It's Not Fun, but It Has to be Done Benjamin Franklin wrote a 1789 letter that states, “But in this world nothing can be said to be certain, except death and taxes.” Even at the United States’ early beginnings, federal taxes were a necessary evil to fund various public projects and administrative costs. Today, federal taxes serve much of the same purpose. While virtually no one likes to prepare and file their taxes, it is a necessity if you want to avoid fines and further hassle. It is no secret that preparing and filing your taxes is notoriously complicated. Many people lament that it should not be so difficult to pay the government. However, some of the complications allow people to save money if they discover specific tax benefits. Knowing how to file your own taxes may be a good option if your tax situation is relatively straightforward, or if you are willing to learn the process. Why Do You Need to File Your Taxes Every Year? The short answer is that federal law requires that most individuals file taxes annually. Income taxes are assessed every year based on your income earned during that period. You then pay a percentage of that income to the government, less any deductions, adjustments, or credits that you qualify to receive. If you do not file (and pay) your taxes, then you may be assessed penalties and interest. The Internal Revenue Service (IRS) can even go as far as garnishing your wages and repossessing your property if you do not file and pay as required. The Benefits of Filing Your Own Taxes If you are one of the 43% of Americans that are doing your own taxes, you are certainly not alone. Roughly 53 million people prepared and filed their own taxes in 2018. There are many benefits to filing your own taxes, including: Saving money: Hiring a tax professional is expensive, and many people can prepare and file their returns on their own, completely free of charge. Control: Some people like knowing the exact information that is included in their return and being able to control the data, and for some, knowing precisely how the numbers work out, is comforting. Gain helpful information: When you prepare your taxes, you can see what items saved you money this year or which issues you should address so you can save money next year. While filing your own taxes is complicated, it can be beneficial under the right circumstances. There are several programs online that walk you through the process to help ensure you are taking advantage of all of your available deductions and credits. The Drawbacks of Filing Your Own Taxes In addition to the benefits, there are also some disadvantages to filing your own taxes. These include: Time and effort: Preparing and filing your taxes takes time and work You have to sift through financial information and deal with concepts that you may not understand well. The process can be frustrating and take a considerable amount of time. Error risk: If you do not completely understand how your taxes work, you run the risk of making a mistake because of misconceptions. If that happens, it could lead to underpayment and audits down the road. Questions: Even if you use a tax preparation software, you may still have questions that will remain unanswered unless you do significant research or reach out to a tax professional. For some people, the risk of having a substantial error that triggers the IRS’s attention is enough to scare them away from preparing their own taxes. Preparing for Filing Your Taxes When you begin work on your taxes, you should have information gathered throughout the year. Some of the most common items that you will need include: Social Security numbers for you, your spouse, and any dependents Information about wages, such as W2s or 1099s Investment income information Documents that represent any other source of income Information regarding adjustments to income, such as student loan interest paid, IRA contributions, and health savings account contributions, just to name a few Information regarding potential credits, including, for example, child care expenses, education expenses, or retirement savings contributions Data about any tax payments that you may have made throughout the year Keeping good records will help make tax preparation easier at the beginning of the year. [youmaylike] The Basics About What You Can Claim When Filing You must pay income taxes on all your income earned throughout the year. However, that income is reduced by a few things. The further you can reduce your taxable income, the less you tax you will pay. There are three general categories of tax reduction methods: Standard or Itemized Deductions Everyone can claim either the standard or itemized deductions. Standard deductions are a set amount that is based on your filing status. Itemized deductions are based on actual expenses that you incurred throughout the year. You can choose to use the higher deduction. The higher the deduction, the less tax you will have to pay on your income because your income decreases on paper. Itemized deductions include things like medical expenses, state and local tax payments, and home mortgage interest deductions. Itemized deductions will only decrease your income by a certain percentage, or up to a specific point. Adjustments Some adjustments to your income may also be available. These include things like paying student loan interest or alimony. Adjustments are more valuable compared to deductions because they decrease your income dollar for dollar. Credits A credit decreases your taxable income as well. Some credits are refundable while others are not. For example, you get a child tax credit simply for having children that qualify for that credit, but that credit will not be paid out to you if you do not have any tax obligations. On the other hand, the Earned Income Credit, which is available for low-income filers, will be refunded to you even if you do not owe any taxes. There are a wide variety of deductions and credits available. Take a look at the federal forms and related schedules to determine whether you might qualify for any of these. How to File Your Own Taxes If You Live Overseas If you earned income in the United States as a U.S. citizen or resident alien, you likely need to pay taxes on that income. This is true even if you live overseas. You can still choose to e-file or mail your tax return to the IRS once you have it prepared, just as if you physically lived in the United States. In some cases, you will be taxed on the income that you earned throughout the world. However, you may be able to deduct a portion or all of the revenue that was not made in the United States in some circumstances. Filing Online The IRS offers an online filing option that is free for individuals that have an adjusted gross income below a specific threshold. Generally, your income must be below $66,000 to qualify for this service. You can also file online by using a commercial tax preparation software. Examples of this type of software include: H&R Block TurboTax TaxCut TaxSlayer There are many programs available that will file your taxes for you, often for a fee. Knowing how to file your own taxes can be a great way to save money, but it can be tricky as well. If you want to file your taxes yourself, be sure to read the form instructions thoroughly and get familiar with various tax saving opportunities before you begin preparing your return.
