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During a no-spend challenge, you try not to spend money on anything extra for a certain period of time. You can choose to cut nonessential and nonrecurring expenses altogether, or select a few categories that you want to cut back on — like clothing, coffee, or dining out. Like other money challenges, the no-spend challenge is meant to help you save money and re-evaluate your spending habits.
Have you ever done a no-spend challenge? What parameters did you set for your challenge? How did it go. If you’ve never done one, what categories would you choose to focus on?
Tell us if you’ve ever done a no-spend challenge and we’ll enter you in a drawing to win a $20 Amazon Gift Card!
We’re doing three giveaways — here’s how you can win:
Use our Rafflecopter widget for your chance to win one of three Amazon Gift Cards:
Waste not, want not.
We make so many purchases that we don’t always realize what we are buying — and how we could be saving money. If we take a step back and think about all of our additional costs, we could cut a few out of our lives.
These 24 products can often be a huge waste of money:
Matthew Michaels contributed to the original version of this article.
SEE ALSO: 15 things you should never skimp on
Many lottery players purchase tickets each day with the hope of striking big, but games of chance are preventing you from having more money, not less. You are expected to lose money if you play the lottery and there is no guarantee you will even keep winnings.
In New York City, someone who smokes one pack of cigarettes a day burns up over $5,000 a year. Smoking can also be a huge cost to your health — medical bills can rack up from the dirty habit even tobacco companies are quitting.
As Americans became more health conscious and started drinking less soda, beverage companies needed a new plan. It worked as Americans now drink more bottled water than soda, even though it costs $1.22 per gallon for a commodity that can be accessed for next to nothing.
For most products that are exactly the same, customers would usually choose the cheaper option. This does not hold true for brand name drugs, which consistently outpace sales of their generic counterparts despite having the same ingredients and effects. Save yourself some money and buy the generic ibuprofen instead of Advil.
Movie theaters don’t make profits from film tickets, but instead through food sales. The over-inflated popcorn and pricey candy is a rip off considering you can buy the same products at the supermarket for much cheaper and many theaters don’t care if you bring in your own snacks (as long as you clean up after yourself).
Before Starbucks and Dunkin’ Donuts were on every street corner, people brewed their own coffee at home. This is still somewhat popular — especially with coffee pods — but coffee shops have taken a lot of the business. With expensive price tags and long waits, it’s a wonder why everyone isn’t turning to homebrew.
A library is the best way to save money on an expensive hobby. Libraries are free and come with millions of books, DVDs, and other materials for you to borrow.
Timeshares sound too good to be true. They offer low prices for a vacation home that you can use whenever you want. But they can trap you with ever-increasing fees and low resale value, making timeshares an almost guaranteed loss.
One sign of wealth is cruising on a personal yacht, but that may be a better indicator of wasted wealth. Boats are expensive on their own, but as Saltwater Sportsman says, prices for storage, gas, maintenance, and electronic navigation drive up the initial cost.
CDs and DVDs are becoming obsolete, but many people still shell out cash for hard copies of albums and movies. Like books, CDs and DVDs can be rented at libraries, but most people now stream entertainment on apps like Spotify and Netflix for a monthly rate that costs less than a single disc.
Like music and movies, television is moving from more traditional modes to online streaming. Since cable packages make you pay for more than you want, a pick-and-pay model may wind up costing you less. Streaming has the added bonus of no commercials and watching on your own schedule.
Make your own — it’s more meaningful if you gift a personalized card and you’ll save the $5.
Gift cards aren’t as popular a present as you may think. Almost one in three gift cards never get used at all, CBS reported in 2014, citing Consumer Reports. And those who do use them tend to spend 20% more than the value of the card, according to Investopedia. Cut your losses and buy something more thoughtful next time.
Gym memberships can be expensive, so if you’re not a frequent visitor, you’re just wasting money. Thankfully, there are ways to be healthy and exercise outside of a gym.
Whenever a new gadget hits market, the older version takes a plunge in price. The old and new version will probably be very similar and the most recent model may have kinks to work out. Save a lot of money by going with a slightly older product that has nearly identical capabilities.
Those free games you play on your smartphone have to get money from somewhere. It turns out these games are highly addictive and designed with psychological tricks so you will spend the most money to get to the next level.
Online retailers can make a lot of money charging customers enormous fees for quick shipping. But while the standard option may take a bit longer, the savings is worth it.
Buying clothing full-price can add unnecessary expenses to your monthly budget. Not only do most in-store clothing items eventually go on sale after a few weeks, but there are countless other ways to get new clothes for less. Hit up your local thrift stores, swap clothes with your friends, or check out online second-hand retailers like Poshmark or Depop to save some money.
Everyone knows that going out to eat is expensive. According to the Bureau of Labor Statistics, the average American household spends about $3,000 a year dining out. That’s a huge expense. According to an article by MoneyUnder30, this number far outweighs how much it costs to prepare food at home. The average price of a meal out is $13. In contrast, the price of buying groceries and making a meal at home is around $4 per plate — a whopping $9 difference.
While a whole bottle of wine at your local liquor store may cost anywhere between $10 and $15, you can expect to pay at least $8 or $9 for just a glass at a restaurant. Cocktails can cost even more, despite only containing a shot or two of alcohol per serving. Save your pennies and order a soft drink the next time you go out to eat.
Food delivery services are sweeping the nation. Companies like Postmates, Caviar, Seamless, GrubHub, and more allow you to enjoy your favorite restaurants from the comforts of home – for an added fee. Delivery charges can cost anywhere from $2.99 to $8, costing you more money for the same product if you simply went and picked up your food yourself.
Drugstore makeup has come a long way in recent years, to the point where they rival higher-end brands. The actual differences between products you find in CVS and Sephora are almost slim to none — so don’t pay more for the luxury brands.
Off-brand tech accessories and chargers — meaning ones not designed by Apple, Android, Samsung, etc — are usually a waste of your money. They may seem like a cheap and easy fix when you find yourself out and about with a dead device. However, according to the experts at Money, cheap cords can actually end up breaking quickly or even damaging your device. You may end up having to purchase a new phone for the sake of a $9.99 charger.
The new year is the perfect time to ditch poor financial habits and pick up some new ones. Maybe you decided that this is the year you’ll finally pay off high interest credit card debt, or perhaps you’re using a budget for the first time in your life. Whatever your goals are, you probably know that it will take time and perseverance to get there.
But how should you invest your money? If you have an extra $100 per month to spare, there’s more than one way to build wealth and finally get ahead.
We reached out to financial advisors to find out how they would invest an extra $100 per month in the new year, and here’s what they said.
Colorado financial planner Mitchell Bloom of Bloom Wealth says your workplace 401(k) is a good place to start if your employer offers one, and particularly if you can qualify for an employer match. After all, an employer match you can qualify for is the closest thing to "free money" you’ll ever receive at work, so you might as well take advantage.
You can strive to boost the percentage of your 401(k) contributions in order to funnel approximately $100 more into your account each month, but you may also be able to set aside a flat $100 in funds monthly if your workplace plan allows.
Either way, money in a 401(k) plan can grow tax-free and compound over time, and you won’t have to pay taxes on distributions until you reach retirement age.
Also note that if you don’t have a workplace retirement plan, all isn’t lost.
Instead, you may want to "consider using a low-cost advisory firm like Betterment, where they will build a fully diversified globally allocated portfolio model with fractional shares so you can achieve diversification with a small investment amount," says Bloom.
Jeff Rose of Good Financial Cents says that consumers can also consider saving money in a Roth IRA if they meet requirements to contribute. While this type of account requires you to invest money that has already been taxed, your contributions can grow tax-free and compound until you reach retirement age. Once you’re 59 ½ or older, you can withdraw money from a Roth IRA without paying income taxes, which is pretty sweet.
In 2020, most people can contribute up to $6,000 to a Roth IRA and traditional IRA account. However, individuals ages 50 and older can contribute an additional $1,000 for the year for a total of $7,000.
Income limits do apply, however. Married couples who file taxes jointly can’t contribute to a Roth IRA if they earn over $206,000, and their contributions are phased out for incomes between $196,000 and $205,999. Single filers with incomes over $139,000 cannot contribute, and their contributions will be phased out for incomes between $124,000 and $138,999. (See also: 401(k) or IRA? You Need Both)
Also, consider saving for emergencies if you haven’t already. Financial advisor Jake Northrup of Experience Your Wealth says that your emergency fund should include at least three months of living expenses, but potentially more.
You’ll likely want to keep your emergency fund in an account you can access such as a high-yield savings account. While this means your emergency cash won’t bring in a huge return, this money can literally save your finances if you face a surprise medical bill you can’t pay or experience a job loss.
