2/16/18

Five Finance Friday Q&A - 2/16/18

2/16/2018



What's up, Smart Money Squad! It's that time again for another edition of our weekly series, Five Finance Friday. We finally got some questions submitted on the page, so we're switching things up this week with a quick 5 question Q&A session. We would love it if you could let us know what you think and whether you prefer this format or the weekly article roundup format.

The topics will vary between all the different topics we write about, blogging, entrepreneurship, hot topics or really whatever we happen to be drawn to that week (basically we'll do whatever the hell we want).

Q1: What's the best way to save for my vacation this summer?

A1: This question really has two potential answers depending on how ambitious you are. The first answer is all about supercharging your savings. A good place to start is with our Unconventional Ways to Save Money tips. If you're really serious about saving, try putting away all your $5 bills and your $20 bills. Also, you can setup a direct deposit from your checking account to your savings account to happen right after your paycheck hits your account. That way you don't even see the money come in, so you're not tempted to spend it. Chances are, you could direct deposit 5-10% into checking without even noticing it's gone. You just might have to make a couple sacrifices in spending along the way.

If you're really ambitious and willing to step outside your comfort zone in your vacation planning, travel hacking is the way to go. We took you through a step by step guide in our 3rd most popular post ever! You'll save some serious cash without making sacrifices to your fun.

Q2: What should my retirement investment allocation be?

A2: If you don't need the money in the next 5-10 years, you shouldn't really have anything substantial in bonds or cash. If you want a little bit in bonds just for peace of mind, that's fine, but you're costing yourself money in order to be risk averse. I'm not criticizing -- just educating. . . okay, maybe criticizing a little.

My strategy is very simple. My company's 401k plan allows me to pick from several exchange traded funds, mutual funds (those two are pretty much the same thing), or individual stocks. I allocate 70% to an ETF that is essentially an S&P 500 index fund and 30% into a growth stock ETF which captures the sexy up and comer type companies like Tesla and Facebook. 

You can also choose a target date fund, but I would recommend recasting past your target retirement date for the majority of your money since you're probably not going to make a 100% withdrawal the day you retire. If you plan to retire in 2050, you could put a small amount in that fund, a small amount in 2055, some in 2060, and so on until you reach the furthest date available. Most people like these funds since they view them as a set it and forget it type option, but I warn you that they get too conservative too quickly if 100% of your money is invested at your retirement year's target fund.

Q3: What should I be focusing on to add to my resume?

A3: I think this answer really depends on your personality and goals. However, two universally positive resume enhancers are certifications and leadership positions. Certifications are important because they show not only your commitment to your field but also your commitment to learning and growing into the most knowledgeable employee you can be. Think of a certification as a glowing letter of recommendation. Your diploma, degree, or certification universally tells potential employers that you have mastered a particular set of skills and knowledge.

Leadership positions are a way to really stand out from the crowd in a sea of resumes flooding a hiring manager's desk. Companies like hiring well-rounded employees, so regardless of whether you're a leader in your church, your child's sports league, or even your book club, it shows the employer that you take initiative and that you can handle leading projects, teams, and initiatives. Leadership positions also provide an opportunity for positive and interesting conversation in an interview.

Q4: Should my significant other and I have a joint bank account?

A4: If you're not yet married, then I would absolutely recommend against a joint bank account. That just smells like a whole bunch of trouble during a relationship that hasn't yet grown into a marriage, especially if things go south. 

Now I'm no marriage counselor, but if you're married, I think you should definitely have a joint bank account. Financial transparency is key to a healthy and trusting relationship, and a joint bank account helps ensure both people know where you stand financially and can work together more visibly to make financial progress.

Q5: Should I be seeing changes to my paychecks as a result of the new tax plan?

A5: All companies are handling this differently, but yes the new tax plan did take effect at the beginning of the year. My company made changes to my federal tax deduction, so I have effectively received a raise consistent with the changes in the tax plan. If you haven't yet seen a difference in your 2018 paychecks, I would recommend reaching out to your supervisor or HR representative to learn more about your company's plan to take the new tax plan into account on your paychecks. 

What did you think?

We need your feedback so we can keep growing the Smart Money Squad! Do you like the Q&A format or the articles for Five Finance Friday? Also, the more questions we get, the higher quality the Q&A sessions will be. Submit your questions through FacebookTwitteremail, or in our Ask The Authors section on our website (right side desktop, bottom mobile).

