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Holiday Gifts That Won’t Break Your Budget

Holiday Gifts That Won’t Break Your Budget

You’ve done a good job of sticking to your financial plan all year, but when it comes to holiday gift giving, it’s easy to let good intentions knock you off your savings path. According to the National Retail Federation, Americans spend about $1,000 on winter holiday gifts. That can be a real budget-buster, but meaningful gifts don’t have to come with a hefty price tag. We’ve got some $25-or-less gift ideas for everyone on your list.

Celebrate Coworkers
Office gifts are part of work culture. Maybe you manage a team and want to give your group a token of appreciation. Or you know one person who always gives gifts, and you want to return the favor. A work-appropriate gift that won’t put your account in arrears could be a nicely bound notebook, a quality writing pen or a gift bag of color-coordinated office supplies like paper clips, magnets and Post-it notes. Keep it professional but fun to brighten your coworkers’ day.

Seasonal Presents to Service Providers
Postal workers, hair stylists and even your GrubHub driver are people you might want to thank during the holidays. A batch of your favorite cookies presented in a festive box or tin is a low-cost way to show your gratitude for a year of good service. Make it extra special by including a handwritten note and a copy of the recipe.

Thank Your Terrific Teachers
Whether it’s your child’s 4th grade teacher or your yoga instructor, there’s lots of reasons to give extra thanks to the people who help us learn and grow. A pick-me-up, like a $10 gift card to a coffee shop, can help any teacher start their day off right. Make it more meaningful by supporting a local business close to your favorite teacher’s place of employment. Bakeries, ice-cream parlors or tea shops often offer gift certificates or cards that you can package in a pretty envelope or decorated box for that personal touch. 

Great Gifts for Grandparents
Grandparents, aunts, uncles, cousins — you want to remember your extended family in your holiday giving, but the costs can add up. Go for truly personal, budget-conscious family gifts by using the photos you take during the year to make photo-mugs, photo-calendars or even a family photo t-shirt! You can look online for low-cost, photo-personalized gift services. And at some big-box stores or national pharmacies, you can connect your camera or thumb drive to their in-store kiosk for easy ordering and processing.

Treat Yourself Too
No one should fault you for indulging in a holiday gift to yourself, but you should be as mindful here as you are in your presents to others. Money you receive as gifts (and funds you save by using our budget gift ideas!) can add up to a special treat and an end-of-year contribution to your retirement savings account. Talk to your WellCents financial professional about how catch-up contributions can help maximize your retirement savings and give your future self the gift that keeps on giving — a more financially secure retirement. 

Gen Z — Start Investing Now!

Gen Z — Start Investing Now!

If you’re a member of Gen Z — those born after 1997 — now is a great time to start investing for retirement. The power of compounding returns is one of the best ways to grow wealth over time. And the earlier you start, the less you have to set aside each month to reach your goals.

Consider that a one-time $10,000 investment you make at age 20 would increase in value to more than $70,000 by age 60, assuming a 5% interest rate. Meanwhile, it would only grow to approximately $43,000 if you make it at age 30. And the same investment at age 40? That would grow to a mere $26,000. As you can see, when it comes to investing, time really is money.

Here’s how to make the most of your investment dollars.

Find a Way to Invest

Even coming up with $200 can feel like a daunting task at this point in your life. Not only is your starting salary likely to be lower today than it will be in a few years, but you might also have student loan debt and other bills to contend with.

The good news is that you don’t have to invest a lot to begin building your wealth and preparing for retirement. Start with what you can afford, even if it’s only $50 per paycheck. Look for ways to free up a small amount of money in your budget each month so that you can contribute to your 401(k) and start putting that money to work.

Have a Plan

Create a plan for increasing your contribution down the road. If your employer offers a 401(k) match, try to invest enough to get the maximum. That match represents free money — and it’s the best deal you’ll find in the world of investing. Once that money is in your account, it begins growing, and it can boost your overall portfolio down the road.

Plan to increase your retirement account contribution each time you get a raise. Depending on your company, you could even plan an incremental increase in your contribution each year. For example, you could arrange to increase your contribution by 1% each year up to a certain percentage of your income.

