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

Underdogs Win Too!/0 Comments/in , /by

Just about everyone loves a good comeback story or a feel good story. We love the drama. We tend to get energized when we hear about a person or a team that was outmatched, undersized, or even counted out, pull off a surprising victory. Psychologists say, “We often associate ourselves with the underdog because sometimes it is difficult to identify with the winner since we don’t win all of the time. The truth is a lot of people consider themselves underdogs so it’s easy to identify with a team we see as being an underdog [1].” But if you look closely at underdogs that win, you see a consistent theme; they don’t beat themselves and they are very opportunistic. In other words, you could say underdogs that win are good stewards of the situation.

The same truth applies to underdogs that win with money. This is good news; it means if you were not born with a silver spoon in your mouth, or you don’t have a rich family member that is grooming you to take over the family business, you can still win with money! You may have an uphill battle to fight, but it can be done. But we don’t have time to waste. We have to turn things around right now. We have to stop beating ourselves and cease making decisions that are moving us away from our goal of becoming financially free. To do that, first, we have to avoid debt. Avoid it all cost; especially credit card debt. I know credit card companies try to tempt us with reward points or bonus miles, but it simple is not worth the risk. All it takes is one missed payment, and you can reap the whirlwind of months of unpaid back interest that puts you further in debt and moves you further away from winning. We also have to avoid the urge to go invest in the “hottest stock”, or try to get in on the latest craze, or buy into the latest “investment product”. Don’t get distracted and keep your eye on the goal. Those are money traps and I’m going to tell you why. Often the product or business model being pitched is oversimplified or, just as worst on the opposite side of the spectrum, are really complex and confusing. These ventures can have hidden or complicated fee structures that lead investors to misguided expectations. Hard pass. If you hear things like, “this is a revolutionary new product” or “act now on this special offer”, you should immediately be alarmed. You don’t need the latest gimmick to win. Millions of people were winning before the latest gimmick and millions of people will win after the next gimmick. But winning always comes at a cost. One of the things it will cost you is discipline (No. That is not a cuss word! It’s in the bible!). If you discipline yourself to stop burying yourself in the hole of debt, focus on paying off your creditors, and commit to saving; you will win! How do I know? Because the Word of God says so! What? You don’t believe it? Are you calling God a liar?

Underdogs that win are usually extremely opportunistic. Let’s take football for example. If the favored team suddenly fumbles or misses a key opportunity to score, the underdog, more often than not, will take advantage of that mishap and use it to their advantage. Now, let me tell you how that relates to money. There are times when opportunities will come, but if you aren’t prepared to take advantage of them, move with wisdom, and steward the opportunity well, you will miss out. An opportunity may come in the form of a chance to earn extra money for paying off your debt or increasing your savings. Or it may come about as a chance to reduce unnecessary or frivolous spending. I don’t know what your chance, or chances, will look like because I’m not the God. But they will come. But those opportunities don’t mean anything if you don’t recognize them and act. That’s on you. God will create opportunities. God will prepare you. But God will NOT act for you! He will require you to move (in faith) and actually participate. And the value you get out of the opportunity, many times depends on your stewardship of the opportunity. Testimony time. Years ago, when we had a lot of debt, an opportunity to take a second job presented itself. This second job didn’t pay much and really didn’t seem to help us make much progress toward our goal of being debt free. But I tried to be a good steward of the opportunity and didn’t discount the small job (even though it came with a small check). But, after about 6 months, my stewardship was rewarded. That job led to a second job that paid almost 5 times more! It was as if God was using that first job as a gateway to the second, higher paying job. He created the opportunity. He prepared me. But He didn’t walk the path for me.

Underdogs can win with money in the real world, but it’s probably not going to just happen if all we do is pray about it. I have noticed, in my own life, God has used the process of struggle to develop resilience and hone our stewardship skills to transform our [financial] character. He permitted us to struggle to remind us there are consequences for our actions while, at the same time, making us better steward which grows our capacity for increase. After all, how can we be trusted with more if we are poor stewards over the few he has already given us? (See Matt. 25:14-40). So things must change. We must change. For an underdog to overcome the odds and take down the giant, they can’t hinder their progress by getting distracted, and they can’t afford to miss the God-given moments. Is it easy? No. But the real question is, “are we willing to get it?” I trust God will do His part, but we have to be willing to do our part. The choice is yours. God Bless.

[1] https://www.bcm.edu/news/psychiatry-and-behavior/why-we-root-for-underdog

4 Things to Know Before Investing in Cryptocurrency /0 Comments/in , /by

Have you ever traveled in a different country? One of the first things you probably did was visit a bank and exchange your money for the local currency. A Benjamin can buy you a nice dinner in the States, but if you want to enjoy fine dining in Italy, then you’ll need some euros!

