Tag: finance blog (page 1 of 2)

Four Easy Ways to Budget This Month

For some, creating and sticking to a budget is a simple task. For others, it’s a strenuous and seemingly impossible task. The temptation to eat out, splurge on clothes, and throw caution and cash to the wind can be huge, so it’s essential to find ways to stay on track. Here are four ways to create a budget that works and stick to it.

Meal Prep

In addition to various forms of outside entertainment, eating out is a considerable expense. Since most restaurants mark food up—sometimes as much as 300 percent—the only sure-fire way to save money on food is to cook meals at home. However, this is a lot more time-consuming and can be difficult for those without much cooking experience.

Take the time to plan meals, including the cost of ingredients, for at least a week’s worth of meals. Also, include the costs of snacks as well. One way to save on food is to buy in bulk. Look for items that can be purchased in larger quantities and divide up for later.

Set Up Autopay

Another way to stick to a budget is by setting up autopay. Instead of having to pay bills and charges every month manually, autopay lets budget-setters know what they pay and when. The same concept can also help track savings. Just have a set amount of money transferred each month into a savings account.

When it comes to paying utilities, look into budget billing. Customers pay a set amount for power and water. After a set time frame, they’re either refunded the difference or charged for any overages.

Entertain at Home

Simply put, going out is expensive. Everything from grabbing drinks to seeing a movie is expensive these days. Instead of breaking the budget, invite friends over and find ways to create a social atmosphere at home. Cocktails made at home cost half the price when ordered out. The same holds true for take-out. If your group wants pizza and a movie, rent a flick and make homemade pizza.

Track Success

Tracking success is a great motivator, so make sure you keep track of how much money you’ve saved over the month. After seeing positive results, you may feel even more motivated to stick to their budgets.

With a little planning, creating and sticking to a budget is easy. Since everyone has different needs, never compare budget planning. Finally, make sure that the budget isn’t so rigid that it’s impossible to follow. Just be sure to leave some wiggle room for the occasional splurge.

Where to Get a Loan Besides the Bank

When it comes to expenses, money can be a point of contention. With the cost of living and the need for appliances and machines on the rise, it’s not always easy for people to come out of expenditures with money in their pockets. For this reason, people often resort to loans to help keep themselves and their families afloat. While many people go straight to their local bank to take out a loan, there are other options that are not considered or even well-known. These are some of those lesser-known places to acquire loans.

A Credit Union

Acquiring a loan from a credit union is sometimes considered a better alternative to getting one from a bank. Credit unions can offer recipients lower fees and interest rates than a bank, which makes paying back the loan a lot easier on the wallet. However, there is a slight drawback to using a credit union. In order to qualify for a loan, people must be a member and meet their requirements. If you’re a member of a credit union such as Members 1st or PSECU, give customer service a call to learn more about how to qualify and what loans are offered.

A Payday Lender

A payday loan is a type of short-term loan amounting to, at most, $500. Often, these loans are taken out to cover unexpected expenses and late bills. Applying for one of these loans is simple; all you have to do is apply online or at a payday loan facility. 

While these loans are helpful in the short-term, there are a few drawbacks. To start, these loans must be paid back as soon as the recipient gets their next paycheck. Secondly, payday loans can be very expensive in terms of fees and interest. If the loan is not paid by the due date, the lender might extend it, but at the cost of tacking on additional fees. Think carefully about whether or not your situation calls for a payday loan.

A Pawnshop

There is one massive difference that pawnshop loans have over others; the shop won’t check credit scores or require an application. A pawnshop loan works like this; you take an item such as jewelry or an electronic to a pawn shop. Should the pawnbroker be interested in the item, they’ll offer a loan.

How much the recipient will receive varies on the overall value of what’s being pawned. Pawnshop loans are a great way to get money quickly, but this speed comes at the cost of substantially high interest rates. Extra fees may also be included, depending on the pawnshop.

Loans may be a surefire way of obtaining money, but they are a huge responsibility. It’s important that people consider all the factors of taking out and paying off a loan before making the investment. 

The Best Personal Finance Software

In the world of personal finance, there are some software programs that stand out from the rest. These programs make it much easier to manage budget and track spending within your household. If you’re looking for software to manage your personal finance, these are the programs you should check out.

