New Site in the Works

Hi Readers,
As you may have seen, it's been awhile since I have done any new posting. I am currently working on reinventing the site, and hope to have better content, a bigger following, and more helpful to my readers. My intent will be to have as much communication with the readers as possible, as well as collaboration as a whole. We will help each other become more financially savvy.

I sincerely appreciate you reading up to this point, I have thoroughly enjoyed posting. When I have the new site ready to launch, I will provide an update here on the new web address. Until then, please feel free to let me know if you have any questions or comments, as I will still be receiving updates from the current site.
Regards,
Jeremy

Do you have an emergency fund?

Many people don't expect any emergencies to happen in their life, and if they do, they expect to deal with it when it happens. If you are one of those, I encourage you to change your mentality on this subject, because at some point, you WILL have an emergency. You need to have this money where it is barely accessible, where you actually have to work to be able to use it. And by work, I mean, pull the money out of the bank, or something that will inconvenience you to use it. The hope is that this money always stays put, and that you never need to dig into it.

With that said, I encourage you to take a portion of your tax return (if you are getting one), and put it back for a rainy day. You'll feel much better knowing that you've accomplished this, and if that emergency ever arises and you need it, you'll feel even better.

401K Advice

Many people are not familiar with how a 401K works at their employer. I haven't been in a job that long which provided me one, but I have learned alot about them. There are a few main features of a 401K, so we'll start with one of them today.

The money that you contribute from your 401K is pre-tax money. For instance, if you contribute $100 to your 401K, and you are in the 25% tax bracket, you save $25 in taxes. This means that the $100 contribution you made, really only costs you $75. You do not pay the taxes until you begin withdrawing the money from your 401K. This is a big feature, that allows you to contribute more, and reduce your tax bill at the same time.

I hope that you will take this year to contribute to your 401K when you can. It is very important for us to prepare for our own retirement. Anything else (Social Security, etc) will just be an unexpected bonus when it comes time to retire!

Tax Deductions vs. Tax Credits

How many of you know the difference between a tax deduction, and a tax credit? When I was younger, I didn't even know the term, much less the difference. My mom took the taxes down to the nearest large tax return preparing company, and had them do the work for us. With that said, let me explain the difference between the tax deduction, and the tax credit.

A tax deduction reduces your taxable income in most cases. For example, if you are in the 25% tax bracket, and have a $1,000 tax deduction, you would pay $250 less in taxes (in most cases).

A tax credit reduces your taxes owed dollar for dollar. For example, if you are in the 25% tax bracket, and have a $1,000 tax credit, you would pay $1,000 less in taxes (in most cases).

I hope this helps you a little in understanding a part of the tax process. Obviously, tax credits are better than tax deductions, but a deduction is better than nothing as well. I encourage you to get your return completed early this year, and if you are getting a return, put it to work!