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

As the tax deadline gets closer and closer, I’m getting more and more questions about ways to save money on taxes. Mora says, “I heard that you can contribute to an IRA and deduct it on your tax return. Is that true?”

Mora, it’s true but it’s not available to everyone. First, if your income is less than $99,000 if you are married filing jointly or $62,000 for singles you can deduct the full amount you contribute up to $5,500 or $6,500 if you are over 50. And, this is true even if you have a retirement plan at work. So there is the possibility that even if you maxed out your 401(k) which reduces your taxable income, you can also reduce it even further with this deduction and this becomes a super win-win for you – you win on lowering your tax bill today and you win on having more money for retirement.

However, if you don’t have a plan at work, you can deduct the full amount you contribute regardless of your income.

But, there are some cons to be aware of: First, you will be required to pay taxes on the money when you take it out. And, second, you will be required to start taking money out at age 70 ½ whether you need it or not so you can pay taxes on it.

Depending on your situation that may not hurt much or if you are like some of the people I see coming into my office, it may hurt a lot because they didn’t have any taxes taken out when they took the money out of their IRA account and that money is due now.

And, that’s the minute for today. 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!

And, here’s the question of the week. What’s the Difference Between Mindset and Motivation?

Is there a real difference or are they both the same thing. I was talking to some friends this weekend and this question turned into a real heated discussion with some saying that they are not the same thing but you need them both and others saying that they are basically the same thing. So I decided to look up the definitions when we parted ways and here is what I learned:

Mindset is defined by Webster’s as a mental attitude or inclination or a fixed state of mind, such as His mind–set does not allow for new situations.

While motivation is defined as incentive, drive such as - The fear of failure was the motivation for his achievements- or the act or process of motivating as in - Some students need motivation to help them through school.

Don’t you just love it when they use the word in its own definition?

They really do sound like two different things but they have the power to shut you down. The wrong mindset can sabotage your efforts even when you have the motivation to get things done and without the motivation the best mindset in the world can be reduced to just ideas.

At the end of the day, the real question is what do you think? And in your case are those two things in sync or are they running to opposite ends of the court? Let me know what you think.

And that’s the minute for today. 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 Systems.

I chose systems because our lives are so complicated and developing or using systems helps us stay on track. Probably one of the most popular or least popular system we have available – depending on which side of the isle you stand on are budgets or spending plans. Having a system like a budget to help you plan where your money goes, takes a lot of the pressure off because that’s one less thing to worry about and you can spend your time focusing on other things like have fun.

Many businesses are able to function efficiently because of the systems they have in place.

Systems can real time savers and when integrated into your routine they can almost become seamless like brushing your teeth in the morning – you just do it.

Our word of the week systems: Look around your life to see the systems you currently have running in it and imagine what your life would be life if you basically had to reinvent them on a daily basis.

And that’s the minute for today. Don’t forget to take control of your money! 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!

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

We talked about taxes and Social Security benefits yesterday and I want to add a couple of extra notes regarding retirement accounts and taxes.

The first note is that when you take money out of a retirement account such as a 401(k) or a deductible traditional IRA, in addition to taxes you will also be subject to a 10% penalty. While the 10% penalty goes away after 59 1/2 the taxes do not.

Plus, starting in the year in which you turn 70 1/2, you must take required minimum distributions or RMDs from traditional IRAs, 401(k)s, etc. The only exception are 401(k)s, etc. from your current employer if you are still working and you own less than 5% of the company.

This is a mandate from Uncle Sam and failure to do so could result in a 50% penalty of the amount you should have taken out but did not. So there is no mistake – if you were supposed to take out $10,000 and you don’t, your penalty could be $5,000. So don’t neglect this mandate.

And here’s food for thought – just because you have to take money out of your account, it doesn't mean you have to spend it. If you don't need the money to live on, you can reinvest the money in a taxable account so it can continue to grow for your future.

And, that’s the minute for today. Take control of your money! 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!

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

I’m into tax season and many of my clients who receive Social Security always seem to be shocked when they see that some of their Social Security benefits are taxed and that in some cases, instead of getting a refund they actually owe taxes. But the truth is, as much as 85% of your benefits could be counted as taxable income when your other income – income from interest, jobs, pensions and retirement accounts including withdrawals of pretax money that you contributed to a 401(k) or a traditional IRA, etc. reaches certain levels.

Here’s a quick way to find out if you must pay taxes on your Social Security benefits: Add one-half of your Social Security to all your other income, including tax-exempt interest. Then compare the total to the base amount for your filing status. If your total is more than the base amount, some of your benefits may be taxable.

Base Amounts.  The three base amounts are:

$25,000 – if you are single

$32,000 – if you are married filing jointly

The takeaway here is if you will be taking out money from retirement accounts or earning other income, consider taxes and either have taxes taken out of your other income or set aside money to pay your taxes. I worked with one couple this week who fell into the trap of taking money out and not withholding any taxes – their total tax bill - $8,000.

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!

