Money Musings 💭 I want to celebrate your wins each week! 👏
One of the most powerful habits we can implement into our money lives is taking small consistent steps. 🪜 Completing a money move each week.
Why does it work?
Small steps are manageable so we actually take them. Quite important. Plus, they are easier to implement because we know what they entail.
A money move each week also helps us build momentum because the big results they lead to are extremely motivating.
That’s why small steps are one of the tenets of Financial Adulting and why I include a money move in this email each week.
We can take the habit further by celebrating the money moves we make! 🥳🥳
It’s too easy to achieve something, move onto the next thing and never really acknowledge how far we’ve come. We think - "I’ll celebrate once I reach my goal."
But we never “arrive” in our financial lives (or in any area of our lives really) - the goal post just moves with us.
There are always areas to improve, new goals, and more steps to take. It’s really about the messy and wonderful journey along the way.
And I’m here for it!
Starting next week, this Fiscal Femme community will celebrate your money wins - big and small. 👏
All you have to do is submit your win (no win is too small!), via this form, and you’ll get a shoutout (with whatever name you choose) in the next Money Musing!
Submitting a win not only celebrates your hard work, it will serve as motivation for others who have similar goals! A win-win.
So let’s get to celebrating!
MONEY MOVE OF THE WEEK
TAX SEASON PREP: STEP #1 - MAKE A LIST OF EVERYTHING YOU NEED.
It’s that time of year again… Whoopee! 🤪 If you’ve been putting off handling your taxes, I have you covered.
We’re starting this series with something easy (but potentially tedious). Make a list and then gather up the docs you’ll need.
What you needed last year is a great place to start. You’ll also notice you have gotten some tax docs in the mail. I always scan those and put them into a folder as they come in.
I have a good list for you to check over here.
YOU GOTTA SEE THIS
DEFINE KEY TAX TERMS.
Tax season comes with its own special brand of jargon. Yippee! But the more you know, the more you know (as they say) - and the more confident you’ll feel. Plus, less unnecessary taxes and penalties to pay.
Here are some of the most common tax jargon words I see.
TAX DAY. This is the big day. This year the deadline for filing tax forms and paying what you owe is April 18th (because April 15th falls on a weekend). It’s also your last chance to contribute to your IRA for the year.
If you file an extension, you have until October 16th (six months later) to file your taxes, but your IRA deadline does NOT get extended and you’ll still want to make an estimated tax payment (if you owe one).
CREDIT. The holy grail of tax benefits. They take money off your tax bill dollar for dollar. If you owe $1,000 in taxes and receive a tax credit for $250, you now owe $750 in taxes.
There are refundable and nonrefundable tax credits. With refundable credits if the credit is larger than the taxes you owe, you can get a refund. I.e. If you owe $500 in taxes and qualify for a $700 refundable tax credit, you should receive a $200 refund. A nonrefundable tax credit can only reduce your tax bill to $0, nothing more.
DEDUCTION. Still your friends, but they don’t have as much of an impact as credits. Deductions reduce your taxable income, which is the amount of money you’re taxed on. This reduces the amount you’re taxed by your tax rate, kind of like a discount, and may also put you in a lower tax bracket. ⬇️
ADJUSTED GROSS INCOME (AGI). Your total income for the year after subtracting out certain adjustments. Income includes wages, dividends, capital gains, business income, retirement distributions, and other income.
TAXABLE INCOME. Your AGI minus deductions (the standard deduction or your itemized deductions). This is the amount you are taxed on.
Important Forms to Know:
1040. When you file your taxes, you’re submitting a 1040 form (pronounced ten-forty). These forms can look really overwhelming and confusing. Take time to read things over as many times as you need (I need to do this every year!) and give a google any time you are not clear on something.
W-2. A summary of what actually happened with your salary and taxes over the past year. It shows how much you earned and how much your company withheld for taxes. It also shows how much of your income went to Social Security, Medicare, and benefits. If you earn a salary, you’ll need this form to prepare your taxes.
1099. If you work for yourself, are a contract employee, or work freelance, you’ll receive a 1099 form from companies that paid you over $600. That being said, if you don’t receive a 1099, you still have to claim that income.
W-4. Something you fill out when you start a new job, but you can update it at any time.
Is there any other tax jargon you have questions about? Hit reply and let me know! I can do a part II.