Make tax filing easier; be organized

This was originally published on Monday, February 19, 2018, in the Pacific Daily News. Click here to subscribe to the PDN.

 April is around the corner and that means tax season will be here soon. By now you should have received all of your tax documents. It all can seem overwhelming, but getting a head start on your taxes will eliminate a lot of the stress.

Filing taxes does not have to be a big ordeal. By being organized, you will cut back on a lot of the frustration and become more efficient.

According to the Internal Revenue Service, we have until April 17 to file for 2017 and pay any taxes due. The filing tax deadline is later this year because the usual April 15 deadline falls on a Sunday. Usually that would normally give taxpayers until at least the following Monday. However, Emancipation Day, a Washington, D.C., holiday, is observed on April 16. This gives taxpayers nationwide an additional day to file. By law, Washington holidays impact tax deadlines for everyone in the same way federal holidays do. For those taxpayers requesting for an extension, you will have until Oct. 15 to file.

Identification numbers. Remember to include all your dependents’ Social Security or tax ID numbers. This includes infants and elderly parents you may be claiming. If your kids don’t have an identifying number, contact the Social Security office as soon as possible. You will also need the tax identification number of the person or business that takes care of your children during the work day if you are filing for the child care credit. If you use an accountant, be sure they have all this information as well. A missing Social Security or tax ID number could cause a delay in the processing of your filing.

Form W-2. By the end of January, you should have received your Form W-2 from your employer. Your W-2 shows how much you earned and how much of that income was taxed. It also breaks down what taxes were withheld from your pay. If you work more than one job, you should receive a Form W-2 from each employer. If you are self-employed, gather all your business-related receipts and documentation. This includes office supplies and mileage for work-related trips.

Other income. Your income you receive from work isn’t the only earnings the IRS taxes. Interest earned on most savings accounts is taxable. Just like your W-2, you should receive statements from each of the financial intuitions with which you have accounts that earn interest. Interest earnings are typically documented on Form 1099-INT. If you invest in stocks or mutual funds, you should get Form 1099-DIV for each stock, mutual fund or money market account. If you use a broker, reports on your transactions will be sent to you on Form 1099-B.

Child support payments are neither deductible by the payer nor taxable to the recipient. When you calculate your gross income return, don’t include child support payments received. According to the IRS website, “Amounts paid to a spouse or a former spouse under a divorce or separation instrument (including a divorce decree, a separate maintenance decree, or a written separation agreement) may be alimony for federal tax purposes. Alimony is deductible by the payer spouse, and the recipient spouse must include it as income.” There are some requirements that must be met, you can find them on the IRS website, www.irs.gov.

Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 25 years of experience in retail banking and at financial institutions in Guam and Hawaii. If there is a topic you’d like Michael to cover, please email him at moneymattersguam@yahoo.com and read past columns at the Money Matters blog at www.moneymattersguam.wordpress.com.

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The five factors in your credit score

This was originally published on Monday, February 5, 2018, in the Pacific Daily News.  Click here to subscribe to the PDN.

Your credit report simply tracks your payment history. Your credit score, on the other hand, rates how well you handle your finances. Your credit score is based on five major factors that go into calculating your score.

Payment history. Accounts for 35 percent of your score. This factor will show lenders your accounts, past or current. This section also tells the bureau how well you meet your payment deadlines and if you are behind, how many days you are past due. It also reports if you have missed payments. This category also shows if your accounts have been turned over to a collection agency or if you have filed for bankruptcy.

Current amount owed. Accounts for 30 percent of your credit score. Recorded in this area are the number of credit accounts you have — credit cards, loans, mortgages or in-store credit cards. Your balance on each account is also noted. High balances or large amount of debt from many sources will lower your score. Also, having a lot of credit with no debt could have an adverse effect on your score. Usually small debts that are paid off in full will raise your score.

Length of credit history. Your credit history accounts for 15 percent of your score. This section concentrates on how long you have maintained your credit. For most creditors, time equals stability. Having a credit card but not using it can actually drop your score compared to carrying a balance on a few different accounts and paying them off on time.

Types of credit. This category is 10 percent of your score. Being more varied in the types of accounts you use will increase your score. A person who carries only one credit card may have a lower score than a person who shows that they can responsibly manage more than one account.

