How to start—and stick to—a budget

Deciding to make a budget is an important step in taking control of your finances. The next step is figuring out how to make a budget that’s right for you. These four steps can help you create a budget that you can stick to. 1) Figure out how much you’re currently spending Without knowing this key piece of information, it’s challenging to create realistic saving goals, so invest a little time to figure out where your money’s going. A typical budget might include categories like mortgage/rent, food, loans, transportation, utilities, child care, and medical expenses. Some other spending categories that could make the cut are things like clothing and entertainment. Create categories that are right for you. To accurately figure out your spending habits, try the following: Carry a budget notebook or another way to take notes. Every time you make a purchase, write it down and categorize it using the categories above. Go through your checking account line by line and categorize everything. If you use online banking, there are free websites that do most of the work for you. Know where you’re spending, without spending any effort. Once you set up your spending goals, they will also send

May 24, 2019 No Comments

Tax planning for the self-employed

Self-employment is the opportunity to be your own boss, to come and go as you please, and oh yes, to establish a lifelong bond with your accountant. If you’re self-employed, you’ll need to pay your own FICA taxes and take charge of your own retirement plan, among other things. Here are some planning tips. Understand self-employment tax and how it’s calculated As a starting point, make sure that you understand (and comply with) your federal tax responsibilities. The federal government uses self-employment tax to fund Social Security and Medicare benefits. You must pay this tax if you have more than a minimal amount of self-employment income. If you file a Schedule C as a sole proprietor, independent contractor, or statutory employee, the net profit listed on your Schedule C (or Schedule C-EZ) is self-employment income and must be included on Schedule SE, which is filed with your federal Form 1040. Schedule SE is used both to calculate self-employment tax and to report the amount of tax owed. Make your estimated tax payments on time to avoid penalties Employees generally have income tax, Social Security tax, and Medicare tax withheld from their paychecks. But if you’re self-employed, it’s likely that no

March 4, 2019 No Comments

The lost art of saving: A four-step plan

According to government data out this quarter, student loan debt, which has doubled over the past 8 years, stood at $1.8 trillion as of June 30. About 11.5 percent of student debt was delinquent or in default for at least 90 days in the quarter that ended in June, up from 11.1 percent in the previous three months.* This new data signals a potentially significant drag on economic growth and upward mobility for the U.S. middle class. Although there are plenty of reasons for the current debt cycle many American students now find themselves in, there is a solution to dig out of this hole over the long term: saving. That simple, timeless virtue of setting aside some of our money to guard against excess or unexpected circumstances is in need of a major comeback. It’s important for those students piling on massive amounts of debt, and it’s also important for the parents of college goers whose own saving habits could help forestall some of the financial burden heaped on their children. Islamic finance eschews debt in its classical sense, respecting the prophetic wisdom that equates debt to slavery. Faithful Muslims are encouraged to regularly ask God for protection from

September 30, 2015 No Comments

The benefits of tax planning

Taxes can take a big bite out of your total investment returns, so it’s helpful to look for tax- advantaged strategies when building your portfolio. You don’t want to pay any more in tax than you have to. That means taking advantage of every strategy, deduction, and credit that you are entitled to. Tax-deferred and tax-free investments Tax deferral is the process of delaying, until a future year, the payment of taxes on income you earn in the current year. For example, the money you contribute to a retirement account (such as a 401(k) or deductible IRA) isn’t taxed until you withdraw it, which might be 30 or 40 years down the road! Any earnings the account generates are also allowed to grow tax-free. This can be very beneficial because the money you would have spent on taxes remains invested and for your own benefit. In the early years of an investment, the benefit of compound growth may not be very significant. But as the years go by, the long-term boost to your total returns can be dramatic. Tax deferred is not the same thing as tax free. Tax deferred means that the payment of taxes is delayed, while tax

April 8, 2014 No Comments

Top 5 mistakes employees make with 401(k)s

The results are in, and our advisors have agreed that these are the five most common mistakes employees make with their 401(k) plans: 1. Not participating: The biggest mistake you can make is not contributing to a 401(k) if you are eligible, especially if your employer matches your contributions. Start out with small contributions and increase them gradually, otherwise you are missing out on an effective pretax and tax-deferred investment. The only reason not to start contributing is if you have an outstanding debt, as paying off your debt should be a priority. 2. Not contributing enough: Contribute enough to receive your employer’s match. Many employers will match your contribution up to a certain percentage. Otherwise, you are basically walking away from free money. For 2013, you can contribute as much as 17,500 in addition to a catch up of $5500 for those 50 or older. For example, if your employer matches you dollar-for-dollar up to 5%, and you make $100,000 annually, then you should aim for a minimum contribution of $5,000 so that you will receive a match of $5,000 from your employer. 3. Forgetting to rollover or cashing out your 401(k) when switching jobs: In the hassle of

September 9, 2013 No Comments