How To Get The Most Out Of Your Yearli Tax Return

by Nasr-Eddine VerhaeghCoupons & Deals

Income tax returns are one of the most important documents you will file during your year. By understanding the different types of returns and how to prepare them correctly, you can reduce your tax bill by as much as 20%.

If you don’t find what you’re looking for on the Yearli website, there are a few other places to check. Couponvario is a great resource for finding promo codes for a variety of online retailers, and they frequently have codes for Yearli.

If you have questions about your tax return, or would like to discuss any specific issues, please contact us at [our phone number]. We can offer a free consultation to help you get the most out of your return.

First, understand the different types of returns.

There are three main types of income tax returns: Individual, Married Filing Jointly, and Estate/Consultation.

Individual returns are the most important type because they identify your taxable income. You must include all of your income on this type of return, even if you only received a small amount of income.

Married Filing Jointly returns identify your combined income and tax liabilities of both spouses.

Estate/Consultation returns are used to discuss your tax situation with the IRS. These returns are not as important as individual and married filing jointly returns, but they can still be important to file because they may identify any special tax benefits you may have.

Now that you understand the different types of returns, it’s time to prepare them correctly.

There are several different techniques you can use to prepare your income tax return. These techniques vary depending on the type of return you are preparing, but all of them should include:

  • An accurate tax return
  • A full disclosure of all your income and deductions
  • An analysis of your tax situation
  • An estimate of your tax liability
  • An explanation of any tax breaks you may have
  • An explanation of any overpaid taxes
  • An explanation of anyUnderpaid taxes
  • An explanation of any changes in your income or deductions
  • An explanation of any unusual items in your income
  • An explanation of any unusual items in your deductions
  • An explanation of any changes in your tax bracket
  • An explanation of any changes in your tax liability
  • An explanation of any changes in your tax refund
  • An explanation of any changes in your tax liability after you file
  • An explanation of any changes in your federal tax refund

Once you have completed all of these steps, you will have a completed tax return that you can use to reduce your tax bill.

To prepare your return, you will want to use the following methods:

  • Standard method
  • Attributable method
  • Line by Line method
  • Parallel method
  • Combined method
  • Standard method

The standard method is the most common method used to prepare income tax returns. This method uses the same steps as the normal method, but you add the appropriate items to your income and deductions to get the correct tax return.

The Attributable method is a more complex method used to identify specific income. This method uses a specific method to figure your taxes, and then uses that information to identify your taxable income.

The Line by Line method is used to prepare a single return with multiple lines. This method uses the same steps as the normal method, but you combine your income and deductions on one line.

The Parallel method is used to prepare two or more income tax returns using the same steps. This method allows you to use the same tax return to reduce your tax bill and avoiddouble taxation.

The Combined method is used to combine the results of the individual and married filing jointly methods. This method uses the same steps as the individual method, but you combine your income and deductions on one line.

Now that you understand the different methods, it’s time to use them.

Next, use the appropriate methods to prepare your return.

The Attributable method is most effective when you have a specific income that you want to identify. The Attributable method can be used with any income, but it is most effective with income that is more than $50,000.

The Line by Line method is most effective when you have a large number of lines to prepare. The Line by Line method can be used with any income, but it is most effective with income that is more than $50,000.

The Parallel method is most effective when you have a small number of lines to prepare. The Parallel method can be used with any income, but it is most effective with income that is more than $50,000.

The Combined method is most effective when you have a small number of lines to prepare. The Combined method can be used with any income, but it is most effective with income that is more than $50,000.

Now that you have used the appropriate methods, it’s time to prepare your return.

Next, use the standard method to prepare your return. This method uses the same steps as

For most taxpayers, the year-end tax return is the most important document they’ll ever produce. It’s the place where you list all of your income and deductions, and it’s also the place where you report how much money you’ve saved and how much money you’ve spent.

There are a few things you can do to make your year-end tax return more effective, and one of the most important things you can do is to follow these three tips.

Make sure you file your return by the due date.

Filing your return by the due date will help you get a better understanding of your tax situation and will make it easier for IRS agents to help you prepare your tax return.

Use the correct forms.

There are a variety of different forms you can use to report your income and deductions, and it’s important to use the correct forms. If you use the wrong form, your tax return will be more difficult to prepare and will likely result in a higher tax bill.

Report your income and deductions accurately.

You should report all of your income and deductions on Schedule A, which is known as the “big four.” This is the form that you use to report your total income, your total deductions, your net income, and your net loss.

By following these three tips, you can make your year-end tax return more effective and accurate.

The Importance Of Personal Finance For Your Retirement

by Nasr-Eddine VerhaeghPersonal Finance

It is never too early to start planning for your retirement. In fact, the sooner you start saving and investing for retirement, the better off you will be.

There are a number of important factors to consider when planning for retirement, but one of the most important is personal finance. Your personal finance situation will have a big impact on how much money you will have to retire on and how long your money will last.

There are a few key things to keep in mind when it comes to personal finance and retirement planning:

Savings: It is important to start saving for retirement as early as possible. The sooner you start saving, the more time your money will have to grow. If you wait until later in life to start saving, you will likely have to save more money each month to catch up.

Investments: Another important factor to consider is how you will invest your money. There are a variety of different investment options available, and it is important to find the right mix for your situation. You should work with a financial advisor to help you determine the best way to invest your money.

Debt: Debt can have a big impact on your personal finance situation and your ability to retire. It is important to pay off any high-interest debt before you retire. This will free up more money each month that you can use to save for retirement.

Retirement Income: When you retire, you will need to have enough income to cover your living expenses. There are a number of different sources of retirement income, including Social Security, pensions, and investments. It is important to have a mix of different sources of income to make sure your needs are covered.

Taxes: Taxes can also have a big impact on your personal finance situation. It is important to understand the tax implications of your retirement income and investments. This will help you keep more of your money in retirement.

Personal finance is an important consideration in retirement planning. By taking the time to understand your personal finance situation and make smart decisions, you can ensure that you have the money you need to enjoy a comfortable retirement.

How Personal Finance Can Help You Save Money

by Nasr-Eddine VerhaeghPersonal Finance

Money is tight these days. Whether you are struggling to make ends meet or you are just looking to save a little extra, personal finance can help. By learning how to budget, invest and save, you can make your money work harder for you.

Budgeting is the key to controlling your finances. By tracking your income and expenses, you can see where your money is going and make adjustments to ensure that you are spending within your means. A budget can also help you to identify areas where you may be able to save money, such as by eating out less or cutting back on unnecessary expenses.

Investing is another important aspect of personal finance. By investing your money, you can grow your wealth over time. There are many different ways to invest, so it is important to do some research to find an investment strategy that best suits your needs.

