This is a great article on how to keep your retirement accounts safe. – Julie
Homeownership can often constitute a smart investment, especially if you purchase property to rent out and generate income. But adjustments to the tax code have changed the way some people look at homeownership. Is it still a good means of reaping tax benefits?
Tax breaks for homeowners
If you own property, there are a number of expenses you can deduct on your tax return, including:
- Interest on a mortgage of up to $750,000 ($375,000 if you’re married filing separately) if your loan was signed after December 15, 2017.
- Interest on a mortgage of up to $1 million ($500,000 if married filing separately) if your loan was signed before December 15, 2017.
- Property taxes of up to $10,000 (with a caveat, which we’ll discuss below).
It’s worth talking about the property tax deduction, because that $10,000 allowance doesn’t tell the whole story. That figure is inclusive of state and local taxes, so if you live somewhere where those taxes are high and property taxes are also high, you may not get to deduct your entire property tax bill.
How do homeownership tax benefits stack up?
Owning a home doesn’t give you as much tax-related leeway as it once did. It used to be that property taxes of any amount could be deducted on your return, but following the Tax Cuts and Jobs Act of 2017, that rule changed, and homeowners are now capped at $10,000. That’s a harsh blow for folks who live in states with high property taxes.
The $750,000 mortgage cap is also a result of the Tax Cuts and Jobs Act. Prior to late 2017, homeowners could deduct interest on a home loan of up to $1 million. And while that change may not impact the typical U.S. homebuyer, it certainly hasn’t helped buyers in more expensive corners of the country.
As such, the tax breaks associated with homeownership are no longer as robust as they once were. But that’s not all. In conjunction with the aforementioned changes, another change that resulted from the Tax Cuts and Jobs Act was the near doubling of the standard deduction. For the current year, that deduction stands at:
- $12,400 for single tax filers and married couples filing separately.
- $18,650 for heads of household.
- $24,800 for married couples filing jointly.
What this means is that in order to capitalize on the mortgage interest and property tax deduction, your total itemized deductions need to surpass the above-noted totals. Now let’s imagine you’re married filing a joint return and you pay $10,000 in mortgage interest this year, and you can claim another $10,000 via the SALT deduction, which encompasses property taxes. Unless you have other items to write off, itemizing on your tax return won’t make sense, which means you won’t get to claim any homeowner tax breaks at all.
It still pays to own
Not everyone will benefit from the aforementioned homeowner tax breaks. But if the cost of owning is comparable to that of renting, then it generally pays to own.
Even if you don’t reap too many tax benefits along the way, you might snag a very lucrative tax break when you go to sell your home. Thanks to the capital gains exclusion, you can avoid paying taxes on up to $500,000 in profits on your home ($250,000 if you’re single).
Normally, when you sell assets for more than what you paid for them, the IRS gets a piece of your profits. For example, if you buy shares of a given stock at $50 apiece and sell them two years later for $70 apiece, you’ve made $20 per share, and the IRS will take a modest cut. But if you sell your home for more than what you paid for it, you won’t pay taxes on up to $250,000 or $500,000 of your profit, depending on your filing status, provided you lived in that home for at least two years during the five-year period prior to its sale.
Another thing: The improvements you make to your home while you’re living in it can help reduce whatever gains on its sale you’d otherwise be liable for. Let’s assume you’re married and bought a home for $250,000, only now you’re able to sell it for $800,000. That’s a $550,000 gain, and you’d normally be liable for taxes on $50,000 of that. But if you made $50,000 worth of home improvements (not repairs), you can add that $50,000 to the cost basis of your home, thereby eliminating your tax burden.
The takeaway? Homeowners are still privy to a host of tax benefits — but that shouldn’t be your sole motivation for buying a place of your own. We don’t know what changes the tax code might have in store in the future, and so while there are definitely tax breaks at play right now, you should buy a home because you want to build equity in a property, put down roots, and enjoy living by your own rules, not a landlord’s. You shouldn’t necessarily rush into homeownership merely to shield some income from the IRS.
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Article By: Maurie Backman
The calendar has reached the final month of the year, giving you just days to make some year-end financial moves. These strategies can help lower the risk of identity theft and give you a better picture of your financial health.
None of them should take long — you can probably knock them out during the commercial breaks of your favorite TV shows.
1. Change passwords
Update all passwords for next year, especially those for bank, credit card and other sensitive accounts.
You could use a notebook and pen to record your new passwords, but a much better idea is a password manager. Most will generate and store strong passwords for you. Then, you only have to remember one.
