Hello, readers! Welcome back to the Hoods Tax & Accounting blog! We’re delighted to be able to share up-to-date information about taxes, savings, and financial literacy—giving you the tools you need to meet your short and long term goals. Whether you’re managing taxes for your small business or wondering how to take advantage of certain tax credits, we’ve got you covered! Our previous post and the first installment of this ‘Bookkeeping Basics’ series introduced the concept of what bookkeeping is, what it's used for, why it’s important and how to begin. From the old “general ledgers,” which used red and black ink, to ultra-modern digital programs, understanding the basics of bookkeeping is an essential part of running any successful small business. As a precursor for accounting, bookkeeping provides an accurate basis for evaluating the health of your business and planning for financial growth. For these reasons, accurate bookkeeping is paramount. 
 
The first part of this series explained the difference between single-entry and double-entry bookkeeping methods. As well, we went through the various types of accounts (i.e. assets, liabilities, revenues, and expenses), as well as their underlying subtypes (e.x. accounts receivable, utilities expense, interest income, etc.). We gave you a few options as far as setting up your accounts (e.g. Excel spreadsheet vs. digital bookkeeping software) along with their corresponding pros and cons. We explained the difference between a debit (Dr) and a credit (Cr) and trust us, it’s not what you think. Finally, we have a few best practices tips concerning bookkeeping to keep your books organized and accurate. Therefore, it’s in your best interest to read our last article (if you haven’t already) before delving into this second part! 
 
Today, we’ll continue our exploration into the world of bookkeeping. We’ll discuss balancing your books, preparing financial reports, then give you a few more best bookkeeping practices. When you’re alone at the computer with a bunch of receipts and numbers, figuring out how to make sense of everything can be overwhelming. Our aim is to showcase how simple bookkeeping can be when you understand the fundamentals. If you begin how you aim to finish, you should establish bookkeeping etiquette early on, as this will ensure later success. If you've been bookkeeping in a messy, roundabout way for years and fear how much effort an overhaul will require, take things one step at a time. We’ll be with you every step of the way!
 
Without further ado, let’s jump in!
 
Balancing the Books
 
This is a phrase many of us have heard thrown around throughout our lives, but what does “balancing the books” really mean? The best way to visualize balancing the books is to envision a scale. Not the scale you step on in the bathroom or the scale your doctor uses to weigh you. In this case, envision what’s called a double-pan balance scale. These types of scales allow you to weigh two things in relation to one another. When you place weights on both sides, the heavier of the two weights will sink lower. If the two weights are equal in mass, then both sides of the double-pan balance scale will appear level. Makes sense, right? 
 
In the same way, when you balance your books, the debits and credits recorded throughout a period (e.g. a quarter, a year) should “match” (which is to say they should correspond. In Part I we discussed the double-entry bookkeeping system. In this system, each transaction is recorded twice. First as a debit, or an increase. Secondly, as a credit, or decrease. For example, if Sally’s lawn company spent $3,000 on a new lawn mower, Sally would record a $3,000 debit in the left-hand side of the Equipment account. Then, Sally would record a $3,000 credit in the right-hand side of the Cash account. Both Equipment and Cash are considered asset accounts and, in this case, Sally has traded one type of asset for another type of asset. 
 
Now, these entries are akin to journal entries. They are a record of the transaction. When you balance your books, you are “posting” these entries into the general ledger in order to extrapolate the final account balances. While most bookkeeping programs will do this math for you (and point out errors in your entries at the time you make them), it’s still important you understand what’s being done. 
 
Continuing the example from earlier, Sally has redistributed her wealth between two different forms of assets in the aforementioned transaction. Thus, her Equipment account will reflect the debit, her Cash account will reflect the credit, but her overall Assets will not change because of this transaction. Now, conversely, if over the course of the month Sally not only purchased a new lawn mower but also needed to pay the firm which markets her services $2,000, the cash account balance and the overall assets would need to be adjusted down by $2,000. 
 
Once you’ve adjusted the balance of each account, you’ll have what’s called an adjusted trial balance. Assuming you’ve done everything right, when you add your company’s liabilities to your company’s equity, you’ll arrive at a figure which is equal to your company’s assets. In short:
 
Liabilities + Equity = Assets
 
Now, equity, if you’re unsure, is the value left over when liabilities are deducted from assets. (Psst! We covered equity in Part I.) This makes the equation, more accurately: 
 
Liabilities + (Assets - Liabilities) = Assets 
 
If you arrive at two different numbers, this indicates a discrepancy in your bookkeeping. You’ll need to comb back over your records, comparing debits and credits and making sure everything is indeed balanced. Once you’ve balanced the figures successfully, you’re ready to close the books and begin compiling financial statements!
 
Yay!
 
Preparing Financial Reports
 
This is one of the most exciting parts of bookkeeping, because this is the stage when conclusions can be drawn based off of the meticulous records you’ve kept. With these financial statements, you’ll be able to assess the health of your business and plan accordingly for future expansion or cutbacks. The three essential types of financial statements are: balance sheets, profit and loss “P&L” statements, and cash flow statements. We’ll provide you with a brief overview of each. 
 
Balance sheets are a snapshot of your books. They showcase the equation at work and include your current assets, liabilities, and equity. You’ll include the balances of your accounts here. When someone looks at your company’s balance sheet, they’ll be able to assess in only a moment the health of your company. Are you in the red? Or, do you have cash reserves which will facilitate expansion? 
 
Profit and loss statements, also referred to as income statements, report on revenues and expenses over a period of time. For example, a clothing company may have grossed $1.2 million in a quarter, but spent $600,000 on materials, shipping, and marketing in the same time span. Therefore, the company’s revenue was actually $800,000. By comparing multiple P&L statements, one can glean the growth (or decline) of a company. 
 
Finally, cash flow statements are a simpler version of a P&L. They focus solely on how much money the company is bringing in and sending out. By evaluating a cash flow statement, you can assess a company’s ability to pay its bills and remain afloat. 
 
Best Bookkeeping Practices
 
Sticking to a regular schedule is key to managing your books. Entering records of transactions can be tedious and time-consuming. Allowing too much time to pass between entries only makes the work unbearable when you finally do sit down. Choose a time every week, two weeks, or month, to input financial information (i.e. invoices, bill payments, revenue, etc.). Keep all of this information in one place and be sure to tackle bookkeeping when your mind is well-rested. Minor mistakes can turn into headaches later. 
 
If you’re unsure about handling the entirety of your company’s bookkeeping, there’s no shame in that! Many successful businesses outsource their bookkeeping needs, as this frees up time and mental energy. Just make sure you invest in a trusted professional to handle your bookkeeping! 
 
 
Thank you for reading the second part of the Bookkeeping Basics series! We hope we’ve demystified bookkeeping, at least a bit. Tune in for the third part of the series, where we’ll be answering commonly asked bookkeeping questions! As always, we’re happy to be able to provide you with the most relevant, up-to-date tax information for you and your family. From savings plans to tax credits to business acumen, the Hoods Tax & Accounting blog is your one-stop shop for everything you need. We offer tax preparation, bookkeeping, payroll, and QuickBooks services. If you have any questions or are interested in a consultation, please reach out! We do offer virtual consultations over Zoom, as part of our effort to accommodate everyone in these trying times. We look forward to hearing from you! Until next time, thank you for reading! 

