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Tamila McDonald is a U.S. Army veteran with 20 years of service, including five years as a military financial advisor. After retiring from the Army, she spent eight years as an AFCPE-certified personal financial advisor for wounded warriors and their families. Now she writes about personal finance and benefits programs for numerous financial websites.

Are Medical Collections Still Relevant to Your Credit Score?

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do medical collections still affect your credit score

Staying healthy can be surprisingly expensive. As a result, many households end up with large medical bills. At times, the bills pile up so high that paying them seems (or legitimately becomes) impossible, causing the household to default on the debt. When that happens, the account can end up in medical collections. If you’re wondering do medical collections still affect your credit score, here’s what you need to know.

How Medical Debt Impacts Your Credit

Medical debt doesn’t usually have an impact on your credit score as long as you are paying the bill on time every month. When that happens, most healthcare facilities don’t bother reporting the account to the major credit bureaus, so neither the amount you owe nor your payment history ends up in your file.

In some cases, even a late or missed payment or two doesn’t cause an issue. Typically, it’s only when you default on the debt and end up in medical collections that you put your credit at risk.

What Are Medical Collections?

Medical collections are a recovery process designed to help healthcare facilities secure payments on past-due medical debt. In some cases, the standard procedure involves selling the debts to a traditional collections agency. However, larger healthcare facilities may have internal collections departments that essentially serve the same function.

It’s important to note that internal collections teams can differ from the healthcare facility’s regular billing department. However, some may use a blended approach.

Do Medical Collections Still Affect Your Credit Score

Once a medical debt ends up in collections – either internally at the healthcare facility or by being sold to a debt collection agency – the default can end up on your credit report. Once it does, it has a similar impact to any other debt that is past due, including a negative impact on your credit score.

However, unlike traditional debts, medical collections don’t appear on your report right away. All three major credit bureaus have a grace period of 180 days, giving you time to resolve the debt before it ends up on your credit report and impacts your score.

Once the grace period passes, the account appears on your report. At that time, you’ll see a negative impact on your score, including potentially a drop of 100 points or more.

How to Avoid Medical Collections

Usually, the simplest way to avoid medical collections is to make payment arrangements. Many healthcare facilities offer payment plans, particularly for large balances. At some facilities, extended payment arrangements can be set up for free and may not involve any interest.

If you can pay most, but not all, of what you owe, the healthcare facility may be open to considering your account paid-in-full in exchange for that lump sum. This is particularly true if you can pay in cash, as some clinics and hospitals do offer discounts for that.

If you’re a low-income household, you may qualify for financial assistance through the healthcare facility as well. Many larger hospitals and clinic systems do have financial assistance programs available, though you typically have to ask about them directly. Request information about eligibility and, if you may qualify, see what you need to do to apply. With that, your balance may end up fully paid or significantly reduced, making it more manageable.

What to Do If Your Account Is in Medical Collections

If your debt is already in medical collections and is legitimately yours, paying it off is usually your best bet. For internal collections, contact the healthcare facility to see if you can work out payment arrangements. If the debt has been sent to an external collections agency, then you’ll need to work with them.

While paying off the debt won’t remove the account from your credit report, the account details will be updated to show that you ultimately ended up handling it. This can benefit your credit score.

If paying it genuinely isn’t feasible, then you need to do some research. Learn more about the statute of limitations on debt collection efforts based on where you live, as the rules can vary from one state to the next. Additionally, find out what kinds of actions reset the clock, as a seemingly innocuous statement on your end can potentially give a collections agency more time to pursue you.

It’s also important to note that, even when a collections agency can no longer attempt to collect the debt, it doesn’t disappear from your credit report right away. Instead, it can show up for up to seven years from the date the account originally became delinquent, causing long-term harm to your score.

How to Dispute Medical Debt That Isn’t Yours

Sometimes, a medical collections account appears on a credit report even though the debt doesn’t belong to that person. This is normally identity theft or administrative errors relating to the account.

If the medical debt isn’t yours, then you do have the ability to dispute it. Usually, the first step you’ll need to take is to contact the collections agency or healthcare facility. Do this by sending a certified letter and tell them you want them to validate that the debt is yours. Also say that, if they can’t provide validation within 30 days (or whatever is allowed by state law in your area), you want the account removed from your credit report.

You can also go another route. All three major credit bureaus have dispute procedures in place. Through those, you can provide information showing that the debt doesn’t belong to you and request it be removed from your report. However, this approach usually only yields results if you have proof of an error.  Which isn’t always easy to find.

While disputing a medical debt can be a lengthy process, it can be worth pursuing. That way, you can get the illegitimate account off your report. Thus, restoring your credit score along the way.

Do medical collections still affect your credit score to this day? Has there been an impact in your financial life in other ways due to a medical bill going to collections? Share your thoughts in the comments below.

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What You Need to Know About Solo 401(k)s

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solo 401k

If you’re looking at retirement account options, a solo 401(k) isn’t always on your radar. However, it could be a good choice for a range of professionals, suggesting you’re eligible to open one. If you’re curious about this retirement option, here’s everything you need to know about solo 401(k)s.

