Whereas Dave Ramsey’s Baby Steps have often been dissected one at a time, my goal in this post is to give an overview of the steps as a unit and explain why the order is essential.
Hopefully, these steps can help you create a focused life plan for your finances, regardless of your age or financial well being.
First, the Baby Steps:
Dave’s premise with the Baby Steps is that people can accomplish great things IF they can just be focused. When you read over these seven steps, you think, “Yes. I need to be saving. But I also need to be investing for retirement. I should get my house paid off early. But I also need to be getting out of debt and saving for my kid’s college.”
You would readily agree that all of these goals are important for successful financial planning. The problem is that your stress level kicks into overdrive with the prospect of doing them all. You clench your jaw and do what you are capable of doing while feeling anxious about the goals you place on the back burner.
The Baby Steps plan works because when you stay focused on one step at a time, you can knowingly put some important goals on hold without the nagging feeling that you are leaving something undone.
You can also check out my YouTube video where I break down each of Dave’s Baby Steps here:
Why?
Because accomplishing each step puts you in a great position to accomplish the next one.
You begin to feel an empowerment and a sense of control as you get one step behind you and start the next one. You are making progress instead of treading water.
Notice that Steps 3 through 7 are all about using your money to do something positive for you and your family. Of course this money comes from your income, but the problem with most of America is that we are using our income on debt payments.
Because we are paying others instead of ourselves, we need to get rid of our debt (Step 2) in order to free up our income for Steps 3-7.
Ask yourself,
“What if I could use all the money I am currently paying to creditors to start “paying myself”?
For many people this is $1,000 to $3,000 a month.
Baby Step 2 debt snowball is designed to do just that. Step 1 is necessary before Step 2 because you don’t want to start paying off debt without having a small cushion to absorb the little unplanned expenses that will occur during Step 2.
After completing the first two steps, you are out of debt (except for your house) and now have that cash flow you dreamed about: all of the money you used to pay others is at your disposal. The temptation is to start investing for retirement or saving for your kid’s college or pay off your house early.
NOT SO FAST! You will get to those, but doing so prematurely is way too risky.
Stop, take a deep breath and use that cash flow to build up your emergency fund so you will indeed be ready for emergencies. This fund needs to be liquid (in a top savings account or money market account).
If you skipped the step and started any of the ensuing steps, how would you handle emergencies? Pull money from your retirement account? Rob the kid’s college savings? Borrow money against your house? All bad ideas.
Step 3 is therefore always ahead of the following steps
You may be asking,
“Why is retirement ahead of college funding? Wouldn’t a good parent put his children ahead of himself?”
Good question. But what if you end up without sufficient retirement income because you made college funding a higher priority? Who will you be depending on in your later years? Your kids!
The thing about retirement planning is that you only get one shot at it. The years go by and you will someday be retirement age. You don’t have a choice. On the other hand, college funding is full of choices: kids can get scholarship, they can work, they can attend community colleges, they can find work/co-op programs, etc, etc.
Step 4 is therefore ahead of step 5. But notice that Step 4 is 15% of your income. If you have cash flow greater than 15% you can apply that to college funding immediately, and if you have more than enough cash flow to accomplish both steps 4 and 5, you can use all of the extra to pay off your house early (step 6).
Note that Step 6 comes behind retirement and college funding because reversing the order could possibly give you a paid for house at the expense of a dignified retirement or helping your kids through college. Most of us wouldn’t want that.
Not sure where to start investing for retirement? Here are some tips:
Life is now very good! You have no debt, a great emergency fund, and a paid for house. All of the cash flow that used to go toward debt reduction and house payments is now at your disposal.
This, by the way, is the step Mandy and I are on. Being semi-retired, we don’t have a huge income, but it is very sufficient because we also don’t have any debt. We continue to invest every month and we are able to give more than we have ever given before.
Once we got our house paid off, we started to budget “bless” money, which we put into an envelope every month just to have available so we can bless others as we see the needs. We are also able to help our grown daughter and daughter-in-law cash flow their college.
As I said, life is good. Mandy and I are experiencing great financial peace and we are very grateful for Dave Ramsey’s Baby Steps.
I wish the same for you.
This article is a general overview of what Dave Ramsey has to offer and is not intended to replace his course, nor is this sponsored or endorsed by Dave Ramsey or the Lampo Group.
The post Dave Ramsey’s Baby Steps Explained appeared first on Good Financial Cents®.
Your credit report may be a part of your life you rarely think about, but ignoring it could come back to bite you in the end. That’s because the information on your credit report can affect your finances in myriad ways, saving you money or costing you money in the long run. It’s time to pay attention to it.
Believe it or not, but you have three main credit reports from the three credit reporting agencies — Experian, Equifax, and TransUnion. Each report lists an array of information, ranging from details on all your loans and credit card balances to your payment history, liens placed against you, and personal information like your address and place of employment. The information on each of your credit reports is used to come up with your credit score, which is a three-digit manifestation of your overall credit health.
Sign up with AnnualCreditReport.com
Where good or excellent credit can help you qualify for loans with the best rates and terms, poor credit can mean being denied outright or having to pay more interest and higher fees. And that’s why the information on your credit report is so important. Having correct, positive information on your reports will absolutely keep your credit score in the best possible shape, which comes with more financial benefits than many people realize.
