Money Management

Being credit card-dependent isn’t great. Read on for tips to get on more solid financial footing. [[{“value”:”

The past few years have been challenging for U.S. consumers. First, there was a massive unemployment crisis fueled by the pandemic. Following that, there was a period of rampant inflation that still hasn’t quite settled down.

All told, many consumers have been forced to rely on their credit cards to cover their expenses. And middle earners are no exception.

In a recent Primerica survey of middle-income households (defined as having incomes of $30,000 to $130,000), 28% of respondents said they’ve been using their credit cards more. But being dependent on credit cards to pay your bills is not a good financial situation to be in at all.

Carrying even a modest credit card balance long enough could cost you a lot of money in interest. And too much credit card debt could also damage your credit score, making it harder to borrow money when you need to. So if you’ve become credit card-dependent, it pays to take these steps to break that cycle.

1. Reduce your spending to build up savings

A big reason consumers are often forced to reach for a credit card is that they don’t have money in a savings account to tap for unplanned larger expenses. If that sounds like you, it’s important to establish some type of financial cushion — even if it’s just $500 or so in the bank to start.

Take a look at your spending and see where there’s room to cut back. You don’t have to commit to reduced spending forever. But you should try to reduce or eliminate non-essential expenses for now until you’re sitting on more of an emergency fund.

Keep in mind that there may be some compromises you can make to reduce the sting of having to slash expenses. If skipping social plans to free up cash makes you unhappy, instead of sentencing yourself to weekends stuck at home by yourself, get creative and invite friends to join you for no-cost activities, like outings to local parks.

2. Join the gig economy

Getting a second job is another great way to boost your income, build up savings, and become less reliant on credit cards. And as is the case with cutting your spending, working a side gig isn’t something you have to commit to forever. You just need to do it for a long enough period to improve your financial situation.

Plus, a lot of the gigs you’ll find available allow you to work at your own pace and on your own schedule. So if you can’t commit to preset hours, or if you don’t want to, don’t. Instead, do something like drive for a ride-hailing service, since that allows you to pick up passengers at times that work for you.

It’s not all that shocking to learn that a large chunk of middle earners are falling back on credit cards. But that’s also not a great thing. So if you’ve gotten into the habit of charging more and more bills on your credit cards and carrying those balances forward, try to break that cycle as soon as possible — before the damage really becomes severe.

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Want to buy an electric vehicle? EV tax credits can save you thousands of dollars. Here’s how to do your research, know the rules, and avoid tax bills. [[{“value”:”

The past few years have been painful for anyone trying to buy a car. We’ve seen nationwide car shortages during the global supply chain crisis, skyrocketing costs of car insurance, and higher APRs on auto loans due to the Fed raising interest rates.

Want to reduce your costs of car ownership? Buying an electric vehicle (and earning EV tax credits) could be good for your personal finances.

Let’s look at a few tips and insights on how to maximize your EV tax credits when buying a car in 2024.

1. Start with the IRS website — know the rules of EV tax credits

In truth, there are no clever “hacks” or shortcuts for how to get EV tax credits. The best way is to just follow the rules. Not every electric vehicle, and not every car buyer, can get EV tax credits. That’s because the IRS has set income limits on who can qualify.

If your income is too high, you can’t get the EV tax credit. Want to buy a new electric vehicle? Here is the modified adjusted gross income (AGI) you need to report on your taxes in order to qualify for a new EV tax credit:

Single filers: $150,000 or lessMarried couples filing jointly: $300,000 or less

Want to buy a used EV? Feel free — there are EV tax credits (of up to $4,000) for used cars, too. But keep in mind that for the used EV tax credit, the used car’s sale price must be $25,000 or less. And to get the used EV tax credit, here’s what your modified AGI needs to be:

Single filers: $75,000 or lessMarried filing jointly: $150,000 or less

Before you start shopping for an EV, read the IRS rules on Clean Vehicle Tax Credits (that’s what the IRS calls “EV tax credits”). This will help you avoid unpleasant surprises on next year’s taxes. (If your income ends up being too high, you might have to repay the IRS for your EV tax credit. But the IRS will let you qualify based on your modified AGI from the current year you bought your car, or the previous year, whichever is lower.)