Further, having a fully funded emergency fund can also help you avoid charging up credit card balances with exorbitant interest rates. (See also: 7 Easy Ways to Build an Emergency Fund From $0)
Financial planner Taylor Schulte, who is also host of the Stay Wealthy Retirement Podcast, says that assuming an emergency savings fund is in place and high-interest debt is paid off, the best place to put extra cash is into a Health Savings Account (HSA).
"The HSA is the magical unicorn of tax-advantaged investment accounts," he says. "Unlike any other account, they are triple tax-advantaged."
Schulte says this because you can invest up to certain limits on a tax-advantaged basis each year, then your money grows tax-free. When you take distributions in order to pay for qualified healthcare expenses, you won’t pay taxes then, either.
There are some requirements in order to use an HSA, however, including the requirement that you have a high deductible health plan. For 2020, the Internal Revenue Service (IRS) defines a high deductible health plan as any plan with a deductible of at least $1,400 for an individual or $2,800 for a family, notes Healthcare.gov. Also note that any high deductible health plan’s total yearly out-of-pocket expenses must be less than $6,900 for an individual or $13,800 for a family.
Morgan Ranstrom, who works as a financial planner in Minneapolis, MN, says you should strive to keep enough cash in your HSA to pay your insurance’s annual deductible in case of unexpected health costs, but beyond that you can invest the rest for long-term growth.
"With regular contributions, potential investment growth, and minimal withdrawals, you’ll have an account that may be used to fund medical expenses in retirement without tax penalty," he says. "How great is that?"
While you may not consider debt repayment as an investment, the financial return can work similarly. Note that any debt you pay off is no longer charging an outrageous interest rate, and that means more money in your pocket each month that you can save or invest for the future.
Debt expert Chris Peach, who teaches consumers how to pay off debt through his Awesome Money Course, says you should check to see the interest rate you’re paying on your credit cards, keeping in mind that the average credit card APR is well over 17%.
"For most people, getting an 18% return on your investment every year is more like a dream come true than a reality," he says. Fortunately, you can achieve that return by paying off high interest debt and saving the money you would normally pay toward interest each month.
Let’s say you have a credit card balance of $10,000 at 18% APR and you’ve been making minimum payments on this card for years. Making the minimum payment of $200 each month would take you another 94 months to pay off the balance, which also results in $8,622 more in total interest paid, notes Peach.
But what if you were able to invest $100 per month as an over payment on your credit card?
"Though it may not sound like a ton of money, $100 more per month will pay the balance off 47 months earlier and saves almost $4,000 in interest," says Peach. "Not bad for a $100 monthly investment if you ask me."
Fee-only financial advisor Russ Thornton, who focuses on providing retirement planning for women, says an investment in yourself can also pay off in a big way. "This could be used to buy books, audiobooks, online courses, offline courses, professional associations, personal training sessions, or something else," he says.
If you acquire new or deeper knowledge that could help you perform your job, it could help you get a bigger raise or even a promotion, whereas learning a new skill could help you create a side hustle that could ultimately help you bring in more income.
You could even get involved with a professional association or networking group to build your network, says Thornton. "This could help with your current career or might open doors to new opportunities — both personal or professional."
Not all startups are designed for venture capital. There are several criteria that VC’s look for when deciding whether to deploy capital or not. There is a reason for that. Some companies are just not capable of utilizing such a massive influx of cash. Startups need to have the ability to scale quickly and take over the market. These startups are also expected to pull this off within 3 to 5 years. As much as I would like to say that everybody can use this growth accelerator to achieve domination, I, unfortunately, cannot. Here are some guidelines to determine whether venture funding is right for you.
Is your startup scalable? What does this mean? It means that your company can grow without collapsing on itself. If your startup is not scalable, then perhaps you will run out of resources when demand increases. For example, take the Impossible Burger. The Impossible Burger captured a deal with Burger King, and almost McDonald’s, but they collapsed under their own success. They did not have the infrastructure in place to keep up with demand.
Can your startup take over your target market? Does it have the ability to crush the competition? Facebook is a perfect example of a startup taking over a market. Not only did they do that during their rapid growth, but they maintain this market dominance and growth by purchasing potential competitors.
Another example is Google. Google was not the first search engine to come onto the scene. Instead, they had a better search algorithm, which gave them the ability to capture the market. They did this in the face of Yahoo! and other search engines. Just like Facebook, they also continue to buy potential competitors to snuff out threats.
Your target market needs to be large enough. A one-billion-dollar market may seem significant, but it is not. A very rough rule of thumb is to assume that you will be able to acquire 1% of the market. If you did obtain 1% of the market, that means your company’s revenue is ten million. By using a revenue multiple of say, 3x, your startup’s valuation is now 30 million. Although good, it is not what a VC is looking for.
Is there a need?
Your market may be enormous, and the potential upside gigantic, but is there a need? Innovation needs to be continuous within every industry. This is how society improves! Does your startup accomplish this? You may be able to find a niche market that can produce enough income to make you comfortable, but that is where it stops. Companies like this are not fit for venture funding. Why? To be blunt, it is because your startup will not disrupt the market.
It is a natural desire to want capital to scale your business to unimaginable heights. Every company has this opportunity, but each path is different. Sadly, some doors are open to one and shut to others.
The original text is hosted on Medium.
Originally From: https://cashmoneylife.com/tax-guide/
Taxes are a part of life. While I don’t mind paying my share of taxes, I do have a problem with the complexity of the tax system.
This is made worse because I am also a small business owner which adds another layer of paperwork and administration.
Taxes can also be incredibly complicated to figure out on your own, leading many people to seek out help from tax professionals or tax filing software.
Tax filers often get bogged down in the jargon of taxes and trying to keep up with all of the tax credits, deductions, tracking expenses, and managing the various tax forms.
That’s why we created this extensive tax guide—so you can learn about the basics of tax filing and see how you can get the most benefits and fewest headaches out of filing your taxes.
The IRS lists the following requirements to help you determine whether or not you are required to file taxes.
If your income is higher than the number given for your status, you’re required to file:
In addition to the income limits above, if you meet any one of the following criteria, you will be expected to file:
The IRS has five basic tax filing statuses:
How your income is taxed varies based on how much income you have, how you earned it, and other factors.
While a flat tax has been talked about (for years), the current U.S. tax system is actually a graduated scale where one who earns more pays more.
There are also standard deductions you can take when filing your taxes. These standard deductions can reduce the amount of income taxes you owe.
The United States uses a marginal tax system, or a gradual tax system. The marginal tax rate means each additional dollar you earn is taxed at the rate which falls within your income tax bracket.
The tax code has operated like for decades, even though the rates themselves have changed several times, and has had many other one-time changes, like an economic stimulus check when the economy was doing poorly in 2008.
Finally, the government may tax capital gains differently than earned income. Capital gains are investment gains.
Let’s look at each of these to see how they impact your tax obligations.
Here are the current tax rates.
Understanding your current tax bracket is useful for tax planning and for long-term planning. If you know your current income tax rate, you can use this information to decide if now is a good time to convert a Traditional IRA to a Roth IRA, sell investments for short-term or long-term capital gains, make tax-deductible charitable contributions, or take other actions that can impact your tax return.
Taxable Income Above
|Married Filing Jointly or
Taxable Income Above
|Head of Household
Taxable Income Above
The Standard Deduction is the amount taxpayers can deduct from their income before paying income taxes. Taxpayers are able to choose between using the Standard Deduction or itemizing their deductions when filing their taxes (itemizing taxes can include deductions such as state and local taxes, property taxes, charitable contributions, and more).
However, the Tax Cuts and Jobs Act significantly increased the Standard Deduction amount, while limiting certain deductions, such as the SALT Taxes (state and local taxes). This change means more people will take the standard deduction when filing their tax returns.
Here are the current Standard Deductions:
|Filing Status||Standard Deduction
Tax Year – 2020
|Married Filing Jointly||$24,800|
|Head of Household||$18,650|
|Married Filing Separately||$12,400|
Long-term capital gains are taxes paid when you sell an investment that you held for longer than a year. Short-term capital gains occur when you sell an investment that you held for less than a year. Short-term capital gains are considered income and are taxed at your marginal income tax bracket.
Long term capital gains are taxed at the following schedule:
|2020 Long-Term Capital
Gains Tax Rate
|0%||$0 – $40,000||$0 – $80,000||$0 – $53,600|
|15%||$40,001 – $441,450||$80,001 – $496,600||$0 – $469,050|
|20%||Over $441,450||Over $496,600||Over $469,050|
Some investments, such as gold or collectibles, are not taxed by the capital gains guidelines.
As you can see from the above federal tax bracket table, there are tax brackets for income ranges.
