Money Management | John J. Bowman Jr

Tag: Money Management (page 2 of 5)

July 15, 2020

3 Key Money Moves to Make Before You Retire

Proper planning is necessary for a successful retirement, as many essential moves are made years before a retiree leaves the working world. Here are three of the most crucial money moves you should be making in preparation for your retirement to live out the rest of your life comfortably.

Eliminate as Many Debts as Possible

Once you retire, you’ll likely be living on a primarily fixed income provided by a blend of pension payments, social security, and investments. Interest on debt payments can rapidly eat into this income, so you must pay off as much debt as possible before you retire. This means paying off all of your credit card balances, car payments, and mortgage, if possible. By getting rid of interest payments, you’ll make the most of your retirement income each month.

Adjust Your Portfolio’s Risk Level

For young investors, riskier investment strategies are often beneficial in producing long-term growth. As you approach retirement, though, you’ll need to re-balance your portfolio to reduce your risks and ensure that you won’t be wiped out by changes in the market. Often, this is accomplished by increasing the ratio of bonds to stocks held in investment accounts. A common rule of thumb is that your portfolio should be split evenly between stocks and bonds when you expect to live another 15 years.

Use Your Last Few Working Years to Bulk Up Your Savings

The final 5-10 years of your working life are some of the most important for successful retirement planning. These years should be spent saving as much income as possible while reducing expenses in preparation for retirement. If you remain healthy and avoid major financial pitfalls, you should be able to substantially take advantage of your late-career years to increase your retirement savings.

By taking these three necessary steps, you can set yourself up for the best possible retirement. While retiring takes years of planning and preparation, these essential money moves will help you navigate the process more efficiently and give you financial peace of mind after you leave the workforce.

June 24, 2020

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.

June 13, 2020

Basic Budgeting Tips

Many Americans have trouble with their finances. For some, it’s due to a lack of income. For others, it’s difficult to figure out how to divvy up money each month. That’s why it’s so important to maintain a budget. Budgets give households permission to spend a specific amount of money during a given month. A budget is a good way to track spending, and many millionaires claim that this step was an important key to their financial success.

Start With A Zero Balance

A family should account for every dollar when setting up a budget. Having a zero-based budget simply means that every dollar is accounted for at the beginning of the month. It does not mean that every dollar gets spent. Some of the money should go toward savings, but it should not be left without a home in the savings portion of the budget.

Save Automatically

That money that gets saved should get automatically deducted at the beginning of the month. Ideally, this will be the result of an automatic draw from a direct deposit. By saving automatically, there will be less of a temptation to spend the money on frivolities. Any cash that gets saved should be put toward an emergency fund, a long-term savings goal like a mortgage down payment or investments.

Prioritize Debt Repayment

Any money that’s left over after accounting for all necessary expenses should go toward paying off debt. One of the biggest drains on the average family’s finances is interest expense. By cutting out interest expenses and debt payments, many people who have financial stress could breathe much easier. Making more money and cutting expenses are the best way to accelerate debt repayment. Fewer payments going to debtors leaves more money for more enjoyable purposes.

Allow for Miscellaneous Spending

Setting aside some petty cash for small and unexpected expenses is a good way to avoid going into debt or dipping into an emergency fund. Few months are alike when it comes to expenses, so having a little cash on hand to deal with unusual expenses is a great step to take.

Budgeting is an important key to financial success. Rather than constraining a family, a budget can actually be a very freeing process. A budget allows for an easy assessment of where a family’s money is going. By gaining an understanding of where a household’s income is going, it’s possible to make adjustments to provide for more efficient use of that money.

May 21, 2020

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.

April 20, 2020

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.

April 14, 2020

Money Moves for Retirement

Retirement planning is one of the biggest financial concerns for many Americans. There are many considerations to make when it comes to savings—retirees should be aware of what income sources they will be relying on in their golden years. It’s also important to be aware of how long investors have before they will need to access those savings. Finally, it’s important to think about how long people expect to live in retirement, and what they estimate their expenses will be. These are the considerations that must be made to accommodate the aforementioned concerns.

Retirement Income Sources

There are many sources of income that retirees can utilize. Social security is a program that most people will qualify for, but it typically is not enough to get by. Some workers may also have a pension to count on, although that’s becoming increasingly rare. Thankfully, savings accounts are one area over which individuals have personal control. Annuities are also an option for savers. Many retirees also look to their property holdings, including real estate and collectibles, as key sources for income in their old age.

Compound Interest

One of the most basic but most important lessons about retirement that everyone should know has to do with the power of compound interest. Compound interest is the accrual of money on interest over time. Saving a little bit while young can help workers build up a healthy amount of savings to fall back on during retirement. Additionally, tax-advantaged retirement accounts like 401(k)s and IRAs allow future retirees to put money aside and reap important tax benefits. However, even a standard savings account can be a good way to start saving. The older an investor gets, the more important it becomes to have money set aside in an account that won’t be touched. It’s also a good idea to look into catch-up deposits in tax-advantaged accounts. Sometimes, investors over 50 are able to exceed the maximum contributions allowed to the rest of the public.

Tax Considerations

Tax considerations should be a key guideline when choosing investments. In some cases, the gains made from selling a home are untaxed. Some investments are subject to capital gains taxes, even in retirement. Even tax-advantaged accounts like IRAs and 401(k)s can be subject to management fees. It’s a good idea to seek professional advice when it comes to specific investment decisions. Reach out to a local financial advisor with any financial concerns!

March 1, 2020

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.

February 15, 2020

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.

February 1, 2020

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.

John J Bowman Jr Accountant - Pittsburgh PA - Personal Finance Software

January 20, 2020

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.

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