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Monthly Archives: January 2022
Rainy day fund: how to save $1,000 and why it matters
In a perfect world, emergencies would never exist—but we all know that unplanned events or emergency needs can happen at any time. You don’t need to live in fear, but you do need to be prepared. That’s why we always recommend having some money set aside to use for life’s unexpected necessities. You hope you never need it, but it’s always better to have it. Read on for more info on how you can save up your rainy day fund and why it matters to you.
What is a rainy day fund?
A rainy day fund, or emergency fund, is exactly what it sounds like: money set aside for the express purpose of being used for an unexpected emergency. Please note that by emergency, we mean something related to medical needs, job loss, or something else necessary to life—not that your favorite store is having a once-in-a-lifetime sale. Be wise when spending your rainy day funds.
How much do I need?
Many experts recommend keeping at least $1000 in your rainy day fund to start with. Ideally you would be able to keep half a year’s earnings in your emergency fund, but starting small will allow you to create a fund without blowing up your budget. Even an amount like $500 can go a long way in an unexpected situation.
There are multiple options for places you can store your rainy day fund—you may choose to keep it in a high-yield savings account or you may prefer to keep it stashed in your locked safe at home. The most important consideration is that the money needs to be easy to access during an emergency but not so easily accessed that you are tempted to use the funds for something else. For some people, that’s a regular checking account; for others, it may be a special account that your CPA helps you set up. Find the solution that fits your needs and plan accordingly.
Emergencies happen all the time—it may be an unexpected root canal that your insurance only partially covers, or you might find yourself laid off from your job without warning. We don’t want to scare you, but it is imperative to understand that, since emergencies are part of life, using this fund for a rainy day need is the whole point. While you don’t want to spend your funds unnecessarily, it’s also critical to remember that you may have to use it—and you’ll be glad it’s there if you do.
How do I save the money?
Setting aside $1000 is an easy task for some and may take months of effort for others—only you know what your financial situation is. If it will take some planning to make it happen, we have a few ideas on ways you can build your savings until your fund is ready to go.
Use an app
There are lots of apps designed to help you set aside a little bit of money at a time, so put them to work for you and start investigating your options. You can determine the amount you want to set aside every month so you don’t sacrifice your budget for your emergency fund.
Make a monthly goal
If apps aren’t your style, you can still apply the same concept to saving money on your own. Use a large soda bottle or even a piggy bank to set aside your extra change and money on a regular basis—those small deposits will add up quickly and give you the opportunity to set aside a little money at a time.
Review your budget
Sometimes, saving up for your emergency fund is as simple as reviewing your budget. Look for places in your finances that can be trimmed down or eliminated and reroute that money to your emergency fund. It might not even be a permanent change—once your rainy day money is all set up, you can resume your previous budget spending.
Consider some credit
We never recommend that you ignore your budget when using your credit card(s). But it might be wise to consider opening a card that is to be used only for serious emergencies. This would allow you to cover your expenses even if you haven’t had time to prep your emergency fund.
We all hope that our rainy day funds never get used—but we also need to be prepared if they should be needed. Work with a financial planner to determine how much you can set aside each month and watch as your emergency fund grows to cover the expenses of keeping you and your family safe and well.
Tax time: what’s new for tax season 2022
The COVID-19 pandemic has impacted our day-to-day lives for the past two years—including our taxes. And tax season is here again. This year, there are various changes to be aware of before you file—especially if this is your first time filing. The deadline to file is April 18th, which is a few days later than the usual April 15th deadline, but it will be here before you know it. File your taxes with confidence—below are a few things to keep in mind when filing your 2021 tax return.
Economic Impact Payments
In 2020 and 2021, taxpayers were issued Economic Impact Payments (also known as stimulus checks) as part of the CARES Act. However, many people were left out, receiving only partial payments or no payment altogether. If you did not receive the entire amount you qualified for in 2021, you can claim the Recovery Rebate Credit. The Recovery Rebate Credit is for individuals who did not receive stimulus checks or full payments. If you file electronically, the tax software you use will help you determine your Recovery Rebate Credit. The Form 1040 and Form 1040-SR instructions can also help determine your eligibility.
Advanced Child Income Tax credit
The IRS advanced Child Income Tax Credits as part of the American Rescue Plan Act. Families that made less than a certain amount with a qualifying child under 18 met the requirements for these advance payments. Half the total credit was paid in monthly payments, and the other half can be claimed when you file your 2021 tax return. If you qualified for the advanced payments, compare what you received with the amount of Child Tax Credit you can claim on your 2021 return. Those who received less than the amount they’re eligible for can claim a credit for the remaining amount. If you received more than you’re eligible for, you might need to repay some or all of the excess amount. The IRS will send Letter 6419 with the total amount of advance Child Tax Credits you received—be sure to file that with your tax records. If you did not receive any advanced payments, you can get a lump-sum payment by claiming the Child Tax Credit on your return.
