The idea of a four-day workweek is so popular with some workers that they’d be willing to take a pay cut to make it happen, according to a new survey.
The survey, which included 1,250 people who work full time, was conducted in April by Resume Builder, a career services company. It found that 8 in 10 workers would be excited to work 32 hours a week instead of 40 because they believe it would help them achieve better work-life balance, improve their health, mitigate burnout, be more productive and reduce commuting costs.
The survey results suggest some workers feel pretty desperate for that better work experience. Even though nearly all the survey participants (94%) said they could do the same amount of work in fewer hours, about 21% said they would take a pay cut if it meant they could work the equivalent of one less day per week.
In addition, 83% of respondents said they would prefer a four-day, 40-hour workweek to the current standard of 40 hours in five days.
“I think people value time now more than they ever have — especially younger generations,” says Julia Toothacre, resume and career strategist with Resume Builder.
Idea of a four-day workweek is catching on
The four-day workweek is still a long way from becoming the norm in the U.S., Toothacre says. But the idea has picked up steam in recent years because it’s seen as a way to address the impact of work stress and long hours.
Roughly 3 out of 4 workers said they experienced work-related stress in the last month, according to the 2023 Work in America Survey by the American Psychological Association. More than half said that stress resulted in an array of negative effects, including emotional exhaustion, lack of motivation, a desire to quit, lower productivity and irritability.
There’s some interest in making the four-day workweek a national policy. In March, Sen. Bernie Sanders, I-Vt., introduced a bill that would standardize a 32-hour workweek without cutting workers’ pay or benefits. But it’s not expected to go anywhere.
Pilot programs show promising results
Instead, the four-day workweek has gained the most traction through companies’ participation in pilot programs. Organizations around the world have tested it out, and the results are pretty positive. In 2022, a pilot program that included 33 U.S. companies found that most of them wanted to continue with the 32-hour schedule after the trial period ended.
The companies involved in this pilot didn’t make any changes to workers’ pay. And it turns out that’s for good reason: The companies reported that productivity was positively affected by the new schedule. Workers at the participating companies said their job performance improved during the course of the trial.
In the trial, companies got rid of meetings and other unnecessary activities to free up workers’ time, according to Boston College researchers who evaluated the results. Wen Fan, a sociology professor, said in a December 2022 news release that the program worked as expected. “Hours reduced, well-being improved, and key organizational bottom-lines sustained — all of these happened without the need for workers to intensify their work demands.”
The most surefire way to get out of debt is to create a detailed budget, prioritize paying off debts with the highest interest rates first while making minimum payments on others, and consistently allocate extra funds toward debt repayment until all balances are cleared. Additionally, consider seeking professional financial advice to explore options like debt consolidation or settlement if necessary.
In the fourth quarter of 2023, the amount of household debt in the United States increased to $17.5 trillion. Although credit cards, mortgages, and loans have several benefits, some consumers have trouble repaying what they borrowed. If you’ve been struggling to get your finances on track, learn how to get out of debt by creating a budget, earning extra money, and adjusting your spending habits.
1. Identify Your “Why”
Everyone needs a little motivation from time to time. Before you start your debt-free journey, it’s important to identify your “why,” or your main reason for getting out of debt. Here are a few ideas to get you started:
You don’t want the stress of making minimum payments every month.
You’re tired of being behind on your bills.
You’d rather put extra money in your savings account than spend it on debt payments.
You want to create a strong financial future for your family.
You need to set aside funds to care for a child with special needs.
You’re tired of arguing with your spouse or partner about money.
You don’t want your kids to have to take out thousands of dollars in loans to pay for college.
You want to travel around the world while you’re healthy enough to enjoy it.
2. Assess Your Current Situation
Before you start making extra payments, review your bank and credit card statements to determine how much you’ve been spending each month. Be sure to include every expense, no matter how small, from snacks to streaming subscriptions.
Once you have a handle on your expenses, make a list of credit cards, loans, and other debts. For each debt, note the creditor’s name, the balance due, and the minimum monthly payment. At the bottom of the page, add up your balances to determine the total amount of debt you have.
3. Review Your Spending Habits
Next, look at the list of expenses from the previous step. Ask yourself these questions:
Are there any duplicate expenses, such as two charges for the same subscription?
Can you eliminate any of the items on your list?
Are you spending more than you earn each month?
The answers to these questions will help you determine how to get out of debt faster. For example, if you’re spending more than you earn each month, your priority should be to increase your income or reduce your expenses to eliminate the shortfall.
As you review your expenses, see if you can identify any spending triggers, which are things that cause you to spend money impulsively. Limited-time discounts, negative emotions, envy, and boredom are examples of triggers that may lead to increased spending.
Once you identify your triggers, work to eliminate them. For example, if you notice you buy something every time you receive a weekly email from your favorite retailer, consider unsubscribing from the retailer’s email list.
4. Make a Budget
If you think budgeting is only for people with lower incomes, think again. Having a budget makes it easier to get your finances on track, regardless of whether you earn $40,000 or $400,000 per year. To create a personal budget, follow these steps:
Calculate your net income from all sources. Your net income is the amount of money remaining after taxes, health insurance premiums, and other deductions are taken from your paycheck.
Add up your monthly expenses.
Subtract your expenses from your net income. If the result is positive, you have some money left over each month. A negative result indicates you’re spending more than you earn.
Here’s an example to help you understand the process:
Cassandra nets $2,247 per month from her full-time job and $325 per month from her side hustle. Her net income is $2,572.
Cassandra shares a two-bedroom apartment with a friend from college, so she pays just $750 per month in rent. She also spends $350 per month on groceries, $218 per month on student loan payments, $150 per month on utilities, $175 per month on public transportation, and $829 per month on clothing, toiletries, entertainment, and other personal expenses. Her expenses add up to $2,472 per month.
After subtracting $2,472 in expenses from $2,572 in net income, Cassandra has $100 left over.
If you have trouble keeping track of your income and expenses, use this monthly budgeting sheet.
5. Find Ways to Increase Your Income
Slashing your expenses is a great start, but if you have a significant amount of debt, you’ll also want to increase your income. The more income you have, the easier it is to pay off debt quickly.
To maximize your earning potential, do at least one of the following:
Apply for a part-time job.
Start a service-based business in your neighborhood.
Sell clothing, accessories, and household items via online marketplaces.
Deliver for DoorDash, Instacart, Grubhub, or Uber Eats.
Become a driver for Uber or Lyft.
If you start your own business or work as an independent contractor, you’ll have to pay self-employment taxes on your net income. To avoid having a large tax bill on April 15, it’s wise to make estimated quarterly payments.
6. Focus on One Thing at a Time
You have a finite amount of resources, so rather than trying to tackle multiple goals at one time, pick a goal and stick with it. For example, if you have three credit cards, focus on paying one of them in full. You can worry about the other credit cards later.
7. Set Short-Term and Long-Term Goals
Learning how to get out of debt doesn’t happen overnight. If you have multiple accounts, it may take several years to pay them all in full. It’s easy to get discouraged if you have to wait years to celebrate an accomplishment.