Investing in cryptocurrency is similar to exchanging your money in a new country. Bitcoin, Litecoin, and Ether are a few examples of “foreign currencies” that work in a very specific context within certain online communities.

Exchanging any type of currency is built upon shared trust. We value dollars and Euros because we know that we can purchase goods or services with them.

The question is, can you trust cryptocurrencies? And should you jump into the world of crypto investing?

WHAT IS CRYPTOCURRENCY?

Cryptocurrencies are digital assets people use as investments and for purchases online. You exchange real currency, like dollars, to purchase “coins” or “tokens” of a given cryptocurrency. There are many kinds of cryptocurrencies. Bitcoin is the most famous, but Ether, Bitcoin Cash, Litecoin, and Ripple are a few others. All sorts of big tech and finance companies want a slice of crypto pie. Even Facebook has created a cryptocurrency called Libra.

The word cryptography means the art of writing or solving codes. (Sounds like the setup of an Indiana Jones movie, doesn’t it?) Each “coin” is a unique line of code. Cryptocurrencies cannot be duplicated, which makes them easy to track and identify as they’re traded.

You’ve probably heard of people making (or losing!) hundreds of thousands of dollars by investing in cryptocurrencies. It feels like a modern-day gold rush. But cryptocurrencies have actually been around for about 10 years. The earliest cryptocurrency was Bitcoin, created in 2009 by an unknown person who goes by the name Satoshi Nakamoto.

HOW DOES CRYPTOCURRENCY WORK?

Cryptocurrencies are exchanged from person to person on the web without a middleman, like a bank or government. It’s like the wild, wild west of the digital world. There’s no marshal to uphold the law.

Here’s what I mean: Have you ever hired a kid in your neighborhood to mow your lawn or watch your dog while you were out of town? Chances are, you paid them in cash. You didn’t need to go to the bank to make a formal transaction. That’s what it’s like to exchange cryptocurrencies. They are decentralized: No government or bank controls how they’re produced, what their value is, or how they’re exchanged.

As a result, cryptocurrencies are worth whatever people are willing to pay or exchange for them.

Now hang with me, people. We’re about to get techy! You store your cryptocurrency in a digital wallet—usually in an app or through the vendor where you purchase your coins. Your wallet gives you a private key—a unique code that you enter in order to digitally “sign off” on purchases. It’s mathematical proof that the exchange was legit.

Cryptocurrencies operate on what is called blockchain technology. A blockchain is like a really long receipt that keeps growing with each exchange. It’s a public record of all of the transactions that have ever happened in a given cryptocurrency.

WHAT CAN YOU BUY WITH CRYPTOCURRENCY?

At this point, most people still see cryptocurrencies as an investment. But cryptocurrency spending could become popular as these currencies gain trust. There are online retailers, such as overstock.com, who accept cryptocurrencies. And of course, any two individuals who value the tokens can exchange them for goods or services.

Some major retailers, such as Whole Foods and Nordstrom, are experimenting with accepting Bitcoin as a valid source of payment.1 But for the most part, cryptocurrencies are still on the fringe.

4 THINGS TO KNOW BEFORE INVESTING IN CRYPTOCURRENCY

Okay, y’all, I’ve got my coaching hat on. I might even get a little riled up! Before you say good-bye to your dollars and hello to Bitcoin or Ether, there are a few things you need to know.

  1. Cryptocurrencies are volatile. The value of cryptocurrencies goes through extreme ups and downs. In 2017, the value of Bitcoin swung between $900 and $20,000!2 Someone sneezes and the price drops! Investing in cryptocurrency is risky, to say the least. Of course, all investing carries a degree of risk. But you should always avoid unnecessary risks, especially when it comes to your hard-earned money. Don’t play poker with your financial future.
  2. There are lots of unknowns. There’s still a lot that needs to be ironed out with how cryptocurrencies work. Think about it: Nobody even knows who the founder of Bitcoin is! Relatively speaking, only a small percentage of people in the world understand the system and know how to operate it. Ignorance makes you vulnerable. I always advise people that if you can’t explain your investments to a 10-year-old, you have no business investing in them to begin with. You’re setting yourself up to do something stupid.
  3. Cryptocurrencies can be used for fraudulent activity. People who want to remain anonymous and avoid regulation from banks or the government will use cryptocurrencies to make shady deals on the black market. Money laundering is also a problem in the crypto world. Now hear me on this: I’m not saying that everyone who uses cryptocurrency is a bad person. But I am
  4. saying that if someone wants to commit criminal activity and avoid being tracked, the crypto world is an ideal place for them.
  5. Cryptocurrencies have an unproven rate of return. Trading in cryptocurrency is like gambling. Because it’s exchanged peer to peer without any tie to regulatory standards, there’s no pattern to the rise and fall of its value. You can’t predict changes or calculate returns like you can with growth stock mutual funds. There just isn’t enough data, or enough credibility, to create a long-term investing plan based in cryptocurrency.

