SafeAmerica Credit Union

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• By Kevin Alvarez

Practicing Healthy Habits Can Help Spark Your Financial Independence

A Path to Financial Independence

Making the transformation from being a carefree young person to a financially healthy adult can seem overwhelming and scary.  Most young adults starting out can attest to the challenges of managing an entry-level salary while still striving for financial stability. But there are ways to create a path to financial independence early in your career.

Though your salary may be minimal now, it’s vital to implement a realistic plan designed to save, budget, and maximize your cash flow.  If you find yourself in need of help reaching your financial independence, consider implementing these habits

Write Down What You Spend

Budgeting is the foundation of personal finances at any stage of your life, not just for those starting to “adult.”  If you’re new to budgeting, the first step is to write down all of what you spend. It could the coffee you get each morning, the sofa you purchased for your apartment or house, or the monthly charge for the streaming video service you use.

The idea behind a budget is not to limit what you do with your money, but more importantly to maximize the money you work hard for each and every day.   I remember when I began to dive into my finances and document my spending as a young adult, it was a huge eye-opener.  It became clear where I was wasting money and could cut back.  Cutting out even small things, such as that coffee or a pop purchase each day, could save you over $100 per month.

Best of all, technology has made it easier to connect you with your finances and spending habits. There are a variety of free budgeting apps available to you that will basically do all the tracking of your spending for you. It’s there each and every day to review as needed.

Create Clear Financial Boundaries

Ignoring the “Joneses” can be one of the biggest battles when making practical decisions regarding your finances.  After I graduated from college, I thought I deserved to buy the newest of everything. I soon realized however that spending outside of what my budget could handle would push me further away from saving money and much further into debt.  “Can I do without this?” is one of the questions you should be asking when making a sizable purchase such as a new automobile, or buying/renting in the new trendy neighborhood. For example, it was a difficult decision for me to stick with my used car that I had already paid off instead of buying a brand new vehicle after college. But it was a smart one.

One thing you could consider is the “50-20-30 rule.”  Experts state that we should spend 50% of our monthly income on necessities, which would include utilities, food, and rent.   The next 20% would be allotted to savings and debt, such as paying off any loans or student debt.  The last 30% of your income would be for personal purchases, things like your personal mobile phone plan, internet/cable/streaming services, etc.  Staying within these guidelines can set forth financial boundaries that will cultivate a healthy financial future.  Forget the noise of the Joneses and stay within your means.  Eventually, you’ll build up your finances and leave others in your financial dust.

Paying Yourself is Priority #1

When it comes to managing your finances and becoming more independent, you have permission to be a bit selfish.  Prioritizing paying yourself above and before you pay anything else is highly important when it comes to having a successful financial future.  No one can avoid unexpected expenses or financial emergencies, but you should be prepared.

I have come to think of my finances with this saying in mind: “Hope for the best, but plan for the worst.”  Having a savings plan will also keep you from accumulating debt with credit cards and loans.  It will help you learn to live and be content on a smaller budget.  One suggestion is to start putting a small amount into your savings each month.  Maybe you can’t do 10% of your paycheck, but even 5% is better than nothing. This provides you with the opportunity to make saving a financial habit.

Many employers have made it easier for their employees to streamline their savings by offering direct deposit options.  You can also schedule automatic transfers from a  bank account to a long-term savings or investment account.

Keep in mind that as you achieve your savings goals, you can increase the amount, as you can afford to.  It’s also smart to contribute as much as you can to your companies 403b or 401k employer-sponsored retirement savings plan.  This money can be taken out of your check even before you get paid so it’s likely that you won’t even miss it. You will likely experience long-term tax benefits as well.

This information is brought to you by GreenPath Financial Wellness

Youth Month

Save small. Dream big.

We're celebrating Youth Month all April long! Be sure to check out our blog each week or follow is on social media for a new youth financial literacy topic.

You can also check out our Youth Program to help get your child started on the path to smart money management.

