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Our Debt Free Family

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Will We Ever Get to Buy a Home?

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<p>If you have been following the news at all recently, you know that the housing market is on fire. Many millennials like us are scared that they won't ever get to buy a home (if they haven't already). A few of our friends were lucky enough to buy homes during the height of the pandemic when prices were low. However, since then, the prices have just continued to climb.</p>::Pexels

If you have been following the news at all recently, you know that the housing market is on fire. Many millennials like us are scared that they won’t ever get to buy a home (if they haven’t already). A few of our friends were lucky enough to buy homes during the height of the pandemic when prices were low. However, since then, the prices have just continued to climb.

A Look at the Housing Market

There is some good news for people looking to buy a home. The housing market is finally starting to cool off. Yahoo Finance recently reported that if you’re like us and have been priced out of the housing market you may be in luck soon. It may mean relocating for some folks though. Cities that saw big jumps in the price of housing over the last few years will be the ones to decline the most. Here’s a look at the cities where they are expecting the number on the price tag of homes to go down:

  • Austin, TX
  • Boise, ID
  • Nashville, TN
  • Phoenix, AZ
  • Sacramento, CA

That being said, the price drops won’t really start happening until 2023 some time. So, if you were planning to buy a home this year, it may still be too soon.

Time to Save

The good thing about the market being so crazy right now is that it gives you more time to save money for a down payment and work on your credit score. Go through and pay off everything that you can and save as much money as you can with sinking funds for your down payment. With FHA loans, you will only need to put 3.5% down. Where conventional mortgage loans, good rule of thumb is to have 20% to put down so that you don’t have to pay PMI (private mortgage insurance).

Taking a look at the housing market here in N.C., the median listing price is around $254,000. With that in mind, we need to save about $50,000 to have 20% to put down. Honestly, there aren’t many places cheaper than that anywhere else we’d like to live either. So, that is our goal now. By the time we have that saved and a good chunk of our debt paid down, the housing market will likely be cool. If not, we are happy to wait for our turn to buy.

Extend Your Plans

Anyone feeling like we do right now and wondering if they’ll ever be able to buy a home, breathe. The market will eventually calm down. Now is the best time to practice the flexibility that we’ve leaned on so much over the years. Be flexible with your plans and long-term goals. It’s possible that you may have to put off buying a home for another few years. The same goes for any goal that was thrown off by the pandemic or the impending financial collapse. Patience is key. You will reach your goals, but give yourself some grace. Just about everyone is having a tough time right now.

Readers, have you had to delay any of your financial goals due to the housing market and economy?

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Unpaid Tax Debt: What Happens If You Can’t Pay Your Taxes?

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<p>What to do if you fall behind</p>::Pexels

What Happens If You Can’t Pay Your Taxes?

Tax season can be a headache, and the thought of owing the government money can put a damper on anyone’s mood. Unfortunately, circumstances can occur that might render it impossible for an individual to pay their taxes. If you find yourself in this situation, it’s important to address it head-on.

Ignoring the issue won’t make it go away. The government takes tax nonpayment seriously and will take action to collect the funds. However, there are alternatives to consider. By being proactive and communicating with the IRS, you may be able to work out a payment plan that fits your budget.

Don’t let tax debt drag you down. Take action and explore your options.

 

Understanding Your Tax Liability

Taxes can be a confusing and overwhelming topic for many people, but understanding your tax liability is crucial to avoiding unpleasant consequences. Your tax liability is simply the total amount of taxes you owe to the government, including various state and federal taxes.

This figure includes not only income tax but also property tax and self-employment tax in some cases. You can use the Taxcaster tool from TurboTax to get a better idea. Knowing your tax liability is essential for staying compliant with tax laws and avoiding penalties. So, take the time to carefully calculate your tax liability and ensure that you are on track with your tax obligations to avoid any unexpected surprises down the road.

 

Consequences of Not Paying Your Taxes

 

1. Accruing Interest and Penalties

When you can’t pay your taxes on time, the IRS (Internal Revenue Service) and state tax agencies will begin to charge interest and penalties on the unpaid balance. These additional charges can quickly escalate your tax debt.

 

2. Tax Liens

If you continue to ignore your tax debt, the government may place a tax lien on your assets, including your home, car, and bank accounts. A tax lien can make it challenging to sell or refinance your property until the debt is satisfied.