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Every Homeowner Should Have Flood Insurance-Here’s Why!

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every homeowner should have flood insurance

No homeowner imagines being the victim of a natural disaster. A serious flood can be devastating. Floods can damage your home and personal property with surprising speed. However, not having flood insurance can make the entire situation worse. Without the right coverage, your losses may not be covered. If you’re wondering why every homeowner should have flood insurance. Here’s what you need to know.

What Flood Insurance Is and What It Covers

Flood insurance is a type of coverage that is separate from a traditional homeowners insurance policy. Anyone who lives in an area with flood risk can potentially purchase this supplemental policy.

It specifically focuses on flood-related damage caused by natural disasters, as well as other causes. Usually, flood insurance covers damage in specific categories.

First, flood insurance will commonly handle structural damage to your home. This includes the actual building, as well as some related systems, like electrical, plumbing, and HVAC.

Second, flood insurance may cover your personal property. This includes damaged furniture that isn’t salvageable and similar household items, as well as clothing. However, this isn’t always part of the starting flood insurance policy, so you may need to request it be added if you want this protection.

Now, certain high-value items may not be fully covered by base flood insurance. This can include art, antiques, jewelry, firearms, or electronics above a certain value. In those cases, you may need flood insurance riders to add that coverage, just as you do with traditional homeowners policies.

Additionally, it’s important to note that every policy is different. Before you make assumptions about your coverage, review your flood insurance policy carefully. Ask questions about what is and isn’t protected, and request add-ons if needed to provide you with the level of protection you’re after.

Why Homeowners Need Flood Insurance

Typically, flood insurance fills a gap that many homeowners have in the primary policy. While homeowners insurance does cover some types of water damage under the hazard insurance segment of their policy, flooding events usually aren’t classified as the covered kind of hazard. As a result, damage caused by a flood may not be covered, leaving you without financial support to repair your home or replace your personal property.

Essentially, if you don’t have flood insurance, you’ll have to handle all related costs out of pocket. For most homeowners, this simply isn’t feasible. Flood repairs to a structure can be incredibly costly. Similarly, replacing all of your damaged personal belongings could take thousands and thousands of dollars.

It’s also important to note that homeowners with mortgages who live in higher-risk areas may be required by their lender to have flood insurance. This is especially true for anyone who uses government-backed financing sources, as there are federal laws requiring the coverage for properties they finance in high-risk zones. However, other lenders often follow suit, even if there isn’t a legal requirement.

The mandate for flood insurance through a company like this Minneapolis water damage restoration service, is similar to them requiring homeowners insurance in general. It ensures the property is protected should a flood event occur and, since the lender is technically the owner until you pay off the mortgage, they have a vested interest in protecting its value.

How to Find Out if You’re in a High-Risk Flood Area

If you want to see if a property is in a high-risk flood area, the simplest way is to use the Federal Emergency Management Agency (FEMA) Flood Map Service Center. Simply enter your address into the search bar, and the site will display a map that identifies your home’s risk level.

You may be able to turn to other state and local resources as well. State emergency management agencies may have flood maps, for example, so they can be worth checking if you find the FEMA results lacking.

Should Low-Risk Property Owners Skip Flood Insurance?

No, homeowners in low-risk areas shouldn’t skip flood insurance. Even if you live in a low-risk area, going without flood insurance means you aren’t protected should the unexpected occur.

Low-risk doesn’t mean risk-free. Many natural events are unprecedented. But even if they weren’t deemed likely, your base homeowners policy won’t cover the related damage if it is excluded in your policy.

Additionally, risk levels can change over time. An area that wasn’t previously flood-prone can suddenly become so for a variety of reasons. Climate change, land development, and similar shifts can alter water flow through regions, turning areas that previously didn’t experience flooding into moderate or high-risk areas.

Where to Get Flood Insurance

If you need flood insurance, you can call your homeowners insurance company to see if they offer it. Some insurers have flood insurance riders, while others may require a separate policy for that specific kind of coverage.

However, not all insurance companies offer flood insurance. If that’s the case, you may not be able to secure flood insurance through your homeowners policy provider. Instead, you’ll turn to the National Flood Insurance Program, a system run by FEMA, that can help you find a provider that covers homeowners in your area.

Do you think every homeowner should have flood insurance?  Have you decided to risk it and go without flood insurance? Has flood insurance ever saved you from financial hardship? Share your thoughts in the comments below.

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What Is a PACE Loan and Are You Eligible for One?

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PACE Loan

When you want to update or upgrade a property, finding the right kind of financing options is often essential. For some property owners, PACE loans may be the perfect fit. However, it won’t work for everyone. PACE loans have unique benefits. Yet, they can only be used under specific circumstances. If you are wondering what a PACE loan is and whether you’re eligible for one. Here’s what you need to know.

