If you are a member of a warehouse club, you know the major benefits of its membership and the savings you can receive by shopping in bulk. But did you also know you can save more, and get additional cash back by implementing a cash back stacking strategy? Well here's my favorite cash back stacking strategy for Sam's Club. Now this is a 5 level Cash Back Stacking Strategy with the potential to save more with coupons as well! With every cash back strategy it begins with a Cash Back Credit Card!
Level 1 - Credit Card
For Level One...The Cash Back Credit Card I typically use at Sam's Club, is my Citi Double Cash Card. With the Citi Double Cash card I receive 2% Cash Back no matter where I shop, and at all times! There are no special categories or times of the year you need to use the card in order to get 2% cash back. You get an automatic 1% cash back when you purchase, then an additional 1% cash back when you payoff your credit card bill, essentially giving 2% cash back! The other card that I use, which I am only able to maximize 3 months out of the year is the Discover IT credit card. With this card I receive 5% cash back when shopping at any Club/Warehouse stores that accept Discover. Unlike Costco which now only accepts VISA cards, Sam's club accepts Discover/VISA/Mastercard and I believe AMEX as well. So 3 month's out of the year with the Discover IT card, and also the Chase Freedom card has a similar quarterly option, you can receive 5% cash back at Sam's Club!
Level 2 - Dosh App
For level 2 I receive cash back using the Dosh App. With the Dosh App I receive 5% cash back instantly whenever I shop in-store at Sam's Club! All you have to do is link the credit card, or multiple cards that you use, and whenever you swipe your card at a merchant connected with the Dosh App you will receive Cash Back automatically! As far as I can tell, this works with all Sam's clubs, or at least all Sam's clubs in my area participate. Be sure to check within the offers section of the Dosh app and search your zip code to see what stores are available, and where the nearest Sam's club that offers cash back is for you. In addition to in-store cash back, you can receive 3% cash back if you shop online at Sams club, but you have to start your purchase from the Dosh App first in order to receive credit for online Sams club purchases. If you don't already have a Sam's club card, if you already have a card linked to Sam's club and you use it to pay for a new membership when you sign up for Sam's club, you will receive bonus cash back! At the time I paid for my Sams club membership I received $10 cash back from Dosh! Be sure to check the app for their current bonus offer for getting a Sam's club membership, which may be in addition to any bonus offer that Sam's club is offering directly.
Level 3 - Bits of Stock App
The 3rd level of cash back is with the Bits of Stock App! With Bits of Stock you receive .50% cash back which is then used to purchase shares of stock! Since Sam's club is owned by Walmart, you receive Walmart ($WMT) stock as your reward! Although the amount of cash back received is small, if you happen to shop at Sam's club on a regular basis for groceries in addition to almost any home items you may need, and their gas station as well, this can really add up over the long term. And because you are receiving the cash back as bits of Walmart stock, the value of those fractional shares will increase in value as the value of Walmart stock increases. So the true value of that .50% cash back is also the increase of Walmart's stock value over time! Over the past couple of months, even while the rest of the stock market is down substantially, Walmart stock actually increased in value. Sam's Club and Walmart received more business during the coronavirus pandemic due to many restaurants and other non-essential stores being closed. People rushed to stock up on toilet paper, food, and other essentials causing a shortage with certain items, and that shortage caused other shoppers to panic and want to go shopping as well. Over the course of a normal year, if you Sam's club is your main store for buying groceries, medicine, or even electronics, then you may end up spending thousands of dollars per year at Sam's club. For every $1000 you spend at Sam's club, that's $5 worth of stock of Walmart stock you will gain!
Level 4 - Bumped App
For the 4th level, you have another opportunity to receive $5 worth of stock for every $1000 you spend at Sam's club, and that's with the Bumped App. The Bumped app is another Stock Back app which provides .50% cash back which is used to purchase fractional shares of stock! However instead of receiving Walmart stock, you receive fractional shares of the Vanguard Total Stock Market Index Fund, ticker symbol VTI. VTI is one of my favorite total stock market ETFs, in fact it is one of the 4 ETFs I invest in via the Mobile Money Nation Roth IRA. Each month I deposit $100 into my M1 Finance pie, and 40% of that goes into the VTI ETF. Follow me on Instagram if you would like to keep up with the progress of that Roth IRA, and use the referral link below to start your own Roth IRA with M1 Finance!
