Tax preparation tips to make now

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KJ: Now that we’re a little past the halfway point in the year and approaching the final stretch of the year, we thought this article we read is a good summary of ten midyear tax moves to make now. With this year yielding higher taxes for many – whether it’s higher real estate taxes from a rising real estate market, higher Social Security payroll taxes with the expiration of the tax cuts January 1st, Medicare surtax on higher incomes, or higher income tax rates on top earners – it’s more important to plan ahead for the rest of the year and make adjustments to your budget before it’s too late!

Take a look at your withholding (or quarterly estimated tax payments)
Run a few numbers based on the exemptions, deductions, and your estimated income for the year and see if you should consider changing your W-4 form at work to have more taxes withheld if needed. If you have a more complex situation, your CPA can assist you with this, but if your situation is a little bit more simple, try plugging the estimated numbers into TurboTax or building a handy dandy spreadsheet. In the wake of higher taxes, consider contributing more to a retirement plan that you can deduct from your taxes.

The IRS website has a great W-4 estimator to help you with this process, so check it out and see if it can help you with this process.

Finalize last year’s taxes
Whether by choice from extending your taxes or by circumstances of quite a complex tax structure, what better way to focus on this year than to finally get passed last year?

Start your tax file
Begin making your list of tax documents you will need for this year:

    1) W-2′s, 1099′s from contract work or savings and investment accounts
    2) 1098′s for mortgages (don’t forget you may have more than one if you refinanced throughout the year and took advantage of the low interest rates),
    3) K-1′s,
    4) real estate taxes – did you sell your house this year? Don’t forget you will need information from closing on your home for real estate taxes paid, but you’ll also have a summary for your new home.

Take note of any life changes
Have you had a baby, moved to a new home, moved states (maybe you now GET to pay state income taxes too!…), moved jobs, received a promotion, or anything else that may impact your earnings or tax situation? Now is the time to do a little research (Google is a useful tool, but it’s not a substitute for solid tax advance if your situation is complex) and make any last-minute adjustments while it’s still time.

    What is holding you back from planning for next year’s taxes?
    Have you had to make any significant adjustments from last year?
    Tell us what you do to plan for your taxes each year.

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Who makes the money

Mine Yours Ours

KJ: This post is the last post in our series on who manages, who spends, and who makes the money. We’ve now come full circle to take a look at who makes the money.

A shift in the primary breadwinner
AJ: Pew Research recently published a study showing that 40% of all households with children under the age of 18 include mothers who are either the sole or primary source of income for the family, an increase of 29% from 1960. That’s a remarkable shift in the lead earner in a household. The study goes on to say that the median total family income of married mothers who earn more than their husbands was nearly $80,000 in 2011, well above the national median of $57,100 for all families with children, and nearly four times the $23,000 median for families led by a single mother.

Who makes the money in your household?
AJ: This is always a sensitive subject, I know, but it’s a necessary one. In order to have open and honest conversations about your financial situation you have to acknowledge who makes what. In theory, no one wants to talk about who makes more because there is this social opinion that if you make more money you’re somehow better. Anyone who is part of a team (marriage, relationship, family, etc) knows that everyone serves a very specific, very important role that is all their own. In many households one person makes less as a conscious decision that allows them to take care of their children or an elderly family member. Making less does not equate to contributing less, so let’s be clear about that.

KJ: It would be virtually impossible for both individuals in a relationship to make the exact same amount anyways, so at any point throughout your careers there’s going to be someone who will make more. Maybe it is you or maybe it used to be you; maybe it is by choice or maybe it is a matter of circumstances, but whatever the case, recognizing that it doesn’t translate to your worth relative to your significant other is key to fostering a strong relationship.

Be open and discuss the possibilities
AJ: The reasons it matters who makes more are important since people don’t like to talk about this aspect of working and earning they are sometimes overlooked until a decision needs to be made. Were unexpected career events to occur (a layoff, promotion, relocation, etc) without proper context of the overall financial situation you might find yourself making the “wrong” decision. A promotion coupled with a relocation could be an incredible opportunity for one person while it might severely limit the earning potential of the other. So long-term, it might realistically be better to forgo the promotion for one person for the overall greater good of the family.

KJ: Sometimes the greater good for the family means one spouse stays home or takes a lower-paying, more flexible job…all the more important to make sure you have a proper budget in place and that you stick to it, so you can make it work with your goals!

