Everything You Need To Know About Web Hosting

In order for your website to be live on the Internet, it needs to be hosted.

If you’re creating a website for the first time, move “set up hosting” to the top of your to do list, if it’s not already there.

Already own and operate a website? Did you rush into a plan without understanding how everything worked first? Maybe you feel like you’re fine with the host you picked at random. Makes sense — until you run into a problem with your website, you might not even think twice about your hosting plan. However, you don’t want to wait until that happens. It’s better to educate yourself on web hosting now so you can find the best option before anything goes awry. This will make your life much easier down the road.

Regardless of your situation, you’ve come to the right place. This beginner’s guide on web hosting will help you feel confident picking the host that’s right for you and your goals.

What is web hosting?

Let’s start with the basics. What exactly is web hosting? How does web hosting work?

Websites are hosted on servers. In simple terms, a server is a very powerful computer that does only one or two simple services, hence the name server. The type of server we’re interested in stores websites and delivers them to people over the internet. Your web host provides the server space and the technology for your website to be accessed on the Internet. It’s the process that allows someone to search for your site or enter your URL into their web browser to see your page online.

Everything that your website contains is stored and accessed through the web host. I’m referring to things like images, videos, files, text — everything.

Web hosting and data centers are often confused with one another. While the two are similar and work together, they are not quite the same. Web hosting refers to the servers that host websites or the hosting companies that provide you with server space. Data centers are the physical facilities where those servers are located.

Web hosting types

There is no one-size-fits-all plan for web hosting. It’s like buying a car. You don’t just walk into a dealership and say, “I’ll have a car please.”

What kind do you want? You need to decide if you want a sports car, sedan, coupe, hybrid, SUV, electric, diesel, automatic transmission, manual transmission, etc.

Fortunately with web hosting, you don’t have that many options to choose from. There are four main types of hosting.

1. Shared
2. VPS
3. Dedicated
4. Cloud

I’ll explain how each one of these works and what type of website would need that level of hosting, so you can decide which option is best for you.

Shared hosting

First, shared hosting. With this method, your website shares server space with other websites. Here’s a diagram that shows how shared web hosting works compared to the other web hosting types:

Since you’re sharing a server with other websites, this will be the most cost-effective method. Think of it like taking the bus to work instead of driving your own car. The bus will be less expensive, but you’ll be making some stops along the way to your destination in order accommodate other people.

While I don’t necessarily have a problem with shared hosting, you could potentially run into problems down the road as your website grows and gets more traffic. High spikes in traffic can impact loading time and even lead to error messages for people trying to access your site. The performance of your website can be affected by traffic to other sites on the same shared server. So, just like when you’re on the bus, there may be a ton of other people requesting stops, slowing down your commute. Or, it might be just you and the driver. You’re saving money, but you have less control of the quality of the experience.

Who is shared hosting best for?

Shared hosting is a common option for beginners and entry-level websites. It’s affordable and doesn’t require much technical knowledge. If this sounds like your situation, you’re probably a good candidate for shared hosting. (You can also upgrade later on, when your website traffic grows.)

VPS hosting (Virtual Private Server)

VPS hosting is the next step up from shared hosting. With this option, one server is basically split into multiple virtual servers. The main server is shared with other websites, but each site is given its own virtual server. Since fewer websites share the main server, page load times will be much faster with VPS hosting. Since fewer websites share the main server, page load times will be much faster with VPS hosting.

It’s definitely important for you to understand the principles that boost your website loading time since this will ultimately have an impact on your conversions.

It’s not quite as good as dedicated hosting, but it’s better than shared hosting and gives you, the website owner, more control. If you go with this option, you’ll have complete root access and more control at the server level. But if you’re expecting high volumes of traffic, VPS hosting can still be limiting.

I’d compare it to using a car-sharing service: it’s faster than taking the bus, but you’re still limited in some ways.

Who is VPS hosting best for?

Even small websites with lower volumes of traffic can benefit form VPS hosting. If your site has lots of visual elements like images and videos that could potentially slow down the loading time, you’ll be better off with VPS hosting than a shared host.

Dedicated server hosting

Dedicated servers are yours and only yours. They are more expensive than the other options we’ve looked at so far, but the premium pricing comes with added benefits. It’s like owning your own car, as opposed to taking public transportation. You are in control of everything.

Since you’re the only website on this server, you have complete technical control. This allows you to implement a greater range of software on your website. Downtimes should be minimal since you don’t have to worry about traffic from other sites impacting your site. And, your load time is only impacted by your site — not any other sites.

Depending on your hosting plan, you might be able to upgrade from a shared server to a dedicated server when your website grows without having to start over from scratch. I recommend looking for this room to grow when you sign up for a plan. Migrating isn’t any fun, and neither is capping your site’s success.