What a PACE Loan Is

A PACE loan is a property improvement financing option that focuses on energy efficiency-related upgrades. PACE actually stands for Property Assessed Clean Energy, denoting the purpose of the program.

There are two segments of the PACE program. First, there are commercial PACE loans that focus on business properties. The second option is a residential PACE loan. This is also known as an R-PACE, that is available for qualifying residential projects.

With a PACE loan, the property itself serves as collateral, similar to what you’d see with a renovation mortgage, a cash-out mortgage, or other options many people pursue to finance improvements. However, with a PACE loan, you can finance up to 100 percent of the renovation costs, all without having to cover a down payment or go through a traditional underwriting process.

Plus, unlike those alternatives, the PACE loan is tied to the actual property, not the property’s owner. Since the loan is associated with the property, the remaining balance can be passed from one owner to the next if the property is sold.

Additionally, how a PACE loan is paid back also differs. Instead of the typical monthly payment approach, PACE loans are subject to property assessments. The assessments occur regularly over the course of a set amount of time, usually between five and 20 years, depending on the life of the improvements involved in the project.

The assessment functions similarly to a property tax. Once the assessment is complete, the property owner pays the identified amount. Failing to do so usually carries consequences that are a lot like what you encounter if you don’t pay property taxes.

PACE Loan Eligibility Requirements

The primary eligibility requirements for a PACE loan are two-fold. First, you have to be a property owner, not just a renter or lessee. Second, the updates must be energy efficiency improvement-related. This can include a wide range of project types, including solar panel installations, boiler upgrades, and LED installations, as well as for certain disaster preparedness purposes, like earthquake seismic retrofitting.

It’s also important to note that your project may need to meet a minimum cost requirement. For example, you typically have to borrow at least $2,500.

However, a few other factors may disqualify you. For example, being behind on your mortgage or property taxes, a recent bankruptcy, or liens or judgments on the property could prevent you from securing PACE financing.

Otherwise, you have to be in an area with an active PACE program. The PACE loans are usually administered by a local municipality or through a partnership between a government entity and a private company. They aren’t broadly available, particularly for residential property improvements.

It’s also important to note that you may have to choose from a select list of approved contractors. You’ll need to review your local PACE loan program to determine if only specific contractors are permitted.

How to Apply for a PACE Loan

If you want to apply for a PACE loan, you’ll need a loan servicer in your local area, as that may be the only entities you can work with based on how the programs are usually structured. Since these are administered at the local level, some of the application processes may vary.

However, applying tends to be straightforward and not completely unlike securing other kinds of renovation financing. You’ll need to provide details about yourself – including credit and wage-related information – as well as information about the property and your proposed project.

Once you submit that information, your eligibility is determined quickly. After approval, the funds are disbursed for the qualifying project in accordance with program rules.

Have you ever gotten a PACE loan? If so, what was your experience like? If not, do you feel it is a good option for you? Share your thoughts in the comments below.

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Can an Employer Charge Fees to Turnover Your 401(k) After You Quit a Job?

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Fees to Turnover Your 401(k)

Nobody wants to pay fees to turnover your 401(k). When you quit a job, you usually lose access to the various benefits your former employer provides. However, while the company may manage your 401(k), that doesn’t mean you don’t have a right to the funds. In some cases, you may even be required by your former employer to move the money out of their program.

While you may have the option of leaving your retirement savings in place, there are also benefits to rolling over your 401(k). However, you may be worried that your former employer will charge you a fee to make that happen. If you want to ensure you’re fully aware of the potential costs, here’s what you need to know.

Can an Employer Charge Fees to Turnover Your 401(k) After You Quit?

Generally, no, a former employer can’t charge a fee if you are rolling over your 401(k) into a new retirement account after quitting. They have to turn over the balance that belongs to you. At a minimum, this means your personal contributions, along with any vested matching funds from your employer.

Now, if you have a match from your employer but it isn’t fully vested, then the employer can keep that money. Until it vests, it isn’t technically yours. So, while losing the unvested match may feel like a fee, it actually isn’t.

It’s also important to note that you may have to contend with fees when you roll over your 401(k) from the company or program that is managing the receiving retirement account. All retirement programs come with costs, and they can vary from one program to the next.

However, there usually isn’t any fee to actually complete the rollover. Instead, the new account will come with unique maintenance and administration fees, commission costs, or similar expenses.

You may also have to deal with taxes or withdrawal penalties. When you are not of retirement age and choose to cash out your 401(k) when you leave your former employer, you’ll have to deal with both. If you are of retirement age, then you’ll bypass any early withdrawal penalties but will still owe taxes in most cases.

If you choose to roll over your 401(k), you may or may not have to pay taxes. That will depend on how the rollover is managed, as well as the kind of account receiving the funds.

Can You Keep Your 401(k) With Your Former Employer?

If you like the 401(k) program your former employer offered, keeping it in place may seem like a good idea. However, whether that is an option depends on the company’s program and policies, along with other factors.

