Instead of being careless with your money for the next ten years, get a head start by taking charge of your financial future right out of the gate. Take a look at some of the most beneficial money saving tips for college graduates.

1.  Know Your Goals

In order to save money, you need to know what you plan on doing with your money once it starts flooding (hopefully) your bank account. When you graduate college, you may not have the complete direction for your life mapped out – who does?

Although you can’t totally control your future, or who will offer you a job, one thing you can control is the development of your goals.

How much do you actually need to live on? What standard of living are you comfortable with? When should you learn about 401ks and IRAs? Is it ever too early to think about saving for your future? What kind of car do you see yourself driving?

The answers to these questions will undoubtedly direct your future – and they shouldn’t be ignored.

It’s important to establish your long-term and short-term goals so you will be able to maintain order of your finances both now and in the future. Developing a post-college financial plan is one of the best decisions you can make.

2.  Stay In Control of Your Educational Debt

Another great strategy for saving money is to pay down your educational debt as soon as possible. And since many student loans don’t require repayment until after graduation, paying your loan debt is probably a new concept – one that has dire consequences if it’s pushed to the back burner.

Although making the minimum student loan payments is required, paying more than the minimum each month will help those loans vanish quicker. Not everyone will be able to double their monthly student loan payment, but remembering to include your student loan repayment into your post-graduation budget will help you stay in control and help build your credit.

3.  Adjust Your Financial Perspectives

It’s a mental game – the way you think about and approach your finances will go a long way in helping you save the money you earn. While college offers more freedom, most students live in a relatively safe bubble of existence while earning their degrees.

When you’re a student, all of mom and dad’s money seems to get labeled as disposable. You tend not to notice the money that pays for school or books or food; it’s almost as if college has tricked you into thinking money is easy to get and will always be there.

But once you start earning your own income, paying your own bills, and taking care of yourself financially, your financial perspectives should change accordingly. The income you earn should be respected enough to develop wise strategies for managing, saving, spending, and even investing.

4.  Keep Your Spending In Check

One of the most responsible decisions you can make when it comes to your post-college financial landscape is to re-define your wants and needs. When you can eliminate self-deception and honestly separate your needs from your wants, you will take charge of your income and graduate into responsible adulthood.

Without gaining control of your spending, you’ll soon find yourself trapped within debt wondering where you went wrong. Instead of searching for tips in ten years about how to get out of debt, appreciate the benefits of financial responsibility and spend wisely today.

5.  Seek Advice and Learn From Others

The last bit of advice for saving money as you begin your life after college is something you’re already doing if you’re reading this article – don’t be too proud to seek wise financial advice from family, friends, or other respectable outlets.

Research the topics that you don’t understand, get help with the areas that you struggle with, and always be teachable when it comes to your bank account. None of us make the right decisions 100% of the time. But what separates the wise from the unwise is the humility to know when you need help. Never stop learning and never stop saving.

We examine the rise of the tiny job economy below.

Digital Work Erases Barriers
In an age where an increasing percentage of work is done virtually, it is no longer necessary (or in some cases, even desirable) for someone to be in your office while performing tasks for you. A Yahoo Finance article offers an instructive example:

“Fernando Navales threw himself into the work, taking between 30 and 40 ‘gigs’ per day (often photographing restaurants for Microsoft’s (MSFT) Bing search engine). Over the past year, he has completed about 750 gigs—and this new kind of employment has changed his perceptions of the working world.”

It’s a great deal for companies, too. After all, why hire a full-time employee (or tie up an existing employee’s time) with tiny jobs that can easily and capably be done by a consumer? Websites like Gigwalk offer a system for companies to hire “tasksumers,” as they are now called, to perform miniscule tasks for modest pay.

What Kinds of Jobs?
Naturally, the types of jobs assigned through these networks tend to be quick, “one-off” tasks. Yahoo lists the following examples, which are typical of the tiny jobs being posted for completion:

• $35 to test customer service experience at a well-known store
• $4 to photograph restaurant menus
• $29 to stand in line at a restaurant and deliver food to a nearby office

No one expects to get rich from a single job, but taking on many jobs can cumulatively result in a substantial part-time or even full-time income. Tiny jobs aren’t limited to manual labor, either. Some companies, like CloudFactory, harness the same concept for data entry or technical tasks. Some websites even segment their remote workers by skill level and track record, allowing companies to have their choice of the highest-quality talent for the short-term tasks they need done.

Resume-Building For the 21st Century?
One of the less-discussed benefits of tiny jobs is the potential career boost it can provide. The most common complaint among people who lack work experience is that no one wants to hire them. But with tiny jobs, someone with a meager resume can build work experience one task at a time and weave those tasks into a narrative that makes them appealing to a traditional hiring manager.

