Money Management

Don’t assume that tax break is something you’re eligible for. 

Before the pandemic, remote work was something only a small percentage of people could take advantage of. But between 2019 and 2021, the number of people primarily working from home tripled from about 9 million people to 27.6 million people, according to the U.S. Census Bureau.

If your home is where you primarily do your job from, then you may be wondering if you’ll be able to write off a home office on your tax return. The answer? It depends on the type of employee you are.

What’s your status?

To claim a home office deduction, you cannot be classified as an employee of another company. Rather, you need to be classified as self-employed. And this is where a number of people risk making a mistake on their tax returns.

Even if you work from home 100% of the time, if you’re on a company’s payroll, it means you aren’t eligible to claim a home office deduction. And if you take that deduction when you aren’t supposed to, it could cause problems with your tax return and delay your refund from hitting your bank account.

Do you qualify for a home office deduction?

Even if you are self-employed, that doesn’t automatically mean you’ll be able to claim a home office deduction. To qualify for that write-off, you must satisfy two criteria:

You must have a dedicated space within your home used solely for work purposes.Your home office must be the primary place you work from.

So, let’s say you have a room in your home with a desk, computer, printer, and filing cabinets. There’s no bed in there, so it’s not a bedroom. The only thing that happens in that room is that you get your work done. That meets the first obligation. But you can’t, for example, sit at your dining room table every day working and call that room your home office. That’s not the main/sole function of the room.

Meanwhile, let’s say you work out of your home office 95% of the time, and you occasionally work for an hour at your local Starbucks to get a change of scenery. That still counts as your office being your primary place of work. But if you rent a desk in a coworking space that you use 80% of the time, and you only work from your home office one day a week, you can’t claim the deduction — even if that room in your home only serves as an office.

Make sure you know the rules

Claiming a home office deduction when you’re not entitled to one could complicate your tax situation and cause your return to get audited or rejected. And not claiming a home office deduction when you’re entitled to one could cause you to lose out on a tax break that could save you money.

Neither situation is ideal, so it pays to read up on how the home office deduction works before filing your taxes. And if you’re not sure, consulting a tax professional is always a good idea.

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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 Starbucks. The Motley Fool recommends the following options: short April 2023 $100 calls on Starbucks. The Motley Fool has a disclosure policy.

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Anyone with high car insurance costs should read this.  

When buying auto insurance, it’s important to shop around because the cost of a policy can vary dramatically from one insurer to another. The size of the premiums that come out of a policyholder’s checking account are also determined not just by which carrier is providing coverage, but also by a variety of other factors.

Finance expert Dave Ramsey has identified seven possible reasons why car insurance premiums may be more expensive for some drivers. Motorists should be aware of them, because there are some factors they can change in order to pay less for coverage.

1. A low deductible

A deductible must be paid for covered claims by the policyholder before an insurer covers the remainder of losses. Ramsey explained that a lower deductible results in higher insurance premiums because the insurance company takes on added risk.

2. A valuable car

When a vehicle’s value is higher, insurance premiums are higher too, according to Ramsey. That’s because it would cost more to fix or replace a costlier vehicle in the event of a covered loss.

However, there could be some exceptions to this general rule. If a more expensive car has more safety features than a cheaper one, it may actually come with lower premiums due to the reduced chance of a collision or of serious injuries. Ramsey doesn’t address this issue specifically, but he says safety features impact premiums.

3. A poor driving record

Drivers who have a history of problems will pay higher rates because they present more risk. The reverse is also true, as Ramsey explained.

“Speeding tickets, DUIs and other violations will skyrocket your rates, but a safe driving record can lower it,” the Ramsey Solutions blog reads. “Some insurance companies even offer good-driver and safe-driver discounts. See if you qualify for one of these to lower your existing rate.”

4. A history of claims

Drivers who have made claims in the past are viewed as higher risk by insurance companies, as insurers generally want to avoid having to pay money out. The more claims a motorist has made on their insurance, and the more expensive the claims, the higher the insurer’s future premiums will be.

5. A long commute

The more a policyholder drives, the greater the risk they present since more can go wrong with increased time on the road. This is especially true if a commute that happens regularly takes a long time or requires traversing dangerous roadways.

“Long commutes or traveling on especially dangerous highways will increase your rates,” Ramsey advised. “That’s why insurance companies ask where you work on your application.”

6. A low credit score

Ramsey believes credit scores don’t matter, which is why it’s somewhat surprising that he points out a credit score below 600 will result in higher auto insurance premiums. He’s right to highlight this issue, though, as insurers check credit reports and scores and use those to help establish risk and set rates.

7. A dangerous location

Finally, Ramsey explained that motorists who live in areas with lots of accidents will end up paying higher insurance costs. This is usually an issue for people who live in cities versus suburbs or rural areas.

Each of these factors can affect insurance costs dramatically and, the good news is, drivers can have a positive impact on their premiums by understanding them and making changes where they can.

