Ministers In The Marketplace/0 Comments/in /by

This month I have an interesting topic that might spark a little of a debate.  I was involved in a conversation with a friend of mine that made the following assertion.  They said, and I am paraphrasing, “Rich people (specifically Christians), who have achieved a level of financial success, should give away their competency (knowledge, skill, insight they contribute to their success) for free.  They already made their money and by selling their products, they are keeping the poor people poor, while they get richer.”  I knew immediately that didn’t sound right, but at the time, it was a group conversation and there wasn’t a lot of room for a discussion.  And to be honest at the time, I didn’t have the clarity I have now, but I still challenged the thought.  Now, I have more understanding from a scriptural basis and I want to share with you.

Should Christians give away their knowledge, skills, or wisdom for free to others that want it?  If you were to poll a group of believers, you would have no problem finding people on both sides of the debate.  But let’s remove emotion, use scripture as our guide, and draw our conclusions from the Word of God.  In Genesis 41, Joseph the great-grandson of Abraham has an encounter with Pharaoh, king of Egypt, when asked to interpret Pharaoh’s dream.  Joseph tells Pharaoh the dream is divine and God is showing him there will be 7 years of abundance and plenteousness followed by 7 years of grievous famine.  Then Joseph suggests Pharaoh impose a 20% holding tax (a.k.a. the “fifth part”) on the corn harvest of his people.  Basically, 1 of every 5 ears of corn would belong to Pharaoh.  That tax would be stored and held so when the 7 years of famine comes, there will be food for the people and they will not starve to death.  So Pharaoh appoints Joseph to oversee the matter and Joseph gets to work.  They stored up massive amounts of corn (the bible says, “as the sand of the sea” and it couldn’t be numbered).  And then the drought came just as God had said.  And it was bad. When the people of Egypt were famished and cried to Pharaoh because they were starving, he sent them to Joseph. And Joseph opened up the storehouses and SOLD the corn to the people so they can make food.  And all the countries came into Egypt to Joseph to buy corn because the famine was so sore in the lands.  Joseph didn’t give it away for free, but he sold it.  The people had to pay for it.

But what does God think about this? Surely, God wanted Joseph to give the corn away, right? I believe our answer is found in Proverbs 11:26.  And I think this because there is no other recording in the scripture of corn being sold.  The scripture says, “blessings shall be upon the head of him that selleth it [corn].”  So, are you telling me it is acceptable to God for Joseph to sell corn to people that will starve to death, but it is not acceptable for Christians to charge for the goods or services they offer?

I know this rattles some theological trees, but that’s OK.  You should never be afraid to challenge your own conclusions. Besides, shouldn’t the bible be the ultimate authority?  Please, understand my point. Do I think some people (even those who claim to be Christians) try to take advantage of the poor and the needy?  Absolutely. You can always find a charlatan selling blessed miracle water or special healing prayer cloths. But, do I think wealthy peoples should give away their possessions, just because they can afford it?  Absolutely not. You should always follow as the Spirit of God leads you, but God isn’t leading everyone down the same path.   The truth is some that have obtained a level of status, success, or achievement accomplished it through hard work and time and chance.  There is nothing wrong with wanting to prosper from accumulated knowledge, wisdom, and understanding or experiences.  And if you are seeking that wisdom (and the bible has tons to say about pursuing wisdom), you have to decide what is it worth to you.  It is your choice.  It’s ok to pay so. ne for their wisdom.  In fact, the bible tells you to do it! Proverbs, 23:23 says, “Buy the truth and sell it not; also wisdom, and instruction, and understanding”.  But it definitely is not wrong to make the offer.

So, maybe in future you will look at Christians that have a presence in the marketplace a little different.  If you don’t have the same appreciation for their services or products as the price tag warrants, that is your prerogative and there is nothing wrong with that.  You have the right to disagree and not purchase.  It is OK. It is fin. Do you, Boo! But don’t judge Christians and vilify them for creating the option to share for monetary compensation available.  Joseph did it. Solomon, the wisest and riches person to every live did it (2 Chronicles 9:22-24).  Why are you NOT doing it? I am just saying. God Bless.

 

Tax Tips for Procrastinators/0 Comments/in /by

Are you a last-minute sort of person? Do you only fill up after that little orange gas pump lights up on your dashboard? Do you wait to tackle that mountain of laundry until you have nothing clean (or even sort of clean) to wear? Hey, we’re not judging.

Procrastination is a real struggle. And if you wait until the very last minute to file your taxes, you’re not alone. About a third of Americans file their taxes in the last two weeks leading up to tax deadline.

While procrastinating on some things can lead to minor inconveniences (you can function on three hours of sleep, right?), procrastinating on your taxes can land you in a real mess.

Some of our Facebook fans learned their lessons about tax-time procrastination the hard way. So, to keep you from making the same mistakes—and to help make tax time less stressful—we’re sharing their stories as well as our tips to help you ace tax season.

You Have to File

For the first time in two years, the tax filing deadline hasn’t been extended due to COVID-19. Tax Day is April 18 this year.2

Let’s get one thing straight right off the bat: Ignoring your tax obligation won’t make it go away. Olga M. made that mistake twice and vows never to let it happen again: “For the past two years we have filed on October 15, late. Why? Because I’ve been unorganized and haven’t prioritized. The results? I’ve wasted $150–200 in interest.”