Thanks for stopping by, squad, and have a kick ass weekend!

2/14/18

SMS Tried and True Valentine's Day Tips

2/14/2018
If you've lost track of time, Valentine's day is here! Don't worry, if you're a chronic procrastinator or just plain forgot to pick up your flowers and chocolates, you still have time, and Smart Money Seed is here to help.

For many, Valentine's Day is a good excuse to do a little something extra for that special someone. A dinner, a movie, flowers, or even just a small box of chocolates are some of the most battle tested gifts. Others celebrate the holiday with even bigger gifts such as jewelry, gift cards, or vacations. On the opposite end of the spectrum, some folks choose not to celebrate the holiday altogether.

No matter where you fall on the Valentine's Day gift giving spectrum, there are still some steps you can take to make sure you're spending your money wisely. Here are Smart Money Seed's top 4 tips for this Valentine's Day.
If you decide to go to Disney for Valentine's Day,
find an awesome brother-in-law to get you in the park
for free and take care of lodging! (Thank Matt!!)

1. Set Expectations

I'm not a marriage counselor, but after 7+ years of dating (and engaged for a month and half) I've learned that setting expectations for any sort of gift giving is crucial. Just like we talked about in our Holiday Budgeting Podcast, no one wants to be on either end of a lopsided gift exchange. 

I highly recommend making it a habit to talk with your significant other before the big holiday's to make sure you have some alignment. You don't want to just get her a box of chocolates if she plans on buying you a PS4. If you're still not quite sure what I'm talking about, check out this clip from The Office

2. Think Original

Doing something "original" (i.e. making dinner at home rather than eating out) gives you the opportunity to kill two birds with one stone: 

1. Save some cash (after all, this is a personal finance blog!)
2. Make the gift more meaningful

A trip to Hawaii is about as original as
it gets! But the small stuff can count
just (or almost) the same.
Making a nice dinner at home can give you a great sense of pride, and as we mentioned in our Grocery Store Hacks post, it can save you quite a bit of money. Most restaurants are packed on Valentine's Day, and it's not uncommon for a couple to spend $100 on food and drinks. If you cut this bill in half (or maybe even in thirds), I'm pretty confident I would have enough to head over to the grocery store and get some steaks, mashed potatoes, dessert, and a bottle of wine. Plus if you anything like us, we already go out to fairly often. Celebrating at home adds a personal touch that can help make the experience more meaningful.

Ultimately, your significant other doesn't care about the dinner or the chocolates. What she or he cares about is the effort you show in planning your date and doing something thoughtful for her or him. In many cases, gifts that costs no extra money such as cooking dinner or doing the dishes can be worth much more value to your significant other than a $100 dinner.


3. Celebrate After February 14th

This tip is pretty straightforward, but it can definitely save you some cash! Whether you are planning for a night in or night out, restaurants, stores, and flower shops are banking on your Valentine's Day purchases on the days leading up to the holiday. Some restaurants will even hike their prices on Valentine's Day because they know they will get the demand (another reason you should consider making dinner at home).

Once the holiday passes, stores are ready to get rid of their Valentine's Day inventory and restaurants are done with their over-priced specials. Instead of celebrating on the 14th, try doing something a few days later to avoid those price spikes.

It's okay to eat hot dogs while your friends eat steak.

4. Don't Keep Up With The Joneses

Maybe just avoid your Instagram and Snapchat for the next few days. Your Instagram feed will be flooded with pictures of diamonds, puppies, and everything in between. If you want to get your significant other a diamond or a puppy, go for it. If not, don't feel the pressure to do something that doesn't make sense for your life just because your friends are doing it. Keeping up with the Joneses is a quick way to land yourself in consumer debt hell.










Disclaimer: Smart Money Seed is run by three dudes, and this post has not been vetted by our significant others. I repeat, this is a Valentine's Day advice article written by guys; please use this information at your own discretion. With that said, we've each been able to keep our significant other's around for years!


2/12/18

#MileageMonday: Chase Sapphire Reserve vs. Chase Sapphire Preferred

2/12/2018


Happy #MileageMonday, Smart Money Squad! Since we last spoke, I've been soaking up the sun on the lovely beaches of Oahu in Hawaii. Let me quickly give a shoutout to my future in-laws, who graciously covered the cost of the beachfront condo we stayed in during our week in paradise. Don't forget, guys-you can always earn thousands of points but you can't replace the generosity of family!