Anyone concerned about the cost of car insurance premiums should start thinking about how they can reduce their costs by doing things like taking a driver safety course or improving their credit. These efforts can pay off when they result in lower auto insurance premiums for years to come.

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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.Citigroup is an advertising partner of The Ascent, a Motley Fool company. Christy Bieber has positions in Citigroup. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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The quick answer? It all hinges on your personal expenses and income. 

By age 35, you’ll ideally have the whole adulting thing down to a science. And maybe you’ll even be in a place where you’re able to save money consistently.

But how much savings should you have by age 35? Well, that depends on your living expenses, and also, how much money you earn.

What your savings account balance should look like by age 35

As a general rule, you should have enough money set aside for emergencies to cover at least three full months of essential expenses. And so the amount of money you need in your savings account will hinge on what your monthly bills look like.

Let’s say that between your various essential bills, you spend $4,000 a month. That means you should have a minimum emergency fund of $12,000.

However, you may want to aim higher. By age 35, you might have dependents, a mortgage, and a home to maintain. So the more financial protection you’re able to give yourself, the better.

In fact, some financial experts actually advise building an emergency fund with up to 12 months’ worth of savings. So if you want more peace of mind, run the numbers, see what you spend each month, and then multiply that figure by up to 12, if you can swing it.

What your retirement plan balance should look like by age 35

By age 35, you shouldn’t just be looking at a decent chunk of money in your savings account. You should also have a nice sum of money in an IRA or 401(k).

While retirement might still be several decades away, it’s important to start building up a nest egg at a relatively young age. And also, the sooner you start putting your money into a retirement plan, the sooner you can start investing it so it grows into a larger sum.

Fidelity says that by age 30, you should aim to have the equivalent of your annual salary in a retirement plan. By age 40, you should have three times your salary. So by age 35, your goal should be to have 1.5 times your salary socked away. If you earn $80,000 a year, that means you should, ideally, have $120,000 in your IRA or 401(k).

Now, it’s worth noting that a lot of retirement plan balances lost money in 2022 due to stock market volatility. So if you had 1.5 times your salary before the market tanked, but you have a little less now, don’t worry — you’re still in good shape.

What to do if you’re behind

Whether you’re behind on regular savings, retirement savings, or both, the answer is really the same — start putting the process on autopilot. If you arrange to have money move from your checking account to your different savings accounts, you might get back on track more easily. And if that doesn’t work, examine your spending and look to cut back on expenses that aren’t essential.

Having adequate savings is important at any age. And by age 35, it’s certainly a good thing to have your financial house in order.

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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.Maurie Backman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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As Ramsey said, both savers and spenders benefit from this money move. 

Do you enjoy your money? Surprisingly, many people don’t actually enjoy the cash they work so hard for because it’s a source of stress. This is especially true if you worry about how you’re going to pay your credit card bills or whether you’ll have enough in your checking account to buy things you want.

Finance expert Dave Ramsey has some advice so these financial worries don’t have to be your fate. In fact, he suggests that doing one basic thing can actually enable you to get a lot more enjoyment out of your funds. The big question is, is Ramsey right about this?

Here’s how Ramsey says you can increase your enjoyment of your money

Ramsey’s solution to enjoying your money more is a simple one: You need to make a budget. He believes doing this will enable both savers and spenders to be a lot happier with their money-management efforts.

It may seem hard to believe the process of allocating your dollars to different tasks by using a budget would actually improve your financial life. After all, budgeting can feel kind of tedious and create the impression that you’re depriving yourself by forcing yourself to live on strict limits. But there are some very good reasons why budgeting can improve your life.

“When you’ve got everything covered in your budget, you know there’s space for spending,” Ramey explained. “You won’t worry about the electric bill not getting paid because you decided to treat yourself to a new sweater. If you’ve got a clothing or personal spending budget line, and there’s money in there to buy the new sweater — buy it!”

Ramsey said savers will also enjoy making a budget because “a budget gives you permission to stash cash, without being a Scrooge. Once you’ve budgeted for all your needs and a couple of fun things (trust me, savers, you should budget for fun — even if it’s just a little) you can put all that extra money in savings. With zero regret.”

Is Ramsey right?

Ramsey is 100% spot on about the benefits of budgeting. The reality is, you may not like the process of making a budget, but if you do it right, you should enjoy living on it because it allows you to get the absolute most value out of your money and to make sure you can enjoy the things that matter most to you.

A budget doesn’t have to remove the fun spending from your life and — in fact, it shouldn’t, or you won’t stick to the plan. A budget gives you a chance to spend your money more purposefully so you are actually using it for the entertainment and splurge purchases you really want. And it enables you to do this without guilt or constant stress about money since you have a plan in place.

When you make a budget, for example, you could eliminate the unnecessary spending you do on things that don’t really matter to devote more of your money to whatever your passions are, whether that’s vacations, fancy handbags, or a better car. And if you work these items into your budget while also making sure you’ve allocated funds to saving for the future, you’ll actually get to enjoy them more without worry.

So give Ramsey’s advice a try. Find a budgeting approach that works for you and put your plan in place today.

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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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