Who is dedicated server hosting for?

Dedicated servers are for sites with higher volumes of traffic. If you have an ecommerce platform and want to make changes to the server based on your ecommerce software, you should consider going with a dedicated server.

Cloud hosting

According to Statista, the cloud computing and hosting market has been growing for the last decade or so.

With this method, multiple servers will work together to host your website, as well as other sites. But unlike traditional shared hosting, cloud hosting accounts for traffic spikes, so high levels of traffic to your site or other sites on the same cloud shouldn’t impact anyone’s loading speed.

However, you won’t have root access for a cloud server, which means you can’t change any of the server settings or install specific software. But for those of you who have a simple website and don’t need those tech options, cloud hosting might be a good option to consider.

Who is cloud hosting for?

Cloud hosting is for websites that fall somewhere between shared hosting and a VPS.

If your site doesn’t need access to the technical side of a VPS, but want you’re anticipating high volumes of traffic and don’t want loading time to be an issue, cloud hosting is viable option.

Web hosting features

Now that you understand the four basic types of web hosting, it’s time to know what features to look for before you buy a hosting plan. These features will vary depending on the web hosting type, the hosting company, and the plan you select. Understanding these web hosting features will help you figure out how to choose a web hosting provider.

Bandwidth

Bandwidth refers to the speed of your network connection, as opposed to the transfer speed. Higher bandwidth allows more visitors to access your site at the same time while maintaining a fluid user experience.

Lower bandwidth connections will cause slow loading times, delays, and even errors.

So, take a look at the bandwidth options offered by your hosting provider. If you’re a new website, you probably don’t need the highest bandwidth right away. Find one that can meet your traffic needs and website content.

For example, if users are going to be watching videos, looking at photos, and buying items on your ecommerce shop, you’ll definitely want higher bandwidth. But if you’re just starting with a blog and don’t expect heavy traffic, you can go with a lesser plan.

Data storage and disc space

You might see some web hosting companies offering unlimited data. However, make sure you look at all the details before falling for something that sounds too good to be true. Sometimes there are hidden charges for exceeding average site usage.

Unlimited storage isn’t always the best option. I recommend picking a plan that clearly states the storage you get based on the amount of disc space that you actually need.

Customer support

Most site owners don’t think of this, but customer support should be one of the top considerations when looking for a web hosting company. Roughly 20% of web hosting clients named support as the most important feature when choosing a hosting plan — I think that number should be much higher.

Why?

Hopefully, you don’t have any problems. But in the event you need some help or have time-sensitive questions that need to be addressed, you want to know that your web host is available and at your service.

Read reviews online from their existing clients to see how well they handle customer service communication and response time before you proceed with a plan. It’s also helpful when web hosting companies offer other resources, such as video tutorials or extensive guides and FAQ sections on their website.

Domains

The majority of the best web hosting businesses will let you create multiple domain names under the same account. So if you’re planning to host several websites through the same hosting service, this is definitely something you’ll want to look into before you get started.

It’s easier to manage everything this way. Having to set up a new account for each domain can be a pain.

For those of you that still need to buy a domain name, you can consider using a web host that allows you to purchase domains through their platform, but I recommend keeping these two things separate in case you have to switch hosts later on, your domain won’t be tied to your old host.

SSL certification

SSL stands for “secure socket layer.” Basically, this certification adds encryption to your website to protect your personal information, as well as personal information of your site’s visitors.

There are different types of SSL certificates. Some are for businesses, while others are made for individuals. Major website hosting services will offer an SSL certificate, but they can also be provided by third-party security companies.

If a website hosting company doesn’t offer SSL certificates or doesn’t have a strong SSL certificate, you may want to consider an alternative option. It’s also worth noting that transport layer security (TLS) is an alternative to SSL. This gives you more security, but it’s not as popular or readily available as SSL certificates.

Email

You may not need more than just a couple of company email addresses right now. However, as your website grows, you may want more. That’s why I think it’s important to look for web hosting services that offer multiple email addresses with your domain name. You could always get these email features through a third-party, but it’s much easier to handle everything in the same place.

Ecommerce software

If you’re going to be selling products through your website, proper ecommerce software needs to be a priority when you’re looking for the best web hosting option. You need to be sure that your plan either supports the software that you plan to use, or comes with ecommerce software that you can implement on your site.

It’s worth noting that ecommerce software is not considered a standard feature, so shop around and make sure your web host has what you need to operate your ecommerce platform accordingly.

Uptime

For the most part, you’ll see the majority of web hosting companies offering 99.9% uptime. However, don’t assume anything.

