How Many Allowances Should I Claim

October 1, 2019 by  
Filed under Bankruptcy, Finance

How many allowances should I claim? That is the question many people ask when filling out their W4. Taxes are ever-changing, and rarely understandable for many people. Unless you work in the accounting industry, it's easy to see taxes as a tedious situation you pay little attention to. It's not uncommon to know only the basics regarding taxes (i.e. you pay them) and nothing more without an accounting degree or a job in the tax industry. While many people feel that taxes are boring, there's still a need for them. Without taxes, the nation wouldn't operate in a functioning manner. However, that doesn't mean you don't have questions.

When your employer hires you to work, you're given a W4 form to fill out. This form is a tax form that's short and sweet. Very little information is required to complete this form, but it's necessary you claim the correct number of allowances or risk miscalculating your income taxes at the end of the tax year. How many allowances should I claim? That depends on what you make, where you live, and how many people are in your family. There are other factors, too, and that's why you should understand what it means to choose allowances before you complete your form W4.

The Basics of Tax With holdings

How many allowances should I claim is not an uncommon question, but the other most common question people ask in conjunction with that one is why is my money being withheld from my paycheck? It's not unreasonable to ask this question. It's your money. You earned it when you worked, and you should know where it's going, and why your employer is taking it from you.

What Is Withholding Tax?

Withholding tax is money your employer takes from your paycheck to send to the appropriate tax entity within the Internal Revenue Service. Everyone who earns a living of a certain amount every year is required to pay income taxes to the government. It's how the government works fiscally. Your money is calculated and sent to the IRS by your employer to pay your taxes.

You then file an income tax return at the beginning of the following year for the prior year. On your income tax form, you disclose how many people live with you, how much you care for them, what you earned, and what kind of tax deductions and credits you have throughout the year. This tells the IRS how much you owe them, and they either send you a refund because you paid in too much in withholding tax or you send them a check because you did not pay enough in withholding tax throughout the year.

Tax Withholding Exceptions

If you are self-employed or you are a contract or freelance employee who receives form 1099 rather than a W2 from your employer, you do not have an employer. Your payroll taxes are paid by you when you file your income taxes. Depending on your filing status and your personal situation, you might consider paying income tax payments quarterly to avoid being hit with a large tax bill at the end of the year.

What Is an Allowance?

How many allowances should I claim? If you're here to figure out what you need to do when you're filling out your W4 form, you are not alone. What is an allowance? If you're asking how many allowances should I claim, you're probably also wondering what, specifically, is an allowance?

An allowance is a person. You get to claim one allowance per person in your household. For example, you are one allowance. Your spouse is another allowance. Any children or other dependents you have are each an allowance.

However, when asking how many allowances should I claim, do not automatically claim all the allowances in your home. This is where things get a little confusing. The more you claim, the less money you have withheld from your income taxes. The fewer allowances you claim, the more money you have withheld from your income taxes.

Factors To Consider

When deciding how many allowances should I claim, you must consider how much money you want to have withheld, whether you want a big refund, whether your spouse also has a job and has claimed allowances on his or her W4, and what you want to bring home each paycheck. Do you want to bring home more money each paycheck and have that income in your pocket, or would you rather pay it to the IRS and give them an interest-free loan for a year? Understanding how many allowances to claim is complicated because of the numerous options you have.

How Many Allowances Should I Claim?

a calculator and a exam paper

Image by Steve Buissinne from Pixabay

How many allowances should I claim? You're probably wondering this even though you have all this new information. It's confusing, and it's not always easy to figure out what to do and how to make the correct financial decision.

You're Not Required to Claim a Specific Number

Let's say you have a family of six. You, your spouse, and the four kids you and your spouse have together. You have a family of six, but that doesn't mean you're required to choose six allowances. If you do choose six allowances, you will have less withholding taken from your paycheck. This is because having that many allowances typically means you have more exemptions and tax breaks on your income taxes. This lowers the amount of your tax liability significantly, which means you owe the IRS less money.

 

If you choose to check the box for zero deductions, you will have the most money taken from your income taxes. This is helpful if you worry about being hit with a tax bill at the end of the tax year. It's hard to file your income taxes only to realize you owe money that you may or may not be able to afford. If you cannot afford to pay your tax bill at tax time, the IRS begins charging interest right away, and it's not cheap.

How Much You Bring Home

How many allowances should I claim? That depends on how much of your earned income you want to take home. Your paycheck is affected either way. If you choose to claim as many allowances as possible, you will bring home money in each paycheck. If you choose fewer allowances, you will have more money taken from your check each pay period.

Does Your Spouse Work?

Stack of coins and different colors of ball pen  at the top of a paper

Image by Steve Buissinne from Pixabay

If your spouse works and he or she also claims an allowance on his or her W4, that's another factor to consider. How many tax allowances you claim might depend on whether your spouse is allowing you to have the most money withheld or whether you are allowing your spouse to share that duty with you. You must sit down together and decide which way works best for you financially.

What's Your Previous Tax Situation?

Finally, you need to consider your tax situation of the past. Do you typically get a big refund from the IRS or do you pay? If you're paying the IRS, you may consider lowering the number of allowances you claim, so you have more money taken out of each check. Now, you won't have to write a check to the IRS at tax time. If you get a big refund from the IRS every year, you're giving them an interest-free loan on you, but they are earning money from your money.

If you get a large refund, you are paying too much money that you should bring home in each paycheck. If you like receiving a large refund, that's your prerogative. However, you may consider increasing the number of allowances you claim, so you have fewer taxes taken out of each check. That money is better utilized every time you get paid than it is to sit in the IRS' bank account all year.

How to Figure Out Your Tax Withholding

If you're still confused, you might want to know the IRS offers taxpayers a useful tool designed to help you figure out how much income tax to withhold from each check. It's called the IRS Withholding Calculator, and it's easily found online.

This calculator asks you a series of questions designed to help you figure out how many allowances to claim.

  1. 1
    What's your filing status?
  2. 2
    Are you a dependent on someone else's return?
  3. 3
    How many jobs do you have?
  4. 4
    How many jobs does your spouse have?
  5. 5
    How many dependents do you have?
  6. 6
    Do you get a child or dependent care credit?
  7. 7
    How many kids get the child tax credit?
  8. 8
    How many kids qualify for the earned income credit?
  9. 9
    Do you get any other tax credit?
  10. 10
    Your income information
  11. 11
    Other personal information

Using the information you provide, the calculator will provide you with a suggestion as to how many allowances you should claim.

Conclusion

Taxes are confusing, and that's why so many people ask how many allowances should I claim? Ultimately, the number of allowances you claim is up to you, but these tools can help you make the best financial decision for your family. Every family and every financial situation differs, so take the time to consider your personal situation rather than taking advice from friends or family who have a different familial and income situation.

How Much Do You Have to Make to File Taxes

September 17, 2019 by  
Filed under Finance

It’s that time of year again. Halloween, Turkey Day, and Christmas have reappeared and tax season is upon us. Financially speaking, this is one of the busiest and most stressful times of the year for many Americans. There are deductions to consider, write-offs and expenses to keep track of, and organizing to do of the hoards of receipts you’ve collected over the year. A lot of people will ask “how much do you have to make to file taxes?” in order to try to get out of going through all of this trouble.

Tax season is a time of financial reflection, and while it may not be the most enjoyable things, it is one of the two certainties in life. That is why we have compiled all the information you need to know about a popular tax concern. And that is, how much do you have to make to file taxes? The IRS is scary and Uncle Sam is proactive, so you must be as well. Do not risk making an irreversible financial mistake when you can be empowered and informed. Keep reading to find out just how much do you have to make to file taxes.

Tax Filing Requirements

calculate tax

Image Source: Pixabay.com

Before we dive into the exact requirements one has to meet to file their taxes, we’ll give you the short answer. And that is, it depends. This aspect of the US tax system is unique and varies from person to person. The correlation between one’s minimum annual salary and whether an individual has to file taxes is dependent on two things: age and filing status.

