Financial Tip of the Month
September is the official end of summer and a return to classes for students and teachers.
The third quarter tax payment is due September 15th
It is also estimated tax time again! If you receive income where there is no withholding (eg. Investment earnings, home business) then you are probably familiar with estimated tax payments. The third quarter payment for tax year 2021 is due September 15th
If you plan on using the postal service, it is considered on time if it is postmarked on or before the due date. So, take the checkbook out and pay early or, you can pay online for faster processing.
Have questions? Here’s the scoop from the IRS
Open enrollment for 2022 health benefits begins November 1st
Now is a great time to review your current health plan and medical expenses over the past year to see if your plan best meets your needs. During your review make sure to avoid these four open enrollment mistakes.
And for those who like to get a jump start on the New Year, September is a great month to evaluate end of the year expenses. Make sure your budget includes extra expenditures such as holiday travel and gifts so you don’t have to dip into your savings or emergency fund.
August is usually a time when people enjoy well-deserved vacations and time away from school and work. Many look forward to this month as a time to relax and recharge before heading back to their usual schedules in September.
Taking time off from one’s regular routine is good for physical, mental and emotional health. But in regard to your finances and credit, staying vigilant and informed is crucial throughout the year.
To help you monitor your financial information the 3 credit reporting agencies (Equifax, TransUnion and Experian) are continuing to offer free weekly credit reports through April, 2022.
You can obtain free credit freezes at all 3 reporting agencies. Credit or security freezes prevent new accounts from being opened without your permission. You may also want to add a fraud alert at no charge to your credit account to ensure lenders verify your identity and prevent identity theft.
Knowing that you have taken the necessary precautions to protect your credit can go a long way to having peace of mind with your finances.
Once you’ve checked your credit and made sure that your finances are in order, it’s time to sit back and relax! You’ve got a month of summer left to enjoy and you can do so knowing that you have taken the necessary precautions to protect your credit health.
Consistency is important in all aspects of life and even more so to help meet your personal financial goals. Many of us have big goals; but, often, we do not realize that we achieve those goals by small actions and good habits. Just as compounding can grow your money, consistency, which is the compounding of effort, can help you achieve your personal financial goals.
When we look at others who have achieved something we often ascribe their success to circumstance, luck, or opportunity. The reality is that most success is born from good habits and there is no reason that cannot be you.
Most people start a review of their finances with income and savings, which are important, but not as impactful as you think. Reviewing, analyzing, and critiquing your spending is the part of the financial equation where the big payoff is for a little effort.
To start you on your journey, assess your spending and make decisions about how you spend and why. Remember that small items add up, good habits compound, and consistency will lead you to your goal.
June, the midpoint of the year, is a great month to review your annual spending plan and make adjustments as needed. This will ensure that you have the necessary funds for vacations and other summertime activities.
In addition to your monthly budget items, seasonal expenditures may include summer camp, day care, summer school, family travel, etc. Have you added these costs into your spending plans for the next few months? Now is a good time to do so to make sure these expenses are covered without dipping into your emergency fund or long term savings.
As part of this review, you may want to check your investment statements to make sure your portfolio is in alignment with your financial goals. It is also a good time to meet with your investment advisor or CPA to review your financial investments to see if changes are needed.
If you are retired or close to retirement, it is important to review your income needs and how much will be covered by pensions and Social Security. Having this information available will help inform whether or not additional income needs to be generated from your investments.
Important dates to remember:
- Quarterly estimated tax payments are due by June 15th
- For the Academic year 2020-2021 –FAFSA forms must be submitted by 11:59 p.m. CT on June 30, 2021. Any corrections or updates must be submitted by 11:59 p.m. CT on Sept. 11, 2021.
May is a great month to review your personal finances. This is especially relevant in 2021 because due to IRS changes, the new deadline for submitting your taxes is May 17th
National Financial Literacy was celebrated throughout the month of April and provided many resources and strategies to manage your finances.
Now is the time to apply those financial strategies to your own situation.
May is also a good time to update important information. Have you recently reviewed your designated beneficiary on your life insurance policies and retirement accounts? Not having the person or persons designated whom you currently wish to benefit can prove to be an unfortunate and costly mistake.