Saving is also essential for building your financial security. By putting away money each month, you can create a nest egg that can be used in case of an emergency or for future goals, such as retirement. A savings account can also help you to earn interest on your money, which can further grow your wealth.

Personal finance is all about taking control of your money and making it work for you. By budgeting, investing and saving, you can improve your financial well-being and secure your future.

Personal finance is all about making smart money choices in order to achieve your financial goals. It can help you save money by teaching you how to budget and manage your money wisely. By learning how to save money, you can put yourself in a better financial position and achieve your financial goals sooner.

There are a few key things to keep in mind when it comes to personal finance and saving money. First, you need to have a clear understanding of your financial situation. This means knowing what your income and expenses are, as well as your assets and liabilities. Once you have a good understanding of your financial situation, you can develop a budget.

A budget is a tool that can help you track your spending and ensure that you are living within your means. It is important to remember that a budget is not a diet; it is a guide to help you make informed choices about your spending. When you develop a budget, be sure to include a savings plan. This will help you set aside money each month to reach your financial goals.

In addition to developing a budget, there are other personal finance tips that can help you save money. One of the best ways to save money is to live below your means. This means spending less than you earn. Another way to save money is to make wise choices about your purchases. When you are able to save money on your everyday expenses, you will have more money available to save for your future goals.

Personal finance is all about making smart money choices. By learning how to save money, you can put yourself in a better financial position and achieve your financial goals sooner.

How To Save Money And Still Live A Millionaire Lifestyle

by Nasr-Eddine VerhaeghPersonal Finance

We all know that the key to saving money is to live below your means. But what does that really mean? In order to save money, you need to make sure that your spending does not exceed your income. That may sound like a no-brainer, but it’s actually harder than it sounds.

If you want to save money, you need to be mindful of your spending. Track where you are spending your money and see where you can cut back. There is no need to live like a pauper, but you don’t need to live like a millionaire either. Find a happy medium that allows you to save money while still living a comfortable life.

Here are some tips to help you save money and still live a millionaire lifestyle.

Invest in yourself

One of the best ways to save money is to invest in yourself. Investing in your education and career can pay off handsomely in the long run. Not only will you be making more money, but you will also have the knowledge and skills to better manage your finances.

Live below your means

This may seem like a no-brainer, but it’s actually harder than it sounds. If you want to save money, you need to be mindful of your spending. Track where you are spending your money and see where you can cut back. There is no need to live like a pauper, but you don’t need to live like a millionaire either. Find a happy medium that allows you to save money while still living a comfortable life.

Make a budget and stick to it

Making a budget is a great way to control your spending and save money. When you make a budget, you need to be realistic about your income and expenses. Don’t try to live on less than you earn – that’s a recipe for disaster. But, if you can find ways to trim your expenses, you can free up more money to save.

Invest your money wisely

Investing your money is a great way to grow your wealth. But, you need to be careful about where you invest your money. Invest in solid, long-term investments that will offer you a good return. Avoid high-risk investments that could leave you with losses.

Live a simple lifestyle

You don’t need to have the latest and greatest gadgets to be happy. Live a simple lifestyle and focus on what’s important to you. You’ll be surprised at how much money you can save by living a simpler life.

Saving money doesn’t have to be difficult. By following these tips, you can save money and still live a comfortable, millionaire lifestyle.

How A Personal Finance Policy Can Help You Save Money

by Nasr-Eddine VerhaeghPersonal Finance

When it comes to saving money, having a personal finance policy in place can be a helpful way to make sure you’re doing everything you can to keep your finances in order. A personal finance policy is simply a set of guidelines that you follow in order to make sure you’re making the best possible decisions with your money.

There are a few key components to a strong personal finance policy. First, you need to have a clear understanding of your income and expenses. This will help you know how much money you have available to save each month. Second, you need to set realistic goals for your savings. It’s important to have a specific goal in mind so that you can stay motivated to save. Finally, you need to create a budget and stick to it. This will help you keep track of your spending and make sure you’re not overspending.

following a personal finance policy can help you save money each month, which can lead to a better financial future. If you’re not sure where to start, there are plenty of resources available to help you create a personal finance policy that works for you.

When it comes to saving money, a personal finance policy can be a helpful tool. This type of policy can outline how much you plan to save each month, as well as what you plan to do with that money. Having a personal finance policy can help to keep you accountable and on track with your savings goals.

There are a few things to keep in mind when creating a personal finance policy. First, be realistic about how much you can save each month. It’s important to set a goal that you can actually achieve, otherwise you may get discouraged and give up on your savings plan altogether. Second, consider what you’re going to do with the money you save. Do you want to use it to pay down debt, build up your emergency fund, or invest for the future? Once you know how you’re going to use your savings, you can better tailor your personal finance policy to fit your needs.

If you’re not sure where to start, there are plenty of resources available to help you create a personal finance policy. You can find helpful tips and templates online, or you can talk to a financial advisor for more personalized assistance. No matter what route you choose, taking the time to develop a personal finance policy can pay off in the long run.

How To Create A Personal Finance Policy For Your Family

by Nasr-Eddine VerhaeghPersonal Finance

It’s no secret that money is one of the leading sources of stress in our lives. And when it comes to our finances, it can be difficult to know where to start when it comes to creating a budget and getting our finances in order. That’s why we’ve put together this guide on how to create a personal finance policy for your family.

A personal finance policy is simply a set of guidelines that you and your family agree to follow when it comes to your finances. By creating a personal finance policy, you can take the guesswork out of budgeting and financial decision-making, and help to ensure that your family’s finances are on track.

Here are a few things to consider when creating your personal finance policy:

1. Determine your family’s financial goals

The first step in creating a personal finance policy is to determine your family’s financial goals. What are you hoping to achieve with your finances? Do you want to get out of debt? Build up your savings? Invest for your future? By setting some financial goals, you’ll have a better idea of what your personal finance policy should include.

2. Set some ground rules

Once you know what your family’s financial goals are, you can start to set some ground rules for your personal finance policy. These rules will help to ensure that everyone in your family is on the same page when it comes to your finances.

Some examples of ground rules that you may want to set include:

– No one should spend more than X dollars without consulting with the rest of the family

– We will only use credit cards for emergencies

– We will save X percent of our income each month

3. Create a budget

A budget is an essential part of any personal finance policy. By creating a budget, you’ll be able to track your family’s income and expenses, and make sure that your spending aligns with your financial goals.

4. Have regular financial check-ins

Once you’ve created your personal finance policy, it’s important to have regular financial check-ins with your family. This will help to ensure that everyone is still on track with your policy, and that any changes that need to be made can be discussed and implemented.

Creating a personal finance policy for your family can help to take the stress out of budgeting and financial decision-making. By following the steps above, you can create a policy that will work for your family and help you to achieve your financial goals.

