Category: Credit 101
How to Measure Progress and Achieve Goals
Measurement! I just love measurement. That’s because it tells you how you’re doing and how much progress you’ve made. Progress checks can motivate you, help you catch yourself when you’re slacking, and tell you when to change course.
Without giving thought to how you define progress, however, you can measure the wrong thing, or measure the wrong way. You might end up demoralized for no reason, or falling behind unknowingly on a project, or missing opportunities. So if you’re going to measure progress, do it right! Turn off auto-pilot “gut checks” and measure progress thoughtfully.
Measure process goals
If you’re Type A like me, you probably overwork yourself, under the assumption that more work gives more progress. But does it? Have you ever measured? Just being busy and stressed doesn’t mean we’re getting anything done. We need to track how far we are from our goal, and whether we’re closing that gap.
First determine the kind of goals you’re chasing. Episode 462, “Grow a Pair for Your Career,” outlines the difference between outcome goals and process goals. Outcome goals—like getting a promotion—are something you strive for, not something you just do. Process goals, on the other hand, are measurable actions that help you get closer to your outcome goal, like making ten more sales calls each day.
If you’re going to measure progress, do it right! Turn off auto-pilot “gut checks” and measure progress thoughtfully.
On a daily basis, measure progress through movement toward your process goals. It doesn’t matter how much you work, only whether that work takes you closer to finishing that day’s process goals. Then check that your process goals are doing what they should, by tracking overall movement toward an outcome goal.
For example, if you work in sales, your process goal might be to make fifty cold calls a day. If that’s your goal, sending two hundred emails should not count as progress. What’s more, if your outcome goal is to close sales, and you haven’t closed one in months, you may need to rethink if you have the right process goals. Maybe “number of calls” doesn’t lead to sales. Maybe you need to make progress on the quality of your calls, instead. So make your new process goal tweaking your sales pitch, and direct some work toward that.
Measure how far you’ve come
Another way to track progress is to look at how far you are from your starting point.
Sam is a twenty-something who’s just started up a fairly successful online delivery company. The vision of being the next Amazon.com seems impossible! Or at least, light years away. And it is. But knowing that it’s not Amazon yet isn’t a useful measure for evaluating progress. Furthermore, it’s so far away that it isn’t even clear which paths lead to that result.
Sam can instead concentrate on what’s been accomplished so far. They started sitting around a dining room table. Now they have office space, customers, a business model that works, money in the bank, and profit. By measuring progress based on how far they’ve come, not on how far they have left to go, Sam can realize they’ve made tons of progress, and can make sure it continues to unfold, as more and more milestones get added to the list.
Measure distance to your goals
At some point your goal is within reach. Then, you can start measuring how far you are from your goal, and concentrate on closing the gap.
Don’t do this too soon! You can hurt morale. At my last Harvard Business School reunion, for example, doing an “Am I there yet?” progress check gave me a soul-crushing burst of inadequacy as I was moderating a panel of my classmates, whose combined net worth was enough to purchase a third world country and pave it over. In gold.
When you’re out on a long run, you get a surge of fresh energy when you see you’re only ten feet from the finish line, and there’s an entire 55-gallon drum of gummy bears waiting at the end. And an Oreo ice cream cake. The next thing you know, you’re barreling over the finish line.
When you’ve passed the halfway point, start measuring your progress by how quickly you’re closing on your goal. Keep that Oreo ice cream cake in mind, and set new goals to push you those last few feet.
Even if you get some steps wrong, just making the plan will energize you and be motivating.
A good way to do this is to make a checklist of things you’ll need to do to reach the end point. These can be high-level things like, “Run A/B testing with focus groups,” or low-level things like, “Write an email to call for A/B testing participants.” Once your plan is on paper, finishing your project will seem much more doable, since all the steps left to take are right there in front of you. And as I talked about in episode 466, "Make a Plan for Motivation," even if you get some steps wrong, just making the plan will energize you and be motivating.
Once you figure out the best way to track your progress, and the types of progress you need to track, choose how often you’ll track. Sometimes, tracking progress once a week is plenty. But from my experience, it’s best to track progress every two to three days.
That way, if you suddenly notice you’re not where you should be, you only have to make up two or three days’ worth of work. If you were only checking once a week, you could get an entire week behind before you’d notice it.
From my experience, it’s best to track progress every two to three days.
What gets measured gets managed. And we love to manage progress. On a daily basis, concentrate your measurements on your progress goals, rather than your outcome goals. Then choose a less-frequent measurement that is based on where you are in your project: distance to your goal, or distance from your starting point. With a little experimentation, you can find the magic balance that keeps you on top of your game.
