This Week In Your Wallet: Stay Cool In A Hot Market
I can judge how much a column or an article resonates with me by how many times I email it to friends and family members. Ron Lieber’s story in The New York Times last week about how to deal with worries that the market is too hot or too high or too [insert your favorite overheated adjective here] struck a nerve. I sent it to people who should be thinking about how much short-term losses could impact their short- or medium-term plans. And I think you should ponder the question, too.
When it comes to the markets, the impact of the worries of the world (e.g. disputes with North Korea, showdowns in Congress, hurricane season and a laundry list of other items) can be great. If you’re truly in it for the long term (i.e. if this is for retirement, and retirement isn’t for more than a decade), then my feeling is you’ll want to be properly diversified for your age and risk tolerance. And then you can wait them out. But if your goals are shorter-term, then you need to consider options for how to address your unique financial situation. “There is probably an answer that is right for you, as long as you know how comfortable you are with the possibility of losing some money and have thought through every detail of what you’re willing to sacrifice if you do,” he writes. Take a look.
A Step-By-Step For Quarterly Taxes
In other news (particularly for giggers and anyone else whose income varies), the number of Americans found underpaying some taxes rose nearly 40 percent in recent years, reports Laura Saunders in The Wall Street Journal. (BTW, Saunders has been covering taxes since I was a fact-checker and a writer at Forbes well over two decades ago. More than pretty much any other reporter, she has this beat nailed.) The reason why is “puzzling experts,” she writes, but it’s largely impacting those who pay taxes quarterly, such as business owners, retirees and members of the gig economy. The problem with this is that under-payers will owe a penalty in the form of interest — and it’s not deductible. So how do people avoid this and make sure they’re giving Uncle Sam his “due”?
There are three methods you can use, says Greg Rosica, tax partner at Ernst & Young and contributing author to the EY Tax Guide. For all of them, it’s a good idea to use last year’s tax return as a starting point. And mark your calendar now: The four estimated tax payments are due on April 15, June 15, September 15 and January 15.
- Method #1: Look at how much you paid in taxes on last year’s tax return. Then, divide that amount by four. If you earned less than $150,000 in income, pay 100 percent of the taxes you paid last year — in four equal amounts throughout the year. If you earned more than $150,000 in income, the rule is that you pay 110 percent of the taxes you paid last year in four installments.
- Method #2: Estimate what 90 percent of your taxes will be this year (base it on last year’s tax return), and make four equal payments of that 90 percent. You might owe a little more come April, but it’ll give you a bit of wiggle room.
- Method #3: Calculate your income over a few months (say, three months that seemed to represent your income well). Then, annualize it (if it’s three months, multiply that by four). Now you have an estimated annual income, and you can calculate how much you’ll likely owe in taxes based on that (and how much to pay in your four installments).
Blogger Spotlight
This week, I’m shining the spotlight on Natalie Bacon, a blogger who writes about money, career and personal development for women. She says you can get your finances in order by committing to just 20 minutes a day, and it works best if you do it at the same time every day. This can mean listening to a personal finance podcast (hint, HerMoney, hint) during your commute, reading one how-to personal finance article a day (try sites like Forbes, CNBC, Money Talks News, etc.) or even calling a card company to try to get a lower interest rate. At least a few times a week, take a look at your spending statements. Make sure all the transactions belong to you, and take note of where your money is going. It’ll make you feel in control and powerful — and give you the ability to make a change if one is needed.
How To Get Money Back When A Vacation Doesn’t Go As Planned
Delayed flight due to mechanical issues? No air conditioning in your plane seat? Lost luggage? Rental car overcharge? Many of us have been there. And while complaining to friends and family might make us feel better in the short term, there’s often a way to get actual compensation for these headaches, and I wrote about how for NBC News. The first step is knowing your options — for example, lost and damaged luggage can net you up to $1,220 in the U.S. The next is to, well, be nice. You’d be amazed at how far — and how much — you can get with a calm tone and a “thank you.” Show the representative you’ve been a loyal or long-term customer and that you were disappointed with the situation, but separate it from the person you’re currently speaking to. Finally, don’t take the first offer if you can help it. Be gracious and thank them, but say, “I was thinking more like X,” or nicely ask to speak with a supervisor (who will likely have more pull).
Have a great week,
Jean
