Minding Your Money 360 - Quick tips to manage your money for success

I was talking to a client the other day and she asked a question about credit cards. There are so many products on the market today that it can get confusing and making the wrong choices could make matters worse.

She wanted to know the difference between a prepaid card and a secured credit card and there really are some distinct differences. And the one you choose should be based on your goals.

For example, if your goal is to have a credit card for purchases so that you don’t have to carry cash or for convenience purposes, a prepaid card is most likely a good option. With a prepaid card, you load up the card with your funds and any charges you make are deducted from the available funds on the card.

On the other hand, if your goal is to build or rebuild your credit score, the secured card is a better option because unlike the prepaid card, your usage and payment history is reported to the three major credit bureaus. With a secured card, you make a deposit based on your limit and other factors. Minimum deposits typically range from $200 to $500. Then as make purchases they are charged to the card and you will receive a bill each month for those charges. Charges you make do not impact your deposit. It stays in tact and is returned to you at some agreed upon point.

Once you decide on the right card for you…read the fine print regarding fees, etc. Again making the wrong choice can make matters worse.

My client asked this question as we were working on a financial plan for her future. Studies show that the average person spends more time planning their vacation than they do retirement. For more info about our financial planning services shoot me an email at [email protected] or visit www.psworth.com

Thanks for listening and as always remember that minding your money really is the path to a richer life!

It's Monday and I have a question, “Should Your Kids Invest in Roth IRAs?”

I received a letter from Jennifer and she wants to know if she should encourage her kids to invest in a Roth IRA? She says she’s a single mom with two sons are in their teens and they both have part-time jobs and she wants them to start investing early and wondered if a Roth IRA would be a good investment option for them.

So here’s my answer and you can chime in with your comments. I think that’s really a great idea. As long as your kids have earned income, they can invest up to the amount of their earnings up to $5,500 in 2017. And, since the Roth IRA is a type of account and not an investment, they are free to fund it with many different types of investments like stocks and mutual funds.

There are two really great things about Roth IRAs. First, while I don’t recommend this, if they need money later on to purchase a house or pay for college, they can always take out their contributions out without taxes or penalties because their contributions are made with after-tax dollars. And, under certain circumstances, they are allowed to take out the earnings without paying a penalty before age 59 ½.

But probably the best thing about Roth IRAs is that if you leave them alone, they grow tax-deferred and when you take the money out after age 59 ½ it’s tax –free. Growing tax-deferred over a period of years can add up to big bucks and even a cool million. For example, if your kids start investing about $3,000 a year at age 15 and they get a modest return of 7% by age 62, they could have a cool million. That’s the impact of starting early and investing consistently.

So, yes Jennifer, encourage your kids to start investing and a Roth IRA is a good option. Got a comment or more suggestions for Jennifer shoot me an email at [email protected]. And, that’s the minute for today.

Thanks for listening and as always remember that minding your money really is the path to a richer life!

It’s Friday and time for our word of the week –the word this week is home office deduction.

I chose home office deduction or HOD because it’s one of the most overlooked deductions that both business owners and employees may be eligible to take and don’t. One reason they don’t is because they have heard that it is an audit flag and another reason is that they think they need a lot of detailed information to deduct it. And, if that’s what you think, you’re wrong on both counts.

There is no evidence that having a home office deduction is an audit flag and with the new simplified version of calculating the home office deduction all you need to have is the number of square feet of your office. For example, if your office is a 10’ x 12’ room the number of square feet would be 120 (10 times 12). You would then multiply that number by $5 and that would give you your home office deduction which in this case would equal $600. Whala!

Now, there are limitations to this new simplified version and that is the maximum square feet you can use is 300 so if your space is larger than that, you might want to use the regular method that requires more recordkeeping. Also, be aware that this space must be used exclusively for your business or to do work for your employer – there’s no sharing allowed.

Our word of the week home office deduction: if you are eligible and you don’t take it, it could cost you big time and when you multiply that over the course of several years, we could be talking really big money.

And that’s the minute for today. Don’t forget to visit my website at www.psworth.com and sign up for the Minding Your Money Movement and download a copy of the handbook so you can get started right away making your money work harder!

Thanks for listening and as always remember that minding your money really is the path to a richer life!