With a 401(k), the employer is responsible for the program’s management, and that comes with costs. As a result, they may not want to shoulder that burden for former employees. Instead, they require them to transition the money out of that account and into another one, such as by rolling it over into a new employer’s 401(k) or an IRA.

Mandating that you move the funds is more common for 401(k)s with contributions made – and earnings achieved – during your time with that employer totaling to less than $5,000. It isn’t actually the balance that matters; it’s the amount of money added to your account while you were working for that company.

For example, if you rolled over a previous 401(k) worth $9,000 and then contributed $4,000 to the account while working with the new employer, your balance would be $13,000. However, only that $4,000 is factored into this decision process.

Contribution Factors

With contributions below $5,000, the expenses associated with managing the account may seem unreasonable to them, and they are perfectly within their right to tell you to move the money.

If the contributions are below $1,000, the company might just cut you a check for the balance. In most cases, this is something you want to avoid, as you’d end up owing taxes on the money and may also have to pay an early withdrawal penalty, depending on your age. Luckily, you usually have 60 days to transition the funds into a different kind of retirement account, giving you a pathway for avoiding the fees and taxes.

If the contributions are between $1,000 and $5,000, your former employer may even initiate an involuntary cashout. With this, they transition your money to an IRA of their choice, suggesting you don’t take other action. To avoid this, you’ll need to handle a rollover within 60 days, giving you the ability to choose the destination.

For accounts with contributions above $5,000, you can typically keep the money in place. This can be beneficial if there is a unique aspect of the program that you can’t get in your new employer’s plan or with an IRA. For example, if the fees are far lower than what’s common or there are investment options that are hard to access otherwise, it could be worth leaving the savings in place.

However, you won’t be able to make new contributions to a former employer’s 401(k) plan. Instead, it will simply exist as-is, only growing based on the investments themselves.

What It Means to Rollover a 401(k)

Rolling over a 401(k) simply means transitioning the money into a different retirement account. It isn’t a withdrawal, as you won’t actually gain access to the cash. Instead, it’s shifting the held assets straight into another similar retirement plan.

Generally, you have two options for rolling over a 401(k). First, if you have a new job with an employer that has a 401(k) or similar retirement plan, you might be able to roll over the money into that account. This would allow you to centralize and consolidate your 401(k) savings into a single place, which could make it easier to monitor and manage.

Second, you could roll over a 401(k) into an IRA. With this option, you may get access to a wider range of investment opportunities, have the ability to choose a company with a better fee structure, or, if you already have an IRA, consolidate some of your retirement savings.

With a 401(k) to IRA rollover, you will be responsible for overseeing the account. If you decide to roll over your 401(k) into your new employer’s program, they’ll handle most of the management, though you may still need to set asset allocations or make similar decisions.

Should You Rollover your 401(k)?

Whether you should roll over your 401(k) depends on several factors. First, it may not be optional, particularly if your contributions are under $5,000.

Generally speaking, if your 401(k) contributions are below $5,000, it’s wise to plan for a rollover. There is a decent chance the company may require it, so it’s best to prepare for that situation. However, if you like your 401(k) offerings and the company is fine with maintaining your account, you can always opt not to initiate the rollover.

If your balance is below $1,000 and your former employer would cut you a check for that amount, rolling it over is more urgent. If you don’t, you’ll owe taxes, as well as an early withdrawal penalty if you aren’t of retirement age.

For contributions above $5,000, then you’ll want to look at the virtues of the program. If it has a low fee structure, unique investment options, or other benefits you can’t get elsewhere, then you may want to leave it in place. If not, then exploring your rollover options is wise, as it may let you pay less in fees, access investments you can’t tap currently, and more.

Have you ever had an employer try to charge a fee to turn over your 401(k) after you quit a job? If so, what did you do? Share your thoughts in the comments below.

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Are You Financially Prepared to Return to The Office?

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Now that vaccine rates are rising, and restrictions on gathering are loosening. Many professionals will soon be returning to their traditional workplaces. While the idea of transitioning back may not seem like a big deal. As many people have years and years of experiencing going to an office. That doesn’t mean there won’t be an impact. Returning to the office will come with a financial burden. If you aren’t ready, it can be hard to start shouldering again. If you want to make sure you’re financially prepared to return to the office. Here’s what you need to know.

The Costs of Heading Back to the Office

Often, you can’t determine if you’re financially prepared to return to the office without first understanding the costs you may face. That way, you can estimate how they may impact your budget, giving you a chance to make adjustments in advance.

Commuting

One of the biggest shifts in your expenses will involve your commute. Since you won’t be working from home, you’ll need to tackle transportation costs that may not have been a part of your life for some time. This can include increases in fuel expenses, tolls, parking fees, and wear-and-tear costs if you drive your own vehicle. If you use public transit, then you may need a new pass or to factor in the price of tickets.

Lunch, Drinks, and Snacks

Another point you may need to cover is food and drinks. While you can certainly pack a lunch to bring with you and only drink beverages available for free at work, meals and drinks out may also be part of the equation. If you don’t plan on bringing your own, you need to factor in these costs.

