July 7, 2008

Help somone you know get their Rebate (Economic Stimulus Payment)

I was on vacation last week, visiting with my family in Virginia. That's why this post is late. While we were relaxing and chatting about different things, I discovered that my nephew did not have to file income taxes this year - but he would be eligible for a $300 Economic Stimulus Payment if he did! All he has to do is file, and it's not too late!

I'll bet that you know a friend, retiree, family member, or maybe even a part-time coworker who is also eligible for a rebate, even though they weren't required to file due to the amount or type of income they received. Generally, single people with gross income of less than $8750 and married couples with income of less than $17,500 don't have to file. (For details, see IRS Topic 351 - Who Must File?)

You need at least $3000 of qualifying income to get a rebate. According to the IRS Economic Stimulus Payments Information Center, these kinds of income count toward the $3000, even if the person paid no income tax last year:

• Social Security benefits
• veterans' disability compensation, pension or survivors' benefits from the Department of Veterans Affairs
• Railroad Retirement
• wages
• self-employed income
• military combat pay

If you have at least $3000 in total qualifying income, you're eligible for a $300 payment, or $600 for a married couple. You may also receive an additional $300 for each qualifying child.

However, you cannot get the rebate if you are a dependent of another taxpayer. So this doesn't apply to a 16 year-old who made $3000 mowing lawns or working at the community pool last summer if her parents claimed her on their tax return.

You have until October 15, 2008 to file your income taxes and qualify for your rebate check.

There's more good news: You can file online for free if you aren't normally required to file income taxes and the only reason you're filing is to get your rebate check. Find a list of Free File providers on the IRS website.

Or, just file a simple paper return. According to the IRS, here's all you have to do if you're a low income worker:

• Use either Form 1040A or Form 1040. Write the words "Stimulus Payment" at the top:

• Enter your name, address, Social Security number (SSN), and filing status on the form. Add qualifying children (dependents) and their SSNs to the Exemptions section.

• Enter your earned income on Line 7 of either form.

• Total up any of the other three types of qualifying income and write that total on line 14a if you use Form 1040A, or on line 20a of Form 1040.

• Sign and date the form. Then mail it to the IRS service center for your area.

For instructions specific to other types of income, view the fact sheets for Social Security, Veterans benefits, or Railroad Retirement. Each of these fact sheets is also available in Spanish. There is also a page about military combat pay.

Some people may not be eligible. You (and your spouse, if married) must have a Social Security number. Taxpayers with an Individual Taxpayer Identification Number (ITIN) instead of an SSN are not eligible to receive a stimulus payment except for the spouse or child of married military personnel.

Unless you owe additional taxes, there's no penalty for filing after April 15. If you were't required to file, or if you are owed a refund, there is no penalty. Want to know more? Read the details.

Now, do someone a favor! Share this information and help some of your friends, clients, retirees, or family members get their money!

Posted by Karen Chan at 10:50 AM | Permalink |

June 26, 2008

Kids Need to Practice Spending Money

How can you learn to manage money if you never have a chance to practice? I believe kids --from preschool on up -- need opportunities to practice spending money. They need a chance to make choices and learn from their choices (and mistakes).

Summer is a great time for kids to practice spending money. For one thing, they have all this free time to think of things they want! Of course, to spend money you have to have money. And that brings us to the concept of earning money.

Every summer I have created an "extra jobs" list of things I'd like to have done around the house. Each of these jobs has a dollar value -- from a quarter when they kids were young to several hundred dollars now that I have big teenagers with real muscles and skills. I think these need to be real jobs -- not make work -- for kids to really buy into the concept that what they do has value.

To introduce older kids to concepts of compounding interest and saving money, check out the Plan Well, Retire Well: Your how-to guide website. Online calculators are a fun way to set financial goals.

For example, perhaps your child has a goal like Jamie's:

"Jamie has a part-time job and makes $80 a month. Jamie would like to go with a school group to Florida, but it costs $350. Jamie has 12 months to save the money. This is what Jamie spends money on each month: food, $20; movies, $20, CDs, $30, and school and sport supplies, $10. How can Jamie adjust her spending so that she can go on the trip?"

Use the Plan Well, Retire Well calculator "What's It Worth to Reduce My Spending?" under the section "Dollars from Dimes" to develop a plan. Is there something your teenager would like to have or do in the next year? Here is an opportunity to practice skills that will make a difference throughout their life.