 

3. Wage Garnishment

According to Ideal Tax, the IRS has the authority to garnish your wages if you owe back taxes. This means a portion of your paycheck will be automatically deducted to repay your tax debt, making it even harder to meet your living expenses.

 

4. Seizure of Assets

In the most extreme cases, the government may seize your assets to cover your tax debt. This means that they could take possession of your property, vehicles, or other valuables as a means of debt recovery.

And if you thought that your bank account was safe, think again. The government has the power to issue a bank levy, which freezes any withdrawals or transactions from your accounts. It’s a harsh measure taken to recover the funds owed, and one that should be avoided at all costs.

 

Options When You Can’t Pay Your Taxes

 

1. Installment Agreement

One option to consider is setting up an installment agreement with the IRS. This allows you to make monthly payments towards your tax debt, making it more manageable over time.

 

2. Offer in Compromise

In some situations, you may be eligible for an Offer in Compromise, which is a settlement that allows you to pay less than the full amount of your tax debt. However, this option is typically only available if you can demonstrate financial hardship.

 

3.   Currently not collectible (CNC)

If you are currently facing significant financial hardship, the IRS may temporarily designate your account as “currently not collectible.” This means they will halt any collection actions until your financial situation improves.

 

Seek Professional Help

Filing taxes can be an intimidating process, filled with endless forms and complex regulations that seem to be in a constant state of flux. Trying to navigate these waters alone is a daunting task, but thankfully there are professionals who can help. By seeking the advice of a tax attorney or certified public accountant (CPA), you can rest assured that your tax issues will be handled with the expertise they require.

These professionals have spent years studying the intricacies of tax law and staying up-to-date with the latest developments, meaning they know how to guide you through the process while minimizing your stress and maximizing your potential savings. Don’t let tax issues weigh you down: seek out professional help today, and take control of your financial future.

 

Conclusion

Facing tax debt can be a challenging and stressful experience, but it’s essential to address the issue promptly. Ignoring your tax debt can lead to severe consequences, including accruing interest and penalties, tax liens, wage garnishment, and even the seizure of assets.

However, there are options available to help you manage your tax debt, such as installment agreements, offers in compromise, and Currently not collectible (CNC). It’s crucial to consult with a tax professional to determine the best course of action for your specific situation.

 

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Making Debt Resolutions

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<p>More people than ever a resolving to be more financially healthy in the coming 12 months than ever. Each year, we typically sit down and list out our goals. Things like "lose 20 pounds," and "save $1,000" usually frequent such lists. However, in the personal finance world, I have seen some really amazing (some lofty) debt resolutions for the new year. Honestly, they are inspiring. It made me sit down and reflect on what my resolutions for 2020 were.</p>::Pexels

More people than ever a resolving to be more financially healthy in the coming 12 months than ever. Each year, we typically sit down and list out our goals. Things like “lose 20 pounds,” and “save $1,000” usually frequent such lists. However, in the personal finance world, I have seen some really amazing (some lofty) debt resolutions for the new year. Honestly, they are inspiring. It made me sit down and reflect on what my resolutions for 2020 were.

Resolutions for the New Year

When 2020 began, I had some pretty hefty resolutions, as many people do. None of us expected COVID to derail our plans. Financially, I’m glad to have been able to pay my rent for all 12 months this year. I am glad to have had a little money in my bank account at all times. More importantly, we haven’t accrued any new debt. When it comes to having met last year’s goals though, there was a valiant effort made.

debt resolutions

As far as cutting our debt in half, that did not happen this year. We were on one income for most of the year and were doing good to make minimum payments. The bigger deal is that we did not accrue any new debt. Both of us hustled more this year with side work, freelance, and other opportunities where we could make money. That goal was definitely met.

The others on the list, well…

I did not reach my goal weight, nor did I finish my novel, or run a 5K. I did learn some German (though I’m not fluent) and I read more this year (40 books in total). I also took a few minutes every day to practice some sort of self-care: goal met. While these may not seem like a huge deal, they were things that significantly improved 2020 for me.

