Personal Finance

2019 Roth IRA Contribution Limits

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Fall is quickly approaching.  Every October the IRS (Internal Revenue Service) releases their updated retirement limits for a number of accounts.  The Roth IRA is one particular account that many will be looking at.

For 2018, the contribution limit for a Roth IRA is $5,500 with an additional $1,000 catch-up for individuals over the age of 50.  The 2019 Roth IRA contribution limits will be announced by the IRS in less than two months.

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The government uses inflation numbers to determine when and by how much to raise retirement limits.  When it comes to IRA’s, any annual increase in contribution limits will be in $500 increments.  Meaning that there are only two possibilities when it comes to the 2019 Roth IRA contribution limits.

Either the limits remain the same at $5,500 ($6,500 for individuals 50 or older) or it is increased to $6,000 ($7,000 for individuals 50 or older).  It is expected that the 2019 Roth IRA contribution limits will increase to the latter amount.

So what does an increase in $500 a year for a Roth IRA account mean?  Well, for starters, instead of being able to contribute an awkward $458.33 per month to the account, you will now be able to contribute an even $500.  Of course this only applies to individuals under the age of 50.  Contributing on a consistent basis has proven time and again the best way to invest.  You can take advantage of the market when it hits various highs and lows.

Are you worried that you won’t have the additional funds to contribute an extra $500 a year to a Roth IRA?  Then now is as good of a time as ever to go and create your very own free budget.  The best way to see where you are spending your money every month is to track it.  Although it might seem like a challenge at first, you will most likely be able to find a way to contribute the additional $41.67 per month to your Roth IRA.

Why choose a Roth IRA?  There are many benefits to having one.  First and foremost, the money you put into it will grow and compound tax free through the years.  Additionally, when you do decide to withdraw from the account, you will not be required to pay any income taxes on the withdrawals.  It’s an especially good account to have in order to help offset tax burdens brought on by 401k’s and social security.

With the official numbers for the 2019 Roth IRA contribution limits less than two months away, we will have to wait a little longer, but we can predict that more than likely the amounts will increase.

Budget Smart, Invest Wise

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Focus on Results: Where to Spend Resources for Maximum Gain

JW SteinertLeave a comment

When you’re running a business, working in any kind of managerial role or simply taking decisions on behalf of one for example as a marketing agency entrusted with a budget, what you’re doing every day is choosing where to spend resources to get the best results for the smallest investment. Those resources might be literally money, but the resources you have at your disposal could be the work-hours of the team you’re managing, the reputation of your company, even personal favours built up over time.

You need to make shrewd use of these resources, putting them into projects that bring in a bigger return than spending them costs. This doesn’t just mean profit: one of the most important things you can do is begin to recognise more indirect gains, from building a reputation for quality with your customers, spending money to build in risk avoidance systems that reduce loss from future projects and avoiding false economies, seeing the bigger picture is vital as you rate your decision making and account for it in front of others.

One of the most important factors at work here is the use of data to inform each decision you make. Using research on your own company, and from market research agencies like Attest mean you can approach choices with confidence about what your consumers want, the extent to which they’ll trust your brand, and exactly what you can do to get it to them. It ensures you’ll avoid problems like over promising, which can harm trust in your company in the long term and drive away the loyal repeat custom that success is founded on. With good data you can start to predict the outcome of your choice, and this modelling allows you to steer towards good outcomes and away from bad ones.

It’s important that your research and data gathering looks back as well as forward. Don’t just walk away from a project, especially if it’s gone badly (or at least, not as planned). Review your decisions, look at where your expectations differed from reality and try to work out why: you might need to make some personal changes if your preconceptions are causing to allocate resources wastefully, or you might need to change your data gathering and analysis techniques to better your ability to predict how your choices will turn out and make sure you’re making the right ones.

Buying Part of a Business: Is it Worth It?

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When seeking to continue to build your financial portfolio, adding investments is one idea that many choose to pursue. One way that such investments are typically made is by buying part of a business. Buying into an existing business means that you become one of the main stakeholders, owning a portion of the business itself. While this is something that is done frequently, quite often are new business owners not aware of the many factors that are related to making this significant financial decision.

Benefits

Of course, buying part of a business may sound overwhelming, but there are many factors that make it a beneficial decision.

