Wise Travel - How to Save on Vacations

Wise Travel - How to Save on Vacations

With the start of winter officially setting in, day dreams of tropical islands and warm weather getaways are the subject of many a dreary workday fantasy.  The expense and extravagance of such a vacation however can seem just as out of reach, especially once all the holiday spending bills come due.

Thankfully, travel doesn’t have to translate into an indulgent expense.  By planning ahead with these savings strategies, you can enjoy the getaway monopolizing your free-time fantasies without sacrificing your budget.

Eliminate Housing Costs.  If you feel comfortable renting out your home or living space while you go on vacation, you’re likely to free up more than enough cash from your monthly budget to afford your travel expenses.  Reach out to friends and friends of friends on social media to find someone trustworthy to rent your space to, or use a site like Air Bn’B that has a peer review system to find someone responsible and willing to pay you for your otherwise empty space.

Plan Travel Around Travel.  Plan your next vacation around your next business trip.  With part of your travel expenses already subsidized through work, you’ll only be on the hook for the “extras”- like your significant other or the excursion to the local breweries.

Plan Travel Around Your Networks.  Another fantastic way to save on major travel costs is to reach out to your extended networks of friends, family, and acquaintances.  You might be able to score a free night or two in someone’s guest bedroom in addition to a free home cooked meal or two, not to mention you’ll benefit from the local perspective on wherever you’re visiting. 

Make the Most of Rewards.  If you travel frequently, be it for work or for personal reasons, make sure you’re signed up with every airline and hotel loyalty program.  Nights and flights here and there can add up to freebies in the future.  Don’t miss out by failing to take advantage of this simple savings strategy.  And check your existing rewards plans to make sure there isn’t rewards available that you are overlooking. 

Accumulate Extra Rewards.  In addition to earning perks through travel loyalty programs, you can accumulate additional rewards through incentive programs like credit card cash back categories and sign up bonuses.  If, and only if, you are a responsible credit user, get rewarded for spending you’re already doing by using a credit card with travel perks to pay the bills.  You can earn as many as 50,000 miles toward your next trip just by using the right credit card.  

Do Your Research.  Before embarking on your trip, spend some time researching both travel essentials, like local transit, and travel extras, like special activities and attractions.  Reading reviews on sites like Yelp and TripAdvisor is not only a great way to see whether an activity is worth the expense, it’s also an innovative way to find out about special deals and savings strategies.  Even a simple Google search can turn up a host of budget friendly recommendations.   Finally, take a look through popular deal sites like Groupon and Living Social to find out about any extra special discounts on local activities.

By implementing these travel savings basics on your next trip, you might find you can afford the expense of a vacation without any significant alterations to your monthly spending plan.  

Should You Buy a Home?

Should You Buy a Home?

If the recession of 2008 and subsequent housing crisis taught us anything, it is that no investment is a sure-fire winner, not even real estate.  While housing is a basic necessity, knowing when to rent and when to buy a home can get a bit more complicated.  Here are some things to consider before committing to the decision to buy.

Consider Your Timeline

Like most investments, you’re more likely to see a good return on your home purchase if you adopt a long-term mindset and implement a buy and hold strategy.  Sure, there are pro “house flippers” out there, but don’t let the glamour of HGTV fool you into thinking it’s easy.  For the average young professional, committing to a home that you’ll stay in for at least 5-7 years is the best policy to ensure that your purchase and all that upfront investment is financially worthwhile.  

First, take a long-term view of your life over the next few years and see if there are any circumstances - a marriage, a baby, a new job, going back to school, etc. - that might require a location change before putting your roots and money down.

Know Your Budget

If you’ve decided to stay put and make the commitment to buy a home, start by making an honest assessment of your current financial state.  How much can you afford to spend on a down payment and how much can you afford to spend monthly on all home ownership expenses - mortgage, property taxes, insurance, utility bills, maintenance costs, any potential condo or homeowners association (HOA) dues, etc.?  A common rule of thumb is to make sure your total monthly housing costs constitute no more than one third of your monthly gross income.