To stay motivated, choose a mix of short-term and long-term goals. If your long-term goal is to pay off your credit card debt, a good short-term goal might be to pay off one credit card with a $500 balance. Paying off a small debt gives you a sense of accomplishment, helping you stay motivated.
8. Choose a Debt Payoff Method
Once you have your goals in mind, you need to choose a debt payoff method. You can use the debt snowball or the debt avalanche:
Debt snowball: With the snowball method, you pay off your debts in order of smallest balance to largest balance. For example, if you have debts of $500, $750, and $1,000, you’d pay them off in that order. Each time you pay off a debt, you free up more money to tackle the other accounts.
Debt avalanche: To use the debt avalanche method, list your debts according to their interest rates, with the highest rates at the top of the list and the lowest rates at the bottom. For example, if you have a $3,000 loan with an interest rate of 19% and a $1,500 credit card balance with an interest rate of 28%, you’d pay off the credit card debt first, even though the loan balance is higher.
The snowball method gives you a psychological boost every time you pay a balance in full, so some people find it easier to follow than the avalanche method. However, you may end up paying more in interest if you don’t pay off high-interest balances quickly.
With the debt avalanche method, the opposite is true. You pay less in interest, but it also takes longer to pay off each account, which may leave you struggling to stay motivated.
9. Set Up Automatic Payments
Make things easy on yourself by setting up automatic payments for the minimum balance on each debt. If you have extra money, you can always make a second payment later in the month. Automatic payments eliminate the need to remember your due date, reducing the risk of late or missed payments, which can have a drastic impact on your credit.
10. Apply for a Balance Transfer Credit Card With 0% Interest
If you have a good credit score, consider applying for a balance transfer card with a 0% APR. The promotional APR lasts for a limited amount of time, but it could help you pay off high-interest debt much faster.
For example, if you have a $1,000 balance on a high-interest credit card, you can move it to a balance-transfer card with 0% interest for 12 months. Just make sure you pay off the balance transfer before the promotional period expires.
If you don’t have the credit needed to qualify for a balance transfer card, sign up for credit monitoring to help you determine when your credit has improved enough to apply for a new account.
You can learn more about managing debt and other financial topics at Credit.com.
Maybe you’ve recently spoken to a broker or financial adviser about investments, and they suggested exchange-traded funds (ETFs) as a way to diversify your portfolio and boost your earnings.
But, you don’t know how they work or how to go about adding them to your arsenal of investments. Or perhaps you’re just starting out and want to learn more before making an investment decision?
Either way, we’ve got you covered. Read on to learn more.
Key Takeaways
Exchange-traded funds (ETFs) are diversified investment vehicles that allow investors to buy shares in a collection of assets, ranging from stocks and bonds to commodities and currencies, functioning similarly to mutual funds, but trading like stocks on exchanges.
ETFs offer various types, including those focused on specific industries, commodities, or strategies like inverse or leveraged ETFs, catering to a wide range of investment objectives and risk tolerances.
The benefits of ETFs include lower administrative costs compared to mutual funds, flexibility in trading throughout the trading day, tax efficiency in capital gains, and the transparency of holding disclosure, making them an attractive option for both novice and experienced investors.
What are ETFs?
In a nutshell, an exchange-traded fund (ETF) is a basket of assets that can include a medley of the following:
Exchange-traded funds are ideal for individual investors because they allow you to diversify your holdings without purchasing individual shares of each asset. And the profits are generated by the performance of the overall ETF and not individual shares.
Furthermore, ETFs trade like stocks and are easily bought and sold on the stock exchange, making it simple for investors to buy and sell.
How do ETFs work?
Before exchange-traded funds hit the exchange for trading, they must be created by authorized participants or specialized investors. They conduct extensive research and choose the assets that they deem as most suitable for the portfolio.
The pool of assets is then divided into ETF shares and traded on a major stock exchange, like the NYSE or NASDAQ, or through a brokerage firm.
Each exchange-traded fund has a ticker symbol like a stock and intraday price that can be tracked throughout the day. But unlike mutual funds or index funds, prices are constantly fluctuating because ETF shares are issued and redeemed throughout the day.
Mutual funds are priced at the end of the trading day, so all buyers and sellers receive the same price. This is referred to as the NAV (net asset value.)
Individual investors can purchase ETFs, but the way returns are generated differs from what you’d see with stocks or bonds. Profits are not tied to the actual assets in the ETF, but a sum of the profits generated from interest and dividends from the overall ETF. The return is collectively based on your proportion of ownership in the ETF.
Types of ETFs
There’s no shortage of exchange-traded funds as offerings are designed to track various sectors, markets, and indexes both here in the U.S. and abroad. The types of ETFs that are most popular among investors include:
Actively managed ETFs: ETFs that are managed by a professional fund manager and traded on a stock exchange. They aim to outperform a specific benchmark or index by actively selecting and trading the securities in the fund’s portfolio.
Bond ETFs: ETFs that track a basket of bond securities, such as corporate bonds, government bonds, or municipal bonds.
Commodity ETFs: These ETFs track the price of a specific commodity, such as gold, silver, oil, or agricultural products.
Currency ETFs: ETFs that track the value of a specific currency, such as the US dollar, Euro, or Japanese yen.
Foreign market ETFs: The main objective for these ETFs is to track the performance of a specific foreign market, such as a specific country or region.
Inverse ETFs: A type of ETF that aims to produce the opposite return of a specific benchmark or index.
Leveraged ETFs: These ETFs use financial instruments, such as futures contracts and options, to amplify the returns of a specific benchmark or index.
Market ETFs: The main objective is to track a specific index. These include DIA (tracks the Dow Jones Industrial Average), Spider or SPDR (tracks the S&P 500 Index), and QQQ (tracks the Nasdaq 100).
Sector or Industry ETFs: The main objective is to track a sector or industry. Common sector ETFs include XLF (financial companies), OIH (oil companies), FONE (smartphones), and XLE (energy companies).
Stock ETFs: ETFs that track a basket of stocks, such as those in a specific index, sector, or country.
Benefits of ETFs
Diversified Asset Pool
With ETFs, you can invest with minimal effort to fit your taste in securities, risk tolerance, and investment goals. This also means you can choose from various market segments. Furthermore, poor-performing assets can offset those that are performing well.
Hands-off Management
Professional fund managers do all the work for you according to your investment objectives. They also continuously monitor the performance of the ETF. But since these investments are generally passive and track an index, your fund manager won’t have to spend a bulk of their time day in and day out managing the ETF to stay ahead of the curve.
Quick note: The exception to this rule applies when you’re dealing with an actively managed ETF that is designed to beat an index.
Flexible Purchase and Selling Window
Unlike mutual funds, ETFs are available for purchase at any time of the day. There’s also flexibility with orders as you can choose from margin, limit, or stop-loss orders. Even better, there are no minimum holding periods, like you’ll see with some mutual funds, so you’re free to sell at any point after you purchase ETF shares.
