of mother watch one child playfully smashing a cupcake into another child's facepicture of mother watch one child playfully smashing a cupcake into another child's face

For the 2020 tax year, parents with children 16 years old or younger may qualify for the child tax credit. The maximum credit amount is $2,000 per child, but up to $1,400 of the credit can be refundable. And that’s per child! So, like the EITC, you could end up with a nice refund check by filing a return just to claim this credit.

Not sure if you qualify for the credit? The IRS has an online tool to help with that.

Also note that, if you don’t qualify for the child tax credit, you might be able to claim a different tax credit for your dependents. There’s something called the “credit for other dependents,” and it’s worth up to $500 for each qualifying dependent. It’s a nonrefundable credit, though. So, it won’t trigger a refund if you otherwise don’t owe any tax.

There are a lot of temporary enhancements to the child tax credit for the 2021 tax year. The amounts are higher, more children qualify, it’s fully refundable, and the IRS will make advance monthly payments later this year (which you can estimate using our 2021 Child Tax Credit Calculator). For all the details, see Child Tax Credit 2021: How Much Will I Get? When Will Monthly Payments Arrive? And Other FAQs.

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Recovery Rebate Credit

picture of man holding sign saying &quot;Stimulus Checks&quot;picture of man holding sign saying &quot;Stimulus Checks&quot;

If you didn’t get a first- or second-round stimulus check, or you didn’t get the full amount, you may be able to get paid now by claiming the recovery rebate credit on your 2020 tax return. Those two stimulus checks were actually just advance payments of the credit. So, if you didn’t get the money earlier, you should get it now (assuming you’re eligible).

You’re generally eligible to claim the recovery rebate credit on your 2020 return if, in 2020, you:

  • Were a U.S. citizen or U.S. resident alien;
  • Can’t be claimed as a dependent on another person’s tax return; and
  • Have a Social Security number valid for employment that’s issued before the due date of your 2020 tax return (including extensions).

Calculation of the recovery rebate credit is generally the same as the calculation for the first two rounds of stimulus checks, except that they’re based on information from different sources. The first-round stimulus checks were typically based on information from either your 2018 or 2019 tax return, whichever was most recently filed when the IRS began processing your return. If you didn’t file a return for either of those two years, you could send the IRS the necessary information through an online portal. If you received benefits from the Social Security Administration (SSA), Railroad Retirement Board, or Department of Veterans Affairs (VA), the IRS got the information it needed from those other government agencies. Second-round stimulus checks were based on either your 2019 return, information previously obtained through the IRS’s non-filers online portal, or information received from another government agency. However, the amount of your recovery rebate credit is based entirely on information found on your 2020 tax return. For more information, see What’s the Recovery Rebate Credit?

There will also be a recovery rebate credit for 2021 tax year returns. That will be for people who didn’t receive a third-round stimulus check (or didn’t receive the full amount). To calculate the amount of your third stimulus check, use Kiplinger’s Third Stimulus Check Calculator. For more information on third-round stimulus checks, see Your Third Stimulus Check: How Much? When? And Other FAQs.

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American Opportunity Tax Credit

picture of four college students hanging out on some stepspicture of four college students hanging out on some steps

The American Opportunity credit covers expenses for students who are in their first four years of college. The credit is worth up to $2,500, and it can be claimed by a parent, spouse or student who is not claimed as a dependent who for tuition, fees, or textbooks.

The credit is partially refundable. So, if the credit is worth more than your tax liability for the year, you’ll get a refund check for 40% of the remaining amount – up $1,000 for each qualifying student. That should be enough to get you to complete a tax return if you don’t otherwise have to file one.

As with the EITC and child tax credit, the IRS has an online tool to help you figure out if you’re eligible for the American Opportunity credit. It will also help you determine if you can claim the Lifetime Learning credit or the tuition and fees deduction (2020 was the last year you can claim the tuition and fees deduction).

