JW’s Financial Coaching Podcast JW’s Financial Coaching Podcast-A show devoted to answering your personal financial questions and covering current events in personal finance. Giving people a new perspective on their money!

February 24, 2014  
00:0000:00

Highlights of today's show:

  • Advertisers know what to do with your tax refund
  • The three basic things to know about the tax systems
  • Ways to lower your taxable income
  • Tax credits you might qualify for
  • Why I think the tax system is too complex

After talking about four major tax myths in last weeks lesson, today we share tips on how to reduce your taxes for this upcoming filing season and beyond. Before we learn how to lower our taxes we first need to know the following three basic things:

  1. Our Adjusted Gross Income (AGI)-Our AGI is the amount that we pay taxes on before deductions and credits are removed.
  2. Tax Brackets-It is important to know what tax bracket you are in because it will help determine the tax impacts of having certain deductions or added income. To view what tax bracket you are in for 2013 check out this link.
  3. Do you take the standard deduction or do you itemize? The government allows us to deduct certain expenses on our taxes; mortgage interest, charitable contributions, property taxes paid, state and local taxes paid are the most common. But we can deduct those only if they exceed the standard deduction which is the amount that everyone may deduct from their AGI. In 2013 the Standard Deduction is $12,200 for married couples and $6,100 for individuals.

After knowing these three basic things we can now discuss ways to lower our AGI. There are two major ways to do that:

  1. Contribute to a Health Savings Account (HSA)-I love my HSA and for good reason. A HSA is a savings account attached to high deductible health insurance plan that you and your employer contribute to. As long as you use your account to pay for qualified health expenses the contributions are tax free! Your contributions reduce your AGI which ultimately lowers your tax bill.
  2. Contribute to a 401(K) or IRA-Who says savings doesn't pay off? Not only are your saving for your future when you contribute to a retirement account but it can help save us come tax time.

Now that we have lowered our taxable income, we can now focus on tax credits. There are a lot of tax credits available to us, check out IRS.gov for a full list of 2013 tax credits but below are some common ones you may quality for:

  1. Child credit-You get a credit of $1,000 per child under the age of 17 on your taxes. This is to help offset the cost of raising your child. If you are parents you know that a child cost more than $1,000 a year to raise, but I'm not complaining.
  2. Education Credits-Go back to school this year to work on your bachelors or masters? You may qualify for educational credits.
  3. Adoption Credit-If you adopted a child in 2013 you may qualify for a reimbursement of up to $12,970.

Worn out yet? If so I don't blame you. After doing two lessons worth of shows on taxes I'm really frustrated with the tax system. At the end of the show I give my opinion (rant?) on the state of the current tax system and share why I think major reform needs to be made.

Finally we also discuss how the marketers on TV and radio definitely have a plan for your bonus and tax refund. They want you to buy a new car, take a vacation, or remodel your home. Not that those things are nice but do we you have a plan for your tax refund? Like our monthly income, a large financial windfall needs to have a plan to best be used effectively. For advice on how to handle your refund this year check out the podcast I did on receiving a financial windfall.

Enjoyed this lesson? If so please consider taking five minutes to leave a review of the show either in Stitcher SmartRadio, or iTunes. For a step by step video of how that works, please watch this video on how to leave a review in iTunes.

You can subscribe to future podcasts through FeedburnerStitcher SmartRadioiTunes, or by downloading the iPhone app. Or you may listen to the podcast on the JW's Financial Coaching Facebook Fan page.

If you have any comments, questions, or ideas for future shows you can send them to me and I will integrate them into a future show. There are two ways to get in touch with me: 1.) Email me at JWFinancialcoaching@gmail.com - Please put “podcast” in the subject line and keep your questions brief so they are readable on air. 2.) Simply fill out the form on the contact page. Please fill out your name, email, and your question/comment/suggestion and we will read it on air.

You can find prior editions of the podcast at the podcast archive page.

February 17, 2014  
00:0000:00

Highlights of today's show:

  • Why taxes are so frustrating and confusing
  • Is it wise to get a big tax refund?
  • Explaining the tax system
  • The difference between a deduction and a credit
  • Tax software vs. Accountants. Who should you go with?