This added flexibility is also beneficial to investors because it minimizes the level of risk they’ll have to absorb if the market takes an unexpected turn for the worse. ETFs are much easier to unload in a shorter window than mutual funds, that sometimes have a 30-day holding period before they can be sold.
Tax Efficient
With taxable mutual funds, you must pay taxes on distributions, regardless of whether you keep the cash or use it to invest in more mutual fund shares. However, you will only pay capital gains on ETFs when your investment is sold.
Transparency
As mentioned earlier, the performance of a particular ETF can be tracked throughout the day using the ticker. And the end of each day, the ETF’s holdings are shared with the public. But mutual funds only disclose this information on a monthly or quarterly basis.
Lower Administrative Costs
Unless the ETF is actively managed, your administrative costs will be substantially lower than what you’d find with a portfolio that must have oversight at all times, like a mutual fund. On average, the expense ratio for most ETFs is lower than .20 per year, compared to the 1% or more per year in administrative costs that accompany actively managed mutual funds, according to Nasdaq.
But keep in mind that expense ratios aren’t the same across the board. So, it’s best to speak with the ETF issuer to get a better idea of what you’d expect to pay in administrative costs should you decide to invest in their ETFs.
Drawbacks of ETFs
Before you invest in ETFs, there are some drawbacks you should be mindful of.
Price Fluctuations
Prices often change, so you could be at a disadvantage if you like to buy in small increments. And it’s not always possible to buy low and sell high if the ETF is a slow mover.
Fees from Commissions
Looking to buy ETFs through an online broker? If you select an ETF that’s outside the scope of what they offer, you could incur substantial fees from brokerage commissions.
Sudden Death
If the ETF underperforms and is forced to shut down abruptly, you have no control over the hit you may take, either through a loss on your investment or tax obligation.
Settlement Window
When you sell ETFs, there’s a two-day settlement window that must pass before you can access your cash. This could be to your disadvantage if you need the funds right away to invest in another asset.
How to Invest in ETFs
To invest in exchange-traded funds (ETFs), you’ll need to follow these steps:
Choose a brokerage: First, select a brokerage firm where you will place your trades. Reputable options include well-known online brokers such as Charles Schwab, E*TRADE, Robinhood, and Fidelity. Be sure to compare fees, trading platforms, and other features before making your decision.
Open an account: Once you’ve chosen a brokerage, you’ll need to open a brokerage account and complete any required paperwork. This may include providing personal and financial information, as well as completing any necessary identity verification steps.
Fund your account: To buy ETFs, you’ll have to deposit money into your brokerage account. This can typically be done by linking a bank account or using a credit or debit card.
Select your ETFs: Once your account is funded, you’ll be able to browse and select the ETFs you’d like to purchase. Most brokerage firms offer a wide range of ETFs to choose from, including those that track specific indexes, sectors, or countries.
Place your trade: Once you’ve selected the ETFs you’d like to purchase, you can place your trade by specifying the quantity and price. Your brokerage firm will handle the rest of the process, including executing the trade and holding the ETF shares in your account.
Keep in mind that investing in ETFs carries risks, and it’s important to do your own research and consider your own financial goals and risk tolerance before making any investment decisions. It’s also a good idea to consult a financial professional for personalized advice.
Bottom Line
It’s easy to buy or sell ETFs and make them part of your investment strategy. By gaining a thorough understanding of how they work and working with a broker to analyze how they will impact your investment portfolio, you’ll have the best chance of maximizing your returns.
A charge card is like a credit card, but instead of allowing you to carry a balance from month to month, you’re required to pay off the full balance every month. It’s a way to make purchases without using cash upfront, but you have to be careful to only spend what you can afford to pay off each month.
Many people incorrectly use the terms “charge card” and “credit card” as if they mean the same thing. While these types of cards have some similarities, they’re not the same. Charge cards are similar to credit cards because you can use them to make everyday purchases. However, rather than only paying the minimum balance each month, cardholders are expected to pay the entire balance in full.
Before you consider applying for a charge card, it’s important to understand how it works and the advantages of having this type of card. Keep reading to learn more.
What Is a Charge Card and How Does It Work?
A charge card is a type of card you can use to make both online and in-store purchases. Unlike credit cards, charge cards require cardholders to pay the entire balance at the end of their billing period.
Many charge cards come with various perks and rewards, such as reward miles or cash back. In most cases, you must have good or even excellent credit to qualify for a charge card.
Charge Cards vs. Credit Cards
While many people think credit cards and charge cards are the same thing, there are some stark differences between them.
Minimum Payment
Credit card companies require cardholders to pay at least the minimum balance each billing cycle. This could be a preset fixed amount or based on a percentage of the overall amount due. This feature allows cardholders to make purchases now and pay for them over several months. Failure to make minimum payments each month could result in late payment fees and other penalties.
Alternatively, charge cards have no minimum balance requirements. Instead, cardholders must pay their entire balance at the end of the billing cycle. Failure to make these payments could result in extra fees, or the credit card company could suspend or close the account.
Some charge cards offer alternative payment options for cardholders. For example, American Express gives cardholders the option to use its Pay Over Time feature, which allows them to pay the balance of certain purchases over a set period of time.
Spending Limits
When you apply for a credit card, you get a set spending limit you can’t exceed without facing possible penalties. Charge cards, on the other hand, have no set spending limit. Instead, approval for purchases is based on your specific income, payment history, and credit report.
APR Rates
APR rates are based on your credit history and credit score. When you have a credit card, your specific APR rate is disclosed upon approval and displayed on your monthly statements. Interest, based on your APR, is charged on any outstanding balance at the end of the cycle.
Interest rates don’t apply to charge cards. Since you’re required to pay the balance in full each month, you’ll never have an outstanding balance to generate interest. However, if you fail to pay your balance, you could face late payment fees and other penalties.
Pros and Cons of Charge Cards
Before you apply for a charge card, it’s important to understand the advantages and disadvantages that come with this type of card.
Pros
There are several benefits of getting a charge card, such as:
Having no spending limit can allow you to make larger purchases without worrying about going over your limit.
Since you must pay your balance off each month, you won’t face high APRs.
Many charge cards come with substantial rewards, benefits, and perks.
Cons
While the benefits are great, you also need to consider the disadvantages of getting a charge card, including:
Charge cards often come with hefty annual fees. Be sure to read the fine print before applying for a charge card.
Typically, you must have good or excellent credit to qualify for a charge card.
You must be able to pay the entire charge card bill each month or face late fees and other penalties.
How Do Charge Cards Impact Your Credit Score?
Another thing you need to consider when getting a charge card is how it will impact your credit score. Lenders offering charge cards typically report all payments to the three major credit bureaus: TransUnion, Experian, and Equifax. Since your payment history accounts for up to 35% of your overall FICO credit score, making on-time payments each month can significantly impact your credit.
When it comes to your credit utilization, which accounts for up to 30% of your overall FICO credit score, having a charge card won’t make a difference. Since there’s no spending limit, most credit scoring models don’t consider charge cards when calculating credit utilization.
