Money Management

Are you paying more than necessary? 

As a pet owner, you do everything in your power to keep your pet happy and healthy. One way to protect your furry friend is to purchase pet insurance coverage. But how much coverage should you get? It can be hard for pet owners to determine if they have too much or too little coverage. Here’s what you need to know about finding the right balance.

What does pet insurance cover?

Pet insurance can play a vital role in taking care of your pet. Pet owners can expect to spend $20,000 to $55,000 for a dog and $15,000 to $46,000 for a cat over 15 years of care. These amounts are equal to a down payment for a house or the cost of a new car! This is why getting the right pet insurance policy is vital.

Pet insurers typically offer three types of coverage:

Accident Only (AO) policies offer limited coverage and don’t cover most illnesses. This coverage is cheaper than comprehensive coverage and is typically best for emergencies.Accident and Illness (A&I) policies are also known as “comprehensive policies,” since they cover accidents plus minor and major illnesses.Wellness policies cover routine and preventative care, such as annual check-ups, vaccinations, and teeth cleanings. Insurers may also sell add-ons like holistic and alternative care treatments, preventative care plans that cover physical exams, fecal or internal parasite tests, heartworm tests, blood tests, vaccines, flea/tick medication, routine dental cleaning, and more.

What does it mean to be overinsured?

Being overinsured means you’re paying too much for your policy or that you’re covered for more services than you actually need. This is usually due to purchasing a policy with higher coverage limits than necessary or opting for coverage for conditions not commonly seen in pets. Your pet insurance premiums are “use or lose.” This means you will not get the premiums back regardless of use, so overinsuring your pet can lead to unnecessary costs.

How do I know if my pet is overinsured?

Review your current policy, compare it to what other comparable plans offer, and also what your pet needs. Average monthly premium costs for a pet insurance plan can vary from $10 to $20 for an accident-only plan, $30 to $50 for a comprehensive plan, and $20 to $25 for a wellness plan.

For many pet owners, the cost of a wellness policy is what they would pay out of pocket anyway, so it may not be worth getting a standalone wellness plan. For some pet insurance companies, wellness policies are rolled into comprehensive coverage policies, so a pet owner may not need extra coverage in that case.

You may have opted to add alternative care treatment plans that cover acupuncture, chiropractic, hydrotherapy, physical therapy, laser therapy, massage, herbal therapy, and more. Depending on the type of pet you have, you may not need these types of care or they may not offer much benefit. You may also want to only cover conditions more commonly seen in pets (such as cancer treatments or accident-related injuries) rather than rare occurrences like snakebites.

What should I do if I think my pet is overinsured?

It may be time to start shopping around for a new plan or opt out of certain types of coverage you may not need. Look into different providers and see if they offer similar levels of coverage at lower prices. Talk to an expert about what services should be covered by your policy and which ones can be safely excluded without compromising the quality of care for your pet.

Next, evaluate your current coverage. The amount of coverage you need will depend on the type of animal you have, as well as their age and lifestyle. For example, an older dog with few medical issues may not require the same level of coverage as a younger cat with a history of medical problems. Take into account any pre-existing conditions that may impact the amount of care your pet needs in order to determine the right level of coverage for them. You may be paying a high premium for a condition your insurer may decline to cover, so it’s important to read the fine print to see what the insurer will or will not cover.

Additionally, consider how much you can afford before selecting a policy. Set up a budget that works for both you and your pet by factoring in all of the costs associated with their care, including routine visits, medications, vaccinations, etc., and compare those expenses against what different policies offer in terms of reimbursement rates and deductibles. This will help you find a plan that fits within your budget while still meeting all of your pet’s health care needs.

Bottom line

No matter how much love we give our pets, sometimes it’s just not enough when it comes to taking care of their health concerns down the road. That’s why having proper pet insurance coverage is so important! With careful research, you can ensure that your beloved pet has access to quality medical care with insurance that fits in your budget. Make sure that whatever plan you choose provides ample protection. That way, both you and your four-legged friend can breathe easy knowing you have coverage if they ever need it.

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No one wants to pay the government more than they have to. 

For most people, getting a tax refund is the big reward for filing your taxes, but those expecting to rake in enough money to cover their expenses for a month or two might be disappointed this year. So far, tax refunds are down 11% compared to this time in 2022.