So whether you are single, married, the head of a household, or fall under other categories affects the minimum salary requirement needed to file taxes. Keep reading to see what the requirements are for you and to see how much do you have to make to file taxes.

How Much Do You Have to Make to File Taxes?

Below we will go over how much do you have to make to file taxes. Keep in mind that no matter your filing status, age, or whether you qualify as a dependent, if you earn more than $400 in self-employment, then you must file taxes for the year.

SINGLE

woman holding tablet

Image Source: Pixabay.com

If you are filing your taxes as a single person, you will probably fall under one of four subcategories, single and dependent under the age of 65, single and dependent over 65 or blind, single and over the age of 65, or single and under the age of 65. So what are the minimum salary requirements?

If you are considered to be single and dependent, according to the IRS, as an unmarried dependent, you must file taxes if your unearned income exceeded $1,050 and if your earned income was greater than $6,350.

If you are considered a single dependent and over 65 or blind and if your unearned income for the year exceeded $2,600 or your earned income exceeded 47,900, the law requires you to file taxes.

When you are considered single and under 65 years old, if you are unmarried and made less than $12,000, you do not have to file taxes for the year. However, if you exceeded that amount or made at least $400 from self-employment, then filing your taxes is a must.

For those who are single and over 65 years old, you are only required to file your taxes if you made more than $13,600 or $400 from self-employment.

HEAD OF HOUSEHOLD

mother and child

Image Source: Pixabay.com

The minimum annual income required to file taxes is also dependent on age. Individuals who are classified as the head of a household should fall under one of two categories: under the age of 65 or over the age of 65.

If you are a head of household under 65 years of age and you are earning $18,000 or more a year, you are required by law to file your taxes. Those who make salaries below this number do not legally have to file taxes for the year.

If you are 65 years old and the head of a household making $19,600 or less, you do not have to file.

Married Filing Separately: For those who are married and choose to file separately or have a spouse that would like to file separately, no matter your age if you earn more than five dollars for the year, the law requires you to file.

MARRIED

married

Image Source: Pixabay.com

Those who are married and are filing jointly typically fall under one of three categories: both individuals filing are under 65, one mate is over 65, and both partners are over 65 years of age.

If you are married, are considering filling together, and you are both under 65, then the maximum amount you can make as a household without having to file taxes is $24,000.

If one spouse is over the age of 65, then if your household earned more than $25,300, you must file taxes according to the law.

If you and your partner are over the age of 65, the maximum amount you can earn jointly without having to file taxes is $26,600.

WIDOW

widow

Image Source: Pixabay.com

Widows with dependent children filing should be in one of two categories depending on their age: widows with dependents under 65 years old or widows with dependents over 65 years old.

If you have dependent children, and you are a widow who is under 65, you do not have to file your taxes if you earn less than $24,000 for the year.

If you earn $25,300 as a widow who is over the age of 65 with dependents, then you must file your taxes according to the law.

Is There a Need for Filing Requirements?

tax

Image Source: Pexels.com

As mentioned before, the tax requirements vary from person to person. These requirements are meant to take into consideration the unique situations and the financial environments associated with those varying circumstances lawfully.

Filing your Taxes

filling tax

Image Source: Pexels.com

In 2019, tax day is April 15th, so get ready. Even if you are not legally required to file, you may still want to do so as you may be entitled to a refund no matter how little you think you earned. You should especially file if you qualify for certain tax breaks, like paying for higher education or raising kids. For example, the American Opportunity Tax Credit can give you up to $2,500 in a tax break if you paid for educational expenses like books, tuition, and similar course materials either for yourself or for a dependent.

Here are some other reasons you may need to file even if your salary is below the thresholds listed above:

  • You received unemployment income
  • You had net self-employment income of more than $400
  • You may owe Alternative Minimum Tax
  • You may owe household employment taxes
  • You owe taxes on a health savings account or retirement plan
  • You owe Medicare or Social Security taxes on unreported tip income
  • You received allocations from Health Savings Account or an MSA
  • You accepted an advance payment on Premium Tax Credit.
  • You earned either $108.28 or more from a church-controlled organization or tax-exempt church

Electronic filing is increasingly popular and is regarded as one of the fastest and safest ways to file and receive your refund.

Conclusion

accounting tax

Image Source: Pexels.com

Tax day is at large and will officially be upon us on April 15, 2019. So, how much do you have to make to file taxes? The short answer is that it depends.

Anyone, regardless of filing status, dependence, or age, who makes over $400 in self-employment must file their taxes according to the law. Singles under 65 earning less than $12,000 and singles over 65 earning less than $13,600 do not have to file if they are not inclined to do so.

According to the IRS, a single dependent must file taxes if their unearned income exceeded $1,050 and if their earned annual income was greater than $6,350. In contrast, single dependents over 65 must file if they earned more than $12,000 annually. If you are head of a household who is under 65 and earn $18,000 or more, you are required by law to file your taxes. Those over the age of 65 making $19,600 or less you do not have to file.

For those who are married and choose to file separately or have a spouse that would like to file separately, no matter your age, if you earn more than $5 for the year, the law requires both partners to file. Widows under 65 with dependent children do not have to file if they make less than $24,000, and widows over 65 do not have to file if they make less than $25,300.

Finally, married couples who are filling together who are under 65 can make up to $24,000 a year as a household without having to file taxes. Couples in which only one partner is over 65 must file taxes if their annual income exceeds $25,300. Partners who are both over 65 may choose to not file if their joint income is less than $26,600.

No matter your filing status or income, you may benefit from filing your taxes even if you aren’t required to do so by law. Refunds may await you if you paid for educational expenses, have a dependent child, etc. Taxes are intense, and filing them can be a bit of a hassle. We hope this article made this certainty of life a little less daunting and answered the popular question “how much do you have to make to file taxes?” Be prepared; April 15th, 2019 will be here soon.

How Much Is Home Insurance: Complete Guide

August 8, 2019 by  
Filed under Finance

Hands and a drawing of a house

Image source: Pixabay.com

How much is home insurance is not a question that’s easily answered. It’s one of the first things people ask when they consider buying or building a new home, but there is no right or wrong answer. Everyone pays a different amount, and each amount is based on specifics personal to each individual homeowner. Home insurance is required if you have a mortgage, and it’s highly recommended even if you do not. It’s the insurance that protects you if something happens to your home or your belongings. You never know what might happen, and you need the kind of protection homeowner’s insurance offers.

How much is home insurance is a question everyone asks, and it’s because it affects how much home you can afford. When you’re buying a home, you must know how much it will cost you to pay for the house. It’s not just your mortgage you’re paying for when you sign on the dotted line. Your monthly mortgage payment can increase hundreds of dollars a  month if you escrow your home insurance and your taxes, and you must know this ahead of time to ensure you buy a home you can afford. If you can afford to spend $1,800 per month for a home, you must make sure you buy a home that allows you to keep your mortgage payment, taxes, and insurance at or under this amount. It’s a complicated process.

What Is Home Insurance?

Aside from asking how much is home insurance, the other question people ask is what, specifically, is home insurance? It’s financial protection from the unknown, the unexpected, and unplanned for emergencies that might happen in your home.

  • Hurricanes
  • Tornadoes
  • Floods
  • Fires
  • Theft
  • Damage

Home insurance is designed to protect you, and it comes in many forms. What you pay for depends on where you live, what kind of zone your house is located in, and how much protection you feel you need for your home and family. It's an insurance policy that pays for the things you cannot afford to pay for if the unexpected occurs. You pay a yearly premium, and you're protected as long as you live in your home. 

Why Do You Need Home Insurance?

If a tree falls on your home during a storm and goes through your roof, can you afford to pay out of pocket to have the tree removed, the roof repaired, and the interior damage to your home repaired? It could cost tens of thousands of dollars to repair this. If your home floods in a storm, can you afford to have all the water removed, the drywall removed and replaced, and the flooring re-done? If your new home is in a flood zone, you are required to have flood insurance, which is actually a whole different policy than a standard home insurance policy.  If your home burns down in an accidental fire, can you afford to pay off the remainder of your mortgage and replace all of your belongings as well as buy or build a new home out of pocket? Most people do not have the funds to deal with this kind of devastation, which is why home insurance is necessary, no matter which disaster you are protecting your home from.

