How to Build Your Best Travel Budget

March 27, 2017

Family preparing for road trip at home. Packing their bags and smilingCreating a comprehensive travel budget is a crucial part of the planning process and will help ensure that you have the best trip possible.

Instead of worrying about money while you’re away, a travel budget can help you to enjoy, relax, and live in the moment, knowing that you’re not going to come back to a pile of debt. By planning out your finances before you leave, you may even realize you have a little money to spare for a fun activity or excursion while you’re away.

Planning a travel budget can present a challenge, however, especially if it’s your first time visiting somewhere. Here are a few ways to make your perfect travel budget a little easier.

  1. How Much Will My Trip Cost?

This is the most basic and yet important question you will have to ask when planning your travel budget. There are several factors you need to consider.

In broad brush strokes, you’ll want to think about two main components: the cost of things at your destination, and your travel style. Is it vital you stay in five-star resorts to enjoy your destination, or could you be just as happy in more modest accommodations?

  1. Define Your Travel Style

Travel takes many shapes and forms, from luxury trips with five-star accommodations to roughing it on a backpacker’s budget.

While making your travel budget, it’s a good idea to decide where you want to indulge and where you’re okay doing with less. For example, maybe you’re happy to stay in budget accommodations to make sure you have enough money for an expensive, once-in-a-lifetime activity. By making this a conscious decision, you can enjoy your splurges while knowing that you’re making financially sound decisions that you can afford.

  1. Consider Costs at Your Destination

The cost of travel can vary greatly in different countries, or even in different regions of the country where you live. For instance, you’re going to need to plan a much bigger budget for a trip to New York City than for upstate New York. Websites such as PriceOfTravel.com and BudgetYourTrip.com can give you ballpark figures for travel costs in various destinations.

You’ll need to factor in the price of transportation to the destination and on the ground while you’re there, plus accommodations, activities, and food. Be sure to check if you’ve earned any free travel through airline, hotel or credit card rewards programs. That could significantly reduce your trip costs. Credit card perks such as free rental car insurance can also help leave more breathing room in your budget.

Generally speaking, the Internet can be useful in figuring out approximate costs at your destination. However, keep in mind that larger booking sites may only list more expensive hotels and tours. Smaller mom and pop type businesses won’t necessarily be included. Check out reputable travel blogs, online forums, and guidebooks for accurate information on less expensive, off-the-beaten-path options.

Just make sure to look at when your resources were published and try to get the most up-to-date information. Prices can change quickly, and using outdated information in your budget could set you up for a nasty surprise when you get to your destination.

Known Expenses

With this research, you’ll find you can figure out most of your big expenses in advance.

If you’re booking your accommodations ahead of time, it will be easier to factor into your budget since you will have an exact amount before you leave home. If you’re going to book things as you go, you’ll have to use your research to estimate what you will spend per night on average.

Some expenses go hand-in-hand. For instance, knowing whether your accommodations will have a kitchen can help you better estimate your food budget: Will you be going out for every meal, or cooking some of the time?

Consider, too, whether you want to set aside some money for souvenirs and gifts, and be sure to factor in these expenses as well.

Unknown Expenses

You will also want to budget some money for unexpected expenses, which could include a health emergency while you’re traveling or just the ability to splurge on something you hadn’t necessarily planned on.

Assign an amount that feels comfortable to you and include this extra padding on your travel budget so that you avoid coming up short.

Trip planning doesn’t just involve an itinerary and wish list of activities and sights. Creating a comprehensive travel budget will help you get excited for an awesome trip, while giving you the confidence that your travel is financially sound.

 

Source: WiseBread

 

Six Smart Ways to Spend Your Tax Refund

Shot of a young woman going through her paperwork at homeAccording to 2015 IRS data, eight out of ten tax filers get some version of a refund. If you are among that 80%, keep reading. If you aren’t, consider this your virtual hug. I’m sorry.

The “refund” is basically your over-payment of taxes from the previous year. I would like to remind you that this is your hard-earned money that the government withheld interest free for the past year. In fact, if you are receiving a large refund, it means you are withholding too much of your earnings and should look at your W-4 and make some changes to your Federal withholding allowances.