To determine how much you will pay in taxes, you can start by taking your total income, then deducting all tax deductions and credits form this amount. This includes either the Standard Deduction or your itemized tax deductions.
Then you apply your income to the income tax brackets from above. For example, a married couple will pay the following taxes:
Because the U.S. has a marginal tax system, you only pay the tax rate for your income that falls within each bracket. This does not mean that earning one dollar above the income tax bracket level will increase your entire tax bill by that rate.
For example, receiving a raise from $80,250 to $80,251 will not subject all of your income to the 22% tax bracket – it will only apply to income earned within that specific tax bracket.
Adding the taxes you paid and dividing by your total income results in your effective tax rate.
Some taxpayers mistakenly use the terms tax credit and tax deduction the same way. While they both result in a lower tax bill, they do it differently.
The tax credit reduces your tax bill by the amount of the credit. The tax deduction decreases your tax bill by an amount equal to the percentage of your highest marginal tax bracket.
Here is an example:
Here are a few common tax credits, and how you may qualify for them. Note: some of these are Refundable Tax Credits, meaning you will receive the full amount of the tax credit, even if you don’t owe any federal taxes.
Each of these credits has unique qualifying factors that may be based on your income, Adjusted Gross Income (AGI), number of qualified dependents, and other activities, such as paying for college education, contributing to retirement accounts, certain business activities, and more.
Most tax software programs have automated systems to help you identify which tax credits and deductions you may be eligible to claim when you file your taxes.
There are many different tax deductions. Some of them are available to everyone, while others can only be claimed if you itemize your taxes. Some deductions may also be based on your Adjusted Gross Income (AGI) or whether or not your tax return is subjected to the Alternative Minimum Tax (AMT).
Common tax deductions include:
Qualifying for various tax deductions: Like tax credits, many of these deductions have strict eligibility requirements based on your AGI and other factors.
Most taxpayers find it easier to use a tax product such as H&R Block to calculate their tax deductions instead of trying to do it by hand.
Taxpayers have the option of itemizing their deductions on their tax return, or simply claiming the Standard Deduction (explained above).
You can only choose one or the other.
The best way to decide is to complete your taxes, add up your deductions and take the one that offers you the best overall deduction.
Due to recent changes in the tax laws, the Standard Deduction has been increased, and certain deductions have been decreased. So for many people, the Standard Deduction will offer a better option.
However, you may wish to itemize your deductions if you live in a state with high taxes or can otherwise claim a lot of tax deductions.
Again, this sounds complicated, but most tax preparation programs will do the heavy lifting for you. The software will walk you through your tax situation and add up your deductions as you go. Then it will recommend the option that is best for your situation.
The U.S. tax system is a “pay as you go” tax system. While you only file taxes once a year, you are technically supposed to pay taxes on your income as you receive it. Most people do this through payroll deductions. However, there are times when you do not have taxes withheld from your income. In these cases, you should pay Estimated Taxes.
Some examples of when you may be required to pay estimated taxes include when you receive a large lump sum of money, self-employment income, investment income, or other times when you receive a large amount of money that hasn’t had taxes withheld.
You must pay estimated tax if both of the following apply:
In other words, you need to ensure your withholdings and credits are at 90% of your current tax year obligation, or at least 100% of what you owed last year (110% for high income earners). If your withholdings are less than the lesser of these two amounts, then you should pay estimated taxes.
Who Does Not Have To Pay Estimated Tax?
You shouldn’t have to pay estimated taxes if you owe less than $1,000 in taxes this year, or if your employer has withheld enough money from your payroll. One way to avoid paying estimated taxes is to withhold additional funds from your paycheck using the IRS Form W-4.
How Much Estimated Tax to Pay?
The IRS provides estimated tax worksheets (IRS Form 1040-ES) that you can use to help determine your tax withholding requirements to avoid estimated tax penalties. You can also use tax preparation software to help run the numbers.
Taxpayers with irregular income may have a more difficult time determining how much they may owe in estimated taxes, especially if their income is greater at the end of the year. Thankfully, there is a safe harbor rule, which allows taxpayers to avoid estimated tax penalties as long as they pay at least 100% of their previous year’s total tax liability through a combination of tax withholdings and estimated tax payments.
Estimated Tax Deadlines
Estimated taxes are paid four times throughout the year, on the following dates (or the first business day following the date, if it falls on a weekend or holiday).
Estimated taxes are due by the deadline, even if you have requested a tax deadline extension.
How to File and Pay Your Estimated Taxes
The IRA allows taxpayers to pay estimated taxes by mail or electronically.
Estimated taxes aren’t the only unexpected tax situation you might encounter. The AMT is an alternative method of figuring your tax.
Congress created the Alternative Minimum Tax back in the 1960s to prevent high-income households from receiving too many tax deductions and credits, and thus avoiding paying their “fair share” of taxes.
The AMT rules require high-income households to prepare their taxes using two methods – the normal way, and using the AMT rules. Thankfully, most tax filing software will help you do this automatically.
You must fill out IRS Form 6251 to determine if you need to pay the AMT.
You will then compare the outcomes after completing your tax normal tax return and your return using AMT rules.
AMT rules prohibit certain tax credits and deductions, including the standard deductions and credits, state and local taxes, and property taxes up to a certain amount.
Taxpayers who live in a high-tax state an have children are more likely to pay additional taxes under the Alternative Minimum Tax Rules compared to a single person or a family in one of the lower-tax states.
In 2020, the exemption amount for singles is $72,900 and $113,400 for married couples who file jointly. You can read this article for more information on Alternative Minimum Tax rules.
The ideal tax refund is somewhere close to zero – that means you had the ideal amount withheld from your paycheck. However, sometimes you may discover that you either owe the IRS money, or you have a larger than expected refund. In either situation, you may decide to change the amount the IRS withholds from your paycheck. This can help you avoid big surprises.
You can easily change your tax withholding using the Personal Allowances Worksheet on IRS Form W-4.
Note: Make small adjustments
If you had 6 allowances last year, you probably shouldn’t reduce it to 0 this year. Doing so may have unintended consequences. Make small changes based on your current tax situation.
When to Adjust Your Tax Withholding
There are times when you want to make a proactive change to your tax withholding. Some of these include:
You can use the IRS tax withholding calculator to recalculate your personal allowances each time a new life change happens.
Tax fraud is a growing crime. Discovering you’re a victim of tax fraud often occurs when you try to file your tax return electronically and find out someone has already filed a tax return using your Social Security Number. When this happens, the IRS will reject your return.
At that point, you will need to contact the IRS and open a case with them.
Other ways you may discover tax fraud include:
If you receive a letter from the IRS, it may contain some of the following information:
Contact the IRS via phone, mail, or in-person if you discover you are the victim of tax fraud. And you may also wish to start monitoring your credit reports, as it is likely you may soon become a victim of identity theft.
One of the best things you can do to avoid an IRS tax audit is to check your tax return for errors. Additionally, if you fill out your forms incorrectly, you might be red-flagged for an audit.
If your forms are sloppy or illegible, you could find yourself facing a tax audit. This is a good reason to use tax software and file your tax return electronically.
Here are a few more red flags that might initiate a tax audit:
The IRS may also randomly select individuals for audits. So it’s possible you may be audited even if none of the above issues are present.
It’s a good idea to keep detailed tax records in the event you audited. You can also use a tax preparation service or accountant that offers audit protection. Some tax software programs even come with or allow you to purchase audit protection as an add-on feature.
Most freelancers work on a 1099 basis instead of as a W2 employee. Employees paid on a W2 basis have their income tax, social security tax and FICA tax withheld from their paychecks. However, contractors paid on a 1099 basis typically don’t have anything withheld from their payments. If you receive a check for $500, you receive the full amount. Nothing is withheld for taxes. This means income taxes are your responsibility.
Your income will be reported to the IRS on Form 1099 and it is your responsibility to pay taxes on it. Many freelancers choose to pay quarterly estimated taxes. This breaks up your tax payments throughout the year and keeps you on the right side of IRS requirements.
You will want to keep detailed records of your income and expenses. It’s also a good idea to categorize your expenses so you have a good idea of how much you are spending in each category (and certain expenses may be classified differently by IRS rules).
it’s much easier to do this as you go, instead of trying to play catch up when your tax return is due.
The business structure you choose, such as an LLC or corporation, may also require you to maintain separate funds in a business checking account or savings account. You may also wish to open a business credit card, which may offer unique rewards programs and itemized spending reports.
There are three ways to file your tax return:
Which is best? This depends on your situation. If you have a simple tax return, the DIY route is a quick and easy way to go. Of course, you can also use tax software if you have a simple return. And if you have a lower income, you may be eligible to file your taxes free.
