Get Your Finances In Order This Year (S4E4)

Tuesday, January 2nd

How can you clean up your finances for this year? When should you start? How will the latest tax bills affect your filing next year. Sheri and Kris have the details. 

Transcript - Not for consumer use. Robot overlords only. Will not be accurate.

As the year winds down to a close there's so much to think about where your finances are concerned. They're all sorts of ways to help yourself out at tax time. There's all sorts of ways to be thinking about managing holiday spending. I mean the end of the year is not the end of your financial literacy. Chris Carroll Syrian lands this is her money the podcast. Her money is. I answered like kill financial. Hi I'm only natural with Carol finance something whether you're saving for college met matching your retirement caring for aging parents are seeking a second opinion about your financial plan our team that's tested and experienced advisors can help you navigate through it out to secure financial dot com and click on the coffee cup to set up the complimentary consultation with one of our advisors are cost seven employees that factory 8000 thanks to Carol financial we believe that our clients' best interests is the only interest that matters. Let's talk about some of the steps. That Smart to take as we come to the end of. The calendar year sure well. You got to begin with how well do you know your tax situation because I think thinking through taxes. Is sort of the important thing in my mind. And I would tell you that that needs to start probably before Thanksgiving but he if it hasn't started. And you hit Thanksgiving it definitely needs to be from senator. Okay. There's a number of you know there's a number of little things you can do but they're all different depending on your personal tax situation if you don't do your own taxes you may not know and pray pray to to to try to make some of these decisions. But if you do you you probably have a pretty good hold on it so one of the things we look at is. Is investment income and what your year to date investment income look like. That may be small it may be large. And and we start thinking about are their losses I can take somewhere. That'll reduce our tax bill. One of the other things you think about tax wise is. Property taxes so a lot of people pay their property you have gotten your property tax bill some time where I'm here. It's usually do in early January. So the decision to Haiti it in this year or next year can actually be a pretty big decision. Why because it's it's deductible. Lincolnshire federal income. And do you need to deduction. In 2017. In this case were in 2018. So what I always thought in this may be arm I may be about to learn something major here I always thought that. You had to pay your twenty will cease Tony seventeen yeah I have to pay my 2017 property taxes in 2017. If I wanted to abduct him from my 2017 taxes. Yeah if you if you wait until Tony eighteen that's deductible and Tony eighteen now tell you historically there's a lot of people who wait till the next year to pay them. But particularly. This year it may be extremely important that you pay that tax bill and Tony seventeen. And let's talk about why I cherish so this is a great big giant deal yet for most this wage earners yes so. Part of the tax bill that's on the table right now. Is the elimination of state property taxes as federal deduction is Yelp so it may well be that if you paid dues property taxes and Tony seventeen it's a deduction from here Tony seventeen. Federal income tax but if you pay him and Tony eighteen. There's not a deduction at all they can go in the body yeah that that's deduction could just disappear soon. That's a particularly. And that's a particularly important ones this year. I also tell you that. If you prepaid. Some state taxes and Tony seventeen back to be good thing to so here's the thing. Let's say that you work total state tax bill for Torre seventeen was going to be. 7000 dollars from just kind of OK number OK but you actually only paid 6000 of it during morning seventeen. And then you've paid the other thousand before April 15 when you files next year. The 6000 would be deductible. For 1000 wouldn't. Oh OK the deductions based on what you paid. Not a what you food. So if the state deduction goes away one of the things you don't wanna do is under pay your state. Income taxes guys have only seventeen. And that's something we've been talking to clients about a lot recently because it's kind of you know it's a little unusual. Right after Amanda never even thought about it before and how all how likely. And everything right now politically is a crapshoot. How likely is it that this this bill will go through into law and the average person is gonna lose all of these deductions yeah. You know I I think it's pretty darn likely at this point you really get oh yeah being there. There are minor negotiating points. To get around but it. You know I was I was surprised how quickly it happened what two weeks ago yeah that's really kind of went through the house. And if it was