​Legal Protection

Illustration of a house

Image source: Pixabay.com

One thing many homeowners fail to realize is that home insurance is not just about protecting you from damage to your home. It’s also meant to protect you from lawsuits filed against you. Let’s say someone comes to your home for a gathering, and they slip and fall down your stairs. They are injured, and they decide to sue you for damages. They could be awarded hundreds of thousands of dollars to cover the cost of their medical bills, injuries, and any other damages they seek.

How much is home insurance? It’s invaluable if you’re sued for hundreds of thousands of dollars because someone was injured on your property. You are not personally liable for that if you have home insurance, which means the person suing you isactually suing your insurance company. Keep that in mind when you think about potentially not paying for home insurance.

​Damage

Photo of gold coins and a wood house

Image source: Pixabay.com

Damage can occur anytime and in any way. If you live in a flood zone, it takes one storm to flood your home. If you live in Florida, a hurricane can hit any time. If you live anywhere with any kind of weather, you could face damage from snow or ice, lightning or wind, or worse. Not all damage that your home might face is catastrophic, but your insurance company will cover the cost of replacing or repairing anything that’s damaged in a storm or in a burglary or theft. You will need to read your policy and ask questions because there are some instances, such as runoff water that are never covered.

It’s A Requirement

Photo of a home being build

Image source: Pixabay.com

How much is home insurance is a question you must consider when you buy a home using a loan.You are required to carry insurance or the bank will apply a policy to your mortgage, and it might not be the most affordable policy or the best one for you. The bank that lends you the money to pay for your home is the owner of your home until that loan is paid in full.

This means the lender needs to protect their own investment, and they require all homeowners to carry a home insurance policy. If for no other reason, you need home insurance because it’s a requirement with your mortgage.

How Much Is Home Insurance?

How much is home insurance is the question on your mind, but the answer is not as specific as the question. Generally speaking, the average cost of home insurance for homeowners can be anywhere between $400 to $4000 depending on the replacement value to put your home back to the condition it was in before the damage occurred.. This is not a direct quote, and it does vary based on many factors. Some rates are lower, some are higher, and some are in the middle.

Some people pay significantly more depending on the state in which they live and the zone in which they live. For example, someone who lives in a flood zone will pay more for home insurance because they are in a risky area prone to flooding. Other risk factors that might cause your home insurance premium to cost more than the average is the crime rate where you live, whether you live in a storm-prone area, and even the kind of home in which you live.

Manufactured homes are more likely to suffer damage than block homes in an area where storms are common, but they are less expensive to repair. A person who has expensive furniture, art, and jewels in their home might pay a lot more than someone who doesn’t have that kind of stuff in the house. Personal property coverage is a part of your home insurance policy, and that might cause your home insurance rates to rise significantly.

What Factors Are Used to Answer How Much Is Home Insurance for a Homeowner?

Your home insurance company will consider many things before they quote you on your insurance premium, and the things they consider include many of the following:

  • Your marital status
  • The age of your home
  • The materials used to build your home
  • Whether you have a home-based business
  • Where you live
  • The condition of the roof
  • The proximity of your home to a fire station
  • Your credit score
  • How much you want to pay for a deductible
  • Whether you have a dog and what breed it is
  • If you have a pool or a hot tub
  • If you’re located on or near a body of water
  • The cost of replacement

​These are a few of the things home insurance companies consider when issuing rates for homeowners.

Can I Lower The Cost of Home Insurance?

Photo of a yellow house and a blue car

Image source: Pixabay.com

You can control the cost of your home insurance marginally if you try a few things. Bundling all your insurance policies with the same company can lower your rates. For example, your home, life, and auto insurance policies can be bundled in order to save you some money. You can opt for a much higher deductible to equal a lower monthly premium. The higher your deductibles, the lower your premiums.

You can opt to live in a home without a pool or hot tub, one that is not near a body of water or located in a flood zone, and one that is not in a neighborhood where there is a high crime rate. You can get married, and you can buy or build a new home with all the updated safety features to save you a bit of money on your home insurance. You can also protect your credit score to ensure that you are not viewed as a risky homeowner.

​Pets and Insurance

If you have a dog, you can expect to pay more for your home insurance. If your dog attacks someone and they decide to sue you for damages, your insurance company needs to protect itself. They do this by charging homeowners with certain dog breeds more money for their insurance. Breeds that are more inclined to attack people are listed below, but this is not an all-inclusive list.  Each insurance company has its own list of breeds it will not write at all.

 

  • Rottweilers
  • Pit bulls
  • Chows 
  • German Shepherds
  • Mastiff

However, your dog and your insurance company might have their own relationship. Many insurance companies make their own decision about the cost of your insurance policy and the type of dog you have, and some will refuse to insure you at all if your dog falls into what they consider their own personal breed of “Dangerous Dog Breed”.

Other insurance companies will charge you more if you have an exotic pet such as a snake, ape, or even a game cat. Exotic pets are considered wild animals, and owning one could make your home insurance price skyrocket.

Conclusion

If you want an answer to the question, “How much is home insurance?” you need to get quotes from several companies. It’s the best way to ensure you know what you’re getting if you’re being charged fairly, and what you can expect to pay for what you need. No two people pay the same amount for the same policy, which means you want to be sure you’re shopping for only what you need to cover the cost of your home, valuables, and belongings.

How To File A Tax Extension

July 29, 2019 by  
Filed under Finance

Insert Image
Insert Image
person writing on a paper

image via: pixabay.com

How to file a tax extension might not be a question you thought you’d ever ask, but it happens on occasion. Sometimes, you simply don’t have the time to file your income taxes in a timely fashion. You need more time, but you aren’t sure how to get it or whether the Internal Revenue Service even offers that kind of help to taxpayers. The good news is you can file a tax extension that allows you an additional six months to file your income taxes. The bad news is that it’s not always as simple as it sounds. If you think filing an income tax extension is a great way to put off paying your taxes, you’re mistaken.

How to file a tax extension is a question many people ask specifically for that reason, and the answer is not what they’re looking for. If you owe the IRS money, you must still pay them when you file an extension of time. The extension is not for the money you owe. That’s still due the same day as your income tax is originally due. The extension only grants you six additional months to file your paper return. Here’s everything you must know about how to file a tax extension to ensure you’re following the proper procedures.

What Is A Tax Extension?

Before you can learn how to file a tax extension, you may need to ask what it even is. A tax extension is a six-month timeframe given to you by the Internal Revenue Service to finish and submit your income taxes without penalty. An extension of time is a Form 4868 with the IRS. This form is easily downloaded online or picked up at any tax office or IRS office. You simply fill it out, send it to the IRS prior to the deadline for filing your taxes, and you are automatically granted an extension of time.

Your income taxes are due on April 15 each year. Unless the fifteenth of April is a holiday or weekend and the deadline is adjusted to the following business day after April 15. You must have your income taxes either electronically submitted or postmarked by midnight that day to consider them on time. The IRS doesn’t need to get them that day as long as the postmark or submission date is on or before the deadline day. However, not everyone is able to get their income taxes filed on time for one reason or another.

WHY DO I NEED AN EXTENSION OF TIME?

There are several reasons you may not be able to file your income taxes on time, and many of them are beyond your control. There is always the chance you simply forgot, didn’t get your paperwork together in time to give it to your accountant, or you simply have questions and need more time to ensure you’re doing your own income taxes correctly. There are also other reasons you may not be able to complete your income taxes in a timely fashion.

Insert Content Template or Symbol
  • You didn’t get all your tax documentation from the proper entities
  • An unexpected life event such as a death or an injury occurred
  • Your IRA conversions are taking time
  • Missing tax documentation

If any of these apply to you, you may ask how to file a tax extension to ensure you’re able to spend the extra time gathering your documents and working on your taxes.

HOW DO I KNOW IF I OWE IF MY TAXES AREN’T COMPLETE?