Debt Resolutions for the New year

Now, for my finances in 2021, I’m hesitant to make any big debt resolutions or financial goals. When it boils down to it, I don’t know what the next 12 months will bring us in terms of our money. My husband is starting a new job next week, so we will have an additional income. For the first three months of the year, we will be tying up any loose ends in Atlanta, taking care of things like tires for the car and maintenance items, and getting fully settled in our new home.

After that, we plan to focus on snowballing every extra penny we have towards our debt. In essence, my husband’s new salary should all be additional debt payment cash (whew!). I’m excited about the potential for change for us, but hesitant to be too optimistic, as I am sure many people are feeling right now.

2020 changed a lot of people’s ability to look forward and plan things like debt goals for the next 12 months. For most people, it is hard to plan for anything more than 30 days in advance. So, for now, we are taking everything in stride. I can’t wait to keep you updated on our progress through the next year.

Readers, are you making any debt resolutions for 2022? Are you finding it difficult to look forward to the next year too? 

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Creating Traditions: Place Less Importance on Material Things

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<p>Tis the season to be stressed out over money because you're trying to keep up with your neighbors. Seriously, I remember growing up there was a literal competition between my dad and the neighbors during Christmastime. Every year, more lights would get added to the house and more decorations put up outside just to one-up the family next door. It was all in good fun and certainly never put my parents in a hard spot financially. However, many people do the same thing with how many gifts are under the tree or creating the Instagram-perfect family get together. They compare to others and spend a fortune trying to keep up with the Joneses. When we start creating traditions in our family, we have decided to place more importance on experiences and spending time together.</p>::Pexels

Tis the season to be stressed out over money because you’re trying to keep up with your neighbors. Seriously, I remember growing up there was a literal competition between my dad and the neighbors during Christmastime. Every year, more lights would get added to the house and more decorations put up outside just to one-up the family next door. It was all in good fun and certainly never put my parents in a hard spot financially. However, many people do the same thing with how many gifts are under the tree or creating the Instagram-perfect family get together. They compare to others and spend a fortune trying to keep up with the Joneses. When we start creating traditions in our family, we have decided to place more importance on experiences and spending time together.

The Reason for the Season

It is easy to get lost in the hustle and bustle of what many people refer to as the “shopping season.” The real reason for the season is often forgotten. For many people, it is a time to celebrate faith and love. You celebrate giving and spend time with the people nearest and dearest to your heart. When I think back on holidays as a kid, I think about the Christmas morning breakfast we had each year when my Nana came over.

I also think about the smells in the house, how I’d put on a fashion show with all my new clothes, and we’d curl up on the couch, calling all of our family that wasn’t able to be there. Then, dad would spend the day helping us get our new toys set up while mom cooked a yummy meal. That warmth is something I am reminded of often when thinking about how we can create our own traditions.

How We Are Creating Traditions

Now that we have a little one, it’s time for our family to start creating traditions of our own. My husband and I have been spending time talking about the things we’d like to do with her each year. Obviously, this year she’s still too little to do much of anything but next year and the year’s to come we can continue to build on our traditions. We will also carry over some fun things we remember from our own childhoods (Christmas lights and dressing as Santa).

I recently talked about how we prep for the holiday season and keep things within our budget. The biggest thing was to find things you can experience together with family. While we do plan to do things like matching pajamas and ugly Christmas sweaters each year, the main focus of the traditions we’re creating won’t be material things. We will do small stockings and one big gift each year. Our holidays will be centered around having a fun time with family, showing love and appreciation for each other, and being thankful for the amazing lives we have together.

Readers, what are your favorite holiday traditions?

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Our Money Goals for 2022

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<p>It's the end of the year, which means many people are overspending to celebrate the holidays. The end of the year also brings about talk of New Year's resolutions and promises to live new, improved lives. I enjoy making resolutions each year and setting goals for our family to reach. It is fun to review how far we've come along and all of the things that changed throughout the year. We've already started brainstorming what money goals we want to attack in 2022.</p>::Pexels

It’s the end of the year, which means many people are overspending to celebrate the holidays. The end of the year also brings about talk of New Year’s resolutions and promises to live new, improved lives. I enjoy making resolutions each year and setting goals for our family to reach. It is fun to review how far we’ve come along and all of the things that changed throughout the year. We’ve already started brainstorming what money goals we want to attack in 2022.