What Are The Different Types Of Personal Finance Policies?

by Nasr-Eddine VerhaeghPersonal Finance

There are four main types of personal finance policies: debt management, investment, saving, and spending. Each type of policy has its own set of rules and guidelines that dictate how you should handle your money.

Debt management policies focus on helping you pay off your debts and avoid taking on new debt. Investment policies focus on helping you grow your money by investing it in stocks, bonds, and other assets. Saving policies focus on helping you put away money for your future goals. Spending policies focus on helping you control your spending and stay within your budget.

Which type of policy is right for you will depend on your own financial situation and goals. If you’re trying to get out of debt, a debt management policy will be most helpful. If you’re trying to save for retirement, a saving policy will be most helpful. If you’re trying to grow your wealth, an investment policy will be most helpful. And if you’re trying to control your spending, a spending policy will be most helpful.

No matter which type of policy you choose, the most important thing is to stick to it. Personal finance is all about making smart choices with your money, and the best way to do that is to have a plan in place.

There are many types of personal finance policies, but the three most common are debt, savings, and investment. Each one has different benefits and drawbacks, so it’s important to understand all three before making any decisions about your own personal finance.

Debt:

Debt is often seen as a bad thing, but it can actually be a useful tool if used correctly. Debt can help you buy a home, start a business, or pay for an education. The key is to only borrow what you can afford to pay back, and to make sure that the interest rate on the debt is lower than the rate you could earn by investing the money.

Savings:

Savings are important for two reasons: to have money set aside for emergencies, and to have money to invest. The key to saving money is to make it automatic – set up a direct deposit from your paycheck into a savings account, and make sure you don’t touch it unless it’s an emergency.

Investment:

Investment is how you can grow your money over time. When you invest, you’re buying something – stocks, bonds, mutual funds, real estate – that you expect will go up in value over time. You can also invest in things that will provide you with income, such as rental properties or dividend-paying stocks. The key with investment is to start early and to diversify your investments so that you’re not putting all your eggs in one basket.

Personal finance is a complex topic, but understanding the basics of debt, savings, and investment will help you make the best decisions for your own financial future.

Flat Broke? Find Help for Rent, Food, Heat & More

by PATRICIA HolmesPersonal Finance

What do you do when you max out your unemployment? Is there anything worse than not knowing where your next meal is going to come from? We don’t think so; this is why we’ve put together a list of places that you can find help when you really need it.

$1000 Grants

Modest Needs is a fantastic charity. They help low-income workers from falling into poverty and/or homelessness. If you can’t pay your rent or your heating bill you can apply for a Modest Needs grant (a grant means you don’t have to pay it back) that can help you get through a rough patch.
If you want to help a family in trouble it is easy to donate to Modest Needs; you can help families receive the emergency money they need.

*Clarification: Modest Needs can only assist people who are employed.

Rent or Mortgage

The site NeedHelpPayingBills.com offers loads of information on state, federal and private organizations and charities that can help you pay your rent or your mortgage. The site also has links for help paying heat, electric or water bills.

Most state’s have rental assistance programs. Call your state’s Department of Social Services or Department of Human Resources and ask them. Or, dial 211. You can visit 211.org, enter your zip code, and download a booklet of all the places in your area that can provide help.

Housing and Urban Development (HUD) can provide help for homeowners and for renters.

USDA Rural Development Program can help people in rural areas with their mortgage or rent.

Food

The Federal Food Stamp program is now called SNAP, the Supplemental Nutrition Assistance Program. This program provides monthly funds so you can buy food.

Women, Infant, and Children (WIC) provides Federal grants to States for supplemental foods, health care referrals, and nutrition education for low-income pregnant, breastfeeding, and non-breastfeeding postpartum women, and to infants and children up to age five who are found to be at nutritional risk.

Family Investment Program (FIP) provides cash payments and Medicaid health care coverage to families with dependant children and limited income and resources. The amount of your monthly cash payment is determined by the number of members in your family and your current income and resources. Do a search for “Family Investment Program” and the name of your state.

Emergency Assistance to Families with Children (EAFC) is a program in most states. Family with dependent children under the age of 21 facing an immediate crisis including, but not limited to, eviction notices, mortgage foreclosures, gas and electric turn-off notices and delinquent water bills. Do a search for ” Emergency Assistance to Families with Children” and the name of your state.

SHARE (Self Help and Resource Exchange) is a great program that lets you trade volunteer work for less expensive groceries. Search for food co-ops in your area.

Soup Kitchens can provide a hot meal.

Food Pantries provide emergency food packages.
Feeding America is a terrific program. If you need help, Feeding America will help you. It just released a new study Hunger America 2010. Here are some key findings from their study:
• The 37 million Americans served annually by Feeding America include nearly 14 million children and nearly 3 million seniors.
• Each week, approximately 5.7 million people receive emergency food assistance from an agency served by a Feeding America member. This is a 27 percent increase over numbers reported in Hunger in America 2006, which reported that 4.5 million people were served each week.
• These numbers are based on surveys conducted at emergency feeding centers, such as soup kitchens and food pantries, but do not factor in many individuals also served at non-emergency locations, such as Kids Cafe programs and senior centers.
You can donate to Feeding America to help feed people in our country.

Can’t pay your heating bill?

Call you heating company and ask what help they offer. Most have services or organizations that they can refer you to

Each state has its own chapter of HEAP, the federally funded Home Energy Assistance Program.

My Top 5 Favorite Financial Apps

by PATRICIA HolmesPersonal Finance

There is an existing app designed to make almost every aspect of life easier: calorie-counting, exercise-tracking, navigating and traveling, recipe-learning, sales and shopping, language-learning, news-reading, and the list goes on. It’s all accessible with a touch and a swipe on your mobile device. But some of the most useful apps (to me) are apps that help me to better manage my money. Days are busy and I don’t always have time to stop what I am doing and think about tracking my spending, let alone budgeting for the future. Here are my top 5 favorite financial apps that simplify the money side of life!

1. LearnVest

This app helps you to create budgets and outline your financial goals, while keeping you on track to meet those goals. This app connects to your personal accounts – checking, savings, credit cards, and investments – to track your spending. This feature is designed to give you an instant picture of how you are spending your money, and whether you are spending too much in one area.

2. HelloWallet

This app takes a behavioral science approach to business to help you plan your financial future. The founder of the app molded behavioral psychology with technology to come up with an app that offers individualized personal finance recommendations based on your age, spending patterns, and income. It also brings to your attention financial gaps in your life, for example, inadequate emergency-savings plans.

3. OnBudget

This app includes a fee-free prepaid card, so that you cannot spend more than what you have in the budget. With the MasterCard prepaid debit card, this app is designed to help you organize your spending by using different “envelopes” for each spending category. The envelopes are used to track spending patterns, give you tips on saving, and to give you constructive advice on better decision-making.