If you don’t file by Tax Day, here’s what will happen:

  • If you’re getting a refund: You won’t be penalized for failing to file—but Uncle Sam won’t give you your money until you do. You have three years from the original deadline to file and still receive your refund.3 If you don’t file by then, you can kiss your refund goodbye.
  • If you owe taxes: You’ll be charged a failure-to-file penalty of 5% of the taxes owed for each month—or part of a month—that your return is late, up to a maximum of 25%.4 You’ll also be charged interest (currently about 3%) on any unpaid taxes.5 If you filed on time but didn’t pay your bill in full, you’ll be charged a late-payment penalty (0.5% up to a max of 25%) and interest on your unpaid taxes starting the date payment is due, even if you filed at tax extension.

So, what if you can’t pay your tax bill and didn’t file an extension? Work with a tax pro to file as soon as possible! Why? Because the failure-to-file penalty can be 10 times more than the late-payment penalty. The sooner you file, the less you’ll have to pay!

Get Organized

We know digging through piles of clutter to find paperwork or trying to remember long-forgotten passwords to access online records isn’t fun. You’d much rather be doing something else with your free time (tennis, anyone?). But organizing your tax documents is a necessary part of filing your taxes—so why not go ahead and just get it out of the way? We promise you’ll feel better when it’s done.

Here are a few of the documents you may need to gather:

  • W-2 forms
  • 1099 forms
  • Mortgage interest statements
  • Receipts for tax credits or deductions like charitable giving, childcare and education costs, and medical bills
  • Interest statements or Health Savings Account (HSA) statements

While you’re at it, start a folder for next year’s taxes and file documents as you receive them throughout the year. This tip helped Rachel H. “We’ve procrastinated year after year,” she said “The biggest lesson learned? I need to set up a filing system to keep the receipts I want to find for tax purposes.”

This past year, Rachel handed over all her tax documents to her CPA months before the deadline.

And once you’re organized, you can even file early.

Don’t know where to start? Our free tax preparation checklist can save you time and help you gather the right documents the first time around.

Waiting Can Cost You Money

The clock is ticking. So, just to be done with your taxes, you take the standard deduction, because who has time to itemize? And honestly, the Tax Cuts and Jobs Act about doubled the standard deduction, so it may not make sense for everyone to itemize their deductions.

But it is possible that your expenses add up to more than the standard deduction, which would make itemizing your best bet. Why? Because every deduction you claim reduces the amount of income you’re taxed on, lowering your tax bill. And while it might not make sense to itemize on your federal taxes, itemizing on your state taxes could save you a nice chunk of change.

Want help itemizing your deductions? Ask an experienced tax advisor for advice. But keep in mind that the longer you wait, the harder it may be to get someone to help. All the good ones may be booked through the end of tax season.

Get an Extension

If you start now, you should have time to file your taxes. But if you’re missing documentation—or something other than procrastination keeps you from hitting the deadline—you can request a six-month extension. Simply fill out IRS Form 4868 and submit it to the IRS by Tax Day.

But fair warning: An extension doesn’t buy you more time to pay your tax bill. It simply gives you more time to file. When you request an extension, you must estimate your tax liability (if any) and send payment with your request. If you don’t, you’ll be charged penalties and interest on the amount you owe after Tax Day.

Can’t cover it all by the deadline? Pay as much as you can when you file for an extension and try to knock out the balance before the IRS contacts you, which usually takes 30–60 days. If you can’t pay it off by then, you can apply for a payment plan. And good news—you can set up the plan on the IRS website without having to call and wait on hold for hours!

Written by: Ramsey Solutions

Legacy Group/0 Comments/in , /by

Join Legacy Group Wednesday, April 5th and 19th to discuss estate planning

Meet us at 6 pm on Zoom

Zoom ID 893 265 8434

Get educated on how to plan and leave a legacy

Will vs. Trust: What’s the Difference?/0 Comments/in /by

In the world of estate planning, wills and trusts often take center stage. They’re kind of like siblings (without all the fighting). Both are legal tools that transfer your stuff to those you love.

The main difference is that one takes over while you’re still alive and the other goes into effect after you die.

There are a few more important distinctions you should know about. Let’s go over each one, starting with the basics so you can decide what’s best for you.

What Is a Will?

A will is a legal document that explains what you want to happen when you die—and puts it all in writing. It outlines things like who you want to get your stuff, your money, and guardianship of your kids or pets.

There are many different types of wills. But for most people, a simple will is enough. In fact, for 95% of people, a will is all you need to establish a rock-solid estate plan—one that protects your family if something ever happens to you (and it will, eventually at least).

If you have less than $1 million in assets, you can just stop right here and get yourself a will. (Unless you really want to learn about living trusts as a kind of hobby. More power to you!)

If you think you might be in that 5% of people who need more than a will, keep reading.

What Is a Trust?

Trusts come in lots of different forms—close to a dozen, actually. So let’s focus on the most common ones and what they do.

Living Trust

A living trust lets you transfer your assets to loved ones quickly and easily. It’s “living” because it’s in effect while you’re alive, as opposed to a will, which only kicks into gear after you’re gone. You can put things like bank or savings accounts, cars, real estate, art, jewelry and even intellectual property (like your novel manuscript) in a living trust. But even though those assets are named inside your trust, other people can’t access them until after your death.

Revocable and Irrevocable Trusts

A revocable trust just means you can change the terms of the trust. How about an irrevocable trust? Yep, you guessed it. You can’t change the terms. For example, in an irrevocable trust, once you name the beneficiaries for your property, the names of those beneficiaries are set in stone and can’t be changed.

You can make most other kinds of trusts revocable or irrevocable. Revocable trusts are the most common, but even making changes to a revocable trust takes a lot of paperwork. Fun fact: Revocable trusts magically transform into irrevocable trusts after your death.