What Money Goals Are Next?

When we set about deciding what financial goals we want to tackle in the new year we review what we’ve managed to accomplish over the last 12 months. This year was a slow one in terms of financial progress for us, but we made a number of upgrades in our lives. We added a new member of the family, upgraded our office equipment, and became a two-income household. Because we expanded our family and business this year, debt payoff progress was slow, but it wasn’t nonexistent. We maintained and grew in so many more amazing ways.

So, what’s in the cards for our family over the next 12 months? Here are some of the money goals we’re discussing for 2022…

  • IRA: One thing we’ve been talking about is opening retirement accounts. Both of us have worked as freelancers most of our adult life, so we haven’t had employee-funded 401K accounts or anything like that. We’d like to start contributing to IRAs and max them out next year. It will help with taxes too.
  • Savings for our child: We’ve talked about it a lot and we want to send our child to private school. To do that, we will need some saving stashed away when the time comes. We are going to do some research on education savings accounts that we can put money into for her. We will also be opening a high-yield savings account for her some time next year as well.
  • Tax account: We haven’t been organized enough in terms of keeping up with paperwork, etc. for taxes. One big money goal for next year is to set up separate accounts and have a system for electronically storing our receipts.
  • More organization: Speaking of electronically storing our receipts, we need a new system of organization altogether. Since having a baby and returning to work, things have been a bit scattered. So, the last week of the year we are going to do decluttering, organizing, and vision board creating.
  • Pay off one account: As far as our debt freedom goals go, we’d like to pay off one account next year (hopefully the car). Of course, I’ll keep you up to date on the progress on this here on the blog.

The Importance of Setting Goals

A lot of people chuckle at folks like me who set resolutions every year, but setting goals for yourself is important. It gives you something to work towards and helps you outline how you can reach your biggest dreams. For us, it will reaching debt freedom, having a home of our own, and providing a life for our family that we love. What more could you really ask for?

Readers, what money goals are you setting for yourself next year?

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Unpopular Opinion: People Spend Too Much on Babies at Christmas

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<p>I've been sharing some of my unpopular opinions on social media more recently and one that got a lot of people upset recently was about babies at Christmas time. As you know, we will have a four-month-old for Christmas this year. It is always an exciting time to be around kids during the holiday season. At the end of the day, she won't remember a single thing. We will create plenty of memories but people spend too much on babies at Christmas. That may be an unpopular opinion but it's true.</p>::Pexels

I’ve been sharing some of my unpopular opinions on social media more recently and one that got a lot of people upset recently was about babies at Christmas time. As you know, we will have a four-month-old for Christmas this year. It is always an exciting time to be around kids during the holiday season. At the end of the day, she won’t remember a single thing. We will create plenty of memories but people spend too much on babies at Christmas. That may be an unpopular opinion but it’s true.

Spending at Christmas

It is estimated that Americans will spend around $886 on Christmas presents this year. Much of that will be on gifts for kids, which is great. There is nothing better than seeing a child’s face light up while they are opening a gift on Christmas morning. However, when it comes to celebrating with your newborn, pump the brakes. People are spending way too much. There are the trendy family photos, matching pajamas, big presents, fancy outfits, and the list goes on. All of it is adorable, but it is also extremely expensive and unnecessary.

Instead, spend some money on a babysitter and get some quality time in with your spouse.  The time you get one-on-one with them will make you return to your home, and your little one, more relaxed and happier. At least, that’s how I’d spend the extra money.

Baby’s First Christmas

Numbers vary on how much families spend on their baby’s first Christmas. The average family will spend about $330 per child. This breaks down in different parts, usually many of them unnecessary. Here’s a break down…

  • Baby portraits: This can cost $100+, depending on the package you purchase. Not to mention you’ll want to buy prints, frames, etc. You’ll also likely spend a pretty penny on the outfit they wear for the photos too. Instead of spending money on this for our little one we’ll be posing her for some photos throughout the week before Christmas in different outfits sent by family.
  • Matching pajamas: It is adorable and super trendy to have matching pajamas, but spending $45 on a onesie every year at Christmas time is insane to me. If you have a bigger family, that starts to add up fast. Even a matching dog bandana was $9. We’ll give our little one new pjs, a book, and a stuffed animal every Christmas Eve but there won’t ever be any pressure to hold the matching pj tradition.
  • Toys: Many families shower their kids in various gifts every year, and that’s great. As I mentioned above, many parents will spend more than $300 on each kid. Our family has chosen to have one big gift every year and lots of smaller, useful things. This year, our little one is getting a walker/activity center, which we paid for in gift cards we had from baby presents still. Typically, we will use Christmas bonuses and money to buy her big gift every year.