A worksheet is available to help guide teenagers through the website's first two sections. The free worksheet, "Take Time to Save Now", is available for download.

How do you encourage kids to make and spend money? What has worked for your family? Lets use this forum to share ideas! Click on my name below to send in your ideas.

Posted by Kathy Sweedler at 9:38 AM | Permalink |

June 19, 2008

A Chocoholic Shopoholic's Confession

A few years ago, I found myself in a grocery store where bags of snack sized candy bars were on sale for just $0.99 instead of the usual $2.50 or so. It wasn't on my list, but I put a bag in my cart. Then I thought to myself, That is a really good deal! And I put three more bags in my cart.

When I got home and was unpacking the grocery sack, I pulled out those bags of candy. I stood there with my mouth hanging open. What was I thinking, buying four bags of candy! They weren't even my favorite kind of candy bar! But I knew what would happen: I would eat them all, every single one of them.

Why did this happen? It took that event to make me realize that I could resist buying chocolate - my main food weakness - if it was full-price. But chocolate on sale was irresistable to me. It didn't matter what kind it was. If it was on sale, I had to have it.

Here's the good news. Once you identify the enemy, you at least have a chance of dealing with it. I realized that chocolate on sale was my major food weakness, and probably my major shopping weakness. It may have been on sale, but I spent money that I didn't need to spend on food that I didn't need to eat.

I've really had to work at it. But today, I can read a grocery add and be totally un-moved by huge sales on chocolate chip cookies, bags of M&Ms or Reese's Peanut Butter Cups. I probably save several dollars each week by avoiding just that one weakness. I also weigh less than I used to!

Do you have a shopping weakness? There are probably clues if you look for them. What do you have too many of? What do you end up giving away or throwing out because you never used it? Perhaps you'll see yourself in some of these examples.

• If you see a great piece of clothing on sale, do you have to have it - even if it doesn't go with anything in your closet?
• Have you convinced yourself that you're just too busy or too stressed, and that you deserve the convenience of buying breakfast on your way to work every morning? Or eating lunch out every day? Or picking up takeout most evenings?
• Will you buy anything that a kid knocks on your door to sell?
• Do catalogs leap into your lap and lure you to pick up the phone to place an order?
• Are yard sales and flea markets a form of entertainment that has turned into you into a shopping monster?
• Do you regularly check the internet sites that list the best deals on everything, and then order things that you end up never using?

Shopping weaknesses can take work to overcome. But recognizing them is the first step. Let me know how you're tackling your spending weaknesses!

Posted by Karen Chan at 4:56 PM | Permalink |

June 12, 2008

Have fun being a cheapskate!

We have all seen the price of gas go over $4.00 a gallon and the reality is setting in that gas may even reach $5.00 a gallon over the summer. So, where do you find the extra money to help pay for rising prices such as gasoline and food. A good place as Karen discussed last week is from an emergency account, however, you don't want to drain your emergency account for everyday spending. As prices rises your monthly household budget for items such as gasoline and food needs to be adjusted, this may mean finding ways to cut out unnecessary spending. I call this having fun being a cheapskate!

I have tried a few of the tricks below to help my household cut unnecessary spending. I hope you find something you might like to try for your family. Please send any additional ideas my way to jlhunt@uiuc.edu.

• Try not to spend anything for one week. Try to eat what you have in the pantry and freezer, you might try riding your bike to work, or go for a picnic in your backyard.
• Cut out unnecessary trips in the car. Think about and consolidate errands or consider car-pooling to work to save on fuel.
• Take advantage of low-cost entertainment in your community. Parks, zoos, community fairs and events usually offer low-cost or no cost fun family activities.
• Wait at least 3 days before buying any item over $20. This will make you think about the purchase and if you really need to have the item.
• Pay cash for everything. This helps you to think about purchases. Using a credit card often allows you to spend without thinking.
• Calculate how your little purchases add up over time. Do you need a $4.00 cup of coffee everyday? Check out http://www.retirewell.uiuc.edu/ for more information on how little purchases can add up to big savings over time.
• Instead of buying new toys, take your kids outside and play games you played as a child such as tag, hide and seek, or hopscotch.

I have had fun with my children trying to be a cheapskate. Trying to be creative and adjust our spending has helped my family reevaluate what is truly important and realize how much we really do have and don't need!

Posted by Jennifer L. Hunt at 8:44 AM | Permalink |

June 5, 2008

Meet the New Superhero: Your Emergency Fund!