We explain password managers in detail and offer a free option and a paid option in “The Best Way to Remember and Protect All Your Passwords.”
2. Request a free credit report
Federal law entitles you to one free credit report every year from each of the three major credit-reporting agencies. Download one during a commercial break, and review it for mistakes or suspicious activity.
Make sure you request reports via AnnualCreditReport.com, the official website for free credit reports. Other websites might send you reports, but there’s usually a catch.
For example, the site might automatically enroll you in a credit-monitoring service or some other subscription program. While you’re at it, check out our Solutions Center for help with credit card debt.
3. Review your FSA balance
A rule enacted a few years ago permits employers to let flexible spending account participants roll over up to $500 into the next year.
Note, however, that employers aren’t required to offer a grace period or a rollover. So, now’s the time to find out your employer’s policy.
If the employer does not participate in either option, use the few minutes of a TV commercial break to go shopping. Spend that money on qualified expenses by doing things like refilling prescriptions or maybe buying new glasses.
4. Complete an investment review
Does an investment review sound time-consuming? It’s not, really. You can do one in 15 minutes or less with these steps. In a nutshell, you want to check your investment performance, review your fees and reallocate balances if needed.
While examining and understanding your investments might seem boring, it’s exciting compared with the commercials you’ll be missing.
5. Sell losses to offset gains
Look for losers among your investments and consider unloading them. Selling a stock or other security at a loss can offset investment gains you’ve taken during the year, thus lowering your tax bill.
There are a couple of caveats. For starters, losses in tax-advantaged retirement accounts — like an IRA or 401(k) — aren’t deductible.
You also cannot game the system by selling a stock at a loss, then buying it back a few minutes or days later. For an investment loss to be deductible, you can’t purchase a substantially identical security within 30 days before or after a sale.
6. Scan and shred paperwork
Have a teen in the house? Let him or her scan the mess of paperwork you’ve been hoarding all year onto the computer and then shred the originals. If that doesn’t sound like fun to your kid, you can always pay him or her a few bucks.
For those of you who are childless, never fear. This is a rather mindless year-end task that can be easily accomplished during your annual viewing of “It’s a Wonderful Life.”
7. Make a will
This may not seem like a quick-and-easy money move, but if you have a simple estate, there’s no reason to make things complicated. Search online for “will template” and your home state, and you’ll find all sorts of fill-in-the-blank wills that can be downloaded free. If you don’t have a will, these will do for now.
If that doesn’t sound like an adequate long-term solution, have your will reviewed by an estate attorney later. But even a cheap internet will that you prepare during a commercial break is better than none.
8. Create a budget
Creating a budget is easy today. All you need is the use of a free service such as that offered by our partner You Need a Budget (YNAB).
When you use a site or app like Mint or You Need a Budget, you give it your bank account information and create expense categories. Then, your goals and spending are automatically tracked and updated. You can get started during a commercial break.
If you want to stick to the old-fashioned method of budgeting with paper and pencil, no worries. Just check out our free budgeting spreadsheets.
9. Update beneficiaries
The end of the year is a good time to review your designated beneficiaries and update them as needed. Did you get married? Divorced? Have kids? Have a falling out?
Make sure you have the right people listed as your beneficiaries on accounts such as:
- Life insurance
- Bank accounts
- Retirement accounts, including IRAs and 401(k)s
Even if you’re not born into wealth, you can still become wealthy.
Regardless of your financial situation or education, building wealth boils down to three things: Saving, resourcefulness, and maximizing income, according to William D. Danko, coauthor of the best-seller “The Millionaire Next Door.”
His latest book, “Richer Than a Millionaire,” posits the idea that true prosperity is the convergence of good health, happiness, and wealth.
In a recent Q&A with the Washington Post, Danko was asked for his best advice for building wealth “regardless of financial situation and education.” Danko said:
“First, commit to saving 20% of your income. Currently, most save about 5%. It is hard to get ahead and be an investor without saving first.
Second, be a good steward of your resources. This includes having stable personal relationships, and good personal habits. These behaviors will lead to a longer life, and more compounding opportunities.
Third, consider having more than one stream of income. A second job can be beneficial.”
Committing to saving your income is part of setting financial goals. In fact, it’s the key to building any wealth at all, Business Insider previously reported. Specifically, 20% should be put toward an emergency fund, retirement, and paying down debt.
Danko calls it a “stretch goal” — you may not be able to save that much now, but it’s what you should aim for.
