Category Archives: Money

How to Save Stupid Crazy Money on Travel in Your Thirties..or.. Oh the Places You’ll Go..While Barely Traveling!

July 12, 2015 By in Friendships, Money Tags: , , , , , , , , , , , , , , , , 6 Comments

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I love travel, but I love New York more. If I had to pick whether to travel and never return to New York, or whether to stay in New York and never travel again…I must admit, I’ve just stumped myself with that one…

Anyway…I’m lucky and grateful that I never have to decide between those two options. And I’m also lucky that I get to travel all the time for work, but during the summer, the work travel slows almost to nothing. And it’s during this time that I travel the most of all! But I don’t have to go anywhere! And I don’t have to spend any money.

I will explain.

I used to have a travel blog where I’d talk about traveling all the time. Ironically, I didn’t actually ever travel for pleasure during this time – only for work- because pleasure trips cost too much money for me. Since I’m still paying off my student loan– which I’m gonna kill dammit…soon..I save a lot of money by not taking vacations.But I found a kind of travel that costs me almost no money, is just as pleasurable as pleasure trips, and never takes up a lot of time. I go on staycations! I travel completely within New York, and see lots of exciting places..even ones I’ve somehow managed to miss during my 30 years living here!

My friend Amy does this best. She’s an expert staycationer who both staycations and travels the globe. No matter whether she’s exploring Greenpoint, Brooklyn, or wandering around Tokyo, she always goes alone. It’s pretty amazing and inspiring. She always finds great places to see and new experiences to have.

Amy recently walked the the George Washington Bridge and the Brooklyn Bridge in one day!

Amy recently walked the the George Washington Bridge and the Brooklyn Bridge in one day!

So here’s how to save stupid crazy money on travel in your thirties and go on summer staycations instead:

1. Look for free or cheap summer things to do in your hometown

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I happened upon yoga in Bryant Park one day..I’d forgotten that it was a summer thing in New York. Pretty neat.

2. Find somewhere you’ve never gone in your city or hometown and go there.

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My friend Zach and I recently went to Governor’s Island- a little island off the coast of Manhattan- home to a bunch of museums, and gorgeous views and great picnicking areas. It cost me a grand total of $2.00 for the ferry.

3. Go to an area in your hometown/city you’ve been to but find a street or ave you’ve never seen before.

Saw fireworks on the boardwalks of Long Island City, Queens. Somehow I'd never been there before.

Saw fireworks on the boardwalks of Long Island City, Queens. Somehow I’d never been there before.

4. Go somewhere you’ve already been, but never appreciated as a vacation spot..and call it your vacation day!

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I love Fire Island beaches- and with 32 miles of beaches, there’s always more to explore.

5. Go somewhere in your hometown/city that just opened!

I went to the new Whitney museum off the Highline recently ..it's brand new!

I went to the new Whitney museum off the Highline recently ..it’s brand new!

6. Go to a place you’ve been to before but pretend you’re in Europe. Or Canada. Or America if you live in Europe or Canada. You know what I mean.

Ferry off the coast of downtown Toronto

Ferry off the coast of downtown Manhattan.

Ferry off the coast of downtown Manhattan.

7. Go nowhere, stay at home, and say you’re on vacation. Turn off your phone. Disconnect wifi. Call it ‘mental spa week.’

Ahhh, I’m starting to feel better already just thinking about mental spa week.

Doesn’t a summer staycation sound good? Give it a try! It’ll seem even better after you take a look at your bank account and still have all of your hard earned money left 😉

Are You At Your Income Happiness Cap?

July 3, 2015 By in Money Tags: , , , , , , , , , , 5 Comments

I’ve known for awhile that there’ve been scientific studies showing that your income correlates with your level of happiness only up to a certain amount and then caps off.  This is an interesting tidbit to remember in your thirties, as your income possibly grows more than it has when you were younger.

A study in 2010 found the income level happiness cap to be $75,000. So according to this research, you’d get progressively happier up to $75,000 in income and then your happiness level would remain consistent. Let’s adjust this for 2015 inflation and then adjust it once again for a major city like New York, San Francisco, or LA, plus let’s be generous, so we’ll make the number $120,000.

Now, $120,000 a year is a good chunk of money for someone in their thirties, and nothing to scoff about even in New York, especially for one person and not a household. If you made $120,000, do you think you’d be significantly happier making $140,000?

I guess it depends on who you are, and how well you know yourself. I believe happiness  definitely caps at a certain income level… that level might just be different for different people, but it’ll still work the same way.

I believe there’s a Maslow’s pyramid of needs associated with income. If you don’t know about this pyramid, click the link above…Maslow’s pyramid is a very clear way to view how our goals are naturally set up in life.