Wardrobe

Additionally, you may have to spring for new clothing. You’ll need to look at your wardrobe to determine two things. First, you need to see if your clothes are in good repair. Second, you need to find out if they still fit.

Many people saw their weight change during the pandemic, as being stuck at home altered activity levels and may have also led to diet changes. Since you want to look professional when you head back to the office, you need to make sure your clothing is the right size for you now.

PPE

Finally, you may need to cover some PPE costs that you didn’t have to shoulder before. This could include a higher quality mask, particularly if you aren’t yet vaccinated, and your job doesn’t allow for six feet of separation, as well as personal stashes of hand sanitizer, gloves, or other items that may not be available through your employer.

Child Care

If you have children at home, you may need to make child care arrangements for when you head back to the office. This is especially true if your children aren’t school-aged or if schools have not reopened in your area and your kids aren’t old enough to take care of themselves.

It’s also important to note that these costs may be higher than they were pre-pandemic. Many child care facilities have seen their costs rise and may still be dealing with restrictions about the number of kids who can be on-site at a time. As a result, they might have had little choice but to raise their prices in order to sustain their operations.

How to Financially Prepare to Return to the Office

If you want to make sure that you’re financially prepared to return to the office, your biggest step is to review your budget. Estimate the cost of any expenses you’ll have to cover once you start heading to a workplace and see if you can cover them comfortably. If not, you may need to cut back in various areas, ensuring that any costs that you can’t avoid can fit into your budget.

Additionally, for any items you need to buy – like clothing or PPE – shop around. Discount retailers like TJ Maxx or Ross Dress for Less may help you stretch your budget, or you may find solid options from thrift stores.

It’s also wise to keep a close eye on your food and drink expenses. Dining out is convenient, but it typically costs far more than bringing your own meals, snacks, and beverages. If you’re worried about safety, consider investing in an insulated lunch box or thermos if you need to keep items cold or hot. That way, you don’t have to store your food or drinks in areas that all employees can access, which may give you more peace of mind.

Finally, try to make room for saving. Keeping a solid emergency fund and your retirement on target should be priorities. While you may have to scale back while you regain your financial footing, try to stay committed to setting aside as much as possible. That way, you can maintain your savings habit.

Do you have any tips or insights that can help people financially prepare for a return to the office? Share your thoughts in the comments below.

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Here’s What Your Children Know About Investing That You Don’t

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what your children know about investing

While younger generations often get a bad rap when it comes to how they handle their finances. A decent portion of that reputation is underserved. In fact, on occasion, younger investors are savvier than their older counterparts. Causing them to make better choices than their parents. If you are wondering what your children know about investing that you don’t. You should keep reading.

Dodging Fees and Other Costs

Overall, younger generations are more fee and cost-conscious than older ones. They don’t just understand that investment-related expenses can hinder their progress. They also know how to find information about the associated fees.

Millennials and Gen Z aren’t afraid to get online and dig into the fine print about what various brokerages or investments will cost them. Additionally, Millennials are particularly value-driven. So they look for opportunities to save whenever they exist.

Thanks to the rise of low-cost robo-advisors, many younger investors have learned that high fees aren’t something they have to accept. That isn’t necessarily true of many older investors, particularly those that have been using the same approach for years, if not several decades. In the latter case, the investors simply settle into the status quo, and that can be costly in the long run. With the former, it’s all about finding the best value, ensuring that more of their money works for them instead of going to fees.

Investing Isn’t Just for the Rich

Investing is often touted as a pathway to long-term financial success. However, outside of retirement plans, a reputation of investing just being for the rich arose. In some cases, this was initially true, as getting access to a broker wasn’t an option for lower-income households. The issue is that the idea remained even as that became less and less of the case.

That myth that investing is only for the rich is often more pervasive among older generations than younger ones, causing some households to shy away from investing outside of retirement plans. Younger generations know that investing is something anyone can do. App-based robo-advisors are an expression of that fact, as they give people a quick, easy way to get started.

Plus, information about investing is usually only a few clicks away, either in the apps or online in general. For Millennials and Gen Z, this further demystifies investing, making it feel even more accessible.

Downturns Can Be Opportunities

During the early days of the coronavirus, stock markets tumbled. Many companies that were classically viewed as solid – and financially inaccessible from a stock-buying perspective – saw the price of their shares drop.

For younger investors, the downturn wasn’t just a crisis; it was an opportunity. Some investors who previously couldn’t afford to purchase certain stocks suddenly could, so they hopped on board with companies they believed would ultimately recover.

Older generations didn’t always view the situation similarly. The closer you get to retirement, the more you tend to focus on portfolio value preservation. In some cases, this led investors to abandon companies that were experiencing hardship, even if the odds of that hardship persisting were relatively low.

Investing Doesn’t Have to Be a Taboo Subject

For many older generations, the idea of having genuine conversations about money isn’t appealing. Money is often discussed in hushed tones, viewed as one of the most private topics in a person’s life.

