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Everyone Who Does Taxes For The First Time Should Know These

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Everyone Who Does Taxes For The First Time Should Know These

Like Voldemort from Harry Potter, the word “taxes” should not be The Thing That Must Not Be Named. We should not live in fear of the 15th of April like it’s some plague or judgment day. True, it may feel intimidating the first time you are forced to sit down and complete your taxes on your own. We’ve all been there and, yes, felt your pain.

However, taxes shouldn’t be the bane of your existence. With some planning and premeditation, doing your taxes should be manageable. After all, however you look at it, you will have to file your taxes every year. So do it right and follow these 10 need to know tips to complete your taxes without hyperventilating.

1. Nobody will remind you to do them.

Throughout the year, you should be saving pay stubs, tax returns, and other files and documentation. Let’s face it, filing taxes is not a one and done deal; it’s an ongoing process. Therefore, the government is not going to send you a little friendly reminder letter in the mail like your dentist does for an upcoming appointment. As soon as you begin to receive W2s from your employer, you should being filing your taxes. Don’t wait until the last minute, unless you want to be sweating bullets.

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2. You need to double check everything.

Okay, the truth is, taxes do take a while in order to be completed properly. It requires focus, retrieval of papers and documentation, and reading the directions carefully. At times, the forms may seem a bit repetitive, but make sure you use the examples and directions to help you complete each section. Also, double check everything, especially your name and your math. This not only saves you from a load of extra paperwork, but it will also help ensure that you don’t get flagged for tax fraud.

3. Have your papers organized before you start.

Find a filing and organization system that works for you. Don’t expect to just bring a heap of papers along with you to sift through and have it done in a half hour. Instead, make sure you are keeping your information organized throughout the year to make filing your taxes a lot less stressful. Try using a hanging filing folder system with labeled tabs of all of your paperwork. Or, invest in a filing cabinet or accordion folder system. Just make sure to be consistent. The IRS suggests keeping your records for seven years before discarding any documentation. With all that paperwork, don’t let your files become an unorganized heap.

4. Save some money to file them early.

Set aside money and file early just in case you may owe a lot of money to the IRS. This way, you won’t be blindsided by owing any unexpected large sums. Also, you can save money and get more on your return by filing any charitable contributions and avoid accrued interest on your taxes. Plus, you’ll receive your refund faster. Just make sure you have enough budgeted for these extra costs and money needed if you choose to seek out an accountant or program to file your taxes for you.

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5. Online tax programs don’t know everything.

It’s great to file online through step-by-step programs like TurboTax or TaxAct. Yet, they don’t always know about your individual tax exceptions and needs. Every person is different and you may have some questions that are beyond what the program can provide for you. Save some money and find an accountant who can help you through your unique tax filing. A tax preparer works specifically for the IRS and will cost between $150-$450, depending on your situation. Or, you can use a retail tax company like H&R Block for quick and easy filing. Just make sure you invest your time into finding one that suits your needs. It will be worth it in the long run.

6. Filing jointly is a little easier.

If you are married, filing jointly is a great way to guarantee the largest standard deduction from the IRS each year. You can also qualify for many taxes credits, including the American Opportunity and Lifetime Learning Credit, and the Earned Tax Income Credit. Plus, you only need to submit your taxes once together.

Ultimately, it’s better to file jointly. According to Turbo Tax, “In 2013, married filing separately taxpayers only receive a standard deduction of $6,100 compared to the $12,200 offered to those who filed jointly.” Therefore, if you are married, look to filing jointly to get the best tax breaks.

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7. File as early as possible if you need financial aid.

If you file early, you have the best potential of receiving the maximum amount of financial aid. The IRS makes this easy to do, because there is a link from the FAFSA form to the IRS, meaning you don’t have to provide your tax information by yourself. Be proactive, invest in your future, and get the most out of your education and your tax money.

8. You can submit corrections if you make a mistake.

Remember that we are only human and “to err is human”. So, you flubbed up a number or missed a step in filing your taxes. Something looks off. Don’t freak out; a 1040X file is your saving grace. It’s important to make your corrections rather than wait for the IRS to find them. A simple mistake typically won’t give you a large penalty, but it can cause accrued interest on the correct amount. Just know that it’s okay if you need to make a change.

