Smart On Money

Personal finance topics including budgeting, debt reduction, investing, income creation and saving.

Main Menu

Articles by Miranda Marquit

Looking For A Job? Don’t Forget The Tax Deductions!

By 2 Comments

In this tough economy, a lot of people are looking for jobs, or for one reason or another have just quit their job. If you've spent some time and effort — and money — on your job search this year, you might be eligible for a few tax breaks.

Indeed, many of the expenses that you are likely to incur during a job search are tax-deductible.

Job Search Tax Deduction

Can You Deduct That Job Search Expense?

Before you get excited, though, you need to be aware of the caveats. First of all, you can't deduct job search expenses if you have had a long break since your last job. So, if you were laid off, and then unemployed until your benefits ran out, you aren't going to be able to take the tax breaks. You need to be actively looking for a job within a short period of time after leaving your last job if you want the tax deductions.

Also, you can't deduct expenses if you are looking for your first job, or if you are changing careers. You have to be searching for a job in the same field, and you can't be fresh out of college.

If you meet the qualifications, you can start adding up the expenses related to your job search. Some of the qualifying expenses include:

  • Travel: If you fly or drive to another city to look for a job, you can count those expenses. Travel expenses include flight, mileage, hotel costs, and even a portion of networking meal costs. However, if you take a day trip somewhere fun, those expenses aren't deductible. Make sure that you only deduct the travel expenses directly related to your job search and the interviews you participate in.
  • Fees paid to employment agencies: If you pay a head hunter, career coach or employment agency a fee to help you find a job, you can deduct those costs. However, you do need to be careful. If your employer reimburses you for your employment agency expenses, you can't take the deduction. If you take a deduction in one tax year, and your employer reimburses you in another tax year, you are supposed to report the reimbursement, up to the amount you deducted, as part of gross income.
  • Resume services: If you pay fees to have a professional help you with your resume, that is tax deductible.
  • Printing and mailing costs: Costs associated with printing your resume and mailing it out, or mailing other application materials (such as cover letters and letters of recommendation), can be deducted when you prepare your tax return.
  • Calls: If you make phone calls to potential employers, and you incur costs to call them, you can deduct those expenses.
Remember, though, to keep good records. Make sure you save receipts, and make notes of the job search activities you engaged in. You will need to keep copies of your records with your tax return so that they are handy if the IRS decides to audit you. It can help to talk to a tax professional or an accountant before you deduct your job search expenses. You want to make sure you are on the right track, and deducting appropriate expenses.

Are You Ready Financially And Emotionally To Buy A Home?

By Leave a Comment

One of the big financial and life milestones that our society still values is the purchase of a home. We assume that a home is going to be a solid investment, even if it's more of an emotional investment than a financial investment.

But are you really ready to buy a home? Casey Fleming is the founder of LoanGuide.com, and he has decades of experience in the mortgage industry. He sees plenty of people buy homes when they aren't ready for the financial and emotional commitments that come with home ownership.

house

Financial Preparation to Buy a Home

Before you buy a home, review your finances. Are you truly ready for the cost? “You need to have the savings, credit, and income to support the purchase,” says Fleming.

It's not just about saving up for a down payment. Fleming points out that there are ongoing maintenance and repair costs associated with being a homeowner. “Your landlord will no longer come when the dishwasher breaks,” he says. That's something that you are in charge of. From yard care to repairs, you are in charge of caring for your home.

Not only that, but you also need to consider the costs of insurance and property taxes. These are expenses that will impact your finances in the long run, and you need to be prepared. Also, be on guard against being house poor. The cost of paying for your home and maintaining it can mean that you don't have the money to do other things.

Emotional Preparation to Buy a Home

Don't forget that a big purchase like a home means emotional involvement as well. You need to be ready for the changes that home ownership brings into your life and the way you live it.

If you have a lot of debt, buying a home and adding to that debt will only strain you further. Additionally, both you and your partner need to be on board with the purchase. Otherwise, you'll end up unhappy over the home.

Another reality is that your lifestyle might change. “When you buy a home, your life changes,” says Fleming. “No more exotic vacations, and you usually can't pick up and go rock climbing for the weekend.”

Instead, you have duties and expenses that mean you need to consider the impact of long absences. On top of that, you have less flexibility in living arrangements. You can't just break your lease and leave when you own a home. You need to be sure that you are emotionally ready to put down roots in one place before you buy, and realize that your home ownership ties you to a specific location and lifestyle.

Before you buy a home, make sure that you are truly ready for the responsibility. This goes beyond just the financial aspects. You also need to make sure that you are ready to handle the emotional realities of home ownership. “If you don't really want to take on the lifestyle of a homeowner,” warns Fleming, “it will probably be a terrible investment.”