If your goal is improving your credit or keeping it in the good or excellent range, you should check your credit reports regularly. But, which credit reports should you check over each year? And how do you access them affordably?
While we recommend AnnualCreditReport.com for consumers who want to see their credit reports from all three credit bureaus for free each year, we’ve compared and contrasted the top credit reports and credit report websites below to help you decide.
The best credit report websites let you see all the important details that are used to help determine your credit score and overall credit health. The following chart highlights the features each website offers and what you can expect when you sign up:
| Company | What They Offer | Free Option | Best Of | Get Started |
 |
Check all three of your credit reports for free once per year | Yes | Checking Credit Reports in One Place | Sign Up |
 |
Check your Experian credit report for free | Yes | Checking Your Experian Credit Report | Sign Up |
 |
Check your Experian credit report for free | Yes | Disputing Inaccuracies | Sign Up |
 |
Check your TransUnion credit report and score online with paid credit monitoring service | No | Checking Your TransUnion Credit Report | Sign Up |
 |
Check your TransUnion credit report for free | Yes | Free Credit Monitoring | Sign Up |
 |
Check your TransUnion credit report and VantageScore® 3.0 by TransUnion for free | Yes | Free Credit Monitoring from American Express | Sign Up |
 |
Paid service that includes credit scores, credit reports, credit and identity monitoring, and more | No | Paid Credit Monitoring | Sign Up |
 |
Check your TransUnion credit report and VantageScore® 3.0 by TransUnion for free | Yes | Preparing to Buy a Home | Sign Up |
The best credit report websites give you an inside look at your credit reports and all the details inside, usually for free. However, some websites on our list also offer paid services that can help you monitor your credit and prevent identity theft over time. Below you’ll find a review of all the highlights of each service, what you can expect, and the downsides of each service you should know about.
AnnualCreditReport.com is the only website authorized by federal law to give you a free look at each of your credit reports once per year. This means you can use this website to see your Experian, Equifax, and TransUnion reports every 12 months. You also don’t have to check all your reports at the same time. Instead, you can stagger them and check different reports every 3-4 months throughout the year.
Experian lets you see a free copy of your Experian credit report for free every 30 days, and you can even sign up for account alerts that notify you of changes to your Experian report. You also get a dark web surveillance report with this free service, and you can use the Experian website to dispute any incorrect or fraudulent information you find. If you’re leaning toward paid credit monitoring in addition to checking your reports, Experian also offers a paid service for $19.99 per month. Once you sign up, you’ll get a credit score and reports from all three bureaus, fraud resolution and up to $1 million in identity theft insurance, identity theft monitoring, dark web surveillance, and more. The paid service also comes with a 30-day free trial.
FreeCreditReport.com is another online company that lets you access your Experian credit report for free. You don’t need a credit card to sign up for a free account, and you can get updates on your report every 30 days when you sign in. FreeCreditReport.com even lets you dispute inaccuracies on your report online and for free, which can help you stop identity theft in its tracks and prevent damage to your credit score.
TransUnion promotes a “free” look at your TransUnion credit report and score, but you only get these perks for free if you sign up for their paid credit monitoring service, which costs $24.99 per month. With their paid service, you’ll also receive reports and updates from all three credit reporting agencies, email alerts that notify you of changes to your reports or credit score, the ability to lock and unlock your TransUnion and Equifax credit reports, up to $1 million in identity theft insurance and more.
Credit Sesame offers a free membership that includes access to your TransUnion credit score, basic credit monitoring, and tools that can help you boost your credit score over time. You can also sign up for personalized alerts that let you know when a change occurs to your score, whether it’s good or bad. Credit Sesame’s free membership even comes with $50,000 in identity theft insurance. If you want to pay a monthly fee, you can also pay for a premium membership that includes unlimited daily credit score updates, a downloadable monthly credit report, Social Security number monitoring, $1 million in identity theft insurance, live dispute resolution and more for $19.95 per month. Credit Sesame also offers two lower-tier credit monitoring plans for $9.95 per month and $15.95 per month.
MyCredit Guide is a free service offered by American Express, although you don’t have to be an American Express customer to sign up. This free account comes with a free VantageScore® 3.0 by TransUnion and a free look at your TransUnion credit report. You can also sign up for alerts that let you know when changes have occurred on your TransUnion report, such as new account openings or address updates.
MyFICO.com doesn’t offer free credit scores or a free look at your credit report, but they do offer three levels of paid credit monitoring that include these features. A basic credit monitoring plan only focuses on your Experian report for $19.95 per month, but you can get three-bureau coverage with an advanced or premier plan for $29.95 per month or $39.95 per month, respectively. MyFICO.com’s middle-tier plan may be the best deal at $29.95 per month based on what you get in return. With this paid service, you’ll receive reports from all three credit bureaus every three months, credit score and report monitoring, $1 million in identity theft insurance, identity restoration, identity monitoring, and more.