I just took my car in for an oil change. I didn't expect an oil change to run more than $500. But when the mechanic gave my car a once-over, he found two things that really needed to be fixed. I'm glad he found them before these things caused bigger problems. But $500 in car repairs wasn't exactly in this month's budget. So it's Emergency Fund Superhero to the rescue!

I regularly talk about the need to have enough money to cover 3 to 6 months' worth of expenses where you can get your hands on it easily (in financial terms, it's liquid). But recent events have pointed out just how important those funds can be. A good friend of mine just received a layoff notice. He's married, and his wife stopped working over a year ago when they had their first child. I was so glad to find out that he actually has an emergency fund! It may not be as big as the recommended amount, but just knowing he has money to pay the bills for a few months really takes some of the stress off.

It's tornado season here in Illinois, and we all run the risk of having flooded basements, wind and hail damage, or worse. Many of those things might be covered by insurance, but would you have the money on hand to pay to have a fallen tree removed from your driveway.

Maybe you don't have an Emergency Fund Superhero yet. How do you get started building one?

If you have a checking account, you can start by building up the minimum balance that you always have in your account. When my husband and I were first married, we "hid" a few hundred dollars there. The balance we showed in our checkbook register was a few hundred dollars less than what was really in the account. Not seeing the bigger balance reduced the temptation to spend it.

When we had accumulated a bit more, we moved that emergency money to a seperate account. Over the years, it's been in different places depending on where we could get a good interest rate. Once you've got several hundred or several thousand dollars, you care about whether it's earning 1% or 4% interest! At one point, we set up a savings account with an internet bank that was offering the best interest rates at the time. We transferred money directly from our checking account to open it. We could easily transfer additional money into the savings account to add to our emergency fund, or transfer it back to our checking account if we had an emergency and needed to use it. It was all done online, without even the cost of a postage stamp.

We've also used a money market fund. These are offered by mutual fund companies. Money market funds usually pay higher interest rates than bank savings accounts. They are not insured but they are considered to be very safe. You can check interest rates and minimum opening balances at Bankrate.com. Also look at the expense ratio, which tells you how much it costs to have money in that fund.

At another time when savings bonds were offering market interest rates, we bought bonds with most of our emergency fund. Today, savings bonds aren't a very good option. They are paying a fixed interest rates of just 1.4% (for bonds sold through October 2008) . You can't cash a new savings bond until you've owned it for one year, so you don't use your entire emergency fund to buy savings bonds all at the same time. And you'll give up 3 months of interest if you hold the bond less than 5 years. I-Bonds (inflation protected bonds) are paying a much better interest rate right now (4.84%). But the other savings bond restrictions still apply: you must hold them for 1 year and you'll pay an early redemption penalty if you cash them in less than 5 years. For more information, go to Treasury Direct.

You might not think of using a CD as a place to keep your emergency fund, because CDs have maturity dates and charge you a penalty if you take the money out before then. But a strategy called laddering can make it work.

Say you have $5000 in your emergency fund. You could put $1000 in a one-year CD, another $1000 in a two-year CD, $1000 in a three-year, a four-year and a five year CD. If you have to take money out of a CD before the maturity date, you'll pay a penalty. But the penalty may be pretty small if the CD has almost reached maturity. If you have an emergency that costs less than $1000, you can break just one of the CDs, and you can choose the one that will charge you the lowest penalty. The remainder of your money keeps earning the nice CD interest rates. If you don't have an emergency, you renew each one into a five year CD when it matures. You've set up a rolling series of maturity dates, each now earning the higher rates earned by five year CDs compared to regular savings accounts or shorter CDs. You can check CD interest rates at Bankrate.com.

Your Emergency Fund may not look like much of a superhero right now, but with a little time, effort, and interest, it's powers will grow and grow.

Posted by Karen Chan at 10:23 AM | Permalink |

May 29, 2008

Planning the Perfect Getaway

Summertime – the perfect time to plan a trip and enjoy a vacation! Before you take your trip, take time to plan it. Plans can help you manage your money happily and increase the chance that everyone has a good time. Before you go, ask yourself some questions:

• Who is in your traveling party?
• What is the goal of your vacation?
• When and where do you want to go?
• What is your budget?
• If traveling with family, have you asked them for input?

My summer family vacation started out as a vague idea that I 1) wanted to get out town, and 2) wanted to do something fun with my son and husband, and 3) I didn't want to take an expensive vacation. In the process of planning, my son mentioned that it would be lots more fun if another kid went along. Good idea – and now my nephew is joining us too.

