Money Management

Want to lower your IRS bill? Read on to see how. 

Americans tend to be pretty split when it comes to political matters. But if there’s one thing most people can agree on, it’s that paying less money in taxes is better than paying more.

If you wound up owing the IRS money in 2023, then you may be eager to shrink your tax bill in 2024. And there’s one easy change you can make to lower your personal tax burden.

Put more money into tax-advantaged accounts

The IRS has a pesky way of getting its hands on your money. And it’s not just regular wages that are subject to taxes.

If you make money from a side hustle, that income is taxable. So is interest income earned in a savings account or CD.

If you want to enjoy more of a tax break in 2024, there’s really one move it pays to focus on — taking advantage of accounts that allow you to contribute in a tax-free manner. These accounts include IRAs, 401(k) plans, and HSAs (health savings accounts).

Now some of these accounts have eligibility requirements. Unless you’re self-employed, you can only fund a 401(k) if you have an employer that’s sponsoring one of these plans and allowing you to participate.

Similarly, being able to fund an HSA hinges on your health coverage. In 2024, you can fund an HSA if your health insurance plan has a minimum deductible of $1,600 for self-only coverage or $3,200 for family coverage. Your plan must also have an out-of-pocket maximum of $8,050 for self-only coverage or $16,100 for family coverage.

With an IRA, however, the only requirement to fund an account is to have earned income. And it doesn’t matter whether you earn that income as a salaried employee or a gig worker.

Get as close to the limits as you can

With a traditional IRA, 401(k), or HSA, the money you put in is money the IRS can’t tax you on — up to the annual limits associated with these accounts. So the closer you can get to those limits, the more tax savings you get to enjoy.

The 2024 limits for IRAs are $7,000 for savers under age 50, or $8,000 for those 50 and over. For 401(k)s, they’re $23,000 for workers under 50 and $30,500 for those 50 and over.

HSA limits depend not just on age, but on the type of coverage you have. With self-only coverage, your contribution limit this year is $4,150 if you’re under 55, or $5,150 if you’re 55 or older. For family coverage, your limit is $8,300 if you’re under 55, or $9,300 if you’re 55 or older.

To illustrate the benefit of funding one of these accounts, let’s say you contribute $2,000 this year and normally fall into the 22% tax bracket. That means your contribution will result in $440 of tax savings for you.

Plus, do remember that by funding an IRA or 401(k), you’re setting yourself up with income for retirement. And by funding an HSA, you’re giving yourself a pile of money to tap when healthcare expenses arise. So it’s worth contributing to these accounts for reasons beyond just for the tax benefits, even though saving money on taxes is a great thing in its own right.

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Don’t want to use a credit card for online shopping? Keep reading to learn what your options are. 

Is there really anything better than shopping from the comfort of your couch? A good default payment method for online purchases is a credit card, and there are even options that offer excellent perks for those of us who’d rather shop from our phone, tablet, or computer. But what if you’d rather not lean on one of the best credit cards for online shopping? Here’s a closer look at a few alternatives.

1. Debit cards

Debit cards bear a startling resemblance to credit cards in appearance (you know, numbered, rectangular, and often plastic), but that’s where the similarities end. A debit card, unlike a credit card, is directly linked to your checking account — the money you spend using your debit card comes out of the account. If your debit card is part of the Visa or Mastercard network, you can use it wherever those card types are accepted, including online.

Security: If someone gets access to your debit card and makes fraudulent charges, the amount you’ll be responsible for varies based on when you report the crime. Wait too long, and you could lose all the money in your linked bank accounts.

Convenience: Debit cards are just as convenient as credit cards, but you’re limited to spending only what’s in your bank account — using a debit card doesn’t constitute borrowing money.

2. Virtual wallets

Sometimes, you can pay for an online shopping order with a virtual wallet. Options for these include Google Pay, Apple Pay, and Samsung Pay, and as you may have guessed, they’re often tied to your smartphone. These programs store your payment information (such as credit and debit cards) in the cloud.