It’s only when your tax return becomes more complicated that you need to decide whether to use one of the more advanced tax software programs or hire a professional tax service. Keep in mind there is a big difference between going to a retail tax return office and using a professional CPA or enrolled agent.
Most tax situations can be handled with tax software. However, you may wish to hire an accountant if you are a small business owner, have multiple rental properties, or otherwise have a complicated tax situation.
Organizing your tax documents should be a year-round task. You should keep detailed records of everything related to your tax return. Personally, I recommend scanning everything into your computer and regularly backing it up. This ensures you have a long-term record and makes filing easier when tax season arrives.
Before you sit down to do your taxes, make sure you have everything you need. This will include:
This article provides a more in-depth guide to organizing your tax records.
January 27, 2020, is the first day you can officially file your 2019 tax return. Tax returns are normally due on April 15 each year, unless the 15th falls on a weekend or holiday.
If that is the case, the tax return is due on the following business day.
What happens if you don’t file your taxes on time? Don’t do it! Filing a tax extension is free, and you can do it at any time. Just be aware that you need to pay any money due by the tax deadline, or you may owe penalties or fees. The deadline to file your tax return if you filed an extension is October 15th.
If you think you may want to amend a return, below are five places to start:
You usually have three years to file an amended tax return, dating from when you filed the tax return that needs correction. So if you didn’t take a credit on your most recent tax return, you can file your amended return and possibly get a tax refund for it.
The proper form for filing an amended tax return is 1040X. This guide has a more complete overview of when to file an amended tax return.
Some people aren’t required to file a tax refund, especially if they have lower income. And you don’t technically need to file a tax return if the IRS owes you money. Of course, you can’t receive your refund if you don’t file your tax return. So it’s a good idea to go ahead and file. Finally, the longer you take to file your tax return, the longer you wait to receive your refund.
On the other hand, you definitely want to file your tax return if you owe the IRS money. If you are running out of time to file your return, you want to do three things:
OK, so you missed the deadline and you haven’t filed for an extension.
What happens if you let it slide? If you don’t owe any taxes, nothing happens. Of course, you won’t get a refund either, if the IRS owes you one. And some people aren’t required to file a tax return.
But if you owe money, you absolutely need to file your tax return.
What happens if you owe money and don’t file a tax return? Penalties and interest, my friend.
And they aren’t pretty!
Here is a rough outline of the penalties you may owe for failure to file or pay your federal taxes.
The IRS may also assess penalties for underpaying your taxes, or not paying estimated taxes.
Underpayment penalties can be assessed at different levels, based on whether the IRS determines if there was criminal intent.
You can pay your tax bill by mail with a check, or online. Paying online is faster and more secure, but may come with a charge if you use your credit card to pay your taxes. You may consider sending checks by Certified Mail so you can ensure the check was delivered.
You still need to file your tax return or an extension, even if you are unable to pay your taxes. After that, you should contact the IRS to communicate to them that you are aware you owe money, but you are unable to pay it.
The IRS may allow taxpayers to have an extension to make the payment or to enter into a payment plan.
Note: the IRS may charge penalties or fees for these arrangements, so it’s still a good idea to pay your tax bill as soon as possible.
You can get creative to pay your tax bill if needed.
However, I would avoid payday loans and other high-interest short-term loans. You may try getting a personal loan from a bank, using a peer to peer lending company such as Lending Club, or possibly using a credit card.
What if I Don’t Pay My Tax Bill?
The IRS can file a Notice of Federal Tax Lien if you don’t pay your taxes. This can hurt your credit score and cause other financial and legal difficulties.
Failure to file your return or to pay your taxes can result in fines, ruined credit, or even jail time.
Some people may discover they need more time to complete their tax return. This can happen if you have a complex tax situation, something changes in the previous or current tax year, or if you simply procrastinate. If this describes your situation, you can easily file for a free tax extension.
Note: filing a for a tax extension extends the deadline to file by 6 months, but it does not change the date you must pay taxes (if any are due). So it’s a good idea to at least estimate how much taxes you might owe, and send that amount to the IRS before the deadline. Then you can formally wrap up the paperwork after the fact.
Filing a tax extension is easy and free. Simply download IRS Form 4868, fill it out, and mail it to the IRS. Or, you can file an electronic extension through most of the major tax software programs, including TurboTax or H&R Block Online.
E-File your tax extension for free:
How to File your Tax Extension By Mail:
Filing an extension manually is also easy – just download the form and fill it out, either on your computer or by hand. Be sure to estimate the amount of taxes you think you will owe when you file your extension and be sure to pay that amount before the tax deadline.
These steps will guide you:
Remember – you must request tax extensions. The IRS states tax extensions are automatic, but that you must request them by April 15th. After you request the extension, you have until October 15th to file your return. But remember, any money you owe is due by the tax deadline. Taxes filed after October 15th are late and may be subjected to additional penalties or fees.
What happens if you don’t file your taxes? Some people aren’t required to file a tax return (generally only if their income is too low). However, most people are required to file a tax return. If you are due to receive a refund, there is no penalty for not filing a return. However, if you owe money and don’t file a return, you will be subject to penalties, fees, and possibly even jail time if the government determines your actions were meant to defraud the government. This article provides more information about what happens if you don’t file your taxes.
Expatriates and some military members may qualify for additional tax extensions. This is especially true for military members who served in tax-free zones in the current or previous year.
This article provides additional information regarding military member tax deadline extensions. American civilians working overseas may also be able to file for a longer extension.
The table below shows an approximation of when your federal tax refund should be direct deposited into your bank account or the date your check will be mailed.
This table is based on previous tax return charts.
Remember, this is only an estimation and not a guarantee.
How to use this tax refund chart: This schedule only applies to tax returns filed electronically. The left column represents the date your tax refund was accepted by the IRS. This article has more information on when to expect your tax refund, including FAQs.
|Tax Return Accepted By IRS before 11:00 am between…||Direct Deposit Sent*||Paper Check Mailed*|
|Jan 27 and Feb 02, 2020||10-Feb-20||14-Feb-20|
|Feb 03 and Feb 09, 2020||17-Feb-20||21-Feb-20|
|Feb 10 and Feb 16, 2020||24-Feb-20||28-Feb-20|
|Feb 17 and Feb 23, 2020||2-Mar-20||6-Mar-20|
|Feb 24 and Mar 01, 2020||19-Mar-20||13-Mar-20|
|Mar 02 and Mar 08, 2020||16-Mar-20||20-Mar-20|
|Mar 19 and Mar 15, 2020||23-Mar-20||27-Mar-20|
|Mar 16 and Mar 22, 2020||30-Mar-20||3-Apr-20|
|Mar 23 and Mar 29, 2020||6-Apr-20||10-Apr-20|
|Mar 30 and Apr 05, 2020||13-Apr-20||17-Apr-20|
|Apr 06 and Apr 12, 2020||20-Apr-20||24-Apr-20|
|Apr 13 and Apr 19, 2020||27-Apr-20||1-May-20|
|Apr 20 and Apr 26, 2020||4-May-20||8-May-20|
|Apr 27 and May 03, 2020||11-May-20||15-May-20|
|May 04 and May 10, 2020||18-May-20||22-May-20|
|May 11 and May 17, 2020||25-May-20||29-May-20|
|May 18 and May 24, 2020||1-Jun-20||5-Jun-20|
|May 25 and May 31, 2020||8-Jun-20||12-Jun-20|
|Jun 01 and Jun 07, 2020||15-Jun-20||19-Jun-20|
|Jun 08 and Jun 14, 2020||22-Jun-20||26-Jun-20|
|Jun 15 and Jun 21, 2020||29-Jun-20||3-Jul-20|
|Jun 22 and Jun 28, 2020||6-Jul-20||10-Jul-20|
|Jun 29 and Jul 05, 2020||13-Jul-20||17-Jul-20|
|Jul 06 and Jul 12, 2020||20-Jul-20||24-Jul-20|
|Jul 13 and Jul 19, 2020||27-Jul-20||31-Jul-20|
|Jul 20 and Jul 26, 2020||3-Aug-20||7-Aug-20|
|Jul 27 and Aug 02, 2020||10-Aug-20||14-Aug-20|
|Aug 03 and Aug 09, 2020||17-Aug-20||21-Aug-20|
|Aug 10 and Aug 16, 2020||24-Aug-20||28-Aug-20|
|Aug 17 and Aug 23, 2020||31-Aug-20||4-Sep-20|
|Aug 24 and Aug 30, 2020||7-Sep-20||11-Sep-20|
|Aug 31 and Sep 06, 2020||14-Sep-20||18-Sep-20|
|Sep 07 and Sep 13, 2020||21-Sep-20||25-Sep-20|
|Sep 14 and Sep 20, 2020||28-Sep-20||2-Oct-20|
|Sep 20 and Sep 27, 2020||5-Oct-20||9-Oct-20|
|Sep 28 and Oct 04, 2020||12-Oct-20||16-Oct-20|
|Oct 05 and Oct 11, 2020||19-Oct-20||23-Oct-20|
|Oct 12 and Oct 18, 2020||26-Oct-20||30-Oct-20|
How long does it take to process a tax return? You will receive your tax refund faster if you e-file, since the IRA can process returns more quickly and accurately. Filing a paper return can take significantly longer and may result in errors since they must be manually entered into the IRS system.