Ok, here’s a stab what I think the income pyramid of needs is:

1. Providing basic security items such as paying rent and buying food.

This is the basic bottom level of what money needs to provide- food and shelter.

2. Adding personal touches to our basic needs

At this level, you don’t only eat and pay rent, you can also buy a specific soap you like for your home, and buy a nicer can of beans than Goya.

3. Some disposable income

Once you get to this level, you can move beyond simple food and shelter and possibly go see a movie, or have dinner with friends

4. A good amount of disposable income

Here’s where you can purchase bigger items such as higher education, a vehicle, and a big screen tv. Of course, this is where a lot of people get into trouble and get stuck. Debt occurs the most at this level.

4. Money for the future and savings

This is a major jump that some people never get to.  At this level, you’re mostly out of debt or on a good payment plan, and are setting aside money in a savings account and a retirement fund.

5. Money to give away

At this level, you have all the money you need, and your future accounts are funded. Now you can really help others. This is a nice, happy level to be at.

Beyond the last level, I guess you can give even MORE to others, or sock even more money away or buy a ranch and a bunch of ponies or something, but it’s all extra from there.

So maybe it’s actually not a yearly income thing- maybe people simply need to make enough money to climb to the top of the pyramid, and then more money doesn’t really bring more joy.

What do you think?

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What’s Been the Best Use of Your Money So Far?

June 28, 2015 By in Money Tags: , Leave a comment

Hope you’ve been having a great weekend so far! Mine has been pretty relaxing. My fiancé’s father was in town, so we hung out with him and enjoyed the city. We saw Spy on Friday night (amazing! who doesn’t love Melissa McCarthy?) and have been eating our way through West Los Angeles – highlights have included brick oven pepperoni pizza, graham cracker frozen yogurt and spaghetti squash sautéed in garlic. We’ve also been running long-delayed errands.

While we were wandering around in Bed, Bath and Beyond yesterday and I was fawning over expensive Keurig coffee makers, I started thinking about money. Specifically, how money makes us happy. Many of us have more disposable income in our 30s and we’re able to spend more money on things like rent for nicer apartments, clothing, electronics, trips and having children. Granted, I’m not as far along money/nest-egg wise since I was just in graduate school, but it seems fair to say that most 30-somethings are financially better-off than they were in their 20s.

So the question circling around in my head yesterday was: what’s been the best use of your money in your life so far? For me, it’s been anything education or writing related: writing workshops, grad school expenses, the cost of entering competitions and trips. All of these are experiences, which most research says make a person happier than spending money on material purchases. There’s a great article about this phenomenon in Fast Company, The Science of Why You Should Spend Your Money on Experiences, Not Things.

I found this particular aspect to the rationale of spending money on experiences fascinating:

You’re also much less prone to negatively compare your own experiences to someone else’s than you would with material purchases. One study conducted by researchers Ryan Howell and Graham Hill found that it’s easier to feature-compare material goods (how many carats is your ring? how fast is your laptop’s CPU?) than experiences. And since it’s easier to compare, people do so.

– Author, Jay Cassano

I guess it’s also because we all value such different experiences. I’m sure a ton of people would find spending $500 on a writing course that meets for three hours one night a week after work to be a waste. They might rather take a weekend trip to go sky-diving.

Looking back on your spending in your life thus-far, what’s been the most profound bang for your buck, so to speak?

 

How Prosperous Are You In Your Thirties?

June 26, 2015 By in Money Leave a comment

Today, I meditated for the first time in quite awhile. It felt amazing after all the chaos of the past few months.

My favorite feel good meditations are from the Meditation Society of Australia, and their podcast is called ‘Learn To Meditate.’ It’s a free podcast and I highly recommend it. What I like about these podcasts is that there’s a short lesson before each meditation. The lessons are gentle and always put me in a good state of mind before I meditate. Most of the meditations are also guided, which I like. I’m impatient and not the ‘best’ meditator, whatever that means, so it’s nice to have a guiding voice and some structure sometimes.

I’ve already listened to all 50 of the society’s podcasts, but I just listen to my favorites again and again. Today I listened to one called Authentic Prosperity.

As I listened, I could actually feel myself  relaxing and putting better energy into the room. Now, I know that sounds hokey, but bear with me. I pride myself on being reasonable and down to earth, so I’ll clearly explain what I mean.

Prosperity comes in many forms. I immediately think of it in terms of money, but the meditation explains it in so many other ways.

You can be prosperous in health.

You can be prosperous in friends.

You our can be prosperous in family.