Charitable Trust

As the name suggests, a charitable trust is used to give away part of your estate to a charity. You can create a charitable lead trust (CLT) or a charitable remainder trust (CRT). The CLT is simple: You designate particular assets to go toward your favorite charity (like Agatha’s Donkey Shelter, for example). With a CRT, you put certain assets into the trust that you or your beneficiaries will get income from, and the rest of your assets go to one or more charities.

Testamentary Trust

A testamentary trust is one you create using a will. So in your will, you basically say, “When I die, this and this will be placed into a trust for this person.” The kind of trust (like charitable or special needs) you create is up to you.

Spendthrift Trust

Some people just don’t know how to handle money. If you’re looking at your loved ones and thinking, Yep—that’s them, a spendthrift trust might be a good option for you. This kind of trust allows you to control when and how your beneficiaries get your stuff.

Special Needs Trust

Using this trust, you can make sure any dependents with special needs will be supported and cared for after you’re gone.

Life Insurance Trust

Life insurance death benefits aren’t usually taxable. But if you’re super wealthy and your death benefit will cause your estate to be worth more than $12.92 million for a single person, those benefits will become subject to the federal estate tax.

So, a life insurance trust includes your insurance policy and can protect your death benefit from estate taxes when you pass away.

These are just some of the different types of trusts. They can get even more specialized depending on your needs. As you can see, trusts tend to be geared toward people with complex estates.

Bottom of Form

What’s Covered in a Will vs. Trust?

So, now that we’ve gone over what wills and trusts are, what sets them apart?

One of the most important differences between wills and trusts is the ability to name a guardian for your minor children. You can name a legal guardian in your will, but you can’t in a trust. So, even if you have a trust, you still need a will to make sure your kids are taken care of after you die.

Another important distinction between the two is that, unlike a will, a trust lets you skip probate court. Probate court cases can be expensive and drag on forever. So, skipping them is a big deal. If your estate gets mixed up in probate court because a loved one challenges the will, it could mean your family has to spend the next year heading to court while grieving. Not fun.

But remember, if your will is clear and you don’t have a huge estate (or if you have a lot of debt—yuck), probate won’t be a huge hassle. And you probably don’t need a trust.

And while we’re on the subject of probate court, let’s talk about some family stuff.

There’s a little crazy in every family. You know who they are in your family (and if you don’t, it might be you). But some families deal with more than their fair share.

Wills are best for families that struggle with trust issues (not the kind you’re thinking of) and tension between family members because probate court can resolve those issues. On the other hand, families who can handle healthy conflict and have a lot of confidence in each other are better off with a trust since they don’t need a probate court to babysit them.

And if you’re wondering if you can have both a trust and a will, the answer is yes. In fact, most people who have a trust have a will too.

Will vs. Trust: How Much Does It Cost to Set Up?

In general, trusts can be more complicated and expensive to set up and maintain than wills. The exact cost depends on the type of trust, your location, and how complex the document is.

But remember, even though trusts might be more expensive up front, they could save your family money in the long run by avoiding probate court.

Wills, on the other hand, are generally easier to create and cost less to carry out. So, they’re cheaper up front than a trust. Again though, the ultimate cost of a will depends on how simple or complicated it is.

Will vs. Trust: Which Is Best?

Now comes the big question: Should you get a trust, a will or (drumroll, please) . . . both? It really boils down to personal choice.

First, take a big-picture look at your needs and your overall life circumstances.

  • Just a will: A will is the best option if you’re like the average person with a couple of kids and a house. You won’t need a lawyer unless there’s something really complicated about your situation. You can set up a will in just a few minutes yourself online. That means no more excuses. Get a will!
  • Just a trust: A trust might be better if you’re older, your kids are grown, and your estate is worth at least $1 million. This way, you can avoid probate in a way that wills don’t allow.
  • Both a will and a living trust: You might need both if you have a large estate and dependents. (Remember, the will fills in that guardianship gap.) And if you do get both, don’t worry about them bumping into each other. They’re separate legal instruments and there usually aren’t any conflicts between them (unlike siblings). If there is a legitimate conflict, the trust overrides the will.

Here’s a simple chart that outlines the pros and cons.

Living Trust Will
Takes effect while you’re alive Takes effect at death
Skips probate court Goes through probate court
Harder to change Easy to change
Does not involve guardianship Names guardianship of children
Assets transfer immediately Transfer of assets can take time
Stays private Becomes public
Can involve expensive fees Affordable

So, let’s wrap it all up. The main difference between a will and a trust is that almost everyone needs a will but most people don’t need a trust. Trusts might be more than you need for your situation, but they can also be a great tool if you have a larger estate.

Written by: Ramsey Solutions

 

So You Want To Be An Investor?/0 Comments/in /by

Have you ever been looking at something on YouTube and you started to view the suggested videos and it takes you places you were not intending to go?  That happened to me this weekend.  I don’t remember where I started, but before I knew it, I was watching interviews on YouTube at this exclusive gym in Southern California.  The pool of interviewees were had some occupational diversity including: a retiree, a school teacher, some business owners, a sale representative, and a day-trader.  They were asked such things as, “what do you do for a living?”, “how much money do you make?”, and even, “why do you spend $200-$300 a monthly on a gym membership? at this club”  Among all the questions from all the interviewees, there was a line of questioning I noted that had the most interesting responses. 

First, I want to point out that most of the interviewees claimed to be actively investing.  That’s awesome!  But, I guess you need to make some extra money to afford a $300/monthly gym membership, yikes!).  As they talked, I noticed their investment vehicles and strategies were as diverse as there were.  Some were into the stock market, some were into real estate, others were into crypto[currencies].  Even though their investment strategies and portfolios differed; they all could articulate (at least for the camera) what they were investing in and why.  This may not seem like a big deal, but this is huge!  It means, they had enough interest to learn about the places they decided to park their hard earned money.  What do you invest in and why?  If you can’t defend your investments, you need to do some research.  You might be doing something just because you were told. And who said what you were told was good advice?  How do you know if it’s good advice (or not) if you haven’t vetted the opportunity?  It’s not enough to know a particular investing strategy is working for someone else.  You need to know yourself.  Get educated.  Know where you put your money and why.

