Your Money Mom

You're doing well with your money, and you can do better. I can help.

You are here: Home / Archives for 2020: The Clarity Project

Time for a Paycheck Check-Up–The IRS Can Help

by

Your Challenge: Check the IRS Tax Withholding Estimator and adjust as needed

Time commitment: This estimator took me about 20 minutes to complete, including filling out a new W-4.

What is the IRS Tax Withholding Estimator? 

Here’s a link to the IRS Tax Withholding Estimator.

This tool allows you to check that you’re having the right amount of taxes withheld from your paycheck each pay period. It also instructs you on how to adjust if needed.

Why should you estimate your withholding and adjust?

If you did last week’s challenge and got a head start on your taxes , then you will know roughly if you are getting a refund or owe taxes.

Depending on that result, adjust your withholding to reflect what you would like to happen–a bigger refund, or less taxes owed, for this year–2020.

A lot of personal finance writers advise that your tax withholding should be set to an amount that means little or no refund when you file taxes. But this is a great example of the concept that personal finance is more “personal” than about finance.

I actually fall into the camp of getting a decent tax refund, and especially not worrying about getting “too much.” My husband convinced me on this one–I used to think we should get a small a refund as possible, and he liked a big refund. But now that we have been doing this for several years, I actually love it.

If you want to get a large refund so you have a “chunk” of money for some specific uses, a tax refund is not a bad method of forced savings.

However, if you can’t make ends meet until you get your tax return, it’s probably better to reduce your withholding. Using a giant tax refund to pay off credit card debt you fell into because of lack of income is NOT a good strategy. Better to get the money throughout the year and have a smaller refund.

Who should use the IRS Withholding Estimator? 

Almost everyone would find running the estimator valuable. The IRS especially recommends using it if you:

*Are a two-income family or someone with multiple jobs

*Work a seasonal job or only work part of the year

*Claim the child tax credit

*Have dependents age 17 or older

*Itemized your deductions in previous tax years

*Have high income or a complex tax return

*Had a large tax refund last year

*Had a tax bill last year

When Should You Use the Tax Withholding Estimator?

Once you have completed your taxes, use the estimator to see if you are on track for the current year. So if you completed last week’s challenge (or even got a start on the challenge), now would be a great time to check and adjust for 2020.

In addition, if you have a change in employment or self-employment income, or get a windfall, run the numbers again.

Where is the Estimator? 

Here it is.

How do I use the IRS Withholding Estimator?

Just follow the instructions on the tool. It has six steps, and you will find it especially easy if you have a W-2 job. But it is pretty easy to use, even if you have variable income.

Next week begins a new month and a new theme. March is all about giving.

Week 3 e-mail: Open Multiple “Money Funds”

by

It is Week Three of 2020: The Clarity Project, a yearlong effort to get organized and simplified with your money.

You can read more about The Clarity Project in this overview post here.

This week, I’ve been busy with:

*the start of the semester for my college kids. Family tradition–which we got from the Betsy-Tacy books–is muffins for the first day of school. I make my kinda-famous pumpkin/flax muffins, and they are delicious. Let me know if you want the recipe.

*trying to incorporate more protein in my diet. I keep reading about the importance of this, and I thought I would try easy things to do so this year. I even ordered powdered egg whites, but I’m not really sure how to use them (mixing them into eggs did not work. At all). In smoothies maybe?

*walking in our neighborhood instead of running, since we have had snow and ice here in Illinois, and more is forecast for the next few days. Despite this, we have had some lovely colors in the sunrises and sunsets. I love winter skies. Photos do not do the winter sky justice, but here is one from last week, early morning:

*writing and ordering a talk that I’m giving to a local young moms group next week. The title? “A Mom’s Money Toolbox.” I enjoy this process so much! I will post notes and resources for this, and share once it’s up.

What is new with The Clarity Project?

I intend for these (mostly weekly) e-mails to be quick to read, easy to understand, and simple to implement.