Additional information to update in your personal records (for yourself to have handy and your loved ones) are your home and auto insurance policies. Have you purchased a new car, added drivers to your auto policy, moved or received a new Medicare card? These are all changes that require updating your insurance information.
As many people begin tending to their lawns in the spring, it is also a good month to weed out financial documents you no longer need.
If you don’t have a shredder or you have too many financial documents to get rid of yourself the UPS store offers shredding services. You can also check with your local municipality to see when free shredding events are scheduled.
Also, look into removing documents that are stored on your computer, external drives, and other devices.
Lastly, remember to keep your financial information safe from identity theft and fraud with these guidelines from the IRS.
After “spring cleaning” your finances, take time to relax and savor a job well done!
NEWS FLASH: The deadline to file taxes has been extended to May 17th.
“Individual taxpayers can also postpone federal income tax payments for the 2020 tax year due on April 15, 2021, to May 17, 2021, without penalties and interest, regardless of the amount owed. This postponement applies to individual taxpayers, including individuals who pay self-employment tax. Penalties, interest and additions to tax will begin to accrue on any remaining unpaid balances as of May 17, 2021. Individual taxpayers will automatically avoid interest and penalties on the taxes paid by May 17th”.
As you gather tax documents in preparation for filing by the new deadline of May 17th, this is an excellent time to review your spending habits and create a savings plan and emergency fund if you don’t currently have one.
Financial Literacy Month
The month of April was designated Financial Literacy Month by Congress in 2004 to raise public awareness of the importance of financial literacy and maintaining smart money management habits.
During this month, hundreds of organizations across the country—including businesses, financial institutions, schools, libraries, nonprofit groups, government agencies, and the media—come together to stress the importance of financial literacy.
National Financial Literacy month is recognized each year during the month of April. One of the special events promoting financial literacy that will occur this month is Money Smart Week, which begins on April 10th and extends through April 17th.
In order to ensure everyone’s safety during the pandemic, all sessions during Money Smart Week will meet virtually and will focus on individuals and families hit hardest by Covid19.
Another way to celebrate Financial Literacy Month is to take the 30 day challenge offered by Money Management International. They provide 30 days of financial steps that will help to improve your understanding of finances and increase financial literacy for many.
There will be many opportunities to increase your financial knowledge during the month of April as well as throughout the year.
AADMM will continue to provide a Financial Tip each month so stay tuned!
March is often the considered the “crunch time” for tax preparation. This is a time when missing documents and other tax forms should be tracked down in order to give the information to your tax preparer as soon as possible for filing by the April 15th deadline.
If you plan to utilize one of the tax software programs on the market, be sure to review the requirements so that you have what you need when you are ready to file.
This is also a good time to contribute to an IRA for 2020 prior to the deadline of April 15th 2021.
Many Health Care Flexible Spending Accounts have a March deadline for filing claims from the previous year. Make sure you check your records and add up all of your eligible health care expenses for reimbursement. Due to the Covid19 Relief bill signed into law in December 2020, there may be some extensions and other changes. Contact your FSA administrator if you have questions.
Two major tax bills were passed in response to the COVID-19 pandemic, which could have an effect on your 2020 taxes.
Now is also a great time to look forward for 2021. It is never too late to set your financial goals.
Now may also be the time to check your credit scores. Typically you can check reports free of charge once a year, but the big credit bureaus are allowing consumers to check them free weekly, through April. You can check reports free of charge at annualcreditreport.com.
Free Application for Federal Student Aid (FAFSA)
The 2021–22 FAFSA form is here! Some states and schools have limited funds, so don’t delay! To begin your application, select the “START HERE” button on the FAFSA page. Many states have early filing deadlines.
It is also the time to prepare for the upcoming tax season.
You have probably started getting 1099s of various types for financial statements, school tuition, contract work or other income sources, as well as W-2s if you have an employer. If you are an employer, February 1st is the deadline to send out 1099s.
Make sure you look these over and review for any potential discrepancies.
If there are no errors, put them in that folder or envelope you made last month labeled “For TAXES” along with any tax related statements you have received. If something looks odd or incorrect, now is the time to make contact with that institution to get any corrections made. This will be an ongoing process for the next few weeks, so be diligent with your organization.
First Week of February – If you haven’t already, make contact with your CPA/Tax Preparer. Many will have checklists or at minimum, will want to schedule a time to review what they need. They may also have a first come, first serve list, so now is the time to reach out. If you prepare your own taxes, this is still the best time to get things organized.
