April 2nd is National Employee Benefits Day. It may be a Director or VP who decides on the employee benefits for your organization, but it is your benefits department that puts in the hard work. Whether the benefit is the Employee Assistance Program (EAP), the Health Savings Account (HSA), the 401(k) retirement plan or a financial education program; it is the benefits professionals that select the vendors, maintain the programs and keep the well oiled machine running to ensure their colleagues’ (you) well-being.
They have slogged through the choices, met deadlines, and collaborate with communications to ensure that their employees are informed and have many options available to them. Those could be health care, professional development or your employer sponsored retirement plan. Every day they meet the challenges of management and employees and ask themselves “how can I improve things?”
On April 2, National Employee Benefits Day, celebrate these hard-working professionals by lifting your coffee cup, saying thank you and utilizing those amazing benefits so you can thrive.
It is easy to forget who you have named as beneficiaries on various accounts. Your beneficiaries are the people or charity that receives your money after you die. Your retirement plans and your insurance policies have forms or online ways of checking and updating beneficiaries. A beneficiary can also be named on a bank account, called a POD or pay on death. A non-retirement investment account can also have a beneficiary, called a TOD or transfer on death. Of course, if you hold the account jointly, it is automatically inherited by the joint account holder or if it is owned by a trust, the trust documents suffice.
A little known fact is that you can go to the DMV (Department of Motor Vehicles) and fill out a beneficiary form, so these assets are transferred to a new owner.
These ways of transferring an estate (what you own at death) do not go through the court probate process. In addition, these contracts (TOD, POD, account beneficiaries) and titling assets supersede those named in a will or trust. The contract or titling of the asset comes first. Don’t short change your loved ones because you forgot to change the insurance beneficiary to your second spouse so your ex-spouse inherits (true story). All benefits departments at corporations have similar stories.
To identify or change beneficiaries you will need the name, date of birth, social security number and sometimes their address. If naming a charity, their name and tax identification number is all that is needed. It only takes a few minutes to do this, so go do it now.
Often we tell ourselves that we need to budget, we try to cut down on our spending and do not succeed.
It is easy to fall off the budgeting wagon (as it were) if you don’t know why you should have a budget and see no reason to do so. Have a reason. Have a financial goal you want to reach. Whether it is pay off student loans at an accelerated pace, fully fund an emergency reserve, save for a vacation or send a child to college; having a financial goal you are emotionally attached to reaching gives you a reason to set and maintain a budget.
After deciding on your goals and the amount of money you will need each pay check to reach the most important goals, taking the next step is the hardest. It is not setting the budget, but being realistic about where you spend your money now. Tracking your expenses is one of the most useful things you can do. It will help you to understand where the money is trickling out and will give you power to decide where to spend your money when you set up your budget.
How to track? So many ways. You can use pen and paper, a spreadsheet, an app (of which there are many many many) or have your credit card track for you. The key is to track without judgement for three months and look at the results on a monthly basis so you get an understanding of the costs of those lunches, the gym membership, the groceries, vehicle costs and everything in between.
Now you are ready to set up your budget. Remember a budget is just a spending plan with you in control. You can set up a budget using a spreadsheet, an app, or cash in envelopes. Having tracked your expenses, you can now be realistic about finding the money to fund those financial goals, while still spending money on things and experiences that are important to you.
If you buy coffee from the local coffee shop and then walk on the beach in the morning, perhaps the experience you want is the beach walk while drinking coffee, not the waiting in line for mediocre coffee. Buy a steel mug, make coffee at home and reach your financial goal of saving enough for a plane ticket to Hawaii.
Doing the three step process of forming your financial goals, tracking your expenses and then setting up a budget will help you to stay on the wagon, reach those goals and maybe even have a morning walk on the beach while drinking an excellent cup of coffee in Hawaii!
Now is the time that most adult Americans are filling out forms, mostly online, or have appointments with their tax preparers (who do the filling out of forms) to file taxes for 2018. They are due on April 15th. The tax system for individuals runs a calendar year – January to December.
There is very little you can do about last years income and expenses but there are still a few strategies that can help you for 2018, but they are not available for everyone.
First is to fully fund your Health Savings Account (HSA) if you have one. If you had a High Deductible Health Plan for 2018, you were able to fund an HSA up to $3,450 if single or $6,900 if a family. Most people fund through payroll deductions. If you did not fully fund it, there is still time, until you file your taxes, to fund it to the maximum amount and have that contribution be tax deductible.