On the one hand, a charge card doesn’t give you available credit to use toward boosting your credit utilization ratio. On the other hand, you can make large purchases on your charge card without worrying about it having a negative impact on this ratio.
When to Get a Charge Card
You might have a limited choice of charge cards. However, options are available, such as the Platinum Card® from American Express and the American Express® Gold Card. Be sure to compare your choices and always read the fine print before applying for any type of credit.
You may need to have good or even excellent credit. If your credit score isn’t strong enough right now, you can take steps to improve your credit. Once your credit score reaches the “good” range, you can try applying for a charge card.
Find out your credit score with Credit.com’s Free Credit Score feature. If you want to take look at 28 of your scores and have more tools to manage your credit, the ExtraCredit® subscription is a great option for you.
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A 1099-c cancellation of debt form is issued when a lender forgives or cancels a debt. The 1099 c form helps the IRS account for canceled debts from the previous tax year.
The 1099-C cancellation of debt form deals with canceled or forgiven debt from the previous tax year. This form exists to ensure accuracy when reporting taxes and to help filers determine if they owe debt forgiveness taxes.
Cancellation of debt happens when a creditor discharges or forgives a debt you haven’t paid off. The IRS notes that cancellation can occur when the creditor gives up on collecting because it’s exhausted its resources and is unable to collect. In some cases, cancellation can come about as an agreement between you and the creditor.
Here, we’ll answer several common questions about this form and explain how canceled debt relates to taxes.
Key Takeaways:
The IRS requires 1099-C forms because forgiven debt contributes to your gross income.
Receiving and filing a 1099-C form won’t affect your credit score positively or negatively.
Certain forgiven debts, such as mortgage forgiveness, are exempt from 1099-C requirements.
What Is a 1099-C Form?
Form 1099-C is a tax form required by the IRS in certain situations where your debts have been forgiven or canceled. Forgiven debt contributes to your gross income for the given tax year. The IRS requests 1099-C forms to account for those funds and debt forgiveness tax if need be.
If you received a 1099-C form in the mail, it’s because of a debt cancellation that occurred at some point during the previous tax year. Box 6 on the document contains a code to help you determine why you received the form.
Reasons why a cancellation might occur include:
A creditor stops trying to claim a debt.
Your mortgage is modified.
A property is foreclosed or repossessed.
You can also learn more about the 1099-C cancellation of debt processes and why you might receive such a form if you’re unsure whether yours is accurate.
Is a 1099-C Form Good or Bad for Your Credit?
The 1099-C form shouldn’t have any impact on your credit. However, the activity that led to the 1099-C probably does impact your credit. Typically, by the time a creditor forgives a debt, you’ve engaged in at least one of the following activities:
Failed to make payments for an extended period of time
Negotiated a settlement on the debt
Entered into a program with the creditor because you can’t pay the debt, such as a home short sale or voluntary repossession
Been sent to collections
Had a foreclosure or repossession
Gone through bankruptcy
All those are negative items that can impact your credit report and score for years. So, while getting a 1099-C itself doesn’t change your credit at all, you’ve probably already experienced a negative hit to your score.
What Should You Do with a 1099-C Form?
First, find out whether the type of debt cancellation on the 1099-C form is excluded from taxable income. The IRS provides a list of exclusions; if your debt is included on this list, you won’t have to worry about the 1099-C form.
Some of the items on this list include:
Canceled amounts that were gifts or inheritances
Certain student loans and student loan discharges
Qualifying purchase price reductions
If you ultimately need to claim the income, you must incorporate the 1099-C into your federal tax filing and report the canceled debt as “other income”. Forgiven debt can increase your gross income for that tax year, which might reduce your refund or increase the taxes you owe.
In cases where the 1099-C canceled debt falls under an IRS exclusion—which means you don’t have to pay taxes on all or some of the income—you still may need to file a form. The creditor that sent you the 1099-C also sent a copy to the IRS.
Some types of debt cancellation on the 1099-C form are excluded from taxable income. The IRS provides a list of exclusions, which include debts that were forgiven because you were insolvent or involved in certain types of bankruptcies. You may want to double-check with your bankruptcy lawyer about whether you need to claim 1099-C income relevant to your bankruptcy discharge.
Call out box “Pro Tip:” link
If you don’t acknowledge the form and income on your tax filing, it could result in a tax audit. Luckily, the IRS provides a form for this purpose. It’s Form 982, the Reduction of Tax Attributes Due to Discharge of Indebtedness.
Who Can File a 1099-C Form?
According to the IRS, you can file a 1099-C form if you’ve forgiven or canceled at least $600 in debt for an individual or entity in the previous tax year. You must also be an applicable financial entity, such as a bank or credit union.
For example, you don’t need to file a 1099-C form if you loaned your brother $1,000 and then told him on his birthday you’ve decided he doesn’t have to pay you back.
How to File a 1099-C Form
How you include your 1099-C depends on how you already file your taxes. Online tax filing programs include options for adding the 1099-C form when you file. Typically, you do this when entering various types of income.
You may need to file form 982 if you have exclusions to ensure you don’t pay more than you need to. You can work with a tax professional or use software to file taxes yourself. Both options can help you minimize mistakes and maximize your refund.
How to Read a 1099-C Form
Knowing how to read your 1099-C may help you understand why you got one and what you have to do with it. Here’s a breakdown of what each box means:
Codepen Link for 1099-C instructions
Codes that might be included in Box 6 on the 1099-C:
A. Bankruptcy Title 11
B. Other judicial debt relief
C. Statute of limitations or expiration of deficiency period
D. Foreclosure election
E, Debt relief from probate or similar proceeding
F. By agreement
G. Decision or policy to discontinue collection
H. Other actual discharge before identifiable event
What Is the Mortgage Forgiveness Debt Relief Act?
The Mortgage Forgiveness Debt Relief Act of 2007 generally excludes all forgiven debt on the mortgage of your primary residence. That means you may not have to include canceled debt on your mortgage as part of your income on your taxes.
For example, if your debt is reduced through a restructuring of your mortgage or in connection with a foreclosure, it may be excluded. This is one of the most common exclusions, but there are a few other situations where you don’t have to include canceled debt.
1099-C Cancellation of Debt FAQ
Receiving a 1099-C form is a rare occurrence, which is why people often have so many questions about it. Here are several frequently asked questions we’ve encountered about this rare tax document.
What If You Receive a 1099-C Form on an Old Debt?
There aren’t statutes of limitations on the cancellation of debt, though the IRS does have rules about when these forms should be filed. The creditor must file a 1099-C the year following the calendar year when a qualifying event occurs. That just means the creditor must file the next year if they discharge or forgive a debt.
If the creditor files a 1099-C with the IRS, it typically must provide you with a copy by January 31 so you have it for tax filing purposes that year. This is similar to the rule for W-2s from employers and other tax forms.
However, there’s no rule for how long a creditor can carry debt on its books before it decides it’s uncollectible. So, if your debt isn’t canceled via repossession, bankruptcy or other such processes, cancellation could happen at any time. The creditor doesn’t have to tell you about it other than sending the 1099-C.
