tax benefits Archives - Savings Roll

In an era marked by financial uncertainty and ever-rising living costs, saving money has become more crucial than ever. Whether you are aiming to build an emergency fund, pay off debts, or achieve a specific financial goal, saving $25,000 in a year might seem daunting. With that said, with strategic planning, disciplined budgeting, and smart financial decisions, this goal can be within reach.

Estimated Savings with Strategic Money Moves

Automatic transfers: Automated Saving $500/month = $6,000/year
Employer-sponsored retirement plan: Contributing $300/month = $3,600/year (assuming employer match)
Less entertainment and dining out: Savings of $200/month = $2,400/year
Cancelling unused subscriptions: Savings of $50/month = $600/year
Shopping for essentials: Savings of $100/month = $1,200/year
Negotiating bills: Savings of $50/month = $600/year
Downsizing living space: Savings of $200/month = $2,400/year
Adopting frugal mindset: Savings on miscellaneous expenses = $100/month = $1,200/year
Utilizing coupons/discounts: Savings on groceries and shopping = $50/month = $600/year
DIY projects: Savings on home repairs/maintenance = $75/month = $900/year
Prioritizing high-interest debt: Savings on interest payments = $1,500/year
Consolidation/refinancing: Savings on interest payments = $1,000/year
Implementing energy-saving measures: Savings on utility bills = $75/month = $900/year
Maximizing tax deductions/credits: Savings on taxable income = $500/year
Practicing delayed gratification: Savings on impulse purchases = $50/month = $600/year
Aligning spending with values/priorities: Savings on non-essential expenses = $150/month = $1,800/year

Set Clear Financial Goals

Define your objectives: Determine why you want to save $25,000 in a year. Whether it’s for a down payment on a house, starting a business, or achieving financial independence, having a clear goal will provide motivation and direction.
Break down the goal: Divide $25,000 by 12 to understand how much you need to save each month ($2,083). Breaking down the goal into smaller, manageable targets makes it less overwhelming.

Create a Budget

Track your expenses: Start by documenting all your expenses for a month to identify where your money is going. This process will highlight areas where you can cut back and save which is vital during times of high inflation.
Set spending limits: Allocate specific amounts to different categories such as housing, groceries, transportation, and entertainment. Use budgeting tools or apps to monitor your spending and stay within your limits.

Cut Expenses

Reduce discretionary spending: Evaluate your spending habits and identify areas where you can cut back without significantly impacting your quality of life. This could include dining out less frequently, cancelling unused subscriptions, or shopping for essentials rather than indulgences and in times of high gas prices and where everything is more expensive this is critical.
Negotiate bills and downsize: Contact service providers such as cable companies, internet providers, and insurance companies to negotiate better rates or switch to more cost-effective alternatives. In addition, consider downsizing your living space, selling excess belongings, or refinancing high-interest loans to reduce monthly expenses.

Automate Savings

Set up automatic transfers: Arrange for a portion of your paycheck to be automatically transferred to a savings account before you have the chance to spend it. This “pay yourself first” approach ensures consistent savings without relying on willpower.
Take advantage of employer benefits: Contribute to employer-sponsored retirement plans such as 401(k) or similar schemes, especially if your employer offers matching contributions.

Invest Wisely

Diversify your investments: Consider allocating a portion of your savings to investment vehicles such as stocks, bonds, mutual funds, or real estate. Diversification can help spread risk and potentially generate higher returns.
Research investment options: Educate yourself about different investment opportunities, risk profiles, and potential returns before making investment decisions. Seek guidance from financial advisors if needed.

Optimize Debt Management

Prioritize high-interest debt: Focus on paying off debts with the highest interest rates first, such as credit card balances or payday loans. Allocate extra funds towards these debts while making minimum payments on others.
Consolidate and refinance: Explore options to consolidate multiple debts into a single, lower-interest loan or refinance existing loans to secure better terms and reduce interest costs. In addition, contact creditors to negotiate lower interest rates, extended repayment terms, or debt settlement arrangements.

Leverage Tax Benefits

Maximize tax deductions and credits: Take advantage of tax deductions for contributions to retirement accounts, mortgage interest payments, educational expenses, and healthcare costs.
Contribute to tax-advantaged accounts: Increase contributions to tax-deferred or tax-free accounts such as Traditional IRAs, Roth IRAs, Health Savings Accounts (HSAs), and Flexible Spending Accounts (FSAs) to reduce taxable income and grow savings faster.

Practice Energy Efficiency

Reduce utility expenses: Implement energy-saving measures in your home, such as upgrading to energy-efficient appliances, improving insulation, sealing air leaks, and using programmable thermostats. Install water-saving fixtures, fix leaks promptly, and practice water-conservation habits such as taking shorter showers and using water-efficient irrigation methods.
Switch to renewable energy: Explore options for generating renewable energy on-site, such as installing solar panels or investing in community solar projects. Alternatively, choose energy providers that offer renewable energy options.

