Tag: John J Bowman Accountant (page 1 of 3)

The Benefits and Drawbacks of Certificates of Deposit For Investing

Certificates of deposit are a less exciting investment than the stock market or other investing methods that gain more attention, but they’re also a durable option that many investors appreciate. Like any investment, CDs have pros and cons worth considering before deciding what’s best for your financial needs.

The Benefits of Certificates of Deposit

They offer better returns than a savings account. Even with a high-yield savings account, you can often find certificates of deposit (CDs) with higher return rates for your money.

Your returns are predictable. One of the comforting advantages of a CD is that you will be locked into the term’s interest rate. When you invest in the CD, you will know exactly how much money you’ll be getting back at the end of the terms.

You have a lot of options. There are certificates of deposit available at financial institutions everywhere so that you can shop around for the best deal. This means looking at the highest interest rates for your return. It also means that you can find the timeline that works best for your needs.

It’s a safe option. Investing in the stock market comes with all kinds of risks. A certificate of deposit is done at a federally insured institution and is a predictable and safe way to invest your money.

The Drawbacks of a CD

Your money will be temporarily inaccessible. When investing with CDs, you are locking your money into the certificate of deposit until an agreed-upon date. While you could cash out in an emergency, this takes time and loses your returns. With a high-yield savings account, you can still have access to your money at any time.

Returns are low compared to other investment methods. The risk is also lower, but CDs are not the best option if you’re looking for significant returns.

There is a risk of inflation. If you put money into a five-year CD, it is possible that the low interest rate on your returns could be less than the inflation rate. Ideally, this won’t be true, but it happens.

Strategies For Building An Emergency Fund

One of the best things you can do to support your financial health is to create an emergency fund. This fund can be used in case of a medical emergency, a sudden visit to the veterinarian, a home repair, or other unexpected costs that could lead you to take out a small high-interest loan to cover the emergency.

Eventually, it can also be a way to cover your expenses if you lose your job.

These kinds of incidents, both large and small, put people into debt and their finances in a tangle for years.

By building an emergency fund, you develop a financial safety net for yourself.

Many people see the suggestion of saving for six months of expenses and feel that goal is far out of reach; they don’t even want to try. This is a big mistake. If you’re in that situation, first focus on building a small emergency fund of five hundred to fifteen hundred dollars. If this takes you a little time, it’s still worth having. Having a thousand dollars at your back can keep your finances well in hand on a tight budget.

How do people save a sizable emergency fund on any budget?

Open a High Yield Savings Account

Your emergency fund should be accessible, so you don’t want this invested in a 401k or stocks. Put this somewhere it can accrue the most interest and still be at the ready.

Use An App For Automatic Savings

There are many apps that can help you automate your savings in various ways, so it happens without you having to think about it. This makes building an emergency savings something you never have to consider again. 

Some people prefer to have a specific amount taken from every paycheck that comes in; others like to round up their purchases. Choose a path that works for your goals.

Prioritize Your Emergency Savings

Keep your emergency savings in that separate account. Never mix it with your vacation savings fund or anything else. You don’t want this money to go toward other things on a whim.

Save At Least Half of Your Tax Refund

Your emergency fund can get a big boost when you earn a bonus during the holiday season or receive your tax refund. Put away at least half of this money to help your savings grow.

How to Choose a Credit Card

There are hundreds of credit cards on the market today. Some of these are tied to regional banks, but the most popular come from some of the biggest banks in the United States. With so many options, it’s important to know which card will provide the most benefit before applying.

Check Your Credit

Before researching credit cards, it’s a good idea to get a credit report. A credit report will provide a record of any open accounts and usually includes a credit score. Banks will run a credit check before extending credit to consumers. Those with a low score will be limited in the types of cards they’ll be able to access.

Decide What The Card Will Be Used For

Will the card be used for everyday spending? Is it intended to transfer an outstanding balance on another card for an interest-free introductory period? Does a card pay out a hefty signup bonus? The reason a person needs a card should influence the final choice they make. If a person is looking for a card that provides cash back on everyday spending, a card without an annual fee that pays out at least 1.5% per dollar spent would likely be best. When getting a card for a cache of travel points, it’s a good idea to identify a card that has vendors that operate in the intended vacation destination.