What If You Don’t Get Your 1099-C?
You may not receive a 1099-C or might receive it after you already filed your taxes. If you receive the form after you file, you should file an amended return. That’s true even if the 1099-C doesn’t change your tax obligation, as you want to get a Form 982 detailing the reasons for exclusion on record for documentation purposes. If you don’t receive a form at all, it may mean the creditor didn’t send one and you don’t have to file.
What If You Have a Canceled Debt That Is Less Than $600?
Canceled debt less than $600 still needs to be reported as income on your taxes, though you may not receive a 1099-C for it. Working with tax professionals may be a good idea if it’s unclear which form you should use and what income you need to claim.
What If You Misplaced Your 1099-C?
You should be able to contact the associated creditor for a copy of your 1099-C form if you lose it. If you can’t reach them or retrieve a copy, you may have to call the IRS to resolve the issue.
What If Your 1099-C Form Is Incorrect?
If your form is incorrect, you should contact the creditor to send a corrected version. If the creditor doesn’t send it before the tax deadline so you can file with the correct information, you’ll need to file an amended return when you receive it.
Though receiving a 1099-C doesn’t hurt your credit, the canceled debt that led to it probably will. It’s best to find other solutions to debt than delinquency or cancellation. You may be able to negotiate, refinance, or restructure your debt to make it more manageable.
Can a Creditor Still Collect After Issuing a 1099-C?
Yes, a creditor can still try to collect the debt a person owes even after a 1099-C has been issued. Even if a lender issues a 1099-C form, they can still choose to pursue delinquent funds if they simply want to collect the money you owe.
If you find yourself in this situation, reach out to your creditor as soon as possible and try to negotiate a new agreement.
What to Do If You Received a 1099-C Form after Filing Your Taxes
If you don’t know a 1099-C form is coming, you could make a mistake on your tax return by filing too early. If you receive the form after you file, you should file an amended return. That’s true even if the 1099-C doesn’t change your tax obligation, as you’ll want to get the Form 982 on record for documentation purposes.
The IRS also allows amended tax returns to be e-filed, making it even easier to quickly file an amendment. However, you can only amend 2020, 2021, and 2022 returns in this manner.
Enrich Your Personal Finance Knowledge with Credit.com
Learning more about taxes and financial matters is easier than ever. You can always consult Credit.com’s expansive personal finance guide to learn more about topics like unpaid taxes, credit reports, and debt-to-income ratios.
Receiving and filing a form 1099-C shouldn’t affect your credit, so you check your credit report if you notice any strange fluctuations in your score. Use Credit.com’s ExtraCredit® subscription for a full view of your credit profile—you can even get started with a free seven-day trial.
Your seven-day trial will begin after agreeing to these terms and submitting your ExtraCredit® sign-up. After your trial period, your subscription will automatically continue on the same day every month as the day you started your trial membership. The free trial is available for new ExtraCredit customers only. The credit card you provided will be charged $24.99 (plus any applicable tax) on the next business day and monthly; after your trial period unless you cancel. You may cancel at any time by downgrading your service level in your settings or by contacting us at [email protected]. Dishonored payments will result in an automatic downgrade to the free credit.com product.
If you’re tired of renting, it may be time to purchase your first home. Being a first-time homebuyer is nerve-wracking, but many of the myths about buying a home just aren’t true.
You don’t need a perfect credit score, and you don’t need 20% for a down payment. Many first-time homebuyer programs, grants, and down payment assistance programs are available to help you secure the financing you need to purchase your first home.
Key Takeaways
First-time homebuyer programs and grants offer various forms of financial assistance, such as low down payment options and closing cost aid, making homeownership more accessible without needing perfect credit or large down payments.
FHA, USDA, and VA loans provide significant benefits, including lower credit score requirements and minimal or no down payment requirements, tailored to help first-time buyers with limited resources.
Additional unique programs like the HUD Good Neighbor Next Door and HUD 203(k) Rehab Loans offer further advantages, like substantial discounts on home prices and funding for renovations, specifically designed to encourage public service employees and those interested in revitalizing homes.
Federal Housing Administration (FHA) Loans
FHA loans are a suitable option for first-time buyers with poor credit, or anyone who doesn’t have 20% to put toward a down payment. These loans are backed by the U.S. Department of Housing and Urban Development (HUD).
FHA Loan Requirements
If your credit score is at least 580, you qualify for minimum down payment of 3.5%. If your credit scores are between 500 and 579, you qualify with a 10% down payment. However, you should expect to receive a higher interest rate.
Here are some of the other requirements:
Have a steady employment history of at least two years
You plan to occupy this home as your primary residence
You’re prepared to get an FHA property appraisal
You can qualify for the FHA loan program even if you filed for bankruptcy, as long as it’s been at least two years. However, you should expect to pay for private mortgage insurance (PMI). However, you should expect to pay private mortgage insurance for the duration of the FHA loan if your LTV ratio is less than 90% at the time of closing.
If it’s lower, you’ll have to pay for 11 years (unless the home loan is paid off earlier). These proceeds are used to cover the lender if the borrower defaults on the loan.
FHA loan limits vary by area. You can view the loan limits for your area here.
Energy Efficient Mortgage Program
With this program, you can roll the cost of any energy-efficient improvements into your FHA mortgage. This won’t change your minimum down payment requirements, and the money financed for the EEM package won’t affect your loan limit. You’ll need to work with your mortgage lender to determine how much of an EEM benefit you qualify for.
Fannie Mae
With Fannie Mae, you can roll the cost of any energy-efficient improvements into your FHA mortgage. This won’t change your minimum down payment requirements, and the money financed for the EEM package won’t affect your loan limit. You’ll need to work with your lender to determine how much of an EEM benefit you qualify for.
HomeReady Mortgage Program
The HomeReady Mortgage program is ideal for first-time homebuyers who have a minimum credit score of 620. The minimum down payment is 3%, and PMI is required. If your credit score is 680 or higher, you may qualify for more competitive rates.
HomePath Ready Buyer Program
With this program, you can get up to 3% of the purchase price in closing cost assistance toward the purchase of a HomePath property. To qualify, you’ll need to complete a homebuyer education course.
You’re also limited in what you can buy. This program is only for HomePath properties, which are foreclosed homes owned by Fannie Mae.
97% LTV Mortgages
This mortgage loan could be the right option for first-time buyers that don’t have 20% for a down payment. 97% LTV mortgages from Fannie Mae allow you to make a down payment of only 3%.
You can only take out a fixed-rate mortgage for this type of loan. And the home you purchase must be your primary residence and not an investment property.
Freddie Mac
Freddie Mac is another entity that offers competitive mortgage products to consumers. Their most popular program for first-time homebuyers is the Home Possible mortgage. This mortgage is ideal for low to moderate-income borrowers in underserved communities.