• Established company client base. One of the benefits of owning part of a business that is established is the fact the client base is already set. While a new business has to attract customers and build a group of returning clients, one that is already functioning will have this taken care of. This will allow the business owners to focus more on customer service and maintaining client retention and increasing the number of clients.

• Ease of expansion. If you happen to buy part of a business that is looking to expand, it will be much easier to do with a company that has already made a name for itself and gets good feedback from its clients. It’s also easier to get an unsecured small business loan for expansion when the company has a proven track record of sales.

• Focus on business improvements. You may like challenges and, thus, purchase part of a business that may need to make a few changes to improve. Luckily, the company has a plan of operation in place so that you can focus on how to improve it for the company’s overall success.

• Current owner knowledge. One of the best factors of buying part of a business is that the current owners will be very familiar with the company and can show you what has and hasn’t worked for business operations thus far. You, equipped with this knowledge, can then come up with innovative ideas to benefit the business.

Risks

As there are many pros to buying part of an existing business, there are just as many risks of shared ownership of a company. It is best to keep these factors in mind as you make your decision.

• Current owner practices. It would be an absolute nightmare to purchase part of a business where the owners mismanaged funds. Upon learning more about a business you may want to purchase part of, be sure to research all financial records.

• Bad reputation. A good use of customer feedback is to learn how the company fares amongst past clients. A company with a bad reputation will likely struggle with being successful.

• High turnover. In addition to clients being indicative of a company’s progress, the employees can serve the same purpose. If there have been numerous employees during the business’ lifespan, especially due to multiple resignations, this would be something to keep in mind as a problem area when taking the company on.

• Differences between owners. If the current owners are not open to change or new ideas, you could possibly run into difficulties with trying to take the company to the next level in terms of expansion, increasing profits, or employee and client satisfaction.

The choice to buy part of a company should only be made after carefully considering all factors, good and bad, that are involved. It can also be helpful to seek the help of a business adviser who can answer your questions and give guidance as you take this big step.

What Costs Do You Have When Selling a Home?

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The real estate market has made quite a recovery from the recession lows.  Home values have been steadily increasing for a number of years.  Now is a great time to sell your home depending on which market you live in.

Selling a house isn’t a cakewalk like some might imagine.  It takes a fair amount of effort on the seller’s part, even with a realtor.  For instance, you must schedule repairs that are needed before listing the house.  Then you also have to pay for any repairs that might be needed after a home inspection.  Don’t forget about realtor commissions.

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Below I will go into the four potential cost traps of selling a home and how they can impact your bottom line.

  1. Realtor Commissions: While this may seem like an obvious one, it is one of the biggest if not the biggest expense you will have when selling a home.  In most cases, the seller is responsible for paying the commission of not only their own agent (selling agent) but also the buyer’s agent.  On average, commissions tend to be around 3% for each agent, so you are looking at around 6% of the sale price going towards realtors.
  2. Repairs/Maintenance Before Listing the House:  When you first meet with your realtor, he or she will typically do a walk through of the home with you and advise you of any obvious repairs or maintenance that needs to be done before listing the home.  Sometimes this can be as easy as painting the walls a more neutral color.  Other times it can be more complicated such as repairing leaks or noticeable cracks, or foundation issues.
  3. Repairs Needed After Home Inspection: More often than not, a home inspector is going to find something wrong with the house.  It could be minor, it could be major.  Either way, unless you are selling the home in ‘As Is’ condition, you will more than likely have additional repairs to make before closing comes around.
  4. Potential Taxes:  While selling your home can be a potentially profiting venture, there could be fees you have to pay that far exceed that of a realtor’s commission.  If you are selling property that has been labeled as an investment, prepare to pay taxes.  The IRS recognizes gains on the sale of a property as capital gains.  It will carry around a 15% tax on the difference between the purchase price and the sell price of the property.

So there you have it.  While selling your home can be an adventure of its own and a symbol of moving on to bigger and better things, there are many costs associated with the process.  Being familiar with these potential expenses before you decide to list will remove any element of surprise you might have.