RocketHQ is a free service sponsored by Rocket Mortgage and Quicken Loans, which means its main focus is helping consumers improve their credit scores so they can purchase a home. Once you sign up for a free account, you can access your TransUnion credit report and VantageScore® 3.0 by TransUnion. You’ll also get access to free tools and financial education that can help you build a positive credit history that lasts.
A lot of websites promise to let you see your credit reports for free, but some come with fine print and “gotchas” that most people want to avoid. For example, some companies in this niche use your information so they can heavily market you credit cards and other financial products. Others might offer a free look at your credit score but try to sell you on a pricey credit monitoring plan once they have your information. That’s why we took the time to compare each of the credit report websites to see what they offer and what consumers can expect. Here are the main criteria we considered to come up with this list of the best credit report sites of 2020.
While some of the companies that made our ranking only offer credit reports if you pay for credit monitoring, we definitely gave preference to websites that offer some sort of free membership. And really, that’s why AnnualCreditReport.com made the top of our ranking. This website lets you check each of your credit reports once per year for free, so it’s a no-brainer for everyone and even those who pay for credit monitoring each year.
We also looked to see which other perks consumers can qualify for with free credit report memberships or paid plans. We gave preference to free credit report services that offer additional benefits like credit score updates, emails or text alerts, and tools that can help you improve your score over time.
We also made sure to only include credit reports from reputable companies or from credit reporting agencies themselves. There are a ton of third party websites that offer a free credit report each year, but many sell your information to advertisers or bombard you with ads on their own. We vetted companies carefully to ensure your information would be kept safe and only used for solicitation purposes with your consent.
| Company | Best For… |
| AnnualCreditReport.com | Checking Credit Reports in One Place |
| Experian | Checking Your Experian Credit Report |
| FreeCreditReport.com | Disputing Inaccuracies |
| TransUnion | Checking Your TransUnion Credit Report |
| Credit Sesame | Free Credit Monitoring |
| MyCredit Guide | Free Credit Monitoring from American Express |
| MyFICO | Paid Credit Monitoring |
| RocketHQ | Preparing to Buy a Home |
The post The Best Credit Reports to Check and Improve Your Credit Health appeared first on Good Financial Cents®.
Zero alarm clocks. Working from the couch. A full-time yoga pants wardrobe.
Freelancing certainly has its perks. Filing taxes is not one of them.
Whether you’re considering making the big leap into the world of freelancing or you’re already in the deep end, your tax situation doesn’t have to be that complicated — we promise!
Here’s what you need to know to keep Uncle Sam happy as you navigate your entrepreneurial venture.
The advice below will vary if you’ve chosen a business structure like an S-Corp or an LLC. Since sole proprietorships are the default for most freelancers, we’ll focus on what those taxes look like.
First thing’s first: making quarterly payments.
When you earn money as a freelancer, the transaction is direct: You name a price, you perform the service and your client pays you — without withholding any money to cover taxes or benefits.
Of course, the government still wants its cut even if you’re self-employed — which means it’s your responsibility to dole out that portion. A good rule of thumb: Set aside about 30-35% of every paycheck you make to cover your federal taxes.
This will include both federal income tax — which is organized by brackets and will likely run between 10-24%, unless you’re doing exceptionally well — and self-employment tax, an additional tax levied on independent contractors currently totalling 15.3%.
Instead of having these taxes withheld from each paycheck, you’ll ship them off on a quarterly basis using Form 1040-ES. Quarterly tax payments are due in January, April, June and September, and they’re super easy to file online. However, you can also pay by phone or snail mail; the address will vary depending on your location.
Keep in mind that the 30-35% you set aside may not cover state or local taxes, which vary depending on your location. For example, along with its regular state income tax, New Mexico charges small business owners a gross receipts tax for “the privilege of doing business” here — which ranges from 5.125% to 8.6875% depending on your county.
Although often decried among freelancers as punitive, self-employment tax is actually designed to cover independent contractors’ contributions to Social Security and Medicare.
As you may have noticed on your paystubs, however, the percentage withheld for these programs is only 7.65% when you work a traditional job. That’s because your employer is paying the other half.
Independent contractors — so long as they earn more than $400 in freelance income — are required to pay the full 15.3% to cover their full contribution.
Yes, freelancers, it doesn’t just feel like you pay more taxes. You actually do pay more because you don’t have an employer splitting the bill with you. Sorry.
The good news is, this percentage is levied against your net income… which means you calculate it after you take out your deductible expenses. (More on that in a minute!)
Just like a “normal” worker, you’ll still need to file a tax return if you’ve made at least $400 in freelance income. So long as you’ve kept up with your quarterlies, this shouldn’t be too painful — but if you’ve missed payments or neglected the self-employment tax, you may find yourself owing the IRS.
Your April return should report the sum of your earnings, which is used to calculate your tax bracket and total tax burden. Of course, for freelancers, this means you’ll need to be diligent about recording every single penny you earn.
Each client who pays you more than $600 in a year’s time must file a form 1099-MISC in your name, which you’ll receive at tax time in place of a W-2. It lists your earned wages but not any withheld taxes — because, again, as an independent contractor, that’s your responsibility.
Even if you earn less than $600 from a client, that income still counts toward your annual total, which means you need to include it on your return.