Naturally, a resume full of menial tasks isn’t going to turn many heads, but career-minded workers can accept tiny jobs more strategically. For instance, someone who spends six months doing data analysis for various companies can piece together a resume that captures these experiences and use that to pursue a long-term role.

Conceivably, someone with a stellar track record in excelling at doing tiny jobs could even get hired full-time by one of the companies that he or she worked for. After all, most firms would rather hire someone they already have established a good working relationship with than roll the dice on new and unproven talent from outside the organization.

For example, one of the goals we have is for our little one be financially savvy with her money when it comes time for her to move out.

Raise a Super Saver

Here are five ways parents have successfully gotten their kids into saving their money.

1.  Match their savings: Low interest rates can be great if you want to refinance a loan, but it’s terrible for savers, especially young ones. With banks paying pitiful rates right now, parents might want to boost the return on the account by offering a match. Depending on their age, you perhaps may do a 1 to 1 match with their contributions. If they are older and can save a bit more, you can still choose to create an incentive by giving a bonus on a monthly or quarterly basis.

2.  Have them be a part of the team: This year for the family vacation perhaps you can involve your kids with the spending plans. Everyone one who pitches in the pot can have a special activity planned. Perhaps your little one can save up for an ice cream shop visit after visiting the park. Plan ahead and help them to see how much certain activities cost. Perhaps the kids can team up for a common goal – a win-win for the family.

3.  Make it a contest: If your child loves to compete, having a contest with a prize at the end can help  show him or her the value of saving for long term goals. If they save up enough for a video game console, like an Xbox by a certain date that you two choose, then offer to get them a game or additional controller.

4.  Keep it visual: Let’s be honest – saving money at the bank isn’t the most exciting thing for kids. Help them out by having a visual reminder of the progress they’re making, perhaps a chart or poster of what they are saving up for along with their current savings.

5.  Set the example: This is the best way to encourage your kids to save – lead by example. Whether it’s saving for a car, their college fund, or your next vacation, show them that you save as part of your money routine and it’ll be easier for them to follow.

Right now we’re saving our little one’s small savings in an online bank. When she gets older we’ll work with her on using her money to reach her goals.

Thoughts on Kids and Savings

For all the parents reading this, what has worked well for you and your family when it comes to getting your kids to save?

Moving to an IRA can give you more freedom with your investment options, as you’re not tied to only the stocks that your old employer offered.

Where to Move Your Money

One of the first questions you may have is deciding which brokerage to roll  your money into so you can get your IRA off to a good start. If you already have an IRA with someone you can easily roll it over there so you can maintain a simplified financial system. If you don’t have an IRA already opened or you’re not happy with your current brokerage, here are some things to consider to find the best option for you and your money.

When looking at brokerages, check their fees, including commissions. As you’re building your investments you don’t want fees eating up your returns.

Open a Traditional or Roth IRA?

The great thing about IRAs are the tax advantages associated with them. With Traditional IRAs you can deduct your contributions. With Roth IRAs, your withdrawals are usually tax-free. You have to decide what is best for your circumstances. For us, we decided to have Roth IRAs.

Currently annual contribution limits for either account are $5,500 if you’re under 50 and $6,500 if you’re older. That gives you a great opportunity to stash your money away over the years.

Using Index Funds for Your Portfolio

You don’t need much money to get started with investing. You also don’t need a complicated plan. There are many ways to diversify your portfolio easily. One way to do this is by investing in index funds.

Looking for low cost index funds and Exchange Traded Funds(ETFs) can be beneficial for your portfolio. These are funds and ETFs that track a market index such as the S&P 500.  Since they are typically not actively managed but automated you have much lower fees.

Building Your IRA

Now that you have gained control over your money and have it in an IRA it’s time to set up an easy to maintain system to grow your portfolio. The easiest way to stay on target for your investment goals is to go ahead and automate your IRA contributions. It has certainly helped us avoid skipping deposits.

You may have a fixed budget now, but if you simply increase your contribution every time you get a raise, you’ll be surprised at how quickly you build up your investments.

Thoughts on Rolling Over your Money

How many of you have money left in a 401(k) at an old job? Are you rolling it over to your current brokerage or will you start fresh?

Below, we explore several different approaches to savings (and the pros and cons of each) to help you pick the right one.

Sporadic Savings

Sporadic savings is the default approach of most individuals. In lieu of any specific plan or system, they simply put various amounts of money away at random times when it’s convenient. There are any number of reasons why this is not the ideal approach. Over the long term, it is sabotaged by human nature, our reluctance to delay gratification, and the overall lack of consistency inherent in the approach.