This is Stever Robbins. I give great keynote speeches on productivity, Living an Extraordinary Life, and entrepreneurship. If you want to know more, visit http://SteverRobbins.com.
Work Less, Do More, and have a Great Life!
How Long Do Hard Inquiries Stay on Your Credit Report?
Your credit report offers valuable insight into your financial history and affects most of your financial future. Everything from whether you get approved for a mortgage to what your credit card interest rate will be balances on your credit score. Negative information on your credit report can be detrimental for years. Wonder how long hard inquiries stay on your credit report?… Read More
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How to Break Through and Overcome Financial Hardships
Your life and personal finances don’t always go the way you hope. We all have struggles and no one achieves success without their share of hurdles and challenges. However, there are tools that can help you break through financial hardships and live the life you want.
I interviewed AJ Gibson, author of Flipping the Script: Bouncing Back from Life’s Rock Bottom Moments, an Amazon #1 new release. We talk about the personal, professional, and financial challenges that he’s overcome.
AJ is a Los-Angeles based TV host, public speaker, and coach who loves great people, food, fashion, entertainment, and travel. He’s been the host of the nationally syndicated daytime talk show, Hollywood Today Live, a co-host on Access Hollywood Live, and a frequent anchor on Good Day LA. You’ll see him on CBS’s The Talk and even on several episodes of The Wendy Williams Show.
His journey from being a closeted gay boy in Ohio to a host chatting with the some of the world’s most admired celebrities on Hollywood’s biggest red carpets is incredibly inspiring. He has a gift for busting through life’s roadblocks and persevering despite failure.
On the Money Girl podcast, AJ and I chatted about key lessons from his book. You’ll learn how to shift your perspective to find the beauty in life’s most challenging moments. We cover:
- Overcoming the financial hurdles of becoming self-employed
- Tips for reaching financial goals when you have big dreams
- Why fear and shame may be causing you to ignore your financial situation
- Leaning on professionals to help stay on top of your financial life
- Tools for turning hopelessness into a positive, fresh outlook on your future
- Using a focus wheel for daily motivation to achieve your dreams and goals
Listen to the interview using the audio player above, or check it out on Apple Podcasts, SoundCloud, Stitcher, and Spotify
ABOUT THE AUTHOR
Laura Adams received an MBA from the University of Florida. She's an award-winning personal finance author, speaker, and consumer advocate who is a trusted and frequent source for the national media. Her book, Debt-Free Blueprint: How to Get Out of Debt and Build a Financial Life You Love was an Amazon #1 New Release. Do you have a money question? Call the Money Girl listener line at 302-364-0308. Your question could be featured on the show. Stay in the personal finance loop! Listen and subscribe to the Money Girl podcast on Apple, Spotify, or wherever you get your podcasts.
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16 Good Jobs for Teens (Plus Business Ideas!)
If you’re a teen looking for a job (or a parent helping your teen find a job), you’re in luck! Most people know that 16-year-olds can work in a variety of stores and restaurants. However, some companies will hire teens as young as 15, and sometimes even as young as 14. We’ll share where you should look if you’re a teen looking for ways to earn your own cash.
Here are some of the more well-known jobs that employers hire 14 and 15-year-olds for.
Jobs for 15-year-olds
There are a few companies willing to hire teens as young as 14 or 15. We’ll focus on a few industries that hire 15-year-olds first.
Fast food and casual restaurants often hire teens as young as 15. For instance, Boston Market is a casual restaurant chain with over 450 locations in the United States. Some of the job positions they might hire 15-year-olds for include busboy/busgirl jobs and cleaning crew.
Grocery Store Worker
Some grocery stores will hire 15-year-olds to work as a cashier or stock person. Hy-Vee is a national grocery store chain with nearly 250 locations in states such as Iowa, Minnesota, and Illinois.
Note that not all Hy-Vee stores hire 15-year-olds. Check with your local Hy-Vee location and talk with the manager there.
Movie Theater Worker
As a movie theater worker, you might sell tickets, take tickets, work in concessions or do theater cleanup. The AMC movie theater company has locations throughout the U.S and often hire teens as young as 15. As with Hy-Vee, locations are independently managed and many locations will hire 15-year-olds, however not all locations do.
Amusement Park Worker
Six Flags amusement parks and other amusement parks commonly hire teens as young as 15. There are a variety of job positions available such as park cleaner, store cashier, food service jobs and ride operators.
Check with your local Six Flags or other amusement parks to see what types of job positions are available for 15-year-olds.
The American Red Cross lets teens as young as 15 get certified for service as a lifeguard. If you’re interested in this type of job, talk with hiring managers at local pools and beaches.
If they’re willing to hire a certified lifeguard at 15, get your certification through your local Red Cross or online.