You can be prosperous in career.

You can be prosperous in peace.

You can be prosperous in love.

You can be prosperous right now.

As I meditated, I felt a small bit of peace and calm I hadn’t felt in awhile. I remembered the love I felt before I went through the issues of the past few months. Nothing new had happened, and at any moment, life would come back and throw random things my way. These things might hurt me, maybe even a lot, and everything might get chaotic once again.

But for a few minutes, and in the present moment, I was okay. And for a few moments, before the possible storm of life might hit me again, I realized how prosperous I truly am.

Even when chaotic messes are going on around you, and everything looks dark, see if you can get a few minutes to just sit. Try and feel peace and love inside and around you. It may feel hard, but just relax for a moment.

And you may realize how very prosperous you truly are.

Really Awesome Credit Bureau Changes You Should Know About

May 28, 2015 By in Money Tags: , , , , , , , , Leave a comment

I just wrote an article about credit card myths, and right afterwards, big news broke about some credit bureau changes happening in 31 states in the near future. A lot of the changes will be very helpful to consumers 🙂

Now that you’re in your thirties, make sure you’re keeping your credit report in extra good shape by checking it at least once a year. You can easily check it on a site like http://www.annualcreditreport.com  Errors pop up in credit reports all the time and you want to catch them early before they damage your score. The new rules getting put in place among the credit bureaus should help stop these accidents from happening. Here they are:

  • If there’s an error on your file with one of the three agencies, that agency must notify the others
  • It will now take 180 days for medical debt to appear on your credit report. So if you have medical debt because your insurance is supposed to take care of a bill and things are still processing, the issue will get squared away before doing any credit damage.
  • The bureaus will closely track data furnishers who most often supply disputed info- so if an organization or debt collection agency is being disputed all the time by everyone, credit bureaus will get way more suspicious.
  • The bureaus have to educate consumers on getting access to free credit reports as opposed to paying for promoted credit reports.
  • You’ll get an additional free credit report provided to you if you’ve recently disputed a claim.

Thanks so much! Hope this all gets put into place! 🙂

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Credit Card Myths You May Still Believe In Your Thirties

May 22, 2015 By in Money Tags: , , , , , , , , , , , , 4 Comments

I feel like getting and keeping good credit is something that should be taught in schools. Otherwise you really have to dig to learn the ins and outs of the mysterious FICO score.

Then again, there are many financial topics that should be taught in schools but aren’t.

Sadness.

Just because I’m in my thirties doesn’t mean I was necessarily taught anything about the ins and outs of FICO. Most of my answers have been self taught.

So I’m here with some common credit card myths that I used to believe in the past. The only way to counter the misinformation that abounds about FICO scores is to provide some solid facts. Hope they’re helpful!

1. Applying for Credit Cards majorly damages your credit score

FALSE – Actually, applying for new Credit Cards will likely help your score in the long run because it will lower your debt-to-credit (or credit utilization) ratio and will increase your credit history. Applying for new cards temporarily lowers your credit score- but way less than you may think. The dip will usually be around 5 points. The long term gains you see will likely be much more than that.

2. You must carry a balance on your credit cards to build credit history and increase your score

FALSE- I really used to believe this one and used to wonder what the magic number was- should you carry a 5% balance? 1%? The answer is that you can pay off your cards in full every month and your score will only increase because of your better debt-to credit ratio.

3. Canceling your credit cards is good for your credit score

FALSE – If you’re an out of control spender, financial gurus such as Suze Orman recommend that you cut up your credit cards- but don’t cancel them. Canceling them will lower your all important debt-to-credit ratio, and will likely end up lowering your score. The only time you should cancel a card is when it has an annual fee that you don’t feel is worth paying anymore. It’ll still lower your score a bit, but it may be worth it.

4. Once you have a bad credit score, you can never fix it

FALSE- This is very untrue. Credit scores don’t really reflect how things are today- they’re a collection of happenings over the years. Missed and late payments and other score damagers will actually fall off your report in 7 years! So there’s likely very good FICO news in your future if you got off-track but now are back on.

5. Checking your credit report hurts your score

FALSE- I believed this one forever. But it’s just not true. If you check your own credit, it’s known as a soft inquiry, and doesn’t have ANY effect on your credit score. If someone else (a credit card issuer, lender, etc) checks your credit score, it’s called a hard inquiry, and that affects your credit score. But not by as much as you think (see Myth #1 above).

Hope this was helpful! These are the simplest myths, but I’ll be back with a part 2 very soon 🙂

3d rendering of a credit card cut into pieces

How Much Should I Be Contributing to My Retirement Account in My Thirties?