How long does it take to get a tax refund? The IRS processes 90% of electronic tax returns within 21 days (their stated goal). Some people receive their tax refunds in as few as 8 days, and the majority receive their refunds within 10-14 days. Some refunds may take longer if there are errors or other problems.
Are there any known tax refund delays? There are federal laws that require the IRS to withhold tax refunds until Feb. 26, 2020, when the taxpayer claims either the Earned Income Tax Credits (EITC) or Additional Child Tax Credits (ACTC). Tax refunds that claim these credits after that date are processed as they come in. The IRS also announces other known delays through press releases.
When will my refund be in my bank account? You will receive your tax refund more quickly if you elect to have it directly deposited into your bank account. Some banks make these funds available immediately, while others may place a hold on the funds. Paper checks take longer, as they must be mailed, deposited, then cleared by your bank.
What day of the week does the IRS deposit refunds? ACH transactions are processed on each business day during regular office hours.
What day of the week does the IRS mail paper checks? The IRS mails checks on Fridays.
Contribute to your retirement accounts. Most contributions to your defined contribution plans such as a 401k, 403b, TSP, etc., need to be made by December 31st.
Donate to charity. Any donations you make to a qualified charity can be deducted when you file your taxes next year. This includes donations such as tithing or giving to an organization such as Goodwill, or the USO.
Pay qualified business expenses. If you have your own business, you can write off certain expenses. I run a couple of websites, so for me, this would include prepaying for web-hosting, buying a new computer, paying for advertising, or other qualified business expenses.
Additional tips for saving money on your taxes:
Filing with the IRS can be taxing, but with the knowledge from this guide in hand, you should be able to confidently approach your taxes as part of your full money management.
Making savvy financial decisions all year long can help you to save money at tax time as can being aware of changes to tax laws, deductions, and credits.
If you feel like you need additional resources, working with tax software or a financial advisor can simplify tax filing tremendously.
Originally From: https://cashmoneylife.com/turbotax-review/
TurboTax is the most popular tax preparation software on the market. I use this software myself and recommend it highly. The service is easy to use, even if you’ve never used tax preparation software in the past.
They ask questions – in plain English – and all you need to do is gather your tax documents and input the required information. Sometimes you don’t even need to do that. TurboTax can often import information from online sources, making tax preparation even easier.
TurboTax added their fifth version, TurboTax® Live, for the 2017 tax year. This is the third year this service will be available to taxpayers. The “live” part of the title refers to live assistance by a CPA or an enrolled agent (EA). With this version, you prepare your tax return the same way you would with the other TurboTax versions. But you’ll have a tax specialist available and live to help you with any complications.
Once your tax return is done, it will be reviewed by a CPA or EA, who will make any necessary changes prior to filing. That will ensure that your tax return is done right, and includes every deduction you’re entitled to.
No tax knowledge is required. TurboTax is an extremely user-friendly program. It will ask you all of the necessary questions, and all you need to do is input the information. You don’t have to know anything about preparing taxes whatsoever. TurboTax has a large volume of tax preparation resources, including live-support on the premium versions.
100% Accuracy Guarantee. TurboTax runs thousands of error checks and then double-checks your tax return before you file. If you receive an IRS or state penalty or interest charge because of a TurboTax calculation error, TurboTax will pay the cost.
Audit Support Guarantee. This guarantee applies to every TurboTax return. It entitles you to free one-on-one audit guidance from a trained tax professional. They’ll help you learn what to expect, and how to prepare for the audit. If need be, you’ll even have access to their Audit Defense program, which will provide you with full-service audit representation.
QuickBooks interface. TurboTax and QuickBooks are both products of Intuit, so you can import information directly from QuickBooks into TurboTax. This will enable you to prepare for income tax filing all year long if you are a QuickBooks user. It will simplify documentation collection, and make tax preparation much easier for the self-employed.
Search for over 400 tax deductions. The federal income tax code is incredibly complicated. There are hundreds of tax deductions, and even seasoned tax professionals struggle with knowing them all. But TurboTax will help you to find any you’re entitled to.
Electronic Filing will help you get your refund faster. Filing your tax return electronically is faster, safer, and more accurate than filing your tax return on a paper form. And since the IRS computers can process electronic returns more quickly, you should receive your tax refund faster (if you are owed money by the IRS).
There’s also the TurboTax Military Discount:
$0 for federal, $0 for state, $0 to file. It’s the TurboTax free version, and it’s available only if you file 1040EZ or 1040A, which are the very simplest tax returns.
You will qualify for the TurboTax Free Edition if you have W-2 income, Earned Income Tax Credit (EIC) and child tax credits. If your situation is more complicated, you may need to purchase one of the other TurboTax versions.
The TurboTax Free Edition works like other TurboTax versions with basic tax preparation. It uses the same question and information input format. But you also have access to the following features:
CompleteCheck. TurboTax will run a comprehensive review of your return before you file to make sure that nothing gets missed.
In order to be eligible for TurboTax Free Edition, you must earn less than $100,000 from W-2 sources. It’s not for people who have business income or 1099 income. You’re also ineligible if you have any capital gains income, or need to file Schedule A for itemized deductions.
The free version does support common IRS schedules and forms, including Schedule B (interest and dividend income) and Schedule EIC (earned income credit).
The Deluxe package is the most popular TurboTax version. It’s for more complicated returns, including those with itemized deductions and incomes exceeding $100,000. However, it does not accommodate investments in rental property or self-employment.
It includes all of the features of the free version, plus the following:
TurboTax Premier includes all of the features of the Free and Deluxe versions. It is specifically for those who have investments in rental property.
Features specific to the Premier version include:
TurboTax Self-Employed has all of the features and benefits of the Free, Deluxe and Premier plans. It’s specifically for taxpayers who earn income from self-employment. That includes independent contractors, freelancers, and business owners.
Features specific to the Self-Employed version include:
*QuickBooks Self-Employed also enables you to snap pictures of your business receipts using your mobile phone. You can store those receipts, and keep a permanent record of your business expenses as they occur.
Here’s your chance to fire your CPA!
TurboTax Live is like hiring a CPA to prepare your income taxes, but at just a fraction of the price. It offers all of the features of the other four TurboTax versions. But it also provides you with advice from a CPA or an enrolled agent (EA), both on-demand and for a final review. This makes it easy to ask questions about more complicated topics, such as the Alternative Minimum Tax.
You can quickly and easily connect to a tax expert, simply by clicking “Expert Help” in the program. You can get help with personal and work income, as well as complex tax situations.
On the final review of your return, TurboTax tax experts will make any necessary changes, and back your return with their 100% Accuracy Guarantee.
If your tax return is complicated, or if you feel that you lack sufficient understanding, TurboTax Live is the version for you. You’re performing the actual information input, but it’s like having a CPA working at your side as you do.
This version is also ideal for those who have complicated business tax situations, multiple rental real estate properties, or K-1 income from several partnerships or S corporations. A CPA will charge $1,000 or more to prepare some of these returns. But with TurboTax Live, you can get a similar level of service for under $200.
You can prepare your income taxes on TurboTax in less time than it takes to get your tax information together for a CPA. TurboTax will cost hundreds of dollars less than a CPA, and generate a similar result. This is a perfect platform for a tax novice. There’s absolutely nothing scary about this program, even if you’ve never prepared a return online before.
If you want a tax return that’s 100% accurate, and provides you with all of the deductions you’re entitled to, TurboTax is an excellent choice. If you’d like more information, or you’d like to sign up for the service, visit the TurboTax website.
REITWrecks: February 16, 2010
Formerly known as Wells REIT until it was spun out into a new, self-managed entity and renamed in 2007, Piedmont (PDM) sold 12 million shares at $14.50 and began trading on the New York Stock Exchange on the morning of February 10th. The Company had planned to offer 18 million shares at a price of $16-$18.
Piedmont, which owns and manages a 73 property, $4 billion portfolio of office buildings across the country, including trophy properties like the Aon Center in downtown Chicago and the Nestle headquarters in Los Angeles, has a colorful history.
