Personal Finance Advice

Soon you will start getting reminders that tax season is upon us.  Commercials for tax preparation are already appearing on television and online and it’s only a matter of time before tax documents start showing up in your mailbox.  Right about now you might be thinking about the various deductions you might plan on making on your taxes and you might also be wondering where in the world all your documentation for these deductions are.

If you have simple taxes then your preparation might simply be setting a couple of hours aside to do your own taxes, or perhaps you might even drop your forms off and pay someone else to take care of everything for you.  Taxes can be pretty simple if you don’t have any deductions to claim and there is nothing extraordinary about your tax situation, but you still have to remember to get your taxes in before the April 15th deadline.

Things get a little more complicated when you have deductions on your taxes.  If you have a mortgage on a home, if you’re self-employed, if you had a baby during the year or make substantial contributions to non-profit charitable organizations then your taxes will be a little more difficult.  There are plenty of other situations that can make your taxes more complicated than they were last year.  Did you get a divorce this year? Did you sell your home? Did you have a bunch of debt reduced into a settlement? If so, your taxes might merit professional preparation this year.

This certainly isn’t to say that taxes are so incredibly complicated that you can’t do them yourself.  The IRS does try to supply help as much as possible, but when tax season rolls around it can sometimes be tough to get the answers you need in a timely manner.  Besides, professional tax preparers might be able to find deductions you didn’t even know existed.

No matter which route you take - whether you do your own taxes or pay someone else to do them - it’s time to start getting things together so it’s not such a daunting task.  Pull together all your receipts that you’ll need to file your taxes.  As your W-2s, 1099s and other forms start rolling in you should put them in a safe spot and keep record of which ones have not yet arrived as January nears an end.  Contact anyone who owes you tax information and don’t assume that just because you didn’t receive a form doesn’t mean you aren’t supposed to.

Tax season doesn’t have to be a huge headache, but you should start preparing for it as soon as possible. 

Paying bills using automatic payments can really simplify things for you as long as you remember to have the funds available from your checking account to pay the bills.  The fact that you don’t have to sit down and write out a bunch of checks a couple of times a month can save you a lot of time and can keep you from paying costly late fees if you forget the payment.  With heightened concerns about personal financial information winding up in the wrong hands, many people feel much more comfortable with making payments electronically instead of sending checks through the mail that may wind up in the wrong hands.

You have a few options when sending payments automatically:

1.  You can have payments taken directly out of your paycheck, if available.

2.  You can set up recurring and one-time deductions from your checking account.

3.  You can enroll in a bill payment service that handles all the recurring payments for a fee.

Bill pay services are often offered by financial institutions.  Sometimes the service is offered as a benefit for obtaining a certain type of checking account, including the bill pay service for no additional cost.  Bill pay services offered for a fee through financial institutions take care of your recurring bills for you electronically.  This is a common service that can sometimes include utility bills as well as credit card, loan and other payments.  In other words, all your payments can probably be taken care of through a service like this, making your personal finances really easy to manage.

Should you use a bill pay service? The answer depends on the answers to a few questions:

Can you trust someone else to handle your bills?  There are some people who are downright uncomfortable with the idea of allowing someone else to make their payments.  Ease your anxiety a little by selecting a bill pay service that assumes liability for all late or lost payments, but if you know that you will monitor the payments each month like a hawk then you might as well make the payments on your own. 

Are you willing to pay a fee?  Most bill pay services cost money, although the fees are usually reasonable.  Since it’s quite simple to set up recurring payments on your own, you might not be able to get past the feeling as though you’re wasting your money by paying someone else to do something that you can do on your own for free.

Will your lenders all accept electronic bill payments?  If only a portion of your lenders will accept electronic payments then you’ll have to decide if it’s worth it to pay a fee to only have some of your bills paid while you have to pay the others on your own.

A bill pay service can be a great time saver, especially if you have several bills that you have to pay on a recurring basis.  Choose a service that promises to handle any disputes resulting from late payments and that does not charge a great deal of money to pay your bills for you.

Credit gets misused all the time.  Plenty of people use it to buy things they can’t afford and shouldn’t really buy at all.  Some people fall so far into credit card debt that they eventually get overwhelmed and have to declare bankruptcy because they simply can’t afford to pay all the debt they’re in.  With this in mind, some people assume that it’s far better to manage personal finances solely on a cash basis.  While using cash has tremendous benefits, there are simply some instances when using a credit card for a purchase is a much wiser choice.

You already know to not send cash through the mail to pay for something.  Sending an envelope stuffed with cash to a merchant to buy something through the mail can easily turn into someone at the merchant’s processing center pocketing your cash and “losing” any record of your order.  It also isn’t unheard of for envelopes with cash to get lost in the mail because the envelope comes into contact with someone who realizes the contents of the envelope and helps themselves to it.  This is why processing centers accepting mailed payments always request “No Cash Please.”  Not only is there a chance that the money will be lost in the mail, but some processing centers don’t even have the capability to accept cash payments. 

The ease by which cash can be stolen is not the only reason why sometimes it’s better to use a credit card instead of cash.  Paying with a credit card always gives you several ways to prove the payment was made.  For example, you have the receipt given to you by the merchant as well as your credit card statement that both prove you have paid money to the merchant.  You’re covered twice, so if you lose one form of proof you have the other.  Credit card companies also keep meticulous records and can easily give you a copy of a statement (even from the past) to help you prove you paid for something.

Some credit cards also offer additional protection with certain purchases.  Many credit cards grant cardholders insurance when paying for a rental car and some even offer additional travel assistance that can be used when the credit card was utilized to pay for the travel. 

One of the biggest reasons to use a credit card for certain purchases is because most major credit cards will allow you to dispute a charge on your statement if you never receive the goods or services you paid for using the card.  Although there are different regulations and reporting procedures associated with disputing a credit card charge, the basic principal behind this is your credit card charge will get reversed if the merchant can’t prove that you actually received the goods or services as agreed.  This can be a huge safeguard when making a deposit on something that never gets delivered or paying for services that aren’t rendered as contracted.

Don’t assume that this means you should use your credit card for everything you want to buy.  Perpetually using your credit card can turn into big trouble for your personal finances.  You should utilize cash, checks and debit cards when appropriate, but turn to your credit card when there is a chance that you may have to eventually dispute the charge.  Just be sure that you pay off your credit card balance each month in order to avoid costly interest rate charges.