Quick Books

If there is one program that has continued to stand out over the years when it comes to personal finance, it is QuickBooks. This software has become the cornerstone of personal financing for people who want to keep up with their household spending. The program allows people to set budgets and get running totals for their spending during the month. Users can see how much they deviate from the budget each month, and plan accordingly to save more in the next month. QuickBooks even offers the ability to compare previous years and see if a user’s spending has increased or decreased. With quick references and an easy budgeting interface, this is a great program for users who don’t want tons of fancy features.

Microsoft Money

Another program that stands out amongst personal finance software is Microsoft Money. This is a program that tends to work well for those that have already utilized Microsoft Excel spreadsheets over the years. Users have the ability to create formulas, track their spending, and create easy-to-manage documents.

The ability to add different categories of expenses becomes much easier with a program like Microsoft Money. It has a user-friendly interface that makes it easy for people that are not computer savvy to create documents of their personal finances. This program tends to be one of the favorites for people that like to create documents that can be saved in different formats. These documents can be exported to Excel spreadsheet or saved as PDF files, offering plenty of versatility depending on a user’s needs.

Mint

In the growing age of portable personal finance software, Mint is the finance tool that has gained a lot of attention with the younger crowd. Mint has offered the millennial generation a viable personal finance program that gives them access to an online platform that is not limited to their personal computers.

Mint users have the ability to add their credit and debit cards to track purchases without manually typing in everything that they buy. The Mint app for smartphones allows users to access their financial budgets whenever and wherever they want. 

4 Things You Should Know About The R&D Tax Credit

The Research and Development Tax Credit benefits almost any business, no matter the size, age, or industry. Since 1981, this incentive has offered reimbursement for innovative and highly-technical businesses. Here are four things you should know about the R&D Tax Credit.

It is available for many industries

From aerospace organizations to wineries and vineyards, several industries can reap the benefits of an R&D Tax Credit. Organizations within these industries must pass a four-part test to affirm that their research activities qualify for an R&D Tax Credit. The four parts of the test are:

  1. Technological in Nature – “Activities must fundamentally rely on the principles of physical or biological science, engineering, or computer science.”
  2. Permitted Purpose – “Activities must be performed in an attempt to improve performance, reliability, or quality of a new or existing business component.”
  3. Eliminate Uncertainty – “Activities intended to discover information that could eliminate technical uncertainty concerning the development or improvement of a product.”
  4. Experimentation – “All of the activities must include a process of experimentation including testing, modeling, simulating, systematic trial and error.”

It covers a variety of expenses

With all of the activity that goes on in a given business, it can be difficult to track your direct and indirect R&D expenses. However, taking note of those expenses is essential for receiving the appropriate tax benefits. As a rule, the major expenses that qualify are salaries and supplies and materials. For salaries, employees who work in R&D or directly manage those in R&D are covered. Supplies and materials covers anything from nails to computers.

It offers unique benefits to smaller companies

If your small company has gross receipts for five years or less that average less than $5 million, your company may be eligible for an R&D Tax Credit. This is the case even if your company does not owe any taxes, and the covered amount can reach up to $250,000 of a payroll offset. If your small business does not have credit for offsetting payroll taxes in a given quarter, you can carry that credit into a different quarter. However, to do this, you must not exceed the $250,000 limit.

It undergoes regular updates

The R&D Tax Credit does not behave exactly as it did over a quarter of a century ago. As industries and economies evolve, the R&D Tax Credit does, too. In particular, the removal of the Discovery Rule in 2003 redefined research activities as those that would be “new to the taxpayer” rather than “new to the world.” More recently, the Protecting American from Tax Hikes (PATH) Act ensured that small, mid-size, and startup businesses could benefit from R&D Tax Credits.

John J. Bowman, Jr. is an accountant and tax professional based out of Pittsburgh, Pennsylvania. Follow him on Twitter for more blog updates!

Finance Tips for the Holiday Season

The holiday season can get pretty expensive. Starting with candy and costumes for family and neighbors in October, followed by a feast of food in November and all of the gifts, gatherings, and extras around the winter holiday season, bills can really add up. Unfortunately, your wallet may not be able to keep up with the hustle and bustle of the holiday season. There are several ways to help you save money while still allowing you to delight in the magic and wonder of the holidays.