“If you earn and spend everything, you cannot build a significant financial net worth,” he said in the Q&A. “You must practice self-imposed financial scarcity. So, if you make $100,000, create a lifestyle that only requires 80% of this, and save/invest the rest.”
Research backs up Danko’s point that having a healthy personal life will lead to a longer life — studies show that fostering friendship is key to aging well and boosting happiness, Business Insider’s Erin Brodwin reported. And so do personal habits, like tweaking your diet and getting the right kind of exercise.
Finally, the more income you’re generating, the more money you’ll be able to save, so long as you don’t fall victim to “lifestyle creep.” This will also help you generate passive income, which one financial expert called “the holy grail of ways to make money.”
In fact, one Business Insider contributor has seven separate streams of income, from blogging to real estate, and he says it means he’ll never stop earning money.
Re-posted from MSN.COM
The crushing weight of student debt and the Great Recession have shaped millennials’ relationship with money, for better or worse. In some, it has created enough anxiety about financial security that they save as much as they can and avoid any type of credit agreement that could cause them to take on more debt. Others become so preoccupied with their present expenses that they fail to save for the future.
Unfortunately, both approaches have their drawbacks. Here are a few of the most common money mistakes millennials are making — and what you can do to fix them.
1. Not preparing for the unexpected
About 46% of millennials don’t have any money set aside in an emergency fund, according to a 2017 survey by GOBankingRates. This can pose a problem when an unexpected event like a home repair, a costly medical bill, or a sudden job loss puts an extra strain on your budget. Without any savings to cover these financial emergencies, you may have no choice but to take on debt or fall behind on your rent or mortgage payment and other bills, which can have a serious impact on your creditworthiness.
Most experts recommend keeping at least three to six months’ worth of expenses in a savings account to help cover unexpected expenses. Look at your monthly bills and calculate how much you would need to cover them. Then multiply that number by three (or six if you want to be extra safe) and create a weekly savings goal to help you reach it.
2. Avoiding credit
Only 1 in 3 millennials owns a credit card, according to a recent study by Bankrate. While it’s wise not to overuse credit, avoiding it entirely can pose problems, especially when you go to buy a home or finance another big purchase.
Just about everyone will apply for a loan at some point in their lives. When you do, your lender will pull your credit reports to assess how responsible you’ve been with your money in the past. Your credit reports contain information on all active credit accounts in your name, but if you don’t have any, you’re not giving lenders anything to go on. This can make them hesitant to work with you, and they may deny your loan application or charge you a higher interest rate than someone with a well-established credit history. If you’d like to become a homeowner someday, then a nonexistent credit history will be a major obstacle.
You don’t have to use credit cards, but it is important to build up your credit history in some way. Paying off student loans can help, and if you take out an auto loan or personal loan, these will appear on your credit report as well. But for many, credit cards are the ideal credit-building tool because you can use them regularly, and as long as you pay the balance in full each month, you won’t have to pay any interest at all.
3. Not saving for retirement
For many millennials, paying off student loans is a much more pressing concern than saving for retirement. After all, they have 30 to 40 years left to work, so what’s the big deal if they put off retirement savings for a few years?
The trouble is that your most valuable retirement contributions are the ones you make while you’re young. The sooner you put funds in a retirement account, the more compound interest can make them grow. When you get a late start, your money has less time to gain interest before you need to start using it.
Say you put $10,000 in a retirement account when you’re 25 years old. Assuming your investments earn 8% per year, that $10,000 will have grown to $253,000 by the time you’re ready to retire at age 67. If you waited until age 35 to put that money in, it would only grow to $117,000. And if you waited until 45, you’d end up with only $54,000.
Waiting to start saving for retirement may not seem like a big deal, but it can mean a difference of hundreds of thousands of dollars. If you have any extra money left over after you’ve paid your bills each month, put it into your 401(k). If your employer doesn’t offer one, then open an IRA.
4. Spending frivolously
Millennials are more likely to indulge their immediate wants than baby boomers and Gen X-ers are today. In a survey by Schwab, 60% of millennials admit to spending more than $4 on their coffee (though it doesn’t specify how often), and they’re more likely to eat out and spend money on clothing and electronics they don’t need. While it’s healthy to indulge these wants occasionally, doing it frequently can take a large chunk out of your budget, leaving you less money to put toward retirement and your emergency fund.
