Money Management

It’s easy to get more time to do your taxes. Just be sure you know all the important rules and procedures. Keep reading to find out what you need to know. [[{“value”:”

Tax Day in 2024 is April 15, which is rapidly approaching. And while millions of Americans have already filed their returns, received tax refunds (or paid what they owe), and moved on, there are millions of others who have not. Some are still trying to track down various tax documents. Some are trying to find receipts to back up their deductions. Others may simply not have had time to sit down and get it done.

Whatever the reason, 10% to 15% of households file a tax extension in the typical year, according to IRS data. And the good news is that doing so is a relatively quick and painless process.

Before you file a tax extension, however, there are a few things you need to know. Here’s a quick rundown of the extension process, what a tax extension does (and does not do), and the other important things you should keep in mind.

How to file a tax extension

As mentioned, filing a tax extension is a quick and easy process. To file an extension, you simply submit Form 4868 to the IRS, which is a (less than) one-page form. You fill out your name and identifying information, estimate how much you owe the IRS, and answer a couple of quick questions.

The form can be mailed in, or you can use IRS Free File to submit a tax extension electronically. Most tax software providers (like TurboTax) allow you to quickly submit your extension request for free as well.

Once you’ve submitted your extension request, it is granted automatically. In fact, the form you use is called the “Application for Automatic Extension of Time to File U.S. Individual Income Tax Return.”

What a tax extension does — and what it doesn’t do

Here’s the most important thing to know (and the most common misconception) about tax extensions: A tax extension gives you an additional six months to file your tax return. It does not give you any additional time to pay what you owe.

So, this means that your 2023 tax return will be due on Oct. 15, 2024, if you file an extension before the standard tax deadline. But any money you owe the IRS will be due along with your extension or must be paid before April 15. It’s still important to budget for your taxes as if you were filing in April.

Obviously, if you have not yet completed your tax return, you probably don’t know the exact amount of money you owe the IRS. But it’s important to use your best estimate. Even if you don’t have enough money in savings to pay the full amount, it’s a good idea to pay what you can. Any unpaid balance (intentional or not) will accumulate interest and penalties starting April 15.

Of course, if you anticipate a refund, this doesn’t apply to you. The IRS is happy to let you wait to claim it. But if you owe the IRS money, don’t make the mistake of simply sending in your extension form and not giving it another thought until October.

What about your state return?

If you don’t anticipate owing the state money, your federal extension is sufficient. But if you do owe your state money (or expect that you will), you’ll need to file a separate state tax extension form in most states. In some cases, simply paying the estimated amount you owe by check or online serves as the extension, meaning that no additional form is needed.

The best course of action is to check your state’s department of revenue for the specifics, or your tax prep software can provide guidance when you apply for your federal extension.

The bottom line

If you ask for a tax extension, it’s automatically granted, but it needs to be filed, and any estimated balance must be paid, by the standard April 15 tax deadline. With Tax Day rapidly approaching, act now if you need more time.

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There are several perks to owning multiple credit cards. Here’s how to decide if you should add another to your wallet. [[{“value”:”

Thirty percent of Americans have just one credit card, according to The Motley Fool Ascent’s research. Many feel that’s all they need. It enables them to build their credit history, pay for purchases online, and earn rewards.

But there can be advantages to having multiple cards in your name. Below, we’ll look at some of the most important considerations to help you decide what’s right for you.

Identity theft

Many credit card users experience fraud at least once in their lives. Often, you’re not at risk of owing the card issuer for a thief’s purchases as long as you notify it of the situation promptly. But the company will probably close your card and reissue you a new one to prevent further theft.

This could be problematic if you don’t have another credit card to use in the interim. You’ll either have to fall back on cash or a debit card, and not everyone has this on hand. You also won’t be able to earn any rewards on purchases while you’re waiting for your new card to arrive.

In this case, having a backup credit card is helpful. You can have a primary card you use for most purchases and a backup card you rely upon if your primary card becomes lost or stolen.

Creditworthiness

How you handle borrowed money affects your credit score, and a high credit score is key to securing affordable interest rates on loans. Several factors influence your score, including your credit utilization ratio.

This is the ratio between the amount of credit you have available to you and the amount you use each month. For example, if you have a $1,000 balance on a card with a $5,000 limit, your credit utilization ratio is 20%. Ideally, you want this number under 30% to keep your credit score high.

It’s not impossible to do this with a single credit card. You could limit how much you charge to the card or pay your bill off twice per month. Credit card issuers only report your balance to the credit bureaus once per billing cycle, so this will make it appear as though you spent less than you did, reducing your credit utilization ratio.