Secondly, I noticed all the interviewees had defined goals.  Goals help keep you focused.  Some of the goals were to maintain their lifestyle and enjoy their retirement.  Some of the other goals were to retire early and enjoy more of their life on their own terms.  Some of the investment goals were to make a little extra money to have a little more freedom.  They say, “money can’t buy you happiness”, but it can buy you options!  So what are your investment goals?  Is your strategy leading you toward your goals or are you going to have to course correct?  Have you even thought about it?  I know this may seem simple, but these are basics to investing that everyone should be able to answer; because everyone should be investing!

And the last thing I noticed was, they all wish they started earlier.  Investors know the power of time, the concept of compounding, and how those two forces can work for you or against you.  The longer an investment is growing, the longer it is compounding and its value is more rapidly increasing.  That is how the rich keep getting richer.  They invest in assets and the assets grow in value, compounding over time, to create wealth.  They invest themselves rich!

So what do we do now?  Well, if we are not already investing, we have work to do.  First, we need to get in a position to invest.  And we do that by building a strong financial base from which we will have money to invest.  You build a strong financial base, by eliminating debt, spending wisely, building up savings, and getting current on your bills.  And while we are preparing ourselves financially, we can be preparing ourselves mentally.  We MUST get educated.  We don’t know what we don’t know.  I guarantee, there are far more opportunities than you have thought are possible.  So, let’s get busy and start building the best financial future God has for us.  God Bless.

What is a Gas Tax Holiday?/0 Comments/in /by

What is a Gas Tax Holiday?

Article by Ramsey Solutions 

In a divided country, what’s one thing that can unite us all? Our shared hate of high gas prices. Ugh. If you haven’t felt the pain of ridiculous gas prices these days, you must be traveling around on foot or riding a bike (or a horse).

In 2022, gas prices made headlines when the average price of gas nationwide hit five bucks. Yuck. So how can we put a stop to these outrageous prices that are eating away at our paychecks? Some folks say the answer is a gas tax holiday. But before you bust out the streamers, toss the confetti, and order a piñata, let’s break down why a gas tax holiday isn’t going to save the day.

What Is a Gas Tax Holiday?

A gas tax holiday puts a temporary ban on the taxes charged when someone buys gasoline (aka suspends the gas tax). It might last for a month, three months or six months. Whatever the time span, a gas tax holiday just means consumers don’t have to pay gas tax during a certain amount of time.

What Does Suspending Gas Tax Mean?

When it all boils down to it, suspending the gas tax just means a gallon of gas would cost less. And you’d see a lower total cost when you go to fill up your gas tank.

If the gas tax is suspended at a state level, that means they’re suspending the state gasoline tax. And if the gas tax is suspended at a federal level—you guessed it—that means they’re suspending the federal gasoline tax.

How Much Is the Federal Gas Tax Right Now?

The federal gas tax is 18 cents per gallon of regular gasoline and 24 cents per gallon of diesel gasoline. The federal government uses money from gas tax to fund highways and public transportation through the Highway Trust Fund.

How Much Money Would a Federal Gas Tax Holiday Save?

Not a lot. If you drive a car with a 15-gallon tank, you’d save $2.70 each time you fill up. And if you fill up every week, a three-month gas tax holiday would save you about $32. Oh, goody—that’s not even enough to buy a full tank of gas for most cars right now.

A gas tax holiday might sound like the cure to high gas prices (if you listen to the media), but a $32 savings over three freakin’ months isn’t much of a reason to celebrate. Every dollar counts, but an extra 32 of them won’t solve all your problems.

Biden’s Proposal for a Federal Gas Tax Holiday

It’s safe to say everyone and their mom has been begging President Biden to do something—anything—about gas prices. His answer? Proposing a three-month-long national gas tax holiday.  And his idea sounds exactly like you think it would: For three months, drivers wouldn’t have to shell out money to pay for the federal tax on gasoline.

Now, that’s all fine and dandy—but not paying the gas tax isn’t exactly going to change your life. Will it lower the price you pay at the pump? Sure. But that doesn’t matter much when overall inflation is sitting at a whopping 9.1%.

So, will Biden’s federal gas tax holiday actually happen? Probably not. But stranger things have happened—like, you know, three stimulus checks in 12 months. When it comes to how the government spends money, you never know. And with the way things look right now, there won’t be enough support to pass the bill—which means the buck passes on to the states .

Which States Are Having a Gas Tax Holiday?

Since nothing has happened at a national level yet, states have taken matters into their own hands to make gas tax holidays (and even gas stimulus checks) happen across the country. See if your state made the list:

  • California

California Governor Gavin Newsom couldn’t get his state’s gas tax completely canceled, but lawmakers did suspend some of the diesel gas tax. So the gas tax on diesel fuel in the Golden State will cost about 23 cents less now. (P.S. California has the second-highest gas tax in that nation, clocking in at 51 cents.)

  • Connecticut

Back in March, Governor Ned Lamont signed a bill ditching the state’s 25-cents-per-gallon motor vehicle tax through June 30. But this gas tax holiday for the Constitution State has been extended until November 30, 2022.

  • Florida

Governor Ron DeSantis made a one-month-long gas tax holiday official in Florida—but it doesn’t start until October 1, 2022. Still, residents of the Sunshine State will get a month-long break from paying gas tax.