2. Use EV tax credit search tools on FuelEconomy.gov

If you feel confident that your income is at the right level to qualify for EV tax credits, go to FuelEconomy.gov. This site has great search tools and explanations of how the EV tax credits work, and which cars, SUVs, and trucks qualify for specific dollar amounts of tax credits in 2024.

How to search for EV tax credits for new vehicles

Go to this website (it’s part of FuelEconomy.gov): Federal Tax Credits for Plug-in Electric and Fuel Cell Electric Vehicles Purchased in 2023 or AfterUnder the headline “Search for Eligible Vehicles,” click the dropdown menu for “Delivery date.”Choose the dates for 2024.This will show you all vehicles that are eligible for new EV tax credits — including EVs and plug-in hybrid electric vehicles.Use the search tool to modify your choices. For example, you can search by certain car manufacturers (Tesla or Volkswagen) and models of vehicles.

This site is the best way to see quickly, at a glance, which electric vehicles can get the full $7,500 of new EV tax credits, and which ones can get a partial tax credit of $3,750. This will help you shop for your new EV with confidence. Before you go to the car dealership, shop around for quotes from the best car insurance companies, too.

How to search for EV tax credits for used (pre-owned) vehicles

Go to this FuelEconomy.gov website: Federal Tax Credits for Pre-owned Plug-in Electric and Fuel Cell VehiclesGo to the section that says “Filter table by…”Search for the vehicle year(s), make, and/or model of your choice. (To be eligible for the used EV tax credit in 2024, used vehicles must be from model year 2022 or older.)If you set a wide range of model years, you can see a wide selection of used vehicles from all kinds of U.S. and international car makers — including Audi, Ford, Subaru, and Volvo.You can choose to search for all qualifying vehicles, or just EVs, plug-in hybrid electric vehicles (PHEVs), or fuel cell vehicles (FCVs).This page offers a used EV tax credit calculator, where you can see how much tax credit you’d get based on the sale price of your vehicle. The tax credit is 30% of the sale price, up to $4,000 — and only for used EVs priced at $25,000 or less.

3. One quick tip to protect your EV tax credit

Are you a high earner? Don’t lose your EV tax credit by having a too-high AGI. If your 2023 income was over the limit to qualify for EV tax credits, and you expect your 2024 income to be the same or higher, start planning now to increase your tax deductions for 2024.

Put more money into your 401(k), traditional IRA, or health savings account. Make extra contributions to charity if you itemize deductions. These moves won’t increase your EV tax credit, but they will keep you from having to pay that money back when you file taxes.

Bottom line

Uncle Sam is offering thousands of dollars of discounts on a new or used electric vehicle in 2024. Even if the cost of EV car insurance is more than a gas-powered car, these EV tax credits can make your overall cost of car ownership more affordable.

Our best car insurance companies for 2024

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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 positions in and recommends Tesla. The Motley Fool has a disclosure policy.

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Unless you’re expecting a big refund, you may not be looking forward to filling out a tax return. Avoid these six errors and you could avoid an audit. [[{“value”:”

Do you find yourself worrying about being audited each and every tax season? If so, it may ease your mind to know that the IRS audited only 0.38% of all tax returns during the fiscal year 2022. That means that fewer than four out of every 1,000 returns were flagged for a more thorough examination. Fortunately, there are lessons to be learned from those audited tax returns, including which mistakes are most likely to raise red flags. Here are six of them.

1. Fibbing

As a general rule, it’s not a good idea to lie to the IRS. Whether you’re deflating your income to avoid paying taxes or claiming a dependent you don’t have a legal right to claim, you could find yourself in trouble.

Here’s what will get you: Fudging the numbers to avoid paying taxes or to receive a credit you don’t deserve could get you in trouble. Save yourself the worry of an audit by telling the truth.

2. Calling a hobby a business

The tax breaks business owners have access to make it tempting for some folks to claim a hobby as a business. According to H&R Block, the IRS generally considers a hobby a business if you’ve made a profit for three of the past five years. Let’s say build birdhouses or make wedding cakes. If you’re not making a profit, it’s not a business.