Usually, those services don’t include scheduled downtimes in the percentages they advertise. So again, it’s best to read reviews and see if their clients are experiencing lots of downtime.

If visitors can’t access your site, it’s going to be a big problem for your business. The best websites have a high uptime percentage.

The cost of downtime can add up quickly. If users are experiencing problems on your website and can’t access content, they will leave and may not come back.

Backups

I do not recommend web hosting services that don’t offer backups. This is one of the most important web hosting features, but it’s often overlooked.

All of your website and company files should be backed up appropriately on the hosting server. You should be backing them up on your own as well, but it’s nice to know that you have this data secured by the hosting company.

Advertising credits

Some web hosts offer advertising credits as an incentive for buying a plan. Here’s an example from Bluehost.

Depending on the company you use for hosting, they’ll let you apply those credits to platforms like Google AdWords. I highly recommend taking advantage of any advertising credits you’re given.

Web hosting costs

So how much is all of this going to cost you? I’m sure this is your next logical question.

I know it’s not the answer you’re looking for, but the real answer is: It depends. Refer back to the car analogy that I gave you earlier. You could buy a new car for a few thousand dollars, or a hundred thousand dollars depending on the brand, type, and features. Well, the same goes for your web hosting service. The price can range anywhere from less than $10 per month to hundreds of dollars per month.

If you’re going to get a shared server with low bandwidth, poor support, and no added software, it’s going to be pretty inexpensive. Even the best shared hosts with great support will run you less than $10 per month; under $5 per month for the initial contract. But if you want a dedicated server, ecommerce software, unlimited email addresses, backups, and multiple domains, you can expect to pay a premium price.

The majority of us fall somewhere in between these two extremes. Just be aware that cheaper isn’t always the best option. You need to understand the hidden costs of website hosting and how these costs will change as your website grows.

Conclusion

Your website needs to be hosted to be online. There is simply no way around it.

But that doesn’t mean you should rush into a web hosting plan without doing your research first.

First, decide which type of web hosting type is best for your situation. Then, determine the web hosting features you want. Once you know the answer to these questions, look for a reputable web hosting service that meets the requirements you’re looking for.

Don’t be intimidated by web hosting. Use this beginner web hosting guide as a reference, and let me know if you have any additional questions.

What type of web hosting server are you planning to use for your website?

Source Quick Sprout http://bit.ly/2DxNBy9

EZTaxReturn Review

Tax forms, in principle, should be simple. You fill in what you earned, add in the deductions, and submit it. It’s a pity, then, that the reality is so different.

If you find that navigating the world of tax forms is a nightmare, then tax return preparation software could be a good idea. The problem is that there are a lot of different options out there.

How do you know that you are choosing the right one for you? In this post, we are going to have a look at one option on the market. By the time you’re done with this ezTaxReturn review, you’ll know whether this software is the right choice for you.

How EZTaxReturn Works

Everyone needs a little guidance to file taxes. Free and premium tax services like EZ Tax can help. 

As you might guess from the name, filing with ezTaxReturn is simple, starting with the signup process.

You create an account on the site and check whether their services are available in your state.

Where EZTax Operates

The software does not support state returns in the following states, so if you live in one of these, you’ll need to choose a different company to work with:

• Connecticut
• Delaware
• District of Columbia
• Florida
• Hawaii
• Idaho
• Indiana
• Iowa
• Kansas
• Kentucky
• Montana
• Nebraska
• New Hampshire
• New Mexico
• North Dakota
• Oklahoma
• Oregon
• Rhode Island
• South Dakota
• Tennessee
• Texas
• Utah
• Vermont
• West Virginia

If your state is not on this list, you then answer a series of questions that will determine whether or not the software can help you.

This is a very simple program, designed to deal with straightforward tax issues.

If you’re running a company or receive income from several sources, this is not the right software for you to use.

How The EZTaxReturn Questionnaire Works

The questions that EZ Tax asks are aimed at narrowing down your tax situation. They are pretty straightforward.

As the software is aimed at simple tax returns, you won’t need to answer questions that have no bearing on your situation. The program uses the answers provided to establish:

• Which forms you need to complete
• Whether some deductions or credits might apply

With that information on hand, ezTaxReturn is able to help you file as accurately as possible, without missing out on tax breaks that might be available to you.

What Happens Next

The program populates the tax forms based on your answers, and you will be told what, if any, supporting documents you need to submit. Then you need to review the information, making sure that it’s all correct.

At this stage, if you’re happy that all is in order, you pay the fee and submit the return. You’ll get confirmation that it’s been accepted by the IRS within 24 hours.