  • Georgia

If you’ve got gas prices on your mind, Georgia’s the place to be. The Peach State has had a gas tax holiday in place since early spring, and they’ve extended it through August 13, 2022.

  • Maryland

Maryland was the first state to take up the gas tax holiday back in March 2022. But their little holiday is already over and Governor Larry Hogan is calling on lawmakers to pass another gas tax holiday.

  • New York

Wait, does anyone drive in the Empire State? Some do (just probably not in New York City). Lawmakers in the state took up an extra-long gas tax holiday—from June 1 to December 31, 2022. That means New Yorkers won’t see gas taxes again until 2023. Happy New Year to them.

Don’t Wait Around for a Gas Tax Holiday to Save You

Here’s the hard truth: You can’t just sit around refusing to drive until a gas tax holiday happens. Most people have to drive somewhere and aren’t using a horse and buggy to get around (although it does sound tempting). And even if you try to avoid driving as much as you can, you’ll still need to fill ’er up sooner or later. Here’s what to remember when you need some gas-saving tips:

  1. Shop around for gas prices.

Don’t just pull into the nearest gas station to fill up your ride (unless you’re running on empty and need gas ASAP). It always pays to shop around for gas and see who has the cheapest prices around you. That might mean you get gas closer to work instead of filling up in your neighborhood. Or you can use apps like GasBuddy and Waze that search your local area to find the cheapest gas prices around.

  1. Join gas rewards programs and cash-back apps.

You know these exist, right? Look for gas rewards programs and cash-back apps like Upside that will reward you with cash every time you fill up.

But look out—don’t fall for any of those gas credit cards that offer you rewards or those buy now, pay later apps like Klarna (yup, they really will let you pay for your gas using an installment plan). It’s pretty dumb to pay later on down the road for gasoline you’ve already used up. No matter what kind of a “deal” you think you’re getting, it’s not worth it.

  1. Budget for high gas prices.

We know it’s hard to budget for gas when the price literally changes daily (or sooner!)—but that doesn’t mean you should just stop budgeting for gas altogether. Nope. If anything, it’s even more important to stay on top of your budget now more than ever.

Need help keeping up with your budget from month to month?  Ramsey Solutions offers a great free budgeting tool, called EveryDollar.  There is a free version and a paid version which can be found on at the following link.  But, it will help you budget for gas prices and tackle anything inflation can throw at you. And fingers crossed—one day, that line item you use for gas will have a much lower number.

(https://www.ramseysolutions.com/ramseyplus/everydollar/everydollar-0722)

Money Matter’s-What Is Inflation?/0 Comments/in /by

It’s fair to say there’s a lot going on in the world. In some ways, we haven’t had any breaks from worrying about something. And just when we thought that was letting up, here comes a little something called inflation knocking at the door.

Really, if you wanted to sum up the U.S. economy in one word lately, it’d be pretty easy: inflation. What used to be a chapter you dreaded in your high school economics class is now the hottest topic at the water cooler. So, what is inflation? Well, if you snoozed through that economics class, don’t worry—we’ll get you caught up on what inflation is, why people are talking about it more now, and what you can do to guard your money from inflation.

What Is Inflation?

We’ve all heard a ton about it lately, but what is inflation really?

Inflation is basically when the prices of goods and services go up. It’s measured by how much prices inch up over time and tracks how the value of money falls because of those price hikes. Yeah, it’s not the best dinner party topic. But the truth is, inflation is nothing new. It’s not some big, scary money term that didn’t exist until 2020. Inflation has been around forever.

What Is the Inflation Rate Right Now?

As of March 2022, the inflation rate in the U.S. had risen to 8.5% over the previous 12 months—up 1.2% from February’s numbers.1 That’s the biggest 12-month inflation surge in 40 years (December 1981)! Given all that, it’s no wonder everyone is shouting about inflation these days—because we’re seeing the sticker prices and feeling it in our budgets.

Our Ramsey State of Personal Finance report from early 2021 found that 3 in 4 Americans said they’ve seen higher prices on things they normally buy. On top of that, the State of Personal Finance 2022 annual report showed that 71% of Americans say inflation has impacted their lives—with 26% saying it has had significant impact. So, if you still think inflation isn’t happening right now—think again. Whether we want to admit it or not, inflation is here, and it’s sticking around, folks.

What Is Transitory Inflation?

Transitory inflation happens when prices go up, but the rising prices are short-lived and don’t leave a permanent mark (aka high inflation that goes on for a long time). It’s an economic term used to talk about inflation when it’s quick and painless. Basically, prices might be inflated, but it won’t last long. It’s temporary. It’ll peak and then come back down again.

Does any of that sound like what we’ve seen in the last year?

Nope, we didn’t think so either.

For months, the powers that be (aka the Fed) have been telling us not to worry about inflation—it’s just transitory. But these price spikes have been anything but. Instead of inflation calming down or even leveling off, it’s been gaining rapid speed with each month that goes by. And most people are fed up with being talked down to about it. But don’t worry, there are lots things you can do to protect yourself against inflation (we’ll cover that a little later).

Types of Price Indexes

Here in the U.S., we measure inflation by three things—the Consumer Price Index (CPI), Producer Price Index (PPI), and Personal Consumption Expenditures Price Index (PCE). It’s a mouthful, but it goes a long way to track the changes in prices of goods and production.

Here’s how it all breaks down:

Consumer Price Index (CPI)

The Consumer Price Index measures the change in the prices of goods and services that consumers pay over time. In other words, CPI is tracking how much your toothpaste costs today compared to three years ago.

Producer Price Index (PPI)

The Producer Price Index is kind of similar to the Consumer Price Index, but PPI measures the change in selling prices over time for those creating the product. Think how much the maker of your favorite shoes is paying to make your shoes.