Hello, readers! Welcome back to the Hoods Tax & Accounting blog! We’re delighted to be able to share up-to-date information about taxes, savings, and financial literacy—giving you the tools you need to meet your short and long term goals. Whether you’re managing taxes for your small business or wondering how to take advantage of certain tax credits, we’ve got you covered! Our previous posts delve into the benefits of a 529 savings plan and just what cryptocurrency is. If you’re saving for your education or your child’s education or would like to understand the recent tax provisions concerning cryptocurrency, our latest articles will tell you everything you need to know! 
 
Bookkeeping has come a long way since the “olden days,” when business records were recorded in ledgers. That said, electronic bookkeeping systems still refer to account sheets as “General Ledgers.” Personally, we think bookkeeping would be much cooler if it were still done in red and black ink! When you boil bookkeeping down to its basics, that’s what it’s for: determining whether a business is in the “red” or the “black,” as well as just how far a business is in either debt or profit, respectively. 
 
Bookkeeping is an essential part of any small business. From online-only stores from the living room to full-fledged brick and mortar shops on busy streets—bookkeeping allows businesses to reach their full potential and make informed decisions. Understanding the moving mechanisms of your business on a basic level enables you to assess the overall financial health of your business and improve spending. 
 
So, what is bookkeeping? 
 
Bookkeeping is the precursor to accounting. Bookkeeping is the detailed input of financial data into a system which allows for oversight, review, and analysis. You might feel intimidated by P&Ls, cash flow statements, and balance sheets, but the truth is that bookkeeping is done one transaction at a time. It doesn’t have to be complicated, which is why today we’re taking the time to explain some of the basics. 
 
Questions Bookkeeping Can Answer
 
Where does a majority of the money your small business brings in come from? How much did you spend on office supplies last year? How does your last quarter compare to the quarter prior? Where is your company hemorrhaging money and, more importantly, how can you staunch the losses? Bookkeeping can give you the means to answer these questions. 
Habitual expenses, such as automated purchases and services, can eat up a budget and add to expenses. As you isolate the areas where money is being wasted on things your business no longer requires, you can begin to tighten the purse strings. Adjusting your budget and applying new numbers allows you to think ahead and plan for the future. 
 
Only 2.5% of small businesses are audited, which means you aren’t likely to receive a visit from the IRS, but you should be prepared to answer potential questions nevertheless. In an audit, the IRS will want to know about profits, losses, tax deductions, and tax returns. All of these figures and more are underneath the bookkeeping umbrella. Which means, if you’ve been keeping accurate records, you can answer the IRS’s questions and send them on their way without delay! 
 
Then, when tax season rolls around, you can use the data you have from bookkeeping for your tax write off. Exact figures are often better than using the IRS’s substantiation rates. Bookkeeping can help you determine quarterly tax returns, to ensure you’re paying the adequate amount throughout the year. 
 
If there are mistakes with employees or customers, bookkeeping provides an accurate reference to clear up discrepancies. 
 
As a small business owner, you can anticipate certain seasons when expenses will need to temporarily increase. Bookkeeping will allow you to assess whether your current assets will stretch far enough or you need to apply for a business credit line or loan. 
 
Types of Accounts
 
Bookkeeping is split up by account types. The five types of bookkeeping accounts are: assets, liabilities, revenue, expenses, and equity. Assets are resources which add value to your business. Liabilities are obligations which take value from your business. Revenue is another way of saying income, while expenses are another way of saying spending. Finally, equity is the value left over after the liabilities have been subtracted from the assets. Here are some examples of common subtypes of accounts within these categories: 
 
    Assets

• Accounts Receivable
• Cash
• Equipment 
• Inventory
• Real Estate
• Supplies

 
    Liabilities

• Accounts Payable
• Interest Payable
• Unearned Service Revenue

   
    Revenues

• Interest Income
• Rental Income
• Sales Income

 
    Expenses

• Insurance Expense
• Interest Expense
• Rent Expense
• Salaries and Wages
• Supplies Expense
• Utilities Expense

 
How To Set Up Accounts
 
Now you know what the account types are, you’ll need to go ahead and set up the accounts in a system. As we mentioned at the beginning of this article, at one time, businesses kept their records in a ledger. Now, there are numerous options available online. You could use a spreadsheet, like Excel, although it’s not recommended. There are dedicated bookkeeping platforms, such as QuickBooks, which allow businesses ease-of-use when bookkeeping. That said, outsourcing a bookkeeper is much more time- and cost-effective than having an in-house bookkeeper. Paying someone to set up and manage your accounts ensures everything is done right and you can rest easy knowing a professional is handling your bookkeeping. 
 
However, you should still understand the basics of bookkeeping, even if you outsource. This is your business, and being able to understand the numbers will help you make decisions. 
 
Before you set up your accounts, you’ll need to decide which type of bookkeeping you’re interested in doing. Single-entry bookkeeping is just as it sounds—you enter each transaction just once. This type of bookkeeping works best for simple business with few cash transactions, little inventory, and even less equipment. An example of single-entry bookkeeping would be for an earring shop on Etsy. The owner makes the jewelry to order. When she buys supplies, she places a single value in the Supplies Expense account. When she receives an order, she places a single value in the Sales Income account. See? Simple. 
 
Now, double-entry bookkeeping is a bit more complicated, but it's actually the more commonly used method of the two. This type of bookkeeping works well with complex businesses, with lots of moving parts (e.g. employees, inventory, multiple forms of transaction). With this method, as the name suggests, you would record two entries for each transaction. The first entry is entered on the left-hand side of the account and is referred to as the debit (Dr). The second entry is entered on the right-hand side of the account and is referred to as the credit (Cr). Don’t think of debit and credit in their normal way. Here’s an example: A lawn care business invests in a $3000 lawn mower. They’ll enter a $3000 debit on the left of the Equipment account, and a $3000 credit on the right of the Cash account (since $3000 has been taken from the businesses assets to add to their equipment). Because each value is balanced by an opposite value, you know precisely when profits are beginning to drop off. 
 
Record Everything 
 
Data is no good if the numbers aren’t right. Accurate information will allow you to make the best decisions for your business and anything else could send you spiraling down the wrong track. This is why it's important to invest in a professional if you aren’t confident in your record keeping capabilities. Bookkeeping isn’t the time or place to guess, or estimate. Here, you want precise figures which correlate to real life sales and expenses. Do not leave out expenses because they’re small and “don’t count.” Every dollar counts (as the IRS would say)! Expenses include materials, services, payroll, and income from both clients, customers, investments, and dividends. You may not even be this meticulous with your personal finances, but bookkeeping for your business is a different endeavor altogether. Hopefully, booking for your business will inspire you to pour the same attention into your own finances! As well, you want to make sure you enter everything in the proper account and (if you’re doing double-entry) the proper corresponding account. This helps to ensure your books stay balanced, which we’ll discuss in more detail in the next part. 
 