When applying for a home loan, lenders will want to see that your income is more than enough to fulfill the financial demands of your mortgage and associated ownership costs.  They will also be checking your credit score to determine what kind of interest rate you’ll get on that loan.  Make sure your score is in good shape before applying so that you secure the best possible rate - shoot for a credit score of 760 or higher.

Determine Your Upfront Investment

While you can put down as little as 10 percent on a new home, committing to a 20 percent down payment will save you from having to pay additional private mortgage insurance and a higher interest rate on your mortgage.

Don’t forget to account for closing costs either, which typically range from 2 to 5 percent of the purchase price of your home.

Consider the Lifestyle

Buying a home is not just a financial investment, it’s a lifestyle change.  Not only are you responsible for your monthly payments, you’re also responsible for cutting the grass, raking the leaves, snow removal, cleaning the gutters, fixing the plumbing, etc.  If you’re not prepared to make that kind of time commitment make sure you have more than enough resources to cover the cost of hiring someone who can. 

Beef Up Your Savings

Don’t let your upfront home ownership costs and subsequent monthly payments eat up all of your financial resources. You’ll want to maintain a fully funded savings account to serve as a buffer in case of any future maintenance emergencies or life circumstances, like loss of employment or disability, that could affect your finances and ability to keep up with regular payments.

Buying a home is a big decision with major financial and lifestyle implications.  Consider all of these factors, and seek guidance before deciding if it’s the best option for you.

Thanksgiving, Christmas, New Year's, TAX SEASON?

Thanksgiving, Christmas, New Year's, TAX SEASON?

As many of you may know I have married into an “accounting family”.  My mother-in-law and father-in-law are both CPA’s who specialize in tax return preparation and small business accounting.  My wife is also an internal accountant for a residential property management company local to the Jersey City area.  It was through my in-laws that I was able to grow my tax and accounting knowledge, and now include those services as part of our offering at Legacy Care Wealth.  As you can imagine, many a family discussion has evolved from this shared knowledge, which got me thinking, why not share some of those tidbits with you?

Not everyone realizes this, but the holiday seasons means something different for accountants and tax preparers.  Counting down to the ball dropping and kissing our loved ones at midnight is almost immediately followed by planning for the tax season ahead.  With that being said, January 1^st is often too late for most taxpayers to take the actions necessary to reduce their bill to Uncle Sam.  So what specifically can you do now?

Retirement Plan Contributions: Make sure that you are aware of how much you have contributed to your 401(k), 403(b), or 457 plan with your employer.  If you have not maxed out your contributions yet ($17,500 for 2014 and $23,000 for those over 50 years of age) consider if you are able to increase your deferrals for that last pay period of the year. 

While you technically have until April 15^th to make 2014 contributions to your retirement accounts, the sooner you can get your money working for you in retirement vehicles the better.  In addition to building yours savings, these plans can also offer tax advantages.  

Check Your Eligibility for Tax Credits.  Unlike tax deductions, tax credits allow you to directly lower the amount you owe the government come tax time.  Consult with your accountant or tax professional to see whether you’ve qualified (or can qualify) for any credits in 2014. 

For example, low-income taxpayers who are not full-time students - a description that befits many young professionals - may qualify for the Retirement Saver’s Tax Credit, in which the government provides anywhere from a 10-50% credit (up to $2,000) for contributing to a retirement account like a 401(k) or IRA.

Charitable Contributions: At Legacy Care Wealth we are large supporters of charitable giving. Not only can you deduct cash donations and feel good about contributing to a cause you believe in, you can also deduct the value of non-cash donations like food and clothing.  Take some time to find a cause you believe in and get involved. 

Stock Loss Harvesting:  Stock loss harvesting can be extremely beneficial for those that have more active investment accounts.  An individual with investment accounts that have attained realized gains may benefit from selling out of those large loss positions to offset their 2014 gains.  Speak with your investment professional to see how they handle tax impact of trading activity. 