Interest on refunds
In 2021, some taxpayers received interest payments on their federal refund if they received their refund late. Refund interest payments are taxable and must be reported when filing your 2021 federal income tax return. The IRS sent Form 1099-INT to anyone who received $10 or more in interest. If you did not receive the form, you must still report your interest income earned. Check your account statement or contact your financial institution to get your interest-earning amounts.
Charitable deduction changes
Taxpayers can take standard or itemized deductions. Most taxpayers take the standard deduction, which increased slightly this year—$12,550 if filing single, $18,800 if filing head of household, and $25,100 if filing jointly. Taxpayers who do not itemize deductions can take a charitable deduction of up to $300 (if filing single) for cash contributions made to qualifying organizations. If you’re married and filing jointly, you can deduct $600. This means the deduction lowers your adjusted gross income (AGI), which is your total income minus any deductions already taken, and taxable income—translating into tax savings for you. Cash contributions are donations made by check, credit card, or debit card. Keep in mind that every situation is different as to whether you should take the standard deduction or itemize. For more information on claiming charitable deductions, you can read Publication 526, Charitable Contributions.
Unfortunately, because of the pandemic, many families continued to struggle with medical bills. You can deduct medical expenses above 7.5% of your AGI. For example, your AGI is $50,000, and you incurred $8,000 in medical expenses. You would take $50,000 and multiply that by .075 (7.5%) to get $3,750. In this case, everything above $3,750 would be deductible—meaning you could deduct $4,250. The lower your AGI, the more deductions you will receive. Most medical expenses can be deducted unless you funded them with a flexible spending account (FSA) or health savings account (HSA). However, if you wish to deduct any medical expenses, you’ll need to itemize, which takes longer.
If you were self-employed in 2021, there are various deductions you can claim on your tax return, like travel expenses or the home office deduction. The home office deduction covers mortgage interest, insurance, utilities, repairs, and depreciation. However, if you, like millions of Americans, worked remotely, you cannot claim these deductions. The Tax Cuts and Jobs Act suspended the business use of home deductions through 2025. Home office deductions are reserved for independent contractors or other self-employed individuals who regularly and exclusively use their homes to conduct business and their work. So, employees who receive a paycheck or W-2 from an employer are not eligible to claim the deduction—even if they currently work from home.
Earned Income Tax Credit
While this isn’t new, the Earned Income Tax Credit (EITC) often goes unclaimed. Around 20% of eligible taxpayers don’t claim the benefit or file a return because they don’t realize they qualify. The EITC helps low- to middle-income workers and their families receive a tax break. If you’re eligible, that money earned can reduce the amount you owe or go towards your tax refund. You can determine if you meet requirements through the IRS’s EITC Assistant.
Remember—if your adjusted gross income (AGI) is less than $73,000 annually, you qualify to file your return for free using the IRS’s Free File Program. Once your return is accepted by the IRS, you can use Where’s My Refund to track when you’ll receive your refund. April will be here before you know it, so allow yourself plenty of time to file to ensure there are no errors. Keep these tips in mind, and tax season will be a breeze.
Seven ways to keep food delivery services from eating your cash
We love food delivery. But we don’t love paying so much in fees that it negates all convenience of food delivery in the first place. There is a balance to be struck – and we have some helpful ideas on ways you can find it. Read on to learn how you can make the most of your food delivery without busting your budget.
1. Compare services
Many times we find that we still subscribe to a service without even thinking about it. We pay for multiple streaming channels only to realize we haven’t even used one of those channels in months. The same concept applies to your food delivery service. You may have been with one company for a long time and you may be highly satisfied with the service – but you could be overpaying for what you need. Shop around and discover which services offer which benefits at what cost to determine which food delivery makes the most sense for you.
2. Put the payment in your budget
Your budget should include groceries, and, if you rely on meal or food delivery on a regular basis, it should also include delivery service fees. Incorporate those fees into your budget and look for something you can remove from your expenses to make up the cost. It might mean making coffee at home or switching up your shampoo; the item doesn’t matter as long as it makes up the delivery costs so you budget can stay on track.
3. Plan your meals and groceries
Meal planning isn’t always easy – but people who meal plan are more likely to spend less, not to mention eat a little healthier since they are preparing the food themselves. Try to plan your meals out as far as you can so you know which ingredients you need delivered. The farther out you plan, the fewer deliveries you’ll need, which means more savings for you.
If you have kids in the house, it may seem impossible to plan for your grocery needs since your food seems to disappear overnight. But looking at which groceries you think you’ll need over the next few weeks can go a long way in reducing the number of deliveries you’re paying for – see above about all the extra cash that can bring you. Challenge yourself to plan your grocery needs out over the next month and see if it makes a difference in your delivery budget.