Set a budget

It’s easy to spend money when you don’t try to set a cap on how much you’re allowed to spend. Without a budget, you’ll be more likely to overspend. Sit down and work numbers before even setting foot in a store so you know exactly how much you have to spend. On average, people spend around $704 during the holiday season, but that is all dependent on an individual’s personal financial situation.

Do your research

Everyone is going to be advertising that they have the best deal on a specific product during the holiday season. It’s up to you to do your homework and see who’s actually telling the truth. You can comparison shop right from the comfort of your own home by looking up prices online. That way, you’ll know you’re getting the best deal.

Break out your DIY skills

Giving a homemade gift is the perfect way to save money while also expressing how much you care about the recipient. Anyone can go out and buy something from the store, but a homemade gift takes planning, time to make, and a lot of thought. It can also save you a lot of money by making the gift yourself.

Enlist the help of others

If you decide you want to host a holiday gathering, don’t feel like you have to do it all on your own. Most guests expect to bring something to a party—whether it be a dish to pass, a bottle of wine, or even paper products. You’ll be able to throw a great party on a budget that all of your guests will enjoy.

Talk to a financial advisor

If you’re really struggling to keep up with expenses and expectations at the end of the year, it might behoove you to sit down and talk to a financial advisor. Whether you’re dealing with personal finance concerns or family investment issues, a financial advisor can examine all of those complex moving parts and help you develop a plan for keeping the spirit alive during the holidays.

Tips for Financial Independence and Early Retirement

What do you consider to be “retirement age”? Perhaps early 60s or late 50s. What about 30s and 40s? The FIRE movement, which stands for “financial independence, retire early,” has gained traction with individuals as young as their 20s. The idea of working 9-to-5 jobs for several decades is an intimidating one, and FIRE offers the chance to work hard and, earlier than expected, play hard. However, FIRE is not an easy process, and it takes plenty of planning to truly retire early. Here are some considerations to take into account if you plan on retiring early.

Do Your Research

Monthly earnings from social security and pensions, costs of present and future healthcare concerns, and similar factors must be considered before an individual takes any steps towards early retirement. There are several complications, ones that often work against each other, to sort out during the planning phase of FIRE, but these factors help paint a picture of your financial future. Make sure you understand what FIRE really is, and what it means for you and your situation. In some cases, research may prove that early retirement isn’t the best option; rather, switching to part-time work or taking a temporary hiatus from work is better. 

Speak With a Financial Advisor

Financial advisors often assist individuals experiencing drastic life changes, such as making a family or retiring. When it comes to the latter, financial advisors will examine whether a client’s current financial system sets a strong foundation for retirement. Additionally, financial advisors look to the future to predict potential issues. Taking all of this into consideration, clients and advisors can develop a plan to work towards that independence. While hiring a financial advisor does come at a cost, the benefits of receiving an expert’s advice and planning assistance can be a lucrative investment. 

Don’t Rush the Process

A simple Google search can unearth a plethora of FIRE horror stories. A common trend in these tales involves early retirees jumping the gun and retiring before they’ve hit their financial goals. For some, this means retiring several years sooner than planned. While earlier-than-early retirement is enticing, it’s unwise to throw your financial goals out the window. Doing so means deviating from your financial plans, which in turn leads to increased risks of your independence returning to dependence. Remain patient and diligent as you work towards retirement, and avoid making rash decisions to save time—that won’t always equate to saving money.

Understand Your Drive

Why do you want to retire early? Is it to avoid unhealthy amounts of stress? Are you trying to spend more time with your family? Has a hobby become your life-long passion? A thorough understanding of the “why” behind your desire to retire early will help you figure out how to reach your financial goals. Anyone can say they want to have more free time. But what are you going to do with that free time? Take some time to introspect and figure out what drives you towards early retirement. 

Why You’re Overspending (And How to Stop)

Compare your monthly income with your monthly spending. Do you notice a glaring discrepancy? Are your earnings in the red? Can’t figure out how you spent hundreds on groceries? You aren’t alone. Overspending is easy to do, and purchases can accumulate in the blink of an eye. Here are some reasons why you’re overspending and advice on how to stop.

