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Money Management

How to Reinvent Your Life Living Overseas

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 Discover the number one thing you must do before you start a new life abroad. Sabrina Bracher / Shutterstock.com

Mark Twain summed up behavior like this: “The cat, having sat upon a hot stove lid, will not sit upon a hot stove lid again,” Twain observed. “But he won’t sit upon a cold stove lid, either.” The cat is reacting with his gut. You and I might think gut decisions, coming from instinct and emotions, are sometimes ill-advised. We might think we’re better off applying reason, analysis, and logic.

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4 Ways to Lower Your California Tax Bill

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California state income taxes don’t follow all the same rules as the IRS. See how to save on income taxes in the Golden State. [[{“value”:”

Image source: Getty Images

If you thought federal income taxes were complicated, wait till you see California. The Golden State is known for being a high-tax state with a progressive tax structure — which means the more you earn, the more you pay. The top California state income tax bracket for 2023 is 12.3%. But you won’t have to pay that percentage unless your taxable income is higher than $698,271 for single filers.

Most California taxpayers have to pay a lot less. For example, let’s say that you’re a single person in California who earned the U.S. median household income of $74,580, and took California’s standard deduction of $5,363 with no other deductions. Your taxable income would be $69,217 — and you’d owe $3,090 of California state income tax, or about 4.1% of your total income.

Is it worth paying 4.1% of your income to live in California? If you’d like to cut your California tax bill, there are a few state-specific tax laws, deductions, and adjustments to know about. California does not offer all of the same tax breaks that you can get from the federal government — but there are a few items where Californians can get extra state-level tax advantages.

Let’s look at a few strategies to lower your California tax bill.

1. Traditional IRA contributions

The first and most important deduction that most Californians should try to take — which is the same for your federal tax return as it is for your California state income taxes — is contributing to a tax-deductible traditional IRA. If you qualify for federal tax deduction by putting money into an IRA, this is an easy way to get a California state tax deduction, too.

Keep in mind that the federal government has some income limits for who can get deductions for a traditional IRA, based on whether or not you or your spouse are covered by a retirement plan at work. If you qualify for tax-deductible contributions to an IRA, this deduction will be reflected in your federal adjusted gross income, which you will report on your California state tax return. There’s nothing “extra” to do to claim this IRA deduction for your California taxes; if you qualify for it at the federal level, you’ll get it at the state level, too.

2. Home mortgage interest on a million-dollar home loan

On federal income tax returns, the IRS will only let people deduct home mortgage interest on up to $750,000 of “acquisition debt.” California allows home mortgage interest deductions for mortgages that are larger than this federal limit.

3. Losses for personal casualty and theft

If you’ve had a house fire, experienced damage from a natural disaster, or suffered lost property due to theft, California will let you deduct those losses on your state income taxes. This is a more generous policy than the federal government, which only allows tax breaks for losses suffered in federally declared disasters.

4. California lottery winnings (no state income tax)

If you win the California lottery, you do not have to count your winnings as part of your taxable income for California state income taxes. However, other state lottery winnings are taxable in California. So if you must win the lottery, try to keep it within California state lines!

Don’t count on some other deductions (HSAs, SALT, 529s)

Other than the traditional IRA deduction, there aren’t a lot of major deductions that most Californians can take that are the same on their federal and state tax returns. Basically, California’s tax code is not as forgiving as the Feds’. Some of the same rules for deductions at the federal level do not apply in California.

Here are a few types of deductions that Californians might love to take on their state income taxes — but can’t.

Health savings account (HSA) contributions

If you put money into a health savings account (HSA), you can get a deduction on your federal income taxes. But California state income taxes don’t let you get this HSA deduction. So that means if you put the maximum amount of $7,750 into your family’s HSA for 2023, your California taxable income would be $7,750 higher than your federal taxable income.