 
We hope you’ll tune in for the next part of this series on Bookkeeping Basics! As always, we’re happy to be able to provide you with the most relevant, up-to-date tax information for you and your family. From savings plans to tax credits to business acumen, the Hoods Tax & Accounting blog is your one-stop shop for everything you need. We offer tax preparation, bookkeeping, payroll, and QuickBooks services. If you have any questions or are interested in a consultation, please reach out! We do offer virtual consultations over Zoom, as part of our effort to accommodate everyone in these trying times. We look forward to hearing from you! Until next time, thank you for reading!

Hello, readers! Welcome back to the Hoods Tax & Accounting blog! We’re delighted to be able to share up-to-date information about taxes, savings, and financial literacy—giving you the tools you need to meet your short and long-term goals. Whether you’re managing taxes for your small business or wondering how to take advantage of certain tax credits, we’ve got you covered! Our previous post delves into the benefits of a 529 savings plan. If you’re saving for your education or your child’s education and would like to utilize a tax-advantaged account, our last article will tell you everything you need to know! 
 
Today, we begin the first part in our series on cryptocurrency. Cryptocurrency is a hot topic and you might’ve seen a few news stories about new forms of cryptocurrency emerging and gaining popularity. In future posts, we’ll discuss the difference between certain types of cryptocurrency, as well as the risks and benefits involved in obtaining cryptocurrency. In this post, however, we want to give you an easy-to-understand overview of what cryptocurrency is. As well, we’ll dip our toe into the still-murky waters of tax law concerning cryptocurrency. None of the information in this article is financial advice, nor do we encourage you to invest in cryptocurrency. Our objective is to give you a comprehensive understanding of this new technology and its possible implications for our society. If you’re interested in learning more, keep reading!
 
What is cryptocurrency?
 
Cryptocurrency isn’t as mystifying as it first appears. In simple terms, cryptocurrency is a digital asset. Like your home is a real estate asset or the cash in your pocket is a liquid asset, cryptocurrency is based in the digital (or virtual) sphere. Similar to how dollars used to be backed by gold and silver, cryptocurrency is secured by cryptography. Cryptography is the “art of writing or solving codes. If you’ve ever seen ‘National Treasure’ or ‘The Imitation Game,’ you’ve witnessed cryptography in action. During the first world war, to ensure messages remained secure from the Central Powers, the Allied Powers used rotor cipher machines. During World War II, the Allies and the Axis used computers to encrypt their messages. The way encryption works is pretty straightforward. You begin with plain text. This plain text is when encrypted using an encryption key (i.e. secret algorithm). Without the encryption key, the text cannot be decoded from its unintelligible state. 
 
This encryption makes cryptocurrencies one of the most secure forms of currency, since it's nearly impossible to counterfeit or double-spend. The encryption which secures cryptocurrency exists on a decentralized network. A decentralized network means each node within the network (i.e. computer) has decision-making authority or necessary software capabilities; as opposed to a centralized network, in which instance control can rest in the hands of one individual, government, or organization. The decentralized network is based on blockchain technology, which we’ll discuss later on in this series. 
 
For the reasons stated above, cryptocurrency began as a currency which was not issued by a central authority and thus—theoretically—not subject to the control of a single government. This primary philosophy has resulted in cryptocurrency being used for illegal purposes, including to escape taxes. In the next section, we’ll discuss the societal implications of cryptocurrency, both positive and negative. 
 
Instead of dollars or bills, an individual unit of cryptocurrency is referred to as a “token.” Using a cryptocurrency system, sums of money can be easily transferred without the involvement of a third party (such as a bank or other financial institution). Instead, a user has both a “public key” and a “private key,” which serve as their unique signature to approve financial transactions. There are negligible fees associated with these transactions, as well. 
 
You might be wondering: How does cryptocurrency make money? This is an article in and of itself, as there are a few ways to make money from mining and investing in cryptocurrencies. We’ll cover this in more detail in the future, so make sure you return for the rest of the series! 
 
What potential does cryptocurrency have for our society?
 
Cryptocurrency has the potential to revolutionize the way financial institutions and law operate in our society. Major institutions, such as JPMorgan and Chase, view cryptocurrency as an opportunity to streamline payment processing and lower associated fees. For others, the long term implications could include online voting and crowdfunding. Below, we’ll discuss the major benefits and drawbacks of cryptocurrency becoming the way we spend our money. 
 
    Potential Positives
 
The inflation rate for the U.S. dollar in 2020 was one-point-four percent. Inflation is the process of rising prices which results in the devaluation of individual units of currency. Or: Your money gradually lessens in value year after year. One of the potential benefits of cryptocurrency is its inflation resistance. For example, there are only twenty-one billion bitcoins in existence. Unlike the dollar, new bitcoins are not created to manipulate the value of the currency. 
 
Cryptocurrency is also lauded for its portability and divisibility. Cryptocurrency exists only in a virtual capacity. Therefore, unlike cash or large tangible assets (e.g. cars, houses, boats), the currency can be easily transferred or accessed by anyone with a computer. Similarly, most cryptocurrencies are infinitely divisible. While the dollar can be split into quarters, dimes, nickels, and cents—cryptocurrency can be into infinitesimally small fractions of itself. 
 
    Potential Negatives
 
As we briefly mentioned above, the anonymity of cryptocurrencies encoded networks allows a relatively safe haven for criminals and those seeking to evade paying taxes. In the next section, we’ll discuss how the IRS is attempting to crack down on cryptocurrency as an industry. Besides its potential to offer refuge to criminals, cryptocurrency can also be extremely volatile. Much of a cryptocurrencies value is tied to its perceived value, meaning this metric can vacillate with news events. Most currencies gain and lose value this way, but since cryptocurrency is digital and can be easily divested from, this volatility is much more drastic. 
 
Likewise, since cryptocurrency is digital, the currency is susceptible to digital attacks. Vulnerabilities within the blockchain software are prime targets for hackers, bugs, and malware. If a cryptocurrency is compromised, countless individuals' private information and funds are up for grabs. However, this is a problem faced by cryptocurrencies and financial institutions alike as we move into an age when most robberies are cyber-based.
 
Current Tax Law Concerning Cryptocurrency
 
According to a notice issued by the IRS in 2014 (2014-21, 2014-16 I.R.B. 938), virtual currencies are treated as property for Federal income tax purposes. Therefore, capital gains and losses must be reported. Until now, cryptocurrency has been largely difficult to track and tax. This inability contributes to a gap between how much money the IRS collects and how much money the IRS estimates is due. The cryptocurrency market is worth nearly two trillion dollars; and, at certain times during this year, three trillion dollars. The latest infrastructure bill, which was passed in the Senate on August 10th, includes a new requirement for brokers to report gains and losses to the IRS. This clause stirred discontent within the cryptocurrency community, fostering a fear of intense oversight and reporting obligations. The U.S. Department of Treasury has since clarified its definition of a brokerage includes “entities that transfer digital assets on behalf of another person.”  As well, reporting rules will not go into effect until 2023. Lawmakers hope new reporting rules will help raise money for planned infrastructure (estimated to cost one-trillion dollars) over the next ten years. 
 
