Some people are intimidated by certain tax terms. One example would be “tax bracket.” What is a tax bracket, anyway? A tax bracket simply states what you will owe in taxes according to your income. Every bracket covers a specific range of income amounts and applies a base percentage for taxes. Let’s say, for instance, that you are in the 10% tax bracket. If you earned $4000 that year, you owe $400. If you earned $7600, you are liable for $760. What about the expression “moving into a higher tax bracket?” This means that if you earn more money and exceed your bracket’s cutoff point, you will automatically move into the next bracket. Hence, you will owe a higher percentage in taxes. Would this sort of defeat the purpose of increasing your income? Not at all. If you move into a higher tax bracket, this means that you are now in two or more tax brackets. In 2016, if you earned $9275 or less, you were in the 10% bracket. Let’s give an example. Say you earned $9000. Your income taxes would be $900. You got a promotion and a raise at work (which is wonderful news). You received a whopping $3000 annual raise. Thus, your income would be $12K. This means that you would owe 10% of the $9275 (which is $927.50), and you would also owe 15% of the raised income (which calculates to $408.75. This figure comes from 15% of the pay difference between $9275 and $12000. The total owed would be $927.50 + $408.75 = $1336.25). Although taxes can be complicated, you will have zero worries when you call Rozier. We’re here to assist you with your tax challenges. Call today!

Financial management tips:

Discussing money can be stressful, but it doesn’t have to be. Money is a mere tool that enables us to thrive. It is commonly said that money is the root of all evil, but this is false. Money is a good thing. Let’s explore some financial management tips and ideas to help you handle your finances better.

We could all do well with handling our finances better. To manage your finances, you first need to understand how much your income is, how much you spend, how to prepare your taxes, and be aware of your credit score. Financial awareness will help you reach your goals with greater efficiency.

The first thing to examine is your income and your spending. There are some credit card companies and banks that will help you remain aware of your income, expenses, habits, etc. However, if you don’t have the luxury of such easily accessible records, you can keep track by simply writing everything down.

Start out by writing down your income from last month. Then review how your money was spent. How much did all your bills cost? Were you able to save or invest? What are all the essential expenses you have each month, like rent, gas, groceries, and the light bill? How much did you spend for all the luxuries like dining out, entertainment, movies, and so forth? You will want to be thorough in this list, but you might have to estimate certain things. It’s vital to keep track of specific dollar amounts, because accuracy is paramount. Prepare yourself mentally for these activities, especially if you aren’t used to them. It might be a little bit perturbing at first to see how much you’re spending, but this will forge a path to better living for you and/or your family. If you want to save more, adjustments may be in order. The applicable term here is hedonistic adaptation. It refers to changes one makes in lifestyle according to income, spending, and so on.

Look into your tax situation. If you’re like many folks, your papers may be scattered here and there. Hence, finding those documents may take some time. Be cognizant of any current tax reform laws. Look up your credit score. There are some companies who offer this service for free.

Create some realistic goals for yourself. You should now have a better overview of your income as well as your spending tendencies. If you are overspending, create a monthly budget. Dave Ramsey recommends using the “envelope system.” For each expense, you have an envelope containing the cash for the entire month. This may help preserve more of your money. Is your credit score unsatisfactory? Create a plan to pay off the credit card balances step by step. Finally, when you’re ready to file your taxes, let us at Rozier help you to get the maximum refund you possibly can. Keep reading our blog posts for further financial management tips!