In the long run, we hope there is less focus placed on how much money is spent every year and more emphasis on the experiences we have together.

Readers, how much do you think you spent on your child’s first Christmas? 

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How We’re Planning to Spend Christmas This Year

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<p>Christmas time is usually hectic. Both my husband and I are typically working to meet end-of-year goals while rushing to get things done for the holiday. However, this year, our little one has forced us to slow down a little. That's something kids tend to do, by the way (if you don't have any). Despite our usual seasonal tasks being a little thrown off, we are planning to spend Christmas with family and surrounding the newest member with love.s</p>::Pexels

Christmas time is usually hectic. Both my husband and I are typically working to meet end-of-year goals while rushing to get things done for the holiday. However, this year, our little one has forced us to slow down a little. That’s something kids tend to do, by the way (if you don’t have any). Despite our usual seasonal tasks being a little thrown off, we are planning to spend Christmas with family and surrounding the newest member with love.

A Christmas That Came Together

All in all, this Christmas has just come together. I didn’t go pick up what I needed to make dinner until the Wednesday before Christmas. That is the same day I bought my husband’s gifts. I waited until the last-minute for everything because, well, we’ve been busy soaking up time with our baby. We both returned to work full-time in November and every spare moment we have is with her.

I’m thankful we are both able to work from home and be with her daily, even if there are some hard days. As a family, things generally come together for us. This Christmas is no different. We’ll have a few great things under the tree, thoughtful presents for family, a good meal, and plenty of homemade treats. Best of all, we will be with some of the people we love the most.

Reflecting During the Holidays

The holidays always tends to be a time of reflection for me. I take a moment to think about all that I’ve accomplished throughout the year. Last Christmas, we didn’t even know that we were having a baby yet. Amazing things happened for our family in 2021. There were career moves made, we went on trips, and we received the best gift of them all: our healthy daughter.

<p>spending christmas</p>::Pexels

From a financial standpoint, we are far from where we want to be. There is no doubt about that. We still hold debt and now have a little more to pay off from the birth of our child. Our budget has gone haywire and we need to buckle down. There is time for that still. For now, we are enjoying our child’s first Christmas and reflecting on how incredibly blessed we have been this year. We are beyond rich with love in our family.

Readers, do you use the holidays as a time to reflect on your accomplishments? Share some of your wins from this year!

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How We Plan to Reach Our 2022 Goals

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<p>Everyone is talking about what their resolutions for the new year are. I spoke about our financial resolutions in a post on the blog here recently. What most people don't talk about is the dedication, motivation, and hard work it takes to accomplish each of those goals. It takes a substantial amount of planning and twice as much dedication. So, I'm sharing with you how we plan to reach our 2022 goals.</p>::Pexels

Everyone is talking about what their resolutions for the new year are. I spoke about our financial resolutions in a post on the blog here recently. What most people don’t talk about is the dedication, motivation, and hard work it takes to accomplish each of those goals. It takes a substantial amount of planning and twice as much dedication. So, I’m sharing with you how we plan to reach our 2022 goals.

What Are Our 2022 Goals?

As I mentioned in a previous post, our financial goals mostly center around getting organized. Our finances really aren’t very organized. We need to open up a tax account, a separate savings account, IRAs, and savings for our daughter’s education. At the beginning of the year, we may also be considering trading in our vehicle after we file taxes. However, we aren’t solely focused on improving our money situation. Everyone has other goals they want to accomplish in life.

Personally, I’d like to continue practicing yoga in the new year. I also want to lose this baby weight and keep up my book-a-week reading habit. I also intend on continuing to learn German and would like to take some sort of class outside my general realm of things. I’m also taking a vow to take one day off from social media entirely every week.