Meet with your Accountant: As you may have already gathered from my brief descriptions of each of the above-mentioned topics, there are many considerations that need to be made.  I wish I could touch on a piece of information that would apply to every person reading this article.  Unfortunately, that is never the case as everyone’s financial picture varies.  However, this is why it is important that you work with a trusted professional about how these ideas best apply to your specific situation.

How to Wrap Up Your Fiscal Year

How to Wrap Up Your Fiscal Year

The holiday season not only marks the impending end of the calendar year, but also the final few weeks of the fiscal year.  Get the most from your money by implementing these financial strategies to boost your year-end savings and prepare for a prosperous New Year.

Get Your Health Insurance.  If you are uninsured, it’s time to get on the health exchanges and purchase insurance by the December 15^th deadline for coverage in the new year- or contend with the risks and penalties of being uninsured.  Use the healthcare.gov website to choose a plan and find out if you qualify for any subsidies to help cover your insurance premiums.

Review Your Insurance Coverage.  Not only should you make sure your health insurance is in check, you should also take the time to review the rest of your coverage and assess any new insurance needs - home, life, long-term care, etc. Be sure to account for any life changes you’ve experienced in the past year - a new child, a new home, an aging relative, etc.

Evaluate Your 401(k).  The end of the year is a good time to check in on your 401(k) and make sure you’re not only maximizing your contributions, but maintaining a mix of funds within your account that properly reflect your current risk tolerance - be it aggressive, conservative, or more likely, somewhere in between.

Organize Your Paperwork:  In order to be able to file away all of your documents for the year in the next few weeks, take some time now to sort through that pile.  While doing so, review credit card statements and make sure there is a plan in place to pay off debt.  Take a look at your transactions and receipts to remind yourself of your spending habits.

Lastly, review any legal paperwork.  Do you have a will, advanced healthcare directive and durable power of attorney in place?  If so, are they up to date?  Estate laws vary state-to-state so if you moved recently, it might be time to update these documents...  

Make a Plan for 2015.  Reflections on goals and resolutions during the countdown to the New Year should include some financial goal setting and strategizing, as well.  Take the time to lay out any fiscal priorities for 2015 - be they boosting investments, establishing emergency fund savings, starting a vacation fund or paying down student and credit card debt - then make a monthly budget that covers your day to day costs while taking steps towards reaching those New Years’ goals. 

How To Have a Happy, Debt-Free Holiday

How To Have a Happy, Debt-Free Holiday

Thanksgiving is just days away and will be kicking off the holiday season with late night door busters and Black Friday super sales.  We all know it’s way too easy to get caught up in the mania of holiday shopping.  With seemingly infinite financial demands already weighing on you, it’s tempting to get suckered in by the big stickers advertising clearance and percentage-off sales - pressuring you into spending on “unbeatable deals” before time runs out. 

Making financial decisions under pressure, however, rarely proves to be a sound fiscal strategy.  If budget is a concern - and let’s be honest, it’s always a concern - take some time now to map out a strategy for your holiday spending that won’t leave you with a painful debt hangover come New Years Day.

Identify Your Spending Limits.  Hopefully you’ve already set aside some savings for your holiday travels, parties, and gifts.  But if not, make an honest assessment of what you can afford to spend.  By setting limits on your spending ahead of time, you’re less likely to push the boundaries of your budget when you come across something impossibly perfect or tempting in-store or online.  If you know that you have a tendency to overspend, consider using either cash, spending tracking software or apps to strictly enforce your self-imposed limits.

Learn to Say No.  Allow yourself to turn down invitations and solicitations that fall outside of your holiday spending plan.  Learning to say no to others is an important part of saying yes to yourself and your personal and financial priorities.

Prioritize.  Speaking of priorities, make a list of everything you’d like to fund this holiday season - from decorations to stocking stuffers - then prioritize that list from most important to least.  You may find that your previously designated spending limits don’t allow you to afford everything on your wish list, but with your wishes prioritized, you can easily identify which items to forgo.  Giving up the Christmas wreath to afford a train ticket to spend the holiday with family isn’t such a bad trade off, after all.