That may be disappointing for a lot of people, but the truth is, it’s actually good news. Here’s why.

What smaller tax refunds actually mean

Your tax refund is money that rightfully belonged to you that the government withheld during 2022. It essentially took hold of that money as an interest-free loan until you filed your tax return, showing how much you actually owed for the year.

A large refund means the government withheld a lot more from you than it should have. Had you received that money as part of your 2022 paychecks, you could’ve made better use of it. You might have been able to spend it on something you enjoy, reach your savings goals more quickly, or invest it to help your money grow more quickly over time.

Getting a smaller refund means the government withheld an amount that was much closer to your actual tax liability during 2022. So rather than getting your money in a lump sum as a tax refund, you got it added to each paycheck throughout the year.

How to hold onto as much of your savings as possible

Many people still like the idea of receiving a tax refund, though, and everyone wants to pay as little in taxes as possible. Here are some tips you can try to hold onto as much of your hard-earned cash as you can.

Adjust your tax withholding

When you filled out your employment paperwork at your job, one of the documents you completed indicated how much you wanted the government to withhold from each paycheck for taxes. If you feel the government is withholding too much, you can always update your withholding by filling out a new form and filing it with your employer. Talk to your HR department to learn how to do this.

The IRS has a tax withholding estimator tool to help you determine if you’re withholding an adequate amount from each check or not. You don’t want to reduce your withholdings too much, though, or you could wind up with a tax bill at the end of the year.

Claim all tax breaks you qualify for

There are two types of tax breaks you could earn: tax deductions and tax credits. Tax deductions reduce your taxable income for the year. For example, if you earned $50,000 and qualified for a $1,000 tax deduction, you’d only pay taxes on $49,000 that year. Tax credits are a dollar-for-dollar reduction of your tax bill.

It’d be impossible to list all tax deductions and credits here, but some of the most common include:

Tax deductions for tax-deferred retirement contributionsTax deductions for health savings account (HSA) contributionsTax deductions for charitable donationsEarned Income Tax CreditChild Tax CreditAmerican Opportunity Tax Credit

Your tax software or tax professional should be able to help you find all the tax breaks you qualify for. Just know that you’ll need documentation to back up each one. Otherwise, the IRS could disallow these tax breaks if it audits you.

Itemize deductions if that makes sense for you

It makes sense for most people to choose the standard deduction. This is a predetermined amount of income you won’t pay taxes on, and it varies depending on your age and tax-filing status. But sometimes, it can be advantageous to itemize deductions instead.

Certain tax deductions, like deductions for large medical expenses, are only available if you itemize your deductions. Your tax software or tax professional should also help you work out which strategy will give you the most money overall.

Your financial situation can change over time, and that can affect the factors above. So be sure to review these things each year before filing your taxes to ensure you’re giving the government only as much as you have to.

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This could help you breathe a little easier. 

The only thing worse than filing your taxes is finding out you owe the government at the end of it. Some people wind up with outstanding tax bills that are thousands of dollars. If you weren’t expecting to owe, you could have a hard time coming up with the cash you need before the tax deadline on April 18.

You could set up a payment plan with the IRS, but there’s another option that could help you settle your debt for less than what you owe. It’s called an offer in compromise. Here’s what you need to know about it.

How an offer in compromise works

In short, an offer in compromise is where you tell the IRS how much you can pay toward your tax debt without causing yourself financial hardship. The IRS will evaluate your offer and decide whether to accept or reject it. If it accepts, you’re off the hook for the remainder of your debt.

In order to be eligible for an offer in compromise, you must file all your necessary tax returns by the tax deadline — April 18, 2023 — and not be involved in an open bankruptcy proceeding. Small business owners must also have made all their estimated tax payments during the year. If you’re not sure whether you qualify for an offer in compromise, the IRS has a screener tool to help you find out.

To submit an offer in compromise, fill out Form 433-A. You’ll need to provide information about your finances, including your income, assets, investments, and debt as well as your household’s gross monthly income and average expenses. The IRS will use this information when deciding whether your offer is fair. You will also be required to submit copies of supporting documents to prove your claims. You can find the list of what you’ll need at the end of Form 433-A.