Level 5 - iBotta App
Now for the 5th level of this cash back stacking strategy, this will take a little more planning and effort. With the first 4 levels everything was automatic. All you had to do was link your Credit Card to the 3 apps in levels 2, 3, and 4, and make sure you use that same credit card when you shop at Sam's Club. But with the iBotta app you will need to select specific items within the app that you will receive cash back for. Now this can be a good or bad thing when you think about it. The good thing is that when you do go shopping at Sam's club, you're a bit more strategic with your purchases in order to ensure you are getting additional Cash Back from iBotta, but you have to remember to select those offers before you actually go shopping. Also, maybe the offers available in the app are not products that you purchase on a regular basis if at all. For instance, I don't buy soda in bulk for personal usage, but there's always an offer for soda and other boxed items or typical foods in an American diet like hot dogs, pizza, beer, etc...And then take into account that you are buying in bulk at Sam's club, so you don't want to buy items that you aren't going to be able to fully consume before they expire. So if you're single, you may not buy a case of blueberries or a 36 pack of eggs, but for a larger family this may not be a problem.
Use the 5 options above to gain cash back on all of your purchases at Sam's Club, and this could add up to a nice chunk of change over the course of a year. This could be used to pay for groceries in the future, payoff debt, or to add more money to your investments.
If you use a platform like M1 Finance which offers free trading and the option to invest tin fractional shares, every time you get at least $10 total cash back you can add this money to your Investment Pie within M1 Finance. Use my referral link below to open your own M1 Finance Account and start investing today! I will also have links to the other apps I mentioned in this video for cash back, so check those out in the description.
What is your favorite Cash Back Stacking Strategy? Be sure to leave a comment below with your favorites, and any apps that you know or think will stack along with these.
Related Videos and Blog Posts:
The iBotta App is a receipt based cash back app, which gives you cash back when you purchase specific items at specific stores, and then upload your receipt to claim the cash back. Usually I prefer using cash back apps which do not require you to upload receipts, but I did want to take some time to review this app since it could be a great way to earn cash back in addition to my favorite automated options as part of a cash back stacking strategy.
Ways to Earn Cash Back
How do you earn cash back with iBotta? iBotta has partnered with several retailers to offer cash back when you upload your receipts to their app. You receive cash back when you purchase specific items offered within the app. Cash back can range from a 10 cents to a few dollars for one item. There are some items you can purchase which end up being free once you claim the cash back within the iBotta App. In my experience these are typically new products, or a new version of a product that companies are trying to sell.
Some of the most popular retailers and grocery stores are available in the app, including: Walmart, Target, Costco, Sam's Club, Kroger, Publix, Aldi's, Whole Foods, and many many more. Click on the name of your retailer of choice, then check for the available cash back offers at each store. Some stores may offer different items than others, but many of the cash back offers are the same for all stores. However also keep in mind that just because the offer is available at the store you choose in the app, this does not mean that your local store necessarily carries the specific item being offered. When I first signed up for iBotta, there was a new Campbell's soup which was offering an over $2 cash back offer, which essentially made the cost of the soup free. However I checked with 3 of the Publix's in my area, and none of them sold the specific flavor of Soup listed in the cash back offer. I did however find it at my local WalMart. It may be possible to check this with the individual stores using their apps, before you actually go shopping in order to know what you will purchase before you get to the store. For those of you who make a list before grocery shopping, include walking through the iBotta app with your normal list creation activities to maximize use of the app.
Lets start with the easiest way to earn cash back, and that's with the "Any Item" item list. This allows you to earn cash back for buying generic everyday items like bananas, apples, cheese, diapers, or whatever is being offered at the time. Typically for the Any Item list iBotta may ask you to watch a short video or take a short survey to activate the Any Item option, and then these cash back options can be used to receive cash back at any of the available stores within the app. No matter the brand of the item, as long as you make a purchase in that category you will be credited for cash back.
