Are You Surprised With Your Tax Return?

While it is common for people to be surprised with their tax return results, ideally, you should not be surprised with your tax return results. There are several things you can do to help minimize surprises and ensure that you have a good understanding of your tax liability:

Tax Planning

  1. Keep Track of Your Income and Expenses: Throughout the year, keep track of your income and expenses, including any deductions or credits that you may be eligible for. This will help you estimate your tax liability and ensure that you are taking advantage of all available tax breaks.
    2. Review Your Withholdings: Review your W–4 form and make sure that you are withholding the appropriate amount of taxes from your paycheck. If you have had any significant changes in your income or family status, it may be wise to adjust your withholding allowances accordingly.
    3. Know where you land in the tax brackets. How much income do you make? Use that number and subtract the standard deduction for your filing status to get an estimate of your taxable income. Then google tax brackets for that year. Observe where you land and see if it makes sense.
    4. Do you have other income, such as investment income, retirement account distributions, self–employment income, rental income? Do you know how that income is taxed?
    5. Stay Informed of Tax Law Changes: Keep up to date with any changes to tax laws or regulations that may impact your tax liability. This will help you make informed decisions when it comes to tax planning.
    6. Work with a Tax Professional: If you have a complex tax situation, it may be beneficial to work with a tax professional who can help you understand your tax liability and ensure that you are taking advantage of all available tax breaks.

By taking these steps, you can help minimize surprises and have a better understanding of your tax liability when it comes time to file your tax return.

Personal Income Tax Course

We are developing a self–study course that teaches you the basics of a personal income tax return so there are no surprises. If you want to be notified when it is available, please enter your email address here.

 

Financial Journey LLC is a registered investment advisor offering advisory services in the states of Alabama, Florida, Virginia and in other jurisdictions where exempted. Information provided is for educational purposes only and not, in any way, to be considered investment or tax advice.

Personal Inflation Rates

There’s a lot of talk about inflation right now because the most recent inflation number was over 9%! However, this doesn’t mean that everything you spend money on has gone up nine percent.  That’s where we get into personal inflation rates.  Your personal inflation rate has to do with how you spend your money.  According to the Department of Labor, the 9.1% inflation rate is the average of all items over the last twelve months.  This means some things are higher than others.  In order to get to your own personal inflation rate, you would have to measure the increases for where your money is spent. 

Let’s take a look at a few items that are a part of the all items inflation rate1.

 

Food—10.4%

Energy—41.6%

Used Cars and Trucks—7.1%

Medical Care Services—4.8%

 

As you can see above, food and energy have increased significantly over the last twelve months.  If these two items are large components of your monthly expenditures, then your personal inflation rate could be even higher than 9.1%.  However, if your largest budget item is your mortgage, then don’t forget that the principal and interest parts of your monthly payment, do not change.  So, if 25% of your expenditures are principal and interest, then 25% of your personal inflation rate is 0%.

For some more information on inflation, check out this previous post about inflation.

. 

As interest rates are rising, you are starting to see the difference in savings account rates.  Your typical brick and mortar banks are not increasing rates as much as your online banks.  Check out www.bankrate.com to compare interest rates for your emergency funds (make sure there’s FDIC insurance as well). 

 

There’s also a lot of hype around I-Bonds as well.  The inflation rate for I-Bonds is great right now, but you need to make sure you understand the mechanics for how these work too, which can be found here.

Inflation is a part of life and something that we all have to deal with.  The important thing to remember is to look at your budget and see if you can make changes or substitutions to help combat inflation and to make sure you are including inflation as part of your financial plan. 

 

If you need help with your financial plan, Financial Journey is here to help. Schedule a call with us today!

 

Financial Journey LLC is a registered investment advisor offering advisory services in the state of Alabama, Virginia and in other jurisdictions where exempted. Information provided is for educational purposes only and not, in any way to be considered investment or tax advice.

 

1 https://www.dol.gov/newsroom/economicdata/cpi_07132022.pdf

5 Questions You Should Ask When Hiring a Financial Advisor

Finding the right Financial Advisor for the job is so important! You need someone who is trustworthy, competent, and affordable. 