WHY YOU SHOULD CHOOSE A 15 YEAR MORTGAGE

What Should a Millennial Spend on Rent

Budget and Invest1 Comment

Rents have been steadily increasing throughout the United States over the past decade.  Ever since the financial crisis, people have somewhat shied away from home ownership and opted to rent.  With the demand for rentals on the rise, a sharp increase in monthly rents has been a clear side effect.  The old rule of thumb used to be 30% of one’s income should be spent on rent; however, we are now seeing a burden like never before.  What should a millennial spend on rent?  The simple answer is as little as possible.Image result for what should a millennial spend on rent

Millennial’s are those born from the late 1980’s to the early 2000’s depending on who you ask.  These individuals tend to have a high burden of student loan debt, which makes it all the more concerning that they are spending high amounts on their monthly rent.  A recent report came out showing that millennial’s will spend close to six figures, yes, $100,000 on rent before they turn 30.  That is a staggering amount considering that most are also in the process of trying to pay off student loan debt.

3 WAYS TO NOT SPEND 6 FIGURES ON RENT BEFORE 30

  1. Get a roommate.  Sharing a two bedroom with a friend is a simple and easy way to save money every month.  Sure two bedrooms cost more than a one bedroom, but when you split it two ways, it comes out to about a 30% savings versus living on your own.  This isn’t a long term solution, but it is a good way to free up additional income every month.
  2. Move in with a significant other.  While some will shy away from this advice, there are many benefits to doing so.  I knew a couple who had to live apart until the day they were married for various reasons.  They chose to do this in order to respect the wishes of others.  However, they were basically spending an extra $1000 a month on an additional apartment that got little to no use, all to please a few.  They could have used that money to build up an emergency fund or increase their down payment on a future house.
  3. Buy a house.  While buying a house requires more responsibility and obligations than renting, it is also a good choice to lower your monthly expenses and build equity.  For example, a $200,000 loan on a property with 20% down will give someone a monthly payment of approximately $1250 a month.  Depending on the area of the country you live in, it will almost certainly be cheaper than paying someone else to rent.

CONCLUSION

While some see a benefit to renting, there are also many drawbacks financially.  Although we can’t exactly put into numbers what should a millennial spend on rent, there are ways to reduce your monthly expenses.  Whether you are able to implement one of the solutions above into your situation or not, living costs will be your largest expense every month.

Budget Smart, Invest Wise

 

Ibotta App Review

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I was recently on vacation in Denver, Colorado, when a friend of mine who lives out there told me about this cashback app called Ibotta.  He was head over heels for the app which happened to be created out in Denver.  I downloaded the app and immediately saw how one could benefit.  In the following Ibotta app review, I will go over just how simple it is to start getting cash back on purchases you already make.

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Ibotta App Review

IBOTTA HAS MANY TOP STORES

Most Americans find themselves shopping at the big box stores for everyday items.  Stores such as Target, Walmart, Best Buy and others are some of the top stores in the Ibotta app.  Many of these stores offer cash back for just simply taking a picture of your receipt.  They also have coupons for many items you purchase including Gatorade, salsa and even beer!

THE APP IS EASY TO NAVIGATE AND USE

Ibotta App Review
Ibotta Screen

Unlike some apps that take a while to figure out, Ibotta is pretty straightforward.  From the home page you can select your favorite stores, choose any coupons you might be interested in using, and start earning cash back.  The picture to the left illustrates what one will see if they click on Target as a store of their choice.  You are presented with a list of coupons available.  Towards the top, you are able to segment the products based on the category you want to search for.  In this example, if you wanted to get $1.00 back on Gatorade G2, simply click on the red plus sign and it is added to you offer list.  It’s that simple!

RETRIEVING YOUR CASH BACK IS EASY

The whole point of a cash back app is to actually get cash back.  In this Ibotta app review I am here to tell you that is exactly what you get.  Withdrawing your cash is a super simple process.  The only requirement is that you have at least $20 in your account to withdraw.  You can withdraw the cash via PayPal, Venmo, or for one of the many gift cards they offer.  Never have I had such a hassle free experience withdrawing earnings from an app.

HOW TO GET STARTED WITH IBOTTA

  1. Download the app using the following link (Receive a welcome bonus of $10): https://ibotta.com/r/ycvfdfl
  2. Search through the list of selected stores you shop at and even ones you don’t.
  3. Find coupons you can use and add them to your “My Offers” section.
  4. Once you shop at a store, you can use your camera to make sure the item qualifies for the cash back by simply scanning the barcode.
  5. Take a picture of your receipt and confirm you purchases.
  6. Watch the cash add up.  There is no limit to how much you can have.

