John J. Bowman Jr. Accountant, personal finance, Uncategorized

How to Manage Your 401(k)

In the early 1980s, the Internal Revenue Service introduced a tax-deferred method for US citizens to set aside savings for their retirement. Today, a 401K investment option is provided for employees by a great majority of the nation’s employers. A 401K plan allows a participant to set aside a portion of their pre-tax earnings until the age of 59 and 6 months, at which time they can begin taking taxed distributions with no penalty.

If you have your own 401K plan, there are some things you can do to enhance your profits and protect your savings. Here are a few strategies you should consider to help you properly manage your account:

Maximize Benefits

If your employer offers a proportionate matching benefit, it would be prudent for you to maximize the amount of your contribution in order to maximize the amount your employer is offering. This is a pure benefit that simply increases your employment benefits package.

Risk Assessment

Most 401K accounts allow the participant to manage their own investments. It’s your job to decide how much risk you are willing to take. Remember, the higher the risk might be, higher the returns will usually follow. As a rule of thumb, you’ll want to invest a least a portion of your account on high return investments. Also, you might want to consider taking extra risks if retirement is multiple decades away.

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John J. Bowman Jr. Accountant, personal finance, Uncategorized

Saving Tips for College Students

College is a time of education, exploration and adventure; it’s also a period where you likely need to save money. When you and most of your friends are trying to keep more funds in the bank, you can use some clever tips to help you get the most out of your money.

Review Your Meal Plan

If you’re constantly having money left over on your meal plan at the end of the semester, consider a more cost-effective plan. While the college might require you to have a certain meal plan during your first-year there, you will likely have more freedom as you earn more credits.

Shop For Textbooks Wisely

You’ve probably heard older students complaining about the cost of books if you’re new to campus. Skipping out on buying books is a bad idea because professors require them for a reason. Instead, ask your professor if it’s acceptable to use an older version or an online version of the book if one of those options is available for less. Also, you might be able to reduce the cost of books by taking them out from the library.

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blog, John J. Bowman Jr Accountant, personal finance, Uncategorized

Saving for Your Child’s College Education

With the rapidly rising cost of college tuition, parents are well-justified in their anxiousness about how to pay for their child’s education. There is a myriad of options for parents wanting to get a head start in saving for this big investment. Although it can often be overwhelming deciding what path to take when planning for your child’s educational future and how to pay for it, here are a few of the top options to consider for your savings plan:

529 College Plan

The gold standard of college saving is the 529 plan. Also known as Qualified Tuition Programs (QTP), this plan allows parents to invest after-tax money into a qualified fund and then withdraw that money and its gains tax-free to put toward use for educational expenses. With more than 30 states offering these type of plans, it pays to shop around to find the best fit for your individual needs.

Roth IRA

Although this type of investment is most associated with retirement savings, a Roth IRA can also be an invaluable vehicle when saving for college expenses. The withdraw rules are similar to the 529, however, investors can use the Roth dividends to also go toward retirement, giving this type of plan more flexibility should your child not pursue a higher education.

Prepaid College Tuition Plans

Self-explanatory in nature, these plans allow parents the benefit of pre-paying for college at today’s prices. By locking in current prices, parents can guard themselves against rapidly escalating costs while also saving money.

Coverdell Education Savings Account

This trust applies to both college education expenses as well as costs incurred at K-12 levels. Although the terms are more flexible, a Coverdell account comes with a $2,000 annual limit, making this choice a deterrent for families wishing to contribute more.

UGMA and UTMA Custodial Accounts

Although these accounts do not have as many tax advantages as its Roth or 529 counterparts, they can be gifted to a child for any reason. Unlike other investment accounts geared toward education, these accounts are placed in the child’s name, giving them full control over the money when the term expires. Conversely, since the child owns the fund, the amount of qualifying aid might be affected.

 

This article was originally posted on jbowmanaccountant.org

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John J. Bowman Jr Accountant, personal finance, Uncategorized

How to Maintain Financial Stability

If you’re looking for a better financial future, then maintaining stability should be at the top of the list of things you may want to focus on.  However, maintaining a financially stable bank account may often seem easier than it actually is. As you do your research, you will find yourself creating a path to help you reach your financial goals.  Build your path beginning with a few of these staple tips to help maintain and build your financial stability.

