Unsexy Personal Finance: 6 Things You Need to Take Care Of

Personal finance isn’t always the exciting place that we personal finance bloggers seem to think it is.

While there’s something sexy about finding the right index fund for your Roth IRA, there are plenty of other unsexy things that you just have to do.

Unfortunately, some of the most important items related to your financial situation are often the things that are overlooked.

So, while it might be unsexy, here are 6 personal finance actions you need to take:

1. Create a Will

Thinking about death isn’t usually a lot of fun.  But it needs to be done — preferably before it happens.

What will happen to your assets if you die unexpectedly?  Who will care for your children?

These are questions that deserve serious thought, especially if you care about your family.  Consider how you would make sure your children are cared for, and how you would make sure that your assets are distributed according to your wishes.
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New Options for Taking the Home Office Tax Deduction

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Even as you gather your documentation to prepare your 2012 tax return, it’s time to look ahead and begin planning your tax situation for the next tax year.

One of the things to consider as you plan for this year is the new option for taking the home office tax deduction.

There are a number of tax-deductible business expenses that you can claim with your home business.  One of those is a deduction for the cost of the space you are using in your home.

If you plan to take the home office tax deduction, you are required to fill out Form 8829, which consists of 43 lines and can include depreciation and carryovers of deductions you haven’t used.  In some cases, the IRS even acknowledges, figuring the deduction can be a bit complex.  Plus, if you make mistakes on this form, it can red-flag your return for an audit.

Recognizing that home offices are becoming increasingly popular for the growing number of self-employed taxpayers, as well as for telecommuters, the IRS has released an optional method of claiming the home office tax deduction.  It comes into effect this year, in 2013, so you will be able to claim it (if you choose) early next year when filing your 2013 tax return.

New Option for Claiming the Home Office Tax Deduction

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What Are Required Minimum Distributions (RMDs) and How Do They Affect Your Retirement?

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It seems like when you get to retirement you should be able to take it easy.

Your money is in a tax-advantaged account, and you can take out money as you need.  No reason to fuss about it.

Unfortunately, this isn’t always the case.

While you might think that you can put off withdrawing money from your tax-advantaged account if you have income from other sources, this isn’t true if your account is subject to required minimum distributions (RMDs).

What are RMDs (Required Minimum Distributions)?

The RMD is a required amount that you are forced to take from certain tax-advantaged retirement accounts — even if you don’t need the money.

If you don’t take your RMD when you are supposed to, you can be charged penalties that can reduce the value of your retirement account.

RMDs are not required for Roth IRAs.  However, other retirement accounts come with RMDs.  This means your Traditional IRA, and other non-Roth IRAs are subject to RMDs.  Additionally, all 401(k) and 403(b) accounts are subject to RMDs.
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How Compound Interest Can Work Against You

We hear a lot about compound interest, and how it can help you build your retirement.

Indeed, the power of compound interest is the subject of many articles on how to build wealth over time.

Even though compound interest is powerful, it’s not just a force for good.  In fact, compound interest, like so much in the world of finances, is itself neither good nor bad.  It’s how you use it that matters.

Understanding how compound interest works is essential.

A quote, commonly attributed to Albert Einstein (although it hasn’t been completely substantiated), points out that, “Compound interest is the eighth wonder of the world. He who understands it earns it, and he who doesn’t pays it.”

Compound interest can work against you just as well as it can work for you.

The key is to earn it — and not pay it.  Debt is the way that you pay compound interest, and it works against you.

Simple Interest vs. Compound Interest

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Tax Time: What to Bring to Your Accountant

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Sometimes, it makes sense to have someone else to do your taxes.

If you have complex taxes, an accountant can make your life a little easier — and be worth every penny.

However, your accountant can’t work miracles. He or she can only prepare your taxes based on information that you provide. This means that you need to bring in everything needed to have your taxes done properly.

What to Bring to Your Accountant for Taxes

Personal Information

First of all, you need to have all of your personal information.

Bring in your Social Security number, as well as the numbers associated with your dependents.  The first time I used an accountant for taxes, I didn’t bring in my son’s Social Security number. It slowed things down a little bit, since I had to go back home to get it.
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Is the YOLO (You Only Live Once) Mentality Dangerous for Your Finances?

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When you are young and of limited means, access to experiences can be few and far between — at least without debt.

But to some, experiences are so important that they’ll head off on vacation in spite of mounds of debt.

One of the underlying characteristics of the “You Only Live Once” (YOLO) philosophy is that you should enjoy yourself now, before it’s too late.  What happens if you fritter away all your young and healthy years without truly living, only to find that your golden years are taken up by infirmity?  All that money you scrimped to build a nest egg just goes to paying medical bills.

YOLO says that it’s ok to be comfortable carrying a certain amount of debt, as long as you are pursuing great life experiences and enjoying the lifestyle you want to live.  In some cases, it’s even ok to incur more debt in order to travel the world — as long as you can handle the payments.

How YOLO Can Become Problematic for Your Finances

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How to Blog and Make Money – 5 Ways to Use Your Blog to Make Money

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By now, many have recognized the potential for blogs as a money maker.

While many people don’t actually end up getting rich off their blogging efforts, there are some who manage to build home businesses around their blogs — or at least use their blogs to make a little more money from their business efforts.

If you are looking for ways to use your blog to make money, you might be surprised that it isn’t all about affiliate marketing (although that can certainly be part of it).  The big question of course is how to blog and make money?

Here are 5 ways that you can use your blog to make money:

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