 
We’ve only just scratched the surface with what cryptocurrency has to offer. We hope this article provided an uncomplicated entry point into the world of cryptocurrency. Make sure you come back for the upcoming portion of our series, where we will differentiate between multiple forms of cryptocurrencies and discuss how individuals make money from digital currency. We’ll also cover a host of need-to-know terms. Stay tuned! 
 
As always, we’re happy to be able to provide you with the most relevant, up-to-date tax information for you and your family. From savings plans to tax credits to business acumen, the Hoods Tax & Accounting blog is your one-stop shop for everything you need. We offer tax preparation, bookkeeping, payroll, and QuickBooks services. If you have any questions or are interested in a consultation, please reach out! We do offer virtual consultations over Zoom, as part of our effort to accommodate everyone in these trying times. We look forward to hearing from you! Until next time, thank you for reading!
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Hello, readers! Welcome back to the Hoods Tax & Accounting blog! We’re delighted to be able to share up-to-date information about taxes, savings, and financial literacy—giving you the tools you need to meet your short and long term goals. Whether you’re managing taxes for your small business or wondering how to take advantage of certain tax credits, we’ve got you covered! Our previous post about how to avoid impulse spending is available for your reading pleasure and we hope you’ll return to the blog for our upcoming series on cryptocurrency!
 
Today, we’ll be discussing a hot topic for parents and students alike—a college savings plan! Most parents save for their kids college fund the old fashioned way, by allocating a portion of their monthly income into a standard savings account over a number of years. However, we are here to tell you there’s a better way! There are savings plans created specifically for the purpose of paying for your child’s education-related expenses and which allow multiple family members to pay into the fund! According to Peter Mansfield, the chief marketing officer for U-Nest (an app which allows savers to open 529 plans), about seventy percent of families are unaware 529 plans exist. And, according to a 2018 study done by Morningstar, families are missing out on an estimated $237 million in future educational savings due to the misuse (or lack of use) of 529 savings plans. 
 
In this article, we’ll discuss what a 529 savings plan is, its stipulations, and its benefits. Therefore, if you’re interested in making your money work for you, read on!
 
What is a 529 Savings Plan?
 
A 529 savings account is a tax advantaged savings account which allows for tax-free growth and tax-free withdrawals on qualified expenses. Traditionally, these savings accounts have been used to pay for expenses related to attending colleges and universities, including: 

• Tuition
• Room & Board
• Books
• Fees

In actuality, there are two types of 529 savings plans. The first type of plan is referred to as the prepaid tuition plan. This plan allows individuals to buy tuition credits for future use at today’s prices. However, the prepaid tuition plan cannot be used to pay room and board or expenses unrelated to tuition. Which is why the second type of 529 savings plan—the education savings plan—is considered the more flexible option of the two. The education savings plan allows individuals to pay for any of the education-related expenses stated above. As well, this type of plan can be invested in higher-risk, potentially higher-return options like stock funds. Though, keep in mind, the value of this savings plan is not insured by either state or federal governments. This means potential losses are your responsibility. 
 
How do I set up a 529 Plan?
 
Before setting up a 529 savings plan, you’ll want to shop around at a multitude of financial institutions to find the best option for you. The key elements to keep in mind when comparing savings plans are: low costs, good benefits, and a solid investment track record. Low costs means the institution isn’t charging outrageous fees to open an account or for its servicing of your account. Any money spent on fees is money which isn’t going into your account. Good benefits could include tax deductions for contributions. Only select states (i.e. Arizona, Arkansas, Kansas, Minnesota, Missouri, Montana, and Pennsylvania) offer deductions on state income tax for contributions to a 529 savings plan. Finally, a solid investment track record means the institution has shown a consistent ability to increase its savers’ contributions (especially in years when the market did well). Depending on your goals and the age of your child, you might prefer an institution with a more aggressive or conservative investment style. 
 
Next, you’ll want to name a beneficiary. This can be your child, grandchild, niece, nephew, or yourself. Yes, that’s correct—you can open a 529 savings plan for yourself. If you’re looking to accelerate your career by going back to school or switching your career entirely, a 529 savings plan can be used for eligible graduate programs. Or, you might consider investing in a 529 savings plan as a career emergency fund. The coronavirus pandemic saw massive job loss and wage cuts. Many individuals are rethinking their career path and their job security in the wake of the pandemic. A 529 savings account can be a good way to prepare for the unexpected. 
 
You’ll need to name contributors. Again, this can be anyone related to you or your beneficiary. 
 
After you’ve set up your account, chosen the type of savings plan you prefer, named a beneficiary and contributors, the only thing left to do is contribute after-tax money and watch your savings grow! 
 
How did the SECURE Act change 529 Plans?
 
The SECURE Act, passed in 2020, changed how the 529 savings plans could be utilized and actually broadened their use. Now, the list of qualified education-related expenses extends to upgrading technology (such as computers and laptops), purchasing printers, internet service, necessary software, and anything else required by the beneficiary’s institution to adequately complete their education. 
There’s more! The education savings plan can now be used to cover K-12 private school tuition (some limitations apply). This means you can invest in your child’s entire education before they’re even born! 
 
As well, 529 savings plans have been approved to pay off up to $10,000 per year in qualified education loan repayment. Student loans have been a hot topic as of late, as more and more studies show the millennial generation struggling to retain wealth at the same rate as their predecessors due to crippling student loan debt. No parent wants to see their child struggle to live because they choose to pursue an education. Likewise, no individual wants to be plagued with paying student loans for upwards of thirty years. Even if you did not invest into a 529 savings plan prior to your child going to college, you can still help them pay off their loans quicker!
 
Hold on, there’s more! Registered apprenticeships, certified by the U.S. Department of Labor, are also eligible to be paid for with 529 savings funds. Apprenticeships are an avenue to earn credentials and experience, learn a craft hands-on, and jumpstart your career. Certified apprenticeships might include software engineering, business analysis, or even working on The Late Show with Stephen Colbert! To explore potential apprenticeship opportunities, click here.  
 
We’re almost finished! Finally, if the chosen beneficiary of a 529 savings plan does not utilize the entirety of the savings fund, the remainder of the funds can potentially be transferred to a qualified sibling or relative! You can rest assured knowing each dollar you put into a 529 savings plan can be used to your or your child’s benefit. 
 
 
To reiterate, the benefits of a 529 savings plan are: The ability to have your savings invested and grow at a rate far faster than an average savings account. The ability to both investment gains and tax benefits, including the state income tax deduction (in qualifying states). The flexibility to choose the plan which works best for you and your family. The ability for multiple family members to contribute to a single plan, as well as for a single plan to rollover to multiple family members. As well as much, much more! The benefits of a 529 savings plan for families and individuals are endless. Allow your savings to work for you and invest in a 529 savings plan today! 
 