Security: Your smartphone contains a wealth of information about you, and if you use a virtual wallet, a ton of financial data will also be contained there. Focus on creating strong passwords and other methods of protecting your identity and financial information to make virtual wallets as secure as possible.

Convenience: Virtual wallets are merely a different way of accessing an existing payment method, but they are extremely convenient. If you’re comfortable on your couch and shopping from your phone and don’t want to get up to fetch your credit card out of your wallet, using a virtual wallet program will save you time.

3. Payments apps

Payments apps are another newfangled means of accessing your money in a bank account or a line of credit tied to a credit card. You’ve heard of the big names in the business, which include PayPal, Venmo, and Zelle. These can be used to send money to other people in your network, but you can also use them to pay for purchases.

Security: It’s best to avoid storing money in the app whenever possible, because in some cases, that money might not be insured the way it is in your bank account (thanks, FDIC!). Be wary of paying people you don’t know — and just like with virtual wallets, lean on as many security features (including multi-factor authentication) as are available to you.

Convenience: Payments apps live on your phone, so again, they are extremely convenient.

4. Buy now, pay later

Buy now, pay later is a type of loan that’s offered by a third party (Affirm and Klarna are a few of the bigger companies) to pay for purchases over time. You may pay for a quarter of your purchase initially, then make three more payments over the subsequent six weeks (so one payment every two weeks). This can be a good way to finance a purchase without interest — and in some cases, without a credit check.

Security: BNPL companies aren’t all the same, and Consumer Reports found that only a small handful (Afterpay, Klarna, and PayPal) commit to active monitoring of customer accounts to protect against fraud. If you use a BNPL app, check in regularly to ensure your account is secure and you don’t see unfamiliar charges.

Convenience: You are contracting with a third-party company when you use BNPL, so there’s an additional layer of information you’ll have to provide, but it’s still pretty convenient.

Which should you choose?

As you’ve just seen, all of these payment methods can be easily used to make purchases over the internet. But for my money, credit cards are still the best option. For one thing, the consumer and purchase protections offered by credit cards can’t be beat. If I have a problem with an item I’ve bought (say, it never arrives, and the merchant is unable or unwilling to replace it), I can contact my credit card company. It will investigate, and the money I spent may be returned to me if the problem can’t be resolved and the missing item provided.

Security is another area where credit cards shine. The best credit cards offer $0 liability for fraudulent charges, so if someone steals your credit card, you won’t be held responsible for any of the charges they make. Many credit card companies also offer robust mobile apps that let you lock your card account if the card goes missing, or if you suspect you’re a victim of fraud.

Finally, credit cards offer you the chance to build credit as you borrow money and repay the card issuer. Making on-time payments over a long period shows you’re a responsible credit user and if you are careful about not charging too much and not opening new cards too often, you’ll be rewarded with lower interest rates when you borrow to buy a car or home.

It’s okay to use any of the above payment methods for your online shopping (provided you understand how they work). But credit cards come with the most benefits, hands down.

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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.Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. The Motley Fool has positions in and recommends Alphabet, Apple, Mastercard, PayPal, and Visa. The Motley Fool recommends the following options: long January 2025 $370 calls on Mastercard, short January 2025 $380 calls on Mastercard, and short March 2024 $67.50 calls on PayPal. The Motley Fool has a disclosure policy.

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Financing a purchase can obscure the total cost of what you’re paying. Learn why you may not want to finance a phone, even though it seems convenient. 

If you’ve bought a new phone in the past couple of years, chances are that you financed it.

With the typical smartphone costing hundreds or even thousands of dollars, it’s understandable that you might not want to pay for it upfront out of your bank account — especially when phone companies make it so easy and effortless to pay for it over time.

While it may seem like a smart move to just pay for a phone over time, there are actually three big personal finance downsides of doing so. Here’s what they are.

