Here are a few simple steps you can take to improve your finances this year.
Step 1: Start by getting out of debt.
Not only does carrying debt mean you could end up paying a ton of interest over time, but it also takes away from money you could save and invest for your financial goals. If you decide that 2013 will be the year you tackle any debt you have, then check out www.PowerPay.org, a free resource to help you develop a debt repayment plan.
Step 2: Make sure you have a cash reserve.
If you don’t have an emergency reserve, then make 2013 the year you start one. The rule of thumb is to have between 3 and 6 month of living expenses saved, but don’t worry if you can only put away a little bit of money to start. Since most high-interest, “pay day” loans are for less than $500, even a small amount of cash can save you in an emergency. You can use www.DepositAccounts.com or www.BankRate.com to find high-yielding savings accounts and CDs to hold your cash.
Step 3: Start investing.
If you’re new to the world of investing then the easiest place to start is with your company’s retirement plan. If your company doesn’t have a retirement plan, then you could start an IRA or Roth IRA at a company that offers commission-free mutual funds. Even if you're already investing in your company's retirement plan, it's a good idea to start additional savings in an IRA, Roth IRA, or taxable investment
account to supplement your retirement savings. Consider starting with a “target date” or “asset allocation” mutual fund that will give you instant diversification with a single investment.
Step 4: Get a second opinion.
If you already have investments, you might benefit from sitting down with a professional to discuss things like your asset allocation, individual holdings, tax management, or risk reduction. Keep in mind that someone that earns commissions will have an incentive to recommend changes, so look for an advisor that works on a fee-only basis and never accepts commissions from his or her recommendations. You can go to www.NAPFA.org or www.GarrettPlanningNetwork.com to find a fee-only advisor
To learn more about our company - and find out how we are different from other financial advisors - visit www.VannoyAdvisoryGroup.com or call us at (210) 587-6433.
Monday, December 31, 2012
Thursday, December 6, 2012
Year-End Tax Tips for 2012
Tip 1: Don't overreact to talk about the "Fiscal Cliff."
It's almost impossible to turn on the TV, listen to the radio, or pick up a newspaper without hearing or reading something about the "Fiscal Cliff" and the impending economic disaster headed our way. Before you make any changes to your investments, you should think about getting a second opinion from a CPA or fee-only advisor. It's usually not a good idea to react to media hype!
Tip 2: Be careful when buying a new mutual fund.
Most mutual funds pay out capital gains and dividends toward the end of the year, so you want to check for potential distributions before you buy a new fund. The IRS doesn’t care how long you’ve held a fund so you’ll be taxed even if you buy it just before the distribution. And since the share prices of funds and stocks drop by the amount they distribute, missing the dividend won’t affect your future return.
Tip 3: Prepay your property taxes.
Property tax payments aren’t due until the end of January, but you can deduct them this year if you pay them by the end of 2012. But if you expect to be in a higher tax bracket next year – due to tax increases or higher earnings in 2013 – then you could wait until January to pay and then prepay next year’s taxes in order to double up on the deduction.
Tip 4: Pay your January mortgage payment before December 31st.
Paying your January mortgage payment before the end of the year will increase your 2012 mortgage interest deduction by the extra amount of interest you pay in the January payment.
Tip 5: Review your portfolio.
If you have investments in taxable accounts that are worth less than you paid for them, it might make sense to sell them by the end of the year to realize the loss. These losses can be written off against investment gains, and excess losses can be written off against income up to $3,000. Unused losses can be carried over to future years.
Tip 6: Defer income.
If you have your own business and use the cash method of accounting, you might be able to benefit from waiting until the end of the year to invoice customers so you don’t receive the income – and have to pay taxes on it – until 2013.
To learn more about our company - and find out how we are different from other financial advisors - visit www.VannoyAdvisoryGroup.com or call us at (210) 587-6433.
It's almost impossible to turn on the TV, listen to the radio, or pick up a newspaper without hearing or reading something about the "Fiscal Cliff" and the impending economic disaster headed our way. Before you make any changes to your investments, you should think about getting a second opinion from a CPA or fee-only advisor. It's usually not a good idea to react to media hype!
Tip 2: Be careful when buying a new mutual fund.
Most mutual funds pay out capital gains and dividends toward the end of the year, so you want to check for potential distributions before you buy a new fund. The IRS doesn’t care how long you’ve held a fund so you’ll be taxed even if you buy it just before the distribution. And since the share prices of funds and stocks drop by the amount they distribute, missing the dividend won’t affect your future return.
Tip 3: Prepay your property taxes.
Property tax payments aren’t due until the end of January, but you can deduct them this year if you pay them by the end of 2012. But if you expect to be in a higher tax bracket next year – due to tax increases or higher earnings in 2013 – then you could wait until January to pay and then prepay next year’s taxes in order to double up on the deduction.
Tip 4: Pay your January mortgage payment before December 31st.
Paying your January mortgage payment before the end of the year will increase your 2012 mortgage interest deduction by the extra amount of interest you pay in the January payment.
Tip 5: Review your portfolio.
If you have investments in taxable accounts that are worth less than you paid for them, it might make sense to sell them by the end of the year to realize the loss. These losses can be written off against investment gains, and excess losses can be written off against income up to $3,000. Unused losses can be carried over to future years.
Tip 6: Defer income.
If you have your own business and use the cash method of accounting, you might be able to benefit from waiting until the end of the year to invoice customers so you don’t receive the income – and have to pay taxes on it – until 2013.
To learn more about our company - and find out how we are different from other financial advisors - visit www.VannoyAdvisoryGroup.com or call us at (210) 587-6433.
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