By the way, although it’s tempting to under-report your income in an effort to pay less in taxes, there’s good reason not to — namely, hefty penalties. And seriously, do you really want to go through the hassle of an audit? Save yourself time and money in the long term and just cough up what you owe.
Freelancing isn’t exactly renowned for its reliability or, you know, health insurance, so a lot of freelancers work part-time for someone else in addition to their side hustle.
If that’s you, your employer will still need to file a W-2 for you. You’ll receive it sometime in February in anticipation of the big day in April, and you’ll need it to file your return. It displays your earned wages, Social Security contribution, withheld federal income and Medicare taxes, and more.
This will affect your overall tax burden, and may be a good reason to hire professional help.
Now for a tax topic we can all love: deductions!
One cool thing about freelancing: as a small business owner, you’re eligible to make certain business-related deductions, which can lower your overall tax burden and help keep your enterprise cost-effective to run.
The IRS language on deductions is pretty open-ended: “To be deductible, a business expense must be both ordinary and necessary.” So you can make an argument for deducting an array of costs.
Some of the most common deductions for freelancers include the cost of your home office, office supplies and travel expenses related to work. But you can also deduct meals and entertainment — within reason — that are related to client meetings, as well as professional services, like those of an accountant.
Speaking of which…
As soul-sucking as it can be to live in an all-digital world, the internet has made filing taxes a whole lot easier. Even freelancers can take advantage of the sophisticated software from companies like TurboTax or H&R Block, which are both low-cost and easy.
But in some cases, hiring professional help is well worth the money. Such as when…
1. You have a W-2 job (or three) alongside your freelance business.
Because working a traditional job means you’ve already contributed some of what you owe for Social Security and Medicare, it can complicate your self-employment return substantially — and that’s doubly true if you’re holding down several gigs to make ends meet. (Hey, we’ve all been there.)
An accountant can help you work out exactly how much you actually owe, which can end up saving you money, even after you factor in their charges.
2. You’ve elected a more convoluted business structure, such as an LLC with the S-selection.
While most freelancers operate as sole proprietorships, there can be benefits to incorporating a growing freelance business. For instance, by moving to an LLC and taking the S-corporation option, you could avoid paying self-employment tax on a significant portion of your income.
Overall it’s a complicated — though perfectly legal — scheme in which you hire yourself through the business as an employee and pay regular income taxes. It’s known as a “pass-through” taxation structure, and among other paperwork oddities, it means you’ll file a W-2 as both employee and employer.
And there’s even more such paperwork at tax time. A good accountant can make sure you have all your T’s crossed and I’s dotted — and when it comes to the IRS, you want to be as exact as possible.
3. You just don’t want to deal with it.
Many accountants charge a few hundred dollars to make the tax man happy. This is money well spent. For freelancers. For everyone.
Although independent contractor taxes are significantly more complex than for those who work a traditional job, it’s hard to compete with the freedom and flexibility of the freelance lifestyle.
I mean, yoga pants. And *only* yoga pants. Forever. The CPA fees are totally worth it.
Jamie Cattanach’s work has been featured at Fodor’s, Yahoo, SELF, The Huffington Post, The Motley Fool, Roads & Kingdoms and other outlets. Learn more at www.jamiecattanach.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.
Did you start the new decade with a pledge to finally get to grips with investing? With a majority Conservative government in place and Brexit on the horizon, 2020 may be the moment that you finally start a long-term investment plan.
But as soon as you search Google for ‘beginning investing’, you will come across baffling jargon. Terms such as robo-advisers, trackers and SIPPS have nothing to do with robots, fitness or drinking. Even the firm that I work for, and which is the parent company of Moneywise, is an investment platform, which has nothing to do with railway stations.
It is not an easy language to learn. And if you want to invest your money in line with your principles, you will come across an alphabet soup of terminology.
Last year was when everyone finally woke up to the impact of climate change, and I see no reason for this to change in 2020.
The well-documented climate emergency, and scourge of plastic waste highlighted in awareness campaigns and documentary series, such as David Attenborough’s Blue Planet II, have helped to thrust the environmental issue up the political agenda and into the public consciousness.
However, 40% of investors* find the terminology around ethical investing complex – which is likely to be a significant factor as to why only 23% say they invest in ethical funds.
Nevertheless, some investors are flocking to investments that offer not only a sustainable return for investors but, more importantly, a sustainable future for the planet. Even my own children are showing an interest in where their Junior ISAs are invested and how that contributes to saving the planet. Everyone’s idea of ethical investing will be different so you will have to be prepared to do some research.
The Investment Association, which represents the UK funds industry, has designed new industry-wide definitions to clarify the complexities of sustainable and responsible investment.
It is a great start. But it was no easy task getting an entire investment funds industry to agree on a common framework to help navigate the complex world of responsible investment, and many investors will be unable to speak the new common language. It includes phrases like ‘positive tilt’, ‘sustainability themed’, ‘private impact investing’, ‘SDG Funds’ and ‘norms’, which seem to me classic ethical alphabet soup – albeit sustainably sourced.