Take a good look at how much you’re spending on the non-essentials each month and look for areas where you may be able to cut back. Making your coffee at home, rather than purchasing it at your favorite chain, will save you over $1,300 a year on average. This assumes that an average cup of Joe from a cafe is $4, while the cost of making a cup at home is $0.17, and you are drinking one cup per day. Dining in and curbing your shopping could free up even more money.
For millennials, it’s all about maintaining a balance between what you need now and what you’ll need later. By remaining mindful of how your present decisions are impacting your future finances, you’ll be able to make smart choices that will serve you well today and in all of your tomorrows.
Re-posted from CBS News.Com
After preparing your 2017 tax return and finding out that you still owe Uncle Sam, it’s natural to feel some regret over things you could have done before the end of 2017 that could have lowered your tax bill. For example, if you contributed less than $18,000 to your employer’s 401(k) retirement plan last year, you can’t go back and make that contribution now.
But in certain situations, taxpayers can still do some things now to reduce their gross income on their 2017 tax return.
For instance, workers can make tax-deductible contributions for last year to several types of retirement savings accounts, even though the contributions are made this year. Here’s the list of these accounts, how much you can contribute and the deadline for doing it.
Traditional and Roth IRAs
You’re still allowed to make a 2017 contribution to these accounts if you do so by the due date for filing your 2017 tax return, which is April 18 this year. But this deadline doesn’t get extended when you file for an extension until Oct. 15. This deadline also applies to opening a new IRA.
The maximum contribution you can make to an IRA for 2017 is $5,500. You can add an additional $1,000 if you were over age 50 on any day in 2017. Whether you can claim a deduction for an IRA contribution depends on your adjusted gross income. If you’re single and your AGI is over $62,000, you’re allowed a partial deduction. But if your income exceeds $72,000, the IRA deduction is completely phased out. The AGI limits for marrieds is $99,000 and $119,000.
Health savings accounts
For a growing number of workers, a health savings account, or HSA, is a much.
An HSA is a special account that allows you to save money that can later be withdrawn tax-free to reimburse yourself for medical expenses. Best of all, money you contribute to an HSA is tax-free on the way in, grows tax-free and is tax-free when you take it out to pay for qualified medical expenses. No other long-term savings account allows this.
HSAs are so valuable that I advise clients that after they take advantage of the matching contribution in their employers 401(k) plan, they should make the maximum contributions to an HSA before saving money in another account or plan.
You can still make a 2017 contribution to an HSA if you do it by the April 18 filing deadline. Again, this deadline doesn’t get extended when you file an extension. Contributions for 2017 are also allowed even if you didn’t open the HSA in 2017. You can open one now, make the 2017 contribution and take a deduction for it on your 2017 tax return.
To contribute to an HSA, an individual must have been covered last year under a health insurance plan with an annual deductible of at least $1,300, or $2,600 for a family plan. The maximum annual HSA contribution in 2017 is $3,400 for individuals, $6,750 for a family. Those age 55 and older can contribute an additional $1,000.
This retirement plan allows the self-employed to make generous contributions both as an employer and as an employee. You can make two types of contributions to this plan. As an employer, you can contribute a percentage of net profit. As an employee, you can contribute a fixed-dollar amount up to the employee 401(k) contribution limit ($18,000, or $24,000 for those over age 50 in 2017).
This plan works best for a sole-proprietor with no employees. That’s because if you have any employees age 21 or older and who work at least 1,000 hours per year, you’ll have to also open accounts and make similar contributions for them. Finally, you will need to establish the SE 401(k) account before year-end, but you can make the deductible contributions by your tax filing deadline, including valid extensions.
SEP IRA or SIMPLE IRA plan
If you’re self-employed, a business owner or sole proprietor, you can establish and contribute to either of these retirement plans. For a SEP IRA, as the employer you must contribute a uniform percentage of pay for each employee, who can’t make their own contributions. The allowed contribution amount is up to 20 percent of your self-employed income (or 25 percent of an employee’s compensation), up to $54,000.
An alternative is the SIMPLE IRA. It allows employees to contribute a percentage of their pay to an IRA and requires an employer to either match employee contributions (dollar-for-dollar) up to 3 percent of compensation or make a fixed contribution of 2 percent for all eligible employees, even if they choose not to contribute.
A SIMPLE IRA plan is allowed for employers with 100 or fewer employees. The limit for employee contributions is $12,500 for 2017. The catch-up contribution for those over age 50 is $3,000.
Contributions to these accounts can be made by the employer’s tax filing deadline, including valid extensions, for the employer to be able to deduct contributions for the 2017 tax year.