Start filing your taxes with ezTaxReturn>>

EZTaxReturn Features and Benefits

For people with simple tax returns, the main drawcard with this software is that it doesn’t offer a whole host of features. That means that you are not paying for features that you’ll never use. You also won’t have to deal with an array of confusing options that complicate matters.

Simplicity

The company set out to create software that will enable you to quickly and accurately submit your return. They decided early on that the key to delivering a flawless product was to keep it simple.

They focused on one aspect of tax returns instead of trying to help everyone. The result is software that is simple to use and that will help you generate and file your return as quickly as possible.

You don’t have to answer a bunch of meaningless questions or jump through several confusing hoops to get your return completed.

The questions are simple and to the point. They’re designed to weed out anyone who the software can’t help early in the process, so there’s no time wasted for you if you don’t qualify. Also, because the software is geared towards simple returns, the questions are not nearly as extensive. This makes it perfect for someone who doesn’t know the first thing about tax returns.

Support

The company does offer full technical support via means of email and through their call center. As an additional extra, you can opt to buy Audit Support. This service is there to assist those who are audited.

A tax expert will help you deal with your audit professionally. They’ll assist you in getting the right information to the IRS and help you negotiate where necessary.

Access to Previous Tax Returns

One nice benefit that the company offers that you don’t get everywhere is free access to past returns. You are able to access up to three years’ worth of returns on their site. Downloads for these returns are free.

You can opt to have hard copies sent to you for a price. If you want access to returns outside of this three-year period, you can get them; you’ll just need to pay an additional fee. You’ll love the convenience if you have a simple return and want to get done with it as fast as possible.

Why not try it out for yourself? You don’t have to pay a cent until you want to file, so you can see if you like it or not. It’s not for everyone, but it does offer a simple solution for those who need it.

EZTaxReturn Plans and Prices

The plans are very basic and customizable to your needs.

• Federal: For all federal returns with the IRS, a flat fee of $29.95 is payable per return.
• State: For all state returns that you need to file, a flat fee of $19.95 is payable per return.
• Federal and State: This option allows you to file both types of returns at a reduced rate. You’ll pay a total of $39.95 if you select this option.
• Audit Support: This costs a one-off fee of $39.95 per return. You will receive support until the audit is completed.
• Fees for Copies: If you need a copy of your return outside of the three-year period, you can download it for $9.95. A hard-copy will cost you $19.95 at any stage for regular mail. If you need it overnighted to you, it will cost $34.95.
• Insurance for Amendments: We all hope that we’ve filed our returns properly the first time. Sometimes, however, we need to amend them after filing. The insurance costs $9.95 and entitles you to a free amendment. Without it, you’ll pay $19.95 to amend your return.

Bottom Line

If you want something that is quick and easy to use, this might be the best software for you. That said, its functionality is pretty limited. If you have a very straightforward return, you’re golden, but it can’t handle anything more complex.

In all honesty, some companies offer a similar level of service for free, though these free services might not recommend deductions that apply. Also, to shell out $30 for what is essentially a very basic service might be a step too far if you know something about tax.

If, on the other hand, you’re a complete newbie and don’t know what to do, this is a good service. It definitely makes completing your return a lot quicker and simpler.

Moreover, while there are services that offer the same kind of thing for free, there are plenty of others that charge a whole lot more. Either way, it’s still cheaper than heading off to a CPA and getting your tax return completed in-person by a professional.

With a little research, you can find the tax software that’s right for your situation.

Get started with ezTaxReturn here>>

The post EZTaxReturn Review appeared first on Good Financial Cents®.

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Dear Penny: Will I Hurt My Credit by Opening New Cards for Sign-up Bonuses?

Dear S.,

I’m glad you’re asking about this, but I’m concerned about your motives.

Are you working on building your credit history? Do you want to increase the amount of credit available to you in order to boost your score? These are acceptable reasons to apply for a new card. If you do take this route, your score won’t take a long-term negative hit from opening a new card.

The length of your credit history only constitutes 15% of your credit score, and new credit makes up 10% of your score. How much of your available credit you use and whether you pay on time make up a combined 65% of your score.

Once you start using your new card (and paying it off each month, ahem), your score will settle, and you may even see it increase. If you’re a responsible credit card user who opens new cards only occasionally, you don’t need to worry about your score. Just keep an eye on your credit report for any anomalies, and be sure to make those on-time payments.

I am curious about these credit card promotions you’re considering. What are they offering? A zero-interest introductory period? Miles or points? A pony? OK, probably not a pony.

These offers can be tricky. Sure, you might be able to earn a bonus reward, but what will you have to do to get to that spending requirement?

A report from the Federal Reserve Bank of Chicago found that upon enrolling in a rewards program, cardholder spending increased and credit card payments decreased. Over the course of nine months, both people in debt and debt-free people who did not regularly use their cards before ended up with debt. The average cash-back reward was just $25.