How We’re Reaching Them

That being said, we’ve got some pretty lofty goals we want to meet in 2022. So, we are going to need a solid plan to reach them. Where our financial resolutions are concerned, we are going to start the year off on the right foot by filing our taxes and getting everything paid off. Admittedly, filing will be a little more expensive this year. We made more and have more write offs. There are some other unexpected expenses coming up as well (emergency dental work for me). Thankfully, we have a plan for all of it. We’re stashing away a percentage of everything we make, even small freelance checks, and putting it towards getting these things taken care of.

Budgeting will play a huge role in reaching our money goals this year too. We will need to budget for our various savings plans, retirement, and taxes. It will be a challenge but sticking to our planned budget will be crucial. On the personal side of things, planning and prepping have always been key to success in my life. When I take the time to plan things out, they typically go well.

This year, that means more meal plans and food prep. It will also mean taking on a better routine all around so that I can maintain motivation and stability. Noting how I’ll spend my day and what I’ll eat helps everything else stay on track in some way. The same can be said of our finances. I keep a calendar budget and stick to it. Finding what works for you in terms of planning and honing in on it will help you reach your 2022 goals.

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Here’s Why It is Hard to Save Money

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<p>Our family has always struggled a bit with saving money. It seems every time we get an emergency fund established or a little money stowed away, Murphy's Law kicks in and we have to spend that cash to stay afloat. However, we aren't the only ones that struggle with this. In fact, most people find it hard to save money. Here's why...</p>::Pexels

Our family has always struggled a bit with saving money. It seems every time we get an emergency fund established or a little money stowed away, Murphy’s Law kicks in and we have to spend that cash to stay afloat. However, we aren’t the only ones that struggle with this. In fact, most people find it hard to save money. Here’s why…

Is It Really Hard to Save Money?

You may be thinking to yourself, “That sounds like an excuse to just not save.” It’s really not. Saving is hard, especially when you are spreading your focus across multiple financial goals. For us, we are focused on becoming debt-free, saving money for a home, and stacking up our savings. Sometimes, saving takes a backseat.

Not to mention, every time something comes up, we may have to dip into savings to take care of the cost. Of course, this is better than swiping our credit card or taking out a loan, but it makes reaching that three to six-month emergency fund difficult to reach.

All that being said, we aren’t alone. Much of America has a difficult time even saving enough money to cover a $1,000 emergency. That’s pretty nerve-wracking. Many people don’t even save 5% of their take-home income and 20% of Americans don’t save any portion of their income at all. But why?

Why?

In truth, most Americans aren’t saving any money at all because of their own choices. They aren’t willing to scale back or dial down their lifestyle. That isn’t always the case though. There are several factors that contribute to the difficulty of saving money.

  • Rising cost of housing, childcare, education, and healthcare: This is completely out of your control, but everything is going up. With the rising cost of necessities, it is hard to save money.
  • Debt: One of our loan payments is $488 per month. Think about if that was going into savings! Debt is a huge killer when it comes to being able to save.
  • Not making enough money: Your wages simply may not be high enough to stash anything away and cover your basic needs.
  • Lack of organization: Many people don’t track their spending, which can help you identify areas where you might be able to save.
  • Social activities take priority: This is especially hard for younger individuals. Oftentimes, social engagements take a higher priority than your finances (and they shouldn’t). Plan for outings and don’t overdo it.
  • Financial ignorance: Most of what you need to know about finance wasn’t taught in school and parents often fail to teach their kids about managing their finances too.
  • No desire to learn: While you may not have learned young, you can learn how to better manage your money now. You have to want to do it though.
  • Lifestyle inflation: When you get a raise, start saving more money instead of inflating your lifestyle costs.

The best piece of advice I can give you if you are struggling with saving like we often do is to stop comparing yourself to others. This is at the heart of why it is so hard to save money for many people. Unfortunately, when we compare ourselves to others, we wind up overspending and possibly even hindering financial progress altogether. All of this just to keep up with the Joneses. Don’t do it!

Readers, what part of your personal finances do you struggle with most? Why?

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Does IRS Debt Show On Your Credit Report?

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Does IRS Debt Show On Your Credit Report?

<p>irs debt credit report</p>::Pexels

 

Many individuals are often concerned about how different types of debts can impact their credit scores and financial future. Among the most common queries is whether or not IRS debt shows up on a credit report. This is a valid concern, as credit reports are a reflection of one’s financial health and can influence everything from loan approvals to job applications.