gonna get really hung up somewhere. I expected it to get hung up in the house and then maybe the senate passed some version. And they couldn't reconcile which is the house do you think you know it didn't do it moved through a lot of fashion the rough Ottawa. Now. Even if one if he gets if he gets if it happens in the next couple weeks. It's probably not here is Primerica affect 2017 taxes anyway discovered 2000 doesn't need team. If it doesn't get. It's dairy likely the first thing that gets done when congress is back in session Torre eighteen. Which means it'll be retroactive to junior one of Tony eighteen so and so any excuse my reluctance either way so I think it's very likely late. Maybe it's 80%. That this is gonna happen and that that. I'm particularly karma state taxes auctions going away. Other than deductibility of state taxes go way I think that's 80% I think it's one of the I think it's one of the cleanest. Things to point out and say let's get rid of that deduction and and the reason has. While it affects every one. The wealthy are the ones with the biggest state tax deductions usually so it's actually when you've got a Republican tax bill. Where you can point to a part of it and saying look this is worse for the wealthy. It's more likely to get past race. Does that does that make sense of there's there's some clear stuff that's that's gonna be sticking points and hard to argue but that's one where you can really say. We we get rid of this this kind of deduction and and give people a larger standard deduction. That absolutely helps the middle class time. Our bid. I mean it doesn't John meant well you're not to get all no no no I mean it really doesn't look at how well here's the thing in in any. Kind of action forms are winners and losers and every one is colored by Howard tax reform affects them they can't help but be colored by how it effects that. But there's always and be winners and losers and you've got to look at the whole thing and say who were the winners who were the losers and are we OK without. I think ultimately that's the decision that that that the person that a person should make instant whether they're in favor of it or not in favor of it. Is let's be honest about who were the winners in this and brutal looser some us. And and a lot of times that you know a lot of times it's hard to drive down just that. You know particularly the more complicated these things get harder gets to say who's a real loser and who's the real winner. When people talk about simplifying the tax code in tax law I mean that's to me the most hilarious show so prisons because. Even when you try to simplify it's like you said you drill down you start peeling back it's the least simple thing in the world absolutely. But as we've established on this podcast I am not a sophisticated financial person and a paycheck. And mortgage interest deductions I have a couple of children of dependence. I have my property tax deductions. I think that you know for the average working person in this country. Tipped to have any of that stuff taken away is stating this because a straight up Steiger he's the duke it means. Anything that affects our ruin not enter anything that affects children's deductions because I think giving but he raises kids is for an expensive you know how many got. He his many tax breaks as you possibly get. It if if you're going yet you know if you're spending that kind of money that it takes Sri skids how to surrendering. Absolutely vital that. Now if they can make that standard deduction high enough that it makes up for it. That's great but inevitably there going to be some people without just not gonna happen I mean they you know and and again. I haven't seen a final bill. So anything we serious Steelers fan of this right in the end who unfortunately. You know I'm not very political shares so episodes it's always hard for me you know I'm common in all your money on our owner I numbers right circle until we have a final bill on the table and we know what's gonna be enacted. I think once we do there are numerical ways I can look at it and say. Is it good or bad and shooters are really fact without that route being on the table. It's just we're guessing you and we're looking at each individual separate issue. Like you know who you are saying rather than looking at the big patent pact is looking at the trees instead of the forest. I think it's computing time they do tax reports complicate 'cause the tax who'd yeah so. Really it's to mistreat them we have by far the most complex tax code in the world I only do we know it works Chris I'd be willing to bet there's not a personal lives who understands the US how about a number and talked about it too much to none of personalized. There's there are brilliant tax specialists. Who know enough about it that they can you didn't go find the answer grey to anything else right. But there's so much in the US tax cut it's it's just ridiculous what one of the things we talked we've talked about on her money is the difference between IRAs and 41 kings. And the end of the year is time to also look at