Second Week of February – If you use a software program, use this time to run any reports and review for accuracy. If you don’t use a financial software system, pull out and review those paper statements and other tax related documents. Make sure you follow up on anything unusual and check to see if there are missing documents. (Many financial institutions issue 1099s electronically. Make sure you check your email and locate these documents which can be printed out or uploaded electronically.)
End of February – Once your tax documents are in order and ready for filing, you can relax and take a breather knowing you are ready to file taxes anytime before the deadline of Thursday, April 15th 2021.
**If you’d like more time to file your taxes, you’ll need to submit Form 4868 (Application for Automatic Extension of Time to File U.S. Individual Income Tax Return) by April 15, 2021, or your particular tax deadline. With a tax extension, you can extend your filing due date by six months, up to October 15.
Let’s start the year organized!
- January 1– First day to fund traditional IRAs, Roth IRAs and SEP IRAs (for self-employed and small business owners) for the current year
- January 15 – 4th quarter estimated taxes are due!
Revisit your budget (spending plan) or create a new one. January is a great month to assess spending and determine if an adjustment will help you meet your financial goals.
Here are some suggestions to get organized.
1. Sort Mail as Soon as it Arrives
- Toss junk mail.
- Shred sensitive documents.
- Separate out bills and keep them all in one place, such as in basket or tray.
- File away any documents that you need to keep.
2. Create A Filing System
- Use a filing cabinet or electronic system. Either is fine as long as you use it and it gives you quick, consistent access to information.
- If using a filing cabinet, consider labeling 4 drawers: Tax and Legal, Medical, Household, Financial
- If using an electronic system, create master folders, similar to the four cabinet drawers with subfolders (for example, under Financial Information, you would have subfolders for each bank, credit card and broker account).
- Shred receipts you do not need, especially those that include a barcode.
- Keep your pay stubs until you receive a W-2. Also keep the last paystub of the year as there could be useful information to prepare your tax return (e.g. donations made or dues paid).
- Keep tax related documents separate, so you have them together at year-end (eg. donation receipts, medical bills, taxes paid, sale of stock. Remember most pharmacies can provide you with a yearly report of the out of pocket costs you paid for your prescriptions, so you don’t need to keep individual receipts).
- Keep business or rental property related documents separate.
3. Create A Checklist of Bills
- Use a calendar or list so you don’t miss a payment. Don’t forget to list the bills that are not monthly, such as quarterly insurance or property taxes.
- Ask your utilities and credit cards to change your billing day to match your preferred payment schedule.
- Consider putting regularly recurring bills (such as cell phone or cable) on auto payment on a credit card or use automatic bill payments with your bank account. Be sure to check that they are paid each month and the amount is as expected. Ask for discounts for auto payment. Some companies give discounts for electronic billing and automatic payments.
The holiday season is in full swing, and we have news that there will soon be an effective vaccine for Covid19. With so much going on in our lives, it is easy to overlook several of the important financial dates for this month, so here’s a reminder.
- December 31– Last day to take required minimum distributions for your IRA, 401(k) and inherited IRAs. One exception: if it’s your first RMD, which must be taken by April 1 following the calendar year during which you turn 70 ½.
- December 31: Deadline to set up most types of retirement accounts so that eligible contributions count toward the current year.
Create a Budget and Track Expenses
December is a good month to review expenses for the year, which can help with planning your budget for 2021. Since 2020 was an unusual year due to the Covid19 pandemic, it will be important to factor its impact on your finances for next year.
For instance, do you plan to budget for a vacation in 2021 or will you wait for a later time? Maybe you found yourself tapping your emergency or savings accounts during this year. If so, it will be important to replace those funds when you are able to do so.
Creating a budget is important in order to maintain overall control of income and expenses. From spreadsheets, paper and pen to mobile apps, there are many ways track spending. Finding the method that works best for you is important to ensure your success and provide you with the peace of mind that comes when your finances are in order.
Everything has changed in 2020 but much remains the same. We still give thanks for family and the friendships we have. And as the year comes towards an end, there are time-sensitive financial decisions and tasks to consider.