By contrast, interactive investor has collected 140 ethical investing funds together into a long list and divided them into just three categories to help you get started. We had help from the Moneywise team to do this.
Our categories are called ‘Avoids, Considers, Embraces’ – an approach deliberately designed to be consumer friendly. This is what the terms mean:
The top 10 list of investors’ favourite ethical investments on the interactive investor platform is dominated by the funds in the Embraces category. Some of the investments are sector specific, with clear ethical criteria, including investments in infrastructure, wind, health, solar and clean energy.
The most bought ethical options in 2019 on the interactive investor platform were:
But even with our list, there are lots of questions to ask as we haven’t completely ruled out the complexity or the jargon.
Please get in touch with Moneywise or myself if you have a question about ethical investing. We can guarantee that we won’t call it stupid.
Moira O’Neill is head of personal finance at Moneywise’s parent company interactive investor
Moira.oneill@ii.co.uk
*558 interactive investor website visitors completed the poll from 22-24 August 2019.
Average annual house price growth was 1.9% in January, says Nationwide
UK house prices rose at their fastest rate in 14 months, suggesting that confidence has returned to the market following the General Election in December.
Annual house prices rose by 1.9% in January – up from 1.4% the previous month, according to the latest Nationwide House Price Index.
This follows twelve 12 successive months in which annual price growth has been below 1%.
On a monthly basis, house price growth rose by 0.5% in January, taking the average UK house price to £215,897.
Robert Gardner, Nationwide's chief economist, says: “Indicators of UK economic activity were fairly volatile for much of 2019, but the underlying pace of growth slowed through the year as a result of weaker global growth and an intensification of Brexit uncertainty.
“Recent data continue to paint a mixed picture. Economic growth appeared to grind to a halt as 2019 drew to a close, though business surveys point to a pickup at the start of the new year.
“The underlying pace of housing market activity has remained broadly stable, with the number of mortgages approved for house purchase continuing within the fairly narrow range prevailing over the past two years. Healthy labour market conditions and low borrowing costs appear to be offsetting the drag from the uncertain economic outlook.”
With uncertainty now lifted following the General Election, some analysts believe there will be a ‘Brexit bounce’, with property prices surging.
Samuel Tombs, chief economist at Pantheon Macroeconomics, says: “Indicators of demand at the very start of the home-buying process are red hot.
“We think the pick-up in demand can be sustained this year by the continuation of low mortgage rates and solid wage growth, driving prices up by about 4%.”
However, Howard Archer, chief economic adviser at EY Item Group, remains cautious.
He says: “Certainly, there is compelling evidence that the housing market has had an initial leg-up from increased optimism and reduced uncertainties following the decisive General Election result as well as greater near-term clarity on Brexit with the UK now leaving the EU on 31 January with a deal.
“While we suspect that the housing market may get a further near-term boost from reduced uncertainties, we remain relatively cautious over housing market prospects over 2020 and suspect that the upside will likely be limited.”
A cross-party group of MPs want to change inheritance tax and gift-giving rules
A cross-party group of MPs is calling for a radical shake-up of inheritance tax (IHT), cutting it from 40% to 10%.
They also suggest scrapping the rule that currently allows gifts to be made tax-free so long as the giver lives for seven years after they make the gift.
A report by the All-Party Parliamentary Group (APPG) for Inheritance and Intergenerational Fairness, says IHT is “unpopular” and "ripe for reform”.
Currently, IHT is charged at 40% on estates above £325,000 or £650,000 for married couples or civil partners.
Assets given away seven years before death are also exempt from IHT.
The APPG says that it wants to cut IHT to 10% for estates above £325,000, while those above £2 million would pay 20%.
The seven-year rule would also be replaced with a 10% tax on all lifetime gifts above £30,000 each year.
The report says that small estates would therefore not pay the gift tax, while larger estates would be able to avoid it as donors presently can by making gifts seven years before their death.
John Stevenson MP, chairman of the APPG, says: “The huge complexity around how the tax is levied, and the reliefs available on it, leads to lots of confusion and a strong sense of injustice. The rich get away with not paying and IHT is perceived as an unfair penalty on hard working savers.”
"Our bold proposals for reform seek to address this unfairness by simplifying the system and ensuring that the higher value estates that currently take advantage of so many reliefs and exemptions actually pay some IHT."
A Treasury spokesman says: “IHT makes an important contribution to the public finances. We keep the tax system under constant review and will consider the APPG’s findings.”
IHT is a tax on the estate – property, money and possessions – that is paid when someone dies.
It is payable when the assets of an estate total in excess of £325,000. Any assets above this amount are liable to a tax of 40%.
However, married couples can combine their IHT thresholds, meaning that up to the first £650,000 of their combined estate is IHT-free, as any unused nil-rate band can normally be passed on to the surviving spouse.
There is also an additional threshold called the Residence Nil Rate Band, which is increasing year-on-year. You can use the HMRC calculator to find out how much the additional threshold on your estate might be.
Inheritance tax must be paid by the end of the sixth month after the person dies.
There have been frequent calls for the tax to be overhauled in recent years.
The APPG anticipates the most households will remain unaffected by the changes and that smaller estates will pay nothing.