 

Today, we’ll delve deep into the relationship between IRS debt and your credit report and uncover some key facts.

 

Consulting A Tax Professional Can Make A Difference

 

Navigating the intricate web of IRS debt can be daunting for many individuals. Given the complexities and potential repercussions of unresolved tax debts, seeking the counsel of a tax professional becomes not just beneficial but almost essential.

 

For example, Tax Law Advocates offers a trained eye that can spot nuances in your tax situation that you might overlook, ensuring that you’re not only compliant but also maximizing your financial strategy.

 

Tax professionals are well-versed in the multifaceted world of tax laws. Their knowledge extends far beyond mere numbers; they understand the implications of these figures, the potential pitfalls, and the best strategies to employ. They can be your guiding light in the otherwise dark maze of tax jargon, deadlines, and procedures.

 

Another advantage of consulting a tax expert is their experience in dealing directly with the IRS. Oftentimes, taxpayers can feel overwhelmed or even intimidated by the idea of communicating with this formidable agency. A seasoned tax professional, however, knows the intricacies of IRS processes, its expectations, and the best negotiation tactics. Their expertise can mean the difference between a favorable resolution and a costly mistake.

 

The Direct Impact Of IRS Debt on Your Credit Report

<p>irs debt credit report 2</p>::Pexels

 

Historically, the IRS used to report tax liens on an individual’s credit report, which could seriously damage their credit score. However, as of 2018, the three major credit bureaus, namely Equifax, Experian, and TransUnion, stopped including tax liens on credit reports. This change was initiated due to numerous errors and discrepancies associated with lien reporting.

 

Now, the IRS itself does not directly report your tax debts to these credit bureaus. That said, unresolved IRS debts can indirectly influence your credit. Opting for a loan to pay off the IRS debt will introduce a new line of credit, which will be reflected on your credit report.

 

Tax Liens Can Still Be Problematic

 

Even though tax liens no longer appear on credit reports, they still present other financial challenges. If the IRS places a tax lien against your assets due to unpaid taxes, it essentially gains a legal claim to your property.

 

This can be problematic if you’re trying to sell your assets or use them as collateral for a loan. While the lien itself won’t show up on your credit report, lenders might find out about it during their due diligence, which could influence their lending decision.

 

Potential Consequences Of Unresolved IRS Debt

 

<p>irs debt credit report 3</p>::Pexels

 

Apart from potential tax liens, not addressing your IRS debts can lead to other unfavorable outcomes:

 

  • Garnished Wages: The IRS has the authority to garnish your wages if you have unpaid taxes. This means they can directly take a portion of your earnings until the debt is settled.
  • Seized Assets: In extreme cases, the IRS can seize your assets, such as property or bank accounts, to cover the unpaid taxes.
  • Loss of Passport: For individuals with a significant tax debt (usually over a certain threshold, which may change over time), the IRS can inform the State Department, potentially leading to the denial or revocation of your passport.

 

Taking Proactive Steps Can Avoid Credit Complications

 

If you find yourself owing money to the IRS, taking proactive steps can help mitigate potential credit complications:

 

  • Installment Agreements: The IRS often allows taxpayers to set up installment agreements, enabling them to pay off their debts over time. While this agreement itself doesn’t appear on your credit report, it helps avoid further actions like wage garnishments or asset seizures.
  • Offer in Compromise: This is an arrangement where the IRS agrees to accept a lower amount than what is owed. However, it’s essential to note that not everyone qualifies for this, and it’s often recommended to consult with a tax professional before proceeding.

 

In Conclusion

While IRS debts do not directly appear on your credit report, they can still indirectly influence your financial health. Ignoring or postponing action on these debts can lead to more significant problems, such as wage garnishments, asset seizures, or travel restrictions.

Understanding how the IRS operates and taking proactive measures can make a world of difference. Whether it’s setting up installment agreements, negotiating offers in compromise, or simply staying informed about your rights, every step helps in safeguarding your financial future. Remember, when in doubt, it’s always a good idea to seek the expertise of a tax professional. They can provide insights, offer solutions, and be your advocate in navigating the intricate world of taxes.

 

 

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