4. Go for the store brand
It can be hard to swallow your grocery total by itself, let alone coupled with the delivery service fee you pay. While you can’t always change the delivery fee, you can work to reduce your grocery cost. Look at the items you buy the most – are you able to switch from a name brand to a store brand or other off brand instead? Often grocery stores will give you incentives to buy their brands (thank you, Kroger card!) so it’s worth investigating whether this change can help you save.
5. Find subscriptions
Did you know that some stores offer the option of paying one flat yearly fee for grocery delivery? Walmart, for instance, has a program where customers can pay $100 a year for an unlimited number of grocery deliveries. If you order a lot of food and staples, this might be a great option for you to consider.
6. Shop smarter
We’ve all heard of the extreme couponers, who somehow manage to purchase 18 gallons of milk for $.89 each. That level of dedication is very time consuming, but you can still get some inspiration of your own when it comes to finding savings. Take time each week or month to look for deals on some of your household staples. Even if you don’t find the same deal each month, you will still enjoy the benefit of a discounted grocery item.
7. Get a rewards code
Do your friends use a grocery or food delivery service? If so, they may receive some promotional codes that allow them to gift a free delivery or specific amount to a friend – and that friend can be you. Work together to make this mutually beneficial and send any codes you get to your friend while they send theirs to you.
It’s hard to beat the convenience of having your groceries delivered, and you can make it work for your budget if you plan out your grocery needs and look for the best deals. Make it your mission to have only the most cost-effective services deliver your groceries this new year.
Vacation savings tools: apps to save for that vacation
While we love to celebrate the joys of the holidays, it can become expensive, especially if you plan to travel to see family or take a much-needed vacation. But even though your wallet is worn out, we still have some ideas on ways you can have your vacation without breaking the bank.
Plan ahead… like, really ahead
If you are hoping to visit the home of the Mouse or some other special theme park, it’s a good idea to plan your stay as far in advance as possible. Not only will you have more time to save, but you are also much more likely to get a good deal and stretch your budget a little further. And then you can post daily countdowns on social media—that alone makes the planning fun.
Get a travel agent
Did you know that a lot of travel agents don’t charge you for their services? Many of them get paid directly by the companies they work for when you book through them, so using a travel agent is a win-win for all parties involved. A travel agent can also help you make sure you don’t overspend and give you some tips and tricks for getting better deals for your stay—along with the hot gossip on which restaurants you shouldn’t skip and which ones are actually overrated.
Make it a family affair
If you have kids who earn money through a job or chores, this is a great opportunity to encourage them to save up their pennies to get a souvenir or to enjoy a fun outing. You can even offer to match what they make if they reach a certain goal, which means your expenses are halved for their souvenirs and they will be motivated to save some funds for your trip. Another win-win—we like those.
Create a visual reminder or goal
Have you ever noticed that companies often make a visual representation of the money they have received for a fundraiser? You might see a thermometer drawing filled in as the money is donated or a graphic that changes every time a donation is received. Companies do this because it works: having a visual reminder, especially one that shows how just a few extra dollars would meet the goal, is a powerful way to motivate people to give. This can work for your family, too—set a goal for your vacation fund and make a chart that you fill in as more and more funds are added.
Spare some change
Find a clear container (a soda bottle works well), set it on your kitchen counter, and designate it as the Official Spare Change Vacation fund. Then ask everyone in your family to drop some dollars or coins in the container when they have a little extra cash on them. A few dollars at a time may not seem like a lot, but that money can add up quickly. A four-person family could raise a few hundred dollars in a year if everyone donated about $10 to the vacation each month—and that money can go right back to your vacation, maybe for a fun experience or a couple of great dinners out.
Find the right app
There are tons of great apps out there that can help you save a little extra here and there to create the right vacation budget for your family. Here are a few of our favorites:
Mint: This app gets bonus points for not only using your info to create a budget for saving, but also tracking your credit score in case you need that info, too.
Groupon:Yes, this one is still alive and kicking—and it’s got some great deals. Use this app to help you find coupons for purchases you hope to make in the future.
Ibotta: This app has gained popularity over the years, and is a great way to get some money back on the purchases you make—which is especially useful at this time of year.
Digit: The Digit app is set up to let you designate savings for certain goals—it might be that vacation, or a pair of new shoes, or both (we hope it’s both). You determine the amount you want to save each month and Digit does the rest.
If your dream vacation seems too expensive, don’t give up—instead, get busy following some of these tips to make your dream come true. You might be months or years away from taking the vacation you want, but having the funds to enjoy your vacation is definitely worth the wait.
Don’t have an account to store your vacation savings? Georgia’s Own offers vacation savings accounts, so you can watch your money grow and take your dream vacation in no time. Click here to open a savings account today.