That said, there are some people who would be well-served by sporadic savings. For those with irregular or unpredictable income (say, freelancers) putting money away randomly is infinitely better than not saving at all. Likewise, individuals living paycheck-to-paycheck on extremely tight budgets should certainly save when they can if the only other option is not saving. That said, sporadic savings should be seen as a temporary “stopgap” solution, used only to tide you over until you have steadier income.

Scheduled Savings

The polar opposite of sporadic savings is scheduled savings. As the name implies, this refers to any savings system that is automated, such that a fixed amount of money is being saved each month or pay period. This approach is vastly superior because it removes guesswork and volition from the process. Essentially, savings comes to mirror an assembly line that functions like clockwork to gradually build your wealth.

Scheduled savings is ideal for anyone whose income is both steady and sizeable. If you have excess cash left over after paying your routine bills (and other obligations like retirement, investments, etc.) then you are a prime candidate to set up an automated savings transfer at your bank and let it work for you.

Purpose-Driven Savings

Purpose-driven savings is a hybrid approach. Its defining feature is not the regularity or the amount of savings—depending on the person, these could vary. Rather, purpose-driven savings is about why you save. Very simply, not everyone is motivated by the abstract goal of “savings.” To them, the typical reasons for saving (security, stability, etc.) are just obstacles to buying what they want right now. Instead, these people are much more likely to put money away for specific and compelling reasons: a down payment on their dream home, or their college tuition, for instance.

With purpose-driven savings, your goal is so powerful and appealing that simply thinking about it is enough to make you sacrifice for it. This overcomes the lack of intrinsic motivation to just “save” for its own sake.

The Envelope System

Another solid option for those who find themselves lacking in natural motivation to save is the envelope system. This approach works because of its simplicity. Each month, you decide how much you are willing to spend in each area of your life: bills, entertainment, food, etc.

After doing so, you put those amounts in envelopes that belong to each category. Once you spend each envelope’s contents, you are prohibited from spending anything more in that category until you get paid again and replenish it.

The envelope system is best suited to those who are not naturally “wired” to handle their money. Instead of forcing themselves to mentally juggle their money and responsibilities, the envelopes spell out their spending decisions for them, allowing you to buy whatever you want in each category as long as you only spend the allotted amount.

Infographic by Column Five Media

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No Money for Your IRA Contributions?

With those tax benefits, you’d think that most people would  be aggressively contributing to their IRAs. However how many people actually maximize their contributions (currently it’s $5000/year)? Why is that the case?

One of the biggest obstacles I hear from people about why they are not contributing money into an IRA is that they don’t have the extra money in their budget. With budgets already tight, they feel like retirement contributions are out of the question.

The good news is that you can make some adjustments to your budget that will help you save for later without drastically sacrificing your budget now.

Finding Money in Your Budget

If you’re looking to jump start or increase your retirement contributions, here are some big ways to find money in your budget.

• Proper Withholding on Paychecks: If you haven’t reviewed your w-4 in awhile, you may want to look at it again. When it comes to withholding on your wages, you could optimize your finances by simply adjusting to what could work best for you. For some, being conservative with their withholding means they can get a bigger refund come tax time, which they can immediately use to fund their IRAs in one swoop. For others, getting more money in their paychecks throughout the years can be the right choice as they set up automatic contributions to keep them on point.
• Take a Week to Shop Insurance: Sometimes we can get into a comfortable habit of staying with the same insurance company simply because we’re used to dealing with them. There’s nothing wrong with being loyal to a good company, just make sure you’re getting value for your loyalty. For us, switching car insurance has cut our premiums by almost half. For my mother, calling around got her current insurance company to lower her bill.
• Consolidate Student Loans: If you qualify for lower rates with a student loan consolidation, you should seriously check it out and run the numbers. The money saved can then be redirected towards your IRA.

None of these adjustments will hamper your budget now, yet they can save you a good amount of money. If possible, once you make the change set up an automatic contribution to your IRA so you can stay on target.

Thoughts on Funding an IRA

I’d love to hear from you about your retirement contributions. How did you find money to contribute to your IRA? What has been the easiest adjustment you’ve made? What has been the hardest?

Did you receive a K-1 form? It’s not a common form for most taxpayers but questions about K-1s are some of the top questions we are seeing at this time in the season. This is a document that partnerships, LLCs, S-corps, estates, and trusts use to describe to owners/shareholders what income they are receiving from the entity.