The important thing is to get started and then up those contributions as often as you can. Get in the habit of investing, and you’ll be more likely to reach your long-term wealth goals even if you have to start small.

Give Yourself a Cushion

No matter your situation, there’s a good chance that, at some point, you’ll end up with an emergency where you must come up with a significant sum of money all at once. This can be stressful, and you might consider tapping into your retirement savings to help cover the cost.

However, it’s better to avoid using your retirement investments for emergencies since an early withdrawal can result in hefty penalties. Even if you get a 401(k) loan and avoid the penalties and taxes, anytime your money is out of the market, it’s not working on your behalf. You might replace what you withdrew, but you can’t replace the opportunity cost of time in the market. This is why establishing an emergency fund is so important.

Don’t Go It Alone

Investing for retirement can be daunting if you’re just starting out. Contact your WellCents financial professional to help you set realistic goals to grow your nest egg over time and give you a head start on the road to retirement.

Source: 

https://www.investopedia.com/financial-edge/0212/5-advantages-to-investing-in-your-20s.aspx 

How Do I Save for My Child’s College and Retirement?

How Do I Save for My Child’s College and Retirement?

You juggle multiple financial priorities, whether it’s buying a house, having children, starting a business or buying a car. Saving for retirement and a child’s college fund at the same time is no different, but that’s not to say it’s easy.

 

Get It Down on Paper

Start by setting a budget and timeline for both retirement and college. While the college start date is probably somewhat fixed, you may have more latitude concerning your retirement. Once the kids are old enough, include them in the conversation about how much you can afford to help with college and what they can do.

 

It’s important to set realistic goals about the types of colleges within your budget. Don't let higher education costs get out of control. If your child has their heart set on a specific school or major, there may be ways to lower costs (e.g., subject-specific scholarships and grants). The expectation shouldn't be that you're going to write a lot of checks. And always have a backup plan or safety school.

 

Controlling College Costs

Explore ways to reduce college expenses. Help your child identify special interests early on. Athletics? Music? Science? Math? Money may be available for all of those IF your child is exceptional. Identify colleges early too. See if they can attend special interest camps there to (a) see how they like it, and (b) meet faculty who might recommend them for a grant/scholarship.

 

Also, 529 plans can be a good way to divide retirement from college savings and offer a number of benefits, including the option of contributions by relatives. Coverdell Education Savings Accounts (ESA), sometimes called education IRAs, are tax-advantaged savings vehicles that allow tax-free distributions for qualified educational expenses. Read more about the rules and restrictions of the program in the link below.

 

Reevaluating Retirement

Similarly, find ways to boost your retirement savings or scale back your retirement goals. If time is tight, consider whether you can work a little longer or adjust the kind of retirement lifestyle you’re budgeting for. For example, could you downsize your home or move to an area with a lower cost of living?

 

Also, make sure you’re contributing at least enough to your employer-sponsored 401(k) to earn the maximum company match — this is free money, and you don’t want to leave it on the table. What you also don’t want to do, however, is ramp up your level of investment risk beyond what is appropriate for your personal tolerance and your retirement timeline just to try to boost returns.

 

The most important thing you can do during this juggling act is to sit down and have a frank conversation with your financial advisor about your goals. He or she may be able to come up with options you haven’t even considered. 

 

Source:

https://www.irs.gov/taxtopics/tc310

 

How Do I Save for My Child’s College and Retirement?

How Do I Save for My Child’s College and Retirement?

You juggle multiple financial priorities, whether it’s buying a house, having children, starting a business or buying a car. Saving for retirement and a child’s college fund at the same time is no different, but that’s not to say it’s easy.

Get It Down on Paper
Start by setting a budget and timeline for both retirement and college. While the college start date is probably somewhat fixed, you may have more latitude concerning your retirement. Once the kids are old enough, include them in the conversation about how much you can afford to help with college and what they can do. 

It’s important to set realistic goals about the types of colleges within your budget. Don't let higher education costs get out of control. If your child has their heart set on a specific school or major, there may be ways to lower costs (e.g., subject-specific scholarships and grants). The expectation shouldn't be that you're going to write a lot of checks. And always have a backup plan or safety school.