For the rest of the items available in the app, you can search by category, or look at the list of What's Hot, New Offers, or Best Value! I like to check the Best Value list first to see where I can maximize on my cash back, then I scroll through the full list of offers within the particular store I am planning to shop at. Once you start to use the app on a regular basis, then you can just look at the New Offers to save yourself some time, as well as the Buy it Again section for items you purchase on a regular basis. This way you don't have to scroll through all of the possible cash back items each time you open the app. This is a huge time saver!
Once you've added all of the offers you would like to purchase at your local store, you can then take a look at the "Your List" section to view all of the cash back offers you have marked within the app for that particular store. If you already have your general shopping list, you can use this as a secondary shopping list to ensure you actually purchase all of the items you are going to receive cash back from when you shop.
Once you've made all of your purchases, all you have to do is go to the "Redeem" section at on the bottom row of the app, select the store, then take a photo of your receipt within the app to upload it and claim your cash back offers. The app should recognize your purchases from the receipt, but if not you will be asked to scan the specific product you purchased for proof of purchase. I have messed up in the past by buying the wrong product, whether it was due to being the wrong size or wrong flavored item. Be sure to double check these specifics before purchasing.
With some retailers there is an automated option to receive credit for your cash back offers! Two stores I have personally used are Publix and Target. With both options you have to already have or create an account with those specific stores, then link that account to the iBotta app. This way when you use those store apps to make purchases, the purchases will also link to iBotta for recognition of your purchases without the need to upload a receipt. I like to use these options when I can, that way I don't have to worry about forgetting to upload my receipts after I get home. Any way I can find to automate things of this nature, I take advantage of to ensure I get every cash back offer I can with the individual stores as well as with iBotta!
Earn More With Bonuses:
In addition to the individual cash back offers, iBotta offers Bonus offers. These bonuses can be related to purchasing multiple of a specific product, having a streak of purchases at a particular store, or reaching a specific dollar amount of cash back offer claims within a particular time period. These help to boost your cash back offers when you use the iBotta app on a consistent basis. You can even join forces with your friends and family you invite to use the iBotta app, and they will be included in your Teamwork section of your Account. As a team you can earn Level 1-4 bonuses.
Categories of stores you can shop at include: Grocery, online shopping, clothing, health & beauty, restaurants, travel, home and auto, entertainment, and much more. You can even Pay with iBotta.
With the Pay with iBotta feature, you can literally use the iBotta app to pay for purchases. The same way you would with Apple Pay, Google Pay, or PayPal. Just check the Pay with iBotta section to see which stores provide automatic cash back when you use the iBotta app to pay. You can sort from alphabetical order or by stores which provide the most cash back. You can also make a list of favorites so you can easily see how much cash back you can earn, or search by category when you're getting ready to make a purchase. Cash back can range from as low as half a percent up to as high as 10%. This is in addition to any cash back you can receive when you use their cash back offers for individual products, so don't forget to upload your receipts to receive the additional cash back.
However there is one downside to using the Pay with iBotta feature, and that is the fact that all purchases are final! You cannot return items and receive it back on your credit card, because technically your payment method is the iBotta App. So if you plan to use this feature, maybe using it for an item you know there is a potential for you to return is not a good idea. You may be able to receive store credit or a gift card at some retailers for items purchased using the Pay with iBotta feature. This return problem does not apply to the normal purchases you make with your actual credit card when you receive cash back from iBotta, just to the Pay with iBotta feature within the app. So if you actually physically swipe your card at the retailer, and just upload your receipt to iBotta for the individual cash back offers, then this rule does not apply.
Make a List, Check It Twice!
Despite all of the great options and ways to use the iBotta app to earn cash back, I don't always fully take advantage of these features. I'm more of a spontaneous shopper when it comes to groceries, and I don't always remember to check the app to activate the individual cash back offers. This is why I prefer the automated cash back apps, where I just receive credit automatically whenever I use my credit card. However if you take the time to check the iBotta App and activate these offers, you can earn a lot of cash back!
