Saturday, November 18, 2017

Americans Spend At Least One Paycheck during the Holidays, Don’t Be One of Them


According to a GoBankingRates survey over 50% of Americans spend at least one paycheck during the holidays. While 22% spend two paychecks, 6% three paychecks, 4% four paychecks, 3% five paychecks and 9% six paychecks. Forty-four percent expect to spend two paychecks on more during the holidays. 

These alarming statistics indicate that Americans need to spend less and save more. It also indicates that Americans are not prepared for a financial crisis such as illness, divorce, unemployment, death of a loved one or a natural disaster.

These statistics show a lack of control, discipline, impulse buying and an eagerness to keep up with everyone else. If Americans saved money throughout the year they would avoid the holiday shame when their credit card bill arrives in January.

Advertisers knows that consumers are triggered by emotion so retailers create advertisements to heavily tap into consumers emotions to encourage them to spend more money. Holiday shopping should equal the amount of money you can comfortably afford to spend – money that will not be needed in the near future for another purpose. 

The best way to curb overspending during the holidays is by calculating how many hours it takes you to work to earn enough money to purchase a specific item. For example, if you feel the urge to buy a large flat screen television that costs $1,000 and you earn $998 each bi-weekly paycheck, it will take you 80 work hours to earn enough money to purchase the television. Here are 5 fantastic ways to avoid spending your paycheck during the holidays.

Create financial goals
Set financial goals that you want to achieve for the next five years. Every time you think about spending money determine how the purchase will affect your financial goals.

Ignore peer pressure your family, friends, colleagues, other parents or neighbors to purchase at item even it is for a good cause. If you can’t afford to purchase the item and purchase it anyway you are the only one who suffers.

If you overspent during the holidays last year or earlier in the year, examine why you overspent and solve the root cause to prevent overspending in the future.

Reevaluate how you purchase gifts. If you have a large family consider a secret Santa exchange so you are only required to purchase one gift for one person. If your family has a large number of children skip buying gifts for the adults and buy gifts for the children. Another option is to purchase gifts for your immediate family and work with your family to set a general spending limit.

Spend less money on those persons you purchase lavish gifts for in the past. If they complain tell them you are on a budget this year and need to stick to your budget. The amount of money spent on someone should not indicate your feelings for the person, i.e. if you spend less money it does not mean you care about them any less.

Saturday, November 11, 2017

5 Simple Ways to Pay Off Debt

Many Americans have still not changed their mindset and financial behavior. Stock market volatility, administration changes and federal and state regulatory changes should make everyone improve their financial behavior. Many Americans allow fear to cause them to make hasty decisions. Don’t let fear lead you to make a decision you will regret in the future.

If you owe debt and have the money - pay it off. Forget about the rumors that others have said about keeping a balance on your accounts. Paying off debt will help you maintain a good relationship with your creditors, stop those harassing calls, increase your credit score and reduce financial stress.

To pay off debt you have change the way you think about money.  Money is a tool that can be used either to generate debt or to generate wealth. There are several ways to get out of debt. Use these five simple ways to pay off debt, increase your credit score and improve your financial life.

A budget helps you identify your total monthly income, how much you owe and how much you spending each month. A budget also quickly identifies areas where you may need to reduce spending. Use online banking or automatic paycheck deduction to pay bills. 

Buy needs vs. wants, control your spending, don't buy in excess or more than you need, keep debt (excluding mortgage or rent) at 15% of your total monthly income (after taxes). Keep rent/mortgage at 30% of your total monthly income. Reduce expenses by 30-50%. Delay purchases until you have the cash to purchase them.  

Pay the balance in full each month prior to the due date or as soon as you receive the bill, which helps to avoid, paying finance charges. This also reduces your chances of going into debt and making late payments. 

Many consumers do not realize that they can send in payments for their debts multiple times a month.  Pay half of the bill balance with first paycheck of the month then pay the remaining balance with second paycheck of the month. Pay weekly instead of monthly or pay the minimum monthly payment the first week after you get the bill. Then each week pay as much as you can toward the monthly balance and repeat every month.  

If you pay the minimum monthly payment, you will end up paying 2 to 3 times what you actually purchased due to finance charges that accrue on your balance. Send more than the minimum monthly payment each month.

Keep credit card balances at 20% or below the credit limit.  Having accounts with balances above the credit limit will decrease your credit score and may increase the chances of your credit limit being reduced or your credit card account may be closed.

Saturday, November 04, 2017

How the Trump Tax Reform Plan Will Affect You

Everyone cringes when they hear any news about taxes. The tax code has been broken for years and has constantly favored wealthy tax payers. The Trump Tax Reform Plan is no different. To ensure you concerns are heard vote in the upcoming 2018 local election and state elections and write or call your U.S Congressman. Here are nine ways taxpayers would be affected by the Trump tax reform plan.

The Affordable Care Act (ACA) which provided health insurance to an additional 20 million people would be repealed. The new tax bill would eliminate $1.7 trillion from the ACA over the next decade or $1.7 billion per year. Low-income and middle-income taxpayers would be affected the most. Approximately 30 million taxpayers would lose their healthcare coverage. Medicaid would be reduced by $610 billion.

Social Programs
Social programs like TANF and SNAP that provide food and other benefits for low-income taxpayers would be greatly impacted. The Pell Grant that provides financial aid for college students would be reduced. A total of $1.2 trillion would be reduced from all these programs.

Tax Increase
Low-income and middle-income taxpayers would see a tax increase. The current system of seven income tax brackets 10%, 15%, 25%, 28%, 33%, 35% or 39.6% would be reduced to three: 12, 25 and 35 percent. The majority of taxpayers would see a 2 percent increase. Wealthy taxpayers’ income tax would be reduced by 5 percent. The child tax credit and earned income tax credit (EITC) would be reduced by $38.9 billion.

Standard Deduction
Single taxpayers could deduct $12,000, and married couples could deduct $24,000, a $5,600 reduction but both groups would no longer be able to deduct additional exemptions.

Taxpayers would no longer be able to deduct exemptions for their children. However they could apply for a larger child tax credit up to $1,600 per child.

State and Local Taxes
Taxpayers would no longer be able to deduct income or sales tax and would only be allowed to deduct up to $10,000 in property taxes.

The estate tax exemption would double. Estates with asset of $11.2 million or less would not be taxed. After six years the estate tax would be eliminated entirely.

Small Businesses
The bill would favor large companies and tax income from smaller companies such as an accountants at individual rates.

The homeowner deduction would be limited to $500,000 for first-time mortgages. Mortgages on second homes would no longer be tax deductible.