State and local taxes

If you take itemized deductions on your federal tax return, you’re allowed to deduct up to $10,000 of state and local taxes (known as the SALT deduction). This can include some combination of state and local income taxes, property taxes, or sales taxes.

California does not allow any deduction of state and local taxes or property taxes from your state income tax return. Be prepared to adjust your California taxable income accordingly.

529 education savings plan deductions

529 plans are the best way to save for college or other qualified education expenses with tax-advantaged investment growth. Many states that charge income taxes (like my home state of Iowa) offer state income tax deductions for some contributions to 529 accounts.

But California is not one of them. If you’re a California taxpayer who puts money into a California 529 account (or any other state’s 529 plan), you can still get tax-free growth for the investments and tax-free withdrawals for paying for education. But you won’t get a deduction on your California state income taxes.

Bottom line: Use tax software

Don’t count on every federal tax break being available to you on your California state income taxes. The best tax software can help you navigate the ups and downs of filing taxes in California.

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5 Popular Baby Items You Absolutely Don’t Need When Having Your First Baby

By Money Management No Comments

Preparing for your first baby is full of unknowns, like what items to buy. Here are five purchases you can do without. [[{“value”:”

Image source: Getty Images

Let’s be real — babies are expensive. Even with health insurance, delivery alone can set you back thousands of dollars. You might already be looking for ways to cut costs in preparation, like setting up a registry so others can buy the most expensive baby items for you. And while getting free baby stuff can be fun, it can also be a waste if you’re not getting what you truly need.

Of course, the market for baby items is vast and includes just about anything you can think of. So it can be overwhelming at first. But to help you save money in early parenthood, here are five popular baby items you can do without.

1. Bassinet

Bassinets are beds designed for babies. On the low end, a bassinet plus sheets can cost $75 or under. But fancier versions (like the Snoo) can set you back over $1,500.

Real talk: I wish we had listened to people when they told us this was nonessential. Truth is, babies grow super quick — most will outgrow their bassinet within the first four months. So if you’re tight on cash, just skip the bassinet and go straight for the wider sleep space, like a pack and play. Not only will you help your personal finances, but you can save yourself the hassle of figuring out what to do with the bassinet once your baby has outgrown it.

2. Wipe warmer

If you don’t like cold showers, you can imagine why some babies don’t like cold wipes. That’s where the wipe warmer comes in. It’s designed to make changing diapers (especially at night) more enjoyable for your new little bub.

But is it really necessary to warm up wipes for your baby? No, no it’s not. Besides, the wipe warmer doesn’t always eliminate the possibility of using cold wipes. For example, if you need to change diapers outside your home, you’ll have to use a cold wipe. And if your baby is used to warm wipes, guess what — they’re probably not going to be happy about the chill on their rump.

And then there’s the question of safety. Since most wipe warmers use electricity, shocks and fires are always a possibility. Not only that, warmth and moisture can be a breeding ground for bacteria, which can be harmful to your newborn’s delicate skin. All in all, if you’re trying to save money, take the wipe warmer out of the equation.

3. Baby shoes

I get it — baby shoes are absurdly cute. But they’re also impractical. Even the most eager little baby won’t start walking until they’re between 10 and 18 months. When they do start walking, chances are they’ll be walking on something soft, like your carpet, not on rough or muddy ground, which is why we buy shoes in the first place. Plus, as with all baby clothes, they outgrow them too fast to make this really worth your dime.

4. Baby food processor

Baby food processors turn solid foods into baby purees. If you’re the DIY type, you might be tempted to buy this. But, again, if you’re on a budget, I’d leave it off your list for a couple of reasons.

One is that the “puree stage” doesn’t last very long. In fact, some parents skip it all together and go straight to real foods. Another reason is that a baby food processor is almost no different than a basic blender, which you can buy for cheap at Walmart or Costco.

5. Diaper disposal units

Diaper disposal units are basically trash cans for diapers. At first glance, this doesn’t sound like a bad idea. After all, diapers smell, and you might not want to breathe that in every time you open your regular trash can.