9. You can write off student loan interest.

You can get a tax break and deduct $2,500 or the amount of interest you paid on your student loans. It’s considered an adjustment to your income, so you don’t have to itemize all of it.

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See what qualifies as a student loan adjustment and enjoy the fact that all of your money spent on your education is to good use and can help with your tax break.

10. You can credit your refund to next year.

Don’t always think that you have to spend your refund cash on anything right away. Instead, use it as an investment and put your money in a separate account in case you owe money next year when filing taxes. Or, you can place this money in a retirement fund and receive more money off next year’s income tax. The choice is yours, just choose responsibly.

Take a deep breath.

When you invest the time in filing your taxes and prepare all year, you really are investing in yourself and your money. If you want something done well, do it right. If you are still unsure about how to approach taxes, a good bet is to spend the money and seek someone who knows what’s best for you and your interests. Don’t be overwhelmed by the “big” 5-letter word; taxes aren’t that scary, as long as you don’t procrastinate.

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Featured photo credit: Tax/401(K) 201 via flickr.com

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Kayla Matthews

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Last Updated on July 20, 2021

Financial Freedom is Not a Fantasy: 9 Secrets to Get You There

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Financial Freedom is Not a Fantasy: 9 Secrets to Get You There

Have you ever considered your life now, and how it would be if you had more time to spend with your family and less worries about money?

Nowadays, financial stress is one of the most troublesome weights in life. If you’ve ever encountered financial stress, you know the difficulty of not having enough income to pay your obligations or bills.

Many people say that money is not the ultimate goal of life. While that’s true, money certainly plays a very significant role. The meaning of financial freedom changes with the different phases of our life, but ultimately, it is something that many people strive for.

In this article, we’ll explain how to capture that financial freedom you’ve been looking for. Read on to learn the secrets to financial freedom.

Break Free of Your Finances

Financial freedom is about having a constant flow of cash from your assets to cover all your regular needs.

When you are not worried about your income, or living paycheck to paycheck, you gain a great sense of freedom. It’s the freedom to be obtain and do what you truly need to make your way through everyday life.

Gaining financial freedom, though, is a process of growth, making small improvements and gaining emotional strength.

Though it seems hard to believe, it is really very simple to get financial freedom.

To do so, you simply need to make sure that your assets exceed your liabilities. In other words, you’ll need to find the sweet-spot where your residuals meet or surpass your expenses. This is something that you can achieve with the proper plan.

While not every person will accomplish financial freedom, the potential for anyone to do so is certainly there. Anyone can achieve this success, regardless of their income level.

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Outlined below are 9 secrets that will help you in your goals of achieving financial freedom.

1. Stop Unnecessary Spending

We often spend money inwardly, instead of objectively.

For example, you may spend when you’re anxious, depressed, restless, exhausted, from fear of missing out, or to please others. This is a very unhealthy way to handle your finances.

To stop this habitual spending, log down all your spending over the course of a month.

Just as some people keep a food diary, keep an expense diary. Remember not to just write down how much and what you spent the money on, also include the circumstances of why you spent the money. Was it an impulse buy at the checkout line or was it something you planned to purchase?

This increased self-awareness could enable you to avoid triggering situations in the future when you are considering an impulse buy.

2. Plan a Monthly Budget

This is a great opportunity to get serious.

Take a seat with your spouse or partner and make a monthly budget based on your income, not your expenses. You are never again going to spend more cash then you have on hand.

Overspending is the thing that led you to more financial obligations. Make sure you decide every month what is coming in and what will be going out and stick to that budget… no matter what.

3. Cut-up Credit Cards

Perhaps you are the type of person who always pays your credit card balance in full before the end of your billing cycle, and enjoys the reward points you gain. If this is the case, then you’re already way ahead of the game.

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If not, you may want to consider ridding your life of the burden that credit cards bring.

Many cards have strategies set up so that if you make a certain number of late payments, they will raise your interest rate much higher. This can really add up in the long run and you won’t be doing your financial situation any favors. If you’re prone to late payments or have a large balance due on your cards, cut them up!