Embrace the changes in family dynamics
AJ: Earning potential is a huge element of consideration when attempting to make life-altering decisions about your future. Gone are the days of the stay-at-home mom and the bread winner dad. We are in an era where stay-at-home moms bring in more money than 9-5 dads through blogs, crafts, and in-home careers and stay-at-home dads rule the home life. It’s a beautiful showing in compromise and life-balance as individuals realize their independent as well as their combined power. The solution that is right for your family now might not always be what is right for your family but ensuring you have an overall perspective on your family’s situation ensures you have everything to need to make the best decision long-term.

    Who makes more in your household?
    Has it always been that way or did it recently change?

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What would it take for you to feel wealthy?

Wealthy Money StackAJ: I often wonder how my ten-year-old self would have responded to big life questions like: what does it take to feel wealthy? I feel confident that without a true concept for what things cost and without an income all my own it would have been a number that would now seem absurdly low. When I read what it takes to feel wealthy from CNN Money about the threshold at which millionaires deem themselves wealthy I honestly wasn’t surprised. When I think of wealth I think $20 million+, a point at which one could live reasonably without ever bringing in another dollar for the rest of their life.

When you pit this line of thought against the Washington Post article reviewing the actual median household income in the US in 2013, it’s absurd! $51,404 is a far cry from ever being able to build $5 million, but is certainly more than enough to live comfortably.

KJ: What I’ve learned over the years is that it is seldom about how much money you have and more about what you spend. However you may define “wealthy” – whether that’s never having to work again, having the freedom to do the things you want without stopping to wonder “do I have enough”?, or getting to a point where you only have to work part-time – the reality is it is quite a subjective discussion. If you plan to save up enough money over time to only spend the “earnings” and to leave the “principal” untouched, then consider that a traditional rule of thumb is that you can spend about 3-4% of the value of your savings each year. As in, for every $100,000 of savings, you may be able to rely on $3,000 – $4,000 of income per year – though that’s a far cry from what you actually CAN earn in today’s low interest rate environment. This can vary greatly based on your goals, investment strategy, and time-horizon, but you can see the point.

So take some extra time to think about what it means to you and set the line in your scope, so you can start heading that way. What’s your “wealthy” number…$500k, $1 MM, $5 MM, $50 MM, or $1 BN? The sky’s the limit.

    How do you define wealth?
    At what point would you truly feel wealthy?
    Are you where you thought you would be?
    What have you done lately to try and get there?

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Dream big

Set Big Goals

AJ: Sometimes as I sit reviewing our very organized, somewhat compartmentalized lives feeling so good about the level of control we maintain in our household I have to laugh at the severe lifestyle shift that now defines me.

I have always been eccentric. As a general rule I’m dramatic, I’m self-sufficient, I over exaggerate even when I’m not trying: I do nothing halfway. I am also, however, somewhat messy at home, emotional and compassionate, desperately reliant upon my husband for strength and comfort, and not all together buttoned up in my personal life. I’m two versions of myself and I would bet most of us are. I’ve always loved to work, and I gain enormous satisfaction in strategizing and visualizing in my career. At home, though, I’m much more practical and sensible. All of that to say that saving money isn’t about only being practical, it’s about creating a way to have and do everything you want – dream big!

Think mansions, Ferraris, ocean-front real estate, trip to the moon – big! Whatever it is isn’t impractical if it’s something you truly want and will enjoy. My grandparents have always been shining examples of people who want to enjoy their money while they live instead of willing it away after they’re gone, and I really believe there’s something to that. Of course some are blessed with enough abundance to both do and give AND will away a significant sum of money, but let’s assume for a moment that none of us are those people and talk about spending big.

KJ: Dreaming is an important part of living – it helps define what you’re searching for, and it can help bring meaning to your life. It helps you see the light at the end of the tunnel, and it gives you a sense of purpose. Whether your big dreams are related to purely personal aspirations or whether it’s lofty business goals of climbing the corporate ladder or working for yourself someday, if you don’t think about it, chances are it won’t become a reality. Dreaming is often about thinking beyond your current “needs” and focusing on those “wants” in your life. It’s important from a budgeting and planning standpoint to understand the distinction between “wants” and “needs” in allocating your scarce income resources, but when it comes to what tomorrow may bring, it’s equally important to focus on your “wants” and how to actually reach them.

Our recent life transition
AJ: We recently bought a house – a big house. Bigger than we need without question but not so big that we lose each other. It walked the line somewhere between practical (we have a lot of stuff and therefore needed more space, our dog needed space to roam freely, the market shifted to benefit sellers) and slightly extravagant (double the size of our other home, HUGE yard, more space than we have stuff) but we felt like it was a good time for us to make a change, we fell in love with the possibilities and we knew financially we could make it work.

KJ: The new home certainly wasn’t necessary, but it helps better fulfill our dreams of having more space to breathe, space for our three pets, and a nice place to host family and friends in our so called “spare” time. Time to start paying back all those years of family hosting us!