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Premium Tax Credit

picture of a magnifying glass over a book about ObamaCarepicture of a magnifying glass over a book about ObamaCare

The premium tax credit helps people pay for insurance they buy through the health insurance marketplace (i.e., Obamacare). The credit is available for people with household incomes ranging from 100% to 400% of the federal poverty level. The amount of the premium tax credit is based on a sliding scale, so that people with a lower income get a larger credit.

An estimated credit is calculated when you go on a marketplace website such as healthcare.gov to buy insurance. At that point, you can choose to have the credit paid in advance directly to the insurance company to lower your monthly payments, or you can choose to get all the benefit of the credit when you file your tax return for the year. If you elect to have advance premium tax credit (APTC) payments made to the insurer, you will have to reconcile the amount paid in advance with the actual credit you compute when you file your tax return. Either way, you will need to complete Form 8962 and attach it to your tax return.

The premium tax credit is another refundable credit. So, if the amount of the credit is more than the amount of the tax you owe, you’ll receive the difference as a refund if you file a tax return. If you owe no tax, you can get the full amount of the credit as a refund. However, if your actual allowable credit is less than your APTC payments, the difference is usually subtracted from your refund or added to the tax you owe – except that the repayment of excess advance premium tax credit (APTC) amounts was suspended for 2020. Therefore, if you already filed your 2020 tax return and had excess APTC payments, the IRS will automatically reduce the excess APTC repayment amount to zero and send you a refund if one is required.

Be warned, though, that the IRS typically looks for people who receive advance credits and either don’t file returns or file returns incorrectly reporting the credit. So, monkeying around with the premium tax credit is a good way to get your return audited.

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Health Coverage Tax Credit

picture of a stethoscope on money picture of a stethoscope on money

The health coverage tax credit helps certain displaced workers and pre-retirees pay for health insurance. Specifically, it is available to (1) people eligible for Trade Adjustment Assistance allowances because of a qualifying job loss, and (2) people between 55 and 64 years old whose pension plans were taken over by the Pension Benefit Guaranty Corporation. The credit is worth up to 72.5% of payments for qualified health insurance coverage.

As with the other credits we’ve mentioned, the health coverage credit is refundable. So, if you can claim the credit, you’ll want to file a tax return just to claim the credit, even if you’re not required to file a return. By doing so, you can get a federal income tax refund check sent to you.

As with the premiums tax credit, the health coverage credit can be paid in advance. That also means that your refund will be smaller (or eliminated) if the advance credit payments are greater than your actual allowable credit. There’s no suspension of 2020 excess payments of the health coverage credit like there is for the premium tax credit.

Also note that the health coverage credit was set to expire at the end of 2020, but it was extended to December 31, 2021.

9 of 9

Credits for Sick and Family Leave

picture of sick woman in bed taking her temperaturepicture of sick woman in bed taking her temperature

Many employers were required to provide paid sick and family leave in 2020 for workers affected by COVID-19. However, to shift most of the financial burden for paid leave off the employer’s back, tax credits were also made available to reimburse employers for some of the cost. Self-employed people who couldn’t work because of the coronavirus got similar refundable tax credits, too.

The credits are generally equivalent to the amount of qualified sick or family leave wages the self-employed person would have received if he or she were an employee of an employer. To be eligible for the 2020 self-employment credits, you must have regularly carried on a trade or business during 2020 and been eligible to receive sick or family leave wages if you had been an employee of an employer (other than yourself). Complete Form 7202 to calculate the credit amount.

People who paid household employment taxes might also be able to claim a refundable credit for a portion of any sick or family leave wages you paid that were related to the coronavirus. The amount of this credit is shown on Schedule H, Line 8e.

As with the other refundable credits discussed, the credits for sick and family leave can lower your tax bill or even result in a tax refund. So, make sure you claim them even if you aren’t required to file a 2020 tax return.

Source: kiplinger.com