Simple, but not necessarily easy.

The word for January is SAVE.

This Week’s SAVE Challenge: Open up at least one “money fund” and automate savings to the account(s) weekly or monthly.​

The challenge has a blog post with resources and more about the topic.

As with the others, this post follows the 5W1H format–who, what, when, where, why, and how.

Here is my weekly reminder to you: you may be way ahead of a particular challenge, or way behind. It is okay either way.

But you can take some kind of action on the challenge, even if that is just learning about the topic. Studies show that people often have to hear about something seven times before it “sticks.”

This week, I write about why it’s a good idea to have money for different goals and expenses in different accounts, and how to do this. Read it here.

You can reply to this e-mail with any questions, suggestions, or anything else. I love to hear from you!

Remember, you’re doing well with your money, and you can do better.

All the best,

Nancy

Your Money Mom

Week 2 e-mail: Check Your Retirement Savings

by

It is Week Two of 2020: The Clarity Project, a yearlong effort to get organized and simplified with your money.

You can read more about The Clarity Project in this overview post here.

This week, I’ve been busy with: 

*a lot of writing, including some freelance work; 

*a fair amount of trying new recipes (these quinoa-spinach patties were not bad, but I probably won’t make them again);

*a modest attempt to do some January cleaning/decluttering along with two IG favorites, Stephanie Weinert and Kathryn Whitaker who host a two-week long Organized Simplicity challenge. And seeing new posts often from this mom-of-many, Lindsay Boever, organizes her house (and deeply cherishes her children) is inspiring. I’ve read her blog for years but seeing her more active on IG is a lovely breath of fresh air. 

*missing the Young House Love Has a Podcast, on break until February, I think? But I have been filling in with many others in my feed, including Dolly Parton’s America.

*on Sunday evening, literally yelling at the television when my middle daughter and I watched the first episodes of the adaptation of Jane Austen’s last, and unfinished novel, Sanditon. It was beyond terrible. The next night, we had to re-watch some of the wonderful 2016 adaptation of Anthony Trollope’s Doctor Thorne to clear our minds. 

But I digress–back to The Clarity Project!

I intend for these (mostly weekly) e-mails to be quick to read, easy to understand, and simple to implement.

Simple, but not necessarily easy.

The word for January is SAVE. 

This Week’s SAVE Challenge: Check your retirement savings and your contribution rate. Bonus: increase your contribution by one percent (or more!).

The challenge will have a blog post with resources and more about the topic.

Each challenge will follow the 5W1H format–who, what, when, where, why, and how.

Here is my weekly reminder to you: you may be way ahead of a particular challenge, or way behind. It is okay either way.

But you can take some kind of action on the challenge, even if that is just learning about the topic. Studies show that people often have to hear about something seven times before it “sticks.”

I wrote about retirement savings, the different kinds of accounts, who should have them, and more, in this week’s post. Read it here.

You can reply to this e-mail with any questions, suggestions, or anything else. I love to hear from you!

Remember, you’re doing well with your money, and you can do better.

All the best,

Nancy

Your Money Mom

The 5W1H of Checking Your Retirement Savings

by

This post is part of the 2020 The Clarity Project, a yearlong series of challenges to get organized and simplified with money. Read about the project at this introductory post here.


This Week’s SAVE Challenge: Check your retirement savings and your contribution rate. Bonus: increase your contribution by one percent (or more!). Here are the 5W1H (the 5 Ws and the 1 H) to explain about retirement savings, for people of any age.

WHY should you check your retirement savings?

We all know we should do things that are good for our future selves.

Future you will thank you for doing the right things when you are younger: eating right, exercising, focusing on healthy relationships, developing good work habits. For many of those areas, you have to do or make decisions every day to practice those good habits.

Future you will also thank you—most definitely—for having set aside money so that when you are older, you have options and freedom.