Cash In on Deals.  While holiday deals shouldn’t pressure you into overspending, it’s always a good practice to keep an eye out for good buys.  In addition to researching specials and promo codes, make the most of cash back, price comparison tools, and other savvy shopping strategies.  You don’t have to wait in line in the freezing cold at midnight to enjoy the perks of mobile and online apps like RetailMeNot and PriceGrabber.

Plan For Next Year.  Holiday planning in November doesn’t quite qualify as “waiting until the last minute”, but the more advanced preparation, the better for your budget.  For example, if you get your holiday decorations right after the peak season ends in early January, you can enjoy the benefits of clearance pricing.  And if you start setting aside a small percentage of each paycheck in January your “giving” or “holiday” account should be more than large enough to fund all of your holiday spending priorities come November of next year.

Stay Grounded in What Matters.  Above all, remember to stay grounded in what the holidays are all about - love, friendship, family, etc.  Who you spend time with and the memories you share in together with will ultimately matter much more than how much you spend.

What’s Your Savings Approach?

What’s Your Savings Approach?

How do you approach your savings?

When you were young, you may have stashed your precious pennies in a piggy bank, saving them up until you could dump the entirety of your coin collection onto the floor, count it up, and daydream about what that total could afford you.

As you got older, your savings approach probably evolved from hoarding found pennies to collecting dollars from allowances and odd jobs, all in the hopes of saving up enough to buy the latest hit CD release or ticket to the movies.

But what happened when you got to college?  If, like many, you lived by the “I’m a broke college student mantra”, perhaps you stopped counting those dollars and cents altogether and resigned yourself to the demands on your money in the present being far too great to plan for future savings goals.

Unfortunately, that common collegiate “broke” mentality has a tendency to linger on even after the first paychecks of post-grad, work life start trickling in.  After all, life is expensive when you have to pay for it on your own.  

And so, life goes on while the brakes on savings hold, often locked in that down position long past due - leaving many smart, young professionals financially vulnerable and unprepared.

The early childhood experience of piggy bank savings teaches an important lesson that too often gets forgotten during the flux of new financial demands in early adulthood - savings is a necessary tool for reaching future goals.  Just as saving up five pennies once paid for a piece of gum from the candy shop, small contributions from each paycheck can pay off in years of retirement. 

So if procrastination has been your primary approach to savings in the past, consider what those savings really mean…

A Safety Buffer.  Without accessible, liquid savings you leave yourself vulnerable to high interest credit card debt should any unexpected emergencies or necessary unforeseen expenses arise.  Savings serve as a kind of financial safety buffer.

Fulfilling Short-Term Goals.  Whether it’s a down payment on a home, a wedding, a vacation, or a new computer - savings are the ultimate tool for funding goals.  Defaulting to credit cards and spending your entire life in a cycle of paying back your past is setting yourself up for the constant anxiety and financial burden of high interest debt.

Retirement and Long-Term Freedom.  If you have any hope of retiring some day without living in a cloud of financial anxiety, you’ll need to put some long-term savings strategies in place.

To make sure you achieve all three of these savings realities, you may need to reassess your current approach.  Make savings a priority every month rather than a backburner, “I’ll get to it someday” goal.

Use our PASS acronym to help you remember your savings strategy and reprioritize your savings plan!

  

Pay Yourself First.  If you figure you’ll save whatever’s left over at the end of each month, you’ll probably find that you run out of money before making a savings contribution.  Start making savings as non-negotiable as your housing payments by making a deposit into your savings and/or retirement accounts on the first of every month.

Automate.  If setting aside money on your own proves to be too difficult, schedule an automatic transfer from each paycheck into a savings account.  The more automatic you can make your savings process, the more likely you are to establish the savings habit without self-sabotaging by preemptively spending your savings contributions.

Segregate.  Have separate savings and/or investment accounts for each savings goal to more easily track your progress.  For investment accounts, it is important that you tailor the investment approach to the purpose of the funds in each account, so having unique accounts makes this process much easier and more effective. 

Set Specific Goals.  The more clarity you can bring to why you need to save - whether it’s to buy a home or to pay for your children’s college education - the more motivated you’ll be to achieve your savings goals.