May 6, 2015 By in Money Tags: , , , , , , , , , , 4 Comments

The Suze Orman Show recently went off the air and I’ve been heartbroken ever since.

I never watched Suze on tv, but I listened to her show religiously, podcast-style. After all, Suze’s money commentary was addictive, and she dispensed the good advice to give up cable, which I haven’t had in years to begin with.

There are so many points Suze repeated over and over that made simple what used to feel so complicated in the world of money. She kind of changed my life. In tribute to her, my next few money posts will be as short and simple as possible- her best ideas were short and powerful and repeated time and time again.

So here’s how much you should be contributing to your retirement account(s) in your thirties:

1. First, if you are an employee (and not an independent contractor) make sure you are actually signed up to contribute to your work 401k. Are you SURE? I have so many friends who thought they were signed up for years but actually weren’t. So they contributed ZERO…by accident. Double check.

2. Second, if your workplace offers a 401k match, contribute money into your 401k up to the match. Then stop and contribute to your IRA or Roth IRA. 

3. If your workplace doesn’t offer a 401k match, or you’re self-employed, start out by contributing the maximum to your IRA or Roth IRA. Don’t know how to open an IRA? Read about simple ways to do so here.

4. You can contribute up to $5,500 a year to your Roth IRA OR your IRA. Total. Try to hit that mark. If not, do what you can.

5. Contribute what you can to that IRA or Roth IRA. This is your main retirement vehicle. I try to contribute 10% of my income to my Roth IRA. Many financial advisors recommend 15%…I’m not ready for that yet, but once I finish paying off my student loan I will be.

6. If you max out both your 401k MATCH and ALSO your Roth IRA or IRA, then go back to your 401k and contribute as much as you can. You can contribute up to $18,000 in 2015.

7. If you don’t have a 401k because you’re self-employed like me, and you’ve maxed out your Roth IRA or IRA (good for you!), then you can start contributing to special retirement accounts for the self-employed. Learn about those here.

Hope this helps you learn how to save for retirement! Please ask any questions you have- I’m happy to answer or find you answers! 🙂

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A Base Salary of $70,000 a Year for Every Employee?

April 14, 2015 By in Career, Money Tags: , 1 Comment

Have you heard about how Gravity Payments, a start-up company based in Seattle, is implementing a plan to give every employee a base salary of at least $70,000 a year? I just read about it today in this article, One Company’s New Minimum Wage: $70,000 a Year, and it made my heart do a little dance of joy. It’s a pretty incredible leap from the “Fight for 15” movement which is pushing for minimum wage bumps to $15 an hour at fast food companies.

Citing happiness research as his impetus for this new salary minimum, Dan Price, CEO of Gravity Payments, said that the idea came to him after reading a study that said that for people who make less than $70,000 a year, extra money makes a huge difference in their lives.

Patricia Cohen, the author of the article, succinctly states the research here:

“The happiness research behind Mr. Price’s announcement on Monday came from Angus Deaton and Daniel Kahneman, a Nobel Prize-winning psychologist. They found that what they called emotional well-being — defined as “the emotional quality of an individual’s everyday experience, the frequency and intensity of experiences of joy, stress, sadness, anger, and affection that make one’s life pleasant or unpleasant” — rises with income, but only to a point. And that point turns out to be about $75,000 a year.”

So I guess we should all aim to make at least $75,000 a year? Easier said than done, I know. Because, if you’re like me, in a less traditional, perhaps more artistic or non-profit type job, that’s not all too easy to attain. And sometimes, if a job offer that pays that much comes your way, you may have to choose between salary or higher personal satisfaction? For me, I’ve often chosen the latter – which is why…true money confession…I’ve never made $70,000 a year. Not yet, at least. When I do make that amount, it will nice to not stress about going out to nice dinners with friends, or being able to buy nice gifts for people, or treating myself to something randomly without thinking too much about the financial consequences. Since my tastes are pretty minimal, I think I could do that on a salary of $70,000 a year.

Currently, the average salary of an employee at Gravity Payments is $48,000. So that’s a pretty sweet bump for those employees whose salaries are in the average range. One of the other reasons Dan Price instituted this change was because he felt the discrepancy between CEO/top leadership pay and regular employees salaries was absurd.

I hope the company continues to stay profitable and that the employees end up being more invested and productive in their jobs, so that perhaps one day this can be a model for other companies.

Tax Mistakes You May Still Make in Your Thirties

March 31, 2015 By in Money Tags: , , , , , , , , , , , , , 1 Comment

Did you guys file your taxes already? If you haven’t yet, there’s still time to comb your return for some of the most common tax mistakes. Even though we’re in our thirties, taxes haven’t gotten any more fun. Life’s weird like that sometimes.

