Indeed, there are certain things that can keep one in poverty such as; not understanding credit, taxes and other financial situations. The more knowledge you obtain in life, the smarter moves you make with your money. After all, you work hard for your money! Protect your money at all costs. Here are 5 areas you should learn to master:
Taxes
- Taxes The biggest mistake I’ve seen clients make was not being aware of their tax withholding. Many new employees fill out their job package and fail to withhold taxes. Sometimes, you will have to monitor your first 2 -3 paychecks to see if you’re satisfied with how much taxes are being withheld. You would then go to HR or your Payroll department and request a W4. On line4(c), you will write how much extra you’d like to withhold. This will ensure you don’t get surprises at tax time. So many tax payers end up owing thousands of dollars every year because of this mistake.
Another tax hack - In addition, If you have a side hustle/legitimate business ,you must keep good financial records. Make sure you get a business bank account; seperate from personal. Keep all receipts. Those qualified receipts can be used as a write off to lower your tax liability at tax time. The goal is to owe the least or possibly get back money at tax time. Play smart.
Retirement Contributions
2. Retirement
There are several ways to save for retirement: 401K, Roth IRA , Traditional IRA.
One of my favorite is IRA . As of 2023, the annual contribution limit is $6500 or $7500 if you’re 50 or over. If neither you or your spouse is covered by a plan at work, your deduction is allowed in full. That’s another great way to knock down your tax liability and keep more money in your pocket.
Credit Cards can be dangerous. Yikes
3.Credit Cards
Yes! You’ve heard this phrase, ” credit cards are dangerous!” It surely can be a dangerous trap. Many make the mistake of swiping their credit card as an emergency. One emergency becomes 2 then another. You’ll end up with a huge balance. Once your balance is high, it will feel like you are putting out a never ending fire.
Supposed you pay $400 a month and your balance is $4500. Your balance is now $4100 , right? Wrong! You check your account again and the balance actually went up $100 dollars. It’s because at the end of the month, you get charged for purchase charges, interest charges and other fees. This how so many people become stuck and making it impossible to pay down credit card balance. On top of that, people are still swiping the card with a huge balance.
The first step, is to put the card away and stop spending. Create a plan and start aggressively paying down the balance each month. It’s possible to bring your balance back to 0 and get a higher score. It will take some patience and consistency.
Make your money make more money
4. Investing.
Understanding investing, can set you up financially. You don’t have to be an expert in investing and trading. You can download an app such as Robinhood and choose stocks to invest in. You won’t get rich overnight. The key is to invest for the long term. Continue investing and be patient. Rental property is another great way to make good residual income.
Multiple sources are the way to go
5. Understanding that 1 source of income isn’t enough
As I got into my 30s, I realized 1 income wasn’t enough for me. Once I purchased my first brand new car, I never was comfortable relying on just one stream. What would happen if I was laid off or fired? I’d be stuck with no income and possibly have my car repossessed. I took a side hustle to make sure I’d never miss a car payment. So far, I was blessed to never be late on my note. Side jobs and side hustles are a necessity in today’s economy. You can never have too much money. Work hard and always keep emergency funds stashed away.
Therefore, If you can master these 5 things, you can live a comfortable lifestyle. As the saying go, “The goal is to work smarter Not harder.”
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