A Long-Term Perspective on the
Stock Market Downturn
Prior to Feb. 2, the stock market had been through a remarkably tranquil period. Since that date, the U.S. stock market has experienced multiple days with drops of 2 percent or more in a short period of time. Here, though, we will focus on the long-term investing concepts you should keep in mind, as well as historical context for market moves of this magnitude.
Markets are notoriously difficult to forecast over any horizon, and this difficulty is only amplified over shorter periods of time. Nevertheless, this won’t stop some market “professionals” from trying. You would be wise to ignore these forecasts in your own decision-making. Yes, markets are currently extremely volatile, but that volatility might not continue and no one can reliably know whether stocks will move up or down from here. In fact, no one can even clearly know what caused the drop over the last week. Some commentary we have seen points to inflationary concerns while other pundits blame anxiety around the U.S. budgetary process. Still others believe the market is concerned the Federal Reserve may raise interest rates too quickly. Who’s to say which, if any, of those explanations are correct, much less what that implies going forward. What we do know, though, is that over the long term, you can expect to be rewarded for investing in a low-cost, diversified portfolio of stock funds.
The recent past shows us just how wrong consensus, short-term forecasts can be. Two recent examples are the post-financial-crisis prediction of higher interest rates and the expectation that the stock market would decline following the 2016 presidential election. Both predictions were clearly wrong, and investors who acted on them instead of focusing on the long-run evidence that markets tend to reward risk-taking were harmed.
Your Plan Incorporates Risk
One of the advantages investors have today compared to investors in the early part of the 20th century is that we now have decades-worth of data to help us understand long-run returns and risks. Our partner, BAM Advisor Services, maintains an extensive database of the risk profiles associated with the portfolios that we recommend to clients. This data allows us to incorporate risk into the way we build your financial plan, meaning that outcomes like the market falling by 2, 3 or 4 percent over a handful of days already are reflected in our recommendation. The BAM Advisor Services Investment Policy Committee is well aware that these events — however unpredictable — will eventually happen, and we therefore imbed this knowledge in the comprehensive planning process that results in your portfolio allocation.
Putting Market Risk in Historical Context
The following graph plots the historical annual return of the U.S. stock market in each year (in blue) from 1926 through 2017 and the largest intra-year decline (in light blue outline) that occurred in each of those years.
Annual Stock Market Returns and Intra-Year Declines
There are two primary takeaways from this graph. First, as we all know, the stock market goes up far more often than it goes down. Second, but possibly less well known, virtually every year includes a period of time where markets fell precipitously. It’s clear, though, that these intra-year declines don’t necessarily signal whether the market will be up or down over that particular year. But it does show that stock markets have and always will be risky, particularly over shorter periods of time.
Are There Any Actions to Take?
Given what we know, we obviously don’t recommend making drastic changes to your portfolio allocation as a result of short-term market moves already accounted for in the planning process. Your portfolio is well-thought-through and built to be highly diversified. But are there any other actions worth considering? If you haven’t recently, now could be a good time to reassess your investment plan from a long-term point of view. We’re always here to help with that endeavor.
Re-posted from marketwatch.com
The $1.2 trillion tax overhaul that was signed into law by President Trump on Friday will affect your retirement in a number of ways.
The tax plan no longer includes lowering contribution limits on retirement accounts or nixing traditional individual retirement accounts in lieu of Roth individual retirement accounts (which would have shifted when retirement savers pay taxes on their savings), but it does address individual retirement accounts and increases the standard deduction (by almost double), which could affect the way people itemize their charitable donations. These changes would be for next year’s taxes, to be filed in 2019 — 2017 tax returns are due on April 17.
Here are five ways retirees will be affected:
Retirees will have to be more strategic about their IRA conversions
The new tax bill would stop what’s called “recharacterizations” of IRAs. Recharacterizations allow a person to undo their decision to rollover or convert accounts to Roth IRAs. Therefore, retirement savers who have already made these conversions this year should consider before the new year if they want to reverse them.
And contribute to charity twice every two years
Retirees likely won’t be itemizing since they don’t have many deductions, except for charitable contributions, property taxes and perhaps state income taxes, said Andrew Houte, director of retirement planning at Next Level Planning and Wealth Management in Brookfield, Wis. Some retirees may want to take advantage of Qualified Charitable Distributions, which allow them to donate directly to charity from their individual retirement accounts without having to itemize those donations (after 70 ½ years old). Because of the increase in the standard deduction, retirees may benefit from making more charitable donations, but less frequently — for example, donate twice as much, but every other year — which would help taxpayers by having more to write off than the standard deduction limit, said Scott Bishop, executive vice president of financial planning at advisory firm STA Wealth in Houston, Texas. More people may also invest in donor-advised funds instead of donating cash, he said.