The only thing certain in life is death and taxes. We chuckle every time we hear this because it is true. Taxes aren't something that you or I like to discuss. Mostly because taxes are money going out instead of coming in. But with that being said, taxes are a major component of our finances and we often make decisions based on the tax implications.

With that being said there are a lot of myths that we believe when it comes to our taxes. Today we break down four of them.

Tax Myth #1-It's good to get a tax refund

This might be a little overstated. I'd rather you get $2,000 back in a refund than owe $2,000. But a tax refund is simply the IRS giving you back your money, it's not a reward in the tax code of anything like that. Instead of getting a refund adjust your W-4 and have less money taken out each paycheck. You won't get a nice refund each April, instead you'll get that money sooner each and every month.

Tax Myth #2-All your income is taxed at the same rate

We can get the whole tax bracket thing mixed up. The tax brackets are marginal tax rates, meaning that each dollar is taxed differently. For example for those of us who are married, the first $17,850 of taxable income you earned in 2013 is taxed at 10%, no matter if your total income is $20,000, $200,000, or $2 million. As you make more, your higher earnings are taxed higher, but just that income in the bracket, not all of it. If you make more money and get into a higher tax bracket don't worry about it. That tax rate just applies to that specific dollars. You can find out what tax bracket you are  in for 2013 by visiting Forbes.com.

Tax Myth #3 As tax deduction is the same as a tax credit

Often a deduction and a credit gets used interchangeably but they are vastly different. A tax credit is a reduction in your taxes due. So for example if your taxes due at the end of the year is $2,000 but you have a $500 credit of some kind, the credit takes your total taxes owed down to $1,5000

A tax deduction is a reduction in taxable income. If you have a $500 tax deduction and your total income was $50,000 for the year, your total taxable income is $49,500 ($50,000 less the $500 tax deduction.) If you are in a 15% tax bracket then, your deduction saves you $75 in taxes ($500 times 15%).

Therefore a credit is not the same as a deduction. In almost every case a credit is worth more than a deduction. Truthfully I want both on my taxes, but if I can have only one I'd rather have a credit.

Tax myth #4 I don't need to hire someone to do my taxes for me, I'll instead use software

This isn't really a myth as much as a service announcement. I don't care what you use to file your income taxes. But tax software can only get you every deduction and credit only if it knows that you earned it. If you don't tell the software you earned the credit or deduction it won't give it to you. However a trained professional will know the tax code and will know to ask whether you qualify or not. I personally use the software but I also know a lot about the tax code. If your taxes are pretty basic tax than you are probably using the software. But if yours are complicated and you are claiming a lot of deduction or you own a business, hiring someone might be the right way to go.

Enjoyed this lesson? If so please consider taking five minutes to leave a review of the show either in Stitcher SmartRadio, or iTunes. For a step by step video of how that works, please watch this video on how to leave a review in iTunes.

You can subscribe to future podcasts through FeedburnerStitcher SmartRadioiTunes, or by downloading the iPhone app. Or you may listen to the podcast on the JW's Financial Coaching Facebook Fan page.

If you have any comments, questions, or ideas for future shows you can send them to me and I will integrate them into a future show. There are two ways to get in touch with me: 1.) Email me at JWFinancialcoaching@gmail.com - Please put “podcast” in the subject line and keep your questions brief so they are readable on air. 2.) Simply fill out the form on the contact page. Please fill out your name, email, and your question/comment/suggestion and we will read it on air.

You can find prior editions of the podcast at the podcast archive page

February 9, 2014  
00:0000:00

Highlights of today's show:

  • Is freezing your credit report right for you?
  • How freezing your credit can help protect against identity theft
  • The downsides of freezing your credit
  • Should I take the stability of a company into account when choosing a term life policy?
  • What happens when your life insurance company goes into receivership

Identity theft is one of the worst financial events one can go through. When your identity is stolen you aren't responsible for any of the charges made in your name. However you are going to spend hours upon hours fighting to clear your name of any wrong doing.