Controlling College Costs
Explore ways to reduce college expenses. Help your child identify special interests early on. Athletics? Music? Science? Math? Money may be available for all of those IF your child is exceptional. Identify colleges early too. See if they can attend special interest camps there to (a) see how they like it, and (b) meet faculty who might recommend them for a grant/scholarship.

Also, 529 plans can be a good way to divide retirement from college savings and offer a number of benefits, including the option of contributions by relatives. Coverdell Education Savings Accounts (ESA), sometimes called education IRAs, are tax-advantaged savings vehicles that allow tax-free distributions for qualified educational expenses. Read more about the rules and restrictions of the program in the link below. 

Reevaluating Retirement
Similarly, find ways to boost your retirement savings or scale back your retirement goals. If time is tight, consider whether you can work a little longer or adjust the kind of retirement lifestyle you’re budgeting for. For example, could you downsize your home or move to an area with a lower cost of living? 

Also, make sure you’re contributing at least enough to your employer-sponsored 401(k) to earn the maximum company match — this is free money, and you don’t want to leave it on the table. What you also don’t want to do, however, is ramp up your level of investment risk beyond what is appropriate for your personal tolerance and your retirement timeline just to try to boost returns.

The most important thing you can do during this juggling act is to sit down and have a frank conversation with your financial advisor about your goals. He or she may be able to come up with options you haven’t even considered.  

Source:
https://www.irs.gov/taxtopics/tc310

Did You Know These 8 Things Are Taxable?

Did You Know These 8 Things Are Taxable?

Every April, Americans face the often-dreaded ritual of filing their taxes. The prospect of a larger-than-expected tax bill is one common source of anxiety, but so is the possibility of making a mistake that runs the taxpayer afoul of the IRS. Here are some things that many people don’t realize are taxable.

1. Unemployment income. Yes, the unemployment income you receive after a job loss is taxable. And unfortunately, this is one issue that will affect many 2020 taxpayers. You can elect to withhold taxes from your benefits, but if you didn’t realize your unemployment was taxable, you might be in for an unpleasant surprise when you go to file.


2. Gambling winnings. Even when Lady Luck shines upon you, Uncle Sam still wants a piece of the action. Whether your earnings are from online fantasy football or the racetrack, those earnings are, in fact, taxable.


3. Forgiven debt. You may be fortunate to have a creditor forgive your debt, but that goodwill also triggers a tax liability. From the point of view of the IRS (the only one that matters when it comes to taxes), you received income when that debt was forgiven. Therefore, that amount is taxable except under certain conditions, such as a bankruptcy ruling.


4. Social Security. Social Security benefits can be taxable depending on your level of income from other sources. If you want a smaller tax bill, you can elect to withhold taxes from your Social Security or make estimated payments on a quarterly basis.


5. Severance pay. After losing a job, you might be in for a little more bad news. If you receive a compensation package after separating from a job, your severance pay — just like the income you received from your employer — is taxable.


6. Freelance income. If you work a side hustle on Fiver or Upwork to help make ends meet, you’re responsible for taxes on that income just as you are for the money in your company paycheck. However, since most people have taxes withheld from their employee compensation, but not from freelance earnings, you may end up owing more than you expected on this type of income.


7. Profits on a sale. If you sell your rare Claude the Crab Beanie Baby for a profit, then you may be surprised to learn that you owe taxes on the profit you made — even if the sale was to a friend or family member.


8. Awards, prizes and contest winnings. Did you hit the Powerball jackpot or draw the winning ticket at the church raffle? You guessed it — those winnings are taxable in the eyes of the IRS.


Your individual circumstances may impact your tax liabilities, so always consult a qualified tax professional to see what qualifies as income in your case and what tax deductions you might be entitled to.

 

Sources:

https://www.investopedia.com/articles/personal-finance/031416/10-surprising-taxable-items.asp

https://turbotax.intuit.com/tax-tips/fun-facts/10-things-you-wont-believe-are-taxed/L3tQz7kej

https://www.irs.gov/pub/irs-pdf/p4128.pdf

https://www.irs.gov/newsroom/irs-unemployment-compensation-is-taxable-have-tax-withheld-now-and-avoid-a-tax-time-surprise

https://www.kiplinger.com/article/taxes/t055-c032-s014-selling-your-stuff-the-tax-dimension.html


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