I suggest that we treat this refund with the respect it is due. Let’s do something awesome with it. Here are six things you can do with your refund this year that will potentially help your overall financial picture:

  1. Pay Off Your Credit Cards: I know, I know. I am so predictable! Compound interest is interest on interest and it could destroy you financially if you ignore your credit card debt. Make your credit card debt your priority before it takes over your life.
  1. Pay Off Some Of Your Student Loans: If your student loan burden is overwhelming you, use your refund to give yourself a breather and get caught up. This is a great opportunity to pay down a chunk ahead of time and put yourself in a better position for this year. If you are on track with your student debt and have low rates, then it makes sense to use the refund in smarter ways.
  1. Create An Emergency Fund: Remember when you chipped that tooth last year and had to pay $1000 to get it fixed? Not your best day. Remember when you had to fly home to attend the Christening of your niece? It was a super cute event but how did it cost you $750? Are you freaking out about the nine weddings you have this summer? Use your tax refund as a short-term liquidity salve. Keep your refund in your checking account or create a savings account that is separate from your checking if you lack self-control. If you do not have any savings but are debt-free, use this as a golden opportunity to start one.
  1. Make An IRA Contribution: Were you a late bloomer in the retirement account game? Are you behind on contributions? Do you even have an IRA? If not, use this as a chance to open a retirement account and make a contribution. And even better, you may be eligible for a tax deduction if you are under a certain income threshold.
  1. Invest Your Refund: Use this as an opportunity to start investing your money. You don’t need to have a ton of money to be an investor. If you are going to do this on your own, without an advisor, make sure you do your research. My recommendation is that you utilize the “buy and hold” approach. Buy some securities that you think will grow over time and that you will hold for an extended period. Remember that if you trade in and out of your portfolio, you could be subject to short-term capital gains taxes, which could increase your tax burden next year.
  1. Take Care of Yourself: Hold it right there! I did not just give you permission to run out and blow your refund on cute sunglasses. However, I am saying that if you need something that you haven’t been able to afford this year like new eyeglasses or a warm coat, then it is ok to use your refund for that. Just be smart about it.

I think you get the point here, right? The point is to NOT go out and spend your tax refund on a new bag (guilty) or a trip to Palm Springs (guilty again). The point is to be smart about your money and make strategic moves that will pay off in the long run. And remember that in order to get a tax refund, you have to actually file your taxes. So get on that ASAP!

 

Source: Forbes

5 Tips to Help You Pay Back Your Student Loans

March 20, 2017

Mini graduation cap on US money -- education costs in the design of information related to the cost of educationThe Department of Education already expanded repayment options like pay-as-you-earn plans (PAYE) and income-based repayment plans (IBR) over the last few years, but many students are still struggling with this financial burden well into their post-college years. Do you have student loans? How are you managing to pay the monthly payments?

Recently, lawmakers introduced a new bill that could make a big difference for graduates – and their employers. This bill would extend tax benefits to employers who choose to help their workers with student debt.

About 4% of companies in the U.S. already have programs like this, with maximum annual employee benefits reaching $4,400 a year. Under the terms of the new bill, these payouts would qualify as a tax deduction (just like the money employers contribute to their workers’ 401K accounts). With the incentive of being able to put the money back in their own pockets at the end of the year, more employers might be willing to start or expand these kinds of programs.

Tips for Tackling Student Debt Responsibly

Free money to pay back your student loans would be great, right? Although these kinds of programs are helpful, paying back the bulk of a student loan is ultimately your own responsibility. Paying off debt can be challenging, so here are a few tips for tackling student loans responsibly.

  1. Pay more than the minimum and/or double up your payments.

Like most other bills, student loans are usually due once a month. Paying a little more than the minimum required amount can help you knock out the debt sooner (use a debt repayment calculator to find out exactly how much) and avoid paying extra interest. If you receive bi-weekly paychecks, you could also set up an additional automatic payment on paydays (even if it’s only a small amount).

  1. Find your pay-off date and use it as an incentive.

Knowing it will take you 10 years to pay off your student loans is discouraging, but every little bit of extra you pay into the loan will make freedom day a little bit closer. Create a visual update every time you achieve a new pay-off date, and you’ll find more incentive to keep taking months and years off of the end of it.

  1. Use your tax refunds or education credits.

It’s tax season. Are you due to receive a refund or education credit? Instead of spending it, why not use the money to make a large payment on your student loans? The faster you can eliminate a monthly payment, the faster you’ll free up more of your budget year-round, rather than having to wait for your next refund check to have some “fun” money.

  1. Take on a side job or apply your annual raise.

If you’re already working full-time, more work is the last thing you want. That’s why you choose something fun, and only do it a few hours or days a week. When this money is set aside exclusively for paying your student loans, it can quickly make a dent. Secondly, when you get your annual raise, apply the difference to your loans rather than inflating your lifestyle.

  1. Consolidate and refinance – with caution.

Consolidating debt sometimes makes sense, especially if interest rates have dropped significantly. On the other hand, refinancing just to get lower payments while lengthening the duration of your loan will only mean paying more interest in the long run.

The new employer tax credit could create more incentive for your boss to help you with your student loans, but it’s your personal finance habits that will truly make the difference in getting out from under the burden of student loans, once and for all.

 

Source: MoneyNing

6 Credit Score Myths Debunked

Myth: Closing unused card accounts is good for your credit.