Personal Consumption Expenditures Price Index (PCE)

And the last one here, the PCE Price Index, shows the actual month-to-month changes in the prices of services that consumers actually bought. Think of this one as the way to figure out if people are really laying down their hard-earned cash and buying the stuff or not.

It all sounds like one big headache (probably because it is), but looking at all that data together gives you a pretty good idea of what’s happening in the world of inflation and with our money’s purchasing power.

What Is Purchasing Power?

Purchasing power all comes down to the value of currency. In the U.S. when people say purchasing power, they’re usually talking about how far your dollar bills go to cover the price of items you want to buy. Like, when you go to the store, could your $1 buy one or two packs of gum? And it’s no secret that a dollar bill with George Washington’s face on it has way less purchasing power than it did 50, 20 or even just 10 years ago. In fact, according to the Ramsey State of Personal Finance 2022 annual report, 85% of Americans say their money doesn’t go as far as it used to. Thanks, inflation!

What Causes Inflation?

Inflation happens when prices go up and the purchasing power (the value of the currency) goes down as time goes on. But what’s the deal here? Why can’t a dollar today buy you as much as it did in 1955? Step into our economics class and we’ll try to walk you through it (without putting you to sleep).

Inflation happens when the price of goods goes up. But what causes the price of things to go up anyway? It all goes back to supply and demand. When people want to buy things but there aren’t enough things for them to buy, the price goes up to meet the demand.

Basically, inflation makes the value of that $20 bill in your pocket drop over time. Remember how your grandparents talked about how they could buy nickel candy and go see a movie for under $1? Must’ve been nice for them! Inflation is the reason we don’t pay the same prices for those things today.

Now, there are two different types of inflation, and each one can impact how prices go up. Let’s walk through them:

Demand-Pull Inflation

This happens when the demand for goods goes up but the supply stays the same. If sellers can’t keep up with the supply, then they can raise their prices. This makes the prices pull up to keep up with the demand.

Cost-Push Inflation

This takes place when the supply of goods is low but the demand for them stays the same. When this happens, the prices are pushed up (usually by some kind of event cutting off the supply). We saw this happen when the global supply chain took a hit at the beginning of COVID-19 and when the Suez Canal was blocked and when the Colonial Pipeline was hacked. Now, some of that (okay, a lot of that) was caused by people panic buying, but it was still because of an event that caused prices to push up.

What Is Happening With Inflation Right Now?

Because of the pandemic, the Federal Reserve started “printing” virtual money last year.2 Their goal? To pad the economic and banking markets from taking too big of a hit from the COVID-19 fallout. And now that things have opened up again, that money is starting to move around and stimulate the economy.

Oh, and speaking of stimulated . . . remember all those stimulus checks? Well, somebody has to pay for them. The government’s spending went through the roof in the last year, and yep—you guessed it—that impacts inflation. Yeah, you could say things have been, uh, stimulated for sure.

But inflation’s not just the government’s fault (as much as we might want to pin it all on them). Throw in the housing inventory shortage, the lumber shortage, and the car shortage (seriously, what hasn’t had a shortage in the last year?). That’s a whole lot of demand and not enough supply—which is exactly what causes inflation.

Don’t believe it? It’s hard to argue with the facts: Home listing prices have gone up by 10.3% since last year, the price of lumber has shot up 130% since April 2020 (but is starting to calm down), and the average list price of used cars jumped to an all-time high of more than $29,000 (that’s the first time it’s ever been over $29K).

How Do Interest Rates Affect Inflation?

Ah, yes, we’ve all heard about those crazy low mortgage interest rates—but how does something like that affect other things long term? It might sound kind of strange, but the Federal Reserve lowering these interest rates actually plays a part in inflation.

When interest rates are low, the economy usually grows, but that can also cause prices to go up. That means people are usually okay with borrowing money (boo!), and they feel more comfortable with spending too. Because of that, more money flows through the economy when interest rates hang out at a lower rate.

The opposite happens when interest rates rise. When interest rates are higher, people buy less, the economy slows down, and inflation drops. Think about it: When interest rates on homes are higher—there aren’t as many people lined up to buy them, right? And with higher interest rates, people tend to save and invest more because their rates of return go up too. With fewer people spending their money, the economy slows down and inflation chills out.

So, whose job is it to handle this delicate little balancing act? The Fed. They have to have a close watch on the Consumer Price Index and Producer Price Indexes to try to keep the economy steady around the ideal inflation rate of 2%.

How Inflation Affects You and the Economy

If you’re still wondering, What is inflation? (like a lot of us are these days), just remember that most inflation goes back to the basic supply and demand problem. If items that people need or want are hard to find, it drives the cost up and creates a scarcity mindset (where you think there won’t be enough of something left for you to have any). If you can flood the market with enough product, then the demand goes down and prices can go down.

Oversupply = prices going down. Undersupply = prices going up.

When inflation happens, you see the effects of it hit stores—and your wallet—pretty fast. We’re seeing this kind of thing play out now with meat and seafood prices rising 79%, dairy prices rising 76%, and fresh produce rising 71%.  And prices going up is the part where that nasty word inflation actually starts to impact you. All of a sudden, regular products you used to be able to buy for a decent amount jump in price. I don’t remember cheese costing that much! Yeah, you’re not making it all up in your head.

Oh, and let’s not forgot about that sneaky thing called shrinkflation—when companies give you less of a product but charge you the same amount (so they can give their profit margins a buffer against things like inflation). Again, you’re not imagining things here. That potato chip bag probably does have less in it than it used to.