Do you use the iBotta App? If not be sure to use a link in this post to get started today! If you already use the app, let us know which store is your favorite, which store you get the most value from in combination with the iBotta app, and which stores you use the Pay with iBotta feature if you use it at all. Pretty much let us know your experience with this app!
Due to all of the talk around gas prices at the moment, I started to think about all of the ways I am maximizing the cash back or discounts I can potentially earn whenever I purchase gas. So I wanted to share those with you!
Gas prices are currently at or near decade lows depending on what area of the country you live in. Due to a gas price war between Saudi Arabia and Russia, an over supply of gasoline is being created. Combine that with the fact that people around the world are social distancing, working from home, or not working at all due to the Coronavirus, this is making the issue worse as there's a lot less demand on the purchase of gas due to less driving.
This is why I wanted to talk about my favorite combinations of how I am able to get a discount or increase cash back at the pump, by stacking cash back.
There are a few cash back strategies I use when getting gas. The largest cash back stacking strategy combination when it comes to gas, involves a credit card and three apps. The first level of every cash back strategy you can use should first start with a cash back credit card, and the credit card I use to maximize cash back at the pump is the Costco Credit Card. With Costco I receive 4% Cash Back whenever and wherever I buy gas, not just at Costco!
Level 2 - GetUpside App
The 2nd level is the GetUpside Cashback App. With GetUpside, there are several gas stations including Shell, Exxon Mobile and others which work with GetUpside to provide you with cash back whenever you buy gas. If you're not familiar with GetUpside, I have a video detailing how the app works, but essentially you open the app and use the map to locate your nearest gas stations. Once you've found one near you that offers cash back, you can then select it, and you have a 4 hour window to buy gas and then upload your receipt into the GetUpside App. Now the amount of cashback you can receive will vary each time you check the app, even if you're going to the same gas station. So be sure to check for other gas stations in your area to ensure you are getting the maximum cash back, while also considering the cost per gallon and the station you choose. Getting more cash back is a bad reason to pay more for gas, so ensure that you are getting the best overall value with the lowest total spent on your gas! As an example, at the time of this recording, the Shell gas station nearest me is providing 21cents cash back per gallon, and I also have a bonus .15cents per gallon cash back I received for inviting another user to GetUpside, which brings the price per gallon down to $1.49 theoretically. However the actual price per gallon I pay at the pump is $1.85 per gallon, and I'll receive a total credit of 36cents per gallon in the GetUpside app the next time I pump gas. This would be a total of $5-$6 cash back, as it usually takes 15-17 gallons to fill my tank. Now not including my bonus 15cents per gallon, the 21cents I am seeing in the app at the time of recording is on the high end of what I normally see. This could be as low as 1cent, or as high as 25cents which I've seen in the past even without an invite bonus. If I were to use an average of 15cents cash back per gallon, with gas at $2 per gallon, that would equal out to 7.5% cash back using GetUpside! However with currently low gas prices, and an extra bonus from inviting another user, my cash back percentage is actually higher today at 19.5% per gallon!
Level 3 - Bits of Stock App
In order to go to the 3rd and 4th level, it does take some coordination and decision making on the brand of gas you will consistently shop with. On the first level it didn't matter, because you're getting 4% at any gas station. On the 2nd level there are several gas stations to choose from, but not all gas stations, even from the same company, will give you cash back. And the amount of cash back will vary on a day to day basis. So once you've used the GetUpside app on a regular basis you may find a gas station which is consistently giving a good cash back to price per gallon ratio for you, and you now need to align it to the next app which is the Bits of Stock App! With Bits of Stock, you receive cash back at certain gas stations which are available in the app, and that cash back is used to purchase fractional shares of stock. For me the two gas stations which work out the best for me, as far as aligning with the GetUpside app, are Shell and Exxon Mobile. Every time I buy gas from either Shell or Exxon, I receive .50% cash back on all of my purchases, as long as the credit card I use is linked to their app. In this case, my Costco Credit Card! This is done automatically, and there's no need to upload a receipt or complete the transaction within a certain time period. Just swipe and receive the credit within a few days in the app. This cash back then turns into Shell or Exxon Mobile stock. Now the amount of cash back is very minimal in the grand scheme of things at only half a percent, but this will add up over time. Not only that, but since you receive it back in stock, those bits of stock (pun intended) turn into larger and larger shares. Unless you have an electric vehicle, or don't drive, you will need to buy gas eventually. So why not maximize on your purchases and receive free stock in the process as well!