This is an excellent question you must ask in conjunction with how to file a tax extension. The answer is not always obvious to taxpayers, and it can be a costly mistake. Your best bet is to speak with a tax accountant to have an estimated tax payment drawn up if you are unsure whether or not you owe.

If you pay every year, you can assume that you will need to pay this year as well. This means you will pay what you paid last year along with your extension. If you owe money with your tax extension, it must be paid the same day that your taxes are originally due. If you leave this balance unpaid, the IRS charges you a half percent interest rate on a monthly basis for six months. If you do not get your taxes paid after the six-month extension is filed, your interest rate increases to 5 percent of your amount due each month.

How Do You Qualify For A Tax Extension?

If you want to know how to file a tax extension, you might want to know if you even qualify for one. This is a simple answer, fortunately. Everyone qualifies to file a tax extension. There are no parameters that make it impossible for you to file for an additional six months. You need only file form 4868 and mail it to the IRS to qualify for a tax extension. You must make sure this is postmarked on or before the income tax deadline.

The only caveat is that you must pay when you file your tax extension. A tax extension is for additional time to file your tax paperwork. It is not additional time to pay anything you might owe. If you’ve never owed before, you probably will not owe this year. However, you might do a rough draft of what you have already to find out if you do owe money to the IRS so you don’t end up paying late fees and penalties.

If your taxes are close to done, but you still need to file an extension, it’s in your best interest to file them and send them in as quickly as possible in case you do owe money and didn’t realize it. This minimizes the amount of interest you are charged by the IRS. One month of accrued interest is more affordable than six months or more of interest accruing on your account.

How To File A Tax Extension

Learning how to file a tax extension is simple. You need only look for Form 4868 on the IRS website, by entering it into your favorite search engine, or by asking for a copy of it from your accountant or at the local IRS office. Once you have this form in hand, you must fill it out in its entirety for it to be considered valid. The information required on this form includes the following:

  • Your full name
  • Your address
  • Your social security number
  • Your spouse’s social security number if you file a joint return as a married couple
  • Your estimated tax liability for the year
  • Your total payments for the year (withholding and estimated tax payments)
  • Any balance due
  • The amount you’re paying

HOW TO MAKE AN ESTIMATED TAX PAYMENT WITH YOUR EXTENSION OF TIME

You can make an online payment by visiting www.irs.gov/payments and filling out the necessary information required to make an online payment using your bank, a card, or an electronic check. You can also pay by check or money order.

Your check or money order must be made payable to the United States Treasury. The IRS does not accept or recommend you send cash in the mail this way. You must include your social security number, the tax year, and Form 4868 on the bottom line of your check.

WHERE TO MAIL FORM 4868

Whether you owe money with your income tax extension or not, you’ll need to find the correct address to send your extension on time. There are a total of 18 addresses for sending tax extension forms. Nine of these addresses are for extensions with payments attached, and nine of them are for extensions without payments. Each address is meant only for people who live in certain states. These addresses can be found on page four of the instructions that come with your downloaded form 4868. Find the correct address to prevent any delays or issues with your tax extension.

MAKE COPIES OF YOUR FORMS

Before you mail your extension of time and your check to the IRS, make copies of both and keep them for your tax records. It’s also helpful to go into the post office and send them off to the IRS with a tracking number or other proof of delivery in case something happens in transit and your extension and/or check are lost, damaged, or destroyed. Keep that tracking number with your copies.

Conclusion

Anyone can file an extension of time, but you should consider only filing it when it’s absolutely necessary. You’re not giving yourself extra time to pay the IRS if you owe money, and you’re not collecting interest on any money owed to you by the IRS. The IRS charges interest to taxpayers who are late with their payments, but the same does not apply to money you owe them. You have three years to collect any money you overpaid the government. They will keep it after that point, and they will not provide interest on your payments. If you happen to overpay with your extension, you’ll get that money back as a refund after you file.

How To Get A Business Loan

March 4, 2019 by  
Filed under Finance

Insert Image
Insert Image

If you want to know how to get a business loan, you're already ahead of the game. Starting a business often requires capital with which to buy supplies, to produce what you need, and to find a building in which to house your business. Not many businesses are easy to start without some sort of capital from investors or with a business loan. How to get a business loan is something many aspiring entrepreneurs want to know when they decide to pursue their dreams.

Before you open a business, learn how to get a business loan. It's not as simple as walking into a bank and asking for a loan so you can start a business. It involves forming a business plan, coming up with the financial aspect of your needs, and talking to a lender about the potential success of your business.

If your business is not one that can make any money or that is not thought-out well enough to succeed, no bank will lend you anything. They need to know that you can pay them back with the income you generate with your business. If you're unable to do that, they're not giving you any money. With that said, here's what you need to know about how to get a business loan.

How a Business Loan Works

Insert Image

Every business loan is different. There are small business loans, and there are larger business loans. There are loans for start-ups and loans specifically for purchasing a franchise. The loans available for potential business owners are numerous, and they all work their own way. However, there are a few rules that apply to all business loans in general.

You Create a Business Plan

effective business plan chart

You cannot get a loan for your business without a business plan. This must be fully curated. It must be precise, and it must be something you've carefully considered. Every dollar must be accounted for; every situation must be prepared for. You must have business insurance; you must have liability insurance; you must have everything outlined, planned for, and considered in the financing. You may need to re-work this plan more than once to meet the requirements your lender has in place.

Understand the Terms

terms and conditions stated in a contract

You need to know what you are working with in terms of the loan you want.

  • Short-term loans
  • Term loans
  • Equipment financing
  • Invoice financing
  • SBA loans
  • Business lines of credit
  • Merchant cash advances
  • Small business loans

Each of these loans works differently. Small business loans are often given by smaller lenders such as local banks and even credit unions. They work with the person opening the business. They might offer a small loan of only $15,000 to help you finance minor equipment.

A short-term loan and some of the other loans on the market require you have a minimum credit score, a minimum amount of annual revenue already coming in, and an already established business. For example, a short-term loan requires that you've already in business for a minimum of two years, you have an annual revenue of more than $300,000, and you have a credit score of more than 650.

A term loan, on the other hand, only requires you to spend one year in business, have a minimum credit score of 550, and have a minimum of $50,000 in revenue. Equipment financing loans require you have at least 11 months in business under your belt, more than $100,000 in annual revenue, and a 600 credit score or higher. Every loan is different. Every loan has its own repayment terms.

How Does Each Loan Work?

Insert Image
calculating how much money to loan

When learning how to get a business loan, you need to learn how the loan you need works. You have to present a business plan. You have to agree to the repayment terms. You have to decide how long you need to repay that loan, and you have to know that you are responsible for the repayment of this loan even if something happens to your business. You also need collateral which is often your business, your building, or your equipment.

Pros and Cons of a Business Loan 

Every choice you make in life has a long list of pros and cons, even when you're learning how to get a business loan. When it comes to business loans, there's more at risk than making the decision to have steak or chicken for dinner. Both have their pros and cons, but the idea of taking out tens of thousands of dollars for your business that you are required to pay back has a much more serious list of pros and cons.

The Pros of Business Loans

planting money for your business loans

One of the biggest pros of a business loan from a bank rather than looking for investors to provide you with capital is that you're not taking on any decision-making partners. An investor may use their money to buy into your business. This means they always get part of your profits unless you can afford to buy them out. Additionally, a bank will not ask for any of your profits or to make decisions in your business. They just want you to make a payment to them every month.

You can deduct your loan on your taxes. Business taxes are expensive, so this is a helpful situation you can consider when you are making the decision to apply for a business loan with which to fund your business. Another pro is that business loans are often equipped with much lower interest rates than usual, which makes it much easier for you to repay the loan terms.

Finally, a small business loan is not always a small sum of money. You can ask for whatever you need, and you have access to a great deal of money that can help you fund your business all at once. You can use this money right away, and it can help you build your own credit score as well as your business credit score. This is something you will need to learn more about as you begin a business and work on making it succeed.