Questions To Ask Yourself

Before you interview a financial advisor, you need to ask YOURSELF a few questions: 

  • What are you looking for in a financial advisor?
  • What services do you need?
  • What are you willing to pay for them?
  • How often do you want communication (frequent in-person, occasional call, or email)?

Knowing your goals and communication style will help you to quickly determine which financial advisor is the right one for you.

Questions To Ask a Financial Advisor

  1. Are You a Fiduciary?

You want your financial advisor to say yes! Fiduciaries are financial advisors who are required to:

  • Put the client’s interests first
  • Disclose important information, including their fees
  • Reveal any conflicts of interest
  1. How Do You Get Paid?

Financial advisors can make their money in several different ways:

  • Hourly
  • A fee based on a specific service
  • A percentage of the managed assets
  • A sales commission on investment products

To avoid any conflicts of interest, look for an advisor who is “fee-only.” 

  1. What Services Do You Provide?

Different advisors may only support you in certain financial areas, such as:

  • financial plans
  • managing assets
  • investment advice
  • retirement
  • insurance
  • tax planning

Before you hire a financial advisor, know what services are offered and if there are any extra costs for additional services. 

  1. What’s Your Philosophy on Investing?

A good financial advisor should fit your needs. You want someone whose investment philosophy matches yours and uses strategies that you understand. This will help you feel more secure through the ups and downs of the market. 

  1. Who Are Your Typical Clients?

You want to work with a financial advisor who has experience working with people in your situation. 

Conclusion

A good financial advisor should expect questions like these. They understand how important the relationship is between the advisor and the client and want a good fit for both parties which is why you should interview more than one. 

Your financial advisor is an important person in your life. Take your time to consider all the candidates and choose the one who’s best for you.

If you are looking for a trusted partner to help you navigate financial decisions, we are here to help. Schedule a meeting with us today to see how we can help you with your own financial journey. 

 

Financial Journey LLC is a registered investment advisor offering advisory services in the state of Virginia and in other jurisdictions where exempted. Information provided is for educational purposes only and not, in any way, to be considered investment or tax advice.

Why women need to be proactive about their finances after divorce

Divorce is definitely not easy, but sometimes it is necessary and it can have a huge impact on women and their finances. 

Even though women are the ones who initiate divorce 69% of the time (according to Stanford University), there are high emotions and a lot of uncertainty. How will your life change? Your kid’s lives? Your financial situation? 

The U.S. Census Bureau has some startling statistics on divorce in the United States. Approximately every 42 seconds, there is one divorce in America. You are not alone.  With women typically living longer than men, there’s more years to plan for.  Coupled with the financial toll that divorce has, it is critical to prepare as much as possible to soften the blow.

How to financially prepare for a divorce

When you’ve decided to file for divorce, it’s time to gather as much information as possible and figure out a plan.

When it comes to your new financial future, here are a few things to consider:

Take inventory of your finances

Taking time to get organized and educated is a key factor  if you’re planning to leave your marriage.

Here’s a short list of items to start with:

– pay stubs

– bills

– credit card statements

– bank statements

– mortgage statements

– investment statements

– income tax forms

– contents of your safe or safety deposit box

– any other pertinent financial documents

The more information you can give your financial planner and lawyer, the better.

Your monthly income

Perhaps you have your own income at the time of divorce and earn more than your spouse, or maybe you have a lower income than your spouse because you have been out of the workforce for years. 

Either way, you should work with your attorney and financial planner to try to calculate how much income you’ll require after your divorce. Once you have this information, then you can start planning.  There are a variety of sources that may or may not be available to support your income needs–current and/or future jobs, savings/investment accounts and spousal support.

Unfortunately, the reality is that many mothers are supposed to get alimony or child support but don’t. According to the U.S. Census Bureau, only 45.6% of custodial parents who were due child support in 2013 received full payments. This loss of income can be a significant financial blow. That’s why women must prepare for divorce financially and figure out their budget once finalized.

 

No more joint accounts

If you have a credit card or loan that is in your name and your spouse’s name, you are both responsible for it. It’s best to avoid any negative situations like your spouse running up a large balance on a joint credit card and refusing to pay. This drags down your credit. So be sure to take your name off all joint accounts. 