It’s hard to resist the urge to gamify your experience with credit cards and work toward earning rewards. But don’t let sign-up bonuses get in the way of your long-term goals to build your credit history and your overall financial health.

Wondering how a big financial decision could impact you later? Write to Dear Penny at https://www.thepennyhoarder.com/dear-penny/

Lisa Rowan is a personal finance expert and senior writer at The Penny Hoarder, and the voice behind Dear Penny. For more practical money tips, visit www.thepennyhoarder.com.

This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.

The Penny Hoarder Promise: We provide accurate, reliable information. Here’s why you can trust us and how we make money.

source The Penny Hoarder http://bit.ly/2CLF9Kk

7 Steps for Catching up on Bills When You Have No Idea Where to Start

Personal Finance 101: How Tax Brackets Actually Work

Right now, with the confluence of tax season and a lot of public discussion about tax rates going forward, many people are discussing the ins and outs of how taxes work in the United States. Over the last few days, I have seen several people post tax thoughts on social media and on otherwise reputable websites that represent a wildly incorrect view of how tax brackets actually work.

What follows is a simple primer on how income tax brackets work in the United States.

What Are the Current Tax Rates for Single Filers?

As of this writing, the tax rates for single filers in the United States look like this:

10%: $0 to $9,525
12%: $9,526 to $38,700
22%: $38,701 to $82,500
24%: $82,501 to $157,500
32%: $157,501 to $200,000
35%: $200,001 to $500,000
37%: $500,001 or more

The dollar amount listed is a person’s adjusted gross income, which is the amount a person actually earns in a year minus their tax deductions. For many Americans, it’s how much they earn in a year minus the standard deduction, which is $12,000 this year.

So, let’s say you earned $30,000 this year and then took the standard deduction. Your income for the purposes of calculating taxes is $18,000.

We’ll stick with the rates for single filers as an example, just so everything is incredibly clear.

Often, each of those levels is known as a “tax bracket.” So, someone making $120,000 a year might be described as being in the 24% “tax bracket.” However, being in the 24% “tax bracket” does not mean that you’re paying 24% of your income in income taxes. That is a huge misunderstanding.

The Water Fountain Model

The mental model that works best for me is visualizing tax brackets as one of those large fancy tiered water fountains, where the top part of the fountain is small, the next part is a little bigger, and the next part is a little bigger than that, and so on.

With such a fountain, when the top portion fills up with water, it overflows, and the water overflow is caught by the next portion of the fountain. Eventually, that portion overflows, causing the portion below it to start filling with water.

That’s the way income taxes actually work. You start dumping income into the top bracket – the 10% bracket – and that’s the tax rate you pay until that bracket overflows. You keep pouring your income in, but now it goes into the 12% bracket and that’s the rate you pay until that bracket overflows. You keep pouring income in, but now it goes into the 22% bracket and that’s the rate you pay until that bracket overflows, and so on.

Even if you end up dumping money into the 24% or the 35% bracket or whatever, you still have some of your income sitting in that 10% bracket and that 12% bracket, and that’s all you pay for those portions of your income. Just because your income overflowed that lower tax bracket doesn’t mean that you suddenly have to pay more on the portion of your income that was in that bracket.

In other words, you break your income up into pieces that are equal in size to each tax bracket. When you earn more income, all you do is make the piece in the highest tax bracket bigger – you don’t change any of the others. If that piece gets bigger than that bracket, then you start another piece in the next bracket up.

A Real Example

Let’s jump into a real world example here. Let’s say Connie, a single woman, made $100,000. She does her taxes and takes the standard deduction, knocking $12,000 off of her total. She’s taxed on $88,000 of her income.

Here are the relevant rows of that income tax table from earlier in the article:

10%: $0 to $9,525
12%: $9,526 to $38,700
22%: $38,701 to $82,500
24%: $82,501 to $157,500

Many people make the mistake of assuming that Connie will be paying 24% of her income in taxes, but that’s not remotely true. Here’s how it actually works.

On her income up to $9,525, Connie is going to pay 10% in taxes – $952.50. That leaves her with $78,475 in taxable income, but now the 10% bracket is full, so we move up.

On her income between $9,526 and $38,700 – or, in another way of looking at it, the next $29,175 in income she earned that year – Connie is going to pay 12% in taxes. That equals $3,501 in taxes. That leaves her with $49,300 in taxable income, but now the 12% bracket is full, so we move up.

On her income between $38,701 and $82,500 – or, in another way of looking at it, the next $43,800 in income she earned that year – Connie is going to pay 22% in taxes. That equals $9,636 in taxes. That leaves her with $5,500 in taxable income, but now the 22% bracket is full, so we move up.