The Cons of Business Loans

calculating expenses for your business loans

Learning how to get a business loan involves learning what you're risking when you go this route. One of the biggest cons of a business loan involves knowing that there are strict rules you must follow. These rules are not always easy to deal with as a business owner, but you must follow them to get your loan. Additionally, you could be subject to changing rates depending on the loan you get and the type of business you have.

You will need to provide collateral for your loan, and many people see this as the biggest downfall to a business loan. Your stocks, your home, and even other assets you have might be at risk if your business fails. This is a terrifying aspect for some people, but it might also serve to work as your biggest motivating factor in creating a successful business.

How to Get a Business Loan

How to get a business loan is simple, but only when you know why you need one and how it works. Here are the steps you must follow if you need to get a business loan of your own.

Know Why You Need This Loan

man setting up financial plan for his business

You cannot go into a bank to get a business loan without a full business plan. You need to outline in great detail everything you need to pay for, how it will benefit your business, and how it will help you bring in more income. You need to know what you need money for, exactly how much everything costs,  exactly how much you will make, how you will make it, and why this will work.

Get Your Credit in Check

credit report is important for a business loan

You have to have a good credit score to get a loan. Take the time to make sure there are no mistakes on your credit report. if you need to raise your score a bit, spend a few months or a year working on that before you apply for a loan. You need the best possible rate to help you make the most of your loan.

Decide upon a Loan Type

man deciding what loan type to get for his business

Figure out which loan type works for you and your business. This is imperative because the loan you choose can either help make you or break you. Choosing the wrong loan type can hurt your business, but choosing the right one can help you flourish.

Find a Lender

client and lender shaking hands for a business loan agreement

Do your homework on this one. Find out if you need to work with a major online lender, a big bank, a smaller bank, or even your local credit union. Compare rates and meet with the lenders. Talk to them to help them understand your vision. You have to make the right decision, and part of that is fostering a relationship with potential lenders.

Apply for a Loan

filling up a loan application form

If you are ready to apply for a loan, do it. You will then see what you get, what you need to do to make your loan better, and if it will work. You never know if you don't try, and this is the time to try. Do not sign on the dotted line, however, until you are sure you can agree to the terms and they work for you. Can you afford this loan?

Finalize Your Loan

three persons talking about finalizing their business loan

Gather your documents, do what you need to do as directed by your lender, and close on your loan. This is a business transaction, and it might just be one of the biggest deals you make in your life. Now is not the time to take this lightly. Make sure you can afford this loan.

Conclusion

Learning how to get a business loan is more than just learning how to get the finances you need. It's about learning how to make a business plan that works. It's about setting goals and learning to succeed. It's about so many things you don't consider before you apply for a loan. You cannot fail when you take out a business loan, so now is not the time to go into something you have not thought through with careful consideration.

How Long To Get Tax Refund

March 1, 2019 by  
Filed under Finance

Insert Image
Insert Image

Filing taxes is difficult for many Americans and many dread the task. Even though taxpayers know that they need to remit their taxes annually to the Internal Revenue Service, it may difficult for them to know what is required to do so. The process can be confusing, as each taxpayer should file differently, making it hard for an individual to know what is required or applicable to them, specifically. Even after filing, many will want a ballpark estimate in weeks or months on how long to get tax refunds in the mail.

Although you might be excited to get tax refunds from your federal income tax return, you may still be disappointed with IRS processing times. The agency has many restrictions pertaining to how one should fill out the government's forms, which makes filing individual income more puzzling. The good thing is you can always ask for clarification from IRS on those rules.

This article highlights what the process of taxation involves by diving it into the following sections:

  • How income tax works
  • How to file your incomes tax return
  • How long to get tax refund

How Income Tax Works

calculating income tax and filling up forms

Each year, U.S. citizens are expected to report their annual incomes and pay their taxes accordingly. The federal government requires money to support its programs and build new infrastructure, and it obtains those funds from these taxes remitted annually. Taxpayers may find it difficult to navigate through and then comply with the IRS' elaborate, detailed and highly specific rules surrounding how to calculate taxes owed.

The money collected via taxes is used to fund the military, educational programs, welfare programs and a variety of agencies including the FDA and EPA. Businesses/individuals always pay a part of their profits/wages to the federal government yearly. Politicians, through well-laid-out legislative criteria, determine when and by how much of an increase taxes should be levied based on how much money is required to maintain governmental agencies and programs.

Legislators implement and construct tax laws while the IRS enforces these laws and is involved primarily in the collection of taxes. The IRS also is responsible for providing adequate information to taxpayers, particularly when they have questions that need to be answered or concerns that need to be addressed while they are attempting to calculate and file their taxes. If you find yourself stuck, then you can always talk to them and they will help you through the process. You also can access the help section of the IRS' website, which also offers you the convenience of filing online.

Income Tax Brackets and Tax Rates

make a note of how much is your tax brackets

The IRS has designated tax rates and tax brackets for different taxpayers earning different amounts annually. A progressive system is currently in use in America, which means the higher your income, the higher the marginal rate at which your income will be taxed. However, the IRS has also put in place measures you can use in reducing your income tax liabilities, such as tax exclusions, deductions, breaks and credits.

Each taxpayer belongs to a specific tax bracket. The more you earn, the more tax you should pay since IRS uses a marginal tax bracket.

The “Pay-As-You-Go” system is what most people use. In this system, your tax is deducted from every paycheck sent by your employer to the IRS. This is known as withholding taxes. If you have overpaid your taxes through this system, then you are eligible for a tax refund. The IRS sends you back the amount you paid in excess of your required taxes in the form of a tax refund.

State Income Taxes

State and federal income taxes are different. The IRS is concerned primarily with federal income taxes. Some, but not all state governments also collect state income taxes, which are separate from the federal taxes reported to the IRS. State taxes are based on where you work or invest. They are administered on the state level by the state treasurer or the department of taxation on the state level.

How to File Your Income Tax Return

Income Tax Returns

filing of income tax return

You are required to file various individual IRS income tax forms issued by the IRS and easily found on the IRS website. These forms allow for you to factor in your tax deductions and credits. Form 1040 and 1040 A are mainly for individual returns, while the 1040EZ form is for joint or single taxpayers who have no dependents. Form 1040NR is filed by nonresident aliens, while Form 1040NR-EZ is filed by nonresident aliens who don't have dependents.

Form 1040

Insert Image
form 1040 of US individual income

Form 1040 is the standard form used by most Americans in reporting their income. Form 1040 allows taxpayers to claim numerous tax deductions essential for getting a tax refund. Commonly, it is called the “long form” as it is more far-reaching compared to the significantly shorter Forms 1040A and 1040EZ. Since Form 1040 is more extensive, it takes more time to complete, but it can be worth it because it can help you reduce your tax bill through deductions.

You can get your appropriate IRS form by simply downloading it onto your computer from the IRS website. You can also pick it up from a post office, a local library, a tax center or an IRS office.

The form is due by April 15 each year, although one can request an extension of about 6 months in order to file the return more accurately.

How to Fill Out Form 1040

You need to have the following information prior to filling Form 1040:

  • Your name or any other proof of identification
  • Wage statements
  • Your Social Security Numbers (SSN), and that of your wife or any other dependents
  • Filing and residency statuses
  • A copy of your past tax return
  • Information about you, your spouse's and dependents' birth dates 
  • Interest/dividends statements from banks, brokerages, etc.
  • Bank account information where any refund should be deposited
  • Proof of any tax deductions, tax credits or tax exclusions
how to fill out 1040 form

Line-By-Line Guide

Use the following steps to fill out the form:

  1. Fill the name, address, and ITIN or SSN
  2. Indicate your filing status — whether you're married or single or have dependents
  3. Fill out the tax exemptions
  4. Specify your income by reviewing your wage and taxation statements for an accurate determination of your annual income
  5. Specify your adjusted gross income
  6. Fill out the tax and credits or deductions
  7. Fill out information on other taxes (for example, self-employment tax)
  8. Specify tax payments
  9. Specify refunds
  10. Check the third-party designee only if you want another person to clarify the taxation information from the IRS
  11. Sign your return
  12. Assemble your return by gathering the appropriate documents

How Long to Get Tax Refund

sample tax refund check

Mostly, getting your tax refund depends on how you fill out your return. The best way is to e-file, or electronically file, your return and to receive your refund via direct deposit. Some 90 percent of taxpayers who use this method receive their refunds within 21 days. This means that the amount refunded will be in your bank within three weeks from the day the IRS accepts your tax return, but may take additional days for the funds to be available to you.