Set Your Goals

If you are going to get to your target of financial stability, you have to know what that looks like for you. After all, you can’t hit a target you can’t see. Set attainable goals that will act as stepping stones to your goal.  Keep in mind, unrealistic goals can often do more harm than good; keep your goals within realistic reach.

Always think SMART

Achieving goals requires SMART thinking.  SMART stands for, specific, measurable, achievable, realistic, and time-based. For instance, saying you want to have more money is not a goal.  However, saying you want to contribute 20% of your paycheck into your savings account for the next year, is setting a SMART goal for yourself to reach.

Seek Help From Mentors

It would be very safe for you to assume that there are people in your life who have similar financial goals, and have taken the necessary steps to achieve them.  Seek their guidance and ask for assistance if you need it. Additionally, look for books, teachers, seminars, and any kind of connection with a mentor or source of information that can help you get where you want to go. Now that you know your goal, you can be more selective in picking your program to get you there.

Cut Down on Spending

Spending on things you don’t need is the quickest way to decrease your financial stability. However, it remains a very common problem for many Americans. Understanding the smaller things that you may not realize you’re consistently spending on, is a great way to start.  Go further by making a list of all the things you spend money on in your life that you can cut out if you want to. Doing this will give you a great look into how much money you could really be saving.

When it comes to finances, it is something that is on everyone’s mind but few people take enough action on. Instead of suffering financially as an entrepreneur, you can have financial stability. But it won’t happen overnight. Use the tips above and start going in the right direction in your financial life. Eventually, you will be in a place of complete security and peace of mind.

 

This article was originally posted on jbowmanaccountant.com

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blog, John J. Bowman Jr Accountant, John J. Bowman Jr. Accountant, personal finance, Uncategorized

Essential Money Tips for Before and After Retirement

Throughout life, there are many different financial phases and stages that someone goes through.  From opening your first savings account to buying your first house, and so on.  It is important to build your financial structure over time, to ensure the best possible financial stability as you embark on a lifelong journey.  Here are a few simple money tips to follow before and after your retire.

Open a Savings Account

The first savings account you open independently is an important part of your quest to build financial stability, and a retirement plan that will keep you comfortable.  Start with your preferred banking institution, and sit down with a personal banker. Find out what type of savings accounts your bank offers, if there are any fees or perks, and do your best to contribute to it every paycheck.

Pay Down Your Debt

Outstanding debt is a major issue for many American adults.  Student loans, mortgages, credit cards, and car loans are all components of consumer or household debt.  In fact, by 2018, Americans accumulated a new record of $13 trillion in debt.  It is important, and wildly beneficial, to start tackling outstanding debt as soon as possible.  Establish payment plans for your student loans, and work on paying off credit card debt.

Consider Your Budget When Buying Your First House

Buying your first home can be very exciting; however, it can also be extremely expensive.  Always consider your budget when house hunting. Think about and understand what you can afford, while still being able to live comfortably, rather than what you want to afford.  Take time to do the required research on loans, mortgages, and lenders; a first home can often come with renovations, you will want to have some money set aside for this as well.

Invest In Retirement

Though it could be years away, it is essential to your future retirement to start planning as soon as possible.  Take a look into 401K plans that your company may offer, if they match or not, and if so, how much. If your company doesn’t offer a 401K, take a look into some independent options, like an individual 401K or an IRA (Individual Retirement Account).

Know Your Budget

While you will have resources like social security, and the retirement plans that you contributed to over the years, it’s important to understand your budget after you retire.  Not having a flowing steady income that you may be used to, can sometimes make understanding what your budget is a little more difficult. After you retire, take a look at the money you are still collecting, and your expenses; and don’t forget, part-time work is always available to stay busy and still collect an income.

Consider Downsizing

The idea of downsizing can be frightening, depending on what you’re used to.  First, try not to look at it in a negative light. Downsizing can be a great way to enjoy retirement and cut down some living expenses.  Not only can you potentially save on your living expenses, but also reduce upkeep, home maintenance, and taxes.

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John J Bowman Jr Accountant - Debt Repayment
blog, personal finance

Strategies for a Quick Debt Repayment

It’s a warm Saturday afternoon, and you’ve decided that you deserve a day out on the town with your friends. You’re exhausted and burned out from a too-long work week, sick of the grind and needing a break. You’ve been so thoughtful lately, you think, minding your budget, that you deserve to splurge a little. You hit the mall with a gaggle of friends and start swiping; more than a few bag handles circle your wrists as you reach for your credit card to pay for overpriced popcorn and soda at the complex’s theatre. You haven’t gotten your paycheck yet, but that’s okay – you know that your credit will cover you for now. When you check your banking app the next day, though, you can’t quite believe the number that blinks up at you. How can your credit balance be so high?