To keep our trip costs down, we decided to drive no further than six hours. Looking at a map we realized that Ozark National Scenic Riverways was within driving range, and met our goals of out-of-town and fun. By thinking ahead, we have a fun, low-cost family vacation planned.

Establishing a spending plan – before you leave – also has a positive impact. When you plan for your getaway, list all the costs you expect to have. Some expense categories might include:

• Travel tickets
• Parking
• Admissions
• Tolls
• Gasoline
• Food and snacks
• Lodging
• Clothing
• Film
• Souvenirs

Once you have your categories listed, decide how much you're comfortable spending. Talk to your traveling partners about these expected expenditures to avoid conflicts during the trip. I like to give my children money for souvenirs and extras at the beginning of the trip. This is a great way for children to have practice managing their money – and avoids a lot of begging for treats along the way!

Traveling in one of the things I enjoy spending money on, and with a little planning I can get lots of pleasure from my dollars. Good luck planning your next trip too.

Posted by Kathy Sweedler at 1:24 PM | Permalink |

May 22, 2008

Step Down Your Expenses & Still Enjoy Life

Gas prices over $4 a gallon, food prices soaring, and just about everyone raising their prices! How can anyone manage? It's easy to get depressed about this and just throw up your hands and declare, "That's it! We can't do X anymore or anyway!" Well, before you give up on everything that makes your life fun, consider "stepping down" your expenses.

Stepping down expenses means changing the way you do something rather than giving it up. For example, rather than skipping a cappucicno with a friend instead "step down" the cappuccino to a cup of coffee with a friend -- you'll save on calories too :)

While skipping cappuccinos and lattes may be the cliché of how to save money these days, the "step down" idea can be applied to lots of other areas. Perhaps some of these ideas might be helpful to you.

• Don't cancel a date to the movies with family/spouse/friends. Instead, rent a DVD and host a movie party at home.
• When shopping for groceries step down to the generic and store products. There's a good chance you will like some of them as well as the brand names.
• Are you thinking about cutting out a family vacation this summer? Instead, step down your plans to somewhere closer (less gas to get there) or a few days shorter or camping rather than hotels.
• Before the truly hot days of summer hit, step down your energy costs by turning your air conditioner's thermostat up a couple of degrees. Even a little change will make a difference in your energy bill.

More money saving tips are listed on the University of Illinois Extension's Consumer and Family Economics website. I'm sure you'll find several tips that are helpful to you.

To see quickly how small changes can add up, visit the Plan Well, Retire Well website and read the section on Start Saving. The calculators on this website can help you find ways to step down your expenses while still enjoying life.

Share your ideas for stepping down expenses. Click on my name below and send me your ideas. I'll add them to this blog so that our list of ideas can grow!

**********************************

A reader from California sends this response:

Go for a walk with a friend instead of going to lunch. Like you said, stop for coffee afterward if you want--its still cheaper (and you get those fewer calories, too) than the whole lunch.

I try to add up my groceries as I go, and when I hit the total I've sort of thought would be the right amount to spend, I stop. Somehow, this makes me buy the things I really need first and I often don't buy those things that will either get binged on or left to rot in the vegetable drawer.

I've always loved the way you approach this kind of budgeting/saving. Most of the time, when you THINK about what you're spending, you spend less.

**************************

More ideas are welcome :)

Posted by Kathy Sweedler at 10:32 AM | Permalink |

May 15, 2008

Simiplfying Your Financial Life

There are times when managing my finances doesn't get in the way of the rest of my life. And then there are times when there's just too much going on, and I want everything in my life to be simpler!!!

I can set up many of my bills to be automatically deducted from my checking account, or even billed to a credit card. I'll never be late paying, but I have to be absolutely certain that there will always be enough money in the account to cover the bill. Also, these agreements have to be cancelled and re-established if you change checking accounts.

If they are billed to a credit card, I'd better be paying that card off in full every month. If I don't, I've just added a lot of interest charges to my monthly bills even though I "paid" them on time. And every couple of years, I have to provide new credit card information for each of these bills, because the old card expired.

I am partly responsible for handling my father's finances. Having most of his bills automatically debited from his checking account means my sister and I will never slip up and forget to pay. That would be embarassing to explain to my dad.