4. Better Haves

Better Haves is a budgeting app designed for couples. This app allows you to easily manage a budgeting envelope, and allows you to track expenses individually and together. 

5. Checks   

This app monitors your bills, accounts, and credit cards and reminds you of payments you need to make. If you are prone to being late or missing payments, this app may help keep you on track! 

Earning Money Online: What’s Your Time Worth?

by PATRICIA HolmesUncategorized

It’s hard to ignore the appeal of making real money online—after all, we live in a world where bloggers land book and movie deals, where top YouTubers are multimillionaires and where celebrities collect thousands of dollars in exchange for a single sponsored tweet.

While some of us dream of a wildly successful Internet career, the rest of us are happy to settle for online earnings that are a little more modest. Thousands of money-making opportunities are just a web search away. Whether you’re selling your old stuff, scoping out freelance opportunities or running your own digital storefront, there are tools and resources to help you along every step of the way. 

In recent years, a new approach to making a quick buck online has been gaining traction: online rewards programs where you can earn money by performing a variety of online activities. Some sites are based on consumer activities (e.g., online shopping, submitting product reviews, watching video promotions), while others are geared towards data-related activities (taking surveys, image tagging, transcribing information). Though the sites vary in nature, they share some commonalities: they are built around “microtasks”—online activities that do not require much time or experience to complete. 

Microtask and shopping rewards websites are appealing because of their perceived easiness. Most of their paid activities can be completed in mere minutes and almost anyone can do it—it doesn’t get much better than that, right? Other ways of making money online suddenly seem slow and labor-intensive by comparison. Why spend time and energy getting a freelance gig when you can sit around filling out surveys instead?

Well, before you go signing up for every free trial and installing every search bar plug-in, consider that the selling points (Easy! Fast! No experience necessary!) on these websites also serve as red flags that this type of money-making may not be worth your while. The following questions can help you weed out the underpaid clickbait from the better-paid gigs:

1) What’s the “hourly wage”? 
This might seem like an obvious first step, but comparing the real hours you’re spending to the real money you’re earning is an incredibly helpful tool in determining whether or not an online pursuit is worth your time. Many rewards sites use point systems in which points need to be accumulated before they can be redeemed. Point systems are really great at obscuring how much you’re actually earning, so take the time to figure out the approximate cash value of a single point. If it takes 500 points to redeem a $5 gift card, for example, a point is worth roughly $0.01. Completing a survey for 25 points sounds decent, but (following this example) if the survey takes 10 minutes to complete, the reality is that you’re working at a rate of $1.50 per hour, which sounds a lot less decent.

2) How much talent or expertise does the gig require?
When considering joining a microtask or shopping rewards website, evaluate the sort of activities you’d be engaging in. Do any conditions or restrictions apply, or can anyone with an Internet connection do the task? As a rule of thumb, online gigs with the fewest barriers have the most people competing for them and therefore tend to pay less. A little know-how can go a long way, so look for opportunities to complete slightly higher-paying activities: for example, submitting a video product review will likely earn you more credits than watching a 30-second ad. 

3) What are you willing to compromise?
Sometimes the ease and convenience of microtask and rewards sites comes at the price of your personal data and online identity. How much is your personal information worth to you? Would you be okay with a fuller inbox (and mailbox!) as a result of filling out surveys and promotional offers? Are you comfortable linking your social media accounts to the product reviews you submit? Are you willing to sell out your ‘likes’ and ‘faves’? Taking stock of your web presence and browsing habits can help you figure out how much you’re willing to compromise for some extra spending cash.

________________

Microtask and shopping rewards sites, although increasingly popular, generally aren’t practical options for any substantial level of online income. That doesn’t mean they have to be avoided completely—if you’re happy clicking around and then redeeming a gift card every couple of months, then all power to you! As with all sources of online income, it’s important to have realistic expectations and to treat your time as a valuable resource.v

A Life Less Taxing: Understanding Taxes

by PATRICIA HolmesTaxes

I had to ask myself, “How could I make a chapter about taxes fun?” I don’t think anybody actually looks forward to paying taxes. That’s not to say we don’t do it, but it just takes away a large part of what we earn. I don’t know if I can really make taxes fun, but I can at least take some of the mystery out of the tax code and make the whole process seem much less scary.

We have many different levels of taxation. The first portion of taxes we notice are the federal taxes that come right off the top of our paychecks. You may also notice your state income taxes (unless you live in one of the states that do not have income taxes), and then there is social security. By the way, your social security taxes are about the same as your state taxes in many cases. Just think, so much of your hard earned tax dollars are right now being fed into some slot machine in Vegas by a retiree. Anyway, all of these are called payroll taxes. We will discus them more deeply in just a moment.

We also pay other taxes, which are called use taxes. When you purchase an item in most states you will pay a sales tax. Sales taxes are essentially use taxes. You pay taxes because you used something. You also pay plenty of taxes on your telephone bill, electric bill, gas bill, and so on. The gasoline that you buy at the pump already has taxes built into the price, so even though it doesn’t seem like you are paying taxes on your gasoline, you are. You have probably heard the expression that the only two sure things are death and taxes. Now you know why. Someone once said, “If you can see it, touch it, feel it, taste it, hear it or even think of it, they can tax it.” Consider it a cost of doing business in the United States.

Understand Your Taxes to Make Them Less Scary

For most people just starting out, taxes are not that complicated. All you have to do is report how much money you make and fill in about four or five other lines on your tax return and pay your taxes. You don’t even have to calculate how much you earned because your employer sends you a statement in the mail at the end of the year that says how much you earned and how much you have already paid in taxes (the form is called your W-2). Now, if you want to learn how to minimize the amount you pay in taxes, that’s where it starts to get a little tricky. Not to worry, because we’ll go through just about every step you need in order to complete your tax return.  We will also discuss ways to minimize your tax liability.

The first question most people ask is, “do I have to fill out a tax return.” The answer: “Hopefully.” If you do not need to fill out a tax return, it would be because you did not make enough money that year. How much is enough? Well, that too changes each year to account for inflation, or any tax law changes. Visit www.irs.gov or refer to the “Do You Have to File” section of the Form 1040 Instructions.

The next question people ask is, “Do I have to file a tax return if the government owes me money?” The answer: “Yes.” The IRS is not interested in keeping your money (just their fair share). Regardless of whether you owe tax dollars or if you are eligible for a refund, you have to file your tax return, and you have to file it on time (by April 15th). There are exceptions to filing your return on time, but you have to file an extension (IRS Form 4868). However, even if you are granted an extension, you still have to pay any taxes owed. Your payments are not extended, only the filing of your return. Now, you may ask, “How do I know how much I owe if I haven’t completed my tax return.” The answer: “You don’t.” Kind of funny isn’t it? You should have an estimate and pay accordingly. Your best bet is to over estimate so you won’t pay any interest (or penalties in some cases). In that case, when you do file, you will get back any over payments.