Basically, it’s a schedule that allows you to see what income you received during the tax year and the Schedule K-1 is used for pass through entities.  Realize, too, that you might receive a K-1 form if you are invested in a fund or an Exchange Traded Fund that operates as a partnership. As a result, you’ll get a form that states your portion of the profit or loss associated with the partnership.

If you are a partner or shareholder in a pass through entity, you probably received a copy of the Schedule K-1, filled out to describe how income has been distributed to you. The information from the K-1 is then put on your personal tax return.

The entity issuing the K-1 forms files them with the IRS. The recipients use their copies to make sure that they are paying the appropriate taxes.

Will You Get a K-1?

If you own a business with someone else, such as a partnership, then that business will issue you a K-1 to report your share of the income, credits, and deductions. If you own a business by yourself, either incorporated or as a sole proprietorship, then your business won’t issue a K-1.

There are a few other cases where you will receive a K-1 and not realize you were to get one – the most common has to do with your investments. If you invested in a master limited partnership (MLP), then you will receive a K-1 because MLPs are set up as partnerships with shareholders being limited partners in the enterprise. If you invested in an Exchange Traded Fund, some of those ETFs will issue K-1s if they are organized in a way that requires it. These ETFs are often trading in commodities such as gold, silver, natural gas, or oil.

Parts of the Schedule K-1

There are three different sections of the Schedule K-1:

1. Issuing entity information: This section includes information about the entity issuing the K-1. It has the EIN, as well as the address and the IRS filing location of the entity. You can also find the publicly traded partnership status, if it applies.
2. Partner/shareholder information: This is the area where the individual partner/shareholder information appears. It includes the tax ID number (usually a Social Security number) as well as name and address.
3. Financial details: In this portion, the partner/shareholder can see information about his or her profits and losses related to the entities activities. So, if you have received a distribution from your LLC, or if you have income from a partnership or S-corp, this is where it will appear. Your losses also appear in this section. This is the longest section of the form, and additional pages might be attached if warranted.

The tricky part for you, the taxpayer, with a K-1 is timing. Unlike 1099 and W-2 forms, which are due to the taxpayer by the end of January (mid-February at the latest), a K-1 isn’t due until mid-March. Employers and banks know how much they’ve paid out to people by January 1st, so the 1099 and W-2 deadlines are reasonable. Since businesses need more time to file their tax returns, the K-1 isn’t due until March 15th. That gives you just a month before taxes are due.

If you actually own the business, you can prepare your own K-1 when you prepare your business taxes.

If you still have questions about your K-1, don’t forget TurboTax has tax experts who are CPAs, IRS enrolled agents, and tax attorneys available to answer your questions, free so you can file before the tax deadline.

Build Your Nest Egg and Save on Your Taxes

Don’t ignore the tax benefits of building a nest egg. A 401k and traditional IRA will give you a tax break today by allowing contributions to be considered tax deductions.

You may be getting ready to file your taxes before the April 15th deadline.  You can still make a contribution of up to $5,000 to your IRA ($6,000 if over 50) by the tax deadline and take a tax deduction for the contribution on your 2012 taxes.  You can build your nest egg and at the same time keep more of your hard-earned money.

If you opt for a Roth IRA you won’t see a tax break today, but qualified withdrawals in the future will come out tax free. If Uncle Sam is going to provide a benefit for saving money, take advantage of it.

Use Your Tax Refund to Build Your Nest Egg

After you file your taxes and find out you’re getting a tax refund, you can contribute some of your tax refund to your IRA and get a head start on tax savings for next tax year while growing your retirement.

Contribute a Little More

If you have a 401k at work or you opened up an IRA these vehicles are a great start, and if you’re already contributing something, that’s all the better. The thing is, you can always do more. Chances are you aren’t maxing out your 401k so there’s room for improvement.

You may be thinking that there’s simply no way you can afford to put more away, and it’s true that money is tight in this economy. But you don’t have to feel like you’re taking on another mortgage payment just to boost your retirement savings.

Start small. For example, if you’re currently contributing $200 a month, bump it up to $250. 50 extra dollars a month doesn’t seem like it will help, but over the long run it can be a big difference. Just the extra 50 bucks a month over the next 25 years tucked away in your retirement account will likely add up to $30,000 or more.

Whether you bump up your contributions 20 dollars a month or 200 dollars a month, the idea is to make it a habit every year. When you make a small bump to your monthly contributions your budget won’t take a noticeable hit.

Sure, you might feel the pinch initially, but it doesn’t take long before your spending adjusts and you completely forget about the extra money you’re putting into your nest egg. Now, if you make the same small increase each year it won’t take long before you’re putting a lot of money away toward retirement and you don’t even realize it. You will be thanking yourself when it comes time to rely on that money.