On her income between $82,501 and $157,500 – or, in another way of looking at it, the next $75,000 in income she earned that year – Connie is going to pay 24% in taxes. However, she isn’t filling up that full bracket. She only has $5,500 of her income in that range. So, her taxes on that last $5,500 is $1,320.

So, her tax total is:
$952.50 from the 10% tax bracket, plus
$3,501 from the 12% tax bracket, plus
$9,636 from the 22% tax bracket, plus
$1,320 from the 24% tax bracket.

The sum total of Connie’s taxes is $15,409.50.

Now, notice that total is not 24% of her income. If she were truly paying 24% of her income in income taxes, her total tax bill would be $24,000. Instead, it’s $15,409.50. Connie is in the 24% tax bracket, but her actual effective tax rate is only 15.4%.

If Connie were to have earned more than $100,000, then all of that additional money would have been taxed at 24%, but that’s not what she’s actually paying on her income.

For example, if Connie had earned $110,000 this year instead of $100,000, her total tax bill would have been $15,409.50 plus $2,400, or $17,809.50. Connie’s effective tax rate would go up a little – she’s now paying $17,809.50 on a total income of $110,000, or 16.2% – but she’s still not paying anywhere near 24% of her income in income taxes.

Even if Connie had a huge increase in salary – bumping her up to $200,000 a year – she would edge into that 32% tax bracket, but her overall tax rate wouldn’t be 32%. Rather, her income tax would be
$952.50 from the 10% tax bracket, plus
$3,501 from the 12% tax bracket, plus
$9,636 from the 22% tax bracket, plus
$18,000 from the 24% tax bracket, plus
$13,600 from the 32% tax bracket.

That would give Connie a total of $41,849.50 in taxes on a $200,000 income, or a 20.9% effective tax rate. Connie might be in the 32% tax bracket, but she’s only paying 20.9% of her income in taxes.

Some Takeaway Thoughts

First of all, the idea that earning more will somehow “cost you money” is foolish. The more you earn, the more you keep. Every single additional dollar that you earn, you’ll keep some large portion of it, regardless of your total earnings.

Many people and many otherwise accurate articles misrepresent this idea. They paint the picture that if you cross the line into the next tax bracket, you’ll suddenly have to pay more taxes on all of your income, so, under this misunderstanding, earning a little more if you’re close to the line can cost you money. That is completely false – earning more money always means more money in your pocket.

What the tax brackets are actually telling you is how much comes out of each dollar that you earn. For the first $9,525 you earn, only 10% comes out of each dollar no matter how much you make in total. That statement remains true regardless of whether you’re earning $15,000 a year or $1.5 million a year. For the next $29,175 you earn, only 12% comes out of each dollar no matter how much you make in total. Again, this statement remains true regardless of whether you’re earning $15,000 a year or $1.5 million a year.

Even if the highest income tax bracket were paying a rate of 70%, a proposal that’s making the rounds these days, you would still only pay a 10% tax rate on the first $9,525 you earn, regardless of how much you earned in total. You just pay the 10% on that part, then forget about it and only worry about taxes on the rest.

Another thing worth noting: the average American household income is around $70,000. If you’re a single person making $70,000 a year, you’re only in the 22% tax bracket and your effective income tax rate is somewhere around 11%. Most tax changes will have very little impact on your life.

If you’re earning $70,000 a year and the 22% tax bracket became a 25% tax bracket, it would literally only add $939 to your total tax bill. That would be about $18 from every paycheck, assuming you’re paid every other week. It would not eat 3% of your income – rather, it would eat about 1.3%.

Thus, I would encourage most Americans to not worry too much about changes to income tax laws. The only changes that will affect most Americans are adjustments to the lowest tax brackets, and those rarely change at all. They might dip up or down a percentage point or two, but those amount to just a few bucks in the paycheck of the average American household.

A final note: be very wary of absurd financial claims that don’t pass the common sense test. If someone is claiming that earning more money will actually somehow cost you money, that should fail the common sense test – and it does, because that’s not how tax brackets work. If someone is claiming that a tax change will cost you thousands, it might if you’ve got a huge income, but for most Americans, tax changes rarely have that much of an impact – it’s usually in the realm of a few dollars in your paycheck.

Related Articles:

• The Best Free Tax Software
• Seven Life-Changing Ways to Use Your Tax Refund
• Five Ways to Get a Faster Tax Refund

The post Personal Finance 101: How Tax Brackets Actually Work appeared first on The Simple Dollar.