Millennials and Gen Z don’t necessarily see it that way. Many younger people are comfortable with sharing details about their lives with the masses, thanks to their comfort level with social media. As a result, they aren’t averse to learning about and discussing investing with their peers, something that can work in their favor.

By being open to talking about money and investing, members of younger generations learn from each other. They can find out about mistakes their peers made and opportunities that were seized. The odds of them being pointed to valuable informational resources may also be higher.

Now, it is true that this can also lead to trouble. After all, not all information is accurate or reliable, so it can lead to the spread of misinformation, too. However, treating the topic as if it isn’t taboo is something that older generations could benefit from, as it can create openings for learning from others, getting support, and, ultimately, making better decisions.

Can you think of anything else young children know about investing that you don’t? Share your thoughts in the comments below.

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Editors Note: If you want more on this topic, consider reading Andrew Adam’s Behaviors Of A Millionaire, it’s got a thorough discussion on evaluating securities, which is helpful if you’re looking at selecting individual stocks.

Work From Home? Here’s How to Take The Tax Deduction

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work from home tax deductions

If you’re self-employed. You may be eligible for a variety of tax deductions designed to reduce your tax burden. Overlooking these deductions means potentially paying more in taxes than necessary. Something that isn’t ideal for anyone. If you want to make sure you get every deduction you’re eligible to snag. Here are some work from home tax deductions that you should take advantage of if you qualify for them.

Home Office

If you have either a separate home office or a designated spot in your home where you work. You may be eligible for a home office deduction. The IRS does require that the space be used “exclusively and regularly” for work. Though, for many self-employed professionals who mainly handle computer-based tasks. This requirement is often fairly simple to meet.

With this deduction, you have two potential approaches. If you’re looking for the easiest option, go simplified. With that, self-employed individuals have the ability to deduct $5 per square foot of office space, up to a total of 300 square feet.

If you aren’t afraid of handling some calculations. You can use the regular method. With that, you can calculate the percentage of your home that you are using for work only. Then, apply that percentage to eligible housing related costs. Which allows you to determine what portion of the allowable expenses are deductible.

In many cases, it’s wise to run both options to determine which approach results in the largest deduction. Just make sure that you handle the calculations carefully to ensure accuracy when you go through the more complex method.

Health Insurance

If you’re self-employed, bought your own medical coverage, and aren’t eligible for coverage through a spouse’s employer, you may be able to deduct the cost of your premiums. Technically, this isn’t a deduction. Instead, it’s an income reduction, so you don’t necessarily have to itemize to claim this benefit.

Vehicle Expenses

If you drive your car as part of your self-employment business, you may be eligible for vehicle expense tax deductions. Usually, you’ll get a specific amount per mile driven, allowing you to recoup some of the financial loss related to greater wear and tear on your car.

Claiming this deduction does require an accurate log of your miles traveled for business purposes. However, it can be substantial, so it’s worth keeping those records to reduce your tax burden.

Plus, there are also potentially deductible vehicle costs. For example, gas, parking fees, tolls, repairs, and similar expenses related to business-connected travel may be claimable.

Self-Employment Tax

While it may seem odd, it is possible to snag a tax deduction for paying self-employment tax. Self-employment tax is the Social Security and Medicare tax that people who are self-employed have to pay and comes in at a rate of around 15.3 percent.

With traditional employment, the employer and employee split that tax burden. If you’re self-employed, you have to pay it all. But you also get to deduct half of the amount you pay when you file your taxes, helping you to reduce some of that burden.

Internet and Phone

If you use your home internet for work or have a separate phone for business purposes, you can deduct the portion of your bill that aligns with your business use. For example, if half of your internet time is work-related, half of your internet bill can be a deductible expense. If you have a separate phone line for business calls that is only used for that purpose, that is 100 percent deductible.

Trade Publications, Memberships, or Subscriptions

Self-employed individuals who pay for specialty publications, memberships, or subscriptions that directly align with their work can deduct the cost as a business expense. The most critical part of the equation is that the content is specialized. For example, a trade magazine counts, while a national newspaper does not, as the latter is too general to be profession-specific.

Educational Expenses

Educational expenses related to honing work skills in your current self-employment field can be deductible. The course or skill has to connect to your existing business, not something you hope to do later or anything you do for personal growth. For example, a self-employed web developer can deduct the cost of a course on responsive design but wouldn’t be able to take the deduction for a yoga class or music theory course.

Advertising

If you spend money to advertise your business, that cost is deductible. This can include any kind of paid-for ad, including Facebook or Google ads, television commercials, bench ads, or mailed flyers.

Business Insurance

In most cases, business insurance premiums are deductible. There are some nondeductible premiums, though, so it’s wise to review IRS guidance to determine which ones you can use to reduce your tax burden.

Office Equipment and Supplies

In many cases, office equipment or supplies that you purchase to use for your self-employed business can reduce your tax burden. The value of the items may determine what kind of deduction or benefit you receive, as high-cost items like computers may be treated differently than pens and paper.