So, when should you file your taxes? Before April 15th. If you are owed a refund, I suggest you file your return as soon as possible. The sooner you get your money back, the better. While you’re at it, you should request a direct deposit so you’ll get your money even faster, within two weeks in some cases. There is space at the bottom of your return to fill in your bank information. You can refer to the sample check in Chapter 4 if you need help with the routing and bank account numbers.

If you owe money, hold off as long as possible before sending any money. If you file electronically, you can file your return whenever it is convenient; yet specify the exact date that the money should come out of your account. In other words, you could file in late January, but not have your money sent to the IRS until April 15th. Just don’t forget to make a note of that in your checkbook. You don’t want the IRS to get an “insufficient funds” notice when they go to get your tax money from your account.

For the record, your employer has until January 31 to send out your W-2. The W-2 is the form that shows how much you made for the year, how much you paid in taxes, how much you put in your retirement account, etc. If you work as an independent contractor, and are not actually an employee of the firm that pays you, they will send you a Form 1099 instead. In most instances, if you are receiving a Form 1099, the firm you worked for was not taking any taxes out of your paycheck (hopefully you were setting money aside or making estimated quarterly payments).

You cannot file your taxes until you have all of this information. Notice that I said they had to send it by the 31st of January. That means you might not receive your W-2 until the second week of February (hopefully it won’t take that long). If you changed jobs at any point during the previous year, you will receive one from each employer. If you have not received your W-2 by the second week of February, you should contact your employer. It is your responsibility to have the information and to file your taxes on time.

While you are waiting, if you have your last pay stub of the year (it may have been received in January) you can see in the “Totals” column how much you made, and how much you paid during the year. If you have contacted the employer at least twice and the April 15th deadline is approaching, use the information from your final pay stub and include a letter to IRS explaining that you contacted the employer on such and such a date (or dates) and they still have not provided your W-2. All of this applies to your bank or brokerage account statements as well. They should have sent something that indicates how much you made in interest or dividends for the year. You will have to include this information on your tax return as well.

Completing a W-4 & How Federal Taxes Are Withheld from Your Paycheck

by PATRICIA HolmesTaxes

How to calculate exemptions and an overview of how federal taxes are withheld from your paycheck.

To calculate how much is taken from your paycheck for taxes your employer uses a formula. Each state is different, but federal taxes use the same type of formula. When you first get hired you fill out a bunch of paperwork. One of the forms you sign is called your W-4. This form determines how many exemptions you take. When you first start out, you should probably be claiming zero exemptions. If your parents are still claiming you as a deduction (which they may do if you just graduated this year) you definitely want to claim zero exemptions in order to avoid owing any more tax than necessary next April.

For each exemption you take, the government basically “exempts” a certain portion of your paycheck from being taxed, so the more exemptions you take, the less that comes out of each paycheck. However, at the end of the year (actually when you file your taxes by April 15th) your entire tax liability is computed based on your income for the year, so if you took too many exemptions and did not have enough taxes taken out of each paycheck, you will owe the difference at the end of the year.

In other words, the number of exemptions you claim on your W-4 does not affect the total amount of taxes you will pay by the time you file in April; it only affects how much you pay each week. Below is a sample of how the formula works (the numbers change each year because tax brackets adjust slightly to account for inflation).

To make this a little clearer, let’s look at an example. If you earn $26,000 per year and you are paid every two weeks (bi-weekly), your gross earnings on each paycheck will be $1,000. After deducting for your 401(k), health insurance and FSA, and taking zero exemptions, your taxable income is $835.00. According to Figure 5-2, your withholdings will be $28.70 plus 15% of the amount over $389. Since $835 is $446 over $389 ($835 minus $389 = $446) you will pay $28.70 plus 15% of $456, which is $28.70 plus $66.90 (.15 x $446 = $66.90). Your federal tax withholding will total $95.60 ($28.70 plus $66.90 = $95.60). Of course you will also pay state, social security and Medicare taxes.

Keep in mind how you are taxed throughout the year doesn’t really affect the total amount of taxes you owe for the year. Simply stated, you either pay too much as you go along, and get money back when you file the following year, or you pay too little from each paycheck and you owe money when you file the following year. Occasionally you may pay exactly what you owe, but usually you’ll be off by at least a few dollars in either direction.

Stretching Your Paycheck

I know what you are thinking. I can’t believe I went through four years of academic torture just to come out on the other side and have to watch where and how I spend my money!

Your parents have more money than you. In many cases your parents make more money than you, especially when you first start out. Don’t feel too bad, because you can’t forget that your parents have been working for more than 20 years.

Even if they don’t make more than you, they probably still have more money than you. Here is why. For one, there’s inflation. My parents had a house payment of around $300 because they bought their home years ago. When I tried to find an apartment, I was paying more than twice that amount. My townhouse cost about four times what my parents paid for their home! You see, I would have to make a lot more than them just to break even after rent (or mortgage).

Another reason your parents have more money than you is because of the years they have had to save. That’s right, they have since paid off their college loans (if they had any), and hopefully their other debts as well. They may have even paid off their mortgage.
A third reason your parents have more money than you… and I hate to admit it… is because they are smarter than you. Remember I am still only talking about money here. Just remember who it was that always left the television on and the lights on and the door open. Was it your dad? No, he was going around closing doors and turning off lights (all the while grumbling, I’m sure).

Your parents have learned through the years how to make their dollars go further (they had to when they had you). Usually, they don’t even have to think about it any more, it just comes naturally. After all, you weren’t “raised in a barn.” I do have two pieces of good news. First, you don’t have to admit your parents are smarter than you. Second, after you finish this book, you’ll be smarter than them! That’s right; you’re going to be twenty years ahead of your time in terms of financial knowledge.

Next week we will look at ways to stretch your paycheck so you can get much more for your money.

How to fill out a W-4

by PATRICIA HolmesUncategorized

When you start a new job you will probably be asked to complete a mountain of forms.  You’re asked to present a driver’s license, social security card and other form of identification while your employer finishes the I-9 form; this Employment Eligibility Verification is a federally mandated form which gathers information that confirms your identity, and permits you to work in the United States.  Another form asks for your emergency contact name and phone number.  Many employers also require you to sign a release for a background check. Another form pertains to your health insurance plan.  You are also given some information about the 401K plan.

Immediate W-4 Witholdings

When you begin a new job you must complete the federal Employee’s Withholding Allowance Certificate, form W-4.  Additionally, each time you experience a life change such as a new address, marriage or a baby’s birth, you need to update your W-4 promptly; never wait until the end of the year to do this.  The federal W-4 is a two-sided form that’s simple to do. Most people don’t need to worry about its back side which is actually a worksheet for employees who itemize deductions, have multiple jobs, or are part of a two-income family.