According to the APPG, fewer than 5% of deaths actually result in payment of IHT.
It says the changes would make the system fairer and help reduce tax avoidance.
However, Rachael Griffin, tax and financial planning expert at Quilter, warns that some people could lose out and that taxpayers will now need to think carefully about gift giving.
She says: “We know that many parents and indeed grandparents are looking to pass on their wealth while they are still alive, be it for school fees or to get on the housing ladder.
“And with the generations of today being the first to be worse of then their parents, taxing the flow of the wealth being passed down might not win the Government many favours.”
Filling up at Asda fuelling stations became cheaper overnight.
Supermarket Asda has slashed the price of unleaded and diesel by up to 3p per litre overnight.
Drivers filling up at any of Asda's 322 petrol stations will pay no more than 120.7p per litre for unleaded and 124.7 p per litre on diesel.
The spread of the coronavirus has caused a sudden fall in demand for oil, according recent figures from the RAC.
While Asda’s petrol price cut will come as welcome news for drivers, other supermarkets have been criticised for only passing on wholesale price cuts to drivers who spend more money in-store.
Luke Bosdet, fuel price spokesperson at the AA says: : “Average UK petrol and diesel pump prices have been at their highest since January since 2014 and, despite wholesale costs declining over the past two to three weeks, they have stayed stubbornly above 128p a litre for petrol and 132.5p for diesel.
“This new price cut is in line with wholesale petrol falling from an average of 39.4p a litre in early January to the 37.0p between Wednesday and Friday last week.
“Sadly, only communities with an Asda fuel presence are likely to enjoy £1.50 being slashed off the cost of a tank of fuel overnight.”
“Instead, two other major supermarkets have gone back down the fuel voucher route, tying savings of 5p a litre to spends of £40-£50.
“Once again, if you’re on a low income and your spending power isn’t up to it, you miss out. Given the time of year with customers trying to pay off Christmas debts and fuel costs falling dramatically, that discrimination is quite simply mean.”
Dave Tyrer, Senior Fuel Buyer at Asda says: “"We’re pleased to be dropping fuel prices for the first time this year.
“January has been a tough month for motorists so we’re glad to be dropping the cost in line with falling wholesale markets.
“We will continue to put the savings straight back into drivers' pockets without any vouchering requirements, meaning all our customers, regardless of their budget, will benefit from a price cut at the pumps.”
The cost of filling up your car can fluctuate over the year. These tips can help you cut the price you pay for fuel.
Shopping around for the best petrol prices will help you cut the cost of your fuelling bill.
Websites like PetrolPrices.com are a quick and easy way compare prices at petrol stations in your local area.
If your cheapest petrol station is quite far away from you then it's worth considering whether driving that distance could end up eating into the money you save at the pump.
MoneySuperMarket has a handy fuel cost calculator which lets you compare how far you should travel for cheaper fuel.
Loyalty card schemes can help you cut the cost of what you pay at the pump.
Supermarkets Morrisons, Sainsburys and Tesco all offer schemes which allow you to earn points while you shop which can be used to pay for fuel.
BP, Shell and Texaco also offer their own loyalty schemes which could help you save on fuel costs once you've collected enough points.
Making adjustments to the way you drive can help reduce the amount of fuel you use.
For example, it's best to avoid heavy acceleration, excessive speeding and harsh braking.
Using the wrong gear and straining your car's engine can also use up more fuel than is necessary.
When you know you have money coming to you, being patient can be difficult. As you visualize all the opportunities for how to use this pending receipt, you start to wonder how you can get it sooner.
When you file your taxes, there’s a tool for getting your refund sooner: It’s called a tax refund advance. It’s effectively a loan against your anticipated refund.
Many companies offer them because they have relatively low risk compared with other loans. The lender sees your anticipated refund as calculated by a tax preparer and knows the government always pays the money it owes.
While these loans offer a way to get what you’re owed sooner, be aware that not all that glitters is gold. These products often come at a cost.
Tax refund advances offer nearly instant access to cash as you wait to receive your tax refund. They’re effectively a short-term loan against your future tax refund, providing liquidity until the IRS decides to issue your return.
After reviewing your tax return and identifying your anticipated refund, a lender will originate a loan that’s usually in line with how much you want to borrow and your expected refund. Then, they’ll extend this credit until the IRS issues your refund. At that time, the lender will claim the amount to satisfy the outstanding loan. The remainder of the refund will be transferred to you.
Some commonly used tax-preparation companies that are offering tax refund advance loans this year include H&R Block, Jackson Hewitt, Liberty Tax and TurboTax.
While the amounts available vary by company, they go as high as $6,400. The lowest available loans are $200. These lower amounts tend not to carry interest charges or fees. They serve to entice you to prepare your taxes with one of these companies.
Some companies offer very small loan amounts before the tax year ends with sufficient documentation from the current year and last to support the need for an early refund advance loan. For example, at Jackson Hewitt, you can receive up to $500 before your W-2 arrives so long as you can provide a valid proof of income, e.g., a pay stub.
Read below for more on the pros and cons of these financial products to weigh whether they make sense for your financial needs.
Here are some advantages of getting a tax refund advance.