If you use another method to file, for example a paper form, or you want to receive your refund as a paper check, then your refund may take longer as the processing time is longer. Filing paper returns and receiving your refund on a paper check will take the longest to process. It may take at least two months. If you are wondering how long to get tax refund, you might as well use the electronic method since it is the fastest.

The approximate schedules on how long to get tax refunds from the day you file to the day you receive the refund are as follows:

  • E-file, direct deposit: 1-2 weeks
  • Paper file, direct deposit: 3 weeks
  • E-file, check-in mail: 1 month
  • Paper file, check-in mail: 2 months

Checking Your Tax Refund Status

checking the status of your tax refund application online

If you have not received the refund within the stated time and you still wonder how long to get tax refund, then you might as well check the status of your federal tax refund. One way to do that is on the IRS website. Another way is by using the IRS2Go mobile application. Your tax return status will be available within a day if you file electronically. However, if you mailed a paper return, it may take up to four weeks for you to be able to get your status update. To check the tax return status, you'll need your SSN, amount of refund anticipated and filing status.

Conclusion

So, how long to get tax refund? It depends on how and when you file your tax returns. The best way of getting a refund quickly is by filing your returns electronically. This means you should e-file and also get the refund via a direct deposit to your bank account. Most of the people who use this method will get their refunds within three weeks. Sending a paper return and receiving the refund as a paper check will slow down the processing by months and, thus, it is not a viable way of getting your tax refunds.

You should also note that the IRS processes tax returns more slowly at the beginning and at the end of the tax season since there's a logjam then because most taxpayers file their returns then. We hope this article has adequately addressed how income tax works, how to file your incomes tax return, and how long to get tax refund.

How To Get A Money Order: Easy Steps To Follow

February 8, 2019 by  
Filed under Finance

There are times when the best form of payment is a money order. Money orders can be obtained from several locations. However, there are only certain instances where a money order might actually be necessary. If you're moving into a new apartment and need to provide a security deposit, the landlord might require a money order instead of a check. Whatever the reason behind it, you will need to know the steps of getting a money order.

What Is a Money Order? 

sample postal money order

Photo credit by: usps.com

A money order is similar to a check. It is a paper form of payment. However, unlike a check, it does not come directly from your checking account. When a money order is required as a form of payment, it is typically because the recipient wants to make sure there is money in the account. A cash payment is difficult to handle as it can be lost, misplaced or miscounted. The recipient of the money may not want a personal check the very first time a payment comes in, because they want to be sure that money is available. Following the first payment, the recipient might then be willing to accept a personal check. For these reasons and more, it is important to know exactly the steps of getting a money order.

The money order looks like an oversized check. It shows the amount the money the order is for, who it is from, and the third party that created the money order. Sending money orders used to be a common form of payment, especially before the expanded use of credit. Lines of credit now are easy to determine if the money is there. As this is not the case with a personal check, the money order offers guaranteed funds to the recipient.

How Do Money Orders Work? 

If you are looking into getting a money order, it is a good idea to know how the entire money order process works. It begins with someone either in need of a guaranteed payment from you (such as a new apartment), or a time when you need to make a payment but don't have a checking account. You will go to a service provider that offers money orders. Once you are there, you will pay for the money order. The recipient will take your money and print out a money order, which is also sometimes known as a cashier's check. (Note: it is a certified check if it comes from your bank.)

THE STEPS INVOLVED

The money order/cashier's check is given to you to give to the recipient of the payment. The creator of the money order keeps the money for the money order. The printed amount on the money order is how much the order is worth.

When the recipient of the money order receives the payment, they can then cash it, similar to the process with a check. When the money order is cashed, the bank will then contact the issuer of the money order (the financial lender that created the money order in the first place) for the actual transfer of the funds.

This isn't all that different from writing out a personal check. However, the recipient of the personal check will not know if there is money in the account until after the check has been processed. By the time the recipient of the personal check discovers that there is no money in the account, it might be a day or two later. The money order/cashier's check offers the guarantee of money existing, which is why certain locations require this form of payment.

Steps of Getting a Money Order

Obtaining a money order isn't difficult and there are several locations you can go to get a money order. Whatever the reason might be, as long as you follow these instructions of getting a money order, you shouldn't have any issue obtaining this form of payment.

GO TO A MONEY ORDER LOCATION

homepage screen of western union send money

Photo credit by westernunion.com

There are several locations you can go to to obtain a money order. First, you can try your personal bank or credit union. This is likely the easiest location to try, as your bank can take money directly out of one of your accounts for the money order.

If you don't have a bank or choose not to go to a bank, there are several other options available to you. Walmart, for example, can create money orders for you in the service department. Western Union can help you with this as well. There are likely other lenders in your area that create money orders too. Certain pharmacies also have this service.

Before you go about paying for a money order, it is important to look at the fee you'll be charged by the service provider. Each provider is a little different. While you can receive a money order from your personal bank, you may find your bank charges a higher fee for the creation of such an order than Walmart or other location providers. If you are part of a credit union, you'll likely have better luck here as credit unions typically have lower fees; either way, you'll be better off looking for the best rate. This is especially true if you need to create multiple money orders or will use the service often instead of writing personal checks.

PAY FOR THE MONEY ORDER

western union sample money order form

Photo credit by: moneyservices.com

When you arrive at the money order location and request a money order, you'll need to pay the value of the money order, plus whatever fee is charged. There are a few ways you can go about paying for this. If you're creating a money order/cashier's check from your personal bank, you can have the funds directly drawn out of your account. This is easier than the other options as you won't have to deal with any additional paperwork. The payment will come right out of your account and you will have records in the form of a withdrawal.

If you go to another location other than your bank, you can still pay with a debit card. Some locations might take personal checks, but most will not. Those that take personal checks like cap off the money order amount to a smaller value (such as $50).

You can pay for a money order with a credit card; although you not only will be charged the service fee for the creation of the money order, but also whatever interest rate is associated with your credit card. Due to these added fees, if you can avoid using a credit card you will be better off.

You are also able to pay for the money order with cash, and some locations will even allow you to pay for a money order with an employment check. This is an option if you don't have a bank account. It is recommended to obtain a bank account rather than rely on money orders for all your service payments (such as for a mobile phone or utilities). Paying the service fee every time you need a written check adds up quickly.

RECEIVE MONEY ORDER AND GIVE TO RECIPIENT

western union sample money order form

Photo credit by: westernunion.com

The final step of getting a money order is to receive the actual money order. When you make the payment, you'll likely be given the money order on the spot. Some locations that accept personal checks may require a day or two to process before the money order is ready. When considering the different ways of getting a money order, if you need the money order right away you should avoid paying with a check because of this.

When you receive the money order, it will include your name as the payer and the recipient as the payee. It also includes what the money order is for. Ask for a receipt from the creator of the money order. Now, take the money order to the individual or business you need to pay. Make sure to not lose this and to treat it like cash; if you misplace it, there is not much you can do about it.

Upon giving the recipient the money order, make sure to ask them for a receipt. This way, should they attempt to say you did not make the payment, you will have the receipt that says otherwise. With money orders, it is all about saving a paper trail. Keep this receipt safe, just in case an issue should ever arise.

Conclusion

There are going to be times when you are required to make a payment in the form of a money order, certified check or a cashier's check. Whatever term is used, the process is all the same. It is about ensuring the recipient of the check receives the money owed. Sometimes the first payment needs to be a money order and then, from there, you can provide a personal check. Other times, you might not have a checking account and need to have a financial location write you out a check. Now that you know of getting a money order, you'll be able to obtain a money order whenever necessary.