The great thing about saving early and automating the process is that you do not have to focus on it every day, or use willpower to force yourself to save. Once you set it up, the savings will automatically happen, and the money will make more money for you (thanks to the magic of compound interest).

Checking your retirement savings accounts this week is a great way to see where you stand right now, and how much you are currently contributing to your retirement savings, and bump that number up if you can.

WHO should have retirement savings?

Nearly everyone is eligible to put money into some kind of retirement savings, usually (but no always) if you have income. 

If you’re older, you should definitely have–and be checking–your retirement savings regularly.

But if you’re young—and I mean as young as a teenager with an after-school job young—you still should have retirement savings.

Even if you don’t have income (in certain circumstances), you can still contribute to your retirement savings.

For instance, if you’re a stay at home mom (or dad), the income of the spouse who works outside the home can be used to save for the stay-at-home parent.

WHAT are some types of retirement savings?

There are many, many different ways for someone to save for retirement. I won’t cover all the ways, but I can share the main ones, some ideas, and offer some resources for further reading.

Employer-sponsored plans

If you have a W-2 job, meaning you work for someone else or a business, school, or non-profit, or the government, you likely have a 401(k), 403(b), or other savings or opportunities.

Taking advantage of this is a no-brainer, especially if the employer offers a match. That means if you put in $100 in your 401(k) or other account, your employer will “match” that amount up to a certain percentage of your income. This is a guaranteed 100 percent return on your money. Set aside money for retirement here first.

Self-employed plans

If you are self-employed, there are a lot of different options.

If you are young and your income is not too high, you should strongly consider a Roth IRA. I have encouraged all my kids open Roth IRAs, as it allows them to put aside money now, when they owe little to no taxes, and the money will grow tax-free forever.

With the power of compound interest, you can easily save for the far-away future in a way that will benefit you much more than the amount you are saving right now.

For further reading: Nerd Wallet has a great guide to saving for retirement. Here is the section on different types of accounts.

WHEN should you check (or start) your retirement savings?

This week, take a few minutes to log into your retirement account at your employer. If you do not know how or do not have the login, find out how to do so this week. Then, keep your login handy (and secure!). A bonus here would be setting up two-factor authentication or similar security for the account(s).

As you will hear from me a lot this year, it is never too early (or late!) to start saving.

This goes double for retirement savings, and triple for the retirement savings vehicle of a Roth IRA.

WHERE should you have your retirement savings?

If your employer offers a 401(k) or similar account, much of your retirement savings will “live” there. But many people will benefit from a separate account for retirement. This can be helpful for such things as Roth IRAs or prior employer “rollovers.”

If you do not yet have any retirement savings accounts, this mission may take longer than the five minutes. But it is 100 percent worthwhile. Start with your employer and see if you can be part of this benefit.

Some people may have one without knowing it, since many employers have adopted an “opt-out” model for retirement accounts. That means that employees are automatically enrolled in the company 401(k) and some percentage diverted there (along with a match, if offered). This is an improvement from the prior “opt-in” model, in which employees have to actively sign up to participate.

If you are self-employed, or if your employer doesn’t offer retirement savings, explore opening up your own IRA (ideally a Roth IRA!!!) at a low-cost online brokerage. It’s easier than you think.

I have accounts (of varying sorts at three of the major low-cost brokerages: Vanguard, Schwab, and Fidelity. I find them all pretty easy to navigate and work with for questions or rollovers (for example, from previous employers).

If you are opening a Roth IRA for a minor child, the process is a little more complicated. That’s because the account will have to be under your brokerage account. I will explain more about how to do that later in the year.

HOW should you keep track of your retirement savings?

I wrote about tracking your net worth here. As I talk about, using a free online software like Personal Capital can be worthwhile.

You can also put together a simple spreadsheet. I talk about that in my net worth post here, but to briefly recap:

Your net worth calculator should have two sections: assets & liabilities. Your net worth equals assets minus liabilities.