Anyways, enough bragging for me. I'll save some of that for a future #MileageMonday where we'll go into how Kayleigh was able to score some killer deals on flights (booked with points) & how we flew back home first class with lie-flat seats! Today, though, we need to get back to where it all started for me: Chase Bank.

Chase Card Overview

As I've alluded to in previous posts, there are 6 main Chase co-branded cards that consumers flock to due to their decent sign-up bonuses & great offerings beyond the initial offering. These are:
  • Chase Sapphire Reserve
  • Chase Sapphire Preferred
  • Chase Freedom
  • Chase Freedom Unlimited
  • Chase Ink Plus (Business)
  • Chase Ink Cash (Business)
These cards all are valuable in their own right because they each offer a unique point-earning structure & different sign-up bonuses. While you technically could have all of these credit cards at one time, I wouldn't necessarily recommend that. As we know from our #Chasecapades (patented by me, don't you dare steal this travel bloggers!), Chase has a 5/24 rule in which you will not be approved for these cards if you've been approved for 5 or more cards within the last 24 months.

A quick note: if you need help tracking how many cards you've received or want a system to track your credit card haul, reach out to Smart Money Seed through email or any of our social media accounts. We're here to help, and I love nothing more than seeing all of you guys reach your travel goals!

Anyways, back to the good stuff. We will split our Chase card breakdown into three separate posts, driven by the category I'd group the card into. The aforementioned Chase-branded credit cards can be grouped into three categories:
  • Premium 
  • Everyday
  • Business
Today, we'll focus on the "Premium" category of Chase-branded cards. There are two cards that fit into the premium Chase category: the Chase Sapphire Reserve & Chase Sapphire Preferred. Both of these cards offer extensive benefits beyond the sign-up bonus; however, they do come with annual fees that may scare away potential customers. I'll go into why every dollar you spend on the annual fee is worth it, but first, let's breakdown each card.

Chase Sapphire Reserve

The Chase Sapphire Reserve (CSR) is currently offering 50,000 Chase UR points after spending $4,000 in the first three months after account opening. We've already talked about why these points are so valuable here. As a reminder, these points can be used to book travel through the Chase UR portal, transfer to different airline programs and much more. The real value in having a CSR in your pocket, though, are the extensive benefits the card provides. Here's a list of the offerings the CSR has at its disposal:
  • You can earn 3x points on all travel & dining purchases. This is about a 3% cash back on flights, hotels, restaurants, you name it. You'll get 1x points on all other purchases
  • $300 annual travel credit (covers anything from an Uber to a flight. If it codes as travel on your statement, you'll automatically be reimbursed)
  • 50% bonus on points when redeeming through the Chase UR portal for travel
  • Up to $100 application fee credit for TSA Precheck or Global Entry
  • Priority Pass Select membership. Ever want to experience an airport lounge? This provides access to over 1,000 airport lounges worldwide & allows you to bring a traveling companion free of charge
  • No foreign transaction fees
  • Trip Delay Reimbursement: If any part of your trip gets delayed for longer than 6 hours due to unforeseen circumstances (think weather, mechanical failure, etc.), you are entitled to up to $500 per person for reasonable expenses. When we say reasonable, think meals, lodging, transportation, etc. Just make sure that some part of your flight was paid for using your CSR to ensure you receive this benefit.
We could keep the list going forever-there's baggage delay insurance, trip cancellation insurance, automatic rental car insurance...clearly, there's TONS OF VALUE in having this card, especially if you are a frequent traveler. Whether it's the massive travel credit or the increased travel redemption opportunity, one thing's for sure: the CSR is one of the hottest bargains on the market.

With all of these benefits, there's a catch: the CSR has a $450 annual fee that is NOT waived in the first year. This annual fee will post with your first statement. While this seems steep, I'd argue that your more than make up the $450 from the benefits included at sign-up. 50,000 UR points + $300 travel credit + $100 TSA Precheck reimbursement already get you over $1,000 in value when used correctly, which is the name of the game.

If you are able to take advantage of all the CSR has to offer, it's certainly a no-brainer in my eyes. However, not all of us are keen on spending $450 on an annual fee but still would like a solid offering from their credit card. Fear not-the Chase Sapphire Preferred has you covered!

