Money Management

Are you self-employed? If so, keep reading to learn about some big deductions you may be eligible to claim on your taxes. [[{“value”:”

Being self-employed has its pros and cons. On the plus side, you can generally set your own hours and maintain a more flexible schedule. On the other hand, as a freelancer, you give up the stability of a steady, guaranteed paycheck. And you also give up workplace benefits like paid time off and subsidized health insurance.

Another perk of being a freelancer, though, is being privy to certain deductions on your taxes that salaried workers can’t take. Mark Steber, Chief Tax Information Officer at Jackson Hewitt Tax Services, says, “There are many benefits that self-employed taxpayers can take that could boost your tax situation.” Here are some deductions you may be eligible to claim when you file your taxes.

1. Office supplies

You may need to stock your office with things like paper, ink for your printer, notepads, and pens. All of these expenses may be deductible on your tax return if they’re used for work purposes.

2. Advertising expenses

Maybe you paid for a print ad in a local newspaper to drum up business. Or maybe you paid for some advertising on social media. Either way, that’s generally considered a business expense, since its purpose is to help you make money.

3. Rented equipment

When you rent equipment to do your job, it’s commonly an expense you can write off. Maybe you’re a self-employed landscaper and you had to rent a backhoe to finish a job at a client’s property. That rental may be something you can deduct.

4. Professional fees

Do you work with an accountant or bookkeeper regularly to keep your records in order? If so, the fees they charge you might serve as a tax deduction.

5. Membership dues

In your line of work, it might help you to join a professional organization. If you’re charged annual membership dues, those may be tax-deductible. The same could hold true for paid online workshops you attend or in-person conferences that charge a fee.

6. License fees

Some freelancers maintain professional licenses. If you’re an IT professional, for example, you may have certain certifications you need to renew yearly. Those license fees can generally be written off for tax purposes.

7. A home office deduction — in some cases

If you primarily work out of your home and you have an area of your home used solely for work purposes, then you may be eligible for a home office deduction. Steber explains that you have two options for taking this deduction.

The simple method has you taking a deduction of $5 per square foot of home office space, up to 300 square feet, for a total deduction of $1,500. You could also total your home expenses and deduct a proportionate amount based on how much space your office takes up relative to your home’s total square footage. So if your home office takes up 10% of your home, and your total home expenses (including things like utilities) come to $16,000, you could deduct $1,600.

Keep detailed tax records either way

Clearly, there are plenty of small business expenses you may be able to write off if you’re self-employed. But Steber warns, “It’s vital for freelancers and self-employed taxpayers to keep detailed records, including receipts, for all the expenses associated with their work.”

Guessing at a tax deduction, whether it’s one of the above examples or something else, is a great way to get your return audited. And that’s probably not something you want.

Plus, if you guess at one of your tax deductions, you might actually sell yourself short. You might think you only spent $80 on office supplies during the year when, in fact, your credit card records show a total of $105. It’s important to be accurate not just for the sake of avoiding an audit, but also, for the sake of getting the maximum tax benefit you’re entitled to.

Alert: highest cash back card we’ve seen now has 0% intro APR until 2025

This credit card is not just good – it’s so exceptional that our experts use it personally. This card features a 0% intro APR for 15 months, a cash back rate of up to 5%, and all somehow for no annual fee!

Click here to read our full review for free and apply in just 2 minutes.

Read our free review

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.

“}]] Read More 

Homeowners insurance won’t always cover you in the event of property damage. Read on to learn more. [[{“value”:”

So far, this winter has been a doozy in my neck of the woods. Not only have we had several snowstorms (albeit fairly minor ones), but we’ve also had several Nor’easters that have brought driving rain and intense winds to the region.

During a recent storm, a portion of a tree from my neighbor’s backyard fell and landed directly on my backyard fence, crushing one of the panels. You’d think that since the damage originated from another property, I wouldn’t be looking at out-of-pocket expenses to get it fixed. But you’d be wrong.

My only option is to file a claim with my own insurance company

One big myth about property damage is that your neighbors are responsible for damage caused by their trees. If you can prove negligence on a neighbor’s part, that may be the case. Otherwise, if it’s a general act of nature, usually, your only option in a situation like mine is to file a claim with your own homeowners insurance policy.

If your insurer then opts to try to recoup money from your neighbor’s homeowners insurance company, so be it. But that’s not up to you, and it may not even impact you. If your property sustains damage and your insurance company approves your claim, it ultimately doesn’t really matter to you which insurer pays. And unfortunately, your premiums might rise going forward by simply filing a claim to begin with, regardless of who pays.

Why I won’t see a dime from my insurer for this incident

The fact that my neighbor’s tree only took out one panel of my fence is a blessing as well as a curse. On the one hand, I’m glad the damage wasn’t so extensive because the repair is fairly simple. Also, while the panel needs to be replaced, it’s intact just enough to keep my backyard secured. That’s important when you have a large dog with impressive jumping abilities and kids who play in the yard alike.

On the other hand, because the damage wasn’t so extreme, the cost of repairing that fence panel is less than my homeowners insurance deductible. It makes no sense to file a claim, since I won’t get paid any money.