The only part of the federal W-4 form that your employer needs is the bottom third of the sheet.

On item 1 of the W-4, print your full name legibly.  Box 2 asks for your social security number.   Box 3 wants your marital status.  Line 4 asks if you are known by some different last name, for example, you may be recently married with a surname change.

Line 5 can be tricky sometimes, but it’s crucial to write the correct number of allowances.

The top of the W-4 form contains a Personal Allowances Worksheet that’s somewhat self-explanatory.  In a nutshell, it gives you guidelines for what number to write on Line 5 of the W-4; this is the number of allowances you are claiming.  If you have no dependents and no spouse, you probably want to write “1” on line 5.  Many people write “0”.  That means you are likely to get a tax refund when you file your year-end income tax.  This may sound like a good idea, but it means that the IRS had access to your money all year, that you could have invested or used for yourself.  But, if you’re not much of a saver, it may be best to write “0”.  Married taxpayers filing jointly need to confer with their spouse so they’ll write the correct number on line 5.  Taxpayers with dependents generally write a bigger number than “1” depending on the number of dependents, and the number of exemptions their spouse has claimed on their W-4.

Line 6 requests additional amount you want withheld for each paycheck.  Most people write “0”.  If you expect you’ll owe a significant amount of federal taxes, you may want to calculate a dollar amount for line 6 so that you don’t owe the Internal Revenue Service (IRS) oodles of bucks at year-end.    On line 7, you’re asked to write “Exempt” if you had no tax liability last year, and expect to be in the same situation again this year.  Most people leave this blank.  Few employed people are in a position to be exempt from paying federal taxes.

A federal W-4 form is only complete if you’ve signed and dated it.  Most states have their own W-4 form to complete in addition to the federal form.   When you file your federal income tax each mid-April and the amount you owe or if the refund is relatively small, then you probably wrote the correct number on line 5. If you’re due a large refund and your situation looks similar for the next year, you probably want to write a larger number on line 5.  If you end up owing the IRS a significant amount of money, you definitely want to change line 5 on the W-4, pronto.  You can either lower the number on line 5, or fill in a dollar amount on line 6.

Complete the W-4 correctly, and you’ll avoid unpleasant surprises at tax-time.  The HR staff at work can help you.  It’s a simple task, but it must be done correctly.

Buying a home is better than investing in gold. But how do you get started?

by PATRICIA HolmesBusiness

Wondering how to begin investing, but uncertain about how the economy is going to go, and therefore, how stocks will do? Gold and real estate are a couple of your investment options if you’re not too excited about stocks.

Gold is a hedge, one investors use as backup against the dollar. If the dollar doesn’t do well vs. other currencies, the logic says gold will be a strong commodity that fetches demand around the world. But, if the dollar does well, gold isn’t going to yield great returns. Essentially, gold and the dollar compete against each other. Real estate, on the other hand, is a long-term investment that many view as safer than gold.

There will always be a demand for real estate, no matter what the dollar does. True, you can lose on real estate. But that’s if you sell when property values are lower than they were when you bought the place. You can always rent your house out, creating steady income, until the right time to sell comes along. Real estate is your smartest investment, for one because it gives you positive cash flow. But if you buy gold when it’s valuable, there’s a chance the dollar won’t tank to the same extent again. But more than that, there’s good chance you would’ve made more money on stocks or real estate.

Need any more convincing? The housing market is healthy–it’s not in a bubble like it was when the Great Recession hit. In 2016, foreclosure rates were the lowest they’ve been since 2000, and June saw property values appreciate at a rate of 5.7%, which means there’s good demand. In general it looks like lenders and buyers have learned from mistakes that led to the housing crisis. Barring some sort of unforeseen housing market disaster, the recovery can (and should) continue. Even if there’s a big collapse, this guide will help you stay away from an investment that will ruin you.

If you’ve still got your heart set on bullion, people have discovered gold in their backyards with a metal detector. In one case, US Army postal inspectors used a military-grade detector to uncover $153,150 worth of gold. So if you buy a house, there’s always the chance you’ll strike two kinds of paydirt, the practical real estate investment kind, and the shiny yellow kind.

Evaluate what you can afford

Essentially, you want to find out which properties you can afford that are going to deliver the best long-term value. There are multiple types of real estate you could invest in, but since this is your first time, I’m going to concentrate on residential real estate. Invest in a home, and you can live in it and rent out the other rooms as well. That way, your tenants make your mortgage payments for you. Once you’re ready, you can move somewhere else and begin to really take advantage of your property’s full earning potential.

The other scenario is you have a family. In that case you’re still making a good investment, because down the line, once you’ve paid off your mortgage and hopefully made some improvements on your home, you can either sell for a profit or become a landlord. Either way, you’ve made a secure investment that will pay off.

Check your credit. If your credit history is bad, do your best to fix your credit score by paying off any outstanding credit debts and debts on other loans. Check to see if there are any errors on the report, and if so, dispute them. If you have any accounts in collections, set up a payment plan to get them out. If you’re in the position to do so, pay off a credit card completely and leave it open. Have a reliable friend add you as an authorized user on their credit card. Next, find a mortgage lender and get a pre-approval letter.

A property in need of renovation can be a solid investment for your money. An FHA Rehab Loan covers both the cost of the mortgage and the cost of renovations. To qualify for one, you must do the following:

  • Find a fixer-upper house in need of rehab
  • Find a qualified lender
  • Meet the lender’s minimum credit score requirement, debt-to-income ratio requirement, and provide proof of income

After the loan is approved, your lender sets up a Repair Escrow Account, and you must begin renovating within 30 days of closing and complete renovations in less than six months.

Particularly if you have great credit and property values are high in the surrounding area, a Rehab Loan could help you flip a house (meaning you fix it then sell it) and make a great short-term return on your investment.

Research the market in your area

Your research into the right home can take multiple forms. A good realtor does all the research for you, and can lead you to properties in your price range in neighborhoods where value is likely to appreciate. Online, you can do all your own research first through sites such as Zillow and Redfin. Look into areas with low crime rates, less inventory than more, and access to desirable resources, such as shopping centers and parks. Once you’ve found an area you like, a realtor will help you get the best deal, and the seller will pay realtor fees. If it’s for sale by owner, ask if they will pay your agent’s commission fee.

Finish the deal

Once you’ve found the home for you, find out what documents your lender needs, provide them, get your loan, and make your offer. Sign a contract with the seller, complete your mortgage application, close the transaction–either through your agent or the seller–and get the keys to your new home.

Keep the place up over the years and make improvements. The value will go up, and you’ll have an investment on your hands that leaves you secure and ready for retirement.