My investments are pretty much on auto-pilot. I have money taken out of each paycheck for my 403(b) retirement account. Once a year, I look at my investments to see whether the balances still match the asset allocation I've chosen (XX% in large US stocks, XX% in bonds, XX% in foreign stocks, etc.) If not, I either shift money from one investment to the other (that's known as rebalancing) or adjust how my new contributions will be invested. Some retirement plans now offer automatic rebalancing. That would work best if all your money was in one account, but my husband's and mine are spread across his 401(k), my 403(b), and two IRAs. So for now, there's no automatic rebalancing for me.

I have simplified our investments by choosing mostly index mutual funds. Unlike actively managed mutual funds, I don't have to worry if the fund manager changes or watch to see that the fund doesn't gradually change it's spots (i.e., small US company stocks) to stripes (mid-sized or larger US company stocks). An added benefit is the lower costs of index funds compared to others.

Some of the things that make our financial life more complicated are a result of my stinginess and desire to maximize the benefits I get. We have one credit card that pays a higher rebate for groceries, gas, and prescriptions. We have another credit card that pays a higher rebate for travel expenses and dining out. We pay both off each month, so we don't have to worry about whether we're incurring interest charges to get these benefits. But then one of the cards will change its rebate structure. Or we're driving into Canada and I'm trying to remember which one charges less (or maybe nothing) extra for foreign purchases. You can drive yourself crazy with this stuff!

Shopping online can be a time saver as well as a money saver. But sometimes, I can spend 45 minutes comparing shipping, sales tax, and price - when it only makes $3 difference in what I pay. Did that simplify my life any?

I still balance my checkbook, and check my credit card statements against my receipts each month. I even download those statements into a software program that lets me see where our money is going. That will go smoothly until next time I have to upgrade the software or open a new financial account that I have to set up to access via the software. I thought about giving this up. But when you start worrying about being laid off, or think about retiring, having real numbers about how you spend your money is valuable information.

Do you have tips about how you're simplified your financial life? Please share! Click on my name below and drop me an email. I'd appreciate hearing from you.

Posted by Karen Chan at 11:55 AM | Permalink |

May 9, 2008

Saving and Investing When You Have Special Needs Child

My youngest son (a pre-schooler) suffered a serious brain injury in January due to an underlying medical condition. This was a very difficult episode for our family, and it included a six-week hospital stay in St. Louis, and now we find ourselves getting used to having a very different little boy in our family. Thanks to a wonderful team of doctors and therapists, as well as the support of our family and friends from our church, the university, and our neighborhood, we are pulling through and have welcomed our son home. My wife and I (and our other children) work with him daily, along with his doctors and a team of therapists, to promote a recovery of functions. Nonetheless, at the present time the reality is that my son has suffered a loss of capacity to understand his environment and to process information, his vision has been affected, and his ability to eat and drink independently (of a feeding pump) have been reduced. Like a lot of families, we find ourselves with a child in our family that has the distinct possibility of never achieving financial independence. Families with children with special needs face unique issues from the perspective of saving and investing and planning for the future financial security of the entire family.

First off, families with children with special needs find themselves very busy with care-giving activities in the present. They often focus so much on getting through the day to day activities that they do not spend much time planning for the future, especially its financial dimensions. Secondly, they often face high out-of-pocket expenses to care for their children. These expenses might be drugs to help treat a chronic condition, co-pays on medical visits and equipment, and the cost of traveling to out-of-town specialists and health care providers. Third, many of these families have foregone work opportunities (say for the spouse that is the primary care-giver) that would bring additional income into the family. These factors all make it more difficult for these families to save and invest for their future, despite the fact that they likely will have higher financial needs in the future compared to families without a special-needs child.

What steps can families like ours take to improve their chances at providing a secure financial future for all their members, including their special-needs child? A number of things come to mind, starting with making sure that the current care-giving situation is viable and sustainable. Parents in this situation need to be aware of options (through their circle of friends and family, as well as community) for respite care and additional care-giving resources. Support groups organized by a local hospital for families with special needs children are a good place to start. Likewise, parents need to speak with their social worker contacts to ensure the family is aware of all applicable private and public programs that might help them. Additionally, parents need to update their wills and make clear their intentions for care-giving and the future of their special-needs child (a letter of intent), should something happen to them. Parents also should begin an education and financial planning process that explicitly takes into account the possibility that their special-needs child may not be able to live independently as an adult. This process includes learning about special needs trusts and talking with lawyers and financial planners familiar with these issues. The parents also should take time to re-evaluate both their savings and investment strategy (and amounts they save monthly) as well as their insurance coverage levels.