Chase Sapphire Preferred 

If you've ever heard me talk about travel hacking, you have probably heard me talk about this card. It's my go-to card & has helped me take countless trips around the world, ranging from trips to see friends in California to a soccer extravaganza in London! The Chase Sapphire Preferred (CSP) is currently offering 50,000 Chase UR points after spending $4,000 in the first three months after account opening. Sound familiar? That's because it is-this card offers the same sign-up bonus as the CSR.

However, the annual fee is much less with the CSP. The annual fee for the CSP comes in at $95, which is waived for the first cardholder year. You owe nothing to Chase for the first year & can make the decision to either keep the CSP or downgrade to a fee-free card down the road. Not a bad option for a card offering 50,000 valuable UR points from the get-go!

As with the CSR, the CSP also offers a wide variety of benefits beyond the sign-up bonus, albeit of lesser value. Here's a sampling of what the CSP has to offer:
  • 2x points on travel & dining
  • 20% bonus on points when redeeming through the Chase UR travel portal
  • 1:1 transfer ratio on UR points to airline & hotel programs (Southwest, United, Hilton, Hyatt, etc.)
  • No foreign transaction fees
  • Auto rental insurance
  • Trip Delay Reimbursement-valid for delays of 12+ hours or overnight (The CSR covers you for delays of 6+ hours, an important note to keep in mind)
  • Baggage Delay Insurance
  • Purchase Price Protection-covers new purchases for 120 days against theft/damage, up to $500
  • Extended Warranty Protection-automatically extends warranty of items purchased with CSP for an extra year for items with warranties of 3 or less years.
Clearly, there's a ton of value to be had with the CSP. As I mentioned, it's my go-to card for nearly all my expenses & a card I will never cancel. The $95 annual fee is peanuts compared to the $1000+ in value I typically expect out of the card every year. If you are looking for a card that doesn't break the bank but still gives you reasonable coverage across the board, look no further. The CSP is your best bet, and a must-have for any consumer under the Chase 5/24 rule.

NOTE: We have an affiliate link for the Chase Sapphire Preferred if you would like to help the blog earn a little extra mileage when you sign up. Simply use our link when applying:

Earn 50,000 bonus points with Chase Sapphire Preferred. I can be rewarded too if you apply here and are approved for the card. Learn more.

https://www.referyourchasecard.com/6/OHOHIICLMV

CSR vs. CSP: Which Card Makes Sense For Me?

Chase recently introduced a rule stating that you cannot have two Sapphire products at one given time, ruling out the possibility of stacking these cards and their bonuses. For those of you on the fence about which card to get, I'd offer this: evaluate how much you plan on traveling this year. If you are a frequent traveler that doesn't have TSA Precheck/Global Entry or simply wants access to the airport lounge with a few pre-flight mimosas, the CSR is a no-brainer. However, that's not the reality for a lot of the Smart Money Squad & people in general.

The reality is that the situation is going to be different for every single person. For me, I know that I have a lot of the benefits offered by the CSR with other credit cards in my portfolio, and thus, I don't need to spend the $450 annual fee. I'm more than happy with my CSP, and until I'm under the 5/24 rule, I don't see myself picking up the CSR in the near future.

There's also no reason you couldn't have BOTH a CSP/CSR & one of the other cards in Chase's co-branded family. With many options to choose from (i.e. having a Chase Freedom for 5x points in quarterly categories, Chase Ink for 5x points on office supplies/phone bills, etc.), you can't really go wrong!

Of course, minimum spends on either the CSP or the CSR can be the obstacle in your way of meeting the bonus. With a wedding on the books in October, I might actually be able to meet a minimum spend like that out of necessity. However, that's not normal spending for 99% of our readership-and that's where manufactured spending comes in. Check out my initial travel hacking post if you'd like to know more about that!

Final Thoughts

We've only scratched the surface of the "premium" level of the Chase-branded cards and already we've uncovered TONS of value in each card. Keep in mind, Chase has many more cost-efficient options we will dive into that I use regularly to boost m UR balance and snag that extra Southwest flight for free.