Budget Smart, Invest Wise

15 Year Mortgage Pros

Budget and Invest1 Comment

A little over five years ago I made a financial mistake that I’m not proud of.  I purchased my first home.  No the purchasing of the home isn’t the financial mistake, the mistake was going with a 30 year mortgage instead of a 15 year one.  Many times throughout the year I often wonder why I didn’t even consider a 15 year mortgage.  Don’t make the same mistake.  If you have the financial ability to do a 15 year mortgage then by all means go for it.  I will discuss a few of the 15 year mortgage pros and why I wish I could go back in time and do it all over again.

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15 Year Mortgage Pros #1

The easiest difference to distinguish between a 15 year and a 30 year mortgage is the interest rate.  15 year mortgages have a significantly lower rate than their counterparts.  The shorter the amount of months a company has to lend you money, the more likely they are to recoop their costs.  A 15 year mortgage tends to have an interest rate of 0.5% to 0.75% lower than that of a 30 year.  Although that might not seem like a significant number, it will ultimately equal many thousands of dollars in savings over the life of the loan.

15 Year Mortgage Pros #2

Simply put, you build equity faster.  Because you are having to pay the full amount of the loan in half the time, your monthly payment will be more; however, that also means you will become the full owner of your home in a shorter period of time.  Many people, myself included, choose a 30 year mortgage because the payments are less on a monthly basis.  Had I chosen a 15 year mortgage, my payment wouldn’t have been much more a month and I’d own the home outright in half the time.

15 Year Mortgage Pros #3

The final pro is that you have the opportunity to eliminate your largest monthly expense.  This is especially important as one approaches retirement.  People sometimes talk themselves out of a shorter mortgage because the higher monthly payments mean they have to forgo savings for other things such as retirement.  Can you imagine owning a house free and clear in retirement and not having the stress or monthly expense of a mortgage payment?  Plus you can also free up more capital if you decide one day to do a reverse mortgage.

Conclusion

The majority of housing loans issued are in the form of 30 year mortgages.  This has been the case for a while.  I messed up when I bought my first home, but I can assure you I won’t make the same mistake for my next.  A 15 year mortgage is ideal for individuals or couples who have stable jobs, and are good at budgeting their monthly expenses.  The opportunity to save money on paid interest and build equity fast will be too much for me to pass up again.  That is why the 15 year mortgage pros strongly outweigh any cons.

Budget Smart, Invest Wise

Ways to Save

JW Steinert1 Comment

When it comes to our personal finances, it’s safe to say we’ve all done our fair share of worrying. With bills to pay and mouths to feed, it can seem like saving any of your money is a pipe dream. An impossibility. And, yet, we must. We have the unenviable task of doing the impossible. Or, at least, that’s how it seems. In truth, savings money can be easier than you think. With a healthy does of will power and the right know how, you can secure your financial future. Here are some tips to get you started.

First and Foremost, let’s talk where and when to spend your hard earned money. For starters, consider eliminated or reducing luxury spending. For example, you don’t really need that new video game, so it can wait until it’s one sale, or until you’re in a better financial position. Meanwhile, we all need things like Winter coats and shoes, so these are items worth spending money on. In fact, it might even be worth spending a little extra on these items to ensure quality. After all, you don’t want to end up spending even more from having to replace these items frequently. However, even in this situation, there’s room to save. Here’s a Mackage coupon to help you find a good quality coat and save. Which brings me to my next point…

Coupons and sales are another great way to save. Retailers employ these cost cutting measures frequently in order to entice customers new and old and generally drum up some extra business. That’s why an eagle eyed shopper stands to be able to take home most, if not all, of their shopping at a heavily reduced price. You may have to do your shopping piecemeal in order to maximize savings, but it’s well worth it to save that much money. You’ll also have to remain diligent in order to find thee special offers, so keep your eyes peeled like a jaguar ready to pounce on its unsuspecting prey.

4 Ways to Save on Valentine’s Day

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February 14th, a day of love that comes around once a year.  It’s a time to celebrate the love of your life, or in your life, but the celebration of that person can sometimes get quite expensive.  There’s flowers, chocolates, stuffed animals, dinner, gifts, etc.  Add them all up and a random Wednesday can easily turn into a $250 event.  Listed below are 4 ways to save on Valentine’s Day.