You’ve fallen into a bad habit

Do you buy lunch at the deli down the street every day? This is just one example of a bad spending habit. It may be comfortable and convenient to make a daily or weekly purchase, but ten dollars per day, five days a week, four weeks a month equals $200 each month just for lunch. 

The best way to remedy a bad spending habit is to ease yourself out of the habit. For the lunch example, try packing a meal most days each week, and only go out once a week or so as a special treat. You don’t have to quit anything cold-turkey, and easing yourself towards a better spending habit might inspire you to be more mindful of what you buy.

You ignore automatic payments

This one is easy to notice, especially if you subscribe to magazines and newspapers that clog your mailbox. Still, with the rise of streaming services and other digital subscriptions, you may not be keeping track of all the services you subscribe to. It’s easy to let automatic monthly payments slip through the cracks, but those payments are also an easy way to lose money.

Each month, carefully study your credit card statement. Write down the names of subscriptions you used during the month, whether that means watching a movie on Netflix or flipping through a copy of Sports Illustrated. Next to that list, write down the subscriptions you didn’t use. Unsubscribe from the ones that you didn’t touch. You’d be surprised how much money you can save annually just by paring down your subscriptions.

You haven’t disciplined your spending habits

It’s hard to find someone who hasn’t disciplined their spending habits. Whether you fall victim to impulse buys at the checkout line or fill your gas tank before it hits the halfway mark, everyone has a spending vice. 

No two people have the same income, interests, and habits, which can make disciplining your spending habits difficult. The key is to figure out what you’re buying and why you’re buying it. It helps to break purchases up into categories, such as “loans,” “food,” and “entertainment.” Not only will this show how much you’re spending, but it will also reveal what exactly you’re spending your money on.

What Your FICO Score Means

What your FICO score means

Just as the understanding of the value of a dollar comes with time, the importance of your credit score often evades us until we are deciding to buy a car or purchase a home. The gravity that a credit score holds is substantial. These scores influence the credit available to you and the terms that go along with it, such as interest rates. When looking to purchase a car or home, lenders rely on the consumer’s credit scores for an understanding of the risk they take on by loaning money.

While there are different credit scores, the most widely used and accepted is the FICO score created by Fair Isaac Corporation. Using the information provided by one of three major credit reporting agencies (Equifax, Experian, and Transunion) FICO creates a credit score ranging from 300 to 850, with the higher number representing lower risks for lenders and insurers.

How exactly do they determine a consumers credit score? FICO analyzes five main factors, which each have a different impact on the score:

  • Payment History (35% of the FICO score)
  • Debt/amounts owed (30%)
  • Age of credit history (15%)
  • New credit/inquiries (10%)
  • A mix of accounts/types of credit (10%)

While the exact number of your credit score can be distracting, it is more beneficial to focus on the areas that require work, rather than feeling overwhelmed by your rank on the credit range. Let’s take a more in-depth look at the five main factors considered by FICO when determining consumer credit scores:

Payment History

This is simply how well does a consumer do with paying their bills on time. Credit reports show when consumer payments are submitted for lines of credit, and it specifies how long payments took to come in: 30, 60, 90, 120 or more days late. Since payment history is the most significant component of a credit score, it is essential to get all credit line payments in as soon as possible.

Accounts Owed

This refers to the amount of money a consumer owes in whole. Having a lot of debt doesn’t necessarily have a significant impact on your credit. Instead, FICO looks at the ratio of money owed to the amount of credit available. Put simply, do not max out your lines of credit.

Length of Credit History

The longer a consumer has had credit, the better this element of their score will be. FICO looks at how long the oldest account has been open, the age of the newest account and the overall average.

New Credit

This refers to recently opened lines of credit. If a consumer opens a bunch of new accounts in a short period, this signals FICO that there is a higher risk, which lowers the consumer’s credit score.

Mix of Accounts
Just like stockbrokers want to diversify their portfolios, consumers want to expand their credit portfolio. With a healthy mix of retail accounts, credit cards, installment loans, such as a car loan, and mortgages, a consumer has ensured a higher FICO score.