Consider The Annual Fee

Many cards come with an annual fee. The high-end cards can come with a fee of $500 or more each year. It’s important to assess whether the card provides enough benefit to justify paying the fee. It might be a good idea to get a card and hold it for a year if the bank waives the fee for the first year. Those looking for cash-back cards can opt for a card that charges no annual fee. There are plenty available.

Getting a credit card is a big financial step to take. It provides credit, but it also requires a great deal of discipline to avoid going into debt. Credit cards come with high interest rates, but those who pay off their cards each month will avoid these charges. For those who have the discipline to avoid spending more than they can pay off, credit cards can provide some impressive rewards.

When is a Financial Risk Worth Taking?

Every single day, there are many risks that we must face. Each risk poses a reward, and usually, the higher the risk, the greater that reward. Financial risks are among the most common risks that we face in our day-to-day lives. Everyone can make a risky financial decision, even if that means losing a bit of value in your investment.

While financial risk may lead to bankruptcy, it is not worth taking it. While leaving savings in a bank account may seem overly cautious, there are times when losing that money can be devastating. When is it appropriate to pursue a monetary risk? Which risks pose the most significant rewards without sacrificing your financial security?

Starting Your Own Business

Some people don’t consider entrepreneurship to be the best venture, but in reality, it is the best opportunity to utilize the resources you have. Such resources include work experience, education, unique skills, and the desire and ability to be your own boss. In fact, successful entrepreneurship can lead to incredible gains—if you own a business, you may see higher earnings throughout your life! 

Going Back to School

Some opportunities, whether those be professional or financial, require finely-tuned skills. And, some of those skills can only be learned from field or industry experts. Going back to school will help you gain more knowledge, thus allowing you to acquire new skills and improve upon existing ones. Whether you want to finally earn your undergraduate degree, or have always dreamed of pursuing a Ph.D., going back to school can reap incredible rewards.

Professional certificates are an alternative to higher education. For instance, accountants can enroll for management skills and human resource training to expand their job opportunities and build upon their current skills.

Buying a House

Purchasing a home for your family is another great investment. It may not seem like an investment, but being a homeowner means investing in a neighborhood and the future of your spouse and children. In urban areas, monthly rent for apartments is the standard. However, if you move out to the suburbs, you’ll want to look into pursuing a mortgage. Once the mortgage is paid off, you can rent or sell the home. If you’ve kept up with the home through repairs and additions, you may be able to sell at an increased price!

Be persistent and think less about failure

While some of the above financial risks might bring short-term losses, be patient and have faith that temporary losses will lead to future returns. When you put more effort and focus on succeeding, success will follow. At the end of the day, persistence is what matters—not failure.

Debunking Common Myths about Personal Finance

It’s possible that the only obstacle to reaching your financial dream is your lack of financial knowledge. Having a job and paying taxes and rent doesn’t qualify you as financially literate. Like many of us in the United States, you’re bound to encounter repeated mistakes with money—many of which are based on false preconceived notions. It’s time to debunk some common financial myths.

That Finance is Corrupt

Start building your financial literacy by accepting the fact that money, itself, isn’t reserved for the corrupt. You need to stay true to yourself as you build your wealth, and if you find yourself in trouble due to money, a closer look will reveal that you got yourself into that trouble. At the same time, though, you can always get yourself out!

That Budgeting Alone is What Saves Money

You can’t save money just by organizing your fixed and variable costs. Your discipline, as you live according to your budget, means nothing if the influences of spending later deter you. One of the largest expenses that people fail to account for is the fact that sellers invest time and money into convincing you to casually give your money away. You won’t save money “if you keep falling into spending sprees.”

That Your Savings Equals Wealth

Money is what you earn, but wealth is only obtained from assets that create an income. Savings won’t make you wealthy, since cash is exposed to inflation, taxes, and spending. Building wealth is about positioning your money to duplicate itself without your direct effort. Your savings, though valuable and necessary, are only useful if used to acquire assets that generate more income for you.

That Retirement is the Goal

Another mistake that promising Americans make with their finances is in organizing them solely for retirement.

Retirement is paradoxical since wealth, which is money that doesn’t deplete, must come from multiple assets that produce an income. If you, at this very moment, hope to reach a point in life where you do nothing, then this mindset will reflect in and limit your personal finances. You should expect to retire, but shouldn’t sacrifice your potential for financial improvement. 