Medicare Enrollment Deadlines
The Fall Medicare Open Enrollment lets you make changes to your Medicare coverage. This includes enrolling in Medicare Advantage, switching Medicare Advantage plans, returning to Original Medicare from Medicare Advantage. The main Medicare Open Enrollment Period for both Medicare Advantage and Medicare Part D prescription drug coverage happens annually from October 15 to December 7.
Year End Retirement Planning
Contribute to 401k plans by December 31
Deposits to your 401k plan are due by the end of the year. Typically, 401k contributions are made through payroll deduction. It may take your company a pay period or two to process a change and make the deposit.
Take coronavirus expense withdraws by the end of the year.
Retirement savers can withdraw up to $100,000 from a 401(k) or IRA to pay for coronavirus expenses until Dec. 31, 2020, without having to pay the usual 10% early withdrawal penalty.
Donate your IRA distribution to charity
IRA owners who are age 70 1/2 or older can avoid paying income tax on part or all of their required distribution if they directly transfer an IRA withdrawal to a qualifying charity.
Qualify for the Savers Credit
Low- and moderate-income workers who save for retirement in a 401(k) plan or individual retirement account could qualify for the saver’s credit. This retirement savings contributions credit can be claimed when filing taxes.
More time for IRA contributions
You have until April 15, 2021, to make an IRA contribution that will qualify you for a tax deduction on your 2020 return. You can contribute to an IRA shortly before filing your taxes to get a nearly immediate reduction in your tax bill.
If you have a family member who will be in college for the 2021-22 school year, October 1 st is the start date for submitting the Free Application for Federal Student Aid, or FAFSA. The FAFSA is the key to getting financial aid; every student should file because not all financial aid is based on need.
October is a good time to check and, if needed, adjust your 2020 tax withholding. If you’re not withholding enough, you could face an unexpected tax bill or even an underpayment penalty when you file your return. If you’re withholding too much tax, you may be able to take home a larger paycheck instead of waiting for a refund next year. The IRS has an online Tax Withholding Estimator calculator available on the IRS website.
People enrolled in a Medicare Prescription Drug Plan can benefit from comparing plans during open enrollment which begins October 15th and runs through December 7th. Plans often change premiums, formularies, drug costs, deductibles, and other plan features annually. The plan that was most cost effective for an enrollee in 2020 may not be the best plan for them in 2021.
An important message from the Consumer Financial Protection Bureau (CFPB)
“As a result of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, consumers started to see some financial relief through EIP issued by the Internal Revenue Service (IRS). However, millions of individuals who do not normally file income taxes are entitled to EIP. These individuals have until October 15, 2020 to enter their information in the IRS Non-Filers Tool to receive their payment”.
Finally, as the cooler season approaches and the weather changes, putting together an emergency kit is one way to prepare for storm related outages.
Annual Financial Calendar
Daily money managers are adept at keeping track of clients’ financial obligations using a variety of methods. One such method frequently used to stay organized and make payments on time is a financial calendar. A financial calendar is a simple system for keeping track of financial obligations throughout the year or for a chosen period of time, in much the same way as people remember birthdays, anniversaries, and appointments.
For those who utilize technology, here are some options available:
- Reminders automatically generated using financial software like Quicken or Microsoft Money.
- Spreadsheets that can be sorted by payee, payment due date, or other criteria.
- Reminders created using apps for electronic devices.
- Reminders established with payees. For example, some insurance companies will send emails to policyholders a few weeks before premiums are due.
A Financial calendar does not have to be high-tech to be effective. It can be as simple as a ‘list’ of financial obligations that you review regularly, or a paper calendar with payments due and funds to be received recorded in different ink colors to make them easier to spot.
Financial calendars are also useful for documenting other financial information such as IRA required minimum distribution (RMD) deadline dates. For those living on a fixed income, tracking receipt of dividends and other distributions is useful for creating accurate cash flow projections.
It is important that the system you use is one that you can maintain.
You can create a perfect financial calendar, but you will only be successful if you use it. For those who struggle with keeping track of bills, or lack the time to handle personal financial affairs, you may want to consider hiring a daily money manager to manage your financial calendar. This will ensure that all of your bills are paid on time every month.
AADMM’s Public Awareness Committee has created a Financial Calendar Series. Each month, financial events and reminders will be added. Watch for updates on AADMM’s Facebook page.