Home Possible Mortgages
Buyers can choose from the 95% LTV (Home Possible) or 97% LTV (Home Possible Advantage) options. This conventional loan is not backed by the federal government, but it comes with flexible terms and low down payment minimums.
Plus, you can cancel your PMI once the loan balance reaches 79% of the home’s appraised value. And even if with no credit or bad credit, you may be eligible for a mortgage with as little as 5% down.
United States Department of Agriculture (USDA) Loans
Considering a home in a rural area? You may qualify for 100% financing through the USDA loan program.
There is no required down payment with this program, and the credit requirements are much lower than what other lenders look for. You can use this tool from the USDA’s website to see if your area qualifies. There’s a 2% guarantee fee with a USDA loan, but it can be rolled into your mortgage loan and spread across your monthly mortgage payments.
Veterans Administration (VA) Loans
If you’re an active service member, veteran, or surviving spouse, you may be eligible for a mortgage through the VA Home Loan Program.
VA loans are perfect for first-time homebuyers because the upfront costs are so low. There’s no down payment required, and you don’t have to pay for PMI. There is no minimum credit score requirement for a VA loan. However, most mortgage lenders want to see a FICO credit score of at least 580.
Native American Direct Loan
If you’re a Native American veteran looking to purchase your first home, this program may help you get the financing you need. Loans come with no down payment, minimal closing costs, and no PMI.
They are also much easier to qualify for than traditional mortgages. Your home must be located on Federal Trust Land, and the mortgage is for a 30-year term at a fixed rate.
HUD’s Good Neighbor Next Door (GNND) Sales Program
Do you work in a public service role such as law enforcement, teaching, or the fire department? Then you can receive 50% off the HUD appraised value of select homes through HUD’s GNND Sales program.
The only catch is that the home must be located in a revitalization area, and you must commit to living there for 36 months. You also need to act fast because homes are only listed for sale during a seven-day window.
HUD Dollar Homes Program
First-time homebuyers should also check out Dollar Homes offered by HUD. These are foreclosed FHA properties that have been on HUD’s website for over six months. The options may be limited, but you never know when a good deal may appear.
HUD 203(k) Rehab Loans
Do you have your eyes set on a fixer-upper? Check out HUD 203(k) loans, which are backed by the FHA and give additional funding to homebuyers who want to complete renovations. Instead of taking out a second loan, you can roll the renovation costs into the mortgage.
See also: How to Buy a HUD Home (And When You Should)
Other Homebuyer Grants and Programs
You can visit HUD’s website to learn more about programs that are available for first-time homebuyers in your area. Once you’ve selected your state, you’ll be redirected to a list of programs that you may qualify for.
National Homebuyers Fund
The National Homebuyers Fund (NHF) is available for low-income homebuyers that need down payment assistance. Once you find a participating lender, the NHF will provide a grant for up to 5% of the loan amount.
You don’t have to repay the grant, but there are income requirements based on the current housing market and your location. Your lender can provide you more information and help you determine if you qualify.
Employer-Sponsored First-Time Home Buyer Programs
Some employers are now offering housing incentives to help employees with down payments and closing costs. Your employer or labor union may give you a grant that’s forgivable over time. Check with your manager to see if they offer any kind of down payment or closing cost assistance.
Local Grants to First-Time Home Buyers
There are many state or local government grants available for first-time homebuyers. And many of these don’t require any repayment if you live in your home for a certain time frame. Contact a real estate agent and check with both your state and county to learn more about what options are available to you.
Learn More
What Is a NACA Mortgage? – For over two decades, NACA has been assisting borrowers in securing affordable housing through its renowned loan program. Here is an overview of how the program operates.
Home Loans for Single Moms – Single mothers often face challenges when trying to secure a mortgage due to having just one income and no down payment. Here are several mortgage programs available for single mothers.
In early January 2024, I wrote an answer to reader-of-the-blog Vince’s question about his retirement portfolio. A quick summary of that article is:
If Vince’s portfolio is $4.2M and his annual spending needs are $100,000, he’ll be entering retirement following (essentially) a “2.38% Rule.” That’s way more conservative than the classic 4% Rule.
He doesn’t need to expose himself to undo risk. 60% stocks, 55% stocks, 50% stocks…Vince will be successful in any of these portfolios. Since he has “won the game” of career financial success, he can “stop playing the game” by taking some of his chips off the table a.k.a. reducing his exposure to risk assets (stocks).
Vince wrote back! He asked this week:
If the market goes down, should I perform my annual rebalance into stocks, or because we have 20 years of spending in our fixed income portion of our portfolio, should we only rebalance into bonds from now on when our equities get too high. It may come back to living comfortably vs. passing on more money to heirs. (I choose the former).
Vince
Ahh! Rebalancing. Let’s dive in.
Two Sentences on Rebalancing
Rebalancing is the act of adjusting the asset allocation within an investment portfolio (how much in stocks? how much in bonds? etc.) to maintain the desired level of risk and return.
To learn more, here’s a deep dive on the topic of rebalancing.
Vince’s Question, Summarized
This is such an interesting question!
Vince is asking:
Should Vince’s rebalancing go in both directions?
If stocks are up compared to bonds, should Vince sell stocks to buy more bonds?
If stocks are down compared to bonds, should he sell bonds to buy more stocks?
Why does it matter? Because part of Vince’s portfolio approach is that his bond allocation represents 20 years’ worth of spending in his portfolio. He’s not measuring in percentages! He’s measuring in years’ worth of spending.
So, in essence, Vince is asking: should he rebalance, even if doing so results in him having “fewer years of bonds” than he’s comfortable with?
We need to understand two different schools of thought regarding portfolio construction. These two schools are definitely similar but with slight, nuanced differences.
The first is the “bottoms-up, bucket method” described on the blog before. It recommends an investor assign a timeline to every dollar in their portfolio, then align those timelines with appropriate levels of risk in investment assets. The money with a 6-month timeline needs to be in cash or ultra low-risk Treasury notes. The money with a 30-year timeline should be in higher risk assets (like stocks) in search of greater returns.
The other common approach is the “expected risk, expected return” method. This approach uses historical data and the investor’s unique risk appetite (a combination of their age, their cashflow needs, their unique mental approach to losing money, etc.) to hone in on the “right” allocation for them. Younger, riskier investors can stomach more stocks, while older, risk-averse investors should own more bonds, etc.
Ideally, the portfolio’s future “expected returns” are then used to test the validity of the overall financial plan (e.g. via Monte Carlo simulation).
Which Method is “Right?”
Which method is right?
Both methods work. And, in theory, both should lead to very similar outcomes. The two methods differ more in mindset than in “brass tacks.”
I prefer the “bottoms-up, bucket method” because it puts planning first (“give the dollar a job and a timeline”) and then determines appropriate investments. I used that approach in my original response to Vince. He is also using that method in his new question today. Vince feels particularly safe with 20 years’ worth of spending in fixed income. Those dollars have timelines, and he’s built an appropriate cash, CD, and bond ladder for those timelines.
Is It Right to Rebalance?
Should Vince rebalance? Let’s start by using some reasonable numbers to add color to Vince’s question.
