There are a bunch of personal finance websites and blogs out there, and many that focus on women. I think this is great; the more information we have access to, the better choices we can make for managing our money. But with so many choices out there, why check out Money Moxie? Here are 5 reasons to stay on top of your personal finances with Money Moxie–and tell your friends!
1. We won’t tell you to ‘lean in.’ Actually do whatever you want.
With due respect to Sheryl Sandberg and successful women everywhere, we all follow a different path. Some of us are children of immigrants, some have worked our way through college and business school (even against our parents’ wishes who preferred that we just settle down and get married), some of us never went to college but managed to build a successful business anyway. There is no one recipe of success. Sure, for some women, it’s a gradual rise to the top, from private school to Ivy League to management consulting to big corporation to start-up sensation. For others it’s a sloppier zig-zag of good luck, dumb mistakes, stupid risk-taking and amazing success. But somehow we ‘did it’ or we’re in the process of ‘doing it’ and we all have a distinct story of our own to share.
2. Saving money is not about foregoing the ‘mocha skim latte.’ Personally I don’t remember the last time I went to Starbucks; it’s not because of the cost, it’s that I feel like my stomach lining keeps getting thinner and more porous every time I get a coffee there. But the point is, saving money isn’t about saving $4.00 a day. It’s about knowing ourselves and what’s important to us.
Does money= financial freedom and home ownership?
Does money= the opportunity to make more money?
Does money= the freedom we need to ‘find ourselves’?
Those are the questions we should be asking ourselves and once we know the answer, the rest is easy.
3. We love ‘shot-callers.’ Every entrepreneur, business owner, freelancer, artist or professional woman has a unique story and experience– how she made it, how she spends her money, how she prioritized to get herself up the ladder. We love meeting these courageous, smart women, and sharing their inspiring stories.
4. We talk about the economy, the deficit, taxes and the election. While these topics may cause some droopy, glazed-over eyes, they’re important. The decisions made in Washington directly impact our wallets. On the other hand, who wants to spend hours watching C-Span when we could/should be watching “Orange is the New Black?” We comb through the WSJ so you don’t have to (unless you want to!)
5. We are a website for hustlers. Sometimes when you break free from the pack and start your own project-whether it’s a new business, a film production company, a freelance lifestyle — sacrifices have to be made. We work several jobs at a time, we work on our passion while we’re ‘working’ at our day job, we’re constantly talking up or about our project. But that also means that money, time and resources have to be managed wisely. We often say ‘no’ to nights out with friends so we can stay home and work on our business plan. Sometimes we say ‘yes’ to nights out with friends so we DON’T have to spend another night working on our business plan. Either way, been there done that. And we wouldn’t trade the experience and the lessons for the world.
I don’t have to look at the calendar to know that it’s already August. All I have to do is notice that people waiting on the subway platform have a look of despair that comes only after giving up the hope of showing up for work wrinkle- and sweat-free. These days, my dog doesn’t linger on her walks and gets her business done in .0004 seconds. And if people aren’t already on vacation, they’ll show up for work in August–sure– but get nothing done. I mean, why hustle to get something on the boss’ desk when she won’t look at it until September 4?
August also reminds me that the year is passing quickly. It seems like not so long ago since the American Taxpayer Relief Act (“the tax bill”) was passed (back in January). Remember how everyone was worried that the moment January 1, 2013 came around, taxes would go up, estate exemptions would decrease and many credits and middle class benefits would disappear? And then good ol’ Congress swooped in with a last-minute bill that kept taxes low for many Americans and increased the tax rate for the “wealthy.” And other stuff. For a refresher on all the fun details of the tax bill, see https://moneymoxie.wordpress.com/2013/01/03/new-year-new-deal/
So what’s changed and what can we expect when Congress returns from summer break in September?
While the tax bill kept taxes at their low rate for most Americans, it allowed income and capital gains rates to go up for individuals/families who earn $400,000 and more. It also limited certain exemptions for higher earners (Pease and PEP exemptions), let some middle class benefits expire like the payroll tax holiday, and made permanent the AMT exemption. In addition, 2013 is the first year that an additional 3.8% tax will be applied on investment income earned by higher income individuals, thanks to a provision in the healthcare act.
2. The Deficit
Since the downturn began, politicians and economists alike were alarmed at the drastic increase in the federal deficit; not since the 1940s was our deficit at such dangerously high levels. Under normal circumstances, the deficit to GDP (gross domestic product–ie. national economic output) ratio hovers at around 3%. In the past few years, however, the deficit reached beyond $1.3 trillion in 2010 and about 10% of GDP, causing the US debt level to increase to historic levels.