Assets include anything of value that you would like to include:

*retirement accounts

*value of house or car(s)

*any other savings accounts

Liabilities include any debts you owe:

*mortgages or car payments

*student loans

*personal loans

*credit card debt or other debt

Now subtract your liabilities from your assets, and the result is your net worth.

It might be negative–this can definitely be the case for young people who have student loan debt. Don’t worry! Just seeing that number change from less negative to positive over time will be a great motivator.

Tracking your retirement savings is a great way to get and keep motivated about your long-term financial goals. It can even inspire you to start saving more intentionally for short-term goals. We’ll dive into short-term goals & savings next week. Stay tuned!

Join 2020: The Clarity Project

Sign up here to get e-mails on monthly money themes.

You’ll get actionable to-dos, encouragement, and resources.

You’re doing well with your money, and you can do better with your money this year!

    We won’t send you spam. Unsubscribe at any time.
    Powered By ConvertKit

    THIS POST MAY CONTAIN AFFILIATE LINKS. PLEASE SEE MY DISCLOSURE FOR MORE INFO.

    An Emergency Fund=Priceless

    by

    This post is part of the 2020 The Clarity Project, a yearlong series of challenges to get organized and simplified with money. Read about the project at this introductory post here.

    #TheClarity Project January word: SAVE


    January’s Clarity Project word theme is SAVE.


    This Week’s SAVE Challenge: Get $1,000 (or $1,000 more) into a dedicated, specific emergency fund. Here are the 5W1H (the 5 Ws and the 1 H) to explain about emergency funds.

    WHY Should You Have an Emergency Fund?

    An emergency fund, or money set aside for unexpected and critical expenses, is a key element of a good money life.

    Nearly 40 percent of Americans could not come up easily with $400 to cover an unexpected expense. That is a problem!

    This statistic is from an annual survey on economic well-being from the Federal Reserve. It found that in 2018, nearly 40 percent of Americans would not be able to pay for a $400 expense without going into credit card debt or borrowing from friends or family. (This is one of the markers of economic fragility).

    You can read the entire survey here.

    This may or may not be you, but nearly everyone could use a boost in their emergency fund.

    Emergency or large expenses cannot be planned for, but they often happen, and having an account for these can take a lot of pressure off of your money life.

    WHEN Should You Create an Emergency Fund?


    The best time to plant a tree is 20 years ago; the second best time is today.

    -proverb

    One of the first suggestions I make to coaching clients is to set up or increase their emergency funds. We talk about ways to free up some money to help that happen, and I also walk them through how to create it as a separate account.

    WHO Should Have an Emergency Fund?

    I think there’s really not too early of an age to start an emergency fund. And if you have responsibility for yourself or anyone else, you should definitely have an emergency fund. But even those who are young and unencumbered should consider having one.

    Even though all of our kids still live and home and have the Mom & Dad safety net, I have talked to each of them about setting aside $1,000 even now in an emergency fund. As they set up their financial lives, a $1,000 emergency fund in place before they begin to set up their own households is a great benefit.

    WHERE Should Your Emergency Fund Live?

    It is important to keep your emergency fund separate from your other money, especially your regular checking account.

    I recommend that clients put emergency fund money in a high-yield savings account (usually from an online-only bank), and to have that account be ONLY for emergency expenses.

    One of the best things our family has done in recent years is set up multiple savings accounts for different goals—and one of those is the emergency fund.

    What I love most about this is that in the past, we had a savings account for everything—savings for our next vehicle, school tuition, a house project, travel, and emergency fund, among other goals. And I always felt bad to spend the money for, say, summer vacation. That is because somehow, I thought about it as all emergency fund money.

    Now, there are many positive about having them all separate. I will share some of those later in the month when I walk you through how we set up our savings accounts and how we fund them.

    We use Discover Bank because it’s online and I already have a Discover credit card. It made it very easy to use and has one of the highest interest rates for online banks. Some of my clients use Capital One, or Ally Bank. All of those offer relatively high interest returns.