Tips for Starting a College Fund

For many industries, a decent college education is a requirement. However, college isn’t exactly easy; from picking a major and career path to writing detailed term papers and theses, plenty of challenges stand in a student’s way. One of the greatest obstacles is the cost. Similar to buying a house or car, investing in a college education is one of the biggest financial moves that anyone will make.

College may be rewarding in terms of education, but it can destroy someone financially. However, it doesn’t have to be that way. If you establish a college fund, you can get the ball rolling and enjoy less debt.

Here are a few tips to start a college fund.

Determine the Best Way to Save

Starting a college fund isn’t as simple as it may seem. Most people can’t just throw over $60,000 in a bank account and call it a day. They need to have a savings plan in place if they want to keep things simple.

There are multiple types of saving plans to choose from including:

  • 529 Plans
  • Uniform Gift to Minors Act (UGMA) Accounts
  • IRA Accounts
  • Coverdell Education Savings Accounts

It’s important to remember that not every savings plan is for everyone. For instance, one might have an easier time having a 529 plan than an IRA. Do your research before investing in any of these plans. 

Apply for a Scholarship

Because college can be so financially demanding, scholarships are the way to go. Scholarships are essentially how people can pay for college without going into debt. Furthermore, a scholarship can range from anything such as math and gymnastics.

For parents, it’s crucial to encourage a child to apply for a scholarship, so they don’t have to worry about the hardships that come with debt. With all the options out there, you’ll be hard-pressed to not find a scholarship that fits your interests.

Put in Time for Work

Getting a job is a surefire way to make money to put towards college. Aside from paying for tuition, a job also gives a person experience in a specific field that they can put on a resume later on. This is a great starting point for those looking to get hands-on experience for their dream job as well.

Being able to afford a college education isn’t always easy, but it is possible with a little advanced planning and strategic thinking.

How to Slash Your Grocery Bill

Most working-class people find it hard to control how much they spend on groceries. After paying critical bills like rent, electricity, and phone bills, what is left is allocated to grocery money and other minor expenses. This kind of lifestyle can quickly lead to poor health due to a poor, budget-focused diet, however. Maintaining a healthy diet while saving money is very possible when a few selective shopping practices are followed.

Shopping at Various Stores and Supermarkets

Some stores might not be grocery stores but have many of the same food items, sometimes at discounted prices. For example, individuals and families who frequently eat canned foods and snack foods should consider buying these food items at family discount stores like Dollar General or Family Dollar. Then they can buy their favorite meats, produce, and other foods they need and want at the more premium grocery stores. Shopping at alternative grocery stores balances out the food budget, but quality and nutrition standards are upheld.

Using All Forms of Coupons

Food coupons come in various forms, and these include newspaper cut-outs, magazine cut-outs, printable online coupons, and online coupons for digital shopping only. If more than one of these are utilized regularly, the savings will add up quickly. Taking the time to sign up for online coupon websites that offer real savings is worth it. While most people don’t read the Sunday paper anymore, they might be surprised to find regular savings on foods they routinely eat.

Learn to Cook

Fresh produce, dairy, and meats are some of the most nourishing foods. Interestingly enough, these are the foods found along the perimeter of most grocery stores. The much less healthy processed foods are found towards the center of the store. Processed foods are generally more expensive than whole foods, and the reasons include the high-priced additives and processes used to manufacture them.

If more people learned to cook their own burgers, fries, and other foods that are commonly processed, they would save money and their health in the process. Fruits and vegetables that are presliced or otherwise pre-prepared for customers are higher in price per-pound than the whole fruits or vegetables themselves. Watching a few online videos and learning some simple cooking skills can improve the standards of living for so many people living on a fixed budget.

How to Correct Tax Return Errors

No matter how many times you check or how accurate you believe your information to be, mistakes happen. When mistakes happen, it is not the end of the world, but mistakes on tax forms can become headaches.

You may use a tax professional, some form of tax software, or complete taxes the old fashioned way; however you do your taxes, you should check them thoroughly before filing. While there are ways to make corrections once you’ve submitted, most of them do entail waiting additional time for a refund and increased time and paperwork. Here are some of the ways to amend those mistakes as quickly as possible.

Let the IRS Fix It

Sometimes, calculations are off by just a few dollars. If you’ve made a small error that does not greatly impact your return, the IRS may fix it for you. If this is the case, the IRS will send a letter explaining the adjustments and offering advice on next steps, should there be any. This is the easiest solution and is actually commonplace for simple and easily-corrected mistakes. 