If you’re in a cash crunch, having ready access to your money can come in handy. Instead of being forced to wait for three to four weeks to receive your refund through direct deposit or a check in the mail, you can instantly receive money through various payment methods like branded debit cards. The loan is then repaid as your refund comes into your possession.
In this instance, one of these products might make sense. However, be sure to read the fine print to make sure it really is free and also to find out how you receive the funds.
Applying for a refund advance loan doesn’t impact your credit score.
Tax refund advances have several drawbacks. Here are a few to consider.
Some lenders require the funds to be transferred onto branded debit cards, limiting your ability to use the funds in some instances.
Normal debit card transaction fees, e.g., ATM withdrawal fees, still apply as they would for any debit card used at a non-member bank.
For instance, with TurboTax if you apply for a refund advance loan with the loan proceeds placed on a branded debit card for an amount less than your refund, after the refund is processed, the remaining refund goes on to the branded credit card as well. This is something to keep in mind with how your total refund will be affected.
Alternatively, you can often have the loan transferred to your bank account, though this service may come with additional fees.
You’ll typically receive a portion of your owed refund within 24 to 48 hours of applying for a tax refund advance. But the IRS rapidly processes tax returns. It usually remits any qualified refund within a few weeks of filing.
If you have a financial cushion capable of lasting until the refund comes in, borrowing that money makes little sense.
While fees and interest charges may appear small relative to the size of the loan, their true cost can be similar to or exceed credit card financing.
For example, Jackson Hewitt’s Go Big Refund Advance lets you borrow up to $6,400 and charges 2% fees on the amount you borrow. (Jackson Hewitt also offers Early Refund Advance loans of $200 to $500 and No Fee Refund Advance Loans of $200 to $3,200 without fees.)
If you applied for a $2,500 loan under the Go Big Refund Advance program and incurred a 2% fee, you would in effect pay $2,550 back on the loan.
But in effect, these fees all represent the 2% fee and reflect an APR of 29.2%, assuming the average loan period is 25 days.
The interest you’ll often see quoted is assessed on a monthly basis. Interest rates of 3% to 5% are often advertised, but viewed on an annual basis, this translates to a 36% to 60% APR.
While these loans represent useful tools for providing liquidity, they can often come with exorbitant costs. However, not all will cost you. Sometimes, they can actually provide a more expedient way to use the funds — though access is limited because it comes through a debit card.
When you plan for your cash flow needs, you may see a tax refund as a self-induced bonus on your earnings because you receive a decent check from the IRS. However, viewed differently, you’re also shortchanging yourself throughout the year because you effectively provide interest-free financing to the federal government. The money you receive back from the IRS represents money you overpaid during the tax year.
Instead of aiming for a tax refund each year, a better planning method would be to adjust your withholding rate to minimize the amount you pay out of each paycheck. You’ll get those funds you would have otherwise received as a refund in your hands as you get paid.
Riley Adams is a CPA who is originally from New Orleans and works as a senior financial analyst at Google in the San Francisco Bay Area. He also runs the personal finance website Young and the Invested, which is dedicated to helping young professionals explore financial independence and entrepreneurship.
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 Simple Dollar has been recommending personal finance solutions since Trent Hamm founded the site in 2006. But this year, we’re launching annual awards for the best of the best apps, services and resources. After months of research, here are our top picks for the most affordable, trustworthy and innovative options in 2020.
N26’s gorgeous, minimalist app does for mobile banking what Robinhood did for mobile investing — made it fun. The real-time notifications are great, but where N26’s app really shines is the Spaces feature, which lets you create custom sub-accounts for multiple savings goals. Need to save up for a new couch? Create a “new couch” space and instantly transfer funds.
If you have friends, family, co-workers or clients living abroad, TransferWise is the best way to send them money (or receive it), period. And now that TransferWise accounts come with a free debit card, you can load your account up with cash before you travel, instantly convert it to another currency at a low rate, and use the card as seamlessly as if you had a bank account in the country you’re traveling to.
Robinhood’s not the only zero-commission trading platform around anymore, but it’s still the most accessible, practical, and fun. Plus, the research and market data available for $5 a month with Robinhood Gold is far more cost-effective than other subscriptions like Morningstar.
Most budgeting apps offer similar features, but Clarity Money stands out from the crowd thanks to its gorgeous design and AI-powered insights — including the ability to track and manage all of your subscriptions to services like Netflix and Spotify.
Wallit brings the best features of a budgeting app to your entire family, including parental oversight. It makes financial planning with spouses and children easier than ever, and even offers spending and saving rewards.
Commonwealth Financial has ranked number one in JD Power’s annual customer satisfaction survey for a stunning six years in a row — and last year, it wasn’t even close. Commonwealth is registered in all 50 states, and is often named one of the best places to work at its headquarters in Boston and San Diego.
Thanks to the ubiquity of Wi-Fi, there’s no need to pay $100 for a cell phone plan anymore. Republic Wireless’s plans start as low as $15 for unlimited talk and text, and $5 per gigabyte of 4G LTE data, so you’ll never pay for data you don’t use. Plus, Republic promises to “never sell, rent, or lease your personal data to third party.”