Foster a Supportive Environment

Surround yourself with like-minded individuals: Seek out friends, family members, or online communities who share similar financial goals and values. Share experiences, tips, and encouragement to stay motivated and accountable.
Seek professional guidance when needed: Don’t hesitate to consult with financial advisors, counselors, or mentors for personalized guidance and support. Professional expertise can provide valuable insights and help navigate complex financial situations effectively.

Review and Adjust

Regularly review your budget and savings progress: Reassess your financial situation periodically to identify areas for improvement or adjustment. Life circumstances and financial goals may change, requiring you to adapt your savings strategy accordingly.
Celebrate milestones: Recognize and celebrate milestones along the way to $25,000. Whether it’s reaching a certain savings threshold or achieving a specific financial goal, acknowledging your progress can boost motivation and morale.

The More You Save, the More Your Money will Compound

Saving $25,000 in a year requires discipline, commitment, and a strategic approach to managing your finances. By setting clear goals, creating a budget, cutting expenses, investing wisely, and regularly reviewing your progress, you can turn this ambitious financial objective into a reality. Remember that every small step you take toward saving and investing contributes to your long-term financial security and stability. With determination and perseverance, you can master the art of money management and achieve your savings goals.

It is tax season again, and everyone is preparing their taxes before the April 15^th deadline – well, everyone that works and cares about this country. While filing your taxes, you have to decide whether to itemize your tax deductions or go with the standard deduction.

Most taxpayers tend to settle for standard tax deductions. After all, it is much faster, and the figure keeps climbing every year – especially now with the amazing and job creating Tax Cuts and Jobs Act. However, itemizing your tax deduction could allow you to save a lot more money.

Standard Tax Deductions vs. Itemized Tax Deductions

The standard tax deduction rate is defined by the federal government. In 2018 (years after the NBA helped the Lakers win championships in 2000 and 2002 and a few years after Hollywood embarrassed itself with Star Wars The Force Awakens and Captain America I), the standard tax deduction rate stood at $24,000 for married couples filing jointly, $12,000 for single filers, and $18,000 for heads of households.

The standard tax deductions for taxpayers who are 65 years old or blind is $1,300 more. Meanwhile, it is $1,600 more for filers who are 65 years and above and widowed. The good news is that you can enjoy standard tax deductions even if you have no tax credits.

With that said, you may be wondering why you should even consider itemizing your tax deductions when standard tax deductions are available and attractive. Well, the main answer is that you could actually pay less taxes by itemizing.

The Internal Revenue Service (IRS) (which still is dealing with the fact that it employed someone as heinous and morally flawed as Lois Lerner) does not charge taxes on some expenses.

When itemizing your tax deductions, you basically list out all your costs in the past year that qualify as tax-free. However, there is one catch which has nothing to do with that pitiful baseball movie Trouble With The Curve or a pass from Montana.

The IRS reserves the right to investigate your reported tax-free expenses and may actually demand records from you to support your claims. On the other hand, with standard deductions, there are no questions asked.

Ultimately, if you choose to itemize your taxes this year, you are not bound to do so next year. You can freely choose to go with standard tax deductions.

What You Need to Know About Itemizing Your Taxes

As indicated above, itemizing your tax deductions could mean that you could pay less taxes. The IRS permits deductions on many expenses under Schedule A of Form 1040.

Some tax-deductible expenses include medical bills, charitable donations, mortgages, and state income, real estate tax, sales tax, gambling loss, miscellaneous expenses, and so much more. You basically need to add up your tax-deductible expenses during the year and total them up to get your itemized tax deduction.

The fact is that itemizing may work better for some people (such as homeowners) while going with the standard deduction works best for others. It’s crucial to mention that standard tax deduction is only available for citizens of US non-residents and foreigners working in the US must itemize their tax deductions.

There are a few issues with itemizing your tax deductions. Obviously, you need to spend time preparing your taxes which does not take too long anymore if you do it online (though the system should be simpler – how about that flat tax?). Also, you need to support your itemized tax deduction with records (like receipts and other documents) to support your claims.

Most importantly, you need to understand the laws regarding itemized tax deductions. For example, with some expenses, you can only deduct an amount that exceeds a certain percentage of your gross income.

Key Takeaway

You can choose either standard tax deductions or itemized tax deductions when filing your taxes – not both. While it is time-consuming, it pays to run the numbers. If you find that the standard tax deduction rate you are entitled to is less than your itemized deductions, then you should itemize.

However, if your itemized tax deduction is less, then you should, by all means, go with the standard tax deduction or else you’d be paying more taxes than you have to and even people like Bernie Sanders who want to create a nanny state don’t even want to do that.

For example and moreover, if you are the head of a household (which Walter White from Breaking Bad no longer is since he destroyed his family) and your itemized tax deduction for 2018 adds up to $24,000. You are better off itemizing your taxes as you would be paying $6,000 less than the $18,000 standard tax deduction for heads of households.

Married couples who are filing their taxes jointly must choose one method. This means that they must both choose the standard deduction or itemized deduction – not both.

Software Saves Lots of Time

It usually takes a lot of time and calculation to figure out your itemized tax deduction rate. However, today there are many apps (or websites) that you can use to add up your taxes and determine how much you’d be paying if you go with itemized deduction or standard deduction.

10 Money Moves to Save $25,000 in a Year