The good news is that the Office of Management and Budget announced in July that it expects the deficit to fall to $759 billion for year ending 2013, or 4.7% of GDP, its lowest in five years. The improvement in the deficit is a result of the economy picking up speed as well as an increase in tax collections and the savings from the automatic spending cuts known as the sequester (for a refresher on the sequester, take a gander at https://moneymoxie.wordpress.com/2013/02/21/the-sequeezter-how-the-coming-budget-cuts-may-affect-you/ .)
3. The Economy
Since the beginning of the year, there’s been a marked improvement in the economy. Last week, it was reported that the economy grew by 1.7% in the second quarter which was an improvement over the 1.1% growth achieved in the first quarter of 2013. The unemployment rate also decreased to 7.4%, its lowest level in five years, although the increase in jobs was a result of discouraged unemployed workers leaving the workforce. Going forward, many economists are optimistic that companies across most industries will continue to expand, boosting employment and growth into 2014.
4. The Stock Market
Despite some gloomy reports about US markets in the beginning of the year, as well as the continued downturn in Europe and slowing economies of emerging markets, the US stock market has been on a roll! Recently, the S & P surpassed 1700 in intraday trading and has been consistently closing above 1500 for months. The market is up over 20% to date, and up near 12% from its pre-recession high.
What to expect after summer break…
1. Debt Ceiling Debate
Just when we thought the sunnier economic outlook would result in a more harmonious Congress, BAM! The debt ceiling debate comes along! While this winter, we mostly avoided a repeat of the summer of 2010 debt ceiling fights that caused Standard & Poor to lower the credit rating of the US–mainly because the automatic spending cuts were instituted in February which helped to reduce the deficit anyway—get your popcorn ready for another round of debates in September. While many Republicans and small business owners want the President to roll back the tax increases instituted by the tax bill, the President has called for a decrease in the corporate tax rate from 35% to 28% as long as Republicans will agree to additional spending on infrastructure and development projects. There are also calls for additional savings by limiting or doing away with tax write-offs of municipal bond interest, real estate interest and charitable contributions.
2. The Stock Market And The Fed
While the market has been on a high this year, many investors fear a pullback if not an all-out crash later this year. One huge factor in whether the market will continue to boil or bust is if or when the Fed will decide to slow its $85 billion in monthly purchases of bonds known as quantitative easing (QE3). The fear is that once the Fed bond purchases slow or stop, interest rates will go up which could have a drastic effect on investments and wealth. The good news is the Fed reported earlier this year that it would not begin to slow these purchases until 2014, but could change its mind sooner if the economy continues to improve.
What should you do to prepare for stormy weather?
– Make an appointment to speak with your financial advisor to discuss coming events in Washington and Wall Street and how they may affect your investment portfolio. Don’t wait for your advisor to call you; be proactive. After all, it’s your money!
– If you don’t already have an advisor, find out who is near you and who you click with. http://www.napfa.org/
– Consider low-cost investments that mirror a specific exchange or index like an Exchange Traded Fund (ETF) that can offer strong returns and an alternative to owning stocks or mutual funds.
– To hedge against rising inflation, consider adding TIPS, commodity funds and real estate trusts (REITs) to your overall portfolio.
– If you’re in the higher tax brackets, make sure to include tax efficient investments in your portfolio like separately managed accounts.
– Pay attention to how you invest your retirement account vs. your investment portfolio. It may be more advantageous to include taxable investments in your retirement account since those will be tax-deferred until retirement, and keep tax efficient or tax-free investments in your taxable investment portfolio.
But first–enjoy the rest of the summer!
By now, everyone is pretty sick and tired of hearing about the fiscal cliff. The fiscal cliff has been discussed, dissected, analyzed, blogged about, and counted down. It seems every man, woman, toddler and goldfish knows about the fiscal cliff!
Fortunately, Congress finally got its act together and on New Years Day passed legislation that presumably kept the US from falling “off the cliff.” In other words, if nothing had been done to avoid the fiscal cliff, then on January 1, 2013, taxes would have increased for most Americans, many middle class incentives would have expired and several harsh mandatory budget cuts would have begun to take effect, basically cutting many social services Americans rely on.