The CSR & CSP have been game changers in the travel sector of credit cards & are the gold standard in an industry that had been lacking real value. As two of the leaders on the marker, these cards are sure to drive competition in the "premium" level of other credit card companies, namely American Express & Citi. It will be interesting to see how these companies continue to compete for our dollar by providing more benefits, ultimately justifying increased annual fees.

As always, happy #MileageMonday, and a happy Valentine's Day to the Smart Money Squad!

Cheers, 

Ty

2/9/18

Five Finance Friday Q&A - 2/9/18

2/09/2018



What's up, Smart Money Squad! It's that time again for another edition of our weekly series, Five Finance Friday. We finally got some questions submitted on the page, so we're switching things up this week with a quick 5 question Q&A session. We would love it if you could let us know what you think and whether you prefer this format or the weekly article roundup format.

The topics will vary between all the different topics we write about, blogging, entrepreneurship, hot topics or really whatever we happen to be drawn to that week (basically we'll do whatever the hell we want).

Q1: How should I handle the recent downturn in the stock market?

A1: STAY THE COURSE! We don't give a ton of investment advice on here because that's not exactly our core competency. But what we do know is that market downturns aren't what causes people to lose money. Panicking during market downturns is what causes people to lose money. 

Unless you're in a position where you absolutely need the money (in which case we'd question why you have it in the stock market in the first place), you need to keep your money in the market. I'm not a stock market expert, but I can with 100% certainty make you 2 promises:


  1. Nobody knows exactly when the rebound will be or where the bottom is.
  2. The market will rebound and be higher at some point in the future than it is right now.

Q2: How do I do my taxes?

A2: I got about halfway done with my taxes before I had to take a break to write this post, so I'm pretty much a tax expert at this point. 

First, you need to get your W2s from your employer. You'll also probably get a form from your bank and from your brokerage if you do any investing outside of your 401k. Turbo Tax is extremely simple and free for basic returns. What I mean by a basic return is taking the standard deduction and not having extras to report such as trading stocks.

I'm using FreeTaxUSA which is free for my federal return and $12.95 for my state return. If you trade stocks or do anything extra like that to make money, this is a good option. The process is much more simple than you would think. Basically, you just type in a bunch of numbers off your W2. If you don't know what you're being asked for, a quick Google search (or email to Smart Money Seed) can help clear things up. Unless you own a home or donate a ton of money to charity, you're probably taking the standard deduction which really makes things simple.

Q3: Should I pay off loans or invest my tax return?

A3: I'm a firm believer that a debt free life is the way to go. The amount of money I've been able to save while living debt free the past year and a half is outrageous. However, I never sacrificed retirement investing in order to pay off debt. If your retirement account needs a boost, a tax return is a great way to jump start your IRA. If you're already saving 10% of your income for retirement, go ahead and pay down that debt.

The real answer is that both options are awesome. The fact that you're not just blowing it on useless shit says a lot about your character and indicates you're going to experience awesome financial success if you're not already.

Q4: What are the most important aspects of a good resume?

A4: You need to view your resume as a door opener. Nobody is going to make a hiring decision based on your resume. What it does for you is earn you interviews and an opportunity to convince hiring managers that you're the right gal or guy for the job.

The most impressive aspects of your resume need to really stand out. Placing them toward the top and in bold certainly helps. Also, the more statistics you can include the better. I actually had a couple of phone interviews with the Cleveland Indians during college (who wanted me to work in ticket sales of which I adamantly opposed), and they kept telling me to include more statistics in my resume. I'd imagine they see tons of applicants and know what they're talking about.

Ultimately, no amount of resume beautification is going to overcome a lack of content. The more high quality, relevant, and interesting content you can include, the better. Pack your resume full of certifications, organizations, leadership positions, and volunteer work. I definitely have some work to do in those areas myself. Those things not only give you a better shot at getting an interview but also give you cool shit to talk about once you're in that interview.

Q5: Were you invited to either Ty's or Christian's vacations?

A5: You know, this week served as a great reminder for me that Smart Money Seed has cultivated a strictly business relationship between its contributors. We've got our eye on the prize of turning this into a successful venture which sometimes causes a guy to feel a little unloved. I'm sure Christian and Ty couldn't get SMS off their brains while they suffered through their warm, sun infected weeks. 

I won't answer the question directly, but I will say that if I were invited, I would have politely declined so as to not garner a soft reputation for SMS. Somebody's gotta bring the grit to the table, walking 5 minutes to work uphill both ways in the sub-freezing weather.