How Much Rent Can I Afford? Living Within Your Means

February 1, 2019 by  
Filed under Finance

Americans might not realize that the struggle to figure out, "How much rent can I afford?", is one experienced around the world. But, finding housing you can afford developed in unique ways in the United States. Prior to World War II, like much of the developed world, most Americans lived in urban situations, in cramped apartments and flats. In the aftermath of World War II, America saw a massive growth in the availability of housing.

The new concept of suburban living exploded onto the scene, helped by special mortgage opportunities for veterans of the war. Veteran's Affairs-backed mortgages had new requirements for how much land a house had to exist on to be approved. There were even requirements for spacing between the house and its neighbors. Townhouses were not an option for these early home-seeking veterans.

The prevalence of these requirements helped pave the way for what we know today as "the American dream," a single-family home with a white picket fence and enough yard for kids and a dog. Developers shifted towards meeting this demand and moved away from building the more economical apartment, condo, and townhouse living that dominated in the past. The accompanying economic boom of the post-war years effectively killed the market for affordable living solutions that didn't meet this new paradigm. It's helpful to understand this history of housing in the United States when you try to determine, "How much rent can I afford?".

What Is Affordable Housing?

money needed to buy a house

Photo credit by: nreionline.com

Anyone asking themselves, "How much rent can I afford?" inevitably runs across the term 'affordable housing'. More generally, this term refers to housing whose costs fall well under the average wages of people living in the area. More specifically, affordable housing might refer to living arrangements that meet the needs of specific socioeconomic groups, like those on a government-funded housing voucher system like Section 8. It could also refer to housing that falls within the standard 30% of income, based on the average income of those living in the area.

Housing is one of, if not the most, expensive recurring financial responsibilities for adults today. And, the costs of housing keeps rising. Because individuals have many financial responsibilities, including food and groceries, the cost of housing should be under a certain percentage of income. This ensures that there is enough income left over to meet other needs, like paying off debts, affording medicine, and paying car payments and insurance. Ideally, housing costs should fall under 30% of your income, including costs for renters insurance and utilities. The reality is that many people spend far more than this, though they may not have taken the time to ask themselves, "How much rent can I afford?".

Affordable housing usually consists of apartments, townhouses or older homes. Newer homes tend not to be available as cost-effective rentals. Single-family homes are not as economical as apartments and townhouses. It takes more resources to build these homes. When developers build single-family homes they need more pipes, more wires, more foundation materials, more insulation, and more roofing materials. Apartments and townhomes economize the distribution of these resources and effectively cut costs. Significantly older homes can be made into affordable rentals because the costs of these resources have already been recuperated. If the property taxes in the area are not high, renters might be able to enjoy an affordable rent in a single-family home. But, this is often a rare find.

Is Affordable Housing Available?

The answer to the question of whether affordable housing is available depends completely on how much money you make. The startling truth is that no state in the USA offers affordable housing for an adult earning minimum wage and working 40-hours a week. At $7.25 an hour, a minimum wage worker averages $1,256 each month. That means he or she would have to find rent for only $300 a month and then spend no more than an additional $77 for renter's insurance and utilities.

AFFORDABLE STATES AND TERRITORIES

affordable houses on a map

Photo credit by: reinsw.com.au

Puerto Rico is the only location that is able to come close to this, but workers there still need to earn at least $10.53 an hour working full time to afford rent. States in the South and Midwest are the next best for affordability, requiring workers to earn between $13 and $15 per hour to afford the average one-bedroom apartment. Arkansas, South Dakota, Iowa, and Idaho offer the cheapest average rent costs out of all the states. The thing to take into account, however, is the average wages in these regions. Typically, regardless of how low rent costs are, the costs of housing still stand higher than the 30% of average income for the area.

SECTION 8 HOUSING VOUCHERS

section 8 row of housing

Photo credit by: candydirts.com

The situation has become even more dire for those asking, "How much rent can I afford?" as struggling state governments tighten the purse strings and municipalities freeze Section 8 wait lists. Section 8 provides housing vouchers for lower-income individuals and families to offset the costs for housing and prevent homelessness. As of writing this in November 2018, thirteen states had only one or no waiting lists open in the entire state. Washington D.C., which requires a $28 hourly wage for the average one-bedroom apartment, offers no waiting list.

OTHER OPPORTUNITIES FOR AFFORDABLE RENT

an american house on a backyard

Photo credit by: ccstcloud.org

Adults over the age of 55 have more options, however. Legislation developed rent controls for adults reaching their senior years, and many older adults can find attractive, affordable housing well-within their income range. Younger adults are developing their own solutions outside of legislation. Many single and childless adults are choosing to rent, or even purchase, housing with friends or roommates to overcome rising housing prices. Other community-oriented adults and families are creating co-operative housing options to not only beat rising housing costs but also to share the household burdens of homeownership.

How Much Rent Can I Afford?

Calculating Your Ideal Monthly Rent

There are a number of calculators available online to help determine the answer to the question, "How much rent can I afford?". The most basic calculation would take your annual after-tax income, multiply it by 0.3 (to figure out 30%), and then divide by 12 (for average monthly rent).

The calculation would look this way:

  • (After-tax annual income) * (0.3) = Annual rent you can afford
  • (Annual affordable rent) / (12) = Monthly rent you can afford

The median income in the United States is currently around $45,000 a year. Assuming the individual files as a single taxpayer, we can estimate that the after-tax/net income is around $36,000 per year. So, $36,000 * 0.3 = $10,800, and then divided by 12, you get a $900 limit for monthly rent.

ACCOUNTING FOR ALL HOUSING COSTS

A more accurate calculation would also figure in associated housing costs. Renter's insurance is a necessary expenditure, and thankfully a rather cheap one. Most renters can find renter's insurance for under $20 a month. Some apartments and homes have extremely high utility costs, especially in older homes with outdated electric wiring or oil heaters in cold-climates. If the apartment or home you are renting covers all utilities in the cost of rent, your job is much easier. However, if the landlord expects renters to cover all utilities, including heating, electric, garbage, and water, you will want to ask how much these costs usually are and factor them into your calculations as you determine "How much rent can I afford."

KEEPING COSTS DOWN

When determining how much rent you can afford, you will want to try to get as close as possible to the 30% income threshold. You want to make sure that you can make your monthly rent payments so that you can keep your credit healthy. There are a few tactics you can use to get to this level, not least of which is finding roommates to share the costs with you.

WHAT IF I CAN'T KEEP UNDER THE 30% THRESHOLD?

If you earn less than your locality requires to find a decent apartment, it will be important to find an apartment that is as close to the 30% of income as possible. When your rent exceeds 1/3rd of your income, you will want to spend the time figuring out your monthly budget. Use an automated budget app or software to do this or develop a spreadsheet for tracking monthly income and expenses. You want to make sure to budget enough for your housing costs if they make up close to half of your income.

Conclusion

Insert Video
Insert Video

Considering how much money goes into putting a roof over your head, it's vital that new renters and those making big moves across state lines or to new jobs ask themselves, "How much rent can I afford?". Since the compulsion toward the "American dream" has not yet died, and developers realize they can make more money from single-family homes, the development of more affordable apartment buildings and townhouses have fallen behind the demand for these. The increase of single-family home rentals has outpaced the increase of available apartment rentals. This will continue pushing rent prices up as the property taxes and values of these housing units far exceed what renters face in more economical apartments and flats.

How To Get Out Of Debt And Other Essential Things To Know

December 4, 2018 by  
Filed under Finance, Resources

Unfortunately, one of the most common financial questions asked in our modern consumer society is how to get out of debt. It's an important question and the correct answers can be found in different places for different people. Before we get into some creative yet logical ideas for how to get out of debt, it's beneficial to know about how debt works and if it's ever a good thing.

How Debt Works

First of all, there's no debt without credit, and while these two things are closely related, they are not synonymous. Credit is something that is given and debt is something that is owed. In any given loan, there are two parties: the creditor and the debtor. The debtor (or the borrower) is the person who receives the credit, while the creditor (or the lender) is the person who gives the credit.