1. Financing makes it harder to understand the total cost

When you finance your phone, you’ll find out at the store what your monthly payments will be. These will just be added onto your cellphone bill along with the amount you’re paying for your service.

Unfortunately, it can sometimes be really confusing to figure out just how much you’re actually spending each month and over time for your upgrade. I know whenever I’ve gone into the phone store, the transaction always involves various promotions, trade-ins, and potential changes to my service package — so by the time the salesperson tells me what my new monthly payment will be, it’s hard to tell what amount is for the phone versus for the other components of my bill.

Even when you ask how much a phone costs each month, this isn’t always straightforward because people have different upgrade eligibility on their plans so the advertised monthly payment isn’t necessarily going to be the same for everyone. On one major phone carrier’s website right now, an iPhone 15 Pro is advertised as “starting at $41.67 per month,” but if you go into the store, you may pay a very different price since that’s just what the phone prices start at.

Breaking down the payment into a bunch of small monthly chunks also makes you forget just how much you’ll spend over time. It may feel OK to spend $41.62 a month for 24 months, but when you look at the fact that adds up to about $999 over two years for a phone, that becomes a little more questionable in terms of whether you’re getting enough value to justify such a big expense.

If you feel as if you need the latest and greatest phone, saving up and paying for it in cash instead of financing it would help drive home the point of just how many of your working hours went to pay for it. This way, you can make a more informed decision about whether it’s worth it.

2. Financing encourages upgrade culture

Another big problem is that financing can spur upgrade culture. If you’re just making a monthly payment for your phone along with the service, you may not feel as if it’s a huge financial burden — even though that’s money you can’t use for other things.

Since you don’t have to come up with a huge sum to put on your credit card each time a new phone comes out, it feels easy and natural to just run to your phone carrier and finance the next one. The problem is, you can end up constantly making a payment toward the newest phone forever if you do this.

Say, for example, that every single month for the next 30 years, you devote $41.62 per month to payments on a new cellphone since upgrading is so easy and you can work the monthly payments into your budget. If you’d instead invested that money and earned a 10% average annual return, you’d have about $80,948.51 at the end of that time. Are you OK with losing over $80,000 of potential money just to have a new phone every two years?

For most people, it does not make sense to upgrade their phone once a year, or even once every two or three years. The price is just too high given there’s often not that much difference between one model and the next. Don’t let the promise of low monthly payments convince you to buy new technology annually when your old one is still working just fine.

3. You’ll be locked in with your phone carrier when you finance your phone

Finally, if you’re on a payment plan with your phone provider for a phone, you’re going to have to stick with that carrier or come up with the money you owe for not following through on buying the phone on your plan.

If you want to switch to a different company to handle your cell service, you’d be out of luck. This means you can’t shop for the best deals, so you could find yourself with a plan that’s more expensive than it should be.

For all of these reasons, try to avoid financing your next phone. Buy one only when you need it and have saved enough to cover the costs out of pocket.

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There are more secure payment methods than checks. Read on to learn your options to avoid check fraud in 2024 and beyond. 

When’s the last time you wrote a paper check? Believe it or not, I actually did today, on the day I’m writing this article, to pay my city government for an annual parking pass. But prior to that, the last time was about a year ago — and for the same reason. Checks as a form of personal payment are slowly going the way of the dodo. According to data collected by The Washington Post, checks made up just 3.8% of payments in 2022.

Why are checks going extinct? Well, there are a few reasons. For one thing, there are more convenient payment options available, credit and debit cards being chief among them. Checks require more labor and materials (like a pen) than simply whipping out a card at the grocery checkout. And if you’re paying for a purchase using a check, it takes several days for that money to leave your checking account, making it more difficult to keep track of your balance and potentially increasing the odds you’ll have an overdraft.

But there’s actually a really compelling reason that all of us should be stepping away from using checks. Let’s take a closer look at check fraud and discuss some alternative payment methods.