Jobs for 14-year-olds
Some industries, although not many, hire 14-year-olds. There are a variety of restaurants and stores that hire 14-year-olds. Some of the jobs you might do in a restaurant at 14 include cleaning, cashiering, and food preparation.
The following restaurants often hire teens as young as 14. Note that the hiring age can vary by location.
- Baskin Robbins
- Ben and Jerry’s
- Bruster’s Real Ice Cream
- Dairy Queen
- Rita’s Italian Ice
Grocery stores also hire teens as young as 14 at times. Again, each location may vary on the hiring age based on management preference and state laws. But the following grocery stores have been known to hire 14-year-olds.
- Giant Eagle
- Giant Food
- Winn Dixie
If you want even more ideas for jobs for teens check out this list.
Not interested in working for a company? Try this next idea on for size.
Businesses you can start as a teenager
What if you want a job as a teenager but you want something different? How about starting your own business?
One of the keys to operating a successful business is to “underpromise and overdeliver.” In other words, do a better job than what you agreed to do and make the customer extra happy they hired you.
Here are some business ideas that anyone age 14 or up can start.
Are you smart in school subjects such as English, reading, math or science? How about working as a tutor for other students your age or younger?
Advertise your skills to parents of other children in your area, or on social media outlets. Set a rate of pay; most tutors charge by the half-hour or by the hour.
Continue reading at WalletHacks.com.
Credit 101: What Is Revolving Utilization?
According to Experian, the average credit score in the United States was just over 700 in 2019. Thatâs considered a good credit scoreâand if you want a good credit score, you have to consider your revolving utilization. Revolving utilization measures the amount of revolving credit limits that you are currently using, and it accounts for… Read More
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Your Guide to Claiming a Legit Home Office Tax Deduction
I’d bet that on just about every city block or long country road, someone is operating a business from their residence. According to the U.S. Small Business Administration, about 50 percent of businesses are home-based, with a larger percentage (60 percent) working as solopreneurs with no employees.
Having a home-based business is one of the easiest and least risky ways to become an entrepreneur, test your business ideas, and increase your income. No matter if you run a business full-time or as a side gig, claiming the home office deduction can significantly reduce your taxes.
No matter if you run a business full-time or as a side gig, claiming the home office deduction can significantly reduce your taxes.
I received an email from John, who says, “My New Year's resolution is to earn more money working during my off-hours and on weekends. Since the work will likely entail making deliveries for different mobile apps, I’m not sure if it qualifies me for the home office tax deduction. Can you explain more about it?”
Thanks for your great question, John! In this post, I’ll give an overview of the home office deduction. You’ll learn who qualifies, which expenses are deductible, and how to legitimately claim this money-saving tax break no matter what type of business you have.
Who can claim the home office tax deduction
If you work for yourself in any type of trade or business, either full- or part-time, and your primary office location is your home, you have a home business. The designation applies no matter whether you sell goods and services, are a freelancer, consultant, designer, inventor, Uber driver, or dog-walker.
If you work for yourself in any type of trade or business, either full- or part-time, and your primary office location is your home, you have a home business.
You can have a home-based business even if you’re like John and mostly earn income away from home. This is common for many trades and solopreneurs, such as musicians, sales reps, and those working in the gig economy. If you’re self-employed and do administrative work like scheduling, invoicing, communication, and recordkeeping at home, you have a home business.
Note that employees who work from home can’t claim a home office deduction. W-2 workers used to be allowed to include certain expenses if they itemized deductions. But tax reform took away that benefit starting with the 2018 tax year.
The home office deduction is available for any self-employed person no matter whether you own or rent your home, with the following two requirements:
- Your home office space is used regularly and exclusively for business
- Your home office is the principal place used for business
You must regularly use part of your home exclusively for conducting business. For example, if you use a guest room in your house or a nook in your studio apartment to run your business, you can take a home office deduction for the space.
You don’t need walls to separate your office, but it should be a distinct area within your home. The only exception to this “exclusive use” rule is when you use part of your home for business storage or as a daycare. In these situations, you can consider the entire space an office for tax purposes.
Additionally, your home must be the primary place you conduct business, even if it’s just the administrative work you do. For example, if you meet with clients or do work for customers away from home, you can still consider the area of your home used exclusively for business as your home office.
Your home doesn’t have to be the only place you work to qualify for the deduction. You might also work at a coffee shop or a co-working space from time to time.
You could also consider a separate structure at your home, such as a garage or studio, your home office if you use it regularly for business. Also, note that your home doesn’t have to be the only place you work to qualify for the deduction. You might also work at a coffee shop or a co-working space from time to time.
