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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personal finance

Understanding Savings Accounts

Currency is arguably the eighth wonder of the modern world, as people have no longer been required to barter goods and services with one another for products and services others desire. Rather, people participating in capitalistic economies across the globe simply offer standardized currency backed by governments in exchange for any product they can put a price on.

 

An inherent part of modern currency, however, is that a dollar loses value over time due to a phenomenon called inflation. Even though inflation goes against the wealth-oriented welfare of income earners, it’s actually a sign of a healthy economy.

 

Participants in capitalistic economic markets can safeguard against inflation through, more or less, two means: stow their hard-earned money away in savings accounts provided by financial institutions or invest money in shares of public companies, government and corporate bonds, precious metals, commodities, and real estate, among other financial instruments.

 

One downside of investing, however, is that investors are generally unable to exchange their invested assets purchased with currency back to its original fiat form. If they are able to make such a premature swap, it typically is coupled with relatively substantial fees that leave investors with less money than they started with.

 

Savings accounts, even though they typically never generate the same returns as investments, allow account owners to withdraw either a set dollar amount of initiate a limited number of transactions without penalty, providing account holders with substantially more freedom than if they were to invest such money via traditional means.

 

Further, money in savings accounts is never prone to market fluctuations that could cut investors’ sums in half, if not reduce their value to mere pennies.

 

The Various Types of Savings Accounts:

 

Savings accounts can prove beneficial to account holders when used appropriately. Such appropriate use involves understanding the various terms and conditions of savings accounts (SA) and weighing the pros and cons prior to depositing money in such secured stores.

 

Basic SAs are those that offer limited interest, set withdrawal limits, all typically offered at no charge.

 

Online SAs are simply those that can be accessed through the Internet, and usually offer the same liberties as described above.

 

Money market accounts are essentially high-dollar checking accounts that generate interest, though account holders are limited to an agreed-upon number of withdrawals. They generally require hefty initial deposits.

 

Make sure to read the fine print prior to opening a savings account! Doing so could save you money and help you reach your long-term financial goals.

*Originally posted on JBowmanAccountant.info

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personal finance

Credit Card Do’s and Don’ts

Credit cards are like keys; they open doors to affordable mortgages, nice cars, low-interest loans, and ideal rental options. As useful as these thin plastic cards are, though, they aren’t without their dangers. When over- or thoughtlessly used, credit cards can cause consumers to spiral deep into debt, and ultimately have a negative impact on a person’s ability to borrow money. To (safely) get the most out of a credit card, you need to use them properly. Here are five do’s and don’ts to using credit cards.

Don’t Carry a Balance

Credit card companies charge high monthly interest rates. While paying the minimum balance may seem like a great idea, it won’t do much to bring down the balance. It’s important that credit card holders pay as much money as possible each month. Depending on the card’s interest rate, the average card owner will save anywhere from 10% to 29% a year in interest.

Use a Credit Card Instead of a Debit Card

Again, there is nothing wrong with using credit cards. The issue is the irresponsibility of credit card use. Credit cards and debit cards are not the same. Credit cards offer a greater level of fraud protection. In situations where fraud occurs, it’s easier to get a refund with a credit card.

Avoid Cash Advances

Cash advances may seem like a great idea. However, cash advances do not have a grace period. An automatic fee is added each time a person uses this card feature. Also, cash advances come with higher interest rates than the rest of the credit card balance.

Don’t Use All of the Available Credit

The amount spent on a card should not exceed 20% to 30% of the available credit limit. Using any more than this will affect the FICO score. Even if the balance is paid off in full, card issues do not like when borrowers reach their card’s credit limit.

Take Advantage of Balance Transfers

Credit cards with high annual percentage rate cost consumers a lot of money. One way to alleviate some of these costs is by taking advantage of balance transfers. Some cards allow consumers to transfer the balance without paying a fee. The advantage of transferring the balance to another card includes paying lower interest fees.

Credit cards are useful. When used correctly they are convenient financial tools. Using these cards irresponsibly can lead to financial issues that may last years. Hopefully, these tips will help consumers avoid the pitfalls of credit card usage.

*Originally posted on JBowmanAccountant.org

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John J. Bowman Jr. Accountant, personal finance

How to Stop Overpaying for the Basics

Households across America are struggling to make ends meet. High housing costs plague many cities. In others, stagnant wages offer little prospect for relief. Many people try to work multiple jobs and reach for just a few more billable hours, but even the hardest workers only have so much time and energy. This leaves people feeling pinched every month, concerned that paying basic expenses will tips them over the edge and into debt.

Ben Franklin is famous for the adage, “A penny saved is a penny earned.” With budgets so tight, this adage is truer than ever. The best place to start saving is on the recurring expenses that you resign yourself to paying every month.