Here’s what will get you: Trying to write off the expenses associated with a hobby by labeling them “business expenses.” Separate business expenses from hobby expenses.

3. Personal use of a business vehicle

One tax break for business owners is the ongoing cost of their business vehicle. Let’s say you design and sew cat clothes and deliver them to pet stores in your area. Writing off the expenses associated with those deliveries is acceptable. What’s not acceptable is calling a trip to drop the kids off at volleyball practice a business expense. In other words, keep careful records detailing the mileage driven for business-only trips.

Here’s what will get you: If you plan to claim the use of a vehicle for business purposes, keep a detailed record of mileage, including calendar entries showing where the trip started and where it ended. Also include the purpose of each trip.

4. Donating a large portion of your income

Being generous has all kinds of benefits, including emotional. And when tax time rolls around, being generous also benefits anyone who itemizes their tax returns. However, you should never exaggerate how much you’ve given. If you really do donate 50% of your annual income each year, that’s great! Just make sure you have the receipts to back up your claim.

Here’s what will get you: Claiming to donate a large portion of your income, particularly if your income is not very high, will immediately raise a red flag. You can protect yourself in a tax audit by keeping careful records of your donations.

5. Inflating the cost of your home office

The home office deduction is typically only available to freelancers and independent contractors. If you’re working for a company you don’t own, a home office is not a deduction you can take. It’s not even a deduction you’re eligible to take if you remotely work for another company and run a side gig.

What the IRS wants to see is how much you spend to run your own business. It’s fine to claim the area where your desk, computer, work phone, and other critical supplies are — as long as it’s not used for any other purpose.

Here’s what will get you: Claiming your office is much larger than it is or claiming an area is an “office” when it’s actually used for other purposes. Unless you have the receipts to back it up, claiming you’ve spent more on inventory and supplies can also raise a red flag.

6. Making simple mistakes

Simple mistakes, like math errors, forgetting to sign your tax return, or mixing up Social Security numbers are one of the most common reasons taxpayers are audited. Sure, it’s an easy fix, but if you’re counting on a tax refund hitting your bank account, it will slow the entire process to a crawl.

Here’s what will get you: Rushing through your work without double-checking your math or reviewing each line of the return to ensure you haven’t forgotten anything.

As long as you’re truthful and careful, chances are excellent that an audit is not in your future. Even if you receive a letter from the IRS saying you’re being audited, there’s no reason to panic. Do your best to make any requested changes or to provide the IRS with the information it seeks. And remember, your tax return is only one of the millions the revenue service will process this year. The IRS is not going to lose any sleep over it, so neither should you.

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Not paying your credit card bills on time can have consequences. As of October 2023, more Americans were delinquent on credit card payments. Find out more. [[{“value”:”

A recent FICO report found that more consumers are falling behind on their credit card payments. Not paying your credit card bill on time can result in late fees and lead to you racking up expensive credit card debt — which can be challenging to pay off quickly.

Unfortunately, FICO scoring data shows that over 11% of the U.S. population has missed a credit card payment within the last year. Find out more about how this money mistake could impact your credit score and why paying your credit card bills on time is essential.

Over 18% of consumers had past-due payments last year

FICO, the company behind the most commonly used credit score known as the FICO® Score, regularly releases reports that analyze consumer credit score data.

In a recent report examining October 2023 scoring data, FICO found that many U.S. consumers had past-due payments listed on their credit reports in the last year.

Over 18% of the population had a 30-day or worse past-due payment on one or more credit accounts. Compared to April 2023 data, that’s a 4% increase in missed or late payments. Consumers were behind on various credit accounts, including mortgages, credit cards, and auto loans.

11.2% of consumers were past-due on credit card accounts

FICO’s October 2023 data showed that mortgage and auto loan missed payments increased but remained below pre-pandemic levels. However, missed credit card payments increased and now exceed pre-pandemic levels.

The latest report shows that 11.2% of the population had a 30-day or worse past-due payment on one or more credit card accounts — compared to 10.5% in April 2023. That’s concerning.

Many Americans are likely relying on credit cards to cover some of their expenses now that everyday costs are higher. If you use credit cards, paying at least the minimum amount due by the due date is vital. Otherwise, your credit card issuer will charge late fees.