IRA Obama and Carla we can't. Good and yeah that's a great points or how much of you put into your forward okay how much you put into an IRA if you have it or Roth IRA if you have a I don't know if we've talked before about what what Roth purses regular means in kind of what the differences are between a Roth IRA at a regular hiring are. Here's if you would mean really simplify this OK okay with an IRA or get a tax deduction. So it's like I've put in pretax money OK but not with the raw with her often don't get a tax deduction socialite cap put in after tax money. Both of them grew tax deferred meaning you can you don't pay taxes on the gains. And the raw fiery when you take it out it's not taxable. Because you've already paid to charter pays taxes on the so that Roth money be is we never gets taxed again as always you follow the rules and there's there's a few simple rules don't leave him for five years. You're sure is fear 59 and a half the person. Very small exceptions to that for hardship opened fire first room. Things like that actually have a really small exceptions but anyway cluster back so Roth vs career you're Eric. If you are. More than fifteen years from retirement. You should be trying to do Roth. If you were less than fifteen years from retirement. He should be. Probably doing a traditional. Okay that's that's a look that's a rule farm who we tell you why it is without Roth because you never pay taxes again. It's got an awfully long time okay. To groove took compounds that magic of compound interest. And then you never paying taxes again sort of over a long period of time that's a huge benefit. Felt the IRA you're going to be taxed when you take it out. There is a benefit to the growing without your paying taxes. But that didn't have to mitigate it a little bit by a factor when you take it out you didn't do your duty tax and I don't have the magic of time plus compounding interest necessary yet you have back compounding up until the point when you take it out. Works for you. So here's a question are you required to let's say years listening right now you have an IRA or Roth serve regular IRA. Are you required to this sock whatever money you're gonna get in for 2017 and by midnight December now are you urging you haven't. How until you file type file taxes right so here's here's the important thing you know if you if you have a for a warranty work. He can't do you can't get a deduction for regular IRA. Craig great take our for taxes. So that you can make a Roth contribution and so we've even if you have a forewarned you work you can still make a Roth contribution. All the way up until whenever you file your taxes this year. So that eases up some pressure that's not one where you know it's unlike your property taxes or tick tick tick you have till midnight December 30 wanna up. So calm which is nice and and there's a few things so there's IRAs there's Roth IRAs and there's you were called sep IRAs for self employed people all of those you kind of get until you file your taxes to make our contribution. For the prior year. So we talked a little bit about saving let's talk about spending beyond the data on consumer spending over Black Friday and Cyber Monday was released not too long ago and the numbers look good for retailers I think it was up 16% is huge huge over last year. Or the cyber sales particular Justin made numerous artist thing that said. Ten years ago those two and a half percent of sales should Christmas sales in this year's going to be Tony 5% which is Christmas sales my below that are online. That's amazing you're from two and a half percentage point 5% in the last ten years. And and it's accelerating it's getting more and more and and I don't know how other people do it but. I can't even imagine trying to get the stuff that's on my Christmas list for other people by going distortion. Well one of the issues with that is and I national terrible about it because it's bad news for brick and mortar retailers play it. Com you go to the stores and it isn't there yet there's no exact and I don't blame them for not stocking the inventory yeah now. So it's a frustrating experience and a on. Excess spending is up that's good grade. Because some of these retailers do you have like let's say the gap or banana republic whatever they do or traditional brick and mortar yeah. But they have they had a pretty robust online sales season to get. It's spending is up that means people are spending that's good supporters some strategies between now and the end of the year to get that bad boy in check. Do you what she and millions ST dislike do you dislike. Lately it if you can make the legs for store credit cards to you know so I hate. Certain characters are terrible and I know that they're going to be great deals you know if you have you start off for whatever. I hate them. Would admit to having one I have had one referee very very very long time actually feared once I had a and just sort of keep it in my my wife and I do pro shop there are so it's not. Has vowed that they really are bad they hate your credit they hear your credit worse than a regular credit card okay because it's it's. It's an additional revolving line of credit. Tennis. Talk about that Sherman Nixon I think that's an important. I think you know and apparently the worst kept secret in all your history you know accused of crazy things. Most of the store credit cards and then if you if you know exist just solution to now for second a lot of people don't know this almost every one of those store credit cards will allow you to buy more than your limit. 