Check fraud 101

The COVID-19 pandemic brought a staggering jump in thieves targeting the mail to steal Americans’ paper checks. According to the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN), mail theft complaints rose by 161% from March 2020 to February 2021 over the same period a year earlier. In 2021, there were over 350,000 suspicious activity reports by financial institutions to report potential check fraud — and in 2022, this number nearly doubled to 680,000.

When thieves get hold of your checks, what are they doing with them? Bad news — check washing is back in a big way. Scammers can use chemical solutions (like acetone, also known as nail polish remover) to remove the payment and payee information from a check (while leaving the signature intact). They can then fill in whatever amounts and payee they want, clearing out your bank account in the process. Scary!

Should you quit paper checks?

I understand that change is difficult, but it’s time to start transitioning to other payment methods to help stamp out fraud. I get it if you don’t want to use a credit card for all your payments and purchases. You can take advantage of robust consumer protections and earn credit card rewards by doing so, but sometimes you’re charged extra to use a credit card, and if the percentage charge amounts to more than you’d earn in rewards, that’s a net loss. Plus, if you’re struggling with credit card debt, you might not want to use them at all, and that could be a safer choice for your personal finances.

But I recommend finding other ways to pay besides with personal checks. Cash is still accepted as an in-person payment in nearly all situations (although, it has no protections of any kind — if you lose it, it’s likely gone for good). Your debit card is another option — use with caution for online shopping and at gas stations, where “skimmers” might be used to steal customers’ payment information.

For your bills, many banks offer bill-payment services; these are very easy to use and once you schedule payments, you need only check that the money left your account. For paying friends and family, you could use a payments app. You definitely have options other than paper checks.

Tips for safer check payments

OK, OK — you don’t want to quit paper checks. Will you at least use the following tips to avoid check fraud?

Don’t mail checks from home: If you have to send checks through the mail, it’s a better idea to take them directly to your local post office. You could also drop them directly in a blue mailbox, but aim to do so near a collection time, as these mailboxes aren’t completely secure.Get the right kind of checks: Some have embedded security features, like watermarks and inks that will be damaged by check washing.Use the right pen: According to the Better Business Bureau (as told to ABC7 Chicago), black gel ink is the most resistant to check washing.Check up on your bank account: Keeping an eye on your balance is a personal finance best practice under all circumstances, but if you’ve sent a check, make sure it’s received and deposited by the right party.

If you suspect you’ve been a victim of check fraud, contact your bank ASAP. And to avoid this fate, consider transitioning to a more secure payment method, like the ones discussed above.

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Extra cash is always a nice thing to have. Read on for ways to make the most of your late 2023 bonus. 

There are different benefits you might enjoy as a company employee, like paid time off, access to a retirement plan, and subsidized health insurance that makes it possible to tend to your medical needs. But another perk that workers tend to love is the year-end bonus.

In 2023, an estimated 96% of professional services companies said they intended to give out year-end bonuses, according to staffing firm Robert Half. So it may be that at this point, you’re sitting on extra money in your bank account. If so, you have plenty of options for that cash, and here are three good ones to consider.

1. Pay off your holiday credit card debt

If you recently racked up a balance on your credit cards, you’re no doubt in good company. But the longer you let that balance linger, the more interest you might accrue on it. So a really smart move for your personal finances would be to use your newfound cash to tackle your balance before it grows and costs you more money.

If you can’t pay off all your credit cards, focus on the card with the highest interest rate, and then work your way downward. You could also look at doing a balance transfer if you owe money on multiple cards and then simply use your bonus to chip away at a single balance. Even if you can’t pay it off in full, having one card to make payments on may be easier to manage.

2. Start a 2024 holiday fund now

Maybe you came close to racking up holiday debt in 2023, but narrowly managed to avoid it. If you want the upcoming holiday season to be less financially stressful, consider earmarking your year-end bonus as your 2024 holiday fund.