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The New Southwest Companion Pass Offer Is Pretty Meh – Here’s What to Do Instead

Why are my insurance premiums rising 89%?

Moneywise helps a reader with soaring insurance premiums

I have just received a ‘review’ from Aviva on a former AXA Equity & Law whole-of-life/critical illness plan, which is asking me to increase premiums by 89% if I want to retain my £200,000 cover level. How can such an increase be justified?

NM/Bath

This sounds shocking, but Aviva has an explanation. An Aviva spokesperson says: “This customer has an ex-AXA Equity & Law Multiplan, which is a reviewable whole-of-life policy linked to a managed investment fund and was taken out in 1994. It provides cover in the event of death, critical illness or in the event of permanent disability.

“Policies such as these are periodically reviewed in order to determine whether the level of cover provided can be sustained by the premiums and if not, to notify the customer of their options to reduce the level of cover or increase their premiums to keep the cover at the same level. One of the factors that will determine the outcome of a periodic review is the investment performance.

• Why can’t I write a cheque in blue ink?

“In the case of this customer’s policy, it was regularly reviewed as part of the terms of the policy. Previous correspondence to the customer in 2014 indicated that the chosen level of benefit would not be sustainable at the next review in 2019. The customer was informed that an increase in premiums would be required, or that there would be the option to reduce the benefit.”

The company suggests that NM talk things over with a financial adviser.

NM wasn’t happy with the response.

• Pick the winner of the Moneywise Customer Service Awards 2019

“I think it is waffle. It provides me with no positive solutions or explanations as to why an 89% increase in premiums can be justified. This was mis-sold tothousands of people as a protection plan when it is really a highly volatile investment-based policy.”

The next step would be to look at how the product was initially sold those years ago and whether it was fair. It is true that the reason for the premium increase is because of the investment performance. Aviva is looking into the issue of mis-selling, but this doesn’t mean that it was mis-sold.

OUTCOME: Aviva will check whether this 25-year-old policy was mis-sold

 

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11 money-saving tips for new parents

Wondering whether you can afford to have a baby or how you’ll cope with the costs of supporting your newborn? Read our guide to making the most of the financial help on offer

There is no escaping it, having a child is an expensive business and from birth until the age of 18 it can set you back just over £4,000 a year – or £75,436 in total for a couple – according to Child Poverty Action Group.

However, there are many ways to cut the costs of having a baby. These range from finding the best deals on essential products and buying second hand to setting up the right protection and making sure you’re receiving the benefits you’re entitled to.

1 Sign up for freebies from new baby schemes

Retailers are desperate to draw in new parents and offer a range of freebies and promotions to do so. Here is a selection of the best around:

• In Scotland, parents receive a free baby box full of essentials, which you can apply for by speaking to your midwife. In England, there is a less generous scheme available through the Baby Box Company, which you can apply for online after watching a free parenting course and taking a quiz on baby and child health.
• Amazon offers freebies when you set up a ‘Baby Wish List’ – currently, it’s a free nappy tub worth £10.
• Mothercare’s ‘My Mothercare’ scheme includes 20% off maternity clothes and discount vouchers on a huge range of products.
• The Boots Parenting Club hands out extra Advantage points when you buy baby items.
• With Tesco’s Baby Club, you will be sent offers appropriate to your child’s age.
• Members of the Asda Baby & Toddler Club get alerted first about discount events in the supermarket.

2 Life insurance will protect your loved ones

No one wants to think about a parent dying, but it’s one of the most important financial factors when preparing for a new baby.

Life insurance pays out a lump sum if the holder dies and there are two options: level-term insurance, which pays out a set amount if they die between a fixed period of time, or mortgage life insurance, which specifically covers the cost of your mortgage.

“A life insurance payment could make all the difference in helping a partner and children cope financially if one parent passes away during the policy term,” Paul Dalgliesh, head of protection propositions at Aviva, explains.

“Having a baby can provide the prompt for new parents to consider taking out life insurance for the first time,” he adds.

Where you buy the policy can make a big difference to the cost, and it’s well worth checking a few different quotes before you buy to make sure you’re getting a good deal.

• Three reasons why pensions are better than Junior Isas for your kids

3 Meet other new parents and share money-saving tips

There are hundreds of apps available for new parents. One of these is Mush, a free app designed to help parents find free and cheap activities to do in the day time with their babies.

“Being a new parent means you suddenly have long chaotic days without any plans. It can be tempting to book in classes for your baby, but they are often extremely expensive,” says Katie Massie-Taylor, founder of Mush.

“Mums who meet on Mush often do babysitting tokens – they take it in turns to babysit their friend’s baby so they can have a bit of time to themselves. This can save between £8 to 12 an hour,” she adds.