Well, I guess we could make our own fun – let’s catch some silly little tax errors on all our returns. Good times.

So in the name of fun and happy times, here are some of the top tax mistakes you won’t make because you read OMGImThirty:

1. All names and numbers (such as your Social Security number) need to be absolutely correct. Make sure your name matches what’s on your social security card. Otherwise your taxes may get rejected or you may not be able to efile. The tax man doesn’t care that your cute pet name is Lollykins- he won’t appreciate you using it on your taxes.

2. Don’t file using a paper tax form- it’s a lot harder to catch any mathematical errors. Actually, are you really still using a paper form? Stop. Just no.

3. Make sure your filing status is correct. If you’re single you may qualify as Head of Household. Fancy stuff.

4. Make sure your bank account info is correct, especially if you changed banks recently. You want that tax refund to get safely into your hands, right? Yay, safe and sound tax refund- come home to me!

5. When  you efile, you need to sign your tax return with a Pin number. You can easily use the one from last year…unless you forgot what it was…like I did. If that happens, you can simply enter your AGI from last year. Unless you have no idea what that was…like I did. Just don’t lose your pin, ok? You’ll just keep needing it year after year. Just put it in a safe place already, ok? Ok??

6. If you file for an extension, remember that you still have to PAY. You didn’t think you’d get to collect interest on that tax money for months on end, did you? You know there’s no way Uncle Sam would let you do that without penalty, right?

7. Don’t lose your paperwork…receipts can be requested by the IRS for up to 7 years after you’ve filed! If you’re a hoarder anyway, indulge your habit and add all receipts to that random paperwork collection under your bed.

8. Don’t file late unless you get an extension! And make sure to actually file! Did you conveniently forget to file already? You may think you’re soaring under the radar, but the IRS will find you. Yup yup, they will.

9. Account for all income sources. Even if you don’t tell Uncle Sam that you worked part time at the circus, you can safely wager that the circus reported every fire-eating penny you collected.

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Happy filing! And let us know if you think of other common errors you’d like to share with others. Thanks for reading!

How You Could be a Millionaire By The Time You’re in Your 60s

March 18, 2015 By in Money 1 Comment

What does money mean to you? To me, it means freedom (to do meaningful work of my choosing and not stress about money) AND a having a great living space (with a requisite jacuzzi bath). It’s never meant designer clothing, cars, fancy dinner outs or exotic trips for me. Money is important to me, specifically the making of it.

I was wondering today if I would ever be a millionaire and what it would take for me to get there. When I hear the word millionaire, it sounds so out of reach and impossible, but in the grand scheme of things, it’s probably not. And quite frankly, most of us will HAVE to be millionaires when we retire, because it’s going to cost us at least 1.5 million to life comfortably in retirement.

I like breaking down goals into their component parts and seeing what it would take to accomplish a goal, especially financial ones. So, here’s a scenario.

Let’s say you never saved in your 20s. Now you found yourself at 30 with a desire to be a millionaire by the time you retire. How could you do it? Well, you could do it and it actually doesn’t seem so daunting.

If you begin investing at age 30 and make a….

Yearly Contribution of $4,924 (Or, $368 a month)…

At Age 67, you would have $1,000,000 if your investments had an annual return rate of at least 8%. 

But the KEY thing to remember is that you can’t just keep your money in some dinky savings/checking account making you 1% interest. You need to invest in something where you’re pretty likely to make at least an 8% return rate. This could mean mutual funds, stocks, or an EFT.

Now my boyfriend is telling me that to expect an 8% return is crazy – but with picking the right mutual funds and EFTs, I’m hopeful it’s possible.

When you do the math, becoming a millionaire doesn’t seem too daunting.

What the hell, Tinder?! Blatant Ageism Towards People Over Thirty in the Online Dating Sphere

March 10, 2015 By in Money, Relationships Tags: , , , , , , , , , , , 1 Comment

Tinder recently introduced a form of “surge pricing” for its famous dating app. They’re now charging American singles 30+ years of age twice what those under 30 will pay. The app will be $9.99 for those under 30, and $19.99 for those 30 and older.

In the UK, Tinder will charge the 28 and older single crowd more than FOUR times the cost for younger generations. Converted from pounds, this comes out to around $23 compared to around $6!

The price change comes as Tinder introduces it’s new Premium upgrade, Tinder Plus. If you use the free version of Tinder, it will still be free…for now.

Tinder can get away with charging whatever the heck it feels like because it’s owned by IAC/InterActiveCorp, which controls 27 percent of of the $2.2 billion dating-services industry. Included in IAC’s portfolio are Match.com and OkCupid. Heard of them?