New credit inquires. This finalizes the last 10 percent of your score. There are two types of inquires that can be made: a soft inquiry; and a hard inquiry. A soft inquiry can be from a financial institution or potential creditor just wanting to look at your score, a perspective employer or you viewing your credit history. Soft inquires don’t affect your score. Hard inquires come from a financial institution that you have applied for a line of credit or loan, such as a car dealership. The increase in hard inquires lowers your score. Usually, if someone has opened a lot of accounts in a short time period, it may suggest potential financial troubles.

Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 20 years of experience in retail banking and at financial institutions in Guam and Hawaii. If there is a topic you’d like Michael to cover, please email him at moneymattersguam@yahoo.com and read past columns at the Money Matters blog at www.moneymattersguam.wordpress.com.

Money matters: Ways to increase your income

This was originally published on Monday, January 15, 2018, in the Pacific Daily News.  Click here to subscribe to the PDN.

Question: This year I want to be able to save money, but right now it is difficult and I find myself living paycheck-to-paycheck. I am making my monthly payments on time, but I can’t seem to save or even enjoy the money I do make. Do you have any suggestions to help increase my income?

Answer: According to a CNN.com article from November 2017, in the United States “unemployment inched down to 4.1 percent, the lowest since December 2000.” That same article also sites that “wages took a step back. They grew only 2.4 percent in October compared with a year earlier.”

Although many are employed, the wages they earn aren’t sufficient to keep up with inflation and the rising cost of living. Most would say: “Get a better paying job.” But at times it isn’t that simple. You may actually enjoy the job you have, the people you work with, or maybe even your work schedule. Here are a few ideas to help increase your income:

Part-time job. The tried-and-true method of making more money is taking on a second job. You can look for another job or work from home. Part-time jobs add up.

Many people are getting creative and selling their skills. A talent that seems ordinary to you might be extraordinary to someone else. Can you speak a second language? Perhaps you can be a tutor or help companies as a translator. Are you good with pets? Many people are looking for someone to watch Fido or Kitty while they are on vacation. Are you a good cook? With today’s hectic schedules people are looking for alternatives to fast food; a personal cook may be a niche that needs filling.

Just think, if you cut grass for five of your neighbors for $50 twice a month you will earn $500 a month. That is $6,000 a year!

Renting. Do you have an extra bedroom in your house? You may want to consider renting out a room and taking on a roommate. In this economy, many single people are looking for others to help ease the cost of rent and utilities. With the rise in rentals, a roommate could lighten some of that financial stress.

You can also rent out your room to visitors. Airbnb has made a few headlines on Guam lately. I was surprised to see how many rooms/houses were available on Guam. If you are interested in turning your home into a rental, be sure you follow the correct procedures and visit the Department of Revenue and Taxation, or you could run into some costly penalties.

Skill and worth. Ask your boss how you can be more valuable to your company or organization and what you would need to do to earn a higher wage. Take what your boss says and do it. It may involve gaining additional skills, a degree or certification. The most important asset to a company is human capital. It takes a lot of money to train and hire people. If you can stand out and show incentive to want to make a difference for the company, it may just pay off in the long run.

Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 20 years of experience in retail banking and at financial institutions in Guam and Hawaii. If there is a topic you’d like Michael to cover, please email him at moneymattersguam@yahoo.com and read past columns at the Money Matters blog at www.moneymattersguam.wordpress.com.

 

Get your personal finances into shape

This was originally published on Monday, January 1, 2018, in the Pacific Daily News.  Click here to subscribe to the PDN.

Happy New Year’s! Many of us are looking at the first day of 2018 as a fresh start. The No. 1 New Year’s resolution is usually to get physically healthier by losing weight, eating better or to start exercising. As you start to get healthier, don’t forget to get your personal finances in shape as well.

Here are a few ideas to get your wallet and budget healthier:

Get out of debt. Most people think debt is all the same, but it isn’t. Make a list of all your debt and liabilities, including the amount and interest rates. The debt with the highest rate should be paid off first. Once you pay that debt in full, use the same amount to pay toward the second-highest debt.

Think about your retirement. If you haven’t opened a retirement fund, you may want to strongly consider one. If you have one, add a little more to your contributions. If your employer matches your contribution, contribute at least to their maximum match. Take some time and talk to your financial adviser if a traditional IRA or Roth would best suit your financial goals.

Save money. One of the hardest yet most important financial steps to take is saving money. You should have at least three months worth of your living expenses saved in case of an emergency. This includes rent/mortgage, groceries, utilities and loan payments. If you are looking to buying a home or car this year, open an account that is strictly for that goal. One of the easiest ways of savings is using an automated deposit into your account.