Have at least one credit card that is in your name only. This will help you start to establish your own financial independence. Next, get a separate checking and savings account and save enough money for a couple of months worth of living expenses.

What are your next steps?

With this new independent life, there are countless things you should consider in your financial planning.

  • will you stay at the family home
  • how will you pay for it
  • do you need to get a job

How to pay your legal fees

When it comes to divorce, most people require a lawyer. If you can’t afford one or your spouse has removed your access to funds, there are a few things you can do. 

  • Ask about a payment plan. Divorce is expensive! Many lawyers offer payment plan options. You might have to pay an initial retainer, and then you would proceed to pay in monthly installments.
  • Apply for a personal loan. If you have good credit, you can consider taking out a personal loan to cover legal costs. 
  • Ask family or friends to help. No one wants to ask friends or family for help, but they may be able to help you at this difficult time. 
  • Look for pro bono services. The American Bar Association states that lawyers should try to contribute at least 50 hours of pro bono legal services per year to help those in need. With that in mind, it wouldn’t hurt to ask the attorney if they can provide pro bono legal aid.
  • Contact the family court in your area. If none of the above options are viable, reach out to your family court. They can refer you to low-cost civil legal services agencies and other resources in your area.

Getting your financial life back in order after a divorce

Once your divorce is final, it’s time to heal your emotions and recover your finances.

As you’re adjusting to your new budget, living independently and paying off debt that you’ve accrued due to your divorce, you might have to tighten your wallet and cut some expenses. 

A nice vacation may be just what you’re looking for, but now is the time to save. Work with a financial planner to track your income and expenses, so you know what kind of budget you’re working with. 

Pay off Debt

As you’re paying off debt, don’t forget to check your credit periodically. It’s not uncommon for credit to take a hit after divorce. If yours is looking less than great, you should work on rebuilding it, as your credit score affects so many things in your financial life. 

To pay off your debt faster, it might be good to look into a side-hustle. There are a lot of options, and with so many jobs going remote, it may be a great choice to freelance. 

Save for Retirement

It’s important to not only pay off debt but also save for retirement. With life expectancy for women at 81.2 years (and growing every day with modern medicine), planning for your future is critical. A great way to save for retirement when you’re focused on getting through each day is to make it automatic. If you have a company 401(k), have them automatically deduct it from your paycheck. And if that’s not an option, set aside a fixed amount each week to save in an IRA or other retirement plan that may be appropriate for your situation (always check the rules).

 Gaining financial independence may be challenging, especially if your former spouse took care of all the finances in the relationship. However, with a plan in place and sticking to a budget, you will get to a place where you will have financial freedom and be able to grow your net worth.

Life beyond challenges

Divorce can significantly impact a woman’s financial and mental health. It may be challenging, but creating stability during this season of life is doable with enough planning and a strategic approach. 

Nothing is permanent, and this chapter is merely an obstacle. You will find a way to navigate it and will once again thrive.

You are independent and free. Set goals, live simply, and before you know it, you will be living the life you desire.

If you’re not sure where to start on your own financial journey, I encourage you to download our FREE Financial Empowerment Guide Exclusively for Women. 

If you are looking for a trusted partner to help you navigate financial decisions, we are here to help.  Schedule a meeting with us today to see how we can help you with your own financial journey. 

 

Financial Journey LLC is a registered investment advisor offering advisory services in the state of Virginia and in other jurisdictions where exempted. Information provided is for educational purposes only and not, in any way, to be considered investment or tax advice.

How Am I Doing?

When I meet with people inquiring about my services, the most common thing that clients want to know is ‘how they are doing.’ This is not a question that I can really answer. Why? Because how someone is doing is relative to the outcome they are hoping to achieve.

Continue reading

Tax Time!

We are now in January of 2022, which means you have to start thinking about completing your taxes for 2021. Your W-2’s and 1099’s are required to be sent to you by the 31st of January, but other forms have more time to be issued and may have multiple versions due to corrections.

Continue reading

Inflation

Inflation is the general increase in price level which corresponds to a reduction in purchasing power. Why do we care about it? We care about inflation because our dollars buy less. For example, remember when you could buy a gallon of gas for $1? Now it’s $3 a gallon. The same amount of money that would fill out tanks up will only fill up one third of a tank now!

Continue reading