Tight Budget? Save Where You Can on Food
Saving money is often a difficult thing to do. When it comes to budgeting, it’s critically important to have a step-by-step process. This is especially true when it comes to groceries. If you want to know how to save money on groceries, keep reading, as we’ll be going over some helpful tips and tricks.
Incorporating groceries into your personal budget can be more daunting than incorporating expenses like transportation and utilities. This is perfectly normal, because who really wants to pinch pennies when it comes to the food you put into your stomach?
Unfortunately, groceries are becoming more expensive. According to USA Today, the price of food in the United States has risen 26.8% during the last decade. These increasing food costs have even managed to outpace the rate of inflation during the same period (21.9%). This trend does create a need to budget, as rent isn’t getting any cheaper either.
The good news is that even though budgeting groceries may take plenty of forethought, it isn’t the hardest thing to do when it comes to personal finances.
Where Do I Start?
Like any great financial endeavor, you’ll need to start by crunching some numbers. You’ll need to know exactly how much you spend on groceries, and how much goes towards specific products. If you haven’t already, you should start making note of all your grocery expenses. Start making simple yet detailed notes when you spend money on groceries. Are you buying staple items every month? Purchasing specific brand names? All of this will be important. Once you know exactly where your money is going, it’ll be much easier to take action and start saving.
Once you’ve painted a picture of your grocery-related expenses, it’s time to start being both more frugal and more resourceful. Being frugal involves cutting out some of the less useful expenses. This means cutting out food items that are pricey and don’t justify their prices through their nutritional value, and/or their cost-to-calorie ratio.
This may sound intimidating, but you don’t need to crunch the numbers on the number of calories you’re getting for each dollar. Instead, you’ll just want to cut the unnecessary costs. These costs include expensive junk food or food items that cost too much when a cheaper alternative is available. Resourcefulness, on the other hand, involves eliminating waste and getting your money’s worth when you buy groceries.
Let’s break these two down a bit more.
Resourcefulness: Getting the Biggest Bang for Your Buck
Resourcefulness is a broad idea, but with groceries, you can just try a few new habits to save money. There are plenty of ways to save money with new habits that can become second nature with a little practice.
One of the best ways to be resourceful with groceries is by cooking in bulk. Try cooking large meals and freezing them separately. For example, if you cook some chicken, rice, and potatoes, store and freeze them separately to have them ready to be heated up later. When it’s meal time, just take out the ingredients you need and heat them up. By getting into the habit of cooking in bulk and storing meals to be prepared for a quick cook-up, you can save both time and money. This way you can take fewer trips to the grocery store while also having your food organized so you don’t waste any.
A large part of being resourceful with your groceries involves having a consistent meal plan. If you know what you need to eat, what’s inexpensive, and what’s easy to prepare, you can put it into a meal plan that you can repeat. This way, you can also take advantage of sales by buying an item in bulk, cooking and freezing it, and making it last for a few days.
The last and most obvious component of resourcefulness is the hardest part. Regardless of how you feel at any given moment, you must insist on not buying what you don’t need. This means not giving into cravings that will drive you over your budget. If you can create new meal plans that are agreeable with your budget, then take full advantage of the opportunity.
Being Frugal: Including Groceries in Your Budget
Once you’ve gotten into the habit of being resourceful with what you have, it’s easier to be frugal. Base your grocery purchases on a healthy mix of what your body needs and what your wallet allows for. Find a way to put all the food groups you need into your meal plan at the most reasonable cost possible. The specifics will depend on your location and what’s in season.
While certain produce can cost more in some places than others, meats are generally more expensive wherever you go. Unless you have a personal health reason or an undying love of meat, it would be a great idea to cut out some meat in favor of other foods that are more critical to your health (and are cheaper, too).
While taking advantage of what’s in season and what’s generally cheap in your area is great, taking advantage of specific promotions can save you plenty. Plus, buying frozen produce is always less expensive than fresh, and allows you to stock up when there are sales.
Taking Advantage of Promotions and Deals
This is where you can truly get creative and have fun when it comes to budgeting your groceries. Sales are common in the grocery business and allow you to save upwards of half of the cost of products. One great rule of thumb is to only buy meat when it’s on sale. If you buy it in bulk, you can also freeze it for future use.
You can often find news about deals in flyers or by looking around in your local grocery store. Knowing both what’s in season and what’s on sale can save your wallet and satisfy your stomach at the same time.
Saving on Groceries Matters
Saving money on groceries is critical if you find yourself in a financial rough spot. You can cut many costs out of your life, but you’ll always need food. Knowing this, why not get into the habit of making your money go further in the areas that you know you’ll need to keep spending on?
By cutting back your grocery expenses, you can set money aside for other important things. You can start paying off debts or put more money into savings accounts. Saving money on groceries is important simply because it empowers you to improve your financial situation on a constant basis.