And now comes big
AJ: I want double ovens! And really rare granite countertops! And really gorgeous custom-laid tiles for our backsplash in a pattern only we will have! And no we can’t afford it all at once! But you better believe that I’m not going to settle just because I don’t have that amount of cash in my pocket right now. I’m going to work more than my very full, full-time job as often as I feasibly can without collapsing in exhaustion or sacrificing the quality of my work, and I’m going to plan menus that better utilize items I can find less expensively, and I’m going to sleep with the thermostat a little higher than I would prefer for a few months. But I’m building that dream kitchen into one that will hold tens of years of family holidays, countless nights of quiet dinners at the enormous island with my husband and so much entertainment for our cats they might die of exhaustion because that’s what I really want. I’m impractically unconcerned with resale (and a home isn’t really a good “investment” in the traditional sense anyways!) and very reasonably focused on something that will improve the quality of my life that will be the crown jewel of our home, and I can’t wait to feel totally broke building it up.

KJ: Since we aren’t willing to go into debt paying for the things we want in our home, the reality is that it will take us a little longer than normal to get some of our projects completed, and we’re likely to step in and do a good portion of it ourselves – time and stress levels permitting! We fortunately have a great support system in friends and family, so all the work hasn’t just been us on our own little island working on it alone.

    What are your goals and aspirations?
    What are you dreaming big about?
    Tell us about what your heart wants most!

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The first hour of your day

AJ: I recently read this article that fascinated me. The article is entitled “What Successful People Do With the First Hour of Their Work Day” and details what some hugely successful executives do to ensure they start on the right foot. I have my own system for staying on top of my day long before the day actually begins and it starts the Friday of the prior week. Each Friday morning I plan out my schedule for the following week. I work in a meeting-heavy company, so the bulk of my time is pre-negotiated but going through everything on Friday means that on Monday I’m not already double-booked before I’ve even made it to my first commitment. It also means that I start each day fresh. No unread emails, no unaccounted for meeting invites, no surprises. Who wants to be surprised first thing in the morning?!

KJ: I do the same thing with my “to-do” list. Despite the e-mails, post-it notes, and task management system we have at work, one of the things that helps me the most is just planning out a list of items I need to accomplish the upcoming week. Some items ultimately get carried over to the subsequent week while new items get added, but it seems to be a good system that works to handle each of the important items in a week.

Here are three of our tips for a successful workday:

Make a schedule and stick to it
AJ: Don’t show up at a different time every single day. You aren’t really all that reliable an employee at this rate, nor are you allowing yourself the opportunity to optimize your time. I’m in love with the 7 am hour at my job. It’s the only hour of the day where no one talks to me, where I can actually sit at my desk for an entire hour and when I can think most clearly (after I’ve made a pot of coffee). Without my 7 am hour I’m all over the place. I’m disorganized, I’m running behind and I’m not ever at my desk for the rest of the day, which makes for a challenging day the next day as well. For some people maybe this time of day is in the 5:00 p.m. hour, so just find what works best for you!

Distinguish between being overworked and doing your job well
For the sake of your own sanity, know what feels like your breaking point and thoughtfully pre-plan to avoid it. My primary commitment is to my husband and our three fuzz balls. That means leaving the office by 6 pm almost every day which also means I have to get to work earlier in order to do my job completely while I’m there. Spending multiple nights at the office after 6 pm makes me feel overworked even if I’ve really worked the same number of hours.

Make your work life as comfortable as possible
I rarely take a legitimate lunch. Mostly I eat things at my desk that I consider lunch but usually lack protein. If you’re always on the go during the day, then bring yourself enough snacks to get through. I’m a big fan of apples at my desk. I can eat them in under 3 minutes, they’re filling, they don’t require the microwave or the fridge and I sometimes feel kind of healthy when I eat them. Many people I work with keep candy at their desk for their afternoon pick me up but I just don’t have the self control to manage that safely.

I love hearing tips about how other people set themselves up for a successful day at work. I don’t often take 10 minutes to reflect upon all of the things I’m thankful for – as Tony Robbins is referenced as doing in the article – but I find encouragement in preparedness and always knowing what’s coming my way. Check your calendar the night before, pre-plan your attire, know in advance when you have time to actually do your job (not in meetings, not on conference calls, not on the phone).

    So tell us, what is it you do to ensure you stay successful?
    What could you be doing better?
    Tell us how you make it all work.

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Some of the links in the post above may be affiliate links. This means if you click on the link and purchase the item, we will receive an affiliate commission. We feel strongly about only recommending products or services we use personally and/or believe will add value to you, our readers. Read more about our commitment to providing quality product recommendations.