What did you think?

We need your feedback so we can keep growing the Smart Money Squad! Do you like the Q&A format or the articles for Five Finance Friday? Also, the more questions we get, the higher quality the Q&A sessions will be. Submit your questions through Facebook, Twitter, email, or in our Ask The Authors section on our website (right side desktop, bottom mobile).

Thanks for stopping by, squad, and have a kick ass weekend!

2/8/18

3 Reasons Why You Should Be Looking for a New Job

2/08/2018

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When is the last time you looked for a new job?

Attention to detail is key; this article is not called 3 reasons why you should get a new job. Trying to get a new job implies you’re not completely happy with your current job or you think that there are better opportunities available. If you’re trying to get a new job then you should definitely be looking, but just because you don’t want to get a new job doesn’t mean you shouldn’t be looking. Sounds kind of weird, I know.

When I say looking for a new job, I’m not talking about actively applying or talking to recruiters. In my opinion, looking for a new job simply means keeping an eye on the job market. It means answering questions like:

  • How many companies in my area have positions in my field?
  • How many of those companies are actively hiring?
  • If I lost my job today, how easily could I get a new one?
  • Is the number of jobs in my area increasing or decreasing?
  • Where would be the first 3 places I would apply if I needed a new job?



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Looking for a new job doesn’t mean you’re currently dissatisfied with your role or position. In fact, even if you love your job, I’d still encourage you to stay in touch with the job market and here are 3 reasons why.

1. If you’re not getting better, you’re getting worse


While this saying is more commonly used in sports, I think the methodology still applies to the job market. If you’re not staying up to date on job opportunities and employment in your city and in your field, then you’re getting behind in your career. As a professional, you owe it to yourself to stay at the top of your field, and one of the best ways to do that is staying in touch with the job market.

One of the easiest ways to stay in tune with the job market is keeping up to date with platforms like LinkedIn, Glassdoor, or Indeed. Keeping up to date doesn't mean you need to peruse these sites with a magnifying glass 24/7; just check once or twice a month to see who is hiring and what opportunities are in your area. Again, looking at these sites doesn't mean that you want a new job - the purpose is simply to raise your awareness.

2. You never know when a company will change or restructure


If there’s one thing that is constant in every profession and career path it’s this: things change! Whether you’re a banker or a chemist, your jobs are changing, and the companies you work for are changing, too. Today’s world keeps getting faster and faster, and companies have to change even more suddenly to keep up with industry trends and standards. Sometimes these changes can result in a loss of jobs, sometimes to even the company’s highest potential employees.

If you were to lose your job today, do you have a back-up plan? Don't let a company's change of plans take you out of the game - always have a back-up plan and know what you would do if doomsday came.

3. It keeps your network up and running

Being at the same company or in the same role for many years can take a toll on your professional network. While you may develop some deep, meaningful relationships, it can be challenging to keep your broader network alive and breathing.

Have you ever heard the saying, "It's not about what you know, it's about who you know,"? Maintaining your professional network is a critical element of staying relevant in your career. A strong network needs both deep and broad relationships to be effective, and staying in touch with the job market can help keep those broader connections alive.

Aside from periodically searching the job boards on LinkedIn or Glassdoor, keep tabs on your contacts that work in other cities or at other companies. Make it a point to reach out to them from time to time to see how their job is going or to learn what is going on with their company. The more frequently you reach out to others in your extended network, the more lively that network will become. Conversely, if you fail to give it enough attention, your extended network will shrivel up and die. (Smart Money Seed is not implying that lack of contact will actually cause death to those in your network.)

Don't let yourself down.

If I haven't said it enough times already, let me say it one more time. Staying in tune with the job market doesn't mean you are not happy with your current job. Touching base with a contact from another company doesn't mean you are ready to jump ship and start a new career. 

Keeping tabs on local job opportunities is simply about raising your awareness, and as a top-rate professional, you owe it to yourself to be aware. Keep those connections alive, stay current with opportunities in your area, and make sure you're ready for any curveball your professional career throws at you!

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2/5/18

3 Powerful Ways To Make Your Tax Return Catapult You Towards Success

2/05/2018
'Twas the night before tax day, when on my commute home
I felt great excitement, right up in my dome.
I took the dog out to the mailbox with care
In the hopes that my W-2 would be in there!