Fact: The average age of your accounts is a significant part of your score; keeping your oldest cards open (even if you don’t use them often) generally will help your score.

 

Myth: Paying your utility or cell phone bills on time builds your score.

Fact: Not really. On the other hand, if you are late or delinquent that will hurt you.

 

Myth: Holding a credit-card balance is good for your credit.

Fact: Generally it’s better to pay your credit card bill in full and on-time every month. (Plus, that way, you avoid interest charges.)

 

Myth: There is only one credit score. (Nearly 29 percent thought so.)

Fact: There are multiple credit-scoring models used by multiple credit-scoring companies. Your score can even change depending on the type of loan you are seeking.

 

Myth: While more than half of consumers know that checking your credit report will not reduce your credit score, 27 percent said it will.

Fact: A so-called hard inquiry for credit-card applications or credit checks for loans can cause a temporary dip in your score. Soft inquiries such as reviewing your credit score through credit-monitoring tools will not impact your score. (Surprise! Frequent credit score checks improve it.)

 

Source: CNBC

5 Money Subjects You Need to Talk About Before Tying the Knot

March 15, 2017

Getting married will change the way you file your taxes every April 15. There is good news, though: Many of the changes will be positive ones that can help boost your deductions and save you money.

Let’s look at five of the biggest tax changes you’ll face after the wedding bells stop ringing.

  1. Filing Jointly vs. Separately

Once married, couples have to face a big tax decision: Should they file their taxes jointly or separately? In most cases, married couples who file their taxes jointly save more money. But there can be exceptions.

Couples who file their taxes jointly in 2017 will qualify for a standard deduction of $12,700. When married couples file separately, they each can claim a standard deduction of $6,350. Note that if your spouse chooses to instead itemize their deductions, you will have to as well.

Filing jointly makes especially good financial sense for married couples in which one person earns significantly more than the other. The averaging effect of combining two incomes can bring these couples out of higher tax brackets.

When couples file jointly, they might also qualify for several tax credits and deductions that they wouldn’t otherwise get if filing separately. This could include the earned income tax credit, child and dependent care tax credit, American Opportunity Act education credit, and the Lifetime Learning education tax credit. Couples who have adopted might also qualify for adoption tax credits when they file jointly. You also will not be allowed to deduct student loan interest if you and your spouse opt to file separately.

This doesn’t mean that filing jointly is always the right decision for married couples. Say one spouse has significant medical expenses, casualty losses, or miscellaneous itemized deductions. Taxpayers can deduct medical expenses and casualty losses only after they pass 10% of their adjusted gross income for the year. That milestone can be easier to reach when couples file separate tax returns.

Taxpayers can deduct miscellaneous itemized deductions after they exceed 2% of their adjusted gross income. If one spouse has a significant amount of these deductions, it might make financial sense for this taxpayer to file separately because the spouse will be able to claim a greater percentage of these deductions.

  1. You Might Be on the Hook for Your Spouse’s Filing Mistakes

Before you got married, you were responsible for the information you provided on your own tax return. If you are married and filing your taxes jointly, you are now also responsible for any information your spouse provides on his or her tax return.

This means that if your spouse provides incorrect information on deductions, charitable contributions, or income, you could also face financial penalties from the IRS. If you suspect your spouse may have been dishonest with their tax returns, intentionally or not, you may choose to protect yourself by filing separately. This will ensure you’re only responsible for your own tax liabilities.

  1. It’s Easier to Protect Your Estate From Taxes

You might be worried that too much of your estate will be gobbled up by taxes after you die. Being married should ease these concerns. Federal laws state that you can leave any amount of money to your spouse after you die without generating estate taxes. This makes it far easier to protect the financial assets that you want to leave behind.

  1. Your Tax Bracket Might Change

The rate at which your income is taxed depends on the amount of money you made during the most recent year. Filing your taxes jointly might change your tax bracket.

In 2017, married couples filing jointly who earned $18,650 to $75,900 in the previous year will fall into the 15% tax rate. This means this couple would pay $1,865 in taxes plus 15% of any money they earned over $18,650. Married couples filing jointly who earned $75,900 to $153,100 would fall into the 25% tax rate. They would pay $10,452.50 in taxes plus 25% of any dollars they earned over $75,900.

The rates go up from there. It’s important to note that depending on your spouse’s earnings, your tax rate might rise or fall after you get married if you decide to file jointly.

  1. If You Bought a Home, You Could Enjoy Major Deductions

Owning a home comes with an important tax deduction: the home mortgage interest deduction. This deduction allows homeowners to deduct the interest they pay on their mortgage loan throughout the year. This deduction can be especially valuable during the years in which you first own your home, as a large amount of your monthly mortgage payment will be made up of interest. You can also deduct the property taxes that you pay on your home each year, as well as any mortgage points.

 

Source: WiseBread