The second is to fully fund a Traditional Deductible Individual Retirement Account (IRA). This is funded from earned income. If you have no earned income, but your spouse does, you can use marital income to fund this. The maximum contribution for 2018 is $5,000 with an additional $1,000 catch-up for those 50 and older. But wait, the IRS has income limitations. Depending on your filing status, and your Adjusted Gross Income (AGI), the IRS may deem that you make too much money. Don’t despair, you may still be able to fund a ROTH IRA for 2018 although it is not tax deductible.
Your tax software (or that of your tax preparer) will let you know if you have contributed the maximum to your HSA. It will also tell you how much, if any, you can put into a Traditional IRA or a Roth IRA for 2018.
If you overfunded any of these accounts in 2018, it is easy enough to move the contribution to 2019 or withdrawal the funds. Just let the custodial company where the account is held know the dollar amount it was overfunded. You may have to fill out paperwork but you will not be the first person to do so as this is a frequent occurrence.
By knowing what your taxes for 2018 look like, it can give you a jump on tax strategies for 2019!
Studies have shown women are better long term investors than men. Women tend to be “buy and hold” investors and are less likely to make changes to their investments. They are less emotionally attached to their investments and do not make rash sell decisions when the stock market fluctuates. Women also are much more likely to manage household finances and budgets. This is all good news!
However, women are more likely to be the family care givers, whether children or parents. This means more time off work, not working outside of the family or taking a job with family flexibility. Many companies do not provide adequate mentoring, promotions or clear career ladders for women. Income inequality still exists.
All of that adds up to less income over the working years. What does this mean? Less savings in retirement plans, less pensions, less social security payments. Add longevity to that and you can see that there are large financial differences between the genders.
Many women have grown to believe that investing is a man’s domain. Whether that is the media not showing women in those roles or societal messaging that has been internalized or gender bias. It does not have to be that way.
While it takes time for society to change, to wake up to the resources it is losing by down playing women’s talent and abilities; YOU can change faster. Education is gender neutral. Knowledge does not care – it is just knowledge. Investments do not care. Let’s make everyone informed financial consumers, one class at a time. Whether that class is negotiating a salary, saving for financial goals, or analyzing mutual funds. Learn, grow and change- be a financial powerhouse!
Having a giving plan for charity and friends/family will help you to say “yes” and to say “no.” It is easy to break this down into a few manageable steps.
First, how much will you be giving to friends and family? This could be cash or cash-like items such as grocery gift cards or paying a utility bill for a relative. Next, how much are you willing to give to charity this year besides family and friends? It can be either a dollar amount or a percentage of your income. For some folks it is cash, while for others it could be appreciated assets like stock.
Next, think about where you would like your charitable dollars to go this year, whether or not it is personal or non-profit organizations. Know what purpose you want those dollars to go towards. It can be education, environment, political, social justice, health care, children, arts, or any other focus that is near and dear to your heart. Knowing what is important to you will allow you to say “yes” more often and with purpose. It will also allow you to say “no” to requests for money that are either not in your budget nor in your heart.
To avoid being inundated with solicitations from like charities requesting money, consider giving anonymously using a donor advised fund (DAF), bundling the charitable deduction in one year while granting out over a number of years.
Often we work with others who ask us to support their charities or raise money for their children’s school projects. It is diplomatic to say yes and to give a little, even if it is not in our giving plan. Perhaps you too can have a charity you are raising money for by participating in a bike ride or half marathon or even something less physical like Movember. Give and don’t be shy about promoting your charitable interests.
It all starts with a plan and may you have a great year of saying “yes” to supporting charitable goals that touch you. For more tips, information and education visit financialknowledge.com.
We never stop learning. There are always the (unwanted) life lessons and there are the things we learn for our job. And then there is continuing education, whether it is for our career, things we ‘ought’ to know or just because we are interested in the subject.
Financial Knowledge offers conflict-free, comprehensive financial education. That is what we do. One of the most common comments after a class is “I wish I had learned this in school.” We take subjects that often people think they should know, but never learned like Analyzing Mutual Funds, Investing Basics or Smart Strategies for Your 401(k) Plan and break it down into easy to understand concepts and illustrations. We avoid financial jargon and welcome your questions. We are not going to tell you if you are doing the wrong thing, or the right thing, just the facts. We want you to be an informed financial consumer to make your own decisions.
All we do is financial education. We work with benefit managers to bring employees classes that they want, need and will find useful. Financial Knowledge is not going to sell employees anything – we have no mutual funds, no insurance products, no advisory services – just the knowledge. All our classes, and we have over 50, are IACET certified for continuing education credits.