00 in a heartbeat can stink about it if I'm I don't wanna pick on a company let's say our company that sells very nice underwear. Can I happen to have a store credit cards that you can get to should come to to to the store a lot. I give you credit card and it's for. 250 dollar limit not very much you know nothing crazy. But you go live and you buy a new word for your dad and socks for your uncle and you know under sure that your husband then the next thing you know. You go up to the registering you've got 275. Dollars worth of stuff. Now are they gonna not sell you Tony five dogs with the thought they'd rather not do dad and dad they they wanna show you the stuff that's their stuff anyway they're making money so a lot of times they'll sell you more. Did what your credit limit was well guess what happens when they report that to the credit card agency. They report news being over your limit. So so guess what anytime you have a car that's over your limit that pitcher credit pretty hard even if it's only this little 250. Let you do it in a heartbeat. So G student credit bureaus like when their when all the credit stuff is being reported even if you're not over your limit. Today look at lake cure you g.s are your Amex differently than they look at your. John how is popcorn yeah credit different it's a different category of credit draped. If you ever look at your credit report you'll see. And you'll see the different categories of credit so like. The money that you have your house mortgage loan that's a different category of credit a lease car weren't were obese. Normal MasterCard or exits are and category. And then the store cards usual faltering lines or credit the loser that's a different category. So what it makes sense let's say your person who bombed doesn't like to say no to people and they cashier almost started to cry asking you to open the store credit card to get an extra. 10% of subpoena trail we've all been there afraid. And you've opened some of these accounts and you're not really using them and they're just sitting there are you better off citing those accounts down in terms of the. Overall they yes credit so I sure I've told you before that you keep the line of credit open for a long time as a good thing right but not historic card not store cards close it down such as bad boys down again I have one I've had a for a really long time. Hadn't. The way I found out that tell that you go ever actually it was about a year after I got an I whenever my bouncer didn't because my wife and I bought some stuff on the same day. And they let me go to my balance my freaked out humorous is in sight a yeah so I wouldn't I was so mad I. Appealed for my credit and again this is a decade ago but it really it was a learning experience for me I was like wait you'll just let me spend an hour for your little was it was like. I think we have a 500 dollar limit and Reese we were like 600 tornadoes in world war. Why don't play over an eight imam and it was just random because it was during the stormy year my wife for shopping and I was shopping separately. We do we didn't know the left handed a note to write him I was doing. But he was a big wake up call for me. So question because this is the time of the year where emotion and is to make in the decisions. Sentimentality. I'm just out there and do it all a woman gets all. Tangled up with money and it's Altera is this time right you wanna give your kids the greatest Christmas or Brad. Doesn't lose when you have a credit card where you're not over your limit. But you're approaching your limit that and add your credit and mr. master card sends you email on goes head drop girl you're getting close. That's bad for your credit tell us why hustler happens every month the credit card companies are reporting to the credit agencies. What sure credit available. And and you. So having I think I talked about the soccer show while back but if you have a Tony 5000 dollar limit even which is a ton of money like credit. If you're Tony 3800. Dollars hatched terrible for your credit. And how long does it stay terror it's months and months. That's one of the kind that actually gets. That's one of the things that actually gets updated every month doesn't it doesn't keep your credit hard. So if you're the kind of person that pays off your credit card every month and then every one soul while you get an up close it it might go an actual month or some thing right. So as long as you pay it off from the bill comes every time they reported it's a zero. It's a zero balance okay right so I hope hope you got a 5000 are limit. But you pay it off