Is It Time to Dip Into Your Emergency Fund?

By Leave a Comment

One of the most important things you can do for your financial security is to build an emergency fund. Unfortunately, many Americans aren't prepared with a fund that they can tap in the event of a financial emergency.

The Americans that do have an emergency fund, though, might not know when to tap into it. It's easy to feel as though any setback is an emergency. Another temptation is the fact that you have a large amount of money sitting there, and it seems like you could do something better with it, like buy a new TV or go on a vacation.

emergency-fund

Before you dip into your emergency fund, you need to take a step back and ask yourself whether or not it's truly necessary. Here are some ideas for using your emergency fund appropriately:

Maintenance and Repairs

One of the best things you can do is make sure that your home and your cars are properly maintained. First of all, it can make more sense to have a separate maintenance fund, designed specifically to take care of routine maintenance and repairs. You know that your car's oil will need to be changed and that eventually you will need to buy tires. It's also clear that at some point your roof will need to be replaced, and that there are things you should do each month to keep up your property.

Creating a separate fund for expected maintenance and repairs can be a good way to plan ahead without the need to deplete your emergency fund when you have a maintenance or repair cost that amounts to less than $2,000. Consider using a small emergency fund for these types of costs.

Major Setbacks

Your main emergency fund should be built up to handle major setbacks. These are items like medical emergencies, natural disasters that damage your home, or job loss. You don't want to be depleting your major emergency fund over time if it means that you will be less able to handle your setbacks.

At the very least, you want to be able to pay the deductible on insurance claims. Another consideration is what other resources are available to you. When my dad had a heart attack and a hospital stay, his portion, even though he had insurance, was still quite large. The hospital offered a no-interest payment plan for six months, so rather than deplete the emergency fund in the name paying it all at once, my parents took advantage of this payment plan. It allowed them to take a smaller amount from their emergency fund, so there was less to do to build it back up later.

What About Paying Off Debt?

Be careful about how you use your emergency fund to pay off debt. If you have a high-interest credit card you want to get rid of, it can make sense. However, you don't want to deplete your emergency fund to the point where it is ineffective if you run into trouble. In these cases, you could easily then run up debt again. Find the balance between paying down debt and making sure you are covered in an emergency.

What is your approach to using the money in your emergency fund?

Is A Zero Based Budget Right For You?

By 6 Comments

One of the budgeting techniques that has gained some popularity in recent years is the zero based budget. In this budget, you make sure that every dollar is accounted for at the beginning of the month. You look at what you expect to get in terms of a paycheck, and then use every penny to pay bills, or accomplish your goals. As part of your budget, you decide what will go to debt reduction, or to building an emergency fund, or to your retirement account. You can also put money toward a vacation or some other goal, on top of making sure your groceries, gas, insurance premiums and other expenses are covered.  Every dollar of income is assigned to a spending, saving or giving category. No dollar remains un-assigned.

A zero based budget is also expected to help you manage your cash flow. You match up expenses with your paychecks so that you can see when to pay your bills, dividing expenses into first of the month costs and end of the month costs. You can make the process a little easier with the help of bill scheduling so that your credit card payments, utility bills and other expenses are paid automatically — on a day that works best for you.

Is A Zero Based Budget For Everyone?

Zero Based BudgetWhile I know people who swear by the zero based budget, I admit that it kind of makes me nervous. This type of budget doesn't really account for leaving a cushion (although I suppose you could budget in a cushion one month, and then it would be there for the future). I like to have extra money in my checking account at the end of the month, even after I've contributed to retirement and short term savings. It doesn't need to be a lot of money in the checking account, but I like to have a little something in there.

Another issue with the zero based budget, at least for me, is that I don't have a regular income. My income is variable. Trying to figure out exactly what I will make each month, and then matching it up with expenses, doesn't work for me, since my exact income depends on which projects I am doing, and whether I have extra money that month — or less coming in.  Of course there is the option of faking a regular paycheck when you have an irregular income.

Instead of using a zero based budget, I prefer to create a more general spending plan. I figure out how much I need each month for regular expenses that are important spending priorities. Fixed expenses, like insurance premiums, the mortgage payment, car payment, IRA contributions and utilities, are all taken care of first, via automatic withdrawal or by using bill scheduling. Then I spend on other things that I want or need for the month. I track my income and spending, so that I don't exceed what I make, but I don't create a budget to limit what I can spend on entertainment, dining out, charity or other variable expenses.

In the end, how you decide to spend your money is up to you. But it does help to have a plan. Think about what sort of plan would work best for you, whether it's a zero based budget, or some other type of spending plan. As long as my most important expenses are covered, and my future provided for, I don't worry too much about where I spend my other money, as long as it reflects my priorities.