Christmas is a special time of receiving for most fortunate children. Although good parents will try to instill the value of selflessly giving in their children, let's all be honest with ourselves. . . the kids just want the toys! And although we've gained perspective that Christmas isn't just all about the gifts, we don't at all mind our own much more boring version of Christmas morning that still gives us geezers that childlike joy inside. . .

TAX RETURN SEASON, BABY!

If you're privileged and fiscally responsible enough to have a little wiggle room allowing you to do something with this extra cash besides simply making ends meet, you need to really make an impact with this thing!

Whether your tax return is just a few bucks or it represents some serious spending power, this "extra" cash can go a long way in helping you achieve your financial goals. That is, of course, as long as you don't waste the entire thing on booze or a fancy dinner.

3 Success Strategies

Similar to most aspects of your financial life, you'll probably want to diversify your bonus allocation. However, if you have a lofty financial goal such as paying off debt or saving for a house down payment, allocating most or all of your bonus toward that goal is completely acceptable and can make an enormous impact.

1. Contribute to retirement

Some people adapt the mindset that their bonus is "play" money, so they decrease their retirement contribution or don't contribute at all. While it's certainly okay to use some of your bonus as "play" money, wasting all of it that way is grossly irresponsible.

Let's assume that you receive a $1,000 tax return and your usual retirement contribution on your salary is 10%. If you're currently 28 and plan to retire when you're 62, that $100 will grow to over $2,500 by the time you retire. If you receive that same return every year and continue to invest $100, your $3,500 contribution will grow to over $25,000!



Pro Tip: Since this money is most likely not essential to your day to day needs, what if you doubled your contribution amount? You'd still pocket about $600, but that $200 annual contribution would grow to nearly $60,000! That represents a full year of retirement income for new retirees according to New Retirement.

2. Pay off debts

This is the main philosophy Ty and I utilized during our first couple of years after college which you can read about here and here (Ty's story is packed full of valuable content and is our most popular post on the site!). The rate of return on paying loans doesn't always look as appealing as the rate of return on potential investments. For example, you may be paying 5% interest on your student loans but noticed the S&P 500 saw returns last year of 21.83%. Why the hell would you take a 5% return when you can get 21.83%??

The answer is that you're guaranteeing a rate of return for yourself while effectively giving yourself a monthly raise by freeing up cash. Nobody exactly knows what type of returns the S&P 500 will pay out tomorrow or over the course of the next year. A bunch of smart people work incredibly hard every day to answer that question, and they're quite often wrong. The market is only up about 5% so far this year, so now paying off your loans doesn't look so dumb after all!

Also, you free up whatever cash you had been paying toward your loans to do whatever you want with it. When we graduated, Ty watched $428 head out the door for his loan payments, and my payments totaled nearly $600. That is an absolutely brutal amount of money to pay each month for shit we already had! Now we have the freedom to make progress toward our other financial goals or do things like go on bachelor party trips to Vegas this summer!

I should point out that neither Ty nor I had any credit card debt. If you have credit card debts that are gouging you for 20% or more interest, you need to put every extra penny you can pick up on the street toward this debt and evict it from your life forever.

3. Build your rainy day fund

The term we use for this in the biz is an emergency fund. However, you don't need to wait for a truly life threatening emergency to tap into this fund. Your emergency fund should be used to cover unexpected expenses you wouldn't have planned for in your monthly budget like a medical bill or car breakdown. 

If you don't currently have an emergency fund, Dave Ramsey recommends setting aside $1,000 as the first step toward getting your finances in order. Dave teaches to then pay off your debts and build your emergency fund all the way to 3-6 months of expenses to cover things like unexpected serious illness or job loss. 

Whether your tax return is $100 or $1,000, future you will definitely appreciate having a little extra cash in the bank to ease the stress next time an unexpected expense comes up!

Just Do Something!

When you come across any extra cash whether it's in your regular monthly budget, a tax return or bonus check, or an inheritance, don't worry about toiling over what decision is perfect for you. Take a second to think about it, look at your current financial life and your goals, and just do something positive with it! Unplanned dollars you don't need to survive day to day can go a long way in helping you reach levels of financial success you previously never thought possible.

What are your plans for your tax return? Are you doing something we didn't write about, or did our ideas inspire you to make a positive financial decision? Let us know in the comments!