Wednesday, June 3, 2015

How to Save on Vacation this Summer

How to Spend Less on Vacation
It’s natural to want to make the most of precious vacation time. All too often, though, that desire leads to overspending on things that don’t necessarily make the trip more enjoyable. As you plan your next vacation, consider the following tips to reign in spending.

Choosing a destination
New York, Las Vegas, Disney World: They’re top destinations, and you’ll pay top dollar to visit them, especially during peak tourist season — something to avoid if you can.
To help you brainstorm alternatives, compare official tourism websites for different states. Those sites typically have huge databases of tourist attractions off the beaten path, and often include sample itineraries and travel deals as well.

Booking accommodations
It might be tempting to stay at the nicest hotel you can afford. But depending on the kind of trip you’re taking, you might consider these thrifty approaches to lodging:
  • Use peer-to-peer rentals. Check out Airbnb, VRBO and its parent company, Homeaway (all available as both websites and smartphone apps). 
  • Hotels. You may find lower costs by reviewing sites like Expedia, Priceline or Kayak, or smartphone apps like Hotel Tonight, for those who need the privacy and security of traditional travel accommodations.

Note that you can also lower your food costs by finding a place to stay that has at least some kitchen facilities and cooking sometimes rather than dining out.

Getting there

In some cases, flying is the only practical option, but it can be expensive. Some lower-cost alternatives: 

  • Drive. It’s usually much cheaper than flying, all the more so if you’re not traveling alone and your vehicle is reliable.
  • Bus. Rolling down a highway with a bunch of strangers can be a great deal, especially if you look beyond the major national carriers to regional or discount lines like MegaBus and BoltBus in the East, and California’s CA Shuttle. Some charge just $1 for certain routes with advance purchase.
  • Train. Riding the rails can cost less than flying and be faster than a bus, though neither is true in every case. Still, it provides an unusual travel perspective, and is typically a little more comfortable than either a bus or plane.
Getting around
Renting a car provides the ultimate in convenience, but it can be costly. Consider visiting a city where you can rely on a combination of public transportation, cars-for-hire, bicycle rentals and other cheap ways to get around.
You might also be able to skip the rental by staying within walking distance of things you’re likely to want to do. Slightly more expensive accommodations near a city center might well be worth it if it saves you the cost of a car or other ground transportation.

Setting your priorities
To help you stay disciplined about reserving funds for your trip, consider opening a savings account from a financial institution like PriorityOne Bank if you don’t already have one.
Even with a savings plan in place, you may not be able to afford every detail of the dream vacation you might want, but even the cheapest trips are still a good chance to relax, often with the people you love the most. So focus your dollars on the things that matter most to you, and enjoy your trip!



Devan Goldstein, NerdWallet
http://www.nerdwallet.com/

Tuesday, April 14, 2015

Best Money Moves for April

Best Money Moves for April

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Best Money Moves for April
As winter melts away and spring begins, April can be the time to renew your financial life. The tax season is nearly over, so you can finally say goodbye to 2014 and focus on just this year’s finances. Here are some ways to reassess your situation and spring into action:

Step up your budgeting

It’s been three months since you made your New Year’s resolutions, so consider updating your money goals. Look at which online or mobile budgeting apps work for you.
While apps may help you budget, “it’s really about how you spend money,” says Dana Twight, a financial advisor and owner of Twight Financial Education in Seattle. She suggests referring to these as “spending plans” rather than “budgets.”
“A lot of personal finance is about trade-offs and where you place the gratification on your spending plan,” she adds. If you spend a lot more than you need to, consider setting up an automatic savings plan.

Reflect on your tax situation

While your tax-filing experience remains fresh, determine how to be better prepared for next year. If you don’t keep track of receipts well, use mobile apps like Shoeboxed or Proximiant to digitize and sort them. This can help cut down on paperwork and avoid misplaced documents.
Also focus on the benefits of filing earlier next year. If you’re owed a refund, you can get it sooner. Alternatively, if you owe taxes, filling out your return in January or February can give you more time to come up with what you have to pay by April 15. Either way, you get to plan more accurately for the first few months of next year.
Apart from the stress of facing a last-minute race to the deadline, there’s another downside to waiting.
“If you’re focused on 2014 until April, then you’re three months behind for your 2015 taxes,” Twight says.

