Passing Up Tax Breaks
Small investors often look only at the return an instrument is giving them, and overlook how taxes take a bite out of those returns. Morningstar figures that over the 74-year period ending in 2010, investors who did not manage investments in a tax-sensitive manner gave up between one and two percentage points of their annual returns to taxes.
What to do: Click on the Heading
What to do: Click on the Heading
First, take a look at which of your investments are taxable, tax deferred, or tax-free, says John Sweeney, executive vice-president of Fidelity’s Planning and Advisory Services, and plan to commit some ordinary income to tax-deferred accounts, such as defined contribution plans such as 401(k)s or traditional IRAs and annuities.
When buying and selling stocks that pay dividends, or managing your mutual funds, bone up on tax rules about qualified dividends — those paid on stocks that you’ve held for 60 days or more within prescribed windows that qualify the dividends to be taxed as capital gains.
When buying and selling stocks that pay dividends, or managing your mutual funds, bone up on tax rules about qualified dividends — those paid on stocks that you’ve held for 60 days or more within prescribed windows that qualify the dividends to be taxed as capital gains.
Selling stocks even a day to soon can result in paying tax on dividends as ordinary income, costing you 10 percent or more.
Paying Late Fees
Are you paying late fees, even though you keep up with your bills? Late fees not only add to expenses, they can negatively impact your credit score.
What to do: Mounting late fees are usually the result of due dates that are scattered throughout the month without regard to any rational schedule. You simply need to align your due dates.
Call your credit-card companies, utilities, and other service providers and ask to have your due dates changed to your paydays, when you have money available. Most companies have two billing cycles a month, and will gladly accommodate your request to switch to the one that makes sense for you, says online account manager Manilla.com. Next, create a monthly bill reminder calendar that works for you and pick one or two days during the month to pay all of your bills.
What to do: Mounting late fees are usually the result of due dates that are scattered throughout the month without regard to any rational schedule. You simply need to align your due dates.
Call your credit-card companies, utilities, and other service providers and ask to have your due dates changed to your paydays, when you have money available. Most companies have two billing cycles a month, and will gladly accommodate your request to switch to the one that makes sense for you, says online account manager Manilla.com. Next, create a monthly bill reminder calendar that works for you and pick one or two days during the month to pay all of your bills.
Paying Retail
Though not an investment snafu, paying full price on purchases can be a big drain on your finances. In today’s digital age, there are many tools available to help consumers make better buying decisions.
What to do: Make savvy comparisons. Websites and mobile apps like Red Laser, PriceGrabber, and NextTag find retailers with the best prices, according to Trae Bodge, senior editor for RetailMeNot.com.
What to do: Make savvy comparisons. Websites and mobile apps like Red Laser, PriceGrabber, and NextTag find retailers with the best prices, according to Trae Bodge, senior editor for RetailMeNot.com.
Next, become a coupon cutter. You can find discounts online for everything from apparel to conference registrations via coupon code websites such as Bodge’s RetailMeNot.com. As for fashionistas, two words: flash sale. With sites out there like Belle & Clive, which sells designer brands at a discount, there really is no reason to pay full price.
Leaving Valuables Uninsured
Lately wine, art, and gold have become favorite investments, especially for high-earners. But according to insurer ACE Private Risk Services, nearly 40 percent of high-net-worth individuals don’t have their collections insured with a valuables policy.
What to do: Have your items appraised and shop around for insurance that fits your collection. If you already have insurance, consider whether you need an update. As your collection appreciates, its value may have outpaced the coverage you have on it, leaving you underinsured.
What to do: Have your items appraised and shop around for insurance that fits your collection. If you already have insurance, consider whether you need an update. As your collection appreciates, its value may have outpaced the coverage you have on it, leaving you underinsured.
Not Checking Your Credit Score
We know you’ve heard it before, but if you don’t check your credit report at least three times a year, you may be leaving fraudulent charges undetected. Credit card companies, mortgage underwriters, or auto lenders could have a much different picture of you than you think. If they erroneously think you’re high-risk, they’ll charge you more to borrow.
What to do: Request a free credit report online from one of the three credit rating agencies — Equifax, Experian, or Transunion. Each is required to provide you with a free report once a year. Flag any unexpected changes to your report, such as loans you don’t remember, and report any discrepancies to the credit rating agencies. Don’t dismiss any odd item, no matter how small the amount — some thieves test your awareness with a small purchase to see if you notice, according to Manilla.com. A few months later, check again using another of the agencies.
What to do: Request a free credit report online from one of the three credit rating agencies — Equifax, Experian, or Transunion. Each is required to provide you with a free report once a year. Flag any unexpected changes to your report, such as loans you don’t remember, and report any discrepancies to the credit rating agencies. Don’t dismiss any odd item, no matter how small the amount — some thieves test your awareness with a small purchase to see if you notice, according to Manilla.com. A few months later, check again using another of the agencies.
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