I’ve got taxes on the brain so I’m answering your tax questions. Here’s one that is more common than you might imagine. With all of the free options online the Timothy asked, “Should I use one of the free programs online or should I use someone like you to do my taxes? And, now here’s my favorite answer…it depends!

And, here some of what it depends on:

How simple or complex your situation is. If you have a fairly simple return or you are familiar enough with preparing taxes so that you can spot issues then there’s probably nothing wrong with using one of the free online services. But if you have a complex situation, you might want to get some help from a tax professional who can help you navigate through some of the crazy questions you might bump into.

Another option is to get help or advice this year so that you are better prepared next year. For example, I teach a DIY tax class right after the end of tax season while everything is still fresh in your mind so that you can not only be better prepared for the next year but so that you can put options in place to have more control over your tax bill next year. (The class is scheduled for the end of April so stay tuned for details.)

In either case, nothing will help if you don’t keep good records so document everything and be prepared to show how you arrived at your numbers.

And, that’s the minute for today. Take control of your money? Join the Minding Your Money Movement! Visit my website at www.psworth.com and sign up today.

Thanks for listening and as always remember that minding your money really is the path to a richer life!

Piggybacking on yesterday, another common tax question I get asked is what should I do with my tax refund? And, this is such a common question that I don’t think some people realize what tax refunds are. Tax refunds are a return of your money – money that you earned and Uncle Sam took out of your pay and graciously saved and used it interest free for the previous year. It’s not found money, it’s not a gift and it’s not lottery winnings – it’s your money.

There are two schools of thought – people who want to get a refund and that represents savings for them to do something big – go on a vacation, buy a car, etc. and while can understand that way of thinking, you can actually accomplish that same thing and possibly have even more money available.

When I work with clients, I tell them that the goal is to breakeven at tax time – not to owe any money and not to get anything of substance back. I have some clients where that owe or get back $3 to $5. They can do that because they calculate what they owe in advance and set things in motion such as altering their W4 so that the appropriate amount is taken out of their pay and then setting up an automatic savings plan to scoop up any extra money and immediately put it in savings and investments. We have good technology today and all of this can happen without you lifting a finger.

And, that’s the minute for today. Don’t get caught in the trap of thinking that the only way you can save is with Sam’s help. That’s just not the case anymore. Want to learn how to take control of your taxes and your refund. I have a DIY class coming up at the end of April. The class info is not up yet, but if you are interested, send me an email at [email protected] and put taxes in the subject line and I will add you to the list to get class info as soon as it is available.

Thanks for listening and as always remember that minding your money really is the path to a richer life!

What’s your definition of wealth? I was talking to some friends and we were trying to boil down the essence of achieving wealth into its least common denominator and we came up three key things that people could do if they wanted to build wealth regardless of your definition or how much money you made. Here are three we decided on:

#1: Reduce your debt. Every dollar you spend on interest is a dollar you don’t have available to invest and grow your money which is key to building wealth. If debt is an issue and you need to make a plan to get out.

#2: Build a cash reserve. A cash reserve also known as an emergency fund is money you have saved in case of an emergency so that you don’t have to go into debt or take money out of your long-term investments to bail yourself out. This is typically 3-6 months of expenses but, depending on your situation, you may want to have a larger cushion. Truly, there is no magic number, so save the amount that makes the most sense to you.

#3: Invest early and invest for the long term. Investing early and for the long-term allows you ride out the inevitable ups and downs in the market and gives your investments an opportunity to grow. A good place to start is with retirement accounts. This includes accounts like 401(k)s, 403(b)s, SEPs if you’re self-employed and IRAs. The good thing about retirement accounts and one of the reasons that I like them so much is that your investments grow tax-deferred which means your money grows faster because you don’t have to pay taxes on the growth each year.

And, that’s the minute for today. Did you notice that making a ton of money was not one of the keys to building wealth? We eliminated that one because if you don’t have these three in place making a lot of money won’t help you sustain it. Want to take control of your money? Join the Minding Your Money Movement! Visit my website at www.psworth.com and sign up today.

Thanks for listening and as always remember that minding your money really is the path to a richer life!

It's Monday and I have a question, “What’s Your Legacy?”