If you aren’t currently building up your nest egg with a 401k, IRA, or even just a savings account, now is a perfect time to start. Just like the advice above about starting small, that’s probably how you’ll want to start for the first time.

If you can’t afford to max out an IRA right now that’s perfectly fine and nothing to be ashamed about. Start with 25 or 50 dollars a month. Sure, that alone won’t give you the retirement of your dreams, but we’re just trying to build a foundation and get into the habit of saving.

Over time you will increase your contributions and it all adds up. Remember, every day that passes is one less day you have to save. You can’t get that time back, so save something, anything, and it will pay big dividends and help you save on your taxes.

Investing has never been easier than today with all the options available for people to really use their savings to achieve the dreams and goals for the future. No savings to become a smart investor? Consider your tax refund to start investing in the stock market like a professional.

According to the IRS, the average tax refund in 2012 was about $2,803 and that is more than enough to open a brokerage account and start investing your savings for the future. In fact you can start investing with a lot less.

It is an interesting year for investors. After the Financial crisis of 2008 and 2009 the stock market has recovered and now we are in what experts call a “bull market”, a market in which prices of company’s stocks are rising and investors are encouraged to buy shares.

The performance of the stock market is remarkable. From the bottom of the market in March 2009 to February 2013, the price of stocks has risen 89% based on the S&P 500, the stock index composed by the leading 500 companies in the US. That represents an impressive average annual return of 17% in the last 4 years.

That return outperforms by far other investment alternatives such as bonds, money market funds, certificates of deposit or real estate. However, there is more risk involved when investing in the stock market. That means the returns change a lot from one month to the next or even from one day to the next.

But the stock market is a good alternative to achieve long term goals such as retirement when the risk is properly managed and balanced with your age and goals.

Your tax refund could be your pass to the world of investments:

-As soon as you get your tax refund this year, go to an investment brokerage firm or even your own bank and open an Individual Retirement account (IRA). An IRA is a vehicle in which you can invest your money and obtain a tax advantage: every dollar you put  in the IRA is reduces  your taxable income so you pay fewer taxes as you invest your savings.

-When you have your IRA, you can pick mutual funds to invest your money in. A mutual fund is a collection of stocks, bonds and cash alternatives. The Mutual Fund manages the money from many investors (hundreds or thousands) and that allows the small investor to have their money managed by professionals.

-You can pick among thousands of different funds with different objectives. There are funds for stocks, for bonds or funds that invest in a mix of stocks and bonds.

-Your selection of the fund depends on the risk you are willing to take with your money. For instance, stocks are riskier than bonds. However, in the long run the annual return for stocks tends to be higher. And you will need a higher return to achieve long term goals like retirement.

-How much risk can you take? It all depends on the time you have to achieve the goal. If you have 20 years for retirement, you can take a lot more risk than if you plan to retire next year.

-The tax refund is only the starting point. Once you open the IRA account you should sign up for automatic investments to contribute every month to the IRA account.

-Your finances are going to be transformed because you will be officially an investor with real long term goals.

- Haven’t filed your taxes yet?  Go online and file your taxes so that you can get your tax refund as soon as possible, make these smart investment moves with your tax refund, and keep more of your hard-earned money.

Did you participate in a March Madness pool in 2012?  Don’t forget to claim your winnings and to deduct your losses.

Infographic by Column Five Media

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Invertir nunca había sido tan fácil como ahora gracias a todas las opciones disponibles para que la gente  realmente aproveche sus ahorros para lograr los sueños y metas para el futuro.

¿No puede ahorrar para convertirse en inversionista? Considere su devolución de impuestos para empezar a invertir en la bolsa como un profesional.

De acuerdo con el Servicio de Impuestos Internos (IRS), la devolución promedio de impuestos en 2012 fue de cerca de $2,803. Esa cifra es más que suficiente para abrir una cuenta de inversiones y empezar a invertir sus ahorros para el futuro. De hecho, es posible empezar a invertir con mucho menos.

Es un año interesante para los inversionistas. Después de la crisis financiera de 2008 y 2009, el mercado de acciones se ha recuperado y ahora estamos en lo que los expertos llaman un mercado en auge (“bull market”), un mercado en el que los precios de las acciones de las empresas están aumentando y los inversionistas están interesados en comprar las acciones.