RELATED: How to Cut Taxes When You Work From Home
Expenses that are eligible for the home office tax deduction
If you run a business from home, two types of expenses are eligible for the home office deduction: direct expenses and indirect expenses.
Direct expenses are the costs to set up and maintain your office. For instance, if you work in a spare bedroom, you might decide to install carpet and window treatments. These expenses are 100 percent deductible, no matter the size of the office.
Indirect expenses are costs related to your office that affect your entire home. They’re partially deductible based on the size of your office as a percentage of your home.
For renters, your rent, renters insurance, and utilities are examples of indirect expenses. You’d have these expenses even if you didn’t have a home office.
For homeowners, you can't deduct the principal portion of your mortgage payment, which is the amount borrowed for the home. Instead, you’re allowed to recover a part of the cost each year through depreciation deductions, using formulas created by the IRS.
Other indirect expenses typically include mortgage interest, property taxes, home insurance, utilities, and maintenance. Allowable indirect expenses actually turn some of your personal expenses into home office business deductions, which is fantastic!
Allowable indirect expenses actually turn some of your personal expenses into home office business deductions, which is fantastic!
However, expenses that are entirely unrelated to your home office, such as remodeling in other parts of your home or gardening, are never deductible. So, your ability to deduct an expense when you’re self-employed depends on whether it benefits just your office (such as carpeting and wall paint) or your entire home (such as power and water).
Also, remember that business expenses unrelated to your home office—such as marketing, equipment, software, office supplies, and business insurance—are fully deductible no matter where you work.
How to claim the home office tax deduction
If you qualify for the home office deduction, there are two ways you can calculate it: the standard method or the simplified method.
The standard method requires you to determine the percentage of your home used for business. You divide the square footage of the area used for business by the square footage of your entire home.
For example, if your home office is 12 feet by 10 feet, that’s 120 square feet. If your entire home is 1,200 square feet, then diving 120 by 1,200 gives you a home office space that’s 10 percent of your home. That means 10 percent of the qualifying expenses of your home can be attributed to business use, and the remaining 90 percent is personal use. If your monthly power bill is $100 and 10 percent of your home qualifies for business use, you can consider $10 of the bill a business expense.
To claim the standard deduction, use Form 8829, Expenses for Business Use of Your Home, to figure out the expenses you can deduct and then file it with Schedule C, Profit or Loss From Business.
The simplified method allows you to claim $5 per square foot of your office area, up to a maximum of 300 square feet. So, that caps your deduction at $1,500 (300 square feet x $5) per year.
The simplified method truly is simple because you don’t have to do any record-keeping, just measure the space and include it on Schedule C. It works best for small home offices, while the standard method is better when your office is larger than 300 square feet. You can choose the method that gives you the biggest tax break for any year.
But no matter which method you choose to calculate a home office tax deduction, you can’t deduct more than your business’ net profit. However, you can carry them forward into future tax years.
As you can see, claiming tax deductions for your home office can be complicated. I recommend that everyone who’s self-employed use a qualified tax accountant to maximize both home office and business tax deductions.
Yes, professional advice costs money. But it’s well worth it, and it usually saves money in the long run when you know how to take advantage of every legit tax deduction.
Habits of The 800 Club â The Path to Perfect Credit
What do you know about the 800 Club? Find out exactly what the 800 Club is, the benefits club members get and what you can do to become a member yourself.
Can Your Craft Become Your Livelihood? A Conversation with Grant Ginder
That creative thing you love—writing, painting, designing, composing—that’s what you do for pleasure. To relax, unwind, escape. Many of us hold a belief that the thing we love to do and the thing we get paid to do can’t be one and the same. Unless, of course, you’re Lizzo or Stephen King.
But what if that assumption is wrong? What if there's a way to add a small revenue stream, or even make a full-time career, out of the creative thing you love?
Becoming a creative begins with creating.
I sat down with novelist Grant Ginder (author of The People We Hate at the Wedding and Honestly, We Meant Well) who boldly shares his advice on how he turned his writing hobby into a profession and how he believes you can follow his lead down any artistic path you choose.
What makes someone an artist?
When I asked Grant what makes someone an artist, he chuckled before confessing that even as a published author, he struggles to claim the title out loud.
"I think … so much of it is just a matter of taking ownership. [We tend to believe] you're not allowed to call yourself a painter unless you've sold paintings. But a painter is someone who paints. …I spend a lot of my day writing, and so I'm a writer. Getting anyone else to take you seriously is to take yourself seriously. And part of taking yourself seriously is calling yourself what you are."
Addressing the mindset of art as a hobby or creative pursuit only
Many of us carry a creative wish or talent inside of us. And yet so many believe that our art—the creating—is the thing we must do after the “real job” is done. Being creative happens separately from being a professional.