Although I’ve personally never used Tinder (well, I’ve swiped through on a friend’s app), this price surging strikes me as blatant ageism. It’s discrimination pure and simple! Isn’t it difficult enough to be over 30 and single? Does there really need to be a dating app pointing out that you’re too old and therefore not as valuable to the online dating scene? There’s already a shameful age bias to being single over thirty – does Tinder really need to add to it?

Although it’s TINDER afterall, and you might expect them to pull a dick move like this, it’s still making a pretty awful statement. Tinder’s singling out older daters…just because it can. Even TechCrunch wrote an article titled New Tinder Charges Whatever It Wants. They say, “older users, who theoretically have less supply and offer less demand, pay a greater amount for extra dating tools.” Tinder’s excuse is basically that it’s courting the younger crowd, who “are more budget constrained, and need a lower price to pull the trigger.”

I get the idea of this excuse (younger people are poorer), but the policy still sends a crappy message to quite a large group of “older” singles (who aren’t old at all). Plus, people in their 20’s aren’t necessarily poorer than people in their 30’s anyway. And the excuse just seems like a blatant marketing lie. Wired magazine says, in their article titled Yes, Tinder’s New Pricing is Ageist Pure And Simple, “why not just be honest: Tinder is charging us more because it thinks we are desperate. Desperate to find our last chance at love and willing to pay whatever it takes.”

I’m hoping that singles over 30 boycott the Premium Tinder until this price difference is adjusted. Possibly, we should boycott Tinder altogether for making such a biased statement. Hopefully Tinder gets the message and comes up with a middle ground price that’s equal for all ages.

Do I think this is likely? Nope. Do I think dating in your 30’s is fair? Nope. But one can dream.

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Credits vs Adjustments vs Deductions, The Most Common Tax Questions in Your Thirties- Part 3

March 5, 2015 By in Money Tags: , , , , , , , , Leave a comment

On to the next one! The next tax question pertinent to those of us in our thirties, that is…

Yesterday, I wrote about Standard Deductions vs Itemized Deductions. Today I will attempt to explain Credits vs Adjustments vs Deductions in the simplest way possible.

It took me forever to understand the difference in these terms (they’re slippery). If you can grasp them, you’re miles ahead of the tax curve..so let’s start 🙂

TOTAL INCOME: So let’s say you’re single and you make $60,000 total this year in income, including every penny that goes in your pocket. That’s your total income. 

ADJUSTMENT (also known as ABOVE THE LINE deductions): Now, let’s say you paid $1,500 in student loan interest this year and contributed $3000 to a traditional IRA (retirement account). No matter whether you decide to take the standard deduction or itemize your deductions (both standard deductions and itemized deductions are known as Below the Line Deductions), you can subtract your student loan interest of $1500 and the traditional IRA contributions of $3000 from your total income! This is because they are adjustments. And adjustments are great! So your Adjusted Gross Income would be $55,500. ($60,000 – $1,500 – $3000 = $55,500). 

To clarify more regarding adjustments, let’s say you still made $60,000 in total income, and you still paid $1,500 in student loan interest this year and contributed $3000 to a traditional IRA. But you also gave $500 to charity and paid $1000 in medical expenses. If you took the standard deduction on your taxes ($6,300 this year for single filers), you would still able to subtract the adjustments (student loan interest and health insurance contributions) from your total income but couldn’t subtract the $500 given to charity and the $1000 in medical expenses because they count as itemized deductions. If you itemized your deductions, you could subtract the student loan interest, retirement account money paid, AND charity donations AND medical expenses. This doesn’t mean that you should itemize though- only itemize if your itemized deductions exceed $6,300 (the standard deduction) this year!

CREDIT: So far, we’ve only talked about subtracting from your total income. How about subtracting from your tax bill? Sound good?

So lets say you have to pay $6000 in taxes. If you have a credit, it will reduce that bill dollar for dollar. So if you have a $2,000 credit, your tax bill will be $4,000 (6,000-2000). Credits are the best to have but also the hardest to come by. Credits you could possibly take include the Credit for Child and Dependent Care expenses, the Child Credit, and education credits (like the Lifetime Learning Credit and the Hope Credit).