Level 4 - The Bumped App
The 4th level follows the same premise, and that is with the Bumped app. But there is a slight difference on how they work. With the Bumped app you can only choose one gas station and there are only 4 options to choose from, so this is really getting you into brand loyalty territory. With this app I ended up sticking with Shell, since Shell has the best cashback/price per gallon ratio in my area. In fact, where I live there is not an Exxon Mobile gas station nearby that provides cash back at all via GetUpside. I tend to run into more eligible Exxon Mobile's when I travel away from home. The other 2 options within the Bumped app are BP and Chevron. No matter which of the 4 options you choose, you will receive .50% cash back which is also used to purchase fractional shares of stock! With all 3 of the 4 companies you have the option to choose either the VTI ETF as your stock, or the actual company stock of ExxonMobil/Chevron or BP. Shell only has the option to receive fractional shares of VTI, which is my preference anyway. So I receive half a percent of my gas purchase which is used to purchase the VTI ETF whenever I buy gas.
So in Total, my favorite cash back stack receives 4% from Costco Credit card + an average of 7.5% from the GetUpside App + half % from Bits of Stock + another half % from the Bumped App, bringing my average cash back at the pump to a total of 12.5% cash back! With the average person using over 600 gallons of gas per year, and using an average price per gallon of $2, that's about $150 worth of cash back every year! If gas cost more in your area, then your cash back amount would be higher as well.
Alternate 2 Level Stack
However this cash back combination isn't always the best value. Remember, the actual price per gallon of gas also matters. Like I mentioned, my average cash back from the GetUpside app is 7.5%. So if I can buy gas at another gas station, which has a higher percentage savings vs the percent of cash back per gallon using get-upside, then that is the better value.
This takes me to my most often used stack, which is simply Costco!
Costco gas in my area is typically 15 to 20 cents lower than all of the surrounding gas stations. So if gas is $2 at Shell, in many cases gas at Costco will be in the $1.85 to $1.80 range. That's 7.5% to 10% cheaper on a pretty consistent basis. If my cash back from GetUpside isn't more, then here's my 2 level stack! 4% Cash back with the Costco Credit Card, and then .50% cash back with the Bits of Stock App! Yes, Costco is also available in the Bits of Stock app, and you get cash back with their gas station or whenever you shop inside of Costco. This makes my Cash Back stack at a minimum, 4.5% when I buy gas using my Costco Card at Costco Gas Stations.
Now if you happen to have a credit card which provides a higher cash back amount than the Costco Credit card, then certainly use that card. The Sam's Club credit card offers 5% cash back year round, and the Chase Freedom and Discover IT 5% Cash back for 1 quarter out of the year. So definitely use the credit card which provides the most cash back on a consistent basis for you.
If you are not familiar with any of the apps mentioned above, or don't currently use them, be sure to use my referral links in the description and comment section below. With GetUpside you will receive a bonus 15cents per gallon on your first gas purchases when using the app. And there's also an automated feature to receive cash back without uploading a receipt, just look for the gas stations with a Blue Lightning Bolt next to their location. What credit cards and cash back apps do you use to maximize your cash back? Think you have a better Cash Back Stack? Let us know in the comment section below!
Apparently there's a TikTok video going around stating that the Stimulus Checks the government is sending out for the Economic Impact Payments from the CARES Act, have to be paid back on next years taxes. Here's why this is completely false, and all it takes is a little math and understanding of what a Tax Credit is to debunk this notion.
The one truthful thing the guy mentions in his video, is that the Stimulus Check is an Advance on a Tax Credit on your 2020 tax return.
What Is An Advance?
What is an advance? An advance is when you receive something before you were originally scheduled to receive it. Typically you may hear this in regards to maybe an employer or a bank which will give you your "paycheck" a week earlier than you normally would have received it. Typically banks and other businesses who provide this service will charge you a flat fee or a percentage of the amount that you want to advance. But what they are giving you is what you are already going to receive anyway! So when you receive what you were going to receive anyway, it is then your job to "pay back" what you borrowed.