Know what your deductible entails

If your home sustains damage, whether in a storm or otherwise, don’t automatically assume you’ll be able to file a claim with your homeowners insurance company. Your deductible might make a claim useless. And the higher your deductible, the less viable a claim for minor or moderate damage might be.

Forbes Advisor says that homeowners deductibles typically range from $250 to $2,500. If you have a $2,500 deductible, you may not end up filing many claims against your policy, whereas with a $250 deductible, you may be more likely to land in a situation where your insurer will pay for a repair once you’ve paid your portion.

Meanwhile, because I’m going to have to foot the bill for my fence repair on my own, I’ve decided to do the work myself — or, more accurately, have my husband take over the work and help as best as I can. For the most part, that will probably mean fetching him and his friends cold drinks while they repair my fence since I’m not particularly handy and would probably hinder the work more than assist.

But either way, if you’re a homeowner, it’s important to know what your insurance deductible amounts to. That way, you’ll know whether it pays to file a claim after a given incident or just deal with the problem yourself.

Our picks for best homeowners insurance companies

There are many homeowners insurance companies to choose from. We’ve researched dozens of options and short-listed our favorites here. Looking for a green build discount or easy bundle policies? Want an easy-to-use interface? Read our free expert review and get a quote today.

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 Fetch. The Motley Fool has a disclosure policy.

“}]] Read More 

Sometimes, a little research on your part could lead to more wealth. Read on to learn more. [[{“value”:”

An estimated 63% of Americans don’t have enough money on hand to cover an unplanned $500 expense, according to recent SecureSave data. If you’re in that boat, your first order of business should be to build yourself some sort of emergency fund.

But let’s say you’re set on emergency savings and have extra cash at your disposal. You may be inclined to keep that cash in the savings account you’ve used for years. But that decision may be costing you.

A little research could go a long way

The interest rates banks pay on savings tend to follow the federal funds rate, which is the rate banks charge each other for short-term (typically overnight) loans. When the federal funds rate rises, banks tend to offer more generous interest rates in savings accounts. When the federal funds rate drops, banks tend to pay less interest to customers.

However, within that setup, there’s a wide range of interest rates you may be privy to as a saver. Banks can ultimately offer whatever interest rates they want. Many will raise rates in conjunction with the federal funds rate to remain competitive. But there’s nothing stopping one bank from paying 4% interest on a savings account while most others are paying 4.5% or more.

That’s why it’s important to shop around for a good interest rate on your savings. A little research might lead you to find that your bank is one of the stingier banks out there, and that could be costing you.

Let’s say you have $10,000 socked away in the bank. If you’re earning 4% on your money, that’s $400 a year (assuming your interest rate stays put for 12 months, which is not guaranteed to happen). If another bank offers 4.5%, you’re shorting yourself $50 a year. Or, to put it another way, choosing a bank with a more competitive interest rate could, in this example, make you $50 richer for essentially no extra work.

You may want to consider a CD

Another option you may want to look at to earn more interest on your money is to open a certificate of deposit (CD) instead of keeping your cash in a savings account. CD rates tend to be higher than savings account rates because with the former, you’re making a commitment to keep your money in the bank for a preset period. And your bank, in turn, has the right to penalize you for an early withdrawal, which is something you won’t find in a savings account.

However, if you’re certain you have a sum of money you won’t need for a period, then a CD could make financial sense. Going back to our example, let’s say you have $10,000 and your savings account is paying 4%, while a 12-month CD is paying 5%. With the latter, you’re earning an extra $100 in interest over a year at a minimum.

Why at a minimum? Remember, the interest rate on your savings account is not guaranteed. But CD rates are. So that 4% rate could drop during the next 12 months, leading to an even wider gap.

Saving money is not an easy thing to do. So the fact that you may be in a position to earn interest on savings means you’ve done a great job of building up some cash reserves. But if you do your research and make savvy choices, you may find that you can earn even more on your money. And that’s unquestionably a good thing.

These savings accounts are FDIC insured and could earn you 11x your bank

Many people are missing out on guaranteed returns as their money languishes in a big bank savings account earning next to no interest. Our picks of the best online savings accounts can earn you 11x the national average savings account rate. Click here to uncover the best-in-class accounts that landed a spot on our short list of the best savings accounts for 2024.

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.

“}]] Read More 

When you increase your monthly credit card payment by $50, you could pay off your debt much more quickly. Find out just how far an extra $50 goes. [[{“value”:”

Paying off credit cards can seem just about as difficult as climbing Mount Everest. After all, the interest rate on most cards is really high, averaging 21.47% as of November 2023. With such a high rate combined with minimum payments that are very low relative to what you owe, you’ll make progress at about the pace of a snail climbing that mountain if you’re paying only the minimums.

But what happens if you pay just an extra $50 a month toward your cards?

Sending an extra $50 doesn’t require a ton of planning, and you may be able to find that much extra cash by making a few simple changes like skipping one meal out at a restaurant per week or canceling two streaming services you aren’t getting much value from.

You’d be surprised at just how much of a difference it can make, though.

