Romance Scams

Giving to charitable causes can be a very emotional thing. You’re supporting something near to your heart, possibly with a deep personal connection. However, if you’re not mindful, it is possible to give at the expense of yourself. Be sure you don’t let your heartstrings control your purse strings.

Forethought and planning should extend over all your financial decisions, including charitable giving. For a variety of reasons, many don’t follow a plan. Some give whatever’s left in their budget, perhaps not as much as they’d like or tempting them to give more than they can afford. Others give at the end of the year for the tax break. Alternatively, perhaps charitable giving isn’t planned for at all, which allows one to be swayed by emotion when the right cause comes along. Suddenly, they can be committing based on what they feel rather than what’s best for their finances.

Once you decide to factor your charitable giving into your annual financial plan, you can start doing your research. Not only do you determine which causes you want to support, but you can also investigate various organizations that service that cause. There are many websites that evaluate charitable organizations to ensure that your financial contributions or going where you want. Additionally, having your charitable giving worked into your financial plan allows you to turn down other charitable requests graciously. Should you be approached, you can mention your annual giving plan and that you will consider them for the following year.

Being mindful about your charitable giving also gives you the opportunity to influence your children or loved ones on how to do the same. Your actions become the example to your values. While you needn’t share all the details, you can openly share how you formulated your plan and why. The more people who become aware of how to consciously create an annual giving plan, the more people are actively working towards their financial independence.

I don’t think it’s possible to take all emotion out of your connection to a charitable cause, and I don’t think you should. However, I will always be an advocate of folks proactively working towards their financial independence. The key to that is approaching your finances with reason and logic, relegating our emotions to the backseat and holding firm to your purse strings.

Paying taxes is inevitable. The key to being as efficient as possible about how much one pays in taxes requires careful consideration of the big picture. And while many people simply want to know if they can have a tax-free retirement, it really starts with being clear about how and when taxes get paid…and to defining what a “tax-free retirement” actually means. For example, if someone is striving to have income during retirement that is tax-free AT THAT TIME, then there are a plethora of investment and insurance products out there that could help defer taxes on earnings, and potentially, have tax-free withdrawal benefits for some types of accounts. But that doesn’t mean retirement is “tax-free”.

Let’s clarify what a few of the most common types of taxes are:

Income Tax – taxation on earned income can occur on many levels; local, state and federal. The amount a person would have to pay varies greatly on their situation. And, there are various types of tax credits that could affect the amount of taxes that would be paid on income. Any earned income that is deferred into a qualified retirement account generally means that taxes on that income won’t get paid at the time it is earned, but when that income is taken at a later date, during retirement, taxes are paid at that time. The idea that paying taxes on income later, when one might be in a lower income tax bracket, might prove more beneficial. But a) there is no guarantee what the tax rates will be in the future, and b) there may be several other factors with a person’s overall taxation that could affect what is perceived as a benefit. A tax professional is the best person to help folks evaluate what kinds of strategies are best for their overall situation. At the end of the day, SOME form of income tax will be paid, either when it is received upon earning, or when it is withdrawn from a qualified plan “down the road” in retirement.

What can be done to possibly reduce these taxes? Speak to a tax professional about what tax credits might apply, and also review with them if itemized deductions can play a role in reducing taxation.

Sales Tax – taxation occurs on state levels for various goods and services that get purchased. The percentage of taxation is usually based on the price of said goods and/or services. But that percentage charged can vary greatly from state to state, or even within different municipalities. There are a few states that don’t have any sales tax on most goods and services.

Excise Tax – taxation that is applied to specific types of goods; gas, cigarettes, beer, liquor, etc. These are typically nicknamed as “sin products”. Taxes received for these particular products are generally used to help raise money for bringing awareness to the potential dangers of these products.

What can be done to manage sales and excise tax? Not much. These types of taxes are very hard to “manage”. Changes in lifestyle; consumption of goods that fall within this category, will obviously affect the amount of sales taxes paid.

Property Tax – taxation that is applied to property owned. Taxes received tend to go towards local municipality needs. The amount of property taxes charged is usually based on a percentage of the value of the property.

What can be done to manage or alleviate property tax? Renting instead of owning might prove beneficial with alleviating property tax. However, there may be tax benefits also lost by being a renter instead of an owner. Again, a tax professional is best for helping to calculate what the tax benefits are for both scenarios.

It might not be possible to have a completely tax-free retirement, but by working with a financial professional and a tax professional, the ability to strategize investments and manage how taxation occurs could prove very beneficial. It’s not just about saving and investing…it’s about being as savvy as possible with the decisions along the way.