You may get presents or hand-me-downs from friends

4 You might be eligible for child tax credits

Anyone with children might be able to get child tax credits. The exact amount you could receive depends on your income, but for a child born on or after 6 April 2017 parents may be able to claim up to £2,780 a year.

You may also be able to claim child benefit, which is available to anyone living in the UK who is responsible for a child up to the age of 16 (or under 20 if they stay in approved education or training). A sum of £20.70 is paid weekly for the first child and £13.70 is paid for subsequent children. If you can, putting this into an interest-paying savings account is a good way to start a mini savings pot for emergencies.

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5 Until your baby arrives, only buy the essentials

It might be tempting to overbuy on new baby items, but you only really need the essentials at this time. The NHS has a checklist of things you’ll need including a cot, pram, basic babygrows, feeding equipment and nappies.

Anything else you can buy once the baby arrives, and by this time you’ll know what you actually need. You may also receive presents or hand-me-downs from friends with older children.

• Moneywise Children’s Savings Awards 2019

6 Free childcare hours are available for working parents

Although you can no longer apply for childcare vouchers after the scheme shut to new parents last year, working parents can still benefit from the government’s tax-free childcare scheme. For every £8 you pay in to your account, the government will top it up by £2, offering a maximum saving of £2,000 a year per child. Families where either partner earns more than £100,000 are not eligible.

You can pick up a nearly new pram online for £100

7 Claim your full maternity entitlement

If you’ve worked at a company for six months or longer, you will be entitled to the statutory maternity pay, which is £145.18 per week for up to 39 weeks.

However, most companies offer an enhanced maternity allowance for at least the first six weeks and this can be your full-time salary or 90% of it.

Before you go on maternity leave, find out exactly what is available and ask about ‘keeping in touch’ days, which are paid days when you can go back into the office.

If you are self-employed, to receive statutory pay, you will need to have made enough national insurance contributions, although you can top these up if not.

Don’t cut your company pension contributions before you go on maternity leave. Your employer will continue paying contributions at the same level, so in fact if you can increase your contributions you will get even more.

8 Don’t succumb to emotional spending

All parents want everything to be perfect for their newborn and this makes you an advertiser’s dream. Think carefully whether your baby really needs sheepskin liners in their car seat or baby-wipe warmers. After your baby is born, when you’re likely to be tired and emotional, be wary of splurging on products that promise to revolutionise your life. Just because Amazon reviewers claim a high-tech baby bouncer got their baby to sleep doesn’t always mean it will work for you.

new-parents-3.jpg

9 Start building a nest egg

It is never too early to start saving for your new arrival. If you open a Junior Isa (Jisa), you can pay in £4,260 a year and all growth and income is tax-free. The money can’t be accessed until the child is 18, at which point the account becomes an adult Isa.

You can choose either a Cash or an Investment Jisa: 70% opened this year were cash products, but if you’re saving for the long term, an Investment Jisa may produce better returns.

• How investing is teaching children about money - and life

10 Buy secondhand or try before you buy to save a fortune

There is a wealth of secondhand baby items available, whether it’s from a local Facebook group, eBay, Gumtree or an NCT sale.

Most of the items have a short usage span before the baby grows out of them and therefore are usually in an almost-new condition, at a fraction of the price. A brand-new pram, for example, could set you back £700, but online you could pick one up for nearer to £100 or less.

Also check out services such as toy or sling libraries to test-drive items before splashing out.

11 Register the birth on time or you’ll be fined

You need to register your baby’s birth at the local registry office within 42 days – if you miss this deadline, you might be fined £200. Once you register the birth, which takes around half an hour, you will receive your child’s a birth certificate.

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“Baby brain is not a myth, so save time and money by shopping online”

Georgie Gilding, 34, lives in Buckinghamshire with her husband, Jack, and her 17-month-old daughter, Harriette (pictured left) and is expecting her second baby in March. Here, she explains her top tips for cutting down the cost with a new arrival.

“Baby brain is not a myth, so save time and money by online shopping as there’s nothing worse than driving to the shops and ending up buying 10 things you don’t need and forgetting what you initially wanted.

“Plan meals and bulk-cook – it will save you a fortune when your baby starts eating food.

“Services such as Amazon are a new parent’s dream as you can shop online at 4am when up with the baby, and it has a discount scheme for families.

“We used reusable wipes which are a fantastic way to say money and also be environmentally responsible – I highly recommend Cheekywipes, these are fantastic.

“If you can, make the most of asking friends and family for free childcare and if you have any big trips coming up, make sure you are strategic with when you book as children usually fly free under the age of two.”

Rebecca Goodman writes for websites and publications including This is Money, MailOnline,The Sun and LoveMONEY.com

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