Financial Knowledge is what we do and who we are. Let us help you to continue your education and learning . Visit us at financialknowledge.com for more tips, advice and education.
A few of our classes include reaching financial goals, budgeting or saving. These classes all touch on having an emergency reserve. Recently in the news, it has been reported that 78% of households in the US live paycheck to paycheck. This means no retirement investments, no savings accounts and no emergency reserve.
An emergency fund is just that – a rainy day account for when the income is insufficient for your needs while you are working. It could be for unexpectedly buying new tires, to get your child medical treatment, to cover your expenses while been on a work furlough; any number of things. It is also so you do not have to use credit and be in the difficult position of having to pay high interest on a credit card in the future. Think of it as an insurance policy.
It will take a number of steps and some time to build up your reserve. First, know approximately your monthly essential expenses. Examples would be housing, food, insurance, utilities and transportation. This is only necessities. Next, have a bank account or a place to stash three to six months worth of money for these necessities. You want to have it in a safe place. The money should be there for you to access immediately when you need it.
Now comes the hard part – filling the account with the requisite amount of money. It may take you a year or more to save this amount. It can be a slow process but watching it grow is very satisfying. Think of it as a bucket of water that you are filling drip by drip. When the bucket (account) is full, you no longer need to add to it. If you pull out some water (money), you should refill it so that it is full for when you next need it.
Why so much or why such a big bucket? We suggest three months worth of essential expenses if you are in a dual income household, six months in a single household. It is a lot of money, but past economic cycles have shown us that it can take a while to get another job and there is no guarantee that a new job will pay as well as your last position.
Saving has no magic wand. It is a slow process that requires patience but it will “pay off!”
Most people know approximately how much they spend a month. Some months may be a little more while December is generally a lot more for most people. But very few people know exactly how much they spend and hardly anyone likes to track their expenses, except a few of us here at Financial Knowledge 🙂
Knowing how much you spend will allow you to save towards those financial goals that are more important to you than an extra cup of coffee on Friday (for example). It is not just how much you spend but where you spend it. Tracking for three months will give you an excellent snapshot of your spending habits and some ideas of where you can trim or spend/save differently.
There are a number of different ways to track. First is the oldy but goody – pen and paper. Writing down everything will make it more real and may, in the future, have you pause before making an unnecessary purchase. There are software programs like spreadsheets that are also very helpful. You will have to create spending categories and spend some time up front.
Many people use an app to track their expenses and there are a lot out there. Choose one that has enough ease of use that you will actually use it. It does you no good to download the app, use it a few times and then abandon it. Some apps will go into your bank account and pull spending information from there. If you use cash, you will still have to manually enter those purchases. Don’t forget to enter items that are automatically on your credit card. Spend a little time in the beginning researching the best app for you and then entering the spending categories.
Track without judgement. Write/enter it all down. Yes, maybe you are embarrassed you spend so much on an evening out or a gift or on yourself. But write it down. If you are sharing this task with a partner or spouse and they are also tracking, give each other a dollar amount that is miscellaneous. This way avoids any finger pointing or eye rolling over spending categories that the other thinks is pointless or doesn’t understand.
And here is the biggest step. You need to look at the aggregate data at the end of every month. Where is your money going? Do you want it spent there? Do you want to spend more in one category and less in another? You get to choose. Knowledge is power.
With the Job Creation and Tax Cuts aka new tax plan of 2018, income tax exemptions were eliminated. That’s right, eliminated. To make up for this, the standard deduction is almost doubled and the child tax credit is doubled. But… you may still be in for a big surprise come time to file and pay your taxes this April. Surprises can be good (if you get a tax refund) or bad (when you owe more money). The exemption was based on the number of your household members for tax purposes and your tax status. For a family of 5 comprising of two spouses and three dependent children, this was worth just over $20,000. This was the information you put on your W4 and used to calculate tax withholding every pay period.
While you have your latest pay stub in hand, go to the IRS website and check your withholding. It won’t change any amounts you owe for 2018, so you may still be in for a surprise, but it will put you on track for your 2019 return so the earlier in the year you do this, the better.
This calculator is a few pages, it does not link to any of your personal IRS information, doesn’t ask for personal information like name; it just wants the financial facts.
The new W4 looks very different from previous years and at a first glance looks a lot like a tax return. Be not intimidated, work your way through the two-page document and then send it off to your payroll department. Sometimes the best surprise is no surprise at all!