    WHAT is an Emergency Fund for?

    An emergency fund is not for birthdays, or Christmas presents, the latest sale at your favorite store, or going out for a friend’s birthday.

    An emergency fund is also not for reoccurring large expenses, like annual auto insurance premiums or real estate taxes. Those can, and should, be planned for.

    An emergency fund is for true emergencies—like a major car problem; a home repair issue; or travel to visit a sick relative. If you have that money set aside, you do not need to take from regular income, or go into credit card debt.

    HOW Much Should I Have in my Emergency Fund?

    Many money coaches or writers suggest you have from three to six months spending in an easily accessible emergency fund. To this money coach, it is very individual to each family or person. If you have a stable W-2 job, you could probably stand to have less in your account. If you have variable income, a larger emergency fund is a good idea.

    It is important, however, to set an emergency fund goal and work diligently to reach that goal. First goal? $1,000. After that, set another goal that works well in your family, and then work towards achieving that. Having that peace of mind is–as the credit card ad goes– “Priceless.”

    Bonus One: Money Mindset Tip

    If you are saving to add something to an emergency fund, especially if you do not have one yet, tell yourself:

    I can have this, but not yet.

    -Money Mindset

    Delayed gratification is one of the most important tools you can have in your money toolbox.

    You may decide that you want to cut out a particular expense, like eating out to lunch once a week—to add money to the emergency fund. Remind yourself that it doesn’t mean you will never eat out again for lunch in your life. You can eat out again—just not yet, or right now.

    An easy way to stick with this money mindset is the keep a “purchase wants” list.

    I have mine as a a specific note on Google Keep, and have found it invaluable in cutting down on non-essential spending. Just writing down the name or description of the item can have a similar effect to buying it, and I often find that later I look back and think, “Why again did I want to buy this item?” The list also allows me to go back later and find ideas for Christmas and other presents, or purchases I actually need but want to delay.

    Bonus Two: Extra Credit Reading

    Ever challenge, I will provide some extra reading for further learning and ideas.

    Clarus Money Coaching: Five Ways that Tidying Up with Marie Kondo is a Lot Like Money Coaching

    This is not exactly related to an emergency fund, but does share an article I wrote about a year ago.

    Remember how Marie Kondo’s Netflix show caused a stir and had people cleaning out their spaces and filling up local Goodwills? I talk in this article how Kondo-ing is a lot like money coaching.

    Dave Ramsey: Four Quick Ways to Build Your Emergency Fund

    I have mixed feelings about Dave Ramsey. On the one hand, I acknowledge he has helped thousands of people get organized with their money. But I do not fully agree with some of his advice beyond “the basics.” (say, beyond babystep #3)

    Discover: Four Places to Keep Your Emergency Fund

    Later this month, I will talk all about high-yield savings accounts, but this is an interesting. I actually really like the idea of using a Roth IRA as an emergency fund, but I know it’s controversial. And if someone does not have

    NerdWallet: Emergency Fund: What it is and Why It Matters

    Best take-away from this article: keep your emergency fund SEPARATE from other spending. A dedicated savings account ONLY for emergencies is critical. And then if you have savings for other goals (travel, etc.)

    J. Money: Be Proud of Your Emergency Fund!

    Whether you have a lot or a little, it’s worth being pleased with any steps that you take related to your emergency fund.

    Join 2020: The Clarity Project

    Sign up here to get e-mails on monthly money themes.

    You’ll get actionable to-dos, encouragement, and resources.

    You’re doing well with your money, and you can do better with your money this year!

      We won’t send you spam. Unsubscribe at any time.
      Powered By ConvertKit

      THIS POST MAY CONTAIN AFFILIATE LINKS. PLEASE SEE MY DISCLOSURE FOR MORE INFO.