Let’s illustrate all of this below:

Total income (sum of all your income)
— Above the line deductions
=  Adjusted gross income ← “The Line”
— Standard deduction or itemized deductions
— Exemptions (you can always take an exemption for yourself, and then more for your dependents. Right now the exemption per person is $3,950.)
=  Taxable income

Here’s our example plugged in:

$60,000 Total Income
— $4,500 Above the line deductions (adjustments)
= $54,500 Adjusted Gross Income ← “the line”
— $3,950 Exemption
— $6,200 Standard deduction
= $44,350 Taxable Income

Hope this helps! Let me know if you have any questions or comments! 🙂

Standard Deduction vs Itemized Deductions, The Most Common Tax Questions in Your Thirties- Part 2

March 4, 2015 By in Money Tags: , , , , , , , , , , 3 Comments

It’s still tax time! If you finished your taxes already, kudos to you!

For everyone else, lets get some more questions answered..(and for the record, I haven’t finished mine either, so don’t worry).  🙂

Also, if you didn’t get to read Part 1 of Tax Questions Answered, click here.

I do my parents’ taxes every year and just finished their 2014 filing this weekend. However, I recently realized that even though they always take the standard deduction, I still spend time calculating their itemized charitable contributions- even though that particular type of contribution (charitable) doesn’t factor in on your taxes if you take the standard deduction.

If the paragraph above made no sense to you, let me clarify below. We’ll start with some terminology I feel like I should know all of this now that I’m thirty, but some of it I actually had to dig into a bit, so I’ll explain it pretty piecemeal here:

Gross Income= What you make in a year, including EVERYTHING, from Jan 1 to Dec 31 (you, of course, probably already know this one).

Adjusted Gross Income= Your taxable income after you subtract certain ADJUSTMENTS but before you subtract either the Standard Deduction or your Itemized Deductions (you can only subtract one or the other of those two types of deductions)).

Standard Deduction= An amount you can always subtract from the gross income you’ll be taxed on, as long as you don’t subtract your itemized deductions instead. The standard deduction for the 2014 tax year is:

  • Single or married filing separately: $6,300
  • Married filing jointly: $12,600
  • Head of household: $9,250

Itemized Deduction (not the standard deduction kind)= These are deductions you can take if you decide NOT to take the standard deduction. These include but aren’t limited to: medical and dental expenses that exceed 7.5% of your AGI (Adjusted Gross Income), property taxes, your state and local income or sales taxes, charitable donations you make, work related travel, union dues. 

So if you’re trying to decide whether to take the standard deduction or itemize your deductions, you want to basically choose whichever one is larger.

Here’s an example: Let’s say you’re unmarried with no children and make $50,000…And you can itemize these deductions:

  1. $1000 in work related unreimbursed travel
  2. $500 in medical expenses
  3. $400 in state and local taxes
  4. $100 in clothes donated to goodwill

This equals $2000 in Itemized donations. If you chose to itemize deductions, you’ll be taxed on $48,000 (50,000-$2000). If you took the standard deduction, you’ll be taxed on $43,700 ($50,000-$6,300). So you’d want to take the standard deduction for sure, because you want to be taxed on less income and pay less money 🙂

I’ll stop here for now, but hope this was somewhat helpful! Next time, I’ll talk about Adjustments and Credits, and how they can reduce your tax bill even further!

As always, please let me know if you have any questions or anything to add. Thanks!

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Top 10 Money Mistakes to Avoid in Your 30s

February 21, 2015 By in Money Tags: , 3 Comments

In no particular order, here are 10 money mistakes to avoid in your thirties:

1. Only paying the minimum on your credit card

No. No. No. Avoid this, unless you absolutely cannot. The interest on some of these cards is bonkers (30% anyone?), and it’s just not worth it.

2. Not Considering the Benefits of a Company You May Work At 

Think about all the benefits a future company can offer you. Not just the job itself.

Choosing to work at a company that offers matching funds for your retirement 401K is an amazing perk and you absolutely MUST take advantage of it. Larger corporations often offer matching funds and it’s basically free money, so don’t let it pass you by.

Also consider how good the health benefits are, if there are benefits at all. How much will you have to pay monthly? Do they cover services like physical therapy and talk therapy?

Are there other benefits to consider? Like education or free daycare. I worked at a college for 4 years, and I was able to get a FREE MFA if I wanted. Umm…free Master’s Education, heck yeah! That’s worth like $40,000. I would have done this if they offered writing, but they didn’t. However, imagine if you worked at a school like Columbia, and could a Master’s program that would up your earning potential. Awesome. In many cases, you can also get your children free tuition down the line, if you’re still working at the school of course.

3. Spending too much on little things 

From your $3 cold brew iced coffee to your $1.75 Dasani cold water (guilty), all of these little extravagances add up. Sometimes, at the end of the day, I think about all the small fees and treats I could have avoided paying for, and usually it’s been $3 and $5. So let’s say I could save an extra $5 a day, that would be $1825 a year! Holy moly. That’s a lot of money.