This is what an extra $50 a month can do for you

The impact of paying an extra $50 can be much bigger than you’d expect.

The specifics do depend on your credit card interest rate and how much you owe, though. The table below shows the effects of your additional $50 monthly payment with different credit card balance amounts — assuming all cards are at the average interest rate of 21.47% and assuming your minimum monthly payment is the greater of 2% of your balance or $10 (so you would pay 2% of your balance until that would leave you with a payment under $10, as $10 is the absolute minimum payment on your card).

As you can see, you’ll cut decades off the time that it takes to repay your credit card debt even if you are only sending in an extra $50 per month out of your checking account.

And the savings you can earn are huge, with interest costs coming in tens of thousands of dollars lower in most cases.

Why does an extra $50 have such a big effect?

An extra $50 is not a huge sum of money, but it makes a big difference in how soon your credit card debt is paid off. That’s because the entire amount is extra money that goes to reduce your balance — which isn’t the case when you don’t pay extra.

If you pay a small minimum payment, almost the entirety of that payment is going to be eaten up by the interest charges on your card — especially if your card is like most cards and you’re charged a high rate. But if you put in extra money with every payment, that entire amount directly goes toward reducing what you owe.

As your balance falls, interest costs drop, too, and a little more of your payment ends up going to principal that month. And that’s why just $50 a month makes a difference — it helps your balance drop a whole lot faster.

So if you have cards you’re paying down, try to find an extra $50 (or $20, or $100, or any amount) to put toward them. Every little bit helps and has more impact than you’d ever think it could.

Our picks for the best credit cards

Our experts vetted the most popular offers to land on the select picks that are worthy of a spot in your wallet. These best-in-class cards pack in rich perks, such as big sign-up bonuses, long 0% intro APR offers, and robust rewards. Get started today with our recommended credit cards.

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.

“}]] Read More 

Everyone needs emergency savings, but some people need more than others. Learn about a few of the signs that you should have a large emergency fund. [[{“value”:”

A popular money rule is to have three to six months of emergency savings in your savings account. So if your living expenses are $5,000 per month, then a good goal would be $15,000 to $30,000 in your emergency fund.

While that works as a general rule, everyone’s financial needs are different. In some cases, it’s better to err on the side of caution, saving six to even 12 months of expenses. Here are the most common signs that you should aim for a large emergency fund.

1. You don’t have a stable income

If your income fluctuates from month to month, you’re not alone. Freelance and gig work is on the rise. In fact, 39% of the American workforce did freelance work in 2022, according to Upwork.

As every freelancer knows, it’s harder to manage your money when you don’t have a steady paycheck coming into your bank account. There’s also the risk that you have months where you don’t earn enough to pay your bills. You could lose a client, or not be able to work due to a medical issue. Sometimes it’s a double whammy — like if a medical issue keeps you from working and leaves you with an expensive bill to pay.

That’s where a large emergency fund can keep you safe and give you peace of mind. If you have several months in a row where you don’t earn as much as usual, you can use your savings to get by. If you also have an emergency expense during that time, such as a car repair, you’ll be able to cover it.

2. You’re supporting your family on a single income

It often makes sense for parents to bump up their emergency savings. When you have kids, financial security is a must. Your emergency fund is especially important if you have a single-income household, since you’re reliant on one income.

When both parents have jobs, it’s easier to manage financial challenges. If your kid needs expensive dental work, you can split the cost between two salaries instead of one. And if one of you loses your job, it’s not pleasant, but at least the other one is still earning money.

If you’re the sole earner, you’ll need to cover any surprise expenses. And if you lose your job, your household income goes down to $0. In that situation, three months of living expenses probably won’t seem like much, and it puts a lot of pressure on you to find another job right away. With six months or more in savings, you’ll have time to look for a job you like.

3. You’re planning to make a major life change soon

Life changes are exciting, but they’re often expensive, too. Even when you’re prepared for them, they could bring their fair share of unexpected costs. For example, if any of the following are on the horizon, you may want to pump up your emergency fund:

Buying a homeStarting a familyMoving to a new cityLaunching a business

Those are just a few examples, and they’re all situations where you could find yourself needing to tap your emergency savings. New homeowners are often surprised by how much repairs and maintenance cost. New parents go through the same thing (except they’re spending on diapers and childcare, not repairs and maintenance, at least from what little I know about babies).

Do your best to plan for the new expenses you’ll have after a big life change. And if possible, add to your emergency fund so you’re ready for anything you didn’t plan for.

Three months of living expenses is the minimum for an emergency fund. It won’t work for everyone, and you don’t want to end up in debt because you weren’t prepared enough. If your income fluctuates, you’re the sole earner for your family, or you have a major life change coming up, you’ll be much safer with an emergency fund that can last you at least six months.

These savings accounts are FDIC insured and could earn you 11x your bank

Many people are missing out on guaranteed returns as their money languishes in a big bank savings account earning next to no interest. Our picks of the best online savings accounts can earn you 11x the national average savings account rate. Click here to uncover the best-in-class accounts that landed a spot on our short list of the best savings accounts for 2024.

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.

“}]] Read More