The company was founded in 1997 by Leo Wells and quickly became adept at raising money through a network of independent brokers, paying them commissions of 7% along the way. Wells also earned lucrative acquisition fees for buying property, as well as advisory fees for managing the portfolio. Allegedly, Wells also encouraged investor participation in prayer chains for favorable acquisitions.
This unconventional model attracted the attention of many skeptics, including David Swensen, Yale Endowment’s chief investment officer. Swensen accused Wells of turning a blind eye toward investors’ best interests while he raced to raise money and buy more property. In his book “Unconventional Success” (pages 70-75), Swenson said the high fees simply encouraged two things: the sale of still more shares and the purchase of property – any property – at almost any price:
No rational buyer can compete with the Wells acquisition machine’s willingness to overpay for product. As a consequence, investors suffer the double indignity of high fees and poor investment prospects.
Unfortunately, the Piedmont IPO is confirming Swensen’s claims. Prior to the public listing, Wells orchestrated a 3 for 1 reverse stock split that created four separate classes of shares. Only one class, the Class A shares, now trade on the NYSE, while the rest will convert over time. This effectively delays a full “liquidity event” for another 12 months. The Class A shares traded up to $16 on Friday, but that still translates into a pre-split loss of almost 40%, according to The Rational Realist.
Even the Wall Street Journal pilloried the IPO. The Journal estimated that investors would have received a “paltry” 2.1% annual return including dividends, assuming the offering priced at the high end of the $18 range. According to an analysis by Green Street Advisors, had those investors simply bought shares in an index of publicly traded real-estate stocks, their total return over that time would have averaged about 8% a year.
Ironically, shareholders had the option of being cashed out in 2007 through a series of buyout offers from Lexington Realty Trust (LXP). Lexington offered to pay up to $9.25 per share (a post-split equivalent of more than $18 per share), but Wells never informed investors of the offers. Instead, he took the bulk of a $175 million payout as part of the spin off to Piedmont.
Sir Leo argued that the Lexington buyout offers were not material because they were merely tentative expressions of interest. Unfortunately, a federal district court disagreed, stating that “there can be no doubt that this information is material, as it would be considered important by a reasonable shareholder in deciding whether to vote for or against the [spin off].” The court also granted the plaintiff’s request for a class action, and discovery continues.
Certainly, public REITs are imperfect vehicles for a variety of reasons. They are highly correlated to equities, they can be much more volatile than the underlying real estate in which they invest, and they are not great as inflation hedges either. However, beginning at 9:30 every Monday through Friday, excluding holidays, investors in public REITs can vote with their feet and reclaim their money. Sadly, long-suffering Wells shareholders are stuck sucking swamp water for another 12 months before they finally get that freedom.
Originally From: https://cashmoneylife.com/td-bank-bonus-offer/
Interested in earning some quick money? TD Bank is currently offering a lucrative sign up bonus to new customers who meet their criteria (more on this below).
Banking is a competitive industry, which is why many banks offer sign up bonuses to new customers. These bonuses are often the right incentive to get new customers in the door where the banks hope they can convert these new customers into lifelong clients.
TD Bank currently offers two different sign-up bonuses for customers who apply online and meet the qualifying criteria.
In fact, TD Bank can handle just about any personal or business banking need.
Customer service is available online and via the phone, and is available 24/7.
One of the few downsides is availability. While TD Bank has hundreds of locations, they are primarily only located in Canada and the Eastern United States.
Here is the current list of states where TD Bank is available:
The TD Checking accounts that are currently offering the sign up bonuses offer customers a solid account that should be able to meet their banking needs.
Here are more details:
TD Beyond Checking offers the most perks of all the TD checking accounts.
As a new customer, you can earn $300 when you set up direct deposits of $2,500 or more within 60 days of opening your account.
There is no minimum deposit to open the account. However, you will want to ensure you avoid the $25 monthly service fee, which can be done in one of three ways:
Other benefits of the TD Beyond Checking account include
TD Convenience Checking is their most popular checking account. There is a $15 per month maintenance fee which can be waived in one of two ways:
Students and young adults ages 17 through 23 get additional perks like no minimum balance requirements and no monthly maintenance fee.
This account is currently offering $150 in bonus cash if you set up at least $500 in direct deposits within the first 60 days.
Overall, TD Bank offers great value if you live in one of the areas where they have a strong U.S. presence (15 states and the D.C. metro area). It’s also a great option if you frequently travel to and from Canada, as you can easily open a Canadian account or access TD Bank ATMs in Canada.
They offer full service banking, including Checking, Savings, Money Markets, CDs, Credit Cards, Mortgages, Home Equity Products, Personal Loans, IRAs, Prepaid Cards and more.
TD Bank also offers business banking services ranging from small business needs up to enterprise banking needs.
You can learn more about TD Bank in our full review, or you can visit their website.
We live in a world where people have a hard time paying attention. Everyone is frazzled and overwhelmed to the point that their hands are on the delete key.
It’s a natural and understandable instinct. With more technology and convenience, we can use automation and transactional platforms to fill people’s inboxes to the brim.
Recipients have to figure out what is the signal and what is the noise. It’s a low ratio, thus, the natural survival skill is simply to ignore or delete most messaging that is not personal.
Automation can be lazy many times. Using triggers, templates and targeting scripts to save time can feel like savings, however, if most of your automation is being ignored, then why create such waste? It doesn’t work as well.
Part of this is that you may not dial in the timing, nuanced message and process flow to be frictionless and natural. That takes a lot of focus, study and care.
The other part is that there’s a big difference in having a conversation one-on-one with someone and simply broadcasting sales messages, transactions and updates. In the former case, you have cost. You handle other people with care in your words, interactions and mannerisms and they respond in kind.
In the latter case, you can easily miss without the feedback natural relationship building entails.
There are organizations that do automation extremely well. They use AI and have armies of designers, coders and UX people studying how you interact with their store, brand and messaging.
If you are small, can you apply that much resource consistently?
The better strategy is to build and maintain trust through relationships. Don’t do mass. Make every touch count in your communications and way you do business. That stands out when there’s an inbox filled with hundreds of transactional and automation messages.
People respond to people and this is important to remember when we are out there making connections and seeking to do business. Applying automation in a flow that demands personal connection simply misses the opportunity.
How can you get more relational and selective with your interactions?
I love zerohedge. Last week, they posted a story whose headline blared “Kanjorski Admits There Is A Growing Bubble In Commercial Real Estate As S&P Observes CRE Losses Could Wipe Out Banking System.”
You’re forgiven if you didn’t know, but Kanjorski is a Congressman from the 11th District of Pennsylvania, and his website prominently features a picture of the beautiful Susquehanna River winding its way through an endless horizon of verdant green forests. Meanwhile, the S&P report never comes close to making such a cataclysmic, categorical observation about the U.S. banking system, and even if they had, who cares??
So what’s really going on in commercial real estate? Defaults are skyrocketing by almost every measure, but that’s hardly news. According to RealPoint’s monthly delinquency report, not only had delinquent, unpaid CMBS principal balances increased by 380%, but loss severity reached an all time high of 52%. For those of you following along at home, this means that many CMBS loans are worth no more than 48 cents on the dollar.
Excluding the Peter Cooper/Stuyvesant Town default from its estimated rate of delinquency growth, RealPoint predicts a CMBS default rate of roughly 8.5% by June 2010. Expressed in terms of delinquent, unpaid principal balance, this would be approximately 20 times higher than the low point set in March, 2007 – just as the market peaked. As CMBS delinquencies increase, specially serviced loans, as a percentage of overall CMBS outstanding, are skyrocketing:
This distress in the CMBS market serves as valuable, eyeball grabbing headlines for sites like zerohedge, but it’s more useful and instructive to compare the distress in CMBS distress to the relatively low default rates seen by other lenders. While Realpoint is dramatically predicting a CMBS default rate of 8.5% by June, Fannie Mae and Freddie Mac have consistently been clocking in with CRE default rates of just about one half of one percent, and insurance companies are reporting default rates of just about half that rate.
Clearly, the old CMBS model doesn’t work well, while the Fannie Mae/Freddie Mac model, which requires third party underwriters to take the first loss risk, is working much better. Having “skin in the game”, as it were, causes Fannie Mae DUS lenders and Feddie MAC correspondents to be much more cautious in underwriting their loans than a bank would be in making a loan that can instantly be turned into someone else’s problem via securitization. And often times, that “someone” isn’t all that smart. It’s all about pay for performance, and we should bring it back for real.