How to Protect Yourself Against Inflation

If you’re sitting there thinking, Well, great, this sounds all doom and gloom, think again. What can you do to shield yourself from inflation? Plenty.

1. Stay calm.

When people start talking about inflation, it seems like everyone wants to fill up every container they own with gasoline, start collecting gold, panic buy yeast for baking, and stick their cash under their mattress. Woah there, pal. Slow down, breathe, and take it easy. We can’t stress this enough: You can prepare without panicking. And the first step here is just keeping your cool.

2. Budget.

Inflation or not, you’re still in control of your money. Armed with a budget, you’ll be able to make sure your money is going toward the right things while being able to find places where you can cut back your spending.

On the not-so-fun side of things, if you’re noticing the prices of things like food and gas rising in your area, then you’re going to need to adjust your budget too. (Did that gallon of milk go from $3.50 to $3.99? Yep, been there.) That way, you’ll know exactly how much you’re working with and won’t be in for any surprises.

Let the budget be your guide as you look for places to cut back so you can beef up your grocery cash to cover that dadgum expensive milk. Maybe you’re not traveling right now or not having to pay for your kid’s ballet class for the next few months. Whatever it is—be on the lookout for it.

Here are some ideas from people we surveyed in our Ramsey State of Personal Finance report: 38% of folks have looked for coupons or sales to save more, 32% have bought less than they normally would, 29% have put off purchasing an item, and 25% have switched to the store brand. So, you’re definitely not alone in trying to make your dollars cover more ground these days.

3. Save.

If you’re feeling that pinch and want to save even more, look for ways to lower your grocery bill or save money on gas. Maybe it’s finally time you switch over to generic brands or carpool into work. And if you find great deals on canned food and things you can stock your pantry with (that you’ll actually use), then go ahead and stock up on food. Just make sure you’ve budgeted for that before you head into the grocery store. That way, you already know exactly what you’ll spend and won’t get swept up into the panic buying (toilet paper circa 2020, anyone?).

4. Invest.

Like it or not, inflation is a thing. If you retire in 20 or 30 years, it’s pretty much a guarantee that the cost of a loaf of bread, tank of gas and cup of coffee will have gone up by then. The best way to protect yourself against inflation (that’s bound to happen), is to invest your money—the sooner the better. But remember, if you still have debt (other than your mortgage) and don’t have an emergency fund sitting pretty, you need to take care of both of those things first. The sooner you take care of all of that, the sooner you can invest and get to work on your long-term goals.

So, what is inflation? Well, it’s definitely something you can combat—you just need the right tools. Ready to go to battle against inflation? Start by having a solid investment plan. And no—that doesn’t mean stuffing cash under your mattress. Make sure you connect with a financial advisor to talk through all your investing options. They’ll give you the right kind of advice and insight you need to protect yourself against inflation in the future. Make sure you get the most bang for your buck when it comes to investing.

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HOW TO FILE TAXES FOR THE FIRST TIME/0 Comments/in , /by

As I travel across the country speaking at high schools and colleges, here’s something I hear from young adults all the time: “So . . . taxes. Where do I even start?”

Dude, heck if I know. I’m kidding. But let’s face it: Filing taxes is confusing. It’s intimidating. It’s one of the not-so-fun parts of being an adult. But it has to be done, especially if you want to build wealth (and, you know, be a U.S. citizen).

If you’re worried about when and how to file taxes for the first time, don’t stress—it’s actually not as complicated as it sounds. Here’s how to do it the right way.

1. FIGURE OUT WHETHER YOU NEED TO FILE.

Honestly, you might not even need to worry about filing taxes yet (praise hands)! But before you breathe a sigh of tax-exempt relief, there are a few basic details you need to know to figure out whether or not you need to file.

Here are some common questions you might have about this step:

DO DEPENDENTS NEED TO FILE TAXES?

Even if you’re technically still dependent on your parents (you live with them, they pay your bills, etc.), and even if your parents still claim you as a dependent on their own tax return, you might still need to file based on how much money you earned in 2019. Read on, my friend.

HOW MUCH MONEY DO I NEED TO EARN TO START PAYING TAXES?

So, let’s say your parents claim you as a dependent on their tax return, you’re not married, and you’re also not blind or over the age of 65. You should file taxes if one of these situations applies to you:

  • Your earned income was more than $12,200.
  • Your unearned income was more than $1,100.
  • Your gross income (the money you earn before taxes are taken out) was more than whichever of these totals is bigger: either $1,100 or your earned income plus $350.

If you’re living that single life, your parents don’t claim you as a dependent, and you’re under 65, then you’ll need to file if your gross income in tax year 2019 was at least $12,200. If you’re married and filing jointly (meaning you and your spouse are putting all of your details on the same tax return), you should file if your gross income was at least $24,400. (Nothing’s more romantic than filing taxes together, am I right?)

HOLD UP. WHAT’S EARNED AND UNEARNED INCOME?

Earned income is any money made from working a job, like your salary and wages, bonuses, commissions, and tips. Unearned income is money earned without working—interest earned from a savings account, for example.

Some other forms of unearned income include alimony, dividends, capital gains, etc. But if this is your first time filing taxes, I’d be willing to bet that interest is the only type of unearned income that applies to you.

IF I’M A FREELANCER, DO I NEED TO PAY TAXES?

If you earned at least $400 from freelance work during the year, then you need to pay taxes on it (bummer). My main man Dave Ramsey suggests setting aside about 25–30% of every check you get from freelance work, so you aren’t left hanging when tax season rolls around.