"My parents… encouraged me to follow those [writing] ambitions. And if I would've told them after I graduated college ‘I'm going to go be a writer’… they would have [said] ‘Maybe you won't be doing that.’
"When my first book came out, my parents had a celebration for me and my dad was giving a speech. He said ‘Grant said he was going to write a book and we didn't believe it!'"
Then, after Grant’s second book was published, his parents (supportively) expressed the same surprise.
"It was a mixed message. It’s not just your parents [sending you this message]—I think you have pressures from all sides; from school, from media, from just looking at the world around you. It’s like the only [artists] that matter are the ones who make a lot of money. I think it’s a very skewed way of looking at art."
Making the move from amateur to creative professional
It's all well and good to say that we should all support creative pursuits as a means to an income. But how do you actually get started on making it official? The answer, perhaps unsurprisingly, is that becoming a creative begins with creating.
"For me, the creating part was learning to set aside time, and to protect that time, to engage in this particular craft… I would write on the weekends a lot. [I had to learn] to say no to things… [because] this is the time that I've set aside to engage in this process, and I'm going to engage in this process now. Holding yourself to that and getting other people to recognize and take that seriously [is essential]."
He also speaks to the importance of consuming the art form you want to produce. For Grant, that’s the novel. But he acknowledges that it's probably the same for other creative arts like painting or music. The process involves analysis and self-reflection.
"You read a novel and you want to write one of these things. [What do you like about it? Why do you like that? And how is that writer doing that thing? And so, [you're] coming at it as… someone who's trying to train themselves in a particular craft. I think that's kind of step one in producing something [creative]."
Finding inspiration and motivation
Sometimes you don't have the luxury of waiting for inspiration to strike you. You have a job to do.
What about inspiration? Do you wait for it to strike or do you just have to start?
Grant believes the artist simply has to start.
"I don't believe that I have to wait for inspiration to strike. I actually think that this comes from my training as a speechwriter, and from writing under deadlines. Sometimes you don't have the luxury of waiting for inspiration to strike you. You have a job to do."
He pointed to an idea he paraphrased from novelist Taffy Brodesser-Akner:
"You write a sentence. Just write that sentence. And it might be a really bad sentence, but the next one will probably be a little bit better."
"I'm also a fan of super messy first drafts. I think my writing is at its worst and my process is at its worst when I get way too precious. Am I in the mood? Is the light in the apartment just right? It's like, no, just roll up your sleeves and start."
Getting your creation out into the world
Once you’ve written or painted or composed the thing, is there a clear, step-by-step roadmap to getting it out into the world? Grants recommendations were refreshing. And relatable.
1. Do your research
"I used Google. When I wrote my first novel, I Googled ‘how many words are in a novel?
"I've always loved writing. I've always loved reading. And so, on breaks [from my speechwriting job], I would write. And, I kept that up. And then… when I reached that magic number [of novel words], I Googled ‘how to publish a novel.
"My path was like a Google Commercial."
Grant's googling led him to conclude that he needed to find a literary agent. And, of course, he then used Google to find out what a literary agent was.
"Your research is really important [in figuring out] what the next steps are and how to prepare yourself for those steps."
2. Be scrappy
"I started realizing I'd never really read the acknowledgments in the backs of books before. So I started reading the acknowledgments… and authors thank their agents. So if I really liked the book, I would read the acknowledgments and keep a list of who the agents were.
"When it was time for me to query agents… I reached out to those agents. Some of them didn’t respond, but some did. It takes a while. You get a lot of rejections. But I told myself that for every rejection, I was going to send it out to two more people. You just chip away."
I told myself that for every rejection, I was going to send it out to two more people. You just chip away.
3. Make connections
"I assume this would translate to other fields—developing a network of other writers, painters, musicians helping each other … to navigate the landscape."
Grant had no prior knowledge of the steps to take in getting a book published. He had no connections. He had only a book, a wish, and a decent internet connection. And this is how he would advise any creator to figure things out as they go.
How do you handle rejection?
Grant mentioned rejection. And I wasn’t letting him off the hook. How, I asked, do you deal with rejection?
"There is this incredible vulnerability in putting something out in the world. It's something that you've sat with for years. And it's just [been] you, engaging with [it]. Then all of a sudden it's in the hands of everyone and they're allowed to think whatever they want about it.
"I think you have to get to this state—and I'm not there yet—[but] I imagine [it’s] like the author's Nirvana… where I’ve made this thing that belonged to me while I was making it. And I am now putting it forth for interpretation… [but] texts are meant to be read and processed in a variety of different ways. And I think that… the more you can lean into that belief, the happier, and probably the better writer you can be."