SHOULD I INVEST IN CRYPTOCURRENCY?

Here’s the deal: If you’re out of debt, have an emergency fund that will cover three to six months of expenses, and you’re already investing 15% of your income in growth stock mutual funds—which are hundreds of times more secure than crypto—then you may make the choice to play around with cryptocurrencies.

But I want to warn you: When you invest in crypto, be prepared to say good-bye-o to your money. It’s not a good way to build wealth. There are thousands of millionaires who agree with me.

Don’t give in to stupid just because there’s a lot of hype. I’ve personally talked to people who have taken out a mortgage or cashed out their entire 401(k) early to invest in cryptocurrency! No, no, no! Don’t put it all on the line and risk your financial future, your retirement dreams, and your family’s well-being.

At some point in the future, cryptocurrencies might become legitimate and widely used. But for now, be safe and be smart.

INVEST WITH CONFIDENCE

Get-rich-quick schemes seem too good to be true because they are. The reality is, the road to building wealth is slow and steady. Millionaires don’t build wealth through risky investments like cryptocurrencies. In fact, in The National Study of Millionaires, we found that the number one wealth-building tool of millionaires is their workplace retirement plan, like a 401(k).

Written by Chris Hogan from ChrisHogan360.com

 

Curbing the Christmas Compulsion/0 Comments/in , /by

I don’t know of many people who don’t love Christmas time. This time of year, believers remember the birth of our Savior and celebrate by giving gifts to others, just like the wise men brought gifts of frankincense, mirth, and gold to baby Jesus. And non-believers….hmmm….well, I don’t know why non-believers celebrate Christmas, but I do know they love this time of year as much as we do like to buy and exchange gifts too.

Everyone celebrates Christmas time. Christians. Non-believers. But especially retailers. Yep, the most celebrated time of the year is also the most critical time of the year to stores and retailers, as it means there is a lot of opportunities to make a lot of money. According to an article on USAToday.com [1], customers are projected to spend over $1.1 trillion this time of year! While we customers are thinking about Santa’s red sleighs and candy canes, retailers are thinking about the “green” customers are going to spend at their stores or on-line. That is why internet sales and holiday specials start so early — businesses want to give you plenty of opportunities to spend your money. And there is nothing ethically wrong with that. It’s just business.

Nowadays, if you haven’t started your Christmas shopping by the beginning of December, you’re behind! Black Friday weekend sales are over, and Cyber, Monday One-Day opportunities, has passed. So, if you missed it, what are you going to do? The first thing you need to do is relax. There is still plenty of time. Secondly, you need to know what you are willing to spend on Christmas gifts this year. And once you’ve come to that number, you need to be resolved not to spend more than that amount. Developing a plan will help (calm down, I didn’t say a budget). Next, ask yourself some hard questions. Like…
“Does it make sense for me to spend this much money on Christmas, given my financial situation?”
Or……
“If I spend this much money on gifts, what is it going to cost me later?”
Or……
“If I spend this much money on Christmas, will I have any trouble paying my bills?”
If there is any hesitation to truthfully answering these questions, you might need to reduce the amount you plan on spending. I know everybody wants to give gifts, and retailers are more than happy to help you with that, but you have to know your limitations. Maybe this year, you will need to give more cards than gifts. Or perhaps all you can give this year are text messages! That’s OK!

Don’t let the fear of people’s potential reactions make you do something you will regret later. Sometimes we let ourselves get carried away with silly fears and make bad choices. We worry ourselves with thoughts of how others will feel if we can’t get them the gift we think they are expecting. We fear our failure to meet their expectations will somehow damage the relationship. But if it does, what does that say about the relationship in the first place? And when it comes to children, did you know not one kid in history was emotionally damaged because they didn’t get what they wanted for Christmas? Nope. Not one (trust me, I researched it). Kids are pretty resilient. They’ll live. Does that sound kind of harsh? Not sorry. The truth is not nearly as pleasant as often as we’d like to believe. We have to exercise some restraint. When Christmas has passed, YOU will be the one left to deal with your spending choices.

I want you to have a good time and celebrate Christmas with all your family and friends. But, even more so, I want you to celebrate wisely and not be burdened with any financial debt months later because you “went all out.” Besides, Christmas is about Jesus, not gifts! Enjoy the holiday season. But at the same time, know YOUR season. You can’t reap and sow at the same time. Merry Christmas and God Bless!

[1] https://www.usatoday.com/story/money/2019/09/17/shoppers-expected-spend-more-than-1-trillion-holiday-season/2311725001/