We always talk about the constant change and evolution of marketing trends and strategies that this time, we also want to highlight how equally important it is to keep up with the rising financial marketing strategies this 2020. And in order to keep up with the fast-changing world of marketing, it is absolutely necessary to possess the right tools and incorporate them into your current financial game plan.
Everything has to be instant now. The longer it takes for a transaction to go through and finish, the more off-putting it becomes. Customers expect instant results as well as instant answers to their questions. Time wasted is money wasted and a prospect lost. No business would want that to ever happen to them.
The good news is that’s exactly what chatbots have been created for. Chatbots have been around for some time already and with better versions constantly popping up, you can now include conversational banking into your bots to give your customers a personalized experience at every financial stage.
Depending on the service you want to provide, there are two types of bots that you can choose from:
Qualifying a lead for financial services is deemed as the most important function of any Finance Business. It’s all about connecting your prospects to your marketing department for more personalized questions. Say your prospect clicks on one of your ads that you’ve posted on your social platforms. They would have to provide relevant details about their business, needs, interest, etc. If they get qualified based on the information they enter, the bot now can send their details through to the sales team so they can get in touch with the lead and start the purchase journey.
Au contraire to the Lead bot, support bots are more of a virtual guide for your customers. They can handle all the financial product related questions that your customers might have round the clock so you don’t have to worry about queries stocking up unanswered in your chatbox while you sleep at night.
The great thing about chatbots – and why we highly recommend them – is because they empower the users to be self-sufficient by also offering them solutions that are efficient and quick; providing them with all the information they need to understand your product features and their benefits, etc. Chatbots enhance the user’s experience with your brand and that will encourage them to keep coming back.
Video marketing could be considered a luxury back in the days since not many companies saw the value in spending a good chunk of their resources for a 30-second to 2-minute video. That is not the case anymore today. The best way that you can enhance your customers’ experience nowadays is by putting out video content, and the Finance industry is not exempted from this. Your customers may not all be fluent in all the ‘how’s’ of your product or services and they may also not have enough time to read through all your websites to find out enough information. So, the best solution here is to use video marketing to capture their attention and provide faster solutions.
It shows that you can get an 80% boost in your conversions by integrating videos into your landing page. You have a greater chance of attracting prospects to your website by combining videos into your marketing as users frequently spend 88% more time on websites with video content than those that don’t.
If you’re stuck with what kind of videos you could post, start off with simple video tutorials or demos on how your product/services work. Aside from just posting them onto your website, you can also opt to send exclusive contents of that sort to your customers’ email.
“How-to” videos are a great avenue to show your investors how they can use their products and/or services or how to use it to create webinars for their consumers.
Live streaming technical analysis on your platforms can engage your audience in real-time of maybe a BTS of something you are working on or for them to tune in into a seminar/conference you are holding.
Lastly, never underestimate the impact of emotional and relatable video testimonials and the power of storytelling. These types of videos can inspire your audience as well as encourage them to engage with you.
If our hands are too full, that’s not a problem anymore. You can just talk to your phone, prompting a virtual assistant with your voice.
So, if our virtual assistants on our phones can help us with our groceries and random researches, why not also with financial operations? In fact, many financial companies have already jumped on to this already.
Siri and Alexa are the most famous voice-search enabled virtual assistants that we have today among many others. Now, how is it beneficial for financial institutions to have these VAs? It is to help shift from a product mindset to a customer-centric one by providing them with a ‘voice’ that answers their queries. What’s more, is that your voice-enabled VAs can double as analytical agents and elicit valuable inputs that help you build a stronger business strategy.
While on the subject of AI, it offers key ‘Audience Insights’ which can transform the way a finance company can communicate and engage with their customers in ways such as learning to understand buyer persona and demographics. AI Insights help you identify certain topics, conversations, and areas that your user is more interested in and help drive your marketing campaigns in the right direction.
As a finance company, it helps if you tweak your marketing accordingly to find out more about your customers’ emotional motivations for their financial transactions.
Try integrating the power of segmenting customers (banking, savings, investments, etc.) so you can tailor bespoke marketing campaigns and reaching your right target audience. Address your key customer concerns so they know you also care about what troubles them. “What are your biggest pain points?’ ‘What are they looking for in a financial product at the moment?’ are good questions you can ask them and then take it off from there.
Overall, AI-enabled real-time audience insights can help lower and even prevent you from wasting valuable advertising and marketing resources for financial companies all while allowing them to engage and interact with your customers in an efficient, proactive, and accurate way.
Now, the thing is, people want to be able to even do their banking at just one click of a button from wherever they are, at whatever time of the day. Thankfully, many banks have developed their own user-friendly apps and optimized their websites so that their customers can actively engage without having to physically go to the bank. They can message their queries through the app, schedule appointments, check their deposit balance, etc.
On the other hand, some banking companies have taken several steps more forward and truly thought out of the box. Capita One, for example, has launched an impressive “Banking Reimagined Tour” wherein they established two Capital One Cafes which allowed people to recharge their bank accounts and devices all while managing finances using simple digital tools over – yep! You guessed it! A cup of coffee.
What we can learn from them is that if financial companies want to stay relevant and not fall behind, it’s important for them to keep integrating multiple platforms and facilitate smooth communication and cross-platform support for their customers.
Without a doubt, marketing has emerged and evolved as an indispensable element for stirring the right conversations that are more customer-centric. If Finance Companies start going more and more virtual while still having that human touch and look out for your customer’s financial needs and wants, that’s when innovation starts.
This article originally posted at The Savvy Marketer.
For many people, it is easy to get stuck in the same daily routine where you wake up, go to work, come home, and go to bed. Of course, there is so much more that goes into your day, but how much of that time do you actually allocate for yourself?
Of course, when you work long hours and have other responsibilities such as taking care of your family, it is hard to carve out that time for yourself. However, as a working professional and the father of a child with special needs who requires round the clock attention and supervision, I am here to tell you that all hope is not lost.
While it is cliché to say, “When there’s a will, there’s a way,” I do believe that there are ways to maximize your time in order to provide a healthy outlet for yourself. The key is to identify those precious few minutes where there could be an opening for “me time” and then jump on it. It might not be every day you get these openings, but once you find where they are and do something for yourself during that time, you will feel like a weight has been lifted.
For example, I have identified Thursday nights after 8 pm as a time during my week where I am not at work and my wife is home from work and able to take care of our son. I have allotted those nights to playing in a volleyball league with friends. On those nights, I am able to have my adult time, I am able to get a great workout, and I am able to let loose and have fun.
Personally, there is nothing I’d rather be doing with that aforementioned “me time” than playing volleyball, and so that is what I choose to do. It makes me feel good to get out there on the court, to commiserate with friends, and engage in friendly competition.
For her part, my wife has identified Friday mornings as the best time during the week that she can do things for herself. The outlet she has chosen is yoga and meditation, and she regularly takes classes on those mornings.
We have both found that having these pockets of time and doing something for ourselves make us feel refreshed, re-energized, and ready to tackle whatever is next on the busy home and work fronts. The other unseen benefit is that when you have that outlet, you will find yourself working at a more productive level because you were able to recharge so now you can be more focused on the tasks at hand.
The biggest takeaway from all of this once you realize there can still be a little bit of time for you during the week, it can make a world of difference. After all, once you realize there might be an hour one day or even just 30 minutes on another day, you can, in those moments, find the right healthy outlet for you.
Ultimately, I have found that the sense of freedom that comes with that realization can be priceless, and I am sure you will, too.
We’re already a few weeks into tax season! For many people with complicated returns, tax prep started well before January. But even if your situation is fairly simple, you would still need to gather documents, review your finances, and account for any big changes that may have happened over the past year.
Are you ready for tax season? What documents do you still need, if any? Are you filing your own taxes or hiring someone to do it?
Tell us whether you’re ready for tax season and we’ll enter you in a drawing to win a $20 Amazon Gift Card!
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If you’re starting 2020 with high hopes for your money, consider this: Building wealth is about making incremental progress, day after day, year after year.
Big wins — like getting a raise — are wonderful, but small wins — like choosing the right investment or savings account — are even better, because you have total control. The seemingly tiny habits you start and decisions you make today determine where you’ll be in the future.
With just $100, you can set yourself on a path to a rich life almost instantly. Here are a few ideas to get started increasing your net worth:
A good savings account can do much more for your wealth than you may realize. Even though interest rates are down compared to early 2019, a high-yield savings account can still help you earn up to 20 times more on your cash than a traditional savings account. That means you could earn hundreds of dollars in interest for simply storing your money in the right place, completely risk-free.
Now, just opening a new savings account won’t make you rich. You need to save regularly to meaningfully boost your wealth. Consider an account like CIT Bank’s Savings Builder, which helps create momentum by rewarding you with its top APY if you set up an auto-deposit each month.