As always, we’re happy to be able to provide you with the most relevant, up-to-date tax information for you and your family. From savings plans to tax credits to business acumen, the Hoods Tax & Accounting blog is your one-stop shop for everything you need. We offer tax preparation, bookkeeping, payroll, and QuickBooks services. If you have any questions or are interested in a consultation, please reach out! We do offer virtual consultations over Zoom, as part of our effort to accommodate everyone in these trying times. We look forward to hearing from you! Until next time, thank you for reading! 

Hello, readers! Welcome back to the Hoods Tax & Accounting blog! We’re delighted to be able to share up-to-date information about taxes, savings, and financial literacy—giving you the tools you need to meet your short and long term goals. Whether you’re managing taxes for your small business or wondering how to take advantage of certain tax credits, we’ve got you covered! Our previous post about the differences in subcontractor and independent consultant taxes is available for reading and we hope you’ll return to the blog for our upcoming series on cryptocurrency!
 
Late summer means vacationing to tropical locales, brunching with friends under the noonday sun, and shopping for the impending return to school. With a long list of potential expenses already pulling on your wallet, it’s easy to end up overspending on items which were never on your list in the first place. Today, we’ll be exploring what impulse spending is, how you’re susceptible, and why it could be hurting you in the long run. Finally, we’ll go over a handful of ways you can curb impulse spending and keep those extra dollars for yourself!
 
What is Impulse Spending
 
We’ve all been there. You’re standing near the cash register, ready to checkout, and just there—a well-placed, beautifully displayed cache of candy. You decide to grab a chocolate because you deserve a treat and it’s only two dollars. What’s the big deal? 
 
That’s an impulse purchase. 
 
An impulse purchase, or impulse buy, is any purchase you weren’t planning to make. Some can be small, like the example we just went through. Others can be quite large. If you’ve ever walked into a big-box store and felt the urge to drop seven-thousand dollars on a hot tub or trampoline—that’s an impulse. We cannot help most of our impulses; they’re subliminal and inspired by a range of factors outside of our control. However, most of us can control whether we follow through on the impulse to buy something we know we don’t need. We’ll provide you with the tips you need to resist impulse spending. Keep reading!
 
Why Reigning in Impulse Spending Is Important
 
On average, Americans spend $2,196 on impulse buys each year. Yes, those chocolates and trampolines do add up after a while. Imagine if you put the same amount towards your thirty-year mortgage? You’d shave off the grand total of your house by over sixty-five thousand dollars. About ninety percent of Americans say they indulge in impulse spending, with nineteen percent saying they spent more than one-hundred dollars on their last impulse purchase. Amazingly, nearly sixty percent of all purchases are unplanned. In 2020, the top five impulse buys included cleaning supplies, hand sanitizer, toilet paper, hand soap, and canned. These impulse purchases can tell us a lot about ourselves as a society and what we value, but they can also reveal our fears and deep-seated insecurities. We’ll discuss the reasons why we impulse buy in-depth later.
 
Right now, we’ll focus on how impulse spending might be negatively affecting your life. Impulse spending might be holding you back from reaching your long term financial goals. Do you look around at the end of the month wondering where all of your money went? Chances are your money is going toward unplanned and unregulated expenses. Furthermore, impulse spending can be a major point of contention between you and your partner. We all want to be able to trust our significant other with shared money and impulse spending may be degrading that bond of trust. Finally, impulse buying is often a response to feelings of unhappiness and lack within ourselves. As we know, most purchases won’t have a lasting positive impact on your emotional state, but will have a lasting negative impact on your pockets. 
 
The Psychology Behind Impulse Spending
 
Who is most likely to make purchases impulsively? Men might believe women are, but the opposite is actually true. Men are more likely than women to make an impulse buy, with the percentage of men who regularly make impulse purchases being 26% and the percentage of women who regularly make impulse purchases being 16%. Research suggests extroverted people, as well, are more likely to buy impulsively. This may be because the personality factors linked to impulse buying—openness, conscientiousness, and neuroticism—also correlate to extroversion.  People who are highly susceptible to stress will often use impulse buying to manage their stress levels. Distracted or tired people have less mental capacity to make good choices, therefore they are also more likely to buy impulsively. On the whole, people who feel confident, complete, and fulfilled by their lives are less likely to make impulse purchases. 
 
Emotions shouldn’t play a part in how we spend our money, but they often do. There are four emotional factors which contribute to impulse purchasing. They are:

1. Immediate Gratification 

 
This is when purchases are used as a pick-me-up on a stressful day. If you’ve been working hard or are exceptionally bored, it's easy to justify a small purchase which will bring you joy and excitement for a brief period of time. These purchases are often food-based (e.x. Fast food, candy), entertainment-based (ex. a movie ticket, a book), or appearance-based (e.x. cosmetics, clothes). 

1. Loss Aversion 

 
This is when purchases are made out of a fear of missing out on something good. Perhaps you’ve noticed your friends are frequenting a once-a-year sale or you received a newsletter in your inbox detailing a twenty-four-hour sale. You might justify this purchase by saying it’s a limited time offer and you’re saving money. More than half of shoppers impulse buy because of a sale. The truth is, marketers understand our very human desire to take advantage of opportunities we fear won’t come around again. 

1. Stockpiling

 
This is when purchases are the result of a fear of running out of a supply of something. In 2020, we saw people rush to stores in droves to buy toilet paper out of a fear there wouldn’t be any (for some reason). Well, there were toilet paper shortages in some places—because of this fear-based activity. Alternatively, you might stockpile more of your favorite shampoo than you technically need because another brand of shampoo once discontinued your go-to. Again, this is emotion-based spending. 

1. Biased Evaluation of Use

 
This is when we overestimate how much use we’ll get out of a product in its lifetime. We might justify a clothing purchase by saying how much we’ll wear the item, or a kitchenware purchase by how much we’ll use it to cook. The truth is, if we look in our closets and kitchens, there are plenty of clothes and gadgets we don’t ever use. Regardless of how much we liked them when we first bought them. 
 
Another factor which contributes to how we spend our money, which is a little harder to pin down or solve, is how we were raised. The state of our household finances when we were growing up can play a large role in how we choose to spend our money as adults. If your parents spent money when they were feeling low or fought excessively over small purchases, you might be inherently emotionally predisposed to impulse buying. Being aware of how we’ve been influenced can go a long way towards altering our conditioned behavior. 
 
Advertisers are knowledgeable about psychological weaknesses and use these weaknesses to make sales. In advertising, these psychological weaknesses are called pain points. Be conscious of how ads and promotions might be appealing to your particular pain points to avoid falling into any marketing traps. 
 
Methods for Avoiding Impulse Spending
 
There are a ton of ways to avoid impulse spending and you really need to find the one which works best for you. Most financial institutions will recommend making a budget and simply sticking to your budget. Obviously, anything which hasn’t been factored into your budget will not be purchased, thus eliminating impulse spending. However, it's not always this simple. You have to be realistic when creating a budget. If you know you like the occasional cup of coffee in the morning or a night out on the town with friends, you shouldn’t try to cut these things out. Instead, you should plan for these expenses. Budget five or six coffees and one or two nights out into your monthly budget. This removes the impulse from the purchase, rendering you guilt-free. 
 