Rethink Cable

Do you really need cable? If you have an Internet connection, you can save a bundle by cutting the cord and opting for streaming services like Netflix, Roku, and Hulu. Speaking of electronics, are you overpaying for your cell phone? Unlimited service is available for as low as $35/month via certain retailers; if you are paying more than that, shop around for other options.

Be Sustainable

Energy bills can leave you broke, especially if you live hot or cold climates. Every degree you lower the thermostat in winter and raise it in summer can save you up to 3 percent on your bill. If no one’s home all day, why pay to keep the place at 75 degrees? A programmable thermostat can help you adjust temperatures according to your schedule. When you head to work, are buses and trains an option? Many Millennials find they can do without cars and the payments, insurance, and gas that keep many Americans broke.

Eat In

Dining out can serve up an unnecessary burden on your budget. Avoid high costs and calories by learning some quick recipes to prepare at home. Brown bagging your lunch saves you money and calories. Cook a big dish over the weekend and take the leftover to work. For groceries, forget convenience and shop where you get the best value. Warehouse clubs can save you money if you avoid the temptation to buy more than you use. Be especially careful with perishables. Also, get a coffee maker to make your brew at home. If you like gourmet coffee, you’ll need to invest in gourmet maker, but you’ll make up for the expense over time. If you are stopping by the pharmacy, make sure to get the generic equivalents for both prescription and over the counter medications.

Find Low-Cost Entertainment

Unless you’re a monk, you probably need some entertainment now and then. Big movie theatre chains offer discount plans and second-run movie houses provide big savings. There are also great deals for kids.

These strategies can save you hundreds every month. That can be enough to fund an emergency savings account or retirement plan. Establishing a cost-effective lifestyle takes planning and discipline, but it’s better than being broke.

 

Originally posted on JBowmanAccountant.info

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John J Bowman Jr Accountant - Personal Finance Mistakes
blog, John J. Bowman Jr. Accountant, personal finance

Are You Making These Common Finance Mistakes?

It happens every month without fail. When payday rolls around on the third Friday of the month, your bank account looks healthy – filled with money to spare, even. With a few easy taps on your banking app, you’ve sent off your rent, covered your electric bill, and paid off a little of your credit card debt. You decide it will be alright if you splurge a little on dinner, a movie, a maybe even a quick weekend trip to the local shopping center. A week or so later, you absentmindedly swipe open your banking app – and stare in disbelief. Your bank balance is practically anemic. Where did all of your money go?

Spending Impulsively

Your morning Starbucks latte could be costing you. Crunch the numbers: a venti latte costs roughly $4 a pop. If you multiply that times the five days in a work week, you find yourself with a coffee bill of $20 a week, or a full $80 a month. In other words, the money you spend on coffee alone could have covered your entire grocery bill for a month. Small expenses add up – so avoid making impulse purchases. If you think you might be splurging just a little too often, check! At the end of the month, compile all of your card charges and assess how much you spent on necessary items or services (i.e., rent, food, gas) versus how much you spent on unnecessary treats or luxuries. You might just find yourself reconsidering your coffee budget afterwards.

Paying Too Many Subscriptions

Do you really need Netflix, Hulu, Amazon Video, and HBO Go? Probably not. Signing onto a service may seem simple and cheap when you’re in the free trial period, but those monthly fees accumulate quickly. Do an inventory of the subscriptions you have and decide which ones you can afford to cut ties with.

Living on Credit

Having a credit card doesn’t give you access to free money! Credit card companies make their enormous profits off of people who make minimum payments and allow interest to accrue. Just think – by leaving the expense of a single small item on your balance, you could end up paying out twice the original price in interest and fees. Believing in the “free money” myth could cost you money; living on credit could leave you bankrupt.

Overspending on Housing

You may want the in-building gym or slickly designed kitchen – but can you afford it? According to a report from Harvard’s Joint Center for Housing Studies, over one-third of all American households spend 30% or more of their take-home pay on housing expenses. Most financial advisors set the expense ceiling for rent at 30% of a person’s take-home pay; however, even this might be too high for someone struggling to pay off hefty student loans or provide for a family. Don’t let a nice apartment or charming home lure you deeper into debt. If you do, you might find yourself needing to sacrifice your personal life and stay home far more than you ever wanted to.

“Keeping Up” With Others

If all of  your friends leapt into crippling debt, would you follow? The answer might not be as easy as you think. Sometimes, it can be difficult to say no to a weekend trip or fancy dinner – even if you know that the expense would eat into your budget for the month. Make a habit of thinking your budget first, and fun second – or risk losing out on a significant chunk of potential savings.

 

*Originally posted on JBowmanAccountant.info

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