Youth Month

• By Kevin Alvarez

Tax Return Delays Likely, Here’s What To Do This Tax Season

Tax season is fast approaching! The pandemic has affected production on a multitude of levels and has taught us to be prepared for any delays whether it be shopping in person or even online. The Internal Revenue Service has shared it is faced with backlogs of up to 6 million in unprocessed individual returns. This tax season could very well have delays we are not in favor with. To help alleviate the burdens of the IRS and improve our chances of receiving our returns in a decent time frame, the IRS strongly suggests you do the following:

Use Free Online Resources Provided By The IRS

Filing taxes always brings a myriad of questions; questions we never know who to direct to, but the IRS. For this year’s tax season the IRS has shared, instead of calling in with your questions, you can visit the IRS’ Volunteer Income Tax Assistance (VITA) and/or Tax Counseling for the Elderly (TCE). Both programs are managed by the IRS and staffed with IRS-certified volunteers, who must take and pass tax law training which meets or exceeds IRS standards. To learn more and find a location near you, click here.

File Your Taxes Electronically This Year

The IRS strongly suggests taxpayers file their tax return electronically along with their direct deposit information as soon as all their tax documents have been made available. Tax payers should also check on the accuracy of all their information. Filing a tax return with errors or one that is incomplete may add to the overall delay of receiving your tax return. For the latest IRS forms and instructions, you can visit the IRS website at IRS.gov/forms.

Expect To Receive IRS Letters This Tax Season

People receiving these letters should keep them. Do not throw them away. These letters can help taxpayers, or their tax professional prepare their 2021 federal tax return.

Letter 6419 - Advance Child Tax Credit Payments

Did you know the Child Tax Credits were actually advanced payments on your 2021 taxes? The tax credit was temporarily expanded from $2,000 to $3,600 and the government began to pay half of the available credit via monthly payments from July through December. Those who opted out of advance payments will be receiving full refund amounts.

Each individual, even those who file jointly, should have received letter 6419, 2021 Advance Child Tax Credit. The IRS began sending Letter 6419 via the United States Postal Service back in December 2021 and has continued into the month of January. This letter contains information such as the total Advance Child Tax Credit amount as well as the number of qualifying children used to calculate the overall amount. Anyone who did not receive any payments listed is instructed to call the IRS before filing a return.

Letter 6475 - Economic Impact Payment

Letter 6475, Third Economic Impact Payment (Stimulus Money) was also issued out to individuals who received a third payment in 2021, in late January. This letter is needed to provide verification to the IRS that the taxpayer received the money.

What if I never received Letter 6419 or Letter 6475?

As mentioned above, to ensure you receive your refund, you will need the information on both letters. If you are missing either letter you can use the child tax credits portal to verify the information you need.

You always have the option to call the IRS at 1-800-829-1040, but remember, delays are imminent and strongly suggested you complete all your tax needs, electronically.

For more important IRS information, you can click here.

Tips To Make Filing Easier

  • Gather all your 2021 tax records, Individual Tax Payer Identification Numbers, Adoption Taxpayer Identification Numbers, and this year’s Identity.
  • Set up or log in securely at IRS.gov/account to access personal account tax information including balance, payments, and tax records including adjusted gross income.
  • Individuals can use a bank account, prepaid debit card or mobile app to use direct deposit and will need to provide routing and account numbers.

Key Filing Dates

Below are important dates taxpayers should be aware of this season:

April 18 — Due date to file 2021 tax return or to request an extension and pay tax owed due to Emancipation Day holiday in Washington, D.C., even for those who live outside the area.

April 19 — Due date to file 2021 tax returns or request extension and pay tax owed for those who live in MA or ME due to Patriot’s Day holiday.

When it's time to file your return, remember that filing your taxes electronically and including your direct deposit information would result in the quickest possible return.

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The information in this article is for general educational purposes only and not intended to provide specific advice or recommendations. Please discuss your particular circumstances with an appropriate professional before taking action.