In a recent study conducted by the ‘National Retail Federation and Prosper Insights and Analytics’, it was found that the average American family will spend just south of $700 for back-to-school costs in 2019. Is your child soon to be a college student? The same survey reported you should be ready to spend a little less than $1,000 alone for start-up school supplies. While this cost seems large, it’s just a part of your financial portfolio. Back-to-school time is not only a great time to plan a scholastic budget, but also reviewing and reassessing your financial plan. Below is your Official 2019 Back-To-School Financial Guide to make sure your student, and your financial goals, stay on track:
How has your year progressed in terms of finances? Have you met or succeeded in your goals? Developing a spreadsheet and comparing where you were at the beginning of the year to where you are now can help you asses how aligned you are with your financial goals. Building this report toward the latter of the year will also give you time to adjust your plan (if needed), throughout the remainder of 2019.
Life happens, which is why insurance was invented. Whether you want to provide for your family in case of an emergency or someone forgets to turn off the stove…again; insurance of all sorts can help cushion the blows to your wallet and financial well-being. However, just as life is always changing, so too are your insurance needs and costs. Once a year, you should reevaluate your insurance needs and coverage for any change. While you may not be able to change health insurance in the middle of the year, items like car and home can be changed with a little research and not much effort.
Regardless if you are married, single, with or without dependents, it is crucial to create and maintain a workable budget. Life changes on a regular basis and your budget must coincide with your current income, needs wants, and goals. Back-to-school time is an ideal time to revisit your budget. It’s a relatively slow time on the tail end of summer travels and on the steps leading up to the holiday season. Budgets should be regularly checked throughout the year and especially after any life changes like marriage, death, education, etc.
Now is the best time to make sure you are receiving the most tax breaks you can on income for 2019. Items like 401(k), charitable contributions, and retirement contributions are all fantastic ways to reduce your tax liability. Consider boosting certain contributions to reduce what you’ll pay in taxes. While ‘tax season’ is still months away, it’s important to start looking at your 2019 year from a financial perspective and start looking out other ways to save on taxes before years end.
Back-to-school season signifies the approach of cooler weather, the quick onset of school costs, and the ultimate approach of years end. Make sure you have a great start to 2020 and finish off 2019 by utilizing this guide when looking at the remainder of your financial year. Although these are good recommendations to start with, you should connect with a financial professional to see where you are on your financial journey and how these tips could benefit you.
For those who are looking for financial advice, we realize the available options are many and deciding who to work with is a challenging problem. At SeaCure Advisors, we know that it is your retirement, and you should have control over it. We offer our experience and knowledge to help you design a custom strategy for financial independence. Contact us today to schedule an introductory meeting!
Disclosure: This information is provided as general information and is not intended to be specific financial guidance. Before you make any decisions regarding your personal financial situation, you should consult a financial or tax professional to discuss your individual circumstances and objectives.
The post Back To School Financial Guide For 2019 appeared first on Adult Financial Education Services.
When your child first started school, you doled out the change for milk and a snack on a daily basis. But now that your kindergartner has grown up, it’s time for you to make sure that your child has enough financial knowledge to manage money at college.
Perhaps your child already understands the basics of budgeting from having to handle an allowance or wages from a part-time job during high school. But now that your child is in college, he or she may need to draft a “real world” budget, especially if he or she lives off-campus and is responsible for paying for rent and utilities. Here are some ways you can help your child plan and stick to a realistic budget:
You should also help your child understand that a budget should remain flexible; as financial goals change, a budget must change to accommodate them. Still, your child’s ultimate goal is to make sure that what goes out is always less than what comes in.
For the sake of convenience, your child may want to open a checking account near the college; doing so may also reduce transaction fees (e.g. automated teller machine (ATM) fees). Ideally, a checking account should require no minimum balance and allow unlimited free checking; short of that, look for an account with these features:
To avoid bouncing checks, it’s essential to keep accurate records, especially of ATM or debit card usage. Show your child how to balance a checkbook on a regular (monthly) basis. Most checking account statements provide instructions on how to do this.
Encourage your child to open a savings account too, especially if he or she has a part-time job during the school year or summer. Your child should save any income that doesn’t have to be put towards college expenses. After all, there is life after college, and while it may seem inconceivable to a college freshman, he or she may one day want to buy a new car or a home.