Credit Card and Loan Interest

If you paid interest on a business purchase because you used a credit card or loan to cover the cost, you might be able to deduct the interest. The card or loan doesn’t necessarily have to be a business one. However, you usually need to use that card or loan solely for business purposes to claim the deduction cleanly.

Travel (Including Meals)

If you’re gone on business, some of your travel-related costs are deductible. Plane tickets, hotel stays, Uber rides, and similar expenses that you incur while away from home handling a work-related activity can potentially qualify. Similarly, certain meal-related costs may be deductible, including if you take a client out for dinner or have to pay for meals because you are on the road.

Retirement Contributions

If you have a self-employed retirement plan – like an SEP IRA, Solo 401(k), or SIMPLE IRA – you can potentially deduct the contributions. This can be a boon if you save up to the contribution limit, though it does make a difference even if you are setting aside less than that each year.

Qualified Business Income

A newer self-employed tax deduction, the qualified business income deduction allows self-employed individuals – as well as some small business owners – to deduct part of their business income when they file their taxes. Your total taxable income from all sources does have to be below a set threshold to qualify. But if it is, you may be able to deduct 20 percent of your taxable business income.

Do you know of any other work from home tax deductions? Share your thoughts in the comments below.

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Is It Ever Worth Buying Solar Panels For Your Home?

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For many homeowners, finding ways to save on their electricity bills is a priority. In most parts of the country. Utility costs usually go up over time and can be hard to shoulder for many households. On occasion, this piques homeowner interest in solar panels. However, it’s normal to wonder. Is it ever worth buying solar panels for your home? After all, they can be pricey to install and have to be maintained. So do you get enough from them to make it worth the investment? If you’re trying to decide if buying solar panels for your home is the right move for you. Here’s what you need to consider.

The Cost of Purchasing and Installing Solar Panels

First and foremost, you need to determine how much it will cost to buy the solar panels you need.  You also need to understand how much additional equipment is required – and have them installed. Along with the panels themselves. You’ll usually need other items. Like an inverter, cables, wiring, and metering equipment. You may also want to invest in batteries to store some of the energy you produce. Though those tend to be incredibly costly.

Installation can also come with a large price tag. Usually, solar panel installation requires specialized skills. That can push the total cost up.

Ideally, you want to gather several quotes in advance. That way, you can get a grip on the price. Thus, allowing you to determine if the investment is worthwhile.

Solar Panel Incentives in Your City, State, or Country

At times, there are incentives available that can offset some of the cost of buying solar panels for your home. For example, you may be eligible for rebates, tax breaks, subsidies, or other incentive programs.

In most cases, incentives are offered through the government – including on the local and national level – though they may also be available through your utility company. The incentives vary regularly, so you need to review the programs to see when they expire, allowing you to estimate which ones may be available to you based on your prospective installation date.

Ongoing Maintenance After Buying Solar Panels for Your Home

After installation, you have to contend with maintenance costs. The solar panels are a critical energy system, and they can’t be left unmaintained. If you neglect maintenance, you may find your system breaking down quickly or not functioning at its best.

Usually, cleaning is the most frequent form of maintenance you’ll need to handle. However, inverters, batteries, and other components may only last several years. As a result, you might have to plan for regular replacement based.

Additionally, you might need to budget for panel damage. While today’s solar panels are tough, that doesn’t mean they can’t be harmed. For example, a hail storm could be problematic and may require a panel to be repaired or replaced if it is damaged.

Sun Exposure on Your Roof, Not Just in Your Area

While solar panels are more efficient than they used to be, you get the best performance if your solar panels get a high amount of direct sun exposure. That means you need to look past the weather in your region and actually check out how sunlight moves across the section (or sections) or your roof you are considering for the installation.

Your Current Electric Bill

Your current electric bill is brimming with information that can help you decide if buying solar panels for your home is a good investment. Not only does it list your current electricity costs, but it can also reveal the amount of electricity you use, usually in kWh.

You can use the kWh information to estimate the number of panels you need based on the amount of sunlight the installation area receives. Alternatively, you can provide that information to the companies you receive estimates from, allowing them to give you a more accurate quote.

Once you have an idea of how much a solar panel system that could cover your energy needs costs, you can estimate how long it would take to recoup that expense through electricity bill savings. For example, if the solar panel system would run $20,000 to purchase and install, and your monthly electric bill is $200, then it would take around eight years and four months to recoup that investment, not including the additional money you’ll spend on maintenance.

Is Buying Solar Panels for Your Home Worth It?

By looking at all of the information above, you can estimate how long it would take to get your money back after buying solar panels for your home. At that point, you can decide if the investment is worthwhile to you.

For some homeowners, it will be incredibly worthwhile thanks to a high amount of sun exposure, solar panel incentives, and other factors. For others, the cost of a system that can handle 100 percent of their energy needs will be too high to make recouping the investment in a timely manner possible.

Ultimately, the choice is always yours. However, by doing the math, you can make sure you understand the financial side of the picture, ensuring you make a choice that’s best for your household.