Grant's advice to budding creatives
I wrapped our interview with this question: What’s the one piece of advice you wish you could give your younger self?
Here’s a (slightly paraphrased) summary of the pep talk Grant wished he'd received.
"Just sit down and do it. Trust the process. One sentence will lead to the next sentence, which will lead to the next. Don't worry so much. Just write the book you want to write."
How Late Can You Be on a Car Payment, Mortgage or Other Bill?
It’s always frustrating to come across a bill and realize it was due yesterdayâor last week. If you’re late on a payment or if you miss it completely, you could end up paying late fees and taking a hit on your credit score. It can be especially difficult if you want to apply for a… Read More
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10 COVID-19 Stimulus Benefits for the Self-Employed
Since the outbreak of the coronavirus pandemic in March 2020, life and business certainly have changed. If you’re self-employed full-time or earn business income on the side of a day job, you may be wondering what economic relief applies to you.
Let's review what relief Congress passed to help self-employed Americans cope with financial challenges. I’ll review ten key stimulus benefits that apply to solopreneurs and small businesses.
If you're experiencing economic hardship due to the coronavirus, using some of these new regulations may be the ticket to managing your personal and business finances better.
10 ways the self-employed can get financial relief
The Coronavirus Aid, Relief, and Economic Security (CARES) Act became law on March 27 as the largest stimulus legislation in American history since the New Deal in the 1930s. Here are ten ways it provides relief for individual solopreneurs and small business owners.
1. Getting lower interest rates
On March 3, the central U.S. bank, also known as the Federal Reserve or Fed, made a surprising emergency interest rate cut of half a percentage point. That’s the largest single rate cut since the financial crisis of 2008. While this move wasn’t part of a coronavirus stimulus package, it was an aggressive cut meant to prepare the economy for problems the pandemic was expected to cause.
An economic recovery could take a few years, which likely means the Fed rate will stay near zero through 2023.
In mid-September, the Fed reiterated its promise to keep interest rates near zero until the economy improves and the unemployment rate declines. They indicated that a recovery could take a few years, which likely means the Fed rate stays near zero through 2023.
While savers never celebrate low interest rates, they're beneficial to borrowers. In general, the financing charge on variable-rate credit cards and lines of credit goes down in lockstep with interest rates. Carrying a balance on your personal and business credit cards may be slightly less expensive, depending on your card issuer and type. For instance, if your card’s annual percentage rate or APR is 20%, your adjusted rate could go down to 19.5%.
If you have a fixed-rate credit card, the APR doesn’t change no matter what happens in the economy or with federal interest rates. Also, note that if you pay off your balance in full each month, a credit card’s APR is irrelevant because you don’t pay interest on purchases.
2. Having more time to file taxes
Earlier this year, the due date for filing and paying 2019 federal taxes was postponed from April 15, 2020, to July 15, 2020. You didn't have to be sick or negatively impacted by COVID-19 to qualify for this federal tax delay. It applied to any person or business entity with taxes due on April 15, 2020.
If you missed the tax filing deadline, be sure to request an extension.
Most businesses make estimated tax payments each quarter. Those payment dates have shifted, too. The 2020 schedule gives you more time as follows:
- The first quarter was due on July 15, 2020, which changed from April 15, 2020
- The second quarter was due on July 15, 2020, which changed from April 15, 2020
- The third quarter was due on September 15, 2020
- The fourth quarter is due on January 15, 2021
Individuals and businesses can request an automatic extension to delay filing federal taxes. But it doesn’t give you more time to pay what you owe for 2019, only more time to submit your tax form—until October 15, 2020.
If you missed the tax filing deadline, be sure to request an extension. Individuals must file IRS Form 4868, and most incorporated businesses use IRS Form 7004.
However, depending on where you live, you may have to pay state income taxes, which have not been postponed. If you need a state tax filing extension, check with your state’s tax agency to determine what’s possible.
Taxes due on any date other than April 15, 2020—such as sales tax, payroll tax, or estate tax—don’t qualify for relief.
3. Getting more time to contribute to retirement accounts
You typically have until April 15 or the date of a tax extension to make traditional IRA or Roth IRA contributions for the prior year. But since the CARES Act postponed the federal tax filing deadline, you also have until July 15 or October 15, 2020 (if you requested an extension) to make IRA contributions for 2019.
However, this deadline doesn't apply to retirement accounts you may have with an employer, such as a 401(k). Nor does it apply to self-employed accounts, such as a solo 401(k) or SEP-IRA, which correspond to the calendar year.
4. Getting more time to contribute to an HSA
Like with an IRA, you typically have until April 15 or the date of a tax extension to make HSA contributions for the prior year. Under the CARES Act, you now have until July 15 or October 15, 2020, to make HSA contributions for 2019.