El desempeño del mercado de acciones ha sido sobresaliente. Desde el punto más bajo del mercado en marzo de 2009 hasta febrero de 2013, el precio de las acciones aumentó 89% con base en el S&P 500, el índice de acciones  compuesto por las principales 500 empresas de Estados Unidos. Esto representa un impresionante rendimiento promedio anual de 17% en os últimos 4 años.

Este rendimiento supera de lejos a otras alternativas de inversión como bonos, fondos de mercado de dinero, certificados de depósito o inversiones inmobiliarias. Sin embargo, se asume más riesgo cuando se invierte en el mercado de acciones. Esto indica que la rentabilidad cambia mucho de un mes a otro e incluso entre un día y otro.

Pero el mercado de acciones es una buena alternativa para lograr metas de largo plazo como el retiro cuando el riesgo se administra adecuadamente de acuerdo a la edad y las metas del inversionista.

Su devolución de impuestos puede ser su entrada al mundo de las inversiones:

-Tan pronto como reciba su devolución de impuestos este año abra una cuenta de inversión en una firma de corretaje o en su propio banco. Abra una cuenta de retiro individual (IRA). El IRA es un vehículo en el que usted invierte su dinero y obtiene una ventaja de impuestos: Cada dólar que invierta en la cuenta IRA reduce su ingreso gravable y así paga menos impuestos mientras invierte sus ahorros.

-Cuando tenga una cuenta IRA, usted puede seleccionar fondos mutuos para invertir su dinero. El fondo mutuo invierte su dinero en acciones, bonos o alternativas de efectivo. El fondo mutuo administra el dinero de muchos inversionistas (cientos o miles). Esto permite que el dinero del pequeño inversionista sea gestionado por profesionales.

-Usted puede seleccionar entre miles de fondos diferentes con objetivos diversos. Hay fondos para acciones, para bonos, o fondos que invierten en una mezcla de acciones y bonos.

-Su selección del fondo depende el riesgo que esté dispuesto a asumir con su dinero. Por ejemplo, las acciones tienen más riesgo que los bonos. Sin embargo, a largo plazo el rendimiento de las acciones tiende a ser mayor. Y usted necesitará rendimientos más altos para lograr metas de largo plazo como la jubilación.

-¿Cuánto riesgo puede tomar? Todo depende del tiempo que tenga para alcanzar el logro. Si a usted le faltan 20 años para jubilarse, usted puede asumir mucho más riesgo que si planea retirarse el próximo año.

-La devolución de impuestos es sólo el punto de arranque. Una vez usted abre una cuenta IRA usted puede registrarse para realizar inversiones automáticas para aportar cada mes a su cuenta IRA.

-Sus finanzas se van a transformar porque usted empezará a ser un inversionista con metas de largo plazo.

-¿No ha presentado sus impuestos todavía? Puede ir a Internet y presentar sus impuestos para obtener su devolución de impuestos lo más rápido posible, empezar a invertir y hacer que su dinero rinda más.

Most income is taxable income but there are some examples of non-taxable income and we’ll look at both.

Taxable Income

There are many types of taxable income. The income you earn from working as an employee is taxable, as is the income you earn when you are self-employed, or the income you receive as a business owner.

You are supposed to report income from wages, fees, commissions, tips, stock options and even fringe benefits. The fringe benefits you receive, even if you don’t receive cash, are taxable as income. Realize, too, that even if fringe benefits are given to someone else, or used by someone else, you are considered the recipient.

Investment income is also considered taxable. This includes income from the sale of investments; you pay capital gains on this income. You also pay taxes on income from interest earned on deposits, as well as from dividends paid out. Gains on collectibles sold (which includes physical metals) are also reported as taxable income.

You are also supposed to report and pay taxes on income from royalties. This includes royalties from copyrights, patents, and properties that produce mineral, oil and gas. Realize, too, that you pay taxes on bartering income. You will need to figure your gain for what you received in barter, although you can offset the income with the bartering services or items you provided.

Non-Taxable Income

There are a few income sources that aren’t taxable, here are some of them:
• Some disability insurance payments: While payments from a policy paid for by your employer are taxable, you don’t have to pay taxes on payments when you receive them from a plan that you pay for with after-tax dollars.
• Gift receipt: You don’t have to pay income taxes when you receive a gift. Taxes on gifts are paid by the giver – although the giver doesn’t have to pay taxes until the gift exceeds the exemption amount. Understand, though, that a prize isn’t a gift, and you pay taxes when you win a prize.
• Life insurance payout: You don’t pay taxes when you are the beneficiary of a life insurance policy.
• Municipal bond interest: When you invest in municipal bonds, they are most often tax-free at the federal level – and even usually at the state level (if you live in the state of issuance).