Let’s say Vince needs $100,000 per year from his portfolio. And, based on his personal risk tolerance, he wants 20 years of that annual spending in bonds**. Easy math. That’s $2 million in bonds.
**For what it’s worth, most of the time for most investors, their timelines beyond 10 years should not be in bonds. The math simply says otherwise – that money should be in a higher risk asset, like stocks.
But finance is personal. And many retirees are acutely aware of the fact that “this is all the money I have!” Extra caution – aka extra fixed income – is understandable. It’s helps the investor sleep at night…return on sleeplessness!!! And as long as that extra fixed income doesn’t damage the portfolio’s probability of success, I’m ok with it.
Ok. $2 million in bonds, meaning the rest of Vince’s $4.3M portfolio (as of this writing) is in stocks. That’s $2.3M in stocks. That’s a 55% stock, 45% bond allocation.
Next, we need hypothetical returns.
Let’s say over the rest of 2024, bonds provide their expected 5% interest while stocks drop 8%. But Vince withdraws $100,000 (from bonds, because that’s why they’re there) to support his annual expenditures. Vince’s portfolio will shift to $2.1M in stocks, $2.0M in bonds.
That’s a 51% stock, 49% bond portfolio. Should Vince rebalance to 55% / 45%?! Let’s go back to first principles. Why did Vince end up 55/45 in the first place?
Because he wanted 20 years of bonds to cover his next 20 years of expenses, and everything thereafter went to stocks. And because his financial plan appears to be perfectly successful with that portfolio.
We should look through that exact same lens when considering rebalancing.
Does Vince still need 20 years of bonds to sleep at night? Or, with one more year in the rearview mirror, is he comfortable with 19 years of bonds? This is a mental/personal question.
Depending on that answer, does Vince need more/fewer bonds than he has right now?
And finally, does his financial plan’s probability of success change depending on his rebalancing? This is a math/brass tacks question.
Based on Vince’s investing rationale, his rebalancing decision is a function of bond prices.“I said I needed ~20 years of bonds to sleep at night; do I have them?”
The stock portion of his portfolio has little to do with that! If stocks go up 30%, but he still has 20 years of bonds, I don’t think he should rebalance into even more bonds.
Off the Balance Beam
As asset prices move, our portfolio allocations shift like desert sand beneath our feet. Our targeted risk and return can veer off course and our financial plan’s likelihood of success can decay. These are reasons to rebalance.
However, rebalancing isn’t always needed, depending on your portfolio and the unique rationale of your financial plan. As in Vince’s case, some market movements create more rebalancing needs than others.
Thank you for reading! If you enjoyed this article, join 8000+ subscribers who read my 2-minute weekly email, where I send you links to the smartest financial content I find online every week.
-Jesse
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Getting into gold coin investing can be a smart move for anyone looking to add some shine to their financial strategy. In this guide, we’ll give you the lowdown on different types of gold coins, how to figure out what they’re really worth, and tips for keeping your investment safe and sound.
You’ll also get the inside scoop on dealer markups, how to make sure you can cash out when you need to, and the steps to check that your coins are the real deal. Ultimately, we want to empower you with the knowledge to make informed decisions and enhance your investment portfolio with the timeless appeal of gold coins.
Key Takeaways
Gold coins offer investment diversity, with bullion coins being tied to gold content and purity, numismatic coins prized for their rarity and design, and semi-numismatic coins providing both gold value and collectible interest.
Key factors in gold coin investment include understanding premiums over spot price, ensuring liquidity and ease of resale, and selecting appropriate storage options to safeguard the investment.
Investing in gold coins entails choosing reputable dealers to prevent counterfeit risks, understanding tax implications like capital gains, and considering gold coins as a way to diversify and hedge against inflation within an investment portfolio.
The Fundamentals of Investing in Gold Coins
Gold coins, with their gleaming allure and historical significance, offer investors a tangible asset that stands the test of time. They come in various forms, each bearing unique characteristics and investment potential.
From bullion coins valued for their gold content and purity to collectible gold coins prized for their rarity and historical significance, the world of gold coins is as diverse as it is fascinating. As a form of precious metals, these coins, along with silver coins, provide a sense of security and value for investors.
Bullion Coins
Bullion coins, including bullion gold coins, are the go-to choice for those seeking straightforward exposure to gold. Valued based on their gold content and purity rather than historical and artistic considerations, a bullion coin like the Canadian Maple Leaf and American Gold Buffalo offers a direct link to the global gold market. For those interested in other forms of investment, gold bars can also be considered.
Numismatic Coins
For the history buffs and collectors, numismatic coins offer a unique allure. These coins are valued not just for their gold content, but also for their rarity, historical significance, and the artistry of their designs. Their value is less tethered to the spot price of gold, making them less susceptible to short-term market fluctuations.
Semi-Numismatic Coins
Straddling the line between bullion and numismatic coins are semi-numismatic coins. These coins offer both the gold value of bullion coins and the collectible appeal of numismatic coins. Their versatility makes them an attractive choice for a range of investors, from those seeking a straightforward gold investment to collectors looking for unique assets.
Top Gold Coin Options for Investors
There are a wide variety of gold coins to choose from, which can be overwhelming for new investors. However, some standout choices have captured the attention of investors worldwide. Let’s examine three popular gold coin options: the American Gold Eagle, the Canadian Gold Maple Leaf, and the South African Krugerrand.
American Gold Eagle
The American Gold Eagle coin, prominently displaying Lady Liberty and an American bald eagle, not only represents American heritage and freedom but also stands as a testament to the nation’s robust minting capabilities.
Introduced in 1986, these coins are struck in 22-karat gold, which includes a small alloy of copper and silver to ensure durability. Their availability in multiple denominations—1 oz, 1/2 oz, 1/4 oz, and 1/10 oz—makes them accessible to a wide range of investors, from those starting out to seasoned collectors. The blend of historical significance and investment flexibility has cemented their status as a favored option in precious metals markets.
Canadian Gold Maple Leaf
Produced by the Royal Canadian Mint, the Canadian Gold Maple Leaf is globally acclaimed for its .9999 fine gold purity, one of the highest in the market. Launched in 1979, this coin features the sugar maple leaf, a national symbol of Canada, which underscores the country’s appreciation of its natural environment and cultural heritage.
Its cutting-edge security features, like light diffracting patterns of radial lines and micro-engraved laser marks, ensure its authenticity and protect investors. The coin’s combination of high gold content and stunning design makes it not only a secure investment but also a collector’s delight.
South African Krugerrand
The South African Krugerrand is renowned for being the first gold bullion coin available to the general public, introduced in 1967 to help market South African gold. Named after the 19th-century Boer leader and the rand, the national currency, this coin features the image of Paul Kruger on one side and the Springbok gazelle on the other, celebrating South Africa’s rich wildlife and cultural heritage.
Unlike many other gold coins, the Krugerrand is minted from a gold alloy that is 22 karats, or 91.67% gold, with the remainder being copper, giving it a distinctive, more durable rose tint. This combination of affordability, durability, and cultural symbolism makes it a staple in the global gold trade, appealing to both investors and collectors alike.