Fortunately there is a way to help lower your odds against identity theft and that is by freezing your credit. Freezing your credit is a process that disables most creditors from pulling a copy of your credit report or your credit score.

On today's show we break down the pros and cons of freezing your credit and discuss whether it is the right thing for you to do. It isn't for everyone but if you are committed to stop borrowing then freezing your credit report might be the way to go. The fees to freeze your credit vary by state and you have to freeze your credit report at each of the following credit bureaus:

In addition we also answer the following question sent in by a listener:

"I have two term policies and I feel as if I'm paying too much. I've seen better quotes elsewhere and I'm wondering how concerned I should be with the company issuing the policy.  Should I take the stability of a company into account when choosing a term policy?"

This is a great question. To answer it we first need to discuss what happens if your life insurance company goes belly up. If your life insurance company is under financial distress each state has their own agency with its own rules as to what happens with your policy. The state agency will first try to rehabilitate the company back to financial health. If that doesn't work, good policies are shopped around to other companies. If that doesn't work, each state guarantees a maximum amount to life insurance claims. To check our your state's maximum coverage payout visit The National Organization of Life and Health Insurance Guaranty Associations (NOHLGA.com) website and select your state.

For most states the maximum payout is $300,000. So while you are guaranteed to get at least something if your life insurance company face financial trouble, you are never fully guaranteed. To measure the health of a life insurance company consider looking at Standard and Poor and Moody's Life insurance ratings.

With that being said, if you find a company with a solid rating that has been around for a while and it offers a lower rate than your current term insurance, I say go ahead and switch as long as you wait until the new policy is in place before you cancel your old one. Life insurance companies rarely fail and even if it does happen it is not like you will lose your coverage as your state guarantees at least a $300,000 payout per policy.

To send in your question to be answered on the show please visit our contact page and fill out the contact form.

Enjoy this lesson? If so please consider taking five minutes to leave a review of the show either in Stitcher SmartRadio, or iTunes. For a step by step video of how that works, please watch this video on how to leave a review in iTunes.

You can subscribe to future podcasts through FeedburnerStitcher SmartRadioiTunes, or by downloading the iPhone app. Or you may listen to the podcast on the JW's Financial Coaching Facebook Fan page.

If you have any comments, questions, or ideas for future shows you can send them to me and I will integrate them into a future show. There are two ways to get in touch with me: 1.) Email me at JWFinancialcoaching@gmail.com - Please put “podcast” in the subject line and keep your questions brief so they are readable on air. 2.) Simply fill out the form on the contact page. Please fill out your name, email, and your question/comment/suggestion and we will read it on air.

You can find prior editions of the podcast at the podcast archive page.

February 3, 2014  
00:0000:00

Highlights of today's show:

  • Five good financial habits to start doing today
  • The power of good habits on your life
  • The need to invest in yourself
  • How giving with purpose will improve your finances
  • Importance of continuing to learn

As a follow up to last weeks lesson on the five bad financial habits that are the toughest to break we talk about five good financial habits to start doing today. Good financial habits allow you to do incredible things, not just with your money but with your life. Today we talk about the following habits.

  • Continually Learning
  • Investing in yourself
  • Automation
  • Looking at how your current actions impact your future opportunities
  • Giving with a purpose

Is there a good habit that you started doing that has paid off? Feel free to share it with us below.

Enjoy this lesson? If so please consider taking five minutes and leaving a review of the show either in Stitcher SmartRadio, or iTunes. For a step by step video of how that works, please watch this video on how to leave a review in iTunes.

You can subscribe to future podcasts through FeedburnerStitcher SmartRadioiTunes, or download the iPhone app. Or you may listen to the podcast on the JW's Financial Coaching Facebook Fan page.

If you have any comments, questions, or ideas for future shows you can send them to me and I will integrate them into a future show. There are two ways to get in touch with me: 1.) Email me at JWFinancialcoaching@gmail.com - Please put “podcast” in the subject line and keep your questions brief so they are readable on air. 2.) Simply fill out the form on the contact page. Please fill out your name, email, and your question/comment/suggestion and we will read it on air.

You can find prior editions of the podcast at the podcast archive page.