Send an Amended Return

If the IRS does not fix the mistake that you know you made, an amended return can be used for correcting the large majority of mistakes. Simply download and fill out a 1040x form from the IRS website. This is the best blanket solution on the list, as it covers errors great and small.

Have a Copy of the Initial Return Handy

If you are correcting a mistake, you must have a copy of the initial return that you filed. This return will be used to spot the mistake and any subsequent issue that would need to be changed.

Check Your Math While Making Corrections

When filing your taxes, one incorrect line on your return can affect the outcome of everything else. You cannot just go in and change the error that you made and move on. You must also go through the rest of the return and make necessary corrections based on the initial error. 

Avoid e-Filing Amended Returns

The ability to electronically file your taxes is one of the best things to come from the Internet age. Refunds come more quickly, and there is a lot less paperwork to be mailed. This, however, is not an option for an amended return, so have envelopes and stamps ready. It may help to gauge the estimated time period between your mailing of the return and the IRS’s receipt of it.

How To Plan For Student Loan Payments

Many students get out of college and realize that they need to pay off their loans. With colleges sticker prices on the rise each year, it’s easy to feel overwhelmed by student debt. However, if by applying these tips, students can plan for debt and pay off their loans as quickly as possible. 

Consider Refinancing Your Student Loans

Some people may not know where to start, especially if their student debt is going to be quite high. If you fall into that camp, you could look into refinancing your loans. Refinancing your loans means that you use another loan to pay off your student loans.

If you have a stable job and you can find loans with lower interest, then you may want to refinance. This way, you pay off the student loans and then don’t have to pay as much money over time when you work on the other loan.

Set Money Aside Each Paycheck For Your Loans

You should focus on budgeting your money so that you can set aside some of that income from each paycheck. This way, you can always pay off that set amount with each paycheck. Such a consistent system will go a long way in helping you pay off those loans.

Some people may worry that it would take too long to use this approach, but consistent payments do offer a tremendous benefit. Yes, it may take some time, but this method helps you calculate when you’ll have that debt paid off by. As your financial situation changes, you can accurately pivot and recalculate to get a clear picture of your debt payment schedule.

Prioritize Your Student Loan Payments

People tend to push their loans to the side, but you need to prioritize your loan payments. Sure, you can buy a new phone or gourmet coffee, but you should consider putting that extra money towards your loans. If you prioritize your payments, then you can put all your extra money towards your loans. This will help you to pay them off sooner and reduce interest.

Conclusion

While student loans are scary to think about, keep in mind that you can pay them off with careful planning. Look at how much money you make, set aside specific amounts and continue to prioritize your loans until you pay them off. This way, you can overcome your loans and start saving money for life’s next big adventure.

When Should You Consult an Accountant for Tax Help?

When people are making plans to file their taxes, they may discover that there is a need for an accountant to help them complete the forms. Those who are uncomfortable with filing should seek an accountant that can help them make sense of the tax rules and what they need to do to file before the deadline. Unusual circumstances, such as changes in marital status and career, may call for additional assistance. In such instances, accountants are a taxpayer’s best friend.

Amended Taxes

Inevitably each year, taxpayers file erroneous forms. There may be mistakes and letters from the IRS that indicate that there is income that has not been accounted for, an incredibly stressful situation for everyone involved. If you’ve dealt with erroneous forms in the past, or if you’ve received notice from the IRS that this year’s submissions contain errors, seek out an accountant to help you readjust and refile. 

Owing Taxes

Anyone who owes taxes can benefit from involving an accountant in the process. After all, taxpayers may take the standard deduction when they could owe less or no money at all, all because they’re unsure how to itemize deductions. It’s an involved process, one that requires an expert eye. For this reason, professional accountants are there to help; by pointing out any overlooked itemized deductions, accountants can provide a better understanding of the deduction process.

Change of Status

Plenty of things can change in a year, not the least of which is household status. A single person that files as head of household may be unaware of changes in deductions when they get married. If you’re unsure about the best way to file taxes when your marital status changes, consider working alongside an accountant. 

First Time Tax Preparation

Filing taxes for the first time can be a confusing process. With all of the paperwork and math required for each form, it’s common for people to struggle to wrap their heads around everything. This situation is precisely what accountants handle regularly. Accountants want to help everyone ensure that all guidelines are followed and numbers are accurate. To pay taxes by the deadline, new taxpayers should schedule early consultations with local accountants.