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4 Ways to Save on Valentine’s Day

Go To Dinner A Day Other Than Valentine’s Day

Many couples prefer to go out to eat for Valentine’s Day, but most of your nicer restaurants tend to have set menus that often carry a high price tag.  Try celebrating at your favorite restaurant the day before or after.  You can usually order from the regular menu and avoid the preset and inflated Valentine’s menu.  Valentine’s Day this year happens to fall on Ash Wednesday.  Many couples will decide to celebrate the day after due to the start of Lent.

Bring Your Own Bottle of Wine to Dinner

A cheap bottle of wine at a nice restaurant will easily be anywhere from $28 to $35.  See if you can bring your own bottle and pay a corkage fee instead.  Corkage fees tend to be much cheaper than purchasing a bottle from the restaurant, and you can bring the bottle that will go perfectly with your meal.  A nicer $80 bottle at the restaurant will typically sell at a local store for half that.  So in essence, you can drink an $80 bottle with your meal for $40 + corkage fee (~$10).

Send Flowers Differently

Waiting until the last minute to order flowers can be a costly mistake.  Local and national flower company’s often raise the price of delivery the closer it gets to the date you want it to deliver.  They also charge additional money to get them not only delivered on Valentine’s Day, but early during the day.  Instead, opt to have the flowers delivered to the office of a loved one a day early.  By doing that, the flowers can be present for the entirety of Valentine’s Day and you will avoid additional charges.

Order Gifts Ahead of Time

As like any other holiday, planning can be the key to saving money.  Ordering gifts early can help you not only save on shipping but also gives you time to find the best deal.  Some companies will offer free two day shipping just before major holidays, but often times won’t accept other promotional codes.  Additional charges on shipping can also add to your Valentine’s cost.  For example, a friend recently had to pay an extra $9 for two day shipping where it could have been for free had he planned a week earlier.

Conclusion

Whether you are celebrating Valentine’s Day or not, the holiday is one that many people love, or dread, each year.  If you are celebrating, then I hope you are able to use these 4 ways to save on Valentine’s day to put a little extra money in your pocket at the end of it.

Budget Smart, Invest Wise

 

3 Easy Post New Year’s Financial Resolutions

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A new year signals a new start for many people.  Whether it is with your health, your relationships, or your finances, it is as good a time as any for a re-birthing.  When it comes to one’s finances, there are some relatively easy New Year’s financial resolutions you can do to exit 2018 in a better financial position than when you started.  Listed below are 3 easy post New Year’s financial resolutions you can make.

Financial Resolution 1: Build an Emergency Fund

It is estimated that roughly one out of every three American adults has no money stashed away in an emergency fund.  This often means that they will have to take on high-interest credit card debt in order to pay for an unexpected expense.  No matter your age, any amount of money in an emergency fund will be of benefit.  Focus on saving $100 a month into an emergency fund.  By the end of 2018, you will have $1200 stashed away for those unexpected expenses.

Financial Resolution 2: Create a Budget

Earning money is important, but also of high importance is tracking your spending.  I love the following example:

A teacher making $40,000 in annual post-tax salary, but spending $35,000 of it, has more savings at the end of the year than a doctor earning $120,000 in post-tax salary but spending $130,000.

The point of this example is that if you can make a lot, but if you spend a lot you will never get rich.  Budgeting allows you to monitor you income while also keeping track of your expenses.  We offer a free monthly budget on our website to help you get this resolution underway.

Financial Resolution 3: Open an IRA

Recent tax reform has lessened the financial burden of taxes on many individuals and families, but another way to reduce taxes while funding retirement is through an IRA.  Traditional and Roth IRA’s are both good options to help save for those late years in life.  I prefer a Roth IRA; you put in after-tax money now, and it grows tax-free and has tax-free withdrawals.  Most people qualify for IRA’s, and the best part is that they are easy to open.  Many IRA’s can be started with as little as $100.

Not everyone is a fan of New Year’s resolutions, but that is part of the reason why people make them.  They have goals they want to achieve.  Those goals may be monetary, personal or health, either way they hope to be in a better place at the end of the year than they were at the beginning.  If you haven’t made a New Year’s resolution, it isn’t too late.  We aren’t even a week into the new year.  I challenge you to try at least one of these 3 easy post New Year’s financial resolutions and make your finances great again.

Budget Smart, Invest Wise