Six Steps to Find Your Perfect Career

by PATRICIA HolmesPersonal Finance

You have most likely spent close to nine million minutes of your life, thus far, in school.  You have learned to read, process complex math concepts, articulate your thoughts, and most likely become an intelligent, well-rounded person.  Despite the time you have invested in your education, there is one thing you haven’t been taught—the ability to confidently answer when asked what you want to do after you graduate. In truth, it’s simply the more grown up version of “What do you want to be when you grow up?”


When it comes to determining what career path to follow, there are a variety of strategies, tips and techniques you can use.


1.  Discover your unique talent and gifts by hunting for clues in your life.  Often, your unique talents come so naturally that hunting for them can be challenging.  Begin to look for tiny clues by taking out a blank piece of paper and ask yourself the following questions.  List everything that comes to mind:

  • If you had unlimited amounts of money, what would you do for free that would add meaning to your life?
  • If you could start a business that wouldn’t fail, assured of success, what would it do?  Who would it help or benefit?
  • What parts of school or work do you enjoy most?
  • What daily activities do you like to do most?
  • When someone needs help or advice, what do they come to you to for?
  • What are your hobbies, or what did you love to do before your worries about career and income suppressed them?
  • What sections do you go to first in the bookstore?


2. Think of a career as not a job, but as something that allows you to share your unique talents with the world.   Getting a job sounds plain boring, horrible, and completely devoid of joy.   What if, however, you could work in an industry or career for which you had passion?  Once you begin to understand what your unique talents might be, begin to imagine work that inspires feelings of elation, fulfillment and adventure.  What might make you so excited about going to work each morning that you would tell friends and your parents that you are “passionate” about your career? 


3.  Begin to design the life you want for yourself, using your unique talents as the framework for your creation.  While part of this creation is identifying and then pursuing your dream, it most likely won’t be “the dream”—your ultimate ending point.   I began my professional journey in the mid-1980s, my career path twisting and turning as I worked in a variety of jobs. I explored and exploited my unique talents; writing, creative thinking and teaching.  


Armed with a B.A. degree in political science in 1988 I took a job in a public relations agency so I could write.  I enjoyed writing, but didn’t excel at selling.  I decided I wanted to teach. I returned to school to become a Registered Dietician, stopping just before graduation once I realized that my future career could involve distributing grey sheets of paper with food plans to resentful cardiac patients.  Nevertheless, I recognized that I wanted to teach students who were motivated to learn.  During my next job as Communications Director for a non-profit organization, I was able to harness my creativity and write. 


Ten years later, divorced and raising three children, I received a Masters Degree in Education, finally pursuing my life long dream to of teaching.  Yet, still, three years into this career, I wondered how I might weave the things I loved doing most—teaching, writing, and my love of personal development and adventure—together with my unique talents. Finally, at age 42, I  became a Life Coach.


4.  Armed with the knowledge of your unique gifts, begin to envision your life in two years.  Inspired with knowledge of your unique talents, begin to give yourself direction.  On another piece of paper, answer the following questions:


• What do I want my life to look like in two years? 
• Where do I want to live? 
• Who do I get to meet? 
• Who is on my dream team? 
• What big decisions did I make that took me to this place in my life, two years from now.? 
• What skills did I master? What did I learn? 
• What resources did I use or harness? 
• What beliefs did I change?  What fears did I break through? 


5.  Embark on the journey of moving toward your vision with curiosity.  Once you become aware of your unique talents and the life you want to create, continue to engage in curious questioning of yourself, friends and mentors.  This process is life-long, but to begin it may take months for something solid to click.  In the meantime,  take these steps:


a. Keep a journal, noting things you loved to do in each day.  Keep fleshing out clues to what makes your juices flow.
b. Talk to friends and family, asking them what you enjoyed when you were younger.
c. When you meet a business person whom you admire, ask him/her when they discovered their life’s purpose, and what steps they took to figure it out


6.  Check in to see if your dreams are on track with what you want and who you are.  As your dream and career choices begin to crystallize, be patient, testing what you discover to ensure it represents you and your values.  Once you land on a possibility, check to make sure it meets the following criteria.


*  Would this dream add to my life? 
*  Am I inspired by this dream?
* Does it align with my core values, not those of my peers or family?
*  Does this career allow room for me to grow, change and transform as I grow, change and transform?
*  Does this dream allow me to continue on a path of learning as I excel?


In taking these steps now you can create a life you love, increase the odds that you spend the next nine million minutes earning an income that will sustain your needs, and become a person who is happy, fulfilled and quite simply, jazzed about going to work.

Auto Loan Refinancing in your 20s: When to Refinance Your Car Loan

by PATRICIA HolmesUncategorized

The first few years of your credit history are critical to your long term financial picture. When borrowers are in their 20s, they are typically a few years into their first credit cards, auto loans and student loans. How you handle your debts now can affect how much you pay for credit down the road. To that end, auto loan refinancing can play a crucial role in your financial future.

When to Consider an Auto Loan Refinance

The goal of refinancing a car loan is to reduce your interest rate, your monthly payments or the total amount you pay over the life of the loan. In some cases, an auto loan refinance can achieve all three. If you are in one of the following situations, you should consider refinancing:

You have an exorbitantly high car loan interest rate. Most auto interest rates are between 1 to 5 percent. Anything in the double digits is a bona fide rip off, usually enacted at the hands of a greedy auto dealer. Shop around and you’ll find much lower rates to refinance at.

You’ve established credit history. Your first loans have higher interest rates because you have no credit history. Now that you have a few months or years of on time payments, you can most likely get a lower interest rate without taking on more debt.

You have more income. As you transition from a part-time job or student stipend to a full time salaried position, you’ll likely have the income needed to comfortably reduce the term of your car loan. This will increase your monthly payment, but will drastically reduce your interest rate and overall cost of the loan.

When Not to Consider Refinancing Your Car Loan
Auto loan refinances are not cure-alls for whatever ails your bottom-line. There are a few situations where a car loan refinance will cost you more than it helps you, including:

You have less than $7,500 outstanding on your car loan. Most lenders can’t turn a profit on such a small auto loan principle. If you have extra cash, you’ll be better off by paying down your loan early.

The prepayment penalties outweigh the cost savings. Some lenders incur prepayment penalties for paying off your loan early. Carefully calculate how much money you’ll save in the long run versus how much you’ll spend up front to get out from under your current loan before making a decision.

You are desperate for cash. Cash out refinancing exists for auto loans, where you can borrow more than your car is worth or draw down on some of the equity you’ve built in your vehicle. For some situations, this can be a good strategic move—but if you are doing so out of desperation, you’ll just be digging yourself deeper into debt, especially since car values always decrease (unlike home values). Proceed with caution if you’ll be refinancing to get more cash on hand.

None of the above scenarios are hard and fast, so take time to assess your situation before moving forward. Your best first step is to shop around for car loan refinance quotes on sites such as MoneyAisle.com, where you can see the kinds of interest rates you can get with your current credit score without making a commitment. If opportunity exists, take it.