4 Ways to Wisely Use Your Tax Refund

4 Ways to Wisely Use Your Tax Refund (1)

Now that tax season is fully underway, you may be thinking about what you want to do with your tax return when it comes in.  For some, it might go right into a savings account.  For others, it might be an opportunity to splurge on different items you’ve had your eye on.  A healthy balance between the two, is looking into some wiser ways you can utilize your refund.  If you’re waiting on your refund to come in, consider some of these great options to put it towards:

Contribute to Your Emergency Fund

You may have one already, and if you don’t, it might be a good time to consider starting one.  An emergency fund is a great tool to have in case you encounter an unfortunate major expense that you wouldn’t regularly have the funding for.  You can contribute to your emergency fund on a regular basis depending on your pay schedule. However, when your tax refund comes in, depending on the amount, you may be able to make a large contribution, and give yourself a better financial cushion in the event of an unexpected expense.

Invest in a Down Payment

You may be in the process of looking for a new home, or even a car.  Both of these purchases are likely to require some sort of down payment, especially if you want your monthly payments reduced as much as possible.  Your tax return is a great way to contribute to a downpayment and significantly lower what your monthly costs or the length of your finance or mortgage term will be.  If you’re buying a home, for example, this lump sum of money will be a great contribution to your down payment or even your closing costs.

Pay Down High-Interest Debt or a Mortgage Payment

Any debt you’ve been carrying for a while is likely racking up interest, and depending on the company or what type of loan it is, the interest rate could be extremely high.  Your tax return would be a great way to pay down some high-interest debt and bring you closer to having it paid off completely. Additionally, you can also consider contributing to your mortgage payment if you’re a homeowner.  However, you should always make sure that your mortgage company isn’t going to charge you a penalty for early or pre-payment.  If you’re certain you won’t get a penalty charge, consider using your tax return to make some additional mortgage payments.

Make a Home Investment

If you’ve been wanting to make some interior or exterior home updates, refund time is a great time to do it.  This extra money may help you make improvements or updates that you might not have been financially ready for before.  In the long run, this will ultimately improve the value of your home while turning it into exactly what you envisioned.

Common Financial Mistakes Many People Make

Common Financial Mistakes Many People Make

Rarely, does someone have a perfect financial history.  Mistakes in finance are common and it’s likely that most people have experienced them at one point or another.  The important thing is to figure out how to correct them, as they can tend to pile up and create somewhat of financial hardship.  However, don’t panic; with the right tools, you can easily change your financial habits. The following tips are a great guide and provide insight into the many financial mistakes people tend to make.

Too Many Monthly Payments

You may not realize it, but your monthly payments tend to add up, quickly.  Many people are seeking the “better” things in life, so they’re willing to tack on monthly finance payments to acquire the things they desire.  And while the monthly payments may not seem like a big hit at the time, the more you have, the more they tend to add up. Additionally, it’s not uncommon for people to have monthly payments that are more on the unnecessary side.  Consider the gym, for example. While for some, a gym membership is a great investment, for others, it may just be a monthly bill that isn’t regularly utilized.  Consider where your bills each month are going, and see which ones are actually necessary.

High Credit Balances

While credit cards may seem like a great way to get what you need, without having to see your bank account take an immediate hit, they can do more harm than good if they aren’t used properly.  Think of a credit card as borrowed money; money that needs to be paid back, and should be paid back in full to avoid any further charges like interest and late fees. The days of cash only are gone for many people, as credit cards are a regular part of today’s society.  Utilize your credit cards to purchases that you know you’ll be able to pay in full and avoid using them for everyday purchases that will increase your balance quickly.

Failing to Set a Monthly Budget

Budgeting your expenses on a monthly basis is a great financial habit to have; however, many people neglect to do this.  Without a budget, you’re freely spending your money without keeping track of where it’s going. By the end of the month, you’re left wondering where your paychecks have gone and why you aren’t able to contribute anything to your savings account.  

Falling Behind on Bills and Payments

Making late payments is an unfortunate, but common habit for many individuals.  Late payments can hurt your financial health in that you will likely get hit with late charges and increased interest payments.  Additionally, late payments can affect your overall credit score and lower it by a few points. Once this cycle starts, it can be hard to correct and break.