Sometimes, using a credit card to cover purchases can feel like playing with Monopoly money. We spend and spend and spend, knowing that we don’t have to pay back our debt right now. The fact that the money will need to be paid back at some point is a concern for later…until later rolls around to the present, and we face a veritable mountain of debt. According to a 2017 nerdwallet study on household debt, the average American consumer owes $15,983 in credit card debt. Totaled across the nation, that’s $931 billion owed by US consumers. Paying off this debt is an intimidating endeavor, but not an impossible one. Here, I provide a few strategies for a quick and efficient debt repayment.

Put the Cards Down

If you want to lower the mountain, why would you add to its height? Stop using your credit cards, and avoid making purchases that would add to your overall balance. Steering clear of credit for a few days or weeks might help you keep better tally of how much you actually spend in a day; the dues feel dearer when you have to pay them immediately, rather than at some hazy later date.

Revisit Your Budget

Take a closer look at your current budget! Can you trim any of your costs? Be tough but fair with yourself; you probably don’t need Netflix, Hulu, and HBOGo. Being on a budget doesn’t require you to give up all entertainment, but treating yourself should only go so far. Once you have a pared-down budget, you can start crunching the numbers and make an estimate of how much you can afford to apply towards your debt each month. Remember, paying off your balance now will greatly decrease what you pay in interest later!

Pick Up a Side Hustle

Trimming a budget can only go so far. In the end, you’ll make more from a part-time job or side hustle than you would ever save by canceling subscriptions or couponing. Find a money-making gig that can fit with your schedule!

Apply Unexpected Income Sources Towards Your Balance

It can be tempting to splurge when you find yourself with an unexpected windfall. However, the money you spend on luxuries now could be handicapping your ability to pay for more basic needs later. Put bonuses, inheritances, and tax refunds towards paying off your debt! Once you live debt-free, you will be able to afford splurging now and again.

Be Consistent

Debt repayment won’t happen unless you hold yourself to a firm budget and repayment schedule. Be consistent! As much as it might hurt to pass on dinners out or afternoons at the mall, your debt-free future self will be much happier and more financially secure for your efforts.

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John J Bowman Jr Accountant - Finance Parents
blog, personal finance

Personal Finance Tips for New Parents

Raising a child is absurdly expensive. According to the latest federally-provided figures, a child can cost his or her parents an average of $233,610 over the course of eighteen years – and that isn’t even accounting for private or college tuition! Welcoming a child into the world is an exciting time for any parent, but it requires some practical thinking and hard financial conversations. Here, I overview a few strategies that every single expecting or current parent should implement to secure their own and their child’s financial future.

Create a New Budget

A new baby brings new expenses. The added financial cost posed by diapers, formula, and childcare can weigh down even a solidly made budget. Keep track of your expenses, and build a budget around the actual expenses you face, rather than those you projected pre-baby. Mind you, some of the costs you encounter might not be ones you anticipated; make sure that your health insurance will provide adequate coverage for your child in the case of emergencies. The last thing you want to discover on a trip to a needed doctor’s appointment is that your insurance doesn’t extend to your baby.

Bolster Your Emergency Fund

While every adult should have a sturdy emergency fund, these tucked-away savings are vital for new parents. After all, losing your job when the only person you have to worry about is yourself is one problem. Losing your job when you need to support a child is a problem of an entirely different magnitude. Make sure that you have enough in your emergency account to cover your family’s living expenses for three to six months in case of disaster, and ensure your financial security by reducing your credit card debt.  

Set Up a College Savings Account Now

It may seem odd to start saving for college when your child is still in preschool, but starting early is the only way to lessen the burden of tuition. Set up a 529 college savings account, and contribute however much you can afford every month. Your small inputs will add up over eighteen years; while it may not be able to cover the full cost of college, it should defray the overall burden and put your child in a position to graduate with a manageable amount of college loan debt.

Research Applicable Tax Credits

Knowledge is the key to financial security. Common tax credits include the child tax credit, which can give you a $1000 credit every year until your child turns seventeen, and the child and dependent-care credit, which provides qualifying filers the chance to claim up to $3000 for a single child under the age of 13. Do some research to find out which tax credits your child gives you eligibility for!

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