I got a question from Marla. She said, “I just started a business last year and someone told me that I would need to fill out a Schedule C. What’s a Schedule C? Good question. A Schedule C is basically a summary of your business for the year. It has a place to enter your income and all of your expenses. If you haven’t already done so I recommend that you Google Schedule C and print out a copy or you visit the IRS.gov site and download one.

The reason why it’s important to have a hard copy is so that you can begin to fit your numbers into the appropriate categories. For example, they have categories like advertising, supplies, equipment, etc. and as much as possible take your expenses and put them into these general categories. If you have some expenses that don’t seem to fit anywhere, then you can list them out at the end of the form. The Schedule C also includes space for you to include any mileage you incurred in your business, such as picking up supplies or visiting clients. If you have a home office the deduction from that will flow onto the Schedule C from another form – 8829.

This should all be a little clearer when you have a chance to see the form. If this is all sounds a little overwhelming to you, you might want to consider getting some help at least this first time.

Needless to say, keeping good records is essential and it will make completing the Schedule C a lot easier.

And, that’s the minute for today. 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!

Here’s my Monday question for you to ponder. What’s the best way to manage money with your honey? There is really no right or wrong answer as long as it works for you as I was remind by a friend this weekend.

At one end of the spectrum are couples who keep everything separate even to the point of assigning bills for them each to pay such as one paying the rent and the other paying utilities and they both buy their own groceries – I call this the roommate plan. Then there are couples who have three accounts – one for each of them and a separate household account for bills, groceries, etc. that they may each contribute a set amount to or an amount based on a certain percentage of their income – I call this the equitable plan. And, finally, there’s the couple who puts everything into one pot. It’s not unusual in this case, for one of them to take the lead and make most of the critical money decisions.

However, regardless, of how you choose to manage your money for general things – rent, food, etc. My question is how do you accomplish your money goals? How do you make those decisions about which goals are important and which ones you will go after? There really is more to the money equation besides just paying bills and if the two of you can work together, chances are you will get there a lot faster.

And that’s the minute for today. You know I love helping people with all aspects of their financial lives. If you have a 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!

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

There is so much going on today, and minding your money is so important. This means that before you reach out for help from a financial advisor, one of your first steps should be to check them out. So how can you accomplish that? Here are two important resources and if you don’t make use of them shame on you.

The first resource is to check out representatives, advisors, brokers, etc. To do this, go to www.brokercheck.finra.org. When you go there you can put in your advisors name and a whole plethora of information comes out, including things like licenses so you know if they are licensed to actually sell products to you or if they have been cited for misconduct. That alone is good info since so many people have been swindled by people who were not licensed or who have been sanctioned for not doing a good job for their clients.

If your advisor is a RIA or a registered investment advisor, you should go to www.advisorinfo.sec.gov to check him or her out.

Advisors can be a great help. They can often help you get to where you want to go faster and avoid some of the pitfalls but it won’t do you any good if they’re not good.

Our Word of the Week: Financial Advisor Checks. Don’t forget these resources are listed on our website -- Episode 585.

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!

Okay, I got a question from Cherie and she wanted to know the difference between ETFs and Index Mutual Funds. I know we covered this earlier but it’s kind of important to know the difference so it bears repeating.

An ETF is a type of security that tracks an index, a commodity, bonds, or a basket of assets like an index fund. However, unlike mutual funds though an ETF trades like a common stock on a stock exchange. And like stocks they experience price changes throughout the day as they are bought and sold.

Other than that, they are similar in so many ways including the overall costs, but it’s tough to beat the simplicity of investing in index mutual funds. They can be purchased directly through mutual fund companies like Vanguard or Fidelity which eliminates many of the fees and hassles. So the one you decide to purchase may come down to personal preference.

One word of caution though if you decide to go the route of ETFs – not all ETFs are created equal. So if you are new to investing you might want to stick with the largest, most widely traded ETFs on the market like those from companies like Vanguard and Fidelity, the ones designed to match well-known benchmarks and which have track records demonstrating their accuracy.

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!

Should I buy or rent a home? That’s a question that landed in my inbox. And, truthfully there is no best answer in general – it’s one that has to be answered on an individual basis and here’s why – everyone is different.

I’m not actually dodging the question but where you live can be both a financial and an emotional decision. And, when emotions come into play, all bets are off. For example, there are people, myself included who have this desire, this need to own or have control over the space we live in. That desire outweighs the fact that I could most likely rent a place for the same cost or even less so it is not purely a financial decision.

On the other hand, this is not a line in the sand for some people. They have chosen to focus on other things – the cars they drive, the clothes they wear, the size of their bank account. In other words, where they live is not a make or break decision. So should you buy or rent a home. It depends on where your priorities lie and over time they are subject to change.

And, that’s the minute for today. Don’t forget to visit my website at www.psworth.com, sign up for the minding your money movement and grab a copy of Minding Your Money Handbook. It’s filled with great tips and strategies to take control of your money to reach your goals.

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