One thing you may want to do is open a separate savings account for 2024 holiday spending. That way, you can add to that account as your financial situation allows for, and you’ll know exactly what that money is for.

3. Take advantage of post-Christmas sales

Maybe you wanted to buy a new vacuum cleaner late last year but couldn’t quite swing it. Or maybe you were itching to upgrade your TV on Black Friday but you just didn’t have the funds because your bonus hadn’t arrived yet.

If you’re doing well enough in the savings department (meaning, you have money in the bank to cover emergency expenses) and you don’t have leftover credit card debt, then consider using your bonus to capitalize on the post-holiday sales many retailers are no doubt running right now. There’s nothing wrong with spending that money on an item that can improve your quality of life (like upgrading the TV you watch all the time).

A year-end bonus is perhaps the best holiday gift you can get. If you’re now sitting on extra money, take advantage by eliminating leftover debt from 2023, saving for the upcoming holiday season, and buying the items on your wish list you had the willpower to pass on in the absence of that extra cash.

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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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Planning to travel more in 2024? You can travel more without breaking your budget. Find out how to book one-way JetBlue flights for as little as $39. 

You may have big travel goals for 2024. The good news is you don’t have to spend a fortune to make your travel goals a reality. By taking advantage of airfare sales, you can see more of the world without draining your bank account balance. Until 11 p.m. ET on Jan. 10, travelers can book affordable one-way flights with JetBlue for select travel dates through March 27.

Introducing JetBlue’s Big Winter Sale

After the busy holiday season, many of us are on an even tighter budget as we head into the first few months of the new year. Even if you’re on a budget, it’s a good idea to pay attention to sales that can help you save money as you make moves to reach your 2024 goals.

JetBlue is running its Big Winter Sale. If you hope to travel more this year, this sale is worth your attention. Now, until 11 p.m. ET on Jan. 10, you can book affordable flights to select destinations. These deals are available for Tuesday and Wednesday travel dates from Jan. 17 through March 27.

Ticket prices vary by route, but you can find one-way ticket prices as low as $39. I saw many one-way tickets priced at $59 when I looked at available deals.

As you review flight options, keep in mind that JetBlue has three fare types: Blue Basic, Blue, and Blue Extra. When booking Blue Basic airfare, no carry-on bag is included (except for select transatlantic flights). Additionally, change/cancel and advanced seat selection fees apply.

Before booking, make sure you select the fare that meets your needs. Carefully reviewing fare types can help you avoid extra expenses that eat away at your vacation budget. Additional bag and seat selection fees can add up quickly, so avoiding costly surprises like this is best.

Sales like this one can make travel more affordable, so don’t miss out. Not paying full price for plane tickets can be a major win for your wallet. When booking your tickets, consider paying with one of the best travel credit cards so you earn rewards on your spending.

Three more ways to save money on airfare costs

If this deal doesn’t meet your needs or you want to hold off before buying plane tickets for upcoming travel, there are other ways to save on flight costs. Here are a few tips:

Be flexible with your travel dates: Flexibility can result in significant savings. Traveling on a weekday instead of the weekend or planning your vacation during the offseason, when fewer travelers are flying, are two ways to keep more money in your pocket.Let the deals decide where you go: Another way to save money on flight costs is to let airfare deals determine your destination. Review sales for destination ideas or use a tool like Google Flights to search “anywhere” as your destination to find the cheapest flight deals.Invest in an airfare deal subscription: If you’re a frequent traveler who loves a good deal, investing in a flight deal subscription may be worthwhile. These services alert you to the best airfare deals, allowing you to visit more places without overspending.

Don’t give up on your dreams of travel this year. It’s possible to take a trip while continuing to honor your budget. Check out our free personal finance resources for more helpful tips.

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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.Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Natasha Gabrielle has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet. The Motley Fool has a disclosure policy.

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