But while they might sound convenient, they can also tack on another expense to your monthly budget — trash bags. Refills for diaper disposal units can cost between $15 and $25 for a package of 75 bags. Considering that most units only hold 30 to 50 diapers, you could easily be changing out the bag every two to four days. Chances are you already own a lidded trash can, which is all you really need to keep the smells at bay.

Keep in mind that all babies are different. For example, we didn’t purchase a bottle warmer initially because friends suggested it wasn’t necessary. But our little peanut refused to drink a cold bottle and the warmer was well worth it for us.

My advice is to create a registry on Amazon. You can put questionable items on your registry and Amazon will give you a 15% discount (called the “Completion Discount”) for up to 90 days after your baby’s arrival date If you end up needing items I deem unnecessary, you can buy them for a discount, with a maximum savings of $300 (or $2,000 spent). And if you don’t end up buying those items, good on you — you can put the money you saved in your baby’s savings account or college fund.

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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.John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool has positions in and recommends Amazon, Costco Wholesale, and Walmart. The Motley Fool has a disclosure policy.

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Nearly 70% of Gen Z Freelances or Plans To. Should You?

By Money Management No Comments

Gen Z is leaning into freelance work. With layoffs and threats like AI, Gen Z sees freelancing as a more secure work situation. Here are some interesting stats. [[{“value”:”

Image source: Getty Images

Fiverr, a freelance marketplace, recently conducted a study that examined how Gen Z thinks about work and their careers. The study examined how layoffs, technology, and a need for flexibility impact the generation’s work preferences.

Many Gen Zers are already doing or considering freelance work. We’ll share some interesting stats from the study and discuss the benefits of freelancing so you can decide if this career path is worth exploring.

Over 70% of Gen Z is thinking more about freelancing

Fiverr’s second annual Gen Z report shows the generation is embracing or leaning into freelance work. For the study, more than 10,000 people between the ages of 16 and 26 were surveyed worldwide. Half of the respondents were workers in the U.S.

The study found that over 70% of Gen Z respondents think more about freelancing than last year. The poll also showed that many Gen Zers feel freelancing is more stable than a traditional full-time job. However, like traditional workers, freelancers can lose work with little notice, so it’s always a good idea to have savings stashed away in an emergency fund so you’re financially prepared.

Nearly 36% of respondents feel freelancing is an excellent backup plan if they lose their job due to layoffs or AI technology advancements. The study also found that almost 70% of all Gen Z respondents are freelancing or plan to start freelancing.

Flexibility is key for many Gen Z workers, especially Americans. In fact, 20% of U.S. respondents said they work to live, not live to work. It makes sense why this generation is embracing freelance work: This lifestyle can offer greater freedom and flexibility than a traditional career.

Freelance life can impact your finances

Before jumping into freelance work, consider how your personal finances will change. Some freelancers earn more than they previously did in an employee role. Earning more money could be a win for your bank account balance. You might also find it easier to reach your financial goals faster.

However, there are other financial changes to consider, too. For example, your tax situation will look different if you’re a U.S. freelancer. Employees have their taxes deducted from their paychecks, but freelancers are considered independent contractors or self-employed workers. That means they must save up for and make their tax payments themselves. The IRS requires workers to pay taxes as they earn money. As a self-employed worker, you should make quarterly estimated tax payments. Otherwise, the IRS will charge you penalties.

If you’re considering freelance work, whether part-time or full-time, you should first research how your taxes will change. If you need tax help, contact an accountant.

Should you freelance?

Freelancing could be a good fit if you value flexibility and freedom. But remember that growing any business can take time. If you’re looking to shift into freelance work, consider starting with freelancing part-time while you continue working a full-time job.

This can give you added financial stability as you learn and grow. If you need help determining what freelance work would suit you, give yourself time to experiment and find what work aligns with your interests and skills. Don’t be afraid to try something new.