Now before we go organize a parade to honor our magnanimous government leaders, let’s get realz. This fiscal cliff debate had been going on for years and was a major theme of this election. Everyone knew when the deadline was and what was at stake. By leaving any negotiations on a deal to the very end and then pushing legislation at the last second, our politicians acted like a bunch of high schoolers who had been cutting class all semester long, only to be pulled aside by the school counselor and warned that failure to pull a C- on the final would result in failing 12th grade and staying back a year. So for the last 2 weeks of school (or in the case of Congress, the last 2 days of the year!) the students pulled all-nighters and tried to prove how earnest and hard-working they were about passing chemistry.
So in my mind, there are no heroes in this deal. Although I do applaud Speaker Boehner and Congressman Paul Ryan for standing up for the Bill during the session AND following up by putting their vote where their mouth is.
But now that we’re here, on the other side of the cliff and no one drowned, there’s a brand-spanking-new piece of legislation to wade through. So let’s do this:
What’s in the Bill:
1. Extends low tax rates for most Americans
The Bill permanently extends the Bush tax cuts for most Americans. In other words, the low tax rates that we’ve all enjoyed since President Bush introduced and Congress passed in 2001, will continue to be in force permanently. Individuals who make less than $400,000 will be taxed at those rates (top ordinary income tax rate of 35%, 15% capital gains and dividend tax).
2. Raises taxes on the wealthy
For individuals who make $400,000 or more and families who make $450,000 or more, their taxes will go up. The Bush tax rates were not extended to these individuals and families and so their top tax rate is 39.6%, capital gains and dividends taxed at 20%. Please also note that beginning in 2013, there is an additional tax imposed on investment income thanks to the health care bill. For families who make $250,000 or more, they will have to pay an additional 3.8% tax on capital gains, ordinary income, dividends, royalties and interest on amounts above the $250,000 threshold. So for some unlucky (but wealthy) few–their ordinary income tax rate could be almost 44% and 23.8% tax on capital gains and dividend income.
3. Limits to deductions and personal exemptions are back
In addition, taxes get even more complicated for higher income Americans–even for those who make less than $400,000–because the legislation brings back 2 tax provisions that were frozen by the 2001 Bush legislation. The personal exemption provision (PEP) reduces or eliminates the benefit of the personal exemption for high income earners, and the Pease provision, which limits and greatly reduces the ability of high earners to make certain deductions. These provisions will apply to individuals who make $250,000 or more and families who earn $300,000 or more a year.
4. Sets estate tax and exemption
The bill also addresses and makes permanent the estate tax rate and estate tax exemption, another set of taxes that were in flux over the past 10-12 years because of their temporary status. The estate tax is the amount of tax that a decedent’s (dead person) estate must pay on the value of the assets of the decedent, minus the estate exemption. The new legislation permanently set the estate tax (as well as the gift and generation skipping transfer taxes) at 40% and thereafter adjusted for inflation. The estate exemption–or the amount of a decedent’s estate exempt from tax– remains at $5 million (for couples it is a cool $10 million). This means that for wealthy families, they can continue to shelter up to $5 million of the estate from tax and then pay a 40% tax on the remainder.
5. Extends middle class incentives
The bill also extends several middle class tax credits and incentives for education and families. It extends for 5 years the American Opportunity Tax Credit, the Child Tax Credit and the Earned Income Credit.
6. Extends the AMT patch
It also makes permanent the AMT patch (which is an alternative tax provisions intended to make sure that the wealthy pay their fair share in taxes but because it was never adjusted for inflation when it was created, it has slowly been creeping into the middle class). The legislation allows for the AMT to be adjusted for inflation going forward.
7. The legislation also extends unemployment benefits for workers who would have otherwise run out of benefits this year.
8. Many pro-business, renewable energy and “green” tax credits are also extended.
9. Payroll tax holiday
The Bill did NOT extend the payroll tax holiday. This was instituted two years ago by the Tax Bill of 2010 and basically gave a tax break to every working American. During normal tax years, every worker must pay 6.2% Social Security tax on income. The 2010 Tax Bill cut this tax by 2%, saving Americans about $10-20 in taxes per paycheck. The recent legislation did not extend this tax holiday so this year every worker is back to paying the full 6.2% of tax on up to $113,000 of their income, or an additional $2274 in taxes annually.
What’s NOT in the Bill:
The Bill did not cover any significant budget cuts, entitlement reform, any meaningful deficit reform or corporate tax reform. Many if not all of these issues will be addressed shortly, however, as Congress gets ready for its next major rumble when the government hits the debt ceiling in March. It’s very likely that the Republicans will demand concessions, spending cuts and changes to entitlement during the coming debt ceiling debate. The tension builds….