      2020: The Clarity Project: Get Organized and Simplified with Your Money

      by

      Sign up below for The Clarity Project to get a year’s worth of e-mails with tips and resources for your money.

      Our life is frittered away by detail. … simplify, simplify.

      -Henry David Thoreau, Walden

      2020: The Clarity Project

      This year will be a series of weekly posts to help you simplify and get organized with your money.

      Of course the number 2020 implies clarity (20/20 vision). And my coaching practice, Clarus Money Coaching, begins with Clarus, the Latin word for clarity. Yay for a word doing double duty!

      Each month will have a one-word theme, such as SAVE, or TAXES. (For those who are fellow English majors: yes, some are verbs and some are nouns, which hurts my heart a little, but it is what works.) By the end of the year, you should have a better handle on your money and achieved some goals related to money.

      I plan to send out e-mails approximately every week to a blog post with suggested to-dos, money mindset tips, and helpful resources. You can sign up to get on the e-mail list here:

      Join 2020: The Clarity Project

      Sign up here to get e-mails on monthly money themes.

      You’ll get actionable to-dos, encouragement, and resources.

      You’re doing well with your money, and you can do better with your money this year!

        We won’t send you spam. Unsubscribe at any time.
        Powered By ConvertKit

        How The Year of Clarity Works

        Some of the to-dos will be very basic–and some are more advanced–when it comes to money. But I hope that everyone will be able to do something—actually a lot of somethings—to simplify and get more organized with money. That way, when looking back in December, we will see a lot of progress and a lot of clarity.

        I plan to tackle (or re-tackle) all of these themes myself, and I will keep you posted on my progress.

        The Monthly Themes

        January: SAVE

        Week 1: An Emergency Fund=Priceless

        Week 2: Check Your Retirement Savings

        Week 3: Open Multiple “Money Funds”

        Week 4: Calculate Your Savings Rate–and Increase by 1 Percent

        February: TAXES

        Week 5: Get an IRS Identity Protection PIN

        Week 6: Gather What You Need for 2019 Taxes

        Week 7: File Your Taxes (Early)

        Week 8: Do a Paycheck “Check-up”

        March: GIVE

        Week 9: Learn Why It is Good to Give

        Week 10: The Payoff of Giving with Intention

        Week 11: Set Up Online Giving for Your Church or Other Charity

        Week 12: Consider Opening a Donor-Advised Fund

        April: FUTURE

        Week 13: Create a List of 100 Dreams

        Week 14: Plan a Money Health Day

        Week 15: Four Ideas for Your CARES Act Stimulus Money

        Week 16: Teach Your Children Well (about money)


        May: HEALTH

        Week 17: The Big Things Matter Most (but the little things matter, too)

        Week 18: Simple Ways to Increase Your Emergency Fund

        Week 19: Have a No-Spend Week (during a pandemic)

        Week 20: Mind Your Money Mindset (by cultivating a “growth mindset.”)


        June: KIDS


        July: DEBT


        August: CREDIT


        September: GOALS


        October: WORK


        November: DEATH


        December: LOVE

        Coaching Openings Later this Year

        Later in the first half of 2020, I will be accepting new clients for coaching. I will let you know when that happens.

        I truly enjoy and get a lot of energy from working with individual clients and couples.

        Your Ideas & Questions

        I invite your suggestions and feedback of any topics you would like clarity on. You can comment here with any topics, and I will work to incorporate them into one or more of the monthly themes.

        Remember, you’re doing well with your money, and you can do better.

        –Nancy Piccione (Your Money Mom)

        English major note alert: I actually don’t love the longer quote that is from above associated with Henry David Thoreau, but the shorter quote is pretty spot-on in how getting organized and simplifying allows for clarity.

        Here is the full text of Walden online for free at Project Gutenberg—you can search “simplify, simplify” to find the entire long paragraph.

        If you’ve never read Walden, here is a well-designed (and suprisingly faithful) graphic novel version of it.