Beyond a budget, you have to determine what’s important to you in the long term so you can stop prioritizing short term gratification. What are your financial goals? How long have you estimated before you reach them? The next step is to take stock of your current finances and see how much of your money is being spent impulsively. Recheck the numbers and see how much faster you would reach your monetary goals if you reallocated your impulse buy expenditure towards them? The answer may give you the motivation you need to save. 
 
As we discussed, our emotional state can drive us to make decisions we wouldn’t otherwise make. Ever heard the saying, “don’t go grocery shopping when you’re hungry”? Well, this applies in all scenarios. You shouldn’t shop when you’re overwhelmed, tired, stressed, or hungry. For the same reason, you shouldn’t shop later at night. Potentially sleepy from a large meal and few glasses of wine, your critical thinking skills and inhibitions are lowered. It’s a recipe for disaster. 
 
The tried-and-true method for cutting down on impulse spending is to wait before making a purchase. Chances are, within a week or even a day, the impulse will have gone and you’ll be left wondering why you wanted the item in the first place. In this vein, don’t allow timed deals to force your hand. A clock counting down the minutes until the end of the 50% Off BOGO Sale might induce a feeling of low-grade anxiety, but just remind yourself the sale will be back around eventually and you can wait. 
 
It’s recommended you bring cash to the store and only the amount you need. This can curb overspending. A study done by Bankrate.com found that people who used charge cards at restaurants spent fifty-percent more on average than those who used cash. This may be because of the physical element of holding bills in our hands and being unwilling to part with the feeling.
 
Another tip is to take stock of what you already own. You’ll avoid buying things you already have that you forgot about and may come to develop a deeper appreciation for what you currently own. 
 
A great piece of advice is translating the cost of an item into time. For example, if you make $14 an hour after tax and a dress you want costs $98, then the dress costs seven hours’ worth of work. Is it worth it, though? This added bit of mental work may be enough to prevent you splurging in the moment. 
 
The last two tips are small but effective. If you’re shopping online, we recommend you read reviews and put everything you want in the cart. Pay attention to the bad reviews especially. They may be enough to turn you off of a purchase. The effect of putting everything into the shopping cart and then leaving the site is a feeling of low-grade satisfaction. You’ve picked out everything you want to buy, which gives your brain a small jolt of dopamine, and might be all you really needed. 
 
 
We hope you’ll utilize these tips to avoid impulse spending and reach your financial goals. For more information and advice on saving, spending, taxes and more—make sure you return to the Hoods Tax & Accounting blog! We’re here to help in any way we can! If you have any questions or are interested in a consultation, we are providing meetings over Zoom. For any other assistance, please reach out by calling or emailing! Thank you for reading. Until next time! 

Hello, readers! Welcome back to the Hoods Tax & Accounting blog! We’re delighted to be able to share up-to-date information about taxes and savings and financial literacy, giving you the tools, you need to meet your short and long term goals. Whether you’re managing taxes for your small business or wondering how to take advantage of certain tax credits, we’ve got you covered!
Today, we’ll be discussing the distinction between subcontractors and independent consultants. The tax implications of each classification are relevant to both employers and potential clients. If you aren’t sure where you fall between the two classifications, we’ll outline the specifications of each and how the IRS differentiates between the two. Keep reading to learn more about these non-employee positions!
 
What are Subcontractors?
A subcontractor is, as the title implies, a type of contractor. A subcontractor can be an individual or a business entity. In short, the subcontractor engages in a contract to perform a certain portion of the duties of a primary contractor’s contract. Typically, subcontractors specialize in a particular area of expertise. There are as many subcontractors as there are industries, ranging from construction to communication to food service. A subcontractor rarely engages directly with the client who is procuring their services. Rather, the subcontractor engages with the primary contractor who engages with the client. Subcontractors are considered self-employed by the IRS.
 
What are Independent Consultants?
According to the IRS, independent consultants (also known as independent contractors) are individuals who conduct themselves as businesses. Their clients have the authority to specify the end result of their work, but no authority to specify what will be done and how it will be done. Independent consultants can be classified as self-employed or as an employee of their own company; each classification has its own tax implications. Independent consultants can hire subcontractors.
 
What is the difference between a Subcontractor and an Independent Consultant?
An independent consultant engages directly with a client. They procure their own business, promise their services, and enter into contracts. They purchase their own health insurance and benefits. A subcontractor engages with a senior contractor. They apply their skills to projects brought on board by the senior contractor. They enter into what are called subcontractor agreements—which outline their roles and responsibilities, deadlines, duration, and tax liability. Independent consultants and subcontractors file their taxes differently. 
 
What are the advantages of being or hiring a Subcontractor?
As a subcontractor you have autonomy over your own time and methods. You are hired to produce a result. However you choose to come to the result has no bearing, so long as the finished product or service is high-quality and to specification. You have nearly unlimited flexibility on how you go about completing your work. As well, because you work on a contract, you need not worry about being fired abruptly. 
Contractors will often hire subcontractors because they need someone who specializes in a certain area. As well, hiring subcontractors can cut down on costs and mitigate project risks. 
 
What are the disadvantages of being or hiring a Subcontractor?
As a subcontractor you are responsible for keeping track of and paying your own income tax. This can be quite tedious and time consuming. If you don’t stay on top of your taxes, you can end up with fines or other penalties. As well, since you are not an employee, you miss out on many of the benefits given to employees by their employers, including but not limited to: health insurance, 401k, vision, insurance, etc. 
Contractors who hire subcontractors are on the hook for their subcontractor’s behavior. Even though they’re not an employee, they still represent your company. If a subcontractor fails to perform their duties or performs their duties at a subpar level, there is little recourse by way of discipline. You’ll need to shell out more time and money in order to find someone else to complete the work.
 
What are the advantages of being or hiring an Independent Consultant?
Independent consultants, much like subcontractors, are free to structure their own time and work flow. They choose where and when to work. As well, they have the final say on their health insurance carrier, office equipment, travel plans and more. Since their business is their own, their control is near total. As well, there may be some tax savings opportunities (which we’ll go into later). 
 
What are the disadvantages of being or hiring an Independent Consultant?
The downsides of being an independent consultant are twice-fold that of being a subcontractor. Primarily because, as an independent consultant, you are responsible for finding your own work. This can require copious amounts of time, energy, and money. You must pay for your own marketing and advertising. You must convince each new client of your expertise and trustworthiness. This can, at least in the beginning, distract from the work you got into business to do. 
As well, there are numerous expenses. Everything you have the final say on—health insurance, 401k, vision, dental—you must also pay for. 
Then there are the administrative tasks to consider. Bookkeeping, invoicing, and preparing for tax season fall on your to-do list as an independent consultant. 
 
Why are neither of these classified as employees?
The IRS uses three considerations when determining whether someone’s position classifies as an employee. 