I started talking about the concept of legacy on the ‘Minute’ last week after attending a luncheon where the speaker listed legacy as an element of leadership but I believe that it is so much more so at a workshop, I gave participants the task of writing their legacy. I told them to imagine that they were about to receive a reward for BLANK and they were being interviewed by CNN or a news or magazine of their choice and they were being asked to talk about highlights of their life and how they got to where they are today receiving the BLANK award.

Here’s one example:

I am about to receive the business person of the year award. Over the past few years, I have grown my family restaurant business into a multi-million dollar enterprise with five locations. I employ over 100 people and despite our growth our restaurants are known their family atmosphere and great food and service. I am in the process of turning the business over to the next generation and since they grew up in the business, I am sure that they will continue to carry out our legacy.

Then I asked them to go one step further and match their current actions to their legacy to see if they were headed in the right direction to leave the legacy that they wanted to leave. It was a fun workshop and many decided that they were sorta on the right track but they needed to do some real work to get there.

And that’s the minute for today. Don’t make this a spectator sport – take a moment and complete this exercise so you know if you’re on track. You know I love helping people with all aspects of their financial lives. If you have a question or comment, send it to me at [email protected]

Thanks for listening and as always remember that minding your money really is the path to a richer life!

It’s Friday and time for our word of the week –the word this week is Green.

I chose green because it’s St. Patrick’s Day and it’s also the color of money. When you think about money – what comes to mind? I’ll bet it’s a mixture of things, some of which are not directly related to it being an inanimate object. In other words, money often conjures up so many emotional triggers that may not be good for your financial health such as rich people are greedy, money can’t buy happiness and the list can on for a very long time.

But what I would like to suggest that you do on this day of wearing the green is that you step back for moment – step back from the emotional side of money and see it for what it really is – a means to an end. It really doesn’t know right from wrong such as when you should save it, when you should invest it and when you should give it away. But you do or you should. If you don’t know the answers to questions like these, you owe it to yourself to find out. Because at the end of the day money has no allegiance and it will leave you as quickly as it came to you.

Our word of the week green: it’s the color of money but it’s also the color living and growing, and having money makes both of those a lot easier.

And that’s the minute for today. Don’t forget to visit my website at www.psworth.com and sign up for the Minding Your Money Movement and download a copy of the handbook so you can get started right away making your money work harder!

Thanks for listening and as always remember that minding your money really is the path to a richer life!

Yesterday was special. No I mean it, I attended a ProWin women’s luncheon and Mike Pitcher was the speaker. He has just written a new book, 7 Elements of Leadership. Now I know what you’re thinking…what does leadership have to do with money. Well, it turns out that whether you are a mom, a dad, a teacher or a CEO of a large corporation, leadership skills are important because you have a wide spear of influence regardless of what you do and we’ve talked about this before about how your kids watch more closely what you do versus what you say.

Interestingly enough, one of the seven elements of leadership is legacy – what do you want to leave behind or be remembered for? And, here’s an exercise that Mike gave us – he said, write down what you want your legacy to be then compare it to your actions. If they match – great. But if they don’t, you should either change what you want your legacy to be or change your actions and I think that’s good advice – see how that ties back to money.

And, that’s the minute for today. Mike Pitcher’s book – 7 Elements of Leadership is available on Amazon.com and I highly recommend it. Got a burning question? Send it to me at [email protected]

Thanks for listening and as always remember that minding your money really is the path to a richer life!

Someone leaked a copy of President Trump’s 2005 tax return and there is a real buzz going on about it – but the truth is a tax return raises more questions than it answers because it teases you with summary tidbits and if you don’t have the backup info you can go out on all kinds of tangents.

I like to use the tax returns of my clients to help them paint a summary picture of where they have been like how much money they made and to make their projections for next year. What their priorities are, in other words are there investments that show that they are working towards goals and if so, what are they. Do they own a business? If so, what type of business and what are their plans to expand it, etc. If they own a home – this could show up in itemized deductions unless they have already paid it off. Do they have kids in college (tuition interest) or private schools? And, finally are they withholding too much – money that could be working for them in other ways – or too little so that they owe taxes and penalties. Ouch!

I see a tax return as a like an annual story or cliff notes and as the starting point for a real conversation about where we go from here.

And, that’s the minute for today. Take control of your money? Join the Minding Your Money Movement! Visit my website at www.psworth.com and sign up today.

Thanks for listening and as always remember that minding your money really is the path to a richer life!