Having a special needs child brings different responsibilities and experiences (including the joy of seeing your child grow and progress on their own terms, sometimes in spite of great challenges) from the parenting experience of most families. Taking the time to consider the long-term financial dimensions of this challenge can help families stay on track to a more secure financial future for all of their members.

Posted by Paul McNamara at 9:51 AM | Permalink |

May 1, 2008

Preparing for a Layoff

Between my husband and I, we have received three "terminal contracts" or "pink slips" over the last several years, giving us notice that we would be losing our jobs. We were both fortunate that we were able to transfer to different positions with our employers and remain employed. But nonetheless, we went through the gutwrenching process of reviewing every expense to figure out where we could cut.

University of Illinois Extension learned last month that our state funding would not be released and County Directors were to prepare a plan of what staff would be let go. I know exactly what those individuals will be thinking and feeling. My goal with this post is to share some ideas that people can use to prepare for a layoff.

As I'm writing this, we are just hearing news that Extension's funding may be restored. I sincerely hope that these reports are accurate. But layoffs happen on a regular basis, and you are likely reading this because you are at risk. Perhaps one of these ideas will help you put yourselff prepare financially for that possibility.

All financial education programs and financial experts recommend having an emergency fund. There's nothing like the threat of a layoff to make you stop and think, How long would my cash-on-hand last? Do a quick, back-of-the-envelope calculation: How much do you spend in a month? And how much do you have in your checking and savings accounts? Perhaps you also have savings bonds, CDs at the bank, or a money market account. How many months would these funds support you?

The average job search lasts about six months. Could you make it that long without income? No? Your main focus should be to build up your emergency fund while you do have income. Make a plan for how to reduce expenses, and to increase income. It might keep you from losing your apartment or house.

Look at every expense and ask yourself, honestly, if it's a necessity. And even if it is a necessity, how could you reduce it? I really like watching Animal Planet and National Geographic on television, but that might be one of the first things to go if I get laid off. (Note: I have had the service more than a year and don't have any contractual obligations to keep it.) It may help to list each expense on a separate card or piece of paper and then prioritize them.

Be creative in looking for expenses you can cut. Are there purchases that you can "unwind"? For example, if you've ordered items that have not arrived or that you haven't used, think about returning them or cancelling the order. You may be able to cancel magazine subscriptions and get a refund.

Look for ways to increase your income to build up that emergency fund. Could you generate some cash by having a yard sale or selling clothing at a resale shop? Have you loaned money to others who have not yet paid you back?

Another source of spending money during a long layoff could be credit. Is your credit card at the limit, or do you have available credit that you could use as a last resort? While you're still earning an income, make paying down your credit card balance a top priority. You could need that credit line for groceries and kids' shoes in a few months.

This is probably the only time you'll ever hear me say, Stop contributing to a retirement plan. But until you get laid off, you could stop contributing to your retirement plan in order to increase your take-home pay and use the money to build up your emergency fund. If you're married or have a significant other, the same goes for them. (Note that your income taxes will also go up, unless you were contributing to a Roth.) Just make sure that the extra take-home pay goes straight into a savings account - no splurging on a special dinner or frittering it away on a depressed buying spree.

Stopping contributions to a retirement plan is usually a better idea than taking out money that you're alredy contributed. That should truly be a last resort. If you use money from a 401(k) plan, IRA, or other retirement plan, you will have to pay income tax on all of the money. You will also probably owe a 10% penalty. If you had $5000 in the account, you might only end up with $2950. That is a very expensive way to get money.

If you do lose your job, make sure to file for unemployement compensation right away. Your working spouse could fill out a new W-4 form to have less tax taken out of their paycheck based on your lower income. But be aware that you generally must have paid at least 90% of what you end up owing in taxes (through payroll withholding or estimated tax payments), or 100% of the amount you owed in the previous year, to avoid IRS penalties.

Worrying that you may lose your job is a terribly traumatic thing. Actually getting the notice is a horrible experience. But knowing that your financial house is in order and that you have a plan to deal with the lost income can take some of the panic out of the situation. I hope you never have to use the ideas in this post. But if you're at risk, please take action NOW. From time to time, my husband looks at me and says, What will happen if I lose my job? I think it takes some of the pressure off when I can honestly say to him, We'll be OK.

Posted by Karen Chan at 8:02 AM | Permalink |