TurboTax will ask you questions related to your income to help you include your reportable income on your taxes.  If you still have questions, only TurboTax will let you speak to CPAs, tax attorneys, and IRS enrolled agents while you prepare your taxes, free.

1099-MISC – The 1099-MISC, arguably the most common 1099, was created to cover all sorts of miscellaneous income such as freelancer income and work as an independent contractor. If you’ve received any sort of income over $600 form any source, be looking for a 1099-MISC in the mail leading up to April.

1099-INT – For those of you who’ve earned income from interest, such as investment or savings accounts, you will be using the 1099-INT to report this income to the IRS. This form details exactly how much interest income you’ve earned.

1099-S – Another 1099 that seems to be gaining in popularity as of late is the 1099-S form, which details real estate transactions. This form is pretty straight forward, and you should receive the 1099-S from your broker explaining your income from your real estate deals.

1099-C – The 1099-C reports any of your debts that were cancelled in the past year. As an example, if your credit card company settled the debt that you owed by forgiving $3000, then you would be required to report that amount as income on your tax return.

1099-R – For those of you who have been planning for the future, the 1099-R will find it’s way into your mailbox if you have taken money out of your retirement account or pension plan. Yes, those withdrawals are likely considered income.

1099-DIV – One of the last more “common” 1099 Forms is the 1099-DIV, which will be important to you if you have earned income based on dividends and distributions from your stock portfolio.

A Wise Approach

The overall purpose of the 1099 is to make sure that you, your source of income, and the IRS are all in agreement about your earnings. For a complete, comprehensive, and expert look at all 20+ 1099s, you can talk to a Turbo Tax professional about which forms you should be expecting.

Remember that all your sources of income will not arrive on one 1099 form.

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Finding Unclaimed Property

What is Unclaimed Property?

What qualifies as unclaimed property varies according to state. For the most part, insurance companies, investment companies, utilities, banks, and other business (like medical testing businesses), are required to turn over inactive accounts. This property is considered “unclaimed” or “abandoned.” If you can prove you own the property, you can claim it for your own.

Here are some examples of what might be considered unclaimed money or property:

• Uncashed paychecks
• Investments
• What’s in a safe deposit box
• Savings and checking accounts
• Accounts at failed banks and credit unions
• Payments you are owed from various businesses (such as with pharmaceutical trial participation)
• Positive utility accounts that still contain money after you’ve disconnected
• Unused gift certificates/gift cards (but only in a few states)

Many states use this money to fund various operations. The money is still yours, but states can earn interest on it. Once you prove that you own the money, you can claim it, and the government will turn it over.

Locating Your Unclaimed Money

It’s possible to fairly easily locate your unclaimed property, if you have any. One of the best places to look is MissingMoney.com. This site lists unclaimed property held by states, where the money came from, and how much is available. It’s also possible to use the Treasury Hunt tool at TreasuryDirect.gov to find out if you have unclaimed savings bonds.

The FDIC and NCUA offer tools for finding money at failed financial institutions, and the Pension Benefit Guaranty Corp also provides information about abandoned defined-benefit plans, and the National Registry of Unclaimed Retirement Benefits offers something similar for 401(k)s. Sometimes, you’ll actually be called in the event of a forgotten account.

Claiming Your Money

In order to claim your money, you will have to prove you are the true owner, through documentation. In some cases, the unclaimed property you find actually belonged to someone who has passed on. In that case, you will need to show a death certificate, and prove that you are an heir, and authorized to collect the money on behalf of the estate. Once you locate your unclaimed property, find out from the agency that has it what you need to show as proof of your right to it.

Realize that you don’t need to pay anyone to claim your property. There are firms that can track down your unclaimed property and help you get it back, but these are completely unnecessary. You can get the information for free, and there is no reason to ever pay anyone to get what’s already rightfully yours.  The best step to take is to go to directly to your State Controller’s website.  This is the single best source to check and see if any money being held by your state belongs to you.  Your state’s site will direct you on the proper steps you need to take to collect your money.

With a few minutes of digging, you can find out if you have unclaimed property waiting for you. It’s not a bad way to spend a little time, and you just might profit from it.

You: But the title­—

Sorry, but that refers to rental properties you own.

You: Now how could I possibly own the property if I am renting it?

If you’re the landlord.

You: I knew that.

There are many tax benefits available to those who own rental properties.  As an important example, most modifications you make to your rental property result in tax savings of one kind or another.

You: How so?

It depends.

You: On?

Whether the changes you make to the property are considered improvements or repairs.  Whereas repairs may be immediately tax deductible, improvements must be depreciated over time.

You: What’s the difference?