Interested in environmentally friendly options? Why not try out an environmentally friendly neobank, Aspiration, and start earning cashback on your everyday spending. Not only does the Aspiration and Aspiration Plus accounts offer great cashback percentages, but they put its customers and the planet first. Instead of using your deposits to fund oil pipelines or exploration like big banks, Aspiration invests it in positive change.

Do you think buying solar panels for your home is ever a good idea? Why or why not? Share your thoughts in the comments below.

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What Should I Do With the Next Stimulus Check?

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With the new COVID relief bill passed by Congress and signed by President Joe Biden. Many Americans have stimulus checks on the way if they aren’t already in hand. However, figuring out what to do with the money can be surprisingly tricky. Particularly if you have some conflicting needs. Luckily, it is possible to choose the best path for you. If you aren’t sure where to begin. Here are some options for what to do with the next stimulus check.

Handle an Urgent Need

If you have an urgent financial need, such as issues buying enough food for your household or past-due utility bills, using your stimulus check to handle those costs is your best bet. It ensures you can continue to live without undue hardship, and that’s important during this pandemic recovery period.

Additionally, if you have secured debt – like an auto loan – and you’ve fallen behind on payments, putting the asset at risk of seizure, it may be a solid target. By catching up, you may be able to avoid the repossession or foreclosure. Depending on the asset involved, that might be crucial.

However, before you send stimulus money toward any bill, you may want to see if there are other programs available that may reduce that burden. For example, utility companies, mortgage lenders, certain state or county offices, and many other organizations have relief programs to help those who are struggling due to the pandemic. If you’re eligible for their assistance, don’t hesitate to use it. Then, you can direct your stimulus check toward other needs.

Pay Your Taxes

If you have filed (or are about to file) your federal taxes and owe money to the IRS, using your stimulus check to handle that burden isn’t a bad idea. Unlike for the 2019 tax year filings, the IRS isn’t postponing 2020 tax filings this year. If you want to avoid fees and interest, then you need to pay what you owe in full by April 15.

Even if the stimulus check only covers part of your obligation, using it to handle some of your taxes reduces this total burden. Then, if you need to enter into a payment plan with the IRS to address the rest, what you’ll need to pay could be easier to shoulder.

Create an Emergency Fund

If you don’t have any cash – or very little money – set aside in an emergency fund, using your stimulus check to get one started is a good idea. It’s wise to have a little cash available for unexpected events, something that the pandemic made abundantly clear for many.

Ideally, you want at least $1,000 set aside initially. Then, you can work your way up over time, aiming to save a minimum of three to six months’ living expenses.

Pay Down High-Interest Debt

Using your stimulus check to tackle high-interest debt is always a good idea. Not only will it reduce the amount of money you’ll pay over the life of the debt, but it could potentially boost your credit.

For many people, starting with high-interest credit cards is the best way to go, especially if the cards are close to being maxed out. However, for others, a high-interest personal loan could also be a good target.

Finally, if you have a payday loan, focusing on that might be your ideal option. Payday loans usually come with astronomical interest rates, making them a wise debt to tackle with stimulus money.

Boost Your Retirement Savings

By using your stimulus check to boost your retirement savings, you not only do something to help secure your financial future, but you may also get a tax benefit. You have until April 15, 2021, to finish up your 2020 retirement investing. If you contribute your stimulus to a tax-advantaged account, you might be able to lower your 2020 tax burden.

However, you can also use the money for your 2021 retirement savings. You may be able to get a jump start on it or even fully fund an IRA, depending on how much you receive in your stimulus check.

Handle a Large Purchase

If you have a solid emergency fund, fully funded retirement accounts, no high-interest debt, and have your financial house otherwise in order, then using your stimulus check for a large purchase is certainly an option. It may give you the ability to buy high-cost items in cash, allowing you to potentially avoid high-interest debt.

Even using stimulus money to fund a vacation can be a smart move if you’re in good financial shape otherwise. Again, it lets you avoid the need for debt and could give you something fun to look forward to once you feel comfortable traveling.

Invest, Invest , Invest

If you want to put your stimulus check to work but already have a fully-funded retirement account, then you could always invest separately. There are many options that can help people get started, including full-service brokers, robo-advisors, and anything in-between.

You will need to do some research if you don’t currently have an investment account, ensuring you choose the right brokerage for you. Additionally, if you aren’t sure where to invest the money, you might need professional guidance or to conduct more research.

In many cases, focusing on individual stocks isn’t wise for beginners. Instead, options like index funds may be a better bet, as they come with an innate level of diversification.

Save Money for College

Whether you have children or may go back to college yourself, setting your stimulus check aside in a 529 college savings plan could be a smart move. It lets your money grow tax-free, and any withdrawals you make for qualifying expenses aren’t taxed either. In the end, this option can help make college more affordable, allowing you or your child to potentially avoid or reduce the need for costly student loans.

Do you already have plans for your next stimulus check? Share your thoughts in the comments below.

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