With any loan, there's almost always a contract in which the terms of the repayment are specified. The contract will clarify how much money is owed by the debtor, how much time the debtor has to repay the creditor, and what the interest rate will be. Interest is a percentage of the principal (original amount loaned) that is expressed as an interest rate and is calculated monthly or annually.

For example, a loan might have an annual interest rate of ten percent, meaning that the debtor has to pay back the creditor the original amount of the loan (the principal) plus ten percent of that loan per year. The interest fee is what gives the creditor incentive to loan the money in the first place. To the creditor, it's as if your money is making you more money over time.

DEBT CLASSIFICATIONS

There are consumer debts and public debts. The most popular types of consumer debts are credit card debts, home mortgage, car loans, home equity loans, and student loans. These types of debts are held by the common individual. Public debt, on the other hand, is money owned by governments.

Other debt classifications are secured and unsecured debts. Secured debts are backed by something of real value, or collateral. Mortgage debts are a great example of a secured debt because the debt is backed by the value of the house itself. The same goes for that of a car loan, there's something of physical value backing the debt.

Unsecured debts, conversely, are like credit card loans. There's nothing of real value backing the loan, so if a person can't make good on a loan payment, they often have to borrow even more money, thus starting down a slippery slope; this is why these types of debts are the most dangerous types of debt to accumulate.

GOOD DEBT VS. BAD DEBT

good debt vs. bad debt

Yes, good debt exists. While it's possible to live life completely debt-free, it might not be the smartest thing to do. Unless you have enough money to buy a house up front with cash, for example, taking out a loan for some of life's big purchases can be a good thing.

Good debt is an investment that will grow in value or generate long-term income. Like a mortgage loan, student loans are also a good example of a good debt. While student loans generally have low interest rates compared to other types of loans, they provide future value. With an education, a person is more valuable in the working field and has the opportunity to make more money in the future than they would have without the education.

The same is true for a mortgage loan. While mortgage loans are generally lengthy (around 30 years), they also have relatively low interest rates. That, coupled with the fact that (hopefully) your home will increase in value over time, makes a mortgage loan considered a good loan. In the best-case scenario, your home's value will increase enough during the thirty-year loan to offset any interest payments, essentially making your loan a free one.

Bad debt, on the other hand, is debt incurred to purchase things that quickly lose their value and do not generate long-term income. Bad debt, like credit card debt, also carries a high interest rate. The general rule to avoid bad debt is: If you can't afford it and you don't need it, don't buy it.

Some other types of bad debts are payday loans or cash advance loans. In fact, these are some of the worst kinds of debt. Interest rates for payday loans are incredibly high, starting at 300% annually, and if you don't pay back the loan by your next payday, you incur more fees to "roll-over" the loan, and the cycle continues.

Reasons Debt May Be Bad

reasons debt may be bad

Debt often starts with a little and turns into a lot. The emotional high of buying things with a credit card can be very addicting. You may feel like you are walking away with new things but not having to part with your money. However, you will have to part with that money eventually, and more often than not, it ends up being more money than it should have been.

DEBT BORROWS FROM YOUR FUTURE INCOME

Any time you take out a loan or swipe your credit card, you are taking away from money you hope to earn in the future. Most of time, it feels terrible spending your money to pay for something you've already used up or don't get value from anymore.

INTEREST RATES CAUSE YOU TO PAY MORE

Interest rates pile up over time and those $200 shoes you bought might end up costing you over $250 or more by the time you pay them off.

DEBT CAN KEEP YOU FROM OWNING A HOME

This is ironic because as was mentioned above, most of the time if you buy a home, it comes with a mortgage (which is debt.) You have to have a good credit history to be able to take out a mortgage, so it's crucial to pay back your debts of all kinds.

FINANCIAL AND MENTAL HEALTH MAY BE AFFECTED

When you have unpaid bad debts, it's hard not to stress about them. The stress from debt and worrying about how to pay back your creditors without going further into debt can lead to mental health problems including ulcers, migraines, depression, and even heart attacks. Not to mention monthly debt payments limit the amount of money you have to spend on other things, like retirement, or that vacation you could really use, or Christmas presents for your family.

How to Get out of Debt

she's computing her debt

Often, if you're in some sort of debt, you just want to know how to get out of debt. Here we have created a list of creative, logical, and fairly easy ways for how to get out of debt.

COUPONS

Yes, coupons can help you save money at the register over time. Looking through coupon books can be tedious, but worth it in the long run.

CUT YOUR CABLE BILL

If you haven't done this yet, it's time. Most of your favorite shows can be found online, and this $100 per month will go a long way if you're wondering how to get out of debt. There's also the library for renting books and movies for free.

EAT IN

Going out to eat too often doesn't help the debt situation. While it's easy to justify going out to eat because we are humans and we need food, coupon shopping and making your own food at home is far more logical.

MAKE YOUR OWN COFFEE

Similar to the note above about eating in, make your coffee at home instead of stopping by the coffee shop every morning. If you're a coffee drinker and wondering how to get out of debt, this single thing might be the most effective daily lifestyle change.

CUT UP YOUR CREDIT CARDS

Throw them away! How to get out of debt includes one major step: stop going further into debt. It will be very hard ever getting out of debt if you continue to make ill-advised credit card purchases. So do away with the temptation and don't carry the credit card around.

AVOID EXPENSIVE HOBBIES OR MEMBERSHIPS

This can include cutting down on your golf rounds or even ditching the gym membership. You can always run outside for free and do push-ups and sit-ups on your own. Getting out of debt is really about cutting down on all the non-essentials and getting creative.

MAKE A BUDGET

If you treat this like a game and follow through rigorously, the process of getting out of debt can actually be fun. Track your progress along the way and feel good about yourself while cutting expenses and climbing out of debt.

Conclusion

How to get out of debt? There's no one answer, no magic wand, and no secret formula. You really just have to cut down on your spending in any way you can and realize that it's not a sprint. Steady progress is the way to do it. Be conscious of where all your money is going and make paying off your debts a priority. Best of luck, you can do it!

How stock investment can help the debtors in bill consolidation

July 6, 2011 by  
Filed under Finance

Investments can help you to earn some extra money other than your fixed income. So, you may be able to use this money to pay off your debts even if you are going to consolidate the unpaid bills through a bill consolidation program. This extra money can help you to make your debt payments and also pay the bill consolidation company for their services. There are various types of investment vehicles like the gold investment, stock trading, forex trading, or real estate investment and so on.

What are stocks?

Stocks are parts of a company and the investors are allowed to buy stocks at various prices. So, if you buy the stocks of a company you will be able to own a part of the company. You will also be able to have a say in the voting’s of the company.

How does stock trading community work?

There is more than one stock market. The stock trading community involves the numerous stock exchanges of the world. In United States, the most important and popular stock exchanges are the NASDAQ and the New York Stock Exchange or NYSE.

In case of stock trading, each stock is awarded a particular price which is representative of its value, and it is called the price of the stock market. After the stock market opens, the investors will be able to buy and sell stocks at the rate of the market price. This market price of the stocks vary from time to time based on numerous things like the constant up’s and down’s in business, the availability of the stocks, the demand for stocks, the economic condition and the political condition of the countries and many more.

What are the types of stock trading?

There are mainly three types of stock trading and these are the:

1. Short term stock trading – The short term stock trading also known as swing trading is the type of stock which an investor can choose if he/she doesn’t have much time to devote towards the trade. Short term stock trading is mainly based on daily charts of stocks and the duration can last for a day or several days/weeks.

2. Day time stock trading – You can opt for day time stock trading if you have enough time to devote towards stock trading. In this type, you are supposed to use intra-day chart which has short primary time frame, ranging from 3-10 minutes and can last from several minutes to hours.

3. Position trading – In case of position trading, which is based on weekly charts generally lasts longer and the holding period ranges from 1-6 months. This type helps you to accumulate dollars over time.

So if you can earn good profits through stock trading, you will be able to pay off your debts through bill consolidation and also have money if required to secure your future.

Contributed by Debt Community Member.


Visit Related Topic:

Free credit report help