EveryPlate’s affordable meal kits are only $4.99 per serving, with nine healthy options to choose from every week and a flat shipping rate. That’s more cost-effective than Blue Apron, HelloFresh or Sun Basket, and far less expensive than going out to eat. Recipes are deliberately kept simple, so you don’t spend more than 30 minutes cooking or prepping food, and since it’s delivered right to your door, there’s no need for last-minute grocery runs.
Other streaming services like Netflix might have more content, but you can’t beat the quality of Disney’s entire backlog — including Pixar, Marvel, Star Wars and National Geographic — for just $6.99 per month. The first season of The Mandalorian is worth that much alone, not to mention dozens of new shows and movies every month.
At just $30 per month, Sling’s two basic plans for cord-cutters are the best values you’ll find for live TV, with more than 30 channels each. Many of the most popular networks are available, from ESPN and the NFL Network to CNN, TBS and Lifetime. If you can’t choose between the basic orange and blue plans, you can get all of Sling’s channels for $45 a month (still cheaper than YouTube TV or Hulu + Live TV).
At FinCon, the conference “where money and media meet,” personal finance thought leaders come together to share their expertise on banking, investing and more. Can’t make it in person? Try the virtual pass.
The FPA NorCal Conference is an annual educational and networking event for financial planners and advisors. Don’t let the regional name fool you — it’s planned by Bay Area CFPs, but attended by financial planners from all over the country. Session topics range from investing to disaster preparedness, led by CEOs, economists and other experts.
Presented by the nonprofit Institute for Financial Literacy, the Annual Conference on Financial Education (ACFE) is an internationally attended conference covering the latest financial education strategies and techniques, from K-12 to college and professional development courses for working adults.
Ellie Kay and Bethany Bayless co-host this short-form, weekly podcast from Ellie’s kitchen table in Southern California. Each episode, they invite a financial expert over for coffee and an informal discussion about personal finance strategies for everyday people. The podcast is also a production of the nonprofit Heroes at Home, which provides financial education to military families in the United States and abroad. Follow the Money Millhouse on Facebook.
Los Angeles-based financial analyst Chris Browning is the host of Popcorn Finance, another shortform podcast that “discusses finance in about the time it takes to make a bag of popcorn.” Browning has won numerous awards and taken the show all over the country to interview thought leaders in every field. Follow the podcast on Twitter and check out the Tiny Living Series.
The award-winning Fairer Cents podcast is co-hosted by Kara Perez and Tanja Hester, and has been featured on ABC Nightline, Forbes, and elsewhere. Perez and Hester specifically focus on diverse and marginalized communities and how they can navigate the industry’s entrenched patriarchy. It’s not just one of the best finance podcasts — it’s one of the best podcasts, period. Follow them on Twitter.
Financial reporter Farnoosh Torabi’s 2008 book So Money led to regular appearances on Good Morning America and Today. Now she hosts a fascinating podcast with guests ranging from Margaret Cho to Tim Gunn. Torabi’s personal story is inspiring and her enthusiasm is contagious. Follow her on Twitter.
After losing his job during the 2008 financial crisis, Pat Flynn founded an online community called “Smart Passive Income,” dedicated to helping others become “online entrepreneurs.” Today there’s an entire network of SPI podcasts, but we recommend starting with the original, Flynn’s weekly insights and sit-downs with influential experts. Follow Flynn on Twitter.
As CNBC’s senior personal finance correspondent, Epperson provides crucial insights every week with her reporting and regular appearances on Today and NBC Nightly News, with an emphasis on helping everyone — regardless of income — improve their financial wellness. Follow her on Twitter.
Konish is a personal finance reporter at CNBC who excels at explaining the financial implications of everything from business to politics. Her well-curated Twitter account is a great way to stay up-to-date on the news, financial and otherwise. She’s been featured on CNBC, USA Today, Yahoo Finance, NBC News, and elsewhere. Follow her on Twitter.
Over at the New York Times, Lieber’s Your Money column is worth the price of subscription alone, and his deep dives into everything from banking scandals to paying for college have a real-world impact. Prior to the NYT, Lieber reported for the Wall Street Journal and is the author of The Opposite of Spoiled. Follow him on Twitter.
As a reporter for WealthManagement.com, Martin delivers breaking news and fascinating insights for financial advisors and wealth managers who need to keep their fingers on the pulse of the banking, investing, and business worlds. She’s also written for Forbes, Financial Advisor magazine, The Cranford Chronicle and NJ.com. Follow her on Twitter.
In her reportage at Forbes, Smith is really good at combining topical, breaking-news content with resources guides to help everyday consumers respond to changes — like this breakdown of FICO’s new scoring method. Her reportage and expertise have been featured at Bankrate, The Penny Hoarder, CNBC, Yahoo! Finance, CBS News Radio and elsewhere. Follow her on Twitter.
To determine the winners of the first annual The Simple Dollar Awards, our editorial team researched every major brand and option in every category and ranked them based on the following traits:
For more details on The Simple Dollar Awards, contact Hayley Armstrong at hayley@thesimpledollar.com.
The post The Simple Dollar Awards of 2020 appeared first on The Simple Dollar.