If your child is age 21 or older, he or she may be able to independently obtain a credit card. But if your child is younger, the credit card company will require you, or another adult, to cosign the credit card application, unless your child can prove that he or she has the financial resources to repay the credit card debt. A credit card can provide security in a financial emergency and, if used properly, can help your child build a good credit history. But the temptation to use a credit card can be seductive, and it’s not uncommon for students to find themselves over their heads in debt before they’ve declared their majors. Unfortunately, a poor credit history can make it difficult for your child to rent an apartment, get a car loan, or even find a job for years after earning a degree. And if you’ve cosigned your child’s credit card application, you’ll be on the hook for your child’s unpaid credit card debt, and your own credit history could suffer.
Here are some tips to help your child learn to use credit responsibly:
Finally, remind your child that life after college often involves student loan payments and maybe even car or mortgage payments. The less debt your child graduates with, the better off he or she will be. When it comes to the plastic variety, extra credit is the last thing a college student wants to accumulate!
It’s tax time, and your kitchen table is littered with papers and forms. As if this isn’t bad enough, you recently paid your child’s college semester bill, and you don’t know where you’ll find the money to pay the taxes that you expect to owe. Well, you might finally catch a break. Now that your child is in college, you might qualify for one of two education tax credits — the American Opportunity credit and the Lifetime Learning credit. And because a tax credit is a dollar-for-dollar reduction against taxes owed, it’s more favorable than a tax deduction, which simply reduces the total income on which your tax is based.
The American Opportunity credit is a tax credit that covers the first four years of your, your spouse’s or your child’s undergraduate education. Graduate and professional courses aren’t eligible. The credit is worth a maximum of $2,500. It’s calculated as 100% of the first $2,000 of tuition and related expenses that you’ve paid for the year, plus 25% of the next $2,000 of such expenses.
To take the credit, both you and your child must clear some hurdles:
The American Opportunity credit can be taken for more than one student in the same year, provided each student qualifies independently. So, if you have twins who are in their freshman year of college (and you otherwise meet the requirements), your credit would be worth $5,000.
However, there are other restrictions. You can’t take both the American Opportunity credit and the Lifetime Learning credit in the same year for the same student. And whatever education expenses you cover with a tax-free distribution from your 529 plan or Coverdell education savings account can’t be the same expenses you use to qualify for the American Opportunity credit.
The Lifetime Learning credit is a tax credit for the qualified education expenses that you, your spouse, or your child incur for courses taken to improve or acquire job skills (even courses related to sports, games, or hobbies qualify if they meet this requirement!). The Lifetime Learning credit is less restrictive than the American Opportunity credit. In addition to college expenses, the Lifetime Learning credit covers the tuition expenses of graduate students and students enrolled less than half-time.
The Lifetime Learning credit is generally worth a maximum of $2,000. It’s calculated as 20% of the first $10,000 of tuition and related expenses that you’ve paid for the year.
One major difference between the American Opportunity credit and the Lifetime Learning credit is that the Lifetime Learning credit is generally limited to a total of $2,000 per tax return, regardless of the number of students in a family who may qualify in a given year. So if you have twins who are in their senior year of college, your Lifetime Learning credit would be worth $2,000, not $4,000.
To qualify for the maximum Lifetime Learning credit in 2019, your MAGI must be below $58,000 if you’re a single filer and $116,000 if you’re a joint filer. A partial credit is available for single filers with a MAGI between $58,000 and $68,000 and joint filers with a MAGI between $116,000 and $136,000.
As with the American Opportunity credit, if you withdraw money from your 529 plan or Coverdell ESA in the same year that you claim the Lifetime Learning credit, your withdrawal cannot cover the same expenses that you use to qualify for the Lifetime Learning credit.
The American Opportunity credit and the Lifetime Learning credit cannot be claimed in the same year for the same student, so you’ll need to pick one. Because the American Opportunity tax credit is available for all four years of undergraduate education, is worth more ($2,500 vs. $2,000), and the income limits to qualify are higher, that credit will probably be your first choice. But if your child is attending school less than half-time, the Lifetime Learning credit will be your only option (assuming you meet the income limits).
Every year that you pay college tuition you should receive Form 1098-T from the college, showing the tuition expenses you’ve paid for the year. Then, at tax time, you must file Form 8863 to take either credit. If you are married, you must file a joint return to take either credit. For more information, see IRS Publication 970 or consult a tax professional.