I believe this is why the maker of the viral TikTok video confused their statement, either intentionally or unintentionally, and stated that you will have to pay back the money next year. But this is false.
What is a Tax Credit?
Next let's talk about the definition of a Tax Credit. A Tax Credit is a dollar amount used to reduce your tax bill as a whole, or provide you with a refund if it is a refundable tax credit. This is different from a Tax Deduction, which reduces your taxable income, not your actual tax bill dollar for dollar. So let's break this down.
Let's say you should have paid $10K in taxes, but instead you only paid $8K in taxes. This would mean that you owe the IRS $2K in taxes, so you would have a tax bill. However let's also state that you have a $2K tax credit. Since Tax Credits are dollar for dollar credits towards your tax bill, this would completely wipe out your tax bill and you owe the IRS nothing.
However let's flip it, and say that you paid $12K, only owed $10K in taxes, and now you have an overpayment of $2K. This means that the IRS owes you a $2K refund, because you paid more in taxes than you really needed to. As a reminder...this is the only way you receive a REFUND, that's why it's called a refund! You overpaid! But, since you also have a $2K REFUNDABLE Tax Credit, now the IRS owes you $4K. $2K + $2K = $4K
Now that you are clear on how a Refundable Tax Credit works, let's now look at the Stimulus Check, which is being provided as an advance tax credit, on your 2020 taxes.
In example 1, you owed $2K in taxes, but because you had a $2K tax credit, your tax bill was cut to zero. Now let's add an additional $2K tax credit for the coronavirus stimulus check. Since this is a refundable tax credit, the IRS now owes you $2K! Doesn't that sound awesome? But wait...the IRS already gave you the $2K in April of 2020, so when you file your 2020 taxes in early 2021, you won't actually get the additional $2K in your pocket at that time...you've probably already spent it! This means that your tax bill stays the same as it would have been without the stimulus, which was ZERO!
It is the same case in example 2. Remember in example 2 the taxpayer paid $2K more than they should have paid in the year 2020. Now because of the $2K stimulus check, they are now owed $4K since the stimulus check is a refundable tax credit! Wrong! Why? Because they already gave you the $2K check in April of 2020, which means that your tax refund stays the same at $2K!
If You Didn't Receive Stimulus...
Now, where people will likely bring up that there's an issue, while others will think that they received a larger refund once they file taxes in 2021 is if you were a person who worked less than you typically would have if not for the coronavirus pandemic. Your taxes may look significantly different than it normally would, but the reason won't be because of the advance tax credit you received via the Stimulus Check. If you don't receive an economic impact payment now based on your 2018/2019 taxes, and you end up qualifying in 2021 due to lower income once you submit your 2020 taxes, then you would see a difference in your actual tax return. Since you didn't receive the stimulus check in 2020, the tax credit you receive once you file your 2020 taxes will be impacted by the new tax credit!
I hope this was helpful in debunking the fake news from the TikTok video which went viral. I'm sure there are similar videos out from multiple people, but I wanted to make sure that people understand what is really going on with these stimulus checks, and that any differences in your taxes when filed next year won't be due to the coronavirus stimulus check if you already received payment.
The Coronavirus is making a global impact. What we thought of as a virus half way across the globe, back in late 2019 and early 2020, has now spread to the United States, and cases are popping up in nearly every country in the world. It is officially a pandemic! This is not only effecting the health of people around the globe, but the economy, and thus our personal finances.
As Congress and the President passed the CARES Act, providing its citizens with the Economic Impact Payment based on your income eligibility, you now have a good problem to figure out. How to spend your coronavirus stimulus check! Here are a few ideas, in order of importance, depending on your personal financial situation.
