Money and Marriage - Part II

Budget

 You may want to set a budget to stick as close as possible to expected spending limits. Start by recording current spending in these areas, and then agree on the amounts you want to spend in the future. 

• Rent or mortgage payment

• Utilities, including electric, gas, water, garbage, phone, internet, cable

• Food and supplies, including grocery, kitchen items, liquor, and eating out

• Entertainment, including travel, vacations, local events, holiday decorations, Netflix subscriptions, tech gadgets, books, etc.

• House maintenance including repairs, cleaning, lawn care, appliances, and decorating

• Automobile, including gas, insurance, licenses, and maintenance

• Clothing and accessories, including dry cleaning

• Health care, including pharmacy, doctor’s visit, and HSA contributions

• Personal care, such as haircuts, nail care, etc.

• Tuition and/or education expenses

• Contribution to retirement and savings accounts

• Charitable contributions

• Taxes, including federal, state, local, school, and property

• Paying down credit card or student loan debt

Retirement

What does retirement look like to both of you? Having this conversation will be enlightening. Know that dreams and goals will change over time and as retirement approaches.

You’ll want to have an idea about what you’d like to spend during your final years so that you can make plans to start accumulating that wealth now. The sooner you start, the more years you have to build up your retirement assets. 

Monitoring your progress

Keep an eye on your account balances to make sure everything is as it should be. Review bank and brokerage account statements and/or your budget once a month or at least once a quarter so there are no surprises or trends that sneak up on you.  

When you reach your goals, reward yourself. Managing money is hard work, and you deserve to acknowledge and celebrate your achievement. If there is anything we can do to help make your financial dreams come true, please reach out any time.  

What's with these new forms?? 1 of 4

Form 1040 – U.S. Individual Income Tax Return 

Along with a change in tax laws, another visible change that taxpayers will have to deal with when filing their 2018 Tax Returns is the “new and improved” Form 1040. Gone are the 3 options available for taxpayers for years 2017 and prior, 1040, 1040A, and 1040EZ. Therefore, since Forms 1040A and 1040EZ are gone, the best comparison is between 2017 and 2018 Forms 1040.  

2017 Form 1040 has now been separated into one main form and 6 additional schedules. In this series, we will try to help you navigate through the new form.

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Sooooo much empty space.

Page 1 - Includes personal information for the Taxpayer, Spouse and Dependents in much the same way the old form used to show this information. On this page, you will find information fields for the paid preparer, again similar to the old form. And finally, signature blocks for all applicable parties will be found on this page. In previous years, these information fields would have been found in the 2017 Form at the very beginning and at the very end of Page 1 and 2, respectively.

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Even more empty space….

Page 2 - The majority of basic returns, ones reporting only wage income with standard deductions, will use this form and report that information on page 2. This page can also be seen as a summary page for items detailed throughout the schedules, when necessary. Additionally, you can find your annual tax liability as well as refund or amounts due on this page.

Schedules 1 and 2 next…

Money and Marriage - Part I

One of the biggest things that can cause fights in a marriage is money. No matter where you are in a relationship, it’s a good idea to discuss these major money topics so you’ll know where you and your partner stand. 

Show me the money:  Combine, keep separate, or both

One of the best ways to avoid conflict is to put your money into three separate ‘buckets’: yours, your spouse’s, and a joint set of accounts. In this arrangement, each of you has control over some money that is your own. The household spending will then come out of the joint account, and both will make contributions to it on a regular basis. 

As a couple, you’ll need to discuss who is responsible for what as well as what your regular contributions to the joint account will be. This is not an insignificant discussion. The more thorough you are, the less conflict you will have over money.

One spouse or partner will normally handle the joint finances, and it’s typically the person with the most accounting knowledge. However, both should have access to this account in case of emergency.

Savings and future purchase goals

Do you have goals about upcoming large purchases?  These might include:

• A home purchase or improvement

• Children’s education

• Health care needs

• Saving for retirement

• A car purchase

• A second home purchase

• A vacation

• Another item such as a boat, furniture, technology gadgets, a plane, or something else

• A nest egg or cushion

If so, calculate how much you need and make a plan to set aside the money you need in the agreed upon time frame. 

Spending

Do you like to spend more than your spouse? Or is it the other way around? When money is flowing, there is usually no problem. When money is tight, that’s when the problems arise. 

When there are conflicts in the area of spending, it is best to focus on priorities. If you are in agreement on your priorities and goals, it can often shift spending habits.  

Stay tuned for Part II…

Where’s my refund?!?!

The first filing season after the Tax Cuts and Jobs Act (TCJA) went into effect has shown a reduction in refund amounts of about 8% (as of mid-February ‘19) from prior years. However, one of the more important numbers taxpayers should focus on is their tax liability. Did you pay less taxes on the same money from 2017 to 2018? More? What was your effective tax rate? In 2017? 

Only time will tell the true effects and consequences of the TCJA, but in the meantime it’s wise to focus on the right numbers and what they mean to each of us specifically. This focus will help avoid surprises in the future and the time to do it is now. 

How to Save More in 2019

Many people in their retirement years have regrets about not saving more during their earning years, but you don’t have to be one of them. All you need to do is be realistic and proactive about saving. It’s all about paying your future self.    

Circumstances can arise that can erode savings you hoped would be there for retirement. Some of those events include not being able to work due to poor health or a bad job market, unanticipated hospital bills, a divorce, overestimating Social Security benefits, bad investments, procrastination, and simply not realizing how much you need to live on. 

The good news is you can prevent future regrets by making a strong savings plan now. As a small business owner, you may not have a retirement plan, so it’s essential that you create one for yourself. You earn an income today. Put some of that income toward paying your future self, and pay that “bill” first each month or each paycheck. 

To be proactive and build as much savings as possible, take these steps:

1.     Increase your financial skills by learning how to fund your retirement, including all that traveling you’d like to do.

2.     Take care to manage your investment risk and be realistic about investment returns. In good markets, purchase rather than rent or lease so you are building an asset.

3.     Put as much aside as you can, and try living just below your means.

4.     If you do have periods where you are out of work, try living frugally until your income is back to normal.

5.     Optimize your business profits and apply some of them to your savings plan.

6.     Minimize taxes where possible so you can keep more of what you make.

7.     Make everything work twice as hard for you:

a.     Get credit cards with loyalty programs.

b.     Sign up for frequent customer programs to earn points.

c.     Make sure your bank is giving you the best deal on interest.

8.     Sell unused belongings on eBay and put the money in savings.

9.     Cancel used subscriptions and memberships for both your personal and business needs and move the saved money to savings.

10.  Periodically reach out to vendors to get a better deal on the expenses you incur. This could be for phone plans, utilities, and any other routine expense. Put the difference saved in savings.

11.  Select cars and trucks with good gas mileage and also high resale value. Consider that using Lyft or Uber may be cheaper than maintaining a car, depending on how much you drive.  Put the difference in savings.

There are hundreds more ways to save more, and these will get you started in the right direction for 2019.