2. GET YOUR DOCUMENTS TOGETHER.

There are a few different documents you’ll need in order to file your taxes. (This is the fun part.) You’ll need at least one of these:

  • W2 form: If you earn a salary or wage, your employer will send you this.
  • 1099 form: If you’re a freelancer or self-employed, you should get one of these from every client who paid you at least $600 during the tax year.
  • Charitable donations: If you donate to a nonprofit religious, educational, or charitable group, make sure you get a donation receipt because you’ll need that at tax time!
  • Mortgage interest statements
  • Investment income statements
  • Form 8822: You’ll need this if you moved in the past year.
  • SS-5: You’ll need this if you changed your name in the past year.
  • W-4: If you had a job change and started making a new income in the past year, this form will adjust tax withholdings.

Again, if this is your first time filing taxes, then the W2, 1099, and charitable donation forms are probably the only ones that apply to you (unless you already have a bunch of investments or own a house at 16 years old or something, in which case—what?). But it never hurts to double-check with a tax professional.

3. CHOOSE YOUR FILING STATUS.

As a first-time tax filer, this step should be pretty easy. Your filing status will help you know what your standard deduction is, how much you’ll owe, if you qualify for certain credits, and other official-sounding stuff like that.

There are five different filing statuses:

  1. Single: Your filing status is single if you’re not married (duh), divorced, legally separated, or widowed before the tax year.
  2. Married Filing Jointly: We’ve been over this one. This is for you lucky married people who choose to file a joint tax return. You can usually save more this way!
  3. Married Filing Separately: This one is for you married people who choose to file separate tax returns for whatever reason. That’s up to you guys, but make sure you look at both joint and separate options and pick the one that’s most affordable for you.
  4. Head of Household: If you’re not married, have paid for more than half the household expenses for the year, and can claim a dependent on your tax return, this is the filing status for you. This mostly applies to single parents.
  5. Qualifying Widow(er): You can still file jointly with your spouse if they passed away and you don’t get married again in the same tax year. This filing status is available for up to two years after the year of your spouse’s death.

Note: There are a bunch of other tax rules for special situations, like if your spouse is in a combat zone and can’t sign, you’re married but your parents still claim you as a dependent on their return, etc. I don’t have the time or energy to cover all of that in this blog. (Would y’all want to read a 20-page blog about taxes? I wouldn’t.) But you can find all of these details—and a lot of other answers to your questions—on IRS.gov, the official website for all things tax-related.

4. DECIDE IF YOU WANT TO TAKE THE STANDARD DEDUCTION OR ITEMIZE.

The standard deduction is a specific dollar amount that lowers the income you’re taxed on. Like we’ve touched on already, for single filers, that dollar amount is $12,200. For qualifying widow(er)s or people who are married filing jointly, that dollar amount is $24,400.

So, for example, if your filing status is single, you made $30,000 in 2019, and you decided to take the standard deduction, you would only pay taxes on $17,800.

To take the standard deduction, there are no extra steps you have to do—just file your taxes like normal and the IRS will let you know when or if you get any money back. With this option, it’s still possible for you to get a deduction (which means you might owe less money), even if you don’t have any itemized deductions you can claim.

Your other option is to itemize all your deductions. People who choose this option keep receipts of qualifying expenses throughout the tax year and record them in Schedule A (Form 1040).

Some examples of these types of expenses would be:

  • Out-of-pocket medical or dental expenses
  • Charitable donations
  • Large, work-related expenses that you weren’t payed back for (for example, some people can claim money spent on gas if they had to drive a lot for work)
  • Paid mortgage interest or real estate taxes

Depending on which tax bracket you’re in, a certain amount of money will be taken off your tax bill based on the total amount of your itemized deductions.

Most people go for the standard deduction because it’s easier and faster, but for some people, itemizing can save a lot more money. Talking with a tax pro can help you figure out which option makes the most sense for you.

Have a headache yet? Don’t worry, we’re almost done.

5. FILE YOUR TAXES FOR THE FIRST TIME LIKE A BOSS.

Okay, fam. You’ve got your documents. You know your filing status. You decided if you’re taking the standard deduction or itemizing all the way. Now it’s time to actually file your taxes.

There are a few different ways to do this:

  • You could get the help of a tax pro, which can seriously help with the stress and confusion (this is what about 58% of Americans do).
  • You could use tax software (which can be a good option if your tax situation is pretty simple).
  • You could fill out all the paperwork yourself and mail it to the IRS.

But listen up: No matter which method you go with, your 2019 tax return is due on Wednesday, April 15, 2020.

Once that’s done, it’s time to run a couple victory laps because . . . You. Just. Filed. Your. Taxes. For. The. First. Time! I’m so proud.

6.  WATCH FOR A REFUND (AND ADJUST WITHHOLDINGS IF NEEDED).

Within about a month of Tax Day, the IRS will let you know if you’re getting a tax refund—which is money back in your account. Y’all, this is not the time to go out and treat yo self. It may sound great, but this actually means that too much money was withheld from your paycheck throughout the tax year—all that money was yours in the first place, and you should get to keep more of it during the year.

There’s also a chance you’ll owe money to the IRS instead of getting a refund (this is actually better than getting a huge refund because it means you got to hold onto more of your money each month.) Just know you might have to take some money out of savings to cover that cost, so be intentional about budgeting and having your emergency fund in place.

If you get a really big refund or owe a lot to the IRS, you’ll want to adjust your withholdings (the amount of money that’s taken out of your paycheck for taxes).

Once you adjust your withholdings as needed, all that’s left to do is get organized for next year by buying a folder for all your tax documents and receipts (you’ll want to hang on to them for at least three years just in case).

Congrats, y’all—this means you’re officially an adult. Remember: If you need help figuring out whether to use a tax pro, use tax software, or file on your own, this quiz will help you out!

Written by Anthony O’Neal from AnthonyONeal.com