In addition, you’ll need to fill out Form 656. This identifies the tax year and type of tax you’d like to make an offer in compromise for. It also lists what your offer is and how you’ll pay it. You have two choices: You can make a lump-sum payment or you can make monthly payments, up to a certain amount.

When you submit your application to the IRS, you’ll need to enclose a $205 non-refundable application fee and your initial payment. This is 20% of your total offer in compromise if you’re doing a lump-sum payment or your first monthly payment if you’re doing periodic payments. But you may not have to do this if you meet the Low-Income Certification guidelines, which you’ll find on Form 656.

Once you’ve done this, you must wait to see what the IRS decides. It could either accept your offer or reject it.

What happens if the IRS accepts your offer in compromise?

If the IRS accepts your offer, you’ll receive a notice saying so. It will also instruct you on next steps. At this point, you would submit the remainder of your lump-sum payment or continue making periodic payments as directed until you’ve fulfilled your end of the agreement.

What happens if the IRS rejects your offer in compromise?

You’ll also receive a notice if the IRS rejects your offer in compromise. It may do this if it feels that you could pay more of your outstanding debt than your offer reflects. You are able to file an appeal within 30 days of receiving your rejection notice if you’d like to.

If that fails or you choose not to file an appeal, you’ll still be on the hook for your remaining tax debt. But it’ll be knocked down a little. The IRS automatically applies your application fee and any initial payment you sent in to your bill.

It’s important to note that just because your offer in compromise was rejected doesn’t mean you’ll have to pay the remainder of your debt all at once. The IRS also offers short- and long-term payment plans to help you pay off your outstanding tax debt over time by making automatic deductions from a linked bank account. Inquire about one of these options if you need a little more time to pay what you owe.

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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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Could these economic conditions be affecting you? 

A recession can affect many aspects of your financial life. It’s a period of economic downturn, usually defined by a situation where the gross domestic product of the country declines for two quarters in a row.

A rolling recession, on the other hand, is a little bit different than a traditional recession. Finance expert Dave Ramsey has defined the term and provided some insight into whether the U.S. may be experiencing a rolling recession right now.

What’s a rolling recession?

If you’re not familiar with the term, Ramsey has a simple and straightforward explanation about what “rolling recession” means.

“It happens when parts of the economy take a downturn—but others stay positive,” Ramsey explained. “A rolling recession hits different parts of the economy at different times. Instead of the whole economy tanking at once (like it would during a normal recession), some parts of the economy skid (to) a halt while others keep trucking along.”

Ramsey explained that people may stop spending money on certain goods and services when the economy looks shaky, which would hurt those industries. But, other industries may be performing well at the time, which can help offset the weakness in other sectors and make it so the economy as a whole doesn’t look that bad.

Ramsey gave an example of a situation where gas prices are up, which could increase profits for oil companies and gas stations. This has happened in recent months in the U.S. But if people are cutting back on other purchases, like new appliances, the manufacturing sector could see reduced profits even as the oil companies do better than ever. Ramsey said this has also happened as people stopped buying discretionary items due to high levels of inflation making necessities more expensive.

Since Ramsey gave several real-world examples that could suggest we’re in a rolling recession, it’s clear there’s reason to believe that this might be happening in the economy now. Ramsey also pointed out that some experts believe this is what’s going on. “Some economists think we’re currently experiencing a rolling recession, while others believe downward trends in some industries are just a sign that a full-on recession is headed our way.”

How you can prepare for a recession (rolling or otherwise)

For practical purposes, whether we are in a rolling recession right now or are about to enter a full-blown recession may not matter much. The fact is, there are worrying signs in the economy, and you could end up feeling the impact of them. You’ll want to be prepared if things go south.

The best way to do that is to make sure you have money in an emergency savings account. This should be money that is easily accessible whenever you need it. You should ideally have enough cash to cover three to six months of living expenses, although if that is hard to do, saving as much as you can is still important.

An emergency fund will protect you against devastating loss if a rolling recession (or full-blown recession) disrupts your work. You can use the emergency fund to cover the basics and then rebuild it during a period of recovery that inevitably follows recessions of all types, rolling or otherwise.

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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.

 Read More