Without proper self control on credit card spending and payments, you are basically throwing your money away. To ensure that you have better control over your spending, use only cash or debit for all future purchases (and don’t forget to pay at least your minimum payment on your cut-up cards each month!).

4. Increase Savings

There is no doubt that for a comfortable retirement you must accumulate satisfactory savings throughout your working life.

It’s good practice to save up to 15% of your income.

Start with your workplace 401(k), if you have one. If not, a Roth IRA (if you are eligible) or a traditional IRA (if you are not eligible for the Roth) are the next logical steps.

Increase in longevity means you might be able to look forward to 25 to 30 years in retirement, or possibly even significantly more. Investing now in good retirement plans will ensure that you have a guaranteed a stable monthly income when the time comes to stop working. [1]

5. Invest Wisely

Consider investing in funds.

Specifically, you will gain higher returns if you invest in different types of mutual funds such as Debt funds, Equity funds and Hybrid funds with a proper balance, although it absolutely relies on your personal preferences and sense of risk taking.

To get the most of these benefits, make sure you are investing in a variety of assets. Another resource of investing in mutual funds is SIP (Systematic Investment Plan) where you invest some money every month in funds. SIP works by averaging the per unit price of the stock.

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Mutual fund investors are aware of the benefits of an SIP (Systematic Investment Plan). For one, it is the most secure way to invest in equity mutual plans so that wealth is created over a long period of time. This plan also helps you to gain a better sense of financial discipline, which will come in handy in all your financial endeavors.

6. Invest in Gold

There isn’t really a better way to invest in gold than to have the physical gold itself in your possession.

You can purchase gold coins and bars from mints as well as from coin dealers and other private sellers.

Another way to invest in gold is through ETFs (Exchange Traded Funds).

These are is similar to mutual funds but they are exclusively investments of gold. ETFs are great because they offer more liquidity; the ETF owns the actual physical gold, stores it, and retains the value of the shares. These shares can then be bought and sold in the stock market, and one big benefit is that the transaction costs of gold ETFs are much lower than the that of physical gold.

With its consistently-increasing demand, investment in gold can be very wise long-term investment to make.

7. Stash Emergency Funds

Whether it’s a cash gift or a work bonus, always try to save any extra money that comes your way rather than making unneeded purchases.

If you get paid every other week, you’ll get an “extra” paycheck (three rather than the usual two) twice a year. Either save those paychecks towards your emergency funds or utilize the money to pay down other obligations, such as loans, credit cards or other debts.

Make it hard to get your cash.

Put your savings in an alternate bank, maybe an online bank that forces you to delay for several business days before transferred money hits your regular bank account.

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8. Find Fabulous Mentors

Find a mentor, such as a friend or family member, who has exceptional control over their finances and pay attention to everything they do.

If you do not have any friends or family that are enjoying financial freedom, then find a mentor online! There are numerous blogs and guru websites featuring the advice of many people who have reached financial freedom, and they exist primarily to let you in on how to achieve it for yourself.

There are also plentiful forums available that share tips and tricks on how to best achieve financial freedom. Read as much as you can and start changing your habits for the better.

9. Be Extra Patient

Patience is the key of financial success.

Being patient can be quite tough, especially when you’re struggling with your finances, but having faith is worth it. You’ll continuously be on the right track if you are taking the proper steps above.

So don’t be discouraged, even if you are only saving a few dollars a month; it all adds up. Within just a few years you’ll look back proudly at your accomplishments and be glad that you had the patience to get there.

Financial Freedom for All

Anyone can achieve financial freedom, regardless of their financial circumstance.

Use the tips provided above to get yourself on the track to financial freedom and toss your monetary concerns out the window. If you wish to achieve a life with financial freedom for yourself and your family then you must adopt a disciplined approach towards your finances.

Following the simple secrets above is a great start to making your money work for you, so you can work less and live more!

Featured photo credit: rawpixel via unsplash.com

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Reference

[1] Hartford Gold Group: IRA Retirement Accounts

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