4. Apartment Broker Fees

In NYC, it can sometimes be between 10 and 12% of the annual rent – which can be about one month’s rent or anywhere from $1100 to $2000, depending on what kind of apartment you rent.

I’m ashamed to admit that I’ve paid at least three broker fees when I lived in NYC. That was about $3000 lost dollars. There are ways to get around paying broker fees, and searching for these ways is the best way to go. It may mean a longer search time, or using more unorthodox methods (like asking friends of friends), but it’s worth it.

5. Not Picking Up Loose Change on the Street 

My mom taught me this one. Laugh all you want, but if you see a penny, a quarter, a nickel – anything, pick it up! Seriously. It’s not just about the money itself. I think it truly cultivates a sense of reverence towards money. Every time you don’t pick up change, it’s like saying “Oh, that’s just a nickel, who cares!” but what a terrible mentality. Let’s say you manage to pick up 10 cents a day everyday for 10 years (Which actually seems pretty likely considering how many pennies I see lying around), you’d have $365 dollars after 10 years. Not chump change.

6. Not Shopping Around for Groceries 

I adore Rao’s tomato sauce. It’s anywhere from $7.99 to $9.99 a jar, but man, that stuff rules. It’s absolutely delicious and tastes like you’re eating at a real Italian restaurant. Yum. But the point is that normally it’s on sale, recently Whole Foods has been carrying it for $7.99, and that saves me a whole $2 each time I buy it.

7. Not Choosing the Best Option between Renting and Buying 

I really don’t know how to describe the exact math here, but use this handy calculator to determine the best option for you.

8. Not Shopping for Clothing on Sale

Most stores have sales now that offer days when all items are a percentage off. In particular, Banana Republic and the Gap ALWAYS have their damn 40% off sales, at least once a week it seems. Why would you buy any full-price item that’s NOT 40% off? Those are the main two clothing stores I shop at, so I always wait until that deal is around before I purchase an item.

9. Investing in high-cost managed accounts 

Laura knows more about this than I do, but some investment and mutual fund accounts have fees attached to them, from the 1% fund management fee to the 1% financial advisor fee, you end up paying 40% of your returns (generally between 5 and 7%) to your broker.

10.  Having too many automated payments

I love my fiancé and he’s really good with money in most senses, but he has WAY too many automated payments. From paying monthly fees for Photoshop to Spotify, he pays a ton in monthly payments for services.  The problem with automated payments is that you forget about them. They become like financial wallpaper. And I think that’s dangerous. Again, it goes back to having a reverence for money.

BONUS:

11. Not Consistently Checking Your Credit Score 

I use the free service Credit Karma, and I check in every few months to see if my score has gone up (or god forbid, gone down). Having a high credit score can save you THOUSANDS of dollars in the long run, especially when you want to take out a mortgage. Staying above 760 is ideal. Even higher is better.

Hope this helps! If you have any tips of your own and would like to share, please do.

Would You Invest In Real Estate With Your Friends?

February 17, 2015 By in Friendships, Money Tags: Leave a comment

Tonight I had the pleasure of going to a women’s film mentoring group here in LA. It was a laid-back discussion about goal setting between a diverse group of women in the industry, including directors, actors, writers and even a woman who specialized in commercial real estate brokering for the film industry.

My ears perked up when one very accomplished woman talked about how one of her side projects was real estate investing. She talked about how her and a group of friends invested in homes together and then sold them at a profit. The lead mentor chimed in and applauded what a great idea that was, saying that women need to be more assertive in investing; to take more risks. It got me thinking about women and investing and if it’s really true that women are less risk-taking than men. I did some cursory research tonight and came up with a few interesting facts from a recent study from BlackRock, a New York based investment management firm. Here were some takeaways:

  • 61% of women agreed with the statement, “I am not willing to take any risks with my money,” compared to 41%of men.
  • 30% of women considered themselves active investors, compared to 37% of men.
  • 19% of women said they felt comfortable investing in the stock market, compared to 37% of men.
  • 7%  of women said they allocate take-home income to investing, compared to 12% of men.

While investing can take all kinds of forms, I’m curious – would you ever invest in real estate with your friends? Personally, I think I’d be too wary of inter-mixing friendship and money. I like to keep my friendships completely pure and unsullied. This question reminds me of an article from last year in NY Times which profiled groups of couple friends who bought Brooklyn townhouses together because they couldn’t afford the homes on their own. I thought that it sounded like a solid idea in theory, but I think the potential for building resentments between friends could be overwhelming. Maybe that’s my anxiety speaking. What do you think?

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