But you can always just open another card account, too. This will give you access to an additional line of credit, which reduces your credit utilization ratio. You don’t have to use that credit if you don’t want to. Just having it on your credit report boosts your score.

Earning rewards

Every rewards credit card has its own rewards formula. Some pay a flat rate, often 1% back, on all purchases. Others have bonus categories that either go year-round or rotate quarterly.

You want a primary credit card that aligns well with your spending habits so you can earn the most in rewards. For example, if you use your credit card most often for gas and groceries, you might want a cash back card that offers bonus rewards on these purchases.

But it might be possible to earn rewards more quickly if you have several cards that you can use strategically. Perhaps you use your gas and grocery card primarily, but you have another card that offers bonus rewards on dining out that you use at restaurants.

If you prefer to keep things simple, there’s nothing wrong with sticking to a single card as long as you have a backup plan for what you’ll do if you lose access to that card. Keep some cash with you or have a debit card handy so you still have a way to make purchases in a pinch.

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This writer maintains a separate savings account for emergency home repairs. Read on to see why you may want to do the same. [[{“value”:”

When my husband and I bought our new construction home about 15 years ago, we paid more for it than what we would’ve paid for a similar home that was already lived in. Of course, we made sure to buy a home that fit into our budget. And since mortgage rates were pretty favorable at the time, we were confident that we weren’t getting in over our heads.

Even though we paid a bit extra for our home and wound up with pretty large mortgage payments, we figured that on the flip side, our home repair costs would be pretty minimal for the first decade of living in our home at least. Well, we were wrong. And we’ve adjusted our savings habits because of that.

When the repairs just keep on coming

One thing my husband and I have learned during buying and residing in our home is that when it comes to houses, they just don’t make ’em like they used to.

Several components of our home turned out to be builder-grade. That might sound like a good thing, but it’s basically another way of saying: “Let’s take the cheapest possible water heater/furnace/household system and use it for this build to save ourselves money, even though it will result in the homeowners having to replace it in short order.”

Don’t mind the bitterness. It comes out every so often.

So yeah, to make a long story short, my husband and I started to face costly repairs about six years into living in our home — just at the time when some of our appliances and fixtures conveniently came off of warranty. That served as a wakeup call. So we began putting money into a home repair emergency fund — one we kept separate from our regular emergency fund.

The way we see it, the purpose of our primary emergency fund is to replace our income in the event of a job loss. But our home repair emergency fund isn’t really an emergency fund so much as a “we’re going to need this money at some point so we’d better save it” sort of fund.

And it’s a good thing we made an effort to build those savings, because in the past five years, we’ve had to replace two air conditioning systems, two heating systems, and a water heater. Since those things are all now pretty new and under warranty, we’re not worried about them going out anytime soon. But plenty of other things have the potential to go wrong with our home.

At this point, my husband and I budget for a major home repair every other year. And what we do is to put a certain sum of money into our home repair emergency fund so that when those repairs come up, we have the cash.

It’s best to anticipate major repairs

If you’re buying a home, it’s natural to hope for the best when it comes to repairs. But here’s a news flash. Even if your home undergoes a thorough inspection before you close on it, you might still end up having to shell out thousands of dollars within the first few years of living there.

And if you’re buying a home that’s on the older side, your chances of near-term repairs may be even higher. After all, if we faced repairs just years after moving into a home that was never lived in before, imagine what repairs you might face if you bought a home that’s 80 years old. Then again, some 80-year-old homes may be in much better condition than my 15-year-old home, so there’s that.

It can be tricky to figure out how much money to sock away for major home repairs. So one thing you may want to do is make a list of your home’s major components and research the cost of replacing them.

For example, Angi reports that the average cost to replace an HVAC system is $7,500, with the most typical range for this project falling between $5,000 and $12,500. If your HVAC system is at an age where a replacement is likely in the next year or two, you may want to aim to save $7,500 so you’ve covered for that expense.

All told, repairs are inevitable when you own a home. But planning for major ones doesn’t make you a pessimist. It makes you a realist — and one who just might manage to steer clear of debt by having enough money in your savings account.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
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Costco is known for its hot dog and soda combo. Read on to see what financial impact that offering has on the business. [[{“value”:”

If you’re a long-time Costco member, you may have noticed that the price of many of the store’s items has gone up in recent years. We can thank inflation for that.

Although Costco has tried to keep its prices at a reasonable level to offer great value for members, the company isn’t immune to rising costs. So to some degree, it’s had no choice but to raise prices.

But there’s one deal you’ll find at Costco that’s price hasn’t gone up in decades — the famous food court hot dog and soda combo. Since 1985, Costco has been offering up a giant hot dog with all of the fixings you can pile on plus a large soda for the almost unbelievably low price of $1.50.