Spend less. Take a good look at your spending habits and examine where you can cut back. Find ways ] you can spend less money. Cancel your gym membership and work out at the beach or at home. Look at bundle plans for your insurance and communication needs.

Cutting cable is a big trend in saving money. Many have opted to remove cable from their homes and use online entertainment apps and sites.

Another money saving technique is to commit to a weekly no-spend day. Set aside one day a week where you spend absolutely nothing. No shopping, pack lunch to work and school, use free entertainment. If you spend an average of $20 a day, by the end of the year you will have saved $1,040.

Another money saving idea is to learn how to perform your car and home maintenances. There are many online sites to help you fix and maintain your property.

Make more money. Do you have a hobby like painting, sewing or baking? Or maybe a skill like automotive maintenance or babysitting? Turn these hobbies and skills into making money. Why not get paid for doing something you love and are good at? Consider a part-time job. Even if it isn’t a high-paying job, every little bit counts and adds up.

Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 20 years of experience in retail banking and at financial institutions in Guam and Hawaii. If there is a topic you’d like Michael to cover, please email him at moneymattersguam@yahoo.com and read past columns at the Money Matters blog at http://www.moneymattersguam.wordpress.com.

A few financial rules

This was originally published on Monday, April 24, 2017, in the Pacific Daily News.  Click here to subscribe to the PDN.

As April comes to a close, so does Financial Literacy Month. In these times of economic uncertainty, money management is a necessary life skill. Many of us are not taught how to handle money or prepare ourselves for the future.

Most of the time, we learn as we make mistakes. Sometimes we bounce back, but sometimes it is a life of continuous hardship. Being prepared makes a huge difference when dealing with money management.

Here are a few rules:

Plan. You can’t go through life not having financial goals. The only bad plan is a plan not followed. You must plan for your future. Plan for all your major expenses like home ownership, a car, schooling and periodic expenses.

Goals. What are your short-term (less than one year), mid-term (one to five years) and long-term (more than five years) goals. Make sure your goals are specific and reasonable.

Develop a budget. Determine your living expenses, periodic expenses and monthly debt. Create a budget that can be realistically followed. Follow your budget as closely as possible and evaluate it at least twice a year.

Keep your expenses under control. Try to spend only the money you make and not use your credit cards. Do not incur other debt until you are able to manage the debt you have now. Know where your money goes by keeping a log of all your purchases.

Save. Save up for major purchases such as cars, homes, vacations and major appliances. Experts say that saving 10 percent of your paycheck will add up to a nice savings account. Create an emergency fund with about three to five months of your expenses. Start saving for retirement — the sooner the better.

Need vs. want. Sometimes we have a hard time distinguishing between the two. Needs are must-haves to survive and wants are things we crave. We may need a new car, but we may want a car that is beyond our financial means. Determine your financial priorities to guide your spending choices. Take care of your needs first. Then, if you have some money left over, you can use it for your wants.

Credit. If you must use credit, do so wisely. Use credit for planned purchases only. Determine what amount you can afford to purchase on credit. A golden rule is not to allow your payments to exceed 15 percent of your net income. Do not use one form of credit to pay another and repay the credit back as soon as possible.

Treat yourself. What good is working if you can’t enjoy your money? Even if it’s a little treat like ice cream or a dinner out, enjoy the fruits of your labor, or it will become very hard to follow a budget or stick to your goals.

Don’t get consumed by material things. Trying to keep up with the Joneses will only lead you to financial ruin. Live an enjoyable life but within your means. A 70- inch flat screen television is nice, but so is living debt free.

Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 20 years of experience in retail banking and at financial institutions in Guam and Hawaii. If there is a topic you’d like Michael to cover, please email him at moneymattersguam@yahoo.com and read past columns at the Money Matters blog at www.moneymattersguam.wordpress.com

Money obstacles most households face

This was originally published on Monday, April 17, 2017, in the Pacific Daily News.  Click here to subscribe to the PDN.

Whether you make a lot of money or a little, finances are an issue in most households. Many families don’t communicate about finances, leaving one person in charge. Discussions are a key to making families financially sound. Regular discussions on budgets and goal settings can make a huge difference.

Here are a few money obstacles households face.

  • Conflicting financial values. One of the main causes of divorce in America is money. Usually it’s not about how much they make but how the money is spent. Couples need to be on the same page and have the same money goals. Compromise and discussion is a must on a daily basis.