What about you? Do you have a preferred budgeting technique?

How To Recover After Bankruptcy

By Leave a Comment

For the most part, bankruptcy should be the action of last resort when it comes to your money issues. However, there are times when bankruptcy really is the last option you have left.

If you have experienced a long-term employment problem, or if you have had a medical problem that causes you financial distress, bankruptcy might be your last option.

recover-after-bankruptcy

Once you have filed for bankruptcy, however, it doesn't mean that it's the end of your financial life. You can rebuild after bankruptcy, but it takes effort. As you work to overcome bankruptcy, and avoid financial setbacks in the future, here are some things to keep in mind:

Make Sure All the Qualified Debts are Included in the Bankruptcy

The first step to rebuilding after bankruptcy is making sure that all of your debts are included in the settlement. Everything included in the bankruptcy is covered under a single umbrella, and you want to make sure that all of the eligible debts are included in that. Whether you are filing Chapter 7 or Chapter 13, you want to make sure that everything is covered in the settlement so that it makes it easier to rebuild.

You might also need to revisit your credit report regularly to make sure that the included debts aren't listed separately. In some cases, the debts covered in the settlement are listed out separately in the credit report, and that shouldn't be the case. Check occasionally to make sure that these debts remain under the umbrella.

Reform Your Financial Habits to Get to the Root of the Problem

Your next step is to make sure that you have reformed your financial habits. Bankruptcy is a symptom of the problem, not the problem itself. Re-order your finances so that you aren't living beyond your means. You should also work toward building up an emergency fund so that you can better handle financial setbacks. Changing your financial habits so that you no longer engage in the behaviors and oversights that led to your bankruptcy can help you rebuild your situation and possibly avoid another financial catastrophe.

Use Credit Carefully Going Forward

Once you have changed your money habits, you can start using credit carefully in order to help you rebuild your credit score. Start out by getting a secured credit card so that you can start re-establishing your financial reputation. You should be careful only to spend money that you already have. Even after you have had a secured credit card long enough to begin rebuilding your credit score, you need to be careful. Once you get another unsecured credit card, you need to be especially careful in ensuring that you only use your credit card for purchases that you have money saved up for. It's best not to carry a balance, but if you do, try not to spend more than 30 percent of your available credit.

With the right approach, you can rebuild your credit after bankruptcy, and even improve your finances. Take the careful approach so that you don't end up back in the same place again.

Who Do You Trust For Money Advice?

By Leave a Comment

For many of us, it's difficult to know what to do when it comes to our finances. There are so many decisions to make.

While the basic “live within your means” advice can apply, the reality is that there is more to money management than making sure that your expenses are smaller than your income. What do you do to save for retirement? What's the best course of action when trying to pay down debt?

There's a lot to think about, and it makes sense to carefully consider who you will trust for money advice.

Who Can You Turn To?

One of the more interesting bits of information I read recently is the fact that millennials trust their parents for financial advice. A recent study from Fidelity indicates that millennials view their parents as their top choice when it comes to getting trusted financial advice. I thought about this, and this is true for me as well, even though I am from Gen X.

However, even though I generally trust my parents, and I find talking to them about money helps me a lot, the reality is that I don't really turn to them when it comes to investment advice. Instead, I look to fellow bloggers, and to people I know who have seen success with investing. Some of these folks are financial planners, but, in general, I don't get a lot of help from financial planners.

I get tax input from my accountant (I'm disappointed that, because of my move, I will need to find a new accountant). It's clear that I look to a number of different sources when it comes to getting advice on my finances. I even read books about finances to find new ideas about how to think about and manage money.

Watch Out for the Hype

You do need to watch out for the hype in a lot of cases, though. First of all, it's important to look beyond the advice and see if you can figure out whether or not someone has an ulterior motive for offering the advice. If you are working with a financial planner who is paid commissions when you purchase certain financial products or make particular investments, you might be dealing with a bias you can't really trust.

It's also important to watch out for the hype that comes with financial gurus. Often their advice is very general, and it might not apply to your specific situation. It can make more sense to look to someone else for information about your specific situation. This is where a fee-only financial planner might be able to help. A Registered Investment Advisor might also be able to give you some direction. These are financial professionals that are more likely to help you do what's best for you. Fee-only planners don't get kickbacks for recommending different products, and RIAs are bound by law to recommend what's best for your situation.

While these professionals can help you cut through the hype, you still need to be careful. After all, in the end, you are going to be the best guardian of your money. Take the time to get educated, and really learn about how money works, and then decide what is likely to be the best course of action for you.