For context, based on inflation, that combo should cost more like $4.50 at present. But Costco has intentionally maintained that super-low price for one big reason.

It’s all about customer loyalty

There’s a reason Costco has kept the price of its hot dog and soda combo intact for roughly 40 years. The company is willing to forgo profits and even lose some money selling the combo at that price to offer great value to customers and retain memberships.

Last year, Costco sold more than 130 million hot dog and soda combos, totaling about $195 million of revenue for the company. But all told, it didn’t profit from those combos.

That’s okay, though. See, the reason Costco is able to take a loss on its hot dog and soda combo, and the reason the chain is able to offer such competitive prices in general, is that it generates a ton of revenue from membership fees.

During its last fiscal quarter, Costco reported membership fee income of $1.11 billion, up $84 million or 8.2% year over year. Given that, losing some money on hot dogs isn’t such a big deal.

Should you join Costco?

A basic Costco membership costs $60 a year, while an Executive membership costs $120. With the Executive membership, you get 2% cash back on your Costco purchases.

One thing it’s important to realize is that the amount of money you spend on a membership might pale in comparison with the savings you’re able to reap in the course of a year by purchasing groceries and other household essentials at Costco.

In fact, let’s assume you start off with a basic membership that costs you $5 a month (you pay annually, but $60 divided by 12 is $5 on a monthly basis). You might save yourself $5 on a single purchase at Costco compared to the cost of buying it at a regular grocery store.

Say your family eats pancakes often and enjoys them with maple syrup. A 33.8-ounce jar of maple syrup at Costco costs $14.99 based on the online price, and in-store prices are generally cheaper. The same quantity of syrup at a regular supermarket might cost you more like $27. So here, you’re saving $12, or the equivalent of over two months of your membership fee, by purchasing just maple syrup at Costco.

Now, multiply that savings by the many items you might buy in bulk. The number could be huge.

And that’s the value of joining Costco. You shell out some money for a membership, but Costco will most likely make it up to you in the form of freeing up more money to put in your investment or savings account. So it pays to consider joining if you’ve been on the fence. At the very least, you know you can snag an ultra-cheap lunch in the course of doing your shopping.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Maurie Backman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale. The Motley Fool has a disclosure policy.

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Financial wellness programs could set your employees on a solid path. But read on to see if they’re worth investing in. [[{“value”:”

The financial wellbeing of your employees is something you may not think about all that often. But you should.

A 2023 survey by SecureSave found that employers lose an astounding $4.7 billion per week due to diminished employee productivity resulting from financial worries and stress. So it actually is in your best interest as a small business owner to do what you can to help your employees feel more financially secure.

Only 42% of employees rate their financial wellness as good or excellent, according to a 2023 report by Bank of America. That’s the lowest level since 2010.

What’s more, 96% of employers feel somewhat or extremely responsible for their employees’ financial wellness. Yet only 40% offer some type of financial wellness program.

If you’re wondering whether it pays to spend some of your limited resources on a financial wellness program, the quick answer is “maybe.” It depends on the salaries you pay and the general financial state of your employees.

A benefit some workers can enjoy more so than others

Financial wellness programs can take different forms. Some tend to focus on investing for milestones like retirement. Others can focus on financial basics like budgeting and goal-setting.

If you pay the majority of the people you employ a nice wage, then they may be able to benefit nicely from these programs. For example, let’s say you pay your workers an average annual salary of $80,000. Perhaps many people earning somewhere in that vicinity have the ability to save $5,000 to $10,000 a year or so for retirement or other goals. So it might help them to have tips on how to invest and where to invest.

On the other hand, let’s say the average worker at your company earns $35,000. Chances are, the typical person in that boat doesn’t have disposable income to invest or put toward future goals. So spending your resources on financial wellness programs may not be worth it, because it may not offer much of a benefit.

A potentially better way to spend your money

Financial wellness programs could do a lot of good for your employees. But before you sink money into one, think about what your employees need the most.

Some better uses of your resources may be to:

Raise wagesOffer a retirement plan matchOffer emergency savings accountsOffer a superior health insurance plan, or one that’s more subsidized

Plus, if you’re not sure how much your employees will benefit from financial wellness programs, just ask them. Send an anonymous survey asking them if they feel they’d want something along those lines. And to up the ante, ask what programs they’d prefer if financial wellness initiatives aren’t really of interest.

It’s a good thing to be concerned about your employees’ financial well-being. But before you commit to a wellness program, make sure it’s really a good use of your money and effort. You may decide that you’re better off focusing on other benefits or initiatives that could have more of a positive impact on your staff on a whole.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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