Learning new skills and picking up freelancing projects could help you transition into a more rewarding career. For additional financial tips, check out our small business resources.

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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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What the Top 1% Looks Like in 16 Places Across the Globe

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 Would reaching the top 1% be easier for you in these countries? alphaspirit.it / Shutterstock.com

Money can’t buy happiness, but it sure makes things easier. Most of us have probably dreamed about being wealthy at one point or another. While some level of wealth and happiness are within reach for many of us, we’re unlikely to end up in the coveted 1%. That 1% figure is easier to reach in some countries than others, though. Knight Frank, a global real estate consulting firm…

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3 Financial Spring Cleaning Moves That Could Save You Hundreds

By Money Management No Comments

Now is a great time to review your finances. Take a look at three moves that can get you started. [[{“value”:”

Image source: Getty Images

Here we are at the official arrival of spring, and that means it’s time to start kicking off your spring cleaning. You probably have closets or garages in need of cleaning out, but don’t forget to give your finances a cleanse, too.

The following three financial spring cleaning moves only take a little time and they could save you hundreds of dollars per year. Add them to your list to see how much they can save you in 2024.

1. Cancel your unused subscriptions

It’s easy to lose track of subscriptions, especially if they renew annually. But there’s no sense in paying for a service you’re not using. You may not be able to get the money you’ve spent so far back, but you can stop yourself from losing any more.

Gather your credit card and bank statements for the past 12 months. Going back this far will help you catch all subscriptions, even ones that don’t renew monthly. Flag every recurring purchase and note what it’s for and how much it costs. Then, decide if it’s worth keeping. If not, log into your online account and cancel your subscription.

Or if that sounds like too much work, you can check out an app like Rocket Money that can help you find and cancel your unused subscriptions with a click. All you have to do is download the app and link your financial accounts. The app then does all the work of tracking down your subscriptions.

2. Review your budget

Now’s a great time to craft a new budget for the rest of the year if your current budget isn’t working for you. The first step is to make a note of all the money you have coming in each month. If your income fluctuates, you can go with an average or you might prefer to plan for a lower monthly income. If you earn more in a certain month, you could always spend the extra money however you see fit.

Then, track your essential expenses, like your rent or mortgage payment, your insurance costs, groceries, utilities, and healthcare. Make sure you earmark money for these items first. Then, think about your long-term savings goals, like retirement or saving up for a down payment on a car. Whenever possible, aim to set some money aside for these goals each month. Finally, you can use the money left over for discretionary purchases, like streaming services or dining out.

Track your spending throughout the month. A budgeting app makes this easy. Then, you can see where your money is going and adjust your spending in each category as time goes on. Check in with yourself every few months to see how you’re doing.

3. Build a debt repayment plan

Those struggling with debt may want to think about creating a debt repayment plan. The right way to approach this depends on the type of debt you have and the amount. The first thing to do is note down:

Who you oweWhat your balance isWhat your monthly payments areWhat your interest rate is.

You may want to keep track of payment due dates as well.

If you have extra cash on hand each month, you could try allotting a portion of this to your debt repayment after you’ve covered your basic living costs. But for most people, extra cash is in short supply.

A side hustle could help you earn more money, and it could even turn into a full-time job in the long run. You could also try refinancing some debts, like a car loan, if you qualify for a lower interest rate than you have currently. This will reduce how much you pay in interest, and it could even lower your monthly payment.

Those with credit card debt could also consider a balance transfer credit card or a personal loan. Balance transfer cards temporarily halt the growth of your balance, but that doesn’t last forever, and there are fees involved. Personal loans give you a predictable monthly payment, but interest rates can still be high.

It’s up to you to decide what approach suits you the best, but keep these suggestions in the back of your mind. And don’t feel like you have to stop here with your financial spring cleaning. If you have any other money-related tasks that you’ve been putting off for a while, carve out some time to take care of them in the next few weeks.

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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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