Money Management

Tax season is a stressful time of year, especially when paying your tax bill feels impossible. If that’s the case, here are four potential options. 

If you’re reasonably certain you will owe taxes this year, you may be feeling a little stressed. You may even be tempted to pretend we skipped tax time this year and put the subject out of your mind. Our advice to you is simple: Don’t. Do not blow off the IRS because you don’t know how to cover your tax obligation.

What could happen

We don’t tell you this to scare you into action. Instead, we want you to clearly understand what could happen if you fail to pay taxes. Failure to pay could lead to the following:

A penalty of 0.5% of the unpaid taxes for each month or part of a month the taxes remain unpaid, not to exceed 25% of your unpaid taxes. Accrued interest. You’ll be charged interest on the unpaid taxes equal to the federal short-term rate, plus 3%.

Continue to ignore your taxes, and the situation gets worse. The IRS can:

File a federal tax lien on your property. A lien on your property means the IRS has a claim, and if you sell your home, the IRS gets the money it’s owed before you receive the remaining proceeds. Seize your property.Make you forfeit your refund (if you are due money).File tax evasion charges.Revoke your passport.

Making an effort to pay your tax bill means you don’t have to worry about what the IRS has in its arsenal.

Four easy options

What’s wild about anyone allowing their taxes to go unpaid is how ridiculously easy it is to make things right. Despite all the damage the IRS could inflict, the government revenue service has zero desire to make your life miserable. In fact, you may be surprised by just how accommodating the IRS can be if you’re willing to work with it. An estimated 5 million American taxpayers choose one of the following options each year to get their taxes paid.

1. Request an extension

According to the IRS, you can use the IRS Free File to request an automatic tax-filing extension. Filing the form gives you until Oct. 15 to file your return. On the form, you’ll be asked to estimate how much you think you owe in taxes. Pay as much as you can afford when you file the extension request. You have until mid-October to sort out your taxes, file a return, and either make a payment or request a refund.

2. Request a payment plan

Suppose you owe $5,000 on federal taxes for last year but don’t have the money in your bank account right now. The IRS allows taxpayers to set up an installment agreement to get the bill paid off a portion at a time. Applying for a plan is easy. You can use the OPA application, file a Form 9465 when you file your return, or call the IRS at 800-829-1040 (individuals) or 800-829-4933 (businesses).

3. Ask about “currently not collectible” status

If you’re facing financial hardship and absolutely cannot pay anything toward your tax bill, the IRS may allow you to wait until your situation has improved to pay taxes. You’ll be asked to provide proof of financial hardship, but if you find yourself in a pickle, it’s worth jumping through a hoop or two.

4. Take advantage of the IRS’s Offer in Compromise (OIC)

When a taxpayer has little to no assets and has trouble covering their basic living expenses, the IRS will commonly allow them to settle their unpaid taxes for less than the amount owed. To qualify for an OIC the taxpayer must have:

Filed all tax returns.Received a bill for at least one tax debt.Made required estimated tax payments for the current year.If the taxpayer is a business owner and has employees, they must have made all required federal tax deposits for the current quarter and two preceding quarters.

Given the number of options available to you at tax time, it makes no sense to ignore taxes. The first step is to contact the IRS to learn which option works best in your situation.

Alert: highest cash back card we’ve seen now has 0% intro APR until 2024

If you’re using the wrong credit or debit card, it could be costing you serious money. Our experts love this top pick, which features a 0% intro APR until 2024, an insane cash back rate of up to 5%, and all somehow for no annual fee.

In fact, this card is so good that our experts even use it personally. 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 

Considering buying a timeshare? Read on to see why you may want to rethink that. 

Some homeowners sign a mortgage and regret buying a place of their own after they realize how much work it entails. But if you purchase a timeshare, you may be more likely than not to wind up kicking yourself.

When you buy a timeshare, you get the right to use a vacation property for a limited window of time each year. In exchange, you pay an upfront fee as well as ongoing maintenance fees.

You might think that buying a timeshare is a smart move. And given that it’s an $8.1 billion industry, you clearly wouldn’t be alone. But if you ask John Oliver, he’ll tell you that timeshares are basically nothing but a trap. Here are some of the reasons why.