Plus, you’ll be charged interest when you carry a balance on your credit card account. Credit card interest rates are usually extremely high (20% or higher), so it can quickly get expensive. You should pay the entire monthly statement balance for your credit cards to avoid interest fees.

Paying your entire statement balance is also good practice because it can help you maintain a lower credit utilization ratio. Your credit utilization ratio is how much of your available credit you use, expressed as a percentage. Experts recommend keeping your credit utilization ratio below 30%. Not carrying a balance on your credit cards can help you do this.

Your payment history impacts your credit

Late or missed payments could impact your credit report and credit score. Your payment history makes up 35% of your FICO® Score, so staying on top of your bill payments is crucial. If you can afford to pay your credit card bills but forget due dates, consider enrolling in autopay through your credit card accounts. Doing this can ensure your bills are paid by the due date.

It pays to care about your credit

Don’t ignore your credit. If you have no credit or a poor credit score, it can make your life harder. For example, you may struggle to qualify for an auto loan or mortgage in the future. Reviewing your credit reports can allow you to know where your credit stands.

You can request a free credit report from each credit bureau at AnnualCreditReport.com. Your credit report won’t list your FICO® Score, but some credit card issuers include credit scoring tools within their mobile apps. You can use tools like this to get a free credit score estimate.

If your credit or credit score needs work, making small changes, like paying every bill on time and maintaining a low credit utilization ratio, can help. For additional financial guidance, check out our personal finance 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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Saving a bundle for retirement is a huge accomplishment. Read on for a strategy that can help make your money last. [[{“value”:”

Many people struggle to save money for retirement, period. A 2022 report by the Census Bureau found that 49% of adults aged 55 to 66 had no funds stashed away for retirement as of 2017. And given the financial events that have transpired since — a pandemic-fueled economic crisis and an extended period of rampant inflation — it’s fair to assume that a good number of older Americans who were savings-less a few years ago aren’t in much better shape now.

But what if you’re in the opposite boat? What if you’re nearing retirement with a $1 million IRA or 401(k) balance?

First, give yourself a pat on the back, because reaching that point no doubt meant making your share of sacrifices and investing via a brokerage account shrewdly through the years. But now that you’re sitting on $1 million for retirement, you want to make sure that money lasts.

It’s true that the more savings you have, the greater your chances of not depleting your nest egg in your lifetime. But the risk of running out of funds technically exists even if you have $12 million to your name. So if you don’t want to stress about your savings running out, here are a couple of key strategies to employ.

1. Establish a safe withdrawal rate

When you have a paycheck coming in from a job, you can basically discipline yourself to not spend beyond that paycheck. It’s not as easy to do that with a $1 million nest egg, because instead of having a certain sum being paid to you every month, you’re looking at a large sum that you can technically withdraw from any way you please.

Now clearly, you’re not going to go out and withdraw $500,000 of that in your first year of retirement. That wouldn’t be prudent. But it’s hard to know how much money to withdraw.

As such, one thing you may want to do early on in retirement is meet with a financial advisor and have them help you establish a safe withdrawal rate that’s likely to allow your savings to last. That rate should be based on not just your IRA or 401(k) balance, but your expenses, life expectancy, and investment mix.

As a starting point, it may help you to know that financial experts have long recommended a 4% withdrawal rate. But together with an advisor, you may come to the conclusion that a different rate is more suitable for you. From there, though, sticking to that rate gives you a better chance of not depleting your savings.

2. Generate additional income

Many people associate retirement with not working at all. But while you may be retired from your 9-to-5 job, that doesn’t mean you can’t work in some capacity.

You may decide that finding gig work is a good way to not only generate some extra income for yourself, but also, keep busy. Or, if you start to miss your former career, you may decide to pursue a less stressful version of it.

For example, if you’re a former elementary school teacher, you may no longer have the desire to be in the classroom all day, every day. But you may find that substitute teaching a few times a month is not only enjoyable, but a good way to pad your income. And the more you’re able to earn, the less you have to take out of your savings.

Going into retirement with $1 million is a great situation to be in. And with a few savvy moves, you can do your part to help make that money last as long as you need it to.

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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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