Do You Need Life Insurance?

by PATRICIA HolmesUncategorized

\This is an excerpt from Matthew Brandeburg’s new book: Financial Planning For Your First Job.

Life Insurance

Purchasing life insurance without a clear need for coverage is a common mistake a lot of first-time employees make.  In general, you only need life insurance if someone else is dependent on your income, you have a specific goal you want to fund at death, or you want to provide enough money to cover your burial costs.

CALCULATING YOUR NEED FOR LIFE INSURANCE

1. Add together your estimated burial costs and any outstanding debts you owe.
2. Multiply the annual amount of income your spouse and dependents will need by the number of years they will need the income.  For example, if you want to provide your survivors with $20,000 per year for ten years, you would multiply these numbers together to get $200,000. 
3. Add the values from step one and step two.
4. Subtract your current resources, including other life insurance that can quickly be converted to cash to help meet your survivors’ income need.  (Don’t include your car, home, or similar assets if your survivors will need them after you die.)  The result represents the amount of life insurance you should consider buying.  Review this calculation with your insurance agent to determine which type of policy is best for you. 

The two most common types of life insurance policies are whole life and term insurance.

WHOLE LIFE VS TERM INSURANCE

If you purchase a whole life insurance policy, it will remain in effect for your whole life as long as you pay the annual premium.  When you die, your policy’s death benefit will be paid tax-free to your named beneficiary.

Term insurance, on the other hand, means your policy will remain in force for only a specific term of years.  Term policies are often issued for periods of five, ten, fifteen, or twenty years.  Your beneficiary will only receive the death benefit if you die during the term of your policy.  Term insurance is usually less expensive than whole life insurance for individuals in their twenties and thirties. 

EMPLOYER PROVIDED LIFE INSURANCE

For employer provided life insurance, a medical exam is usually not required.  If you’re unable to purchase life insurance on your own, an employer provided policy might be necessary.  The most common type of employer provided life insurance is group term insurance.  “Group” means the amount of insurance provided to each employee must be calculated using a formula that applies to an entire group of employees.  This reduces the chance for discrimination.  “Term” means the coverage will last for the term of years you remain employed at your company.  If you leave your company, you’ll usually have the option to convert your group term policy to an individual policy.  The conversion should not require a medical exam, either.

Matthew Brandeburg, CFP® is the author of the book Financial Planning For Your First Job, available at www.amazon.com. His book teaches young adults how to manage their money and take charge of their financial lives. He has seven years of financial planning experience and runs his own business, Bridgeway Financial Group, LLC, based in Columbus, Ohio.

Pay Off Student Loans or Save for Retirement?

by PATRICIA HolmesPersonal Finance

Today it’s not uncommon for college graduates to owe $50,000, $100,000 or even $150,000 in student loans upon graduating.  Unfortunately, it’s commonplace given the escalating costs of tuition and students taking more than four years to complete their education.

Students loans are the necessary price to pay for opportunities and the possibility of career advancement.  But be warned, once you assume these loans it becomes your responsibility to manage them effectively and “do your homework.”

If you’re like most of us, you didn’t hesitate to take out loans your first year of college because you were filled with the optimism that a college degree would provide you with more than enough income to meet your living expenses, save for retirement, and quickly pay off your loans.  But reality isn’t always so kind.  Now you realize that between taxes and inflating living expenses there’s not as much money to spread between paying bills and saving for retirement as you had thought.  You’re faced with a decision.  With your limited income, should you pay off your students loans or save for retirement?

If this isn’t a question you’re asking yourself, it should be.  You know that your loans won’t repay themselves, but at the same time you need to maintain a lifestyle and try to put some money away for retirement.   There’s just not enough money to go around and the question becomes one of balance, and finding out where every dollar of your income will be put to its best use.

You have three options:
Option 1: Pay off your student loans now and save for retirement later.
Option 2: Save for retirement now and make only the minimum student loan payment required.
Option 3: A combination of paying off your student loans and saving for retirement at the same time.

Though always painful to watch your money go, the decision between the three options is easy and comes down to pure math.

Review each option to decide what’s right.

Let’s review each option so you can decide which is right for you.

Option 1: Pay off student loans now and save for retirement later.

Paying off students loans before starting to save for retirement is a common mistake a lot of college grads make. The reason is simple. When they took out their large student loans a few years ago they convinced themselves the debt would only be temporary and would be paid off within the first few years after college. In other words, their goal was to erase the loans and forget they ever happened ASAP. I know this mindset because it was mine not too long ago. Another popular reason college grads decide to pay off student loans first and save for retirement later is because they want to get out of debt before saving for retirement. This is very idealistic and not very practical. If Americans waited until they had no more debt to begin saving for retirement no one would be able to retire!

But, there is a time when it makes sense to pay off student loans immediately and save for retirement later.  This is a smart decision when your student loans are charging interest greater than 8%.  The long-term investment return on the stock market is roughly 8%, so if you’re paying more in interest than you’re earning on your investments, your money is best used paying off your high interest loans first and investing in retirement later (but not too much later).  If you have multiple student loans with multiple interest rates, only pay off your over-8% loans first and put any excess money towards retirement.

Option 2: Save for retirement now and make only the minimum student loan payment required.

You should consider this strategy if the interest rate on your student loans is less than 8%. If the stock market returns 8% over the long run, and the interest rate you’re paying on your student loans is less than 8%, then your money is best used being invested for retirement rather than paying off your student loans. And when you factor in the benefits of tax deferred growth provided by retirement plans, it makes an even stronger case that you should invest your money for retirement and make only the minimum student loan payment.

Option 3: The compromise: A combination of paying off your student loans and saving for retirement at the same time.

Remember, all things in moderation.  If your student loans have an interest rate that is between 6% and 8%, you may want to consider a compromise between paying off your student loans and saving for retirement.

Example: Your $30,000 student loan (at 6.5% interest) requires you to make a minimum monthly payment of $200.  You find that after you make the minimum monthly payment and pay your other bills, you still have $100 left over from your paycheck at the end of each month.  You should consider putting an additional $50 towards paying off your student loan (because the interest rate is between 6% – 8%), and put the other $50 into your retirement account.

You’re also allowed a small tax deduction for interest accrued on your student loans if your income is under $55,000 (single) or $110,000 (married), which provides an additional benefit.

Final words of caution…

For your student loans (unlike other debt), if you can prove you don’t have the wherewithal to make your monthly payment, many lenders will let you temporarily put your student loan payments on hold – known as deferment or forbearance. This usually occurs if you’re facing unemployment or have high medical bills. But be careful, many times your interest will continue to accumulate during this time. You should check with your student loan provider and make sure you understand the fine print in your loans.