1. Timeshares can be really hard to sell

Timeshares, says Oliver, are “incredibly easy to get into,” But, he cautions, they’re also “incredibly hard to get out of.”

When you sell a home, you’re handing a property over to someone else. You’re not doing that with a timeshare, because you don’t actually own a home outright.

Also, because there are so many timeshares out there, it can be difficult to find a buyer due to stiff competition. So what sometimes happens is that people buy timeshares, decide they want to sell them, but wind up getting stuck with them for life.

2. The cost of owning one can increase over time

When you buy a timeshare, you might easily get in over your head financially. That’s because the cost of your timeshare may not be clear to you upfront.

What’s scary, according to Oliver, is that salespeople can get away with lying about how much a timeshare will cost. In fact, he insists, they’re often encouraged to lie.

Meanwhile, timeshare maintenance fees typically go up every year, says Oliver. And at higher-end resorts, they can amount to $2,500 to $3,500 per year. That may be a lot more than you bargained for.

Worse yet, Oliver says, “you are on the hook for those costs whether you use your timeshare or not.”

3. They can become virtually useless

In some cases, your timeshare might come in the form of points. But if so, you might have a really hard time booking your timeshare. You might, Oliver explains, have to book a stay way in advance for the option to use the property you’re paying for, thereby negating a lot of the benefit of having a timeshare to begin with, which is being able to plan and take a vacation with ease.

Also, you might, in time, get tired of traveling to the same place. Or your needs might change, like if your family grows. That could render your timeshare pretty useless.

A move you might sorely regret

Oliver quoted a survey saying that 85% of timeshare owners regret their purchases. If you want to avoid becoming part of that statistic, think twice before buying a timeshare. And if you’re asked to sit through a timeshare presentation while on vacation, say no — even if the salesperson in question tempts you with perks like a free extra night at your hotel or actual cash you can put into your savings account.

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 

Does your company employ a fair system for raises? Read on to see how many companies don’t. 

It’s nice to find a job that offers you a chance to do something you love or find interesting while bringing home a paycheck that makes it easy to cover your mortgage, car payments, and various expenses. But you may reach a point where you’re hoping to see your pay go up, whether because you haven’t gotten a raise in a while or your bills are increasing due to inflation.

There are different arguments you can make in the course of fighting for a raise. You could point to your skills, your on-the-job wins, or the fact that you’ve been with your company for a long time. But the latter argument — tenure — may not work as well as you’d think.

Years of service may not translate to a raise

In a recent Payscale survey, 72% of employers said that performance is a factor considered when giving out pay raises. By contrast, only 19% said they consider tenure when making those decisions.

Now, on the one hand, that sort of makes sense. Being at a job for a long time doesn’t automatically make you good at it. Perhaps you’ve been with your company for 20 years and have taken the attitude that you’ll simply do the bare minimum needed to collect your paycheck.

On the other hand, it’s more than conceivable that you’ve not only been with your company for a long time, but have consistently gone above and beyond since the moment you became an employee. Not only that, but you may have, through the years, rejected other job offers from outside firms as a means of showing your dedication to your current employer. That’s something that should be rewarded. And if you’re not being rewarded financially, you may want to take your skills elsewhere.

It’s okay to chase that higher paycheck

There’s something to be said for being settled at a company, having a manageable routine, and not wanting to make a major change. But if your efforts to snag a raise have been futile, then it may be time to search for a job at a new company. Doing so could mean scoring a much higher salary — and getting an opportunity to meet your most important goals, like building a retirement nest egg or putting your kids through college.

What’s more, if you’ve been with the same company for a long time, that could work to your advantage when seeking out a new job elsewhere. After all, companies don’t like to make investments in new employees only to have them jump ship a year or two later. If you have a history of staying put, it may be easier to sell a new employer on the fact that you’re looking to build a long-term relationship.

All told, it’s a little surprising to see that more companies don’t consider tenure when making decisions about pay increases. But knowing that might help inform your next career move — and help you approach the process of getting higher pay more strategically.

Alert: highest cash back card we’ve seen now has 0% intro APR until 2024

If you’re using the wrong credit or debit card, it could be costing you serious money. Our experts love this top pick, which features a 0% intro APR until 2024, an insane cash back rate of up to 5%, and all somehow for no annual fee.