To qualify for an HSA, you must be covered by a qualifying high-deductible health plan. In early March, the IRS issued a notice that a high-deductible health plan may cover COVID-19 testing and treatment and telehealth services before meeting your deductible. And just as before the coronavirus, you can pay for medical testing and treatment using funds in your HSA.
5. Delaying tax on retirement withdrawals
While you typically must pay income tax on retirement account withdrawals that weren’t previously taxed, the good news is that for a period, you can delay or avoid tax altogether. The CARES Act gives you two options for withdrawals made in 2020:
- Repay a hardship distribution within three years to your retirement account. You can replace the funds slowly or all at once, with no change to your annual contribution limit. If you take money out but return it within three years, it’s like you never took a distribution.
- Pay taxes on a hardship distribution from your retirement account evenly over three years. If you can’t pay back your distribution, you can ease your tax burden by paying one-third of your liability for three years.
Since withdrawing contributions from a Roth retirement account doesn’t trigger income taxes, it’s a good idea to tap a Roth before a traditional retirement account when you have the option.
6. Skipping early withdrawal penalties
Most retirement accounts impose a 10% early withdrawal penalty if you take make withdrawals before age 59.5. Under the CARES Act, if you have a coronavirus-related hardship, the penalty is waived.
Under the CARES Act, if you have a coronavirus-related hardship, the penalty is waived.
For instance, if you, your spouse, or a child gets diagnosed with COVID-19 or have financial challenges due to being laid off, quarantined, or closing a business, you qualify for this penalty exemption. You can withdraw up to $100,000 of your retirement account balance during 2020 without penalty. However, income taxes would still be due in most cases.
The no-penalty rule applies to workplace retirement plans, such as 401(k)s and 403(b)s. It also applies to IRAs, such as traditional IRAs, Roth IRAs, and SEP-IRAs.
Since you make after-tax contributions to Roth accounts, you can withdraw them at any time (which was also the case before the CARES Act). However, the earnings portion of a Roth is subject to income tax if you withdraw it before age 59.5.
7. Getting larger retirement plan loans
Some workplace retirement plans, such as 401(k)s and 403(b)s, permit loans. Typically, you can borrow 50% of your vested account balance up to $50,000 and repay it with interest over five years.
You can delay the repayment period for a retirement plan loan for up to one year.
For retirement plans that allow loans, the CARES Act doubles the limit to 100% of your vested balance in the plan up to $100,000. It applies to loans you take from your account until late September 2020, for coronavirus-related financial needs.
You can delay the repayment period for a retirement plan loan for up to one year. For example, if you have $20,000 vested in your 401(k), you could take a $20,000 loan on September 30, 2020, and delay the repayment term until September 30, 2021. You’d have payments stretched over five years, ending on September 30, 2026. Any amount not repaid by the deadline would be subject to tax and a 10 percent early withdrawal penalty.
Note that individual retirement accounts—such as traditional IRAs, Roth IRAs, and SEP-IRAs—don’t allow participants to take loans, only hardship distributions.
8. Suspending student loan payments.
Starting on March 13, 2020, most federal student loans went into automatic forbearance until September 30, 2020, due to the CARES Act. On August 8, the suspension of student loan payments was extended through December 31, 2020.
On August 8, the suspension of student loan payments was extended through December 31, 2020.
The suspension covers the following types of loans:
- Direct Loans that are unsubsidized or subsidized
- Direct PLUS Loans
- Direct Consolidation Loans
- Federal Family Education Loans (FFEL)
- Federal Perkins Loans
Note that FFEL loans owned by a private lender or Perkins loans held by your education institution don’t qualify for automatic forbearance. However, you may have the option to consolidate them into a Direct Loan, which would be eligible for forbearance. Just make sure that once the suspension ends, your new consolidated interest rate wouldn’t rise significantly.
During forbearance, qualifying loans don’t accrue additional interest. Even if you have federal student loans in default because you haven’t made payments, zero percent interest applies during the suspension period.
Additionally, missed payments during the suspension don’t get reported to the credit bureaus and can’t hurt your credit. Qualifying payments you skip also count toward any federal loan repayment or forgiveness plan you’re enrolled in.
However, if you want to continue making student loan payments during the suspension period, you can. With zero percent interest, the amount you pay gets applied to your principal student loan balance, enabling you to get out of debt faster.
With zero percent interest, the amount you pay gets applied to your principal student loan balance, enabling you to get out of debt faster.
If you’re not sure what type of student loan you have or the pros and cons of consolidation, contact your loan servicer. Even if your student loans are with private lenders or schools, they may offer relief if you request it.