every month and some months it's 500 and some months it's 100 in the U took a trip somewhere and it went up through. Three I woes long is your paying off every month. Every month they're reporting zero as you're so that doesn't hurt your card right there reporting zero as your total balance and 5000 measure limit. So if they're going to report. Based on what do you know coming what did you pay it down to at at the last thing so go back. Right or Christmas a lot of people that have credit when push their credit and you know advice I would ride at all or maybe they don't pay the whole thing off. That month may be no it's gonna take them a few months. This interest and you'll actually see their credit rating you're down a lot in common January February march and mankind and then I kind of creep back up and it actually it doesn't realize that with with that score. It does not permanently affect your credit this is not something this gonna show back off. Two years later in somebody's gonna say oh wait here for years ago you have. Lot of money and credit card you know it's not like that this is is one of those things he gets updated quickly and changes. And and really so what it's of what it's trying to avoid a Tikrit regions. Rating agencies are trying to avoid is you grow up occur colonel Lott and anger get a New York. Guy. I'm as you can see how that might be an unhealthy yeah right yeah that's the thing out of the best advice I can give somebody going into Christmas. Some people are budget Hearst but jitters usually have no problem with Christmas it's the people us that don't naturally budget. Even if we have good spending habits. And and are really into running a budget we should budget for Christmas. Because your emotions really take you in this craziness. Why is there any history because who knows you know it is easy to wake up one day and realize you somehow spent. 10% of your annual salary. On Christmas so. That's insane. Well I mean you have a few kids in their asking for the you know they're asking for like and spot will then yeah it's easy are you now. Our sister or something your sister's kids some thing and oh my gosh cousin Larry's coming then I gotta get something for him and my mom and my dad my in laws and Ballmer won't normal bottle now before you and how it out of control your barn Christmas presents for 45 people or something you know that's that's insane. So here's what we want to remember aren't from this episode. You wanna watch you were credit limit. Who do you want to be very careful if you have a store card not to go over yeah pay it any attention to is they're not gonna pay attention for use on their store clerk so you wanna think about if it's possible if you have the bucks to pay your property taxes by the end of 2017. And and you want to avoid doing what I do which is having a blowout Christmas on the assumption that in January you're gonna win enough money on a stretcher. Manifesto session because I'm here to tell you that's my plan every year and not one never has never asked. No not once our network and arms talk some more about holiday spending. And giving money and gift cards and all of that in the next episode of her among the podcast. Hey if you want more information about what we talked out on today's show or if you just how much other questions about money. This is our website it's www. Carol financial dot com. Or you can only should mean email whether it's through the podcast or through my website I'd be happy to help if I can't. Good money is sponsored by general financial. Paddy I'm only now absolute Carol financial whether you're saving for college red mapping your retirement caring for aging parents are seeking a second opinion about your financial plan. Our team that's trusted inexperienced advisors can help you navigate through it out. This to Carol financial dot com and click on the coffee cups to set up a complimentary consultations with one of our advisors are come seven F four back factory and 8006. Carol financial legally that our clients' best interests is the only interest that. Matters to her weight I guess is host of I mean Sherry lynch and meet Chris Carol our executive producers are no trial by. And Carol poke to our producers have their fur and our technical director and editor is Billy black special thanks Emily Nestle and Marion Edwards extra information from this episode or to listen other episodes and subscribe to this podcast to visit. Her money podcasts dot com. Herman podcasts is now on Twitter follow us tweet us at her money podcast email us your questions asked questions at her one podcast dot com. You can even use your phone's voice memo out to record your question. And email it to questions at her money podcast dot com and listen we might complain on the shout. The Herman podcasts production of inner calm Charlotte and Carol financial. Securities offered through security advisor networks LLC member finreg SI BC advisory services offered through Carol financial associates Angel registered investment advisor Carol financial its interior advisor networks are not affiliated.