Factors to Consider When Investing in Gold Coins
Investing in gold coins doesn’t just stop at choosing the right coin. It’s also about understanding the inherent factors that come with it. Let’s explore these key factors: premiums over spot price, liquidity, and storage options.
Premiums and Spot Price
While the spot price of gold is a key factor in determining the price of a gold coin, it’s not the only cost to consider. Premiums over the spot price can significantly impact the overall investment returns. Therefore, it’s essential to understand how premiums work and to be mindful of market trends.
Liquidity and Ease of Sale
One of the key advantages of gold coins is their liquidity. Gold coins are recognized worldwide and can generally be sold in any volume. However, the ease of sale can vary depending on the specific coin and market conditions.
Storage Options
Once you’ve invested in gold coins, you need a safe place to store them. Storage options range from home safes to professional vaulting services. Each comes with its own advantages and costs, and choosing the right one is crucial to the security of your investment.
How to Buy Gold Coins Safely and Securely
Investing in gold coins requires careful planning and vigilance. From choosing a reputable dealer to avoiding counterfeit coins and inspecting your purchase upon delivery, let’s explore how to buy gold coins safely and securely.
Choosing a Reputable Dealer
Purchasing gold coins from a well-established dealer is the first step towards a secure investment. A reputable dealer provides high-quality coins and offers invaluable customer support and guidance.
Avoiding Counterfeit Coins
Counterfeit coins pose a significant risk to investors. It’s crucial to understand how to identify counterfeit coins and ensure the authenticity of your purchase. From requesting documentation to conducting physical tests, vigilance is the key to safeguarding your investment.
Delivery and Inspection
The final step of your gold coin purchase is the delivery and inspection of your coins. Upon delivery, be sure to promptly inspect your gold coins to ensure they meet quality and authenticity standards.
Tax Implications and Legal Considerations
Like all investments, gold coins come with their own set of tax implications and legal considerations. From capital gains tax to reporting requirements, it’s crucial to understand these aspects to avoid legal complications and ensure a smooth investment journey.
Capital Gains Tax
Profits from the sale of gold coins are subject to capital gains tax. The rate of this tax can vary depending on the holding period of the coins and the investor’s income level. It’s essential to understand these rates and plan your investments accordingly.
Reporting Requirements
Certain gold coin transactions may be subject to reporting requirements. Be prepared to declare your holdings when necessary and ensure you comply with all applicable regulations.
Legal Ownership
Maintaining accurate records of transactions and ownership is crucial when investing in gold coins. These records not only help establish legal ownership, but are also essential for proper tax reporting.
Diversifying Your Investment Portfolio with Gold Coins
Bringing gold coins into your investment portfolio can add a unique layer of diversification. They can hedge against inflation, balance risk with other investments, and open up opportunities for both long-term and short-term investment strategies.
Hedging Against Inflation
In times of economic uncertainty, physical gold, particularly gold coins, can serve as a protective hedge against inflation. As the cost of living rises, gold coins can help maintain the value of your investment portfolio, safeguarding your purchasing power.
Balancing Risk with Other Investments
Including gold coins in your investment portfolio can help balance risk. The value of gold coins often moves inversely to other asset classes like stocks and bonds, providing a buffer against market volatility.
Long-Term vs. Short-Term Investment Strategies
Whether you’re looking for a long-term investment to weather market fluctuations or a short-term investment influenced by temporary market trends, gold coins can be a fit for your gold investing strategy, making them a viable option for gold investments.
The choice depends on your financial objectives and risk tolerance.
Bottom Line
Investing in gold coins can be a rewarding journey. From understanding the basics to navigating tax implications and legal considerations, it’s a path filled with learning and potential growth. As you progress, remember the importance of diligence, careful planning, and informed decision-making. With the right approach, you can unlock the golden opportunities that await in gold coin investing.
Frequently Asked Questions
How do I determine the authenticity of gold coins?
The authenticity of gold coins can be verified through several methods, including checking for hallmarks, weight and size measurements, and performing sound and magnetism tests. Purchasing from reputable dealers and considering third-party grading and certification can also ensure authenticity.
Can I purchase gold coins from banks?
Some banks do offer gold coins for sale, but availability can vary widely depending on the bank and the country. It’s often more common to purchase gold coins from specialized bullion dealers, coin shops, or online marketplaces.
How does the price of gold affect gold coin values?
The value of gold bullion coins is closely tied to the current market price of gold, known as the spot price. As the price of gold fluctuates, so does the value of gold coins. Numismatic and semi-numismatic coins may also be affected by gold prices, but their value is more influenced by rarity, condition, and historical significance.
Are gold coins a good option for short-term investments?
Gold coins can be a good option for short-term investments if you are knowledgeable about the gold market and current economic conditions. However, due to the premiums over the spot price and potential market volatility, gold coins are generally considered a more stable long-term investment.
How do I store and insure my gold coin collection?
Gold coins should be stored in a secure location, such as a safe deposit box at a bank or a home safe. For insurance, you can add a rider to your homeowner’s insurance policy or obtain a separate policy specifically for valuable items like gold coins. Ensure that your insurance policy covers the full value of your collection.
What impact do market conditions have on gold coin investing?
Market conditions can significantly impact gold coin investing. Economic uncertainty, inflation, and currency devaluation typically increase demand for gold, potentially raising gold coin prices. Conversely, a strong economy might lead to less demand for gold as an investment.
Is it better to invest in gold coins or gold bars?
The choice between investing in gold coins or gold bars depends on your investment goals. Coins are better for those interested in collectability and legal tender value, while bars typically have lower premiums over spot price and may be preferable for those focusing purely on the gold content and investment.
How do I sell my gold coins when I want to cash out?
To sell your gold coins, you can approach coin dealers, precious metal exchanges, online marketplaces, or auction houses. It’s important to research the current gold price and get multiple quotes to ensure you receive a fair price for your coins.
Affiliate links for the products on this page are from partners that compensate us (see our advertiser disclosure with our list of partners for more details). However, our opinions are our own. See how we rate mortgages to write unbiased product reviews.
Average 30-year mortgage rates continue to hover around 7% after spiking up earlier this month, according to Zillow data. Until we get some data showing that inflation is slowing, mortgage rates are unlikely to go down.
After decelerating substantially in 2022 and 2023, inflation has been sticky so far this year. Because of this, investors have pushed back their expectations of a Federal Reserve rate cut. Until inflation comes down further and the Fed is able to start lowering the federal funds rate, mortgage rates will probably remain near their current levels.
Though investors were initially pricing in as many as six cuts in 2024, we may now only get one or two cuts total by the end of the year. Investors expect that the first Fed cut will come in September, according to the CME FedWatch Tool.
This means we could see mortgage rates improve somewhat as we approach fall. But it really depends on how the latest data shakes out. If inflation stagnates, rates won’t drop. They could even tick up further.
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Use our free mortgage calculator to see how today