What’s the difference between improvements and repairs? Or what’s the difference between an immediate tax deduction and depreciation over time?

You: Actually, both.

Fair enough.

Home Improvements

Improvements vs. Repairs

Like they sound, repairs don’t make any permanent changes to the property; they simply put the property back to a previous state.  Said another way, repairs don’t add to the value of the rental property.  Consequently, expenses such as the cost for a plumber to go fix a toilet or for an electrician to replace a circuit are textbook examples of repairs.  But, so too, are far more expensive costs, like the expense of painting your property or fixing up part of a roof where it might be leaking (again).

On the other hand, expenses you incur which increase the life of the property or add value to it are considered improvements.   Replacing the whole roof, for example, is an improvement. Although you wouldn’t necessarily think of a new roof as immediately increasing the value of the property, it certainly increases the expected useful life of it and consequently is considered an improvement.  Obviously, additions and similar major upgrades are considered improvements as well.

Tax Deduction vs. Depreciation

Repair expenses may be immediately tax deductible from rental income. This means you’ll reduce your taxable income from the rent you collect by the exact amount of the repair expense.  On the other hand, costs for improvements must be depreciated or divided over their useful life.  As a result, improvements add to the amount you can already depreciate related to your rental property on an annual basis.

You: What does that mean?

Say you decide to add a new piece of furniture to the property. Furniture typically has a five-year life, at least according to the IRS (that you and your tenants might have completely different opinions is not relevant).   If the price of the furniture is $500, you can depreciate $100 a year for five years.  Since a couch is not a repair, you cannot immediately expense it.

Between improvements and repairs, there’s plenty of tax savings opportunities if you’re in the mood to get to work (and to spending) this summer.

Five Simple Saving Strategies Part 1

Here are the first five of ten easy strategies to increase your savings level without becoming cheap.

Saving Strategies

Strategy 1:  Don’t become emotionally separated from your money.

Remember when a grandparent or special aunt gave you a dollar bill?  As a child, you enjoyed simply having the money, looking at it, and even counting it.  You knew exactly how much you had and you planned exactly how you were going to use it.

How things have changed!  Now your paycheck is direct-deposited and you charge most every expense. You don’t have a clue how much money you have in your wallet until you find yourself at a place that doesn’t accept credit cards.

This emotional separation from your money makes it much easier for you to spend more.  Try using cash instead of credit cards for a while.  Keep track for a couple of months and see if your expenses decrease.  Handing over six hard-earned twenties is far more difficult than charging $119.40 on a credit card.

Strategy 2:  Understand and be honest about expense classifications.

Think of discretionary expenses as “wants” and nondiscretionary expenses as “needs.”  But be careful.  Frequently, people categorize wants as needs. Incorrectly labeling your expenses limits your ability to take advantage of additional savings opportunities.

Think about decisions you make every day. Are the bulk of your purchases legitimately needs, or do you just view them that way? Eating is a need. Eating out is a want.

Strategy 3:  The time to lower your “needs” spending was yesterday.

Despite successful efforts to limit discretionary spending, many people still struggle with saving.  Typically, this is because their nondiscretionary expenses are just too high for their income level.  The best way to handle this is to avoid the situation in the first place.

It is you who must care enough to review your spending priorities before you make a commitment to an apartment lease, mortgage, or car. Just because someone will sell you something doesn’t mean you can actually afford it. You determine your nondiscretionary expenses when you sign your name. Keep that point in mind next time.  Knowing that additional nondiscretionary expenses could take a significant part of your monthly income for a year or longer just might motivate you to not choose the one with “all the extras” for “just a few more bucks a month.”

Strategy 4:  Enjoy free stuff.

Depending on your interest, you can go on a long hike, sit in a park, talk with a friend, read a book or newspaper, lie on the beach, or play sports with friends without spending a dime.  Many people think they can’t have a good time unless they spend a fair amount of money.  But that belief is based on what has been successful for them in their recent past, not on reality.  When you were younger, there were hundreds of days in which you had no money to spend, yet you were as busy and as happy as ever.  Can you try just a day or two like that this month?

Strategy 5:  Major on the major.

Don’t spend much time evaluating minor expenses, such as where to buy pizza. Rather, put major focus on major purchases.  A car and a place to live are obviously major expenses.  What else is major?  Regardless of your age, financial aptitude, or income, a good rule of thumb is to treat anything you can’t pay for entirely when you buy it as major.  Spend serious time evaluating those purchases to ensure you can afford what you are buying, and you value every feature you’ll be paying for over the upcoming months and years.

Check back for part two of simple savings strategies soon.