Create a budget and stick to it. Both individuals must agree and be aware of what the other person is spending. If you don’t communicate, you may overspend and not have enough money to spend on what is important. Keep a realistic attitude and hold each other accountable, in a friendly way.

If you have children, share with them what your financial status and goals are.

  • Health care costs. With the current uncertainty of what health care insurance will and won’t cover, one thing for sure is health care costs continue to rise. Health insurance is a necessity, especially for families with children. There’s a huge financial risk associated with going insurance-free that could jeopardize your family’s financial well being. Be sure to read exactly what your health insurance covers.
  • Lack of income. The cost of living continues to rise and unfortunately household incomes tend not to follow that trend. Some of the largest expenses households face are medical care, food, and housing — all of which have significantly outpaced income growth.

Most of the time a household’s debt increases because they use credit to cover necessities. Find ways to cut expenses and increase income. It’s not uncommon to have one or even both parents taking on a second job.

Not all jobs have to take you away from your family. If you have a skill that people are seeking, such as baking, repairing cars or gardening, take advantage of it and start a small business. A part-time job may not be ideal, but it may be exactly what you need.

  • Retirement plan. A survey done by the Federal Reserve states 31 percent of non-retired respondents reported no retirement savings or pension — that includes 19 percent of people ages 55 to 64. Social Security isn’t a guaranteed source of income, nor is it enough to cover your retirement expenses.

As you get older, you will require more medical care. Without your own nest egg to assist with those medical bills, you may have to consider working much longer than you would like.

  • Life insurance. Having life insurance will help ease the stress of losing a loved one. There are some affordable and very flexible life and supplemental insurance plans available.

Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 20 years of experience in retail banking and at financial institutions in Guam and Hawaii. If there is a topic you’d like Michael to cover, please email him at moneymattersguam@yahoo.com and read past columns at the Money Matters blog at www.moneymattersguam.wordpress.com

Tips to handle financial challenges

This was originally published on Monday, April 10, 2017, in the Pacific Daily News.  Click here to subscribe to the PDN.

Most of us have some financial uncertainties. Some may be beyond our control, such as unemployment or health reasons. Others may be from overspending or taking on too much debt. Financial challenges arise and it happens to everyone.

  • Overspending. There are many reasons for overspending. It can be because of the holidays, the lack of willpower, or even emotions. I am sure a few of us are guilty of having a bad day at work and bringing home a shiny new object which temporarily lifts our spirits. Overspending usually leads to using credit, which can lead to a dangerous spiral.

Get to know what your spending triggers are. It could be your mood, your friends, certain environments, even the time of day. Keep track of your spending. You will be surprised how something as routine as a daily cup of coffee can add up. Carry cash.

  • Don’t rely on cards. You can see your cash being spent, but using your credit or debit card is a very out-of-sight, out-of-mind behavior. Proactively decide where your money should go and put it aside. Whatever you have left over then can be used to spend on yourself.
  • Save in advance. Do you have a car that needs to be replaced? Are you planning on purchasing a home in the near future? Many of your large expenses are known usually well in advance. Many of us rely on taking on huge amounts of debt instead of saving for it because it is the easier way out.

Even if you take on debt to help pay for the purchase, you still should pay down as much debt as you can. If you save $10,000 for a $100,000 home, the amount you save on interest alone will be doubled after paying off the debt.

  • Too much debt. According to NerdWallet.com, the average U.S. household has about $16,748 in credit card debt. The average household pays a total of $1,292 in credit card interest per year.

If credit card debt is a major problem, the first step is to stop using the card. Many Americans now depend on their credit cards to pay off other debts. It is a cycle that is hard to break. To stop depending on your card, you must decide where you can cut spending. Decide what expenses you can live without.

Create extra income that can be used solely for paying down debt. Pay off the credit card with the smallest amount and carry that payment amount over to the next card and so forth. Once your credit card is paid off avoid the temptation to use it.

  • Credit score. The 2010 National Foundation for Credit Counseling Financial Literacy Survey states “about two-thirds of adults (65 percent) have not ordered a copy of their credit report within the past year and nearly one in three (31 percent) do not know their credit score.” Your credit score is important because it is the first point of reference that lenders use to judge your trustworthiness with money.

Take advantage of your three annual free credit scores. There are also credit monitoring companies that charge minimal fees.

Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 20 years of experience in retail banking and at financial institutions in Guam and Hawaii. If there is a topic you’d like Michael to cover, please email him at moneymattersguam@yahoo.com and read past columns at the Money Matters blog at www.moneymattersguam.wordpress.com