Look at creative debt reduction

After finishing with your taxes, consider using any spare cash you may have — including any refund you may get — to reduce any student loans or credit card balances. This can be tough after forking over money to tax collectors, but remember that you’ll be better off later.
If you’re looking to consolidate debt or reduce what you pay in interest, one option is to find a good balance-transfer credit card. Some cards offer 0% introductory rates for transferred balances, meaning that you avoid paying interest on it for that initial period.
Another alternative to reduce debt may be borrowing from your 401(k) retirement plan at work. According to a study by the Employee Benefit Research Institute, 87% of participants in these plans could potentially borrow, but few do.
If your plan allows loans, you can borrow 50% of your contributions, or up to $50,000, usually for as long as five years, according to Internal Revenue Service rules. Interest rates tend to be low and fixed, which often beats most credit cards.
“Your 401(k) is your own bank, if you think about it,” says Rob Riedl, director of wealth management at Endowment Wealth Management in Appleton, Wisconsin. Since you’re borrowing from your account, the interest goes back into it along with the principal payment.
This strategy can make sense for those with manageable debt, a healthy 401(k) balance and good payment habits. But there can be some risks. If you leave your job, you may have just 90 days to repay the debt. Plus, you’re taking capital from your retirement fund’s investments, albeit temporarily, which will reduce the returns generated by the account.
From reviewing budgeting apps to consolidating debts, make April the month that you lift yourself out of passive money-management strategies. By taking a more active approach, you can get better control of your finances and help ensure a brighter future.
Spencer Tierney is a staff writer covering personal finance for NerdWallet. Follow him on Twitter@SpencerNerd and on Google+.

Illustration by Dora Pintek.

Tuesday, April 7, 2015

The 3 Biggest Mistakes People Make At Tax Time


The 3 Biggest Mistakes People Make At Tax Time

The 3 Biggest Mistakes People Make At Tax Time
It’s an annual tradition: As April 15 draws near, millions of Americans scramble to round up all their receipts and other documents from the previous year to make the federal tax filing deadline.
But that urgency can lead to poor decisions that cost thousands of dollars in the long run, tax specialists say.
NerdWallet surveyed certified public accountants and asked them to list the most common mistakes taxpayers make at tax time, as well as how to avoid them. Here’s what they said:

Mistake No. 1: Not Being Organized

Lugging a shoebox full of receipts into your tax preparer’s office may not be the best way to deal with your return, but at least those harried taxpayers have everything in one place. That’s not the case with many people, CPAs say.
“One of the biggest mistakes we see folks make is simply not being organized,” says New York-based CPA Becky Egan. “People constantly come in for their tax appointment without all their documents, forgetting their charitable contributions, neglecting to let us know they invested in a partnership, or leaving out a 1099 they received.”
Egan advises clients to keep track of their earnings, expenses, accounts and other important information during the tax year itself, instead of leaving everything for the night before their tax appointment.
“It’s impossible to do any tax planning if you’re always in reactive mode, looking behind at the year that’s passed.”
As Brian S. Devers, a CPA in Forest, Virginia, puts it: “January 31, when you receive your W-2, is not the time to do tax planning for the previous year, because that ship has sailed.”

Mistake No. 2: Not Getting Good Advice

Younger people with few financial complications can get by with filing a 1040EZ form, and tax-preparation software has turned millions of Americans into virtual tax experts. But for many people, filing taxes without getting professional help can be a costly mistake.
“The biggest mistake people make is that they prepare their own return or they go to a tax-prep shop that is not staffed with professionals,” says Huntington Beach, California, CPA Mark Prendergast. “While going to a CPA or an enrolled agent may cost more for the services, they are much more aware of tax savings techniques compared to the nationally syndicated tax-prep companies who hire and train part-timers.”
Prendergast says a tax professional can pick up on nuances that can save taxpayers plenty of cash. Knowing how to handle college tuition payments is one example. Qualified tax pros can figure out whether to use the tuition deduction, the American Opportunity Credit or the Lifetime Learning Credit to maximize tax savings.
“Determining which is the best [option] can save hundreds, if not thousands, of dollars,” Prendergast says. “Some apply to some situations but not others. Maybe one dependent child qualifies for one, but another child qualifies for another.”
Another key decision for which good advice is needed is whether to make a Roth IRA contribution or a traditional IRA contribution, he says. “Usually [people] think, ‘I save taxes with a traditional IRA but not with a Roth IRA.’ But in certain circumstances, a Roth IRA contribution will give rise to the Retirement Savings Contribution Credit (Form 8880) and save the person some taxes.”

Mistake No. 3: Not Contributing to an IRA

This issue leads to the third major mistake that CPAs cite.
“The biggest mistake people make at tax time is not contributing to an IRA because they are not eligible for an income tax deduction on the contribution amount,” says San Francisco-based CPA James Dowd. “Every taxpayer under the age of 70½ with earned income is eligible to make an IRA contribution. If the taxpayer has no existing IRA, the mistake is especially costly, and it compounds over time, because they could make an after-tax contribution and immediately convert the IRA to a Roth with no tax consequence.”
For a 30-year-old taxpayer, Dowd says, the cost of this mistake “could easily be worth more than $250,000 over a lifetime.”

Zoran Basich is a staff writer covering personal finance for NerdWallet. Follow him on Twitter@zoranbasich and on Google+.

Image via iStockNerdWallet