9. Having Paycheck Protection Program (PPP) loans forgiven
The PPP is part of the CARES Act, and it supports small businesses, organizations, and solopreneurs facing economic hardship created by the pandemic. The program began providing relief in early April 2020, and the application window ended in early August 2020.
Participating PPP lenders coordinated with the Small Business Administration (SBA) to offer loans to businesses in operation by February 15, 2020, with fewer than 500 employees. Loan amounts could be up to 2.5 times the average monthly payroll up to $10 million; however, annual salaries were capped at $100,000.
For a solopreneur, the maximum PPP loan was $20,833 if your 2019 net profit was at least $100,000. The calculation is: $100,000 / 12 months x 2.5 = $20,833.
When you spend at least 60% on payroll and 40% on rent, mortgage interest, and utilities, you can have those amounts forgiven from repayment. Payroll includes payments to yourself, but you can’t cover benefit costs, such as retirement contributions, or payments to independent contractors.
In other words, a solopreneur could have received a PPP loan for up to $20,833, paid the entire amount to themselves, and not repaid it by having the load forgiven. Using a PPP loan for qualifying expenses turns it into a grant.
The best part about PPP loan forgiveness is that it won’t qualify as federal taxable income. Some states that charge income tax have indicated that they won’t tax forgiven amounts.
However, if you have employees, the PPP forgiveness calculations and requirements are more complex. For example, you must maintain reasonable salaries and wages. If you decrease them by more than 25% for any employee (including yourself) who made less than $100,000 in 2019, your forgiveness amount will be reduced.
PPP loan forgiveness also depends on keeping any full-time employees on your payroll. But if you had employees who left your company voluntarily, requested a cut in hours, or got fired for cause during the pandemic, your loan forgiveness amount won’t be reduced for those situations.
The best part about PPP loan forgiveness is that it won’t qualify as federal taxable income. Some states that charge income tax have indicated that they won’t tax forgiven amounts.
However, not all states have issued their rules on taxing PPP forgiveness. So be sure to get guidance if you live in a state with income tax.
You must complete a PPP Loan Forgiveness Application and get approved by your lender to qualify for forgiveness. The paperwork should come from your lender, or you can download it from the SBA website at SBA.gov. Most PPP borrowers have from six months after loan disbursement or until the end of 2020 to spend the funds.
The forgiveness application explains what documents you must include, and they vary depending on whether you have employees. Once you submit your paperwork, your lender has 60 days to decide how much of your PPP loan can be forgiven.
If some or all of a PPP loan isn't forgiven, you typically must repay it within five years at a 1 percent fixed interest rate. You don't have to start making payments for ten months after loan disbursement, but interest will accrue during a deferral period.
10. Getting SBA loans
In addition to PPP loans, the Small Business Administration (SBA) offers several loans for businesses and solopreneurs facing economic hardship caused by a disaster, including the COVID-19 pandemic.
- Economic Injury Disaster Loan (EIDL) can be up to $2 million and repaid over 30 years at an interest rate of 3.75 percent. You can use these funds for payroll and other operating expenses.
- SBA Express Bridge Loans gives borrowers up to $25,000 for help overcoming a temporary loss of revenue. However, you must have an existing relationship with an SBA Express lender.
- SBA Debt Relief is a program that helps you make payments on existing SBA loans for up to six months.
Depending on your state, you may qualify for unemployment assistance, which allows self-employed people, who typically are ineligible for unemployment benefits to get them for a period.
This isn’t a complete list of all the economic relief available for small businesses and solopreneurs. There are federal tax initiatives, funds from local and state governments, and help from private organizations that you may find by doing a search online.
How to manage money in uncertain times
When it comes to surviving uncertainty, such as how COVID-19 will affect the economy, those who have emergency savings will feel much less financial stress than those who don’t. That’s why it’s essential to maintain a cash reserve of at least three to six months’ worth of living expenses in an FDIC-insured bank savings account.
If you don’t need to dip into your emergency fund, continue shoring it up when possible. If you don’t have a cash reserve, accumulate savings by cutting non-essential expenses, and even temporarily pausing contributions to retirement accounts. That’s a better option than succumbing to panic and tapping your retirement funds early.
If you don’t need to dip into your emergency fund, continue shoring it up when possible.
If you find yourself in a cash crunch, contact your creditors before dipping into any retirement accounts you have. Many lenders will be willing to work with you to suspend payments or modify existing loan terms temporarily.
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Many economic factors that affect your personal and business finances aren’t under your control. Instead of worrying, look around, and figure out how you can create more income or cut unnecessary expenses. Working on tasks that you can control gives you more clarity and helps manage stress in uncertain times.