Most fee-only certified financial planners charge between $100 to $300 for a one-time session, but many offer an initial no-cost consultation. Whether you meet once or set up an ongoing engagement, you’ll be able to get specific guidance on any aspect of your financial situation, including budgeting, retirement, investing, education planning, and estate planning.
According to a Northwestern Mutual survey, people who work with a financial adviser are more likely to know how to balance spending now and saving for later; set specific goals and feel confident that they will achieve those goals; and have a plan in place to weather economic ups and downs.
Retirement may be decades away for you, but the best time to start building a nest egg is today. Whether you contribute to an employer-sponsored retirement plan like a 401(k) or tax-advantaged Roth IRA at a robo-adviser or brokerage, increasing your monthly or per-paycheck savings by $100 can have a big impact.
Of course, there’s no guarantee your investments will gain value in the short term. It’s nearly impossible to predict where the market will be a year from now, but waiting on the sidelines until the “right” time is a mistake none of us can afford to make. As long as you’re thoughtful about your asset allocation, risk tolerance, and time horizon, you don’t have anything to worry about.
If you have money you want to grow for goals that are closer than your golden years and you’ve paid off any high-interest debt, it could be a good time to invest in the stock market.
Despite popular belief, you don’t need a ton of money to get started. For beginners, an online investing app like Betterment can keep your costs low and guide you toward investments that match your risk tolerance and your goals.
Again, there’s no telling whether your investments will gain or lose value over the next year, but if you don’t invest at all, increasing your net worth is going to be a far more difficult task.
Whew! After a furious year of churning CMBS, repurchasing outstanding corporate debt and refinancing its bank loans, among other feats, Northstar actually ended the year with a little bit of cash. That’s the good news. The bad news is they’re going to need it.
Northstar now has about $238 million in cash, which includes the all important figure of $138.9 million in unrestricted cash. This is discretionary cash, the kind of stuff that Hamamoto can use to expense dinners at Bobby Van’s. The remaining $99.4 million is bottled up inside Northstar’s CDOs, and the ability to profitably reinvest that cash is diminishing by the day as credit spreads tighten and the CDO reinvestment periods expire.
If you strip out all the non-GAAP AFFO noise from NAREIT, you can see the nail-biting story unfolding: Northstar’s cash flows from continuing operations have been declining rapidly. It’s true, Northstar did manage to generate $54 million in cash for all of 2009, but that’s down from $88 million in 2008 and $102 million in 2007. Obviously, an almost 50% drop in operating cash flow is not the sign of a healthy business, but the fact that Northstar is currently in an unhealthy business should also come as no surprise.
The question is, what can Northstar do about it? In the short term, the answer is not much. Northstar’s portfolio is running off, interest rates are at all time lows, and Northstar’s CDO funding model is dead. 2009 interest income of $142.2 million was $70 million less than 2008, and $150 million less than 2007. As Northstar’s asset balances decline, so too have Northstar’s advisory fees and rental income.
The lack of good options may be why NRF is attempting replace this revenue with management fees, and in the meantime Hamamoto is generating a lot of work for his accounting department with the debt buybacks and CMBS trading, but all of this is clearly a stop gap, and it’s just not enough.
Not only that, management fees are not ramping up nearly as fast as Northstar needs them to ramp up, and at the current pace, they may never ramp up. Northstar Realty Income Trust, the new non-traded REIT, has not yet been declared effective by the SEC, and Northstar can’t start raising money in earnest until that happens.
However, judging by its new Reg D offering, Northstar Income Opportunity REIT I, Northstar’s shiny new Denver broker/dealer operation isn’t knocking the cover off the ball. The first investor commitment was made on September 24th, but as of early February, Northstar Income REIT I had only raised $3.1 million in equity. This is certainly not failure, but managing $3.1 million will definitely not pay the rent at 399 Park Avenue. Furthermore, starting a broker/dealer from scratch is neither cheap nor risk free. Northstar must now comply with a whole new raft of federal and state securities laws, and be exposed to the liability that arises from selling shares to retail investors through hundreds of rowdy, independent securities brokers across the country.
On top of paying rent on the 18th floor, dinner at Bobby Van’s, and the expense of starting up a brand new broker/dealer, under its new credit facility with Wells Fargo, Northstar must make $30 million in annual amortization payments. Also, through its loan book, NRF is on the hook for $80 million in future funding commitments, of which only $51.9 million will come out of the CDOs. $50 million in operating cash flow doesn’t create a huge margin for error in a capital intensive business, so Northstar will likely have to borrow most of the remaining $28.1 million using credit facilities.
So what is Hamamoto thinking? That’s unclear, but NRF is definitely walking a tightrope, and that may explain the management and board changes at the end of Q4. Curiously, REITs have collectively raised almost $30 billion of debt and equity capital since the crisis began, and Crexus, Colony Capital and Starwood Capital were among several Mortgage REITs to raise almost $1.5 billion. Somehow, despite the stellar performance of its portfolio, NRF just barely managed to squeeze $25.7 million out of this deluge.
Some portfolio managers I know have said that Hamamoto is not part of the “REIT Mafia”, and therefore he is not always invited to the REIT fundraising parties. This may or may not be true, but I’m not sure what else could explain NRF’s decision to throw a hail mary into the cesspool of Reg D offerings and non-traded REITs.
I spent all day reading the 10K in search of an answer, and it seemed to confirm the REIT Mafia conspiracy theory, as well as the fact that NRF has chosen a particularly rocky path to circumvent it:
“we cannot currently raise large amounts of corporate equity capital at attractive levels…we hope that our reputation in the marketplace will enable us to be early in raising corporate capital when market conditions improve.”
One thing is for sure, Reg D offerings and non-traded REITs won’t do much for NRF’s reputation, so shareholders may also want to hope there is a contingency plan brewing somewhere on the 18th floor.
Credit cards have made it extremely convenient to get what we need — from online shopping to everyday purchases, not having to hit the ATM and use cash saves time, space, and energy. But having easy access to credit also means it’s easy to overspend — something you just couldn’t do when paying with cash. You can end up with a mountain of debt that can take years or even decades to pay off.
One kind of credit card may be more likely to set you up for success, and this type of card can even help you save money on interest if you’re struggling with debt already. Balance transfer credit cards, which can also be called 0% APR credit cards, actually let you avoid paying interest altogether for a limited time.
Two main strategies can help you get ahead with this type of credit card, but only if you use plastic with a plan and stay disciplined in your approach.
If you want to make a big purchase and pay it off slowly without having to pay interest, you should check out 0% APR credit cards that let you skip interest payments and earn rewards for each dollar you spend. This type of card typically works well if you need to pay for new appliances for your kitchen, a major home upgrade or repair, or even a semester of college. By charging the large purchase to your 0% APR credit card, you may be able to earn an initial sign-up or welcome bonus as well as rewards as a percentage of your spending.
Of course, there are plenty of rewards credit cards that also dole out big initial bonuses and ongoing rewards while letting you avoid paying interest for up to 21 months. Make sure to compare rewards and cash back credit cards to see which ones might work best for whatever it is you need to buy and pay down slowly over time.
If you have a lot of debt at high interest rates, you can also get ahead with a 0% APR credit card — provided you stop spending and start focusing on debt repayment instead. Balance transfer credit cards often let you secure 0% APR on balance transfers for up to 21 months, although some do charge a 3% or 5% balance transfer fee for the privilege. Even if you do pay a balance transfer fee, however, the interest savings can far outweigh the fee.
If you’re against paying a fee to transfer high interest balances over, you can look for cards that waive this fee for a limited time.
Whether you want to pay down a large purchase without interest or save money by consolidating high interest debt at 0% APR, it’s crucial to make sure you wind up with a new credit card that offers the perks you want. Here’s everything you need to look for as you decide.
If you want to pay off a large purchase over time or consolidate debt at 0% APR, you’ll need to make sure you have enough time to pay off your debt entirely. Definitely compare 0% APR offers to see which ones give you plenty of time to accomplish your goal. If you don’t, you’ll wind up paying off debt at the standard variable APR, which will likely be very high.
If you’re really trying to pay off debt, stay away from cards that offer big sign-up bonuses within the first few months. You should use your balance transfer credit card to save money on interest, but don’t use it for everyday spending.
Most 0% APR credit cards don’t charge an annual fee, but you should still compare balance transfer fees and other potential fees you may be charged such as late fees and over-limit fees.
Finally, make sure you check out rewards programs if you want to rack up points on a large purchase. Some cards only let you redeem rewards for gift cards or cash back, whereas others let you cash in points for travel or transfers to airline and hotel partners. Compare rewards programs ahead of time so you earn the type of rewards you want the most.