Pay Your Bills
The first and most obvious thing you may need to spend this money on are your bills. If you lost your job, were furloughed, currently seeing a reduction in hours, or think there is a chance one of those 3 will occur in the next couple of months, then you should use these funds for your essential needs. Food, housing, and transportation. For some this stimulus will be exactly what they need to make it for another month, while for others it will not be enough to survive another month. If the latter is the case for you, this is a great time to reevaluate your current expenses. Cut out any non-essential bills you have, or find ways to reduce the costs of things that are essential. Based on several articles I've read, the percentage of Americans living paycheck to paycheck is between 50%-75% for those who make under $50K per year. This means that missing just one pay period, for any reason, will setback over half of Americans financially. For those who make over $150K it's not much better, about 25% of these higher income individuals are also living paycheck to paycheck. So we know that higher income is not the only answer to resolving financial concerns, even if it is the largest factor. You still have to control your spending and save money!
Which brings us to the next option. Create an Emergency Fund! If there's any uncertainty with your current employment situation, then you may want to save this money instead if you don't already have an emergency fund. Or even if you already have one, use this money to make it larger. Your emergency fund should not be your only savings. An emergency fund is the foundation of your savings, meaning theoretically you should have additional savings outside of this fund. If you don't already have one, and you don't need to use your stimulus for your current expenses, use this check to jump start your emergency fund. Then work towards creating 3-6 months of reserves.
Contribute to your Retirement
If you receive a Coronavirus Stimulus Check, and you don't need to use it for essentials, you could technically use this towards your HSA or IRA. In fact, I would lean towards using it for your HSA if you have not already maxed it out, and of course assuming you have a High Deductible Health Plan already. This way if you need to use the funds for potential health reasons, due to Coronavirus or otherwise, the funds will be available for withdrawal or to make payments to your healthcare provider.
Most people know April 15th as typically the last day you can file taxes without being penalized. Well this year Tax Day is being postponed 90 days, so the new date is July 15th. Along with this date is also the last day you can contribute to an IRA or HSA to be claimed on your taxes for the prior year! HSA and Traditional IRA contributions are tax deductible, so this could also be a way to help lower your taxable income, thus lowering your tax bill or perhaps increasing your refund if you overpaid! You can also contribute to a Roth IRA, although you won't receive any tax reduction benefits for doing so, you are still eligible to use this additional time. With a Roth IRA your tax benefit will come in retirement, as you won't be required to pay taxes on your Roth IRA withdrawals. So if you don't have any specific thing you need to use the stimulus check for, use it to boost your retirement accounts and take advantage of the current drop in the market.
Start a Business
If you're currently not working either due to being fired or furloughed, now is a great time to start the business you've always wanted to start. Or maybe just start a business that you can afford to start with the $1200 or more you receive from the Stimulus. Many of you may think this is not a lot of money to start, but there are many businesses that either do not require any capital at all, or that you can get started with as little as $100. In fact there's a great book called the $100 Startup by Chris Guillebeau, and you can use your stimulus check to purchase the book to gather some ideas. Or use your local library and/or the Libby App to access the book for free! You can start a website with a free trial, you can start a food delivery service with pre-orders, you can start a YouTube channel, a podcast, or many other things for free or definitely less than $1200. The key is to get started, and use these funds wisely to jumpstart the growth of your side hustle to turn it into a small business. Use your time and money wisely, especially if you find yourself currently with more time than money. There are a lot of great resources whether on YouTube, Podcasts, or via books at your local library or via apps like Libby.
Last but not least, you should spend your Stimulus Check. While this is the last option, for many of you it will be the first option, and it is also the option the government expects you to use. Their expectation is that most Americans will spend their money, by choice or by force since many will need to use it for their essentials. But for those who don't need it for their essentials, already have an emergency fund, have already maxed out their retirement, and already have additional streams of income, then spending it may actually be a good idea. There are many businesses, small and large, which actually need you to go out and spend your stimulus check so that they can stay in business. Personally I would lean towards supporting small businesses when you get the chance. When will that chance occur? Who knows, because many non-essential businesses are currently closed or have modified the way you can interact with them, or perhaps if this stimulus isn't enough, they may never reopen their doors again. You can also spend it on people you know are in need, as spending the money doesn't just mean buying things for yourself. Take the time to help someone in need, or donate to an organization who is helping those in need.