1. Behavioral
2. Financial
3. Type of Relationship

 
The first category is concerned with the degree to which another party controls when, where and how the work is done. As previously stated, both the subcontractor and the independent consultant are free to choose where they work, when they work, and in what manner the work is completed. 
The second category is concerned with who holds the responsibility for expenses related to work. In the case of the independent consultant, the answer is the independent consultant. These work-related expenses can be deducted from their income tax at the end of the tax year, but the consultant must shoulder these costs until then. In the case of the subcontractor, they may or may not be responsible for work-related expenses, as this depends on the primary contractor. However, most subcontractors are responsible for providing their own tools and necessary equipment.
The third and final category is concerned with the relationship between the business and the worker. Is there a written contract between the two parties? Does this contract specify the duration of the relationship and any benefits provided? 
These three considerations are what preclude both subcontractors and independent consultants from the employee classification. 
 
Tax Implications of Both Classifications
Subcontractors who made over $600 will be issued 1099 forms at the end of the year by their primary contractor. These statements include the total amount paid out to the subcontractor in that tax year. The subcontractor will need to gather any business expense receipts. Anything which was bought in order to generate, maintain, or perform business is deductible (i.e. cell phones, office supplies, tools, self-employed health insurance). If you use a room in your home as your sole office, you might even be able to deduct its cost from your income tax. You’ll also need a 1040 Schedule C - Profit or Loss From Business form, which you can download from the IRS website. 
As an independent consultant, things are a bit more involved. You’ll need an Employer Identification Number (EIN), which can be obtained free-of-charge on the IRS website. Then, you’ll need an account on the Electronic Federal Tax Payment System (EFTPS). You will need to pay unemployment taxes, potentially at the state and federal level. As well, you may need to pay payroll taxes. 
 

 
The freedom of being a subcontractor or independent consultant comes with an added sense of responsibility. You must stay on top of your finances. We recommend you consult a tax professional, especially if this is your first year as either classification. We also recommend paying your taxes quarterly instead of annually to avoid running into any problems at the end of the year. If you’re diligent and detail-oriented, there’s nothing to stop you from being a successful subcontractor or independent consultant.
 
Check back into the Hoods Tax & Accounting blog for more information on taxes, saving, and financial literacy! We’re here to help in any way we can! If you have any questions or are interested in a consultation, we are providing meetings over Zoom. For any other assistance, please reach out by calling or emailing! Thank you for reading. Until next time! 

​Hi there readers and welcome back to Hoods Tax’ blog! We’re so grateful to have you here, and we’re excited to share with you some helpful information to make your wallet (and savings account) happier. Now that the world is opening back up and life is seemingly more normal now than the previous year, it’s a good time to reflect on the lessons the pandemic taught us in ways to be frugal and thoughtful with our finances.

It’s about to be the heat of the summertime! Weather is warming up, water parks and beaches are preparing for the oncoming waves of tourists and locals seeking refuge from the heat, and more families are spending time together as schools let out and vacation time sets in! It’s our favorite part of the year, but for our budgets it can get pretty tight. It’s easy to spend money when you’re having a good time, so we want to make sure to remind you of a few lessons to hold on to from the pandemic itself that would be wise to carry over into the summertime activities!

Plan For Your Future
During the pandemic, 1 in 5 people started investing and planning with the stock market and savings. With time to spend online and seeking for something to take it up, many saw an opportunity to learn about something that seemed exclusive to specific crowds of the elite business minded: Stocks. Though fluctuations did occur because of both the ‘temporary crowd’ and those who were genuinely educating themselves on the stock market’s methods, more and more people started to stick around. The education and knowledge focused on investing and planning for the future made an impact. 

The pandemic showed up and disrupted all of our lives for over a year and a half, and many experts say that our concept of normalcy has been entirely shifted because of it. The same occurred with the Spanish Flu during 1918; our civilizations concept of normalcy shifted then as people became aware of how easily airborne illnesses could spread, and ways to limit exposure were discussed while a vaccine was created. As a simplified summary of one of the change reactions that occurred during the pandemic, as the public were recommended to quarantine and limit exposure with the ‘outside world’ businesses saw fewer customers. With fewer customers, job security became unstable as businesses started to ‘cinch their belts’ when funding became too tight. This instability opened many people’s eyes to the realization that anything can happen in our lives, and the importance of having a savings or investments account became significant. Saving and investing in your future is incredibly important, and is one of our highest recommendations for your financial success. 

How are you planning for your or your family’s future? Do you have a savings or investments account with your bank? Or are you learning more about stocks to be active in the market? These are things we want you to consider as a well learned and reminded lesson from the pandemic itself!
Explore the Outdoors and Low Cost Activities
Okay, we hear you. People have been saying ‘go outside and enjoy nature’ for years, but there’s a reason for it! Spending weekends or vacations at attractions around town can really add up to make a decent hole in your pocket. Museums, aquariums, movie theaters, shopping malls, vacation trips, waterparks, and other types of business set activities are definitely fun highlights for the summer but if done often you’re going to run out of budget fast. So, why not enjoy what’s at your disposal and within arms reach on a typical day? Local parks, beaches, outdoor performances, bookshops or libraries, and even just a sunny walk through town are great ways to spend a day with a low budget.  You may find something new and exciting to take note of for another day trip, or develop a new hobby to satisfy your free time! 

During the pandemic, many people resorted to outdoor activities or things that operated on a smaller crowd scale to limit exposure. Social distancing took into effect and many chose to reconnect with their own piece of nature at home in their back or front yards, or local resources such as parks or beaches. We want readers like you to keep that connection because it’s not just healthy for your mind and body, but helpful for your wallet! Keep up those behaviors and explore the outdoors and your local activities with your friends and family to give yourself a low cost option when money gets tight.
 
Do you have a favorite outdoor activity or local, low cost activity you’d like to share with our readers? Feel free to comment below and share the information with us!
Meal Prepping
Home cooked meals are always known to be generally healthier than eating out, but we all certainly did a LOT of it during the pandemic. Some prioritized orders through delivery apps like Uber Eats or Grubhub, but that option only lasts for as long as your funds do- and those delivery fees add up quickly! To save yourself some extra cash, keep the practice of meal prepping and preparing your next day’s lunch ahead of time! You’ll find that not only will your health and energy typically improve, but you’ll be more adept at retaining your budget and applying your funds wherever they’re best suited. A great way to start meal prepping is to start small by cooking an additional meal with your dinner the night before. Pack up that extra meal for your lunch the next day and set it ready to go within your fridge! Take that lunchbox with you to work or your daily adventures in the morning and you’ll be less likely to purchase food out and dig into your wallet! 

Some people may prefer to meal prep an entire weeks worth of meals ahead of time, but everyone is different! If you’re looking to cut down on your ordering in or eating out, we highly recommend doing a bit of research into popular meal prep methods to save you the extra cash.

Did one of these ‘pandemic’ financial lessons make an impact with you and your planning for the upcoming week? We really hope they helped!