In fact, this card is so good that our experts even use it personally. 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 

Getting a tax refund? Read on to see what plans filers are making with that money. 

If you’ve finished filing your taxes, at this point, the only thing to do from here may be to sit back and wait for your refund to arrive. But if you’re getting a refund, it’s really important to put that money to good use. A recent survey by Empower Annuity Insurance Company of America found that these are the top five things taxpayers are doing with their refunds — and you may want to follow suit.

1. Adding to their savings

If you don’t have at least three month’s worth of essential bills in your savings account, then sticking your refund in the bank should be a top priority. Without a complete emergency fund, you might struggle financially in the event of a lost job or unplanned expense.

2. Paying off credit card debt

The longer you carry a balance on your credit cards, the more interest you might rack up. Plus, too much credit card debt could actually damage your credit score. So it definitely pays to use your refund to eliminate an outstanding balance, or at least chip away at one so it becomes smaller.

3. Buying groceries

Grocery prices were up over 10% on an annual basis in February. If you’ve been struggling to put food on the table, then it definitely makes sense to use your tax refund to restock your pantry and fridge. Consider focusing on staple items that can go a long way, like grains that serve as a base for different meals.

4. Paying rent

Falling behind on rent could put you at risk of eviction (not right away, but in time). If you have a past-due rent payment, or you need your refund to cover an upcoming one, then it certainly makes sense to use that money to keep a roof over your head.

5. Covering electric bills

Many people have been struggling with paying basic living expenses thanks to soaring inflation. If you need your tax refund to pay a utility bill, like your electric bill, then by all means, go for it.

Other ways to use your tax refund

It may be that your savings are solid, you don’t have any high-interest debt, and you’re able to cover your incoming bills with your paycheck alone. In that case, you still have an opportunity to make the most of your tax refund, even if you don’t need to use it for any of the purposes above.

For one thing, you could take that money and start funding an IRA for retirement. If you have kids, you could also use it to start building a college fund. And if you’re trying to grow your career, you can consider using your tax refund to invest in yourself by taking a course that teaches you skills that might lead to a promotion.

This isn’t to say that you can’t, or shouldn’t, use a portion of your tax refund for something fun — especially if you’re in good shape financially. But before you blow all of that money, think of the ways you can really put it to great use.

Alert: highest cash back card we’ve seen now has 0% intro APR until 2024

If you’re using the wrong credit or debit card, it could be costing you serious money. Our experts love this top pick, which features a 0% intro APR until 2024, an insane cash back rate of up to 5%, and all somehow for no annual fee.

In fact, this card is so good that our experts even use it personally. 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 

Credit card sign-up bonuses can be a boon for your finances. Read on for five ways to creatively reach your required spending and earn your bonus. 

You’ve just been approved for a new credit card with a great sign-up bonus. Now all you need to do is complete the spending requirement in a predetermined amount of time as dictated by the card, and poof, that bonus will appear in your account! Sounds pretty simple, right? Well, not always. The spending requirement to achieve the sign-up bonus for some cards is much higher than others.

I recently was approved for a card that promised a sign-up bonus of $900 if I could spend $6,000 in the first three months of card ownership. With my mortgage payment not an option towards attaining that total, I had to come up with some other, more creative options. Here are five things that worked for me.

1. Pay ahead on car insurance

I currently pay my auto insurance policy for a six-month term. Most of the best auto insurance companies will let you pay for at least a year of your policy at one time. I contacted my insurer and requested to pay for another six months of my insurance policy, and they kindly obliged. The cost of my policy is about $600 every six months, so that payment automatically brought me to 10% completion of my required sign-up bonus spending.

2. Pay ahead for lawn care or other services

Consider using your card to pay for childcare, cleaning services, pet sitting, or anything else you might pay an individual or company to do for you on a weekly or monthly basis. High inflation levels have left a lot of Americans struggling to pay the bills, therefore there are likely folks out there who wouldn’t mind an advance on their normal paycheck. I pay my lawn service $40 per week from April through November to mow, edge, and trim my lawn. Generally, I receive an invoice at the beginning of each month for that month’s lawn services. I reached out to my lawn servicer and asked if he might allow me to pay for the whole season upfront this time around. Again, he happily obliged. He estimated 30 services for the season, bringing my total invoice to $1,200 and shaving off another 20% of my sign-up bonus spending!