I just signed up for my first Travel Rewards Credit Card, so I wanted to talk about how I planned out making the minimum spend for the signup bonus, while also planning out my Travel for the rest of the year. Travel Rewards Credit Cards award you points toward travel with every purchase that you make. If you travel a lot, using a travel rewards credit card can actually help you towards gaining free travel. Especially when you take advantage of the initial bonus offer when you sign up.
One of the most popular travel rewards credit cards is the Chase Sapphire Preferred. This card has a $95 Annual fee, however with the Bonus points and the rewards you gain from your regular purchases, it can be well worth it. But before I even get into the bonus points, what does this $95 annual fee card give you that your typical no fee credit card may not give you.
Let's first start off with a disclaimer. I am not a tax professional, and I do not provide tax, legal, or accounting advice. Readers should consult their tax advisors! There...I said it!
However, I thought this would be a fun math experiment. Is it possible for a middle class family of 4 to optimize their federal tax to the point where they won't owe anything at the end of the year? I think there are many ways to do this if you plan correctly! In the past I've used my income from the previous year, plus making adjustments to my W-4 withholding to try and approximate how much tax I will owe at the end of the year, so that I can get my tax bill or perhaps a refund that is as close to ZERO as possible!
BIG TAX REFUNDS & BIG TAX BILLS ARE FOR SUCKERS
First let's discuss why getting a huge refund at the end of the year is not "The Move" at all. When you receive a refund, this means that you've OVER PAID what you OWED in taxes for that year. You're essentially providing the government with an Interest Free Loan! When is the last time someone...anyone, especially an institution given you an interest fee loan? For 99% of us that answer is never! The closest you'll get is a credit card balance transfer, and most charge you a fee upfront, with no interest for a certain time period. Typically 6-12 months. After this time period, if you haven't paid off your card, you will be charged interest for the remaining balance as if you were being charged interest the whole time period. Banks are in the business of making money, so a loan is a means of making money off of your need to access cash.When you pay taxes, you are providing cash for the government to take care of the country or states needs. Now it may not be as efficient as we would like it to be, but that is its purpose.
Let's start with a rough example: You or your family unit provides the government with $1,000 of tax revenue each month, which adds up to $12,000 total at the end of the year. Of that $12,000, let's say you really only owed $9,600. That equals $2,400 at the end of year. Unfortunately that money had no opportunity to compound in order to help your money grow in a savings account or in investments. If instead, you could figure out a formula where you pay the exact amount of taxes you will owe, after taking into account Tax Deductions and Tax Credits, then you could put that money in a savings account or invest it throughout the course of the year. Let's assume you are a tax genius, or know one, and you were able to pay exactly $9,600 throughout the course of the year. What would the $2,400 turn into?
Creating a Budget is the first step into getting your finances in order. It opens your eyes to where your money is and isn't going, and forces you to make a change so that 10 minus 10 does not equal negative 5 (debt and interest on debt).
Not creating a budget is kind of like avoiding asking your parents for permission to do something. You know they are going to say no, so you don't ask and you do it anyway. Then later on they find out you did it, and you get in trouble. You're now responsible for the act you previously committed, and now you have to pay for it in some form of a punishment or scolding. You may not receive it immediately, or they may let the incidents pile up before they act upon a punishment.
It's the same with creating a budget. If you write down your income and the bills you need to pay, you will visually realize you may not have enough money to buy everything you want. Then you mentally have to go against what you know you should not do: go out to eat, buy new clothes, buy that new shiny electronic device, continue paying for services you don't really use (looking at you gym membership!).
For some people that's a harsh reality to face. I know it was for me. Especially after graduating from college and not having a job which paid enough for me to seriously think about paying my student loan debt.
Debt is the punishment (spanking or time out) you receive for not asking permission, and the additional interest you pay on debt are the residual memories you have of that punishment. You still feel the sting or disappointment from your parents, days/weeks/months/years later right? But the next question is, after feeling the sting, did you make a change to avoid feeling it again? Or did you follow the same path? Well maybe Mom might not realize what I did, or maybe she won't catch me this time. I'll be able to make up a good story in the Future if this ever comes up. Eventually, you will pay!
AJ Mobile Money
Husband | Father | YouTuber | Former ATLien
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