We know that the pandemic changed many things for our lives and the way we live them, and now that things seem to be levelling out more in public as the vaccines take effect and people become more conscious, we wanted to give you some food for thought about your money spending habits. It doesn’t hurt to look back at how we handled money or were caught by surprise with a lack thereof when things changed, so be prepared and thoughtful with your funds! Either of these three methods are guaranteed to help you rearrange your budget a bit more, and the end result will leave you feeling more confident and responsible! 

What did the pandemic teach you about your finances? Do you have any words for the wise you’d like to share? Feel free to comment below and let us know someway the pandemic shifted your focus on money. We'd love to hear from you!

Until next time readers, we hope you have a wonderful week and you’re being thoughtful of your funds! If you need any assistance with your taxes or accounting, be sure to contact Hoods Tax and Accounting of Goose Creek today, we’re here for you!

Now that we've made it through two very intense and unique tax seasons, we wanted to talk a little bit about saving money so when the next tax season comes around, it won't be such a shock to you or your bank account! We will also be talking about how to begin recovering financially from the whole of 2020! 

While many of our readers and some of us at Hoods are still reeling from the after-effects of these past two tax seasons, we can all take a deep breath and say "we did it"! We've learned a lot about the tax environment and the changes in tax law thanks to these past two tax seasons and thanks to these blogs, and we hope that all of our readers take each and every one of these lessons to heart! For many, one of the trends that we saw throughout these strange and unknown tax seasons is the fact that those tax bills have been a little shocking and unexpected. Of course, due to the pandemic, those tax bills did hit a little harder and were a little more unexpected than most have been in the past! After last year, we should all know that anything could happen when we least expect it to, and now is the time to be as financially prepared as possible. Now that we are on the other side of things and with these ideas in mind, we wanted to dive into some tips, suggestions, and ideas on how to help you save money better than you have ever before, to help prepare you for the next tax season, and to recover from the aftermath of 2020. 

After last year, and after many savings accounts, 401(k)s, and IRAs were dipped into, saving money, we're sure, is one of your top priorities right now. Getting back into your flow of saving money will help make up for what you need to do financially to stay afloat, and will also help you begin paying back what you took out of these saving accounts and to get you back on track and help you feel a little more secure financially for the first time in a long time! While no one can specifically say when we will all be back on our feet financially, we do know that there are steps you can take to get back on the right path again. One of the biggest parts towards recovering your finances and getting back on track is simply starting. Make a plan and get going! Make a plan that works for you and get started one step at a time!

If you did take money from your retirement plan or contribute to a retirement account, your decisions about how you're going to move forward from last year are going to make the biggest differences in your financial future and will help you solidify it once again. It is in your best interest to stay cool, calm, and collected right now, and to get focused. Outside of some of the tips that we are going to be sharing with you today, it is in your best interest to get back into the habit, if you haven't already, of contributing to your retirement program and your overall savings account. You don't have to start back up at the amount you were paying into either before the pandemic, but getting back into the habit of saving as you can, even with smaller amounts, can make a big difference! With all of this in mind, let's get right down to some of the best ways you can start saving money and begin to recover financially from 2020 and to be prepared for next year's tax season! 

• Online shopping became an even larger part of our daily lives last year out of need and safety. Now, you can turn it around and make it work for you! Are you looking to go shopping for any extra items or a big-ticket item you've had your eye on for a while now? Hop back online and shop smart by doing some price comparison between the items you're interested in. Never let a good deal pass you by, you have too many tools at your disposal not to! You can save a lot of money with the use of online digital codes and promotions, too. 
• While this isn't a new or groundbreaking idea, it's one you will continue to hear about because it's still such a hard and fast rule that always works! Begin budgeting better by cutting back on unnecessary expenses. We know this might be extra difficult right now as more and more things begin to open back up and (hopefully) you're working again at almost, if not full, capacity! While it's going to be very tempting to get out there and feel like normal again, take your time to ease back into normal spending until you've recovered financially. Even then, your best bet is to remain financially diligent for a while and to continue these habits throughout your life. One of the best ways to get a better idea of your money is to really understand where it's going and track it as best you can. There are a ton of excellent and helpful apps that can help you do just that! 
• While you're working to recover in multiple ways financially and beyond, part of that recovery is planning for what could come in the future. No one saw 2020 coming, and without being too cryptic, we don't know what else could be coming our way! With last year still fresh in our minds, it would be wise to start working on building an emergency fund so you won't be hurting again or in a tight spot if another year like 2020 happens again! 
• One of the best things you can do is to make a plan of how you're going to pay off all of your debt, and set real and attainable goals to do so. We do urge you to be as realistic about these goals as you can be, and to give yourself time and patience! It will take time to see the end of your debt, but it will happen and it will be worth all of your hard work! 
• Automation can be a real life saver! Choose automatic payments for as much as you can, and do it for more than just paying your bills. You can choose to have money taken out and put into your savings, retirement fund, and much more. Automated payments can make sure you don't accrue any late fees, don't spend anything rent money by accident, and can come with a few perks if you choose to go paperless and turn on automated payments with your bank and other saving establishments. 
• Try matching your savings to how much you spend every week, if not more. If anything try to match your savings and spending dollar per dollar! 
• Get creative on how you spend your free time! Look for fun and free things to do right now in your city, as it is becoming safer to do so and the weather is so wonderful! Since it is almost officially summertime in the Lowcountry, there are so many amazing things to do for free right outside your front door! Also, try and cut down on eating out! While this may not have been part of your 2020, it can be tempting to get out as much as possible now. Save for when it's a special occasion, and start cooking at home as much as you can. 
• Continue with the popular trend that 2020 rushed in with DIY projects and doing work around your home yourself. All the projects, cleaning, and yard work that you can do with no problem, keep doing them! This can be a huge money saver! 
• While traveling does sound very tempting after the year we've had and the prices for plane tickets are looking very appealing, pump the breaks before you book ten trips back to back this summer! Continue to be smart about your overall budget and let that include your travel budget too. 
• Don't just save because you want to save. While we always recommend having an excellent savings account and financial plan, go one step further. Sit down and understand what you're saving for. A nest egg? Emergencies? College? Vacation? Your dream home? All of this and more? Whatever it might be, understand exactly what you want. Visualizing it can make saving money a lot easier. You can see and say exactly why you're putting this money away, not just because you know it's the right thing to do! 

While this list of the ways to save money and ways to begin repairing your fiances after 2020 is just a small one in comparison to all the savings options out there for you, it is a great place to get started! You need to find what works for you, financially, and commit to it! If you have any questions, comments, or would like to discuss your financial options of how we can help you, please never hesitate to reach out! Please remember that we are your leading experts and tax preparers in the Goose Creek area to help with tax prep, throughout tax prep season, the best accounting services in Goose Creek, the best tax preparation in Goose Creek, business consulting in Goose Creek, bookkeeping in Goose Creek, or payroll services in Goose Creek, we are here for you! Our phone lines and inboxes are waiting for you. Don't hesitate! Please stay safe, everyone. We will see you soon!