3. Employ the help of a partner, close friend, or family member

Have anyone in your life with an upcoming large purchase to make? Assuming it’s someone you really trust, ask them to allow you to charge the item on your new card and let them pay you back at an agreed-upon time.

As luck would have it, my parents were out of town recently and the oven at one of their rental units ceased working and needed to be replaced ASAP. Enter myself and my shiny new credit card. I was able to run into the local appliance store and purchase the oven of my mom’s choosing and set up delivery to their rental unit, all while my parents were enjoying their vacation states away. All in, the total for the oven came to $720. If you’re keeping track, that’s another 12% closer to my goal, leaving me now with 42% of my sign-up bonus spend requirement completed.

4. Book an upcoming vacation well in advance

Every year, my best friend and I take a girls trip together to celebrate our winter birthdays that fall just two days apart. Our trip doesn’t take place until late January/early February, but because next year is a bit of a milestone birthday (the big 3-5), we already had our destination well researched and chosen in advance. My new card and the promise of a $900 sign-up bonus gave us the perfect excuse to go ahead and book our trip online.

You could book a hotel, flights, rental car, excursions, and more with your new card, and you’d likely wipe out most of your required spending without having to do much else. But because our vacation is far away and I was making decent progress on my sign-up bonus spending already, we opted to just book our lodgings using my new card. Grand total: $3,000. And just like that, another 50% of my sign-up bonus spending is in the books. Only 8% — or $480 — to go!

5. Purchase gift cards to oft-shopped places

As of now, I’m not going to have trouble meeting my sign-up bonus spending requirement (and then some) in the allotted three months, so I opted to just make this my primary card for gas and groceries for the next couple months to close the gap. With the price of both of these staples currently up, it won’t take me long at all to finish off that last $480.

But if you’re still further off from your goal and time is running out, this would be a perfect time to scoop up some gift cards to places that you regularly shop. A few hundred dollars for your favorite grocery store and gas station will go far in your sign-up bonus spending, and you’ll be sure to use these types of gift cards up in no time!

Sign-up bonuses: approach with caution

Sign-up bonuses are an excellent way to earn some extra cash or rewards points, but be careful, as they’re only a good deal if you come out ahead. If you know there’s absolutely no way you could meet the spending requirement in the given timeline just with spending that you would have done anyway, then it might be best to pass on the offer from the start. After all, needlessly charging up several thousand dollars, not being able to pay it off, and accruing hundreds in interest fees as a result, isn’t a fun bonus for anyone.

Alert: highest cash back card we’ve seen now has 0% intro APR until 2024

If you’re using the wrong credit or debit card, it could be costing you serious money. Our experts love this top pick, which features a 0% intro APR until 2024, an insane cash back rate of up to 5%, and all somehow for no annual fee.

In fact, this card is so good that our experts even use it personally. 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 

You don’t need to win the lottery or invent a time machine to reach millionaire status. Read on to build wealth over time with these straightforward steps. 

Some people associate the word “millionaire” with glitzy lifestyles, fast cars, and cruise vacations. That may be the case for some of the world’s super rich, but in reality, many millionaires live relatively frugally and save a lot of the money they earn. Sure, it’s not as sexy as a fast car, but it also puts millionaire status within reach for many Americans.

If you want to become a millionaire, know that it can take time. These steps will help you on your way.

1. Live within your means

In an interview last year, self-made millionaire Andy Hill said one surefire way to build wealth is to grow the gap between your income and spending and invest the difference. The trouble is, it’s easier said than done. “The biggest secret to building wealth is that it can be very simple, but not easy,” he said.

Living below your means gives you more money to save and invest. But if you’re low on money at the end of each month, how can you make that a reality?