Personal income tax rates are changing, but still important
Personal income taxes would be lowered for most households — to 10%, 12%, 22%, 24%, 32%, 35% and 37%. Retirees will have to watch their income to avoid ending up in a higher tax bracket, Bishop said. Income includes withdrawals from retirement accounts, required minimum distributions and ordinary income. For example, people with large balances might want to begin distributions before turning 70 ½ years old, when they’ll be required to take distributions in some accounts — that way, when they get there, they won’t be forced into a higher tax bracket. It takes a little calculating, and predicting what income will look like in the future versus now, but it could save retirees money down the road.
Also see: The four worst things about the tax bill
Small businesses may not offer retirement accounts
Most 401(k) plans and similar defined contribution benefits are offered by large employers because they’re too expensive for small businesses to administer. Under tax reform, it may become even less advantageous for small businesses to host these accounts, said Trevor Gerszt, chief executive officer of CoinIRA, a company that allows savers to convert assets into digital currency, such as bitcoin. The bill reduces the income tax rate for small businesses but does not address offering or contributing to retirement plans, which are incentives to establish these accounts, according to the American Retirement Association.
Some retirees may want to move
Deductions for mortgage interest rates were left untouched, and $10,000 in local property taxes will be deductible on a federal level. That means income tax-free states will be best for retirees, according to Brett Anderson, a financial adviser and president of St. Croix Advisors in Hudson, Wis. Retirees are more easily able to move from state to state because they have no job tying them down, he said, which also means they can be more sensitive to the various income tax rates in various states. There are a few states that soar above the rest for tax-friendly states best for retirees, such as Nevada, New Mexico and Wyoming.
The new bill also reduces the maximum amount of mortgage debt a person can acquire for their first or second residence, to $750,000 for married couples filing joint tax returns (or $375,000) for those married filing separately, down from $1 million. This won’t affect home purchases before Dec. 16, 2017 so long as the home closed before April 1, 2018.
Re-posted from Investopedia
We all know that being able to save is very important when trying to grow assets. To eventually find financial freedom and have our assets give us the income that we need to live, we need to be able to live on a smaller amount of money than what we are bringing home. However, there are a lot of forces working against us trying to make us spend more. Marketers are getting smarter and more effective in getting us to overspend.
It is true that getting what you need for a smaller price is a good thing, however more people are falling into the trap marketers plant to make us buy more. To become financially successful, you need to understand the difference between buying on sale and being frugal.
Be Aware of Marketers Techniques Use to Make You Buy More
Marketers study human behavior. They know about the mood they need to put you in so that you buy more. They use color, scents, sounds and textures to convince you that you need their products.
Pricing is also an important tool they use. For example, recent research found that coupons actually have neurological effects on customers. They impact happiness and lower stress. Marketers understand that people want a good deal and offering coupons might be a way to get customers to feel good about purchasing their products.
As a financially savvy consumer, you need to be aware of the techniques marketers use so that you can be ready to resist to the temptation. (For related reading, see: Sneaky Strategies That Fuel Overspending.)
Focus on What You Want Versus What You Need
To be smarter with your money, you need to determine the difference between what you want and what you need. Needs are everything you have to have to be able to go on with your day. Besides food, water, shelter and clothing, there isn’t much more we substantially need. Depending on your career choice or goals you are aiming for, there might be other things you need to accomplish them.
The rest of the stuff we buy are wants! To become financially successful, you need to control yourself when dealing with your wants. You need a priority list to help you stay within your budget. This will ensure you have some money to invest for later.
What Is Frugality?
Frugality is not about depriving yourself. It’s not about living a substandard life. It is actually about avoiding waste. To stop you from spending money on stuff you don’t really need, you have to find out what is important to you. There are too many things we buy every day that we end up throwing away. The few dollars you could save can make a huge difference over the long term. Would it be worth it to be frugal with your money if it meant you afford something really important to you later?
Take a hard look at all of the money that you waste on small things and make a plan to control your “want” expenses. If you still decide to purchase a certain want and are able to to buy it on sale, more power to you. It’s time for you to take control over your money. Don’t let marketers dictate how to spend it.
(For more from this author, see: How to Build Your Financial Foundation.)
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