Make a budget: A lot of people fear the very idea of budgeting. Try to see it as a tool to help you control your finances. If you aren’t sure where to start, try a budgeting app.Look at where your money is going: Have a look at what you spend each month and think about how much you’re spending on essentials versus non-essentials. If you’re struggling to save or find you regularly spend more than you bring in, identify areas where you might make cuts. That might mean dropping subscription services while also shaving some off your grocery and utility bills.Set savings and investment goals: You may have heard the phrase “Pay yourself first.” This is where it comes into its own. Work out how much you want to put into your savings and investments and do this before you put money toward anything else. Some people automate these contributions so the money leaves their bank account shortly after pay day.

2. Maximize your earning potential

There’s only so much you can cut your spending, but there are many ways you can increase your earnings. This can give you extra money you can use to build wealth. The route you take depends on your skills, time, and situation.

See if it’s feasible to take on more hours at work, explore a side hustle, or even rent out space in your home. You might want to ask for a raise at work or look for a higher paying job. Switching jobs can be a good way to swing a pay raise, but be careful not to overdo it, as too many role changes may not look great on your resume.

3. Consistently invest a portion of your income

Investing — buying assets that will increase in value over time — is a crucial concept on your path to the millionaire club. There are a number of different asset classes, including real estate, stocks, and bonds. The idea is to build up a diversified portfolio of assets that will work for you over time.

Compound interest and time are your friends here. Take the S&P 500, which tracks the 500 largest companies in the U.S. by market cap. It has generated a compound average annual growth rate of over 10% before inflation per year over the past 30 years. That said, there are no guarantees, and there will be years when your portfolio might decrease in value, particularly during a recession.

The tables below are very simplified, but show how dramatically compound interest adds up long term. Let’s assume a conservative annual return of 9%. If you were able to invest $30,000 and not touch it for 40 years, you’d be close to achieving millionaire status.

How compound interest adds up with 9% annual returns

We can take this a step further. Here’s what that table would look like if you contributed $300 every month. That might feel like a lot if you’re just starting out in your career. But in time, it can take you over the millionaire line, even if you don’t start with a big sum of money.

How compound interest adds up with 9% annual returns and $300 monthly contributions

3. Max out your your 401(k) and other tax-advantaged account contributions

When it comes to making regular contributions to your investment account, there are a few decisions to make. For example, you need to think about what type of assets you want to buy, how much risk you’re comfortable with, and which stock broker is right for you.

Another choice is the type of account you want to use. Specifically, it’s good to understand how tax-advantaged accounts work, what your contribution limits are, and how you can get the most out of them. Every dollar you save in taxes is money that could help you build wealth.

Some — like individual retirement accounts (IRAs) or a 401(k)s — allow you to defer your taxes. This means you’ll pay tax when you take the money out of the account, but don’t need to pay it now. With others — such as Roth IRAs — you invest money you’ve already paid taxes on, but can withdraw it tax-free in your retirement. You can have more than one tax-advantaged account, though there’s a limit on how much you can contribute in total each year.

A study by Dave Ramsey showed that eight in 10 millionaires contributed to their company 401(k)s, which are employer-sponsored retirement plans. Find out whether your company offers one and if it will match a certain percentage of your contribution. Contribute at least that amount to make the most out of this wealth-building tool.

4. Build up an emergency fund and don’t take on high interest debt

An emergency fund is a financial cushion against the unexpected. It means having three to six months’ worth of living expenses in a savings account to tide you over if you lose your job or encounter a medical emergency.

If you want to become a millionaire, your emergency fund will stop you from having to take on debt or sell off your investments if you hit a bump in the road. Selling investments in a crisis can be costly. In a worst-case scenario, you might wind up selling at a loss during a market downturn.

Carrying high interest debt can destabilize your finances over time. We looked at the power of compounding above, but debt works the other way — rather than earning interest, if your debt compounds, it costs you more over time. The repayments eat into your available income and make it harder for you to live within your means. All in all, high interest debt is the enemy of wealth building.

Bottom line

You don’t have to win the lottery or create the next social media giant to become a millionaire. For many of us, the path lies in consistently spending less than we earn and investing the difference.

Alert: highest cash back card we’ve seen now has 0% intro APR until 2024

If you’re using the wrong credit or debit card, it could be costing you serious money. Our experts love this top pick, which features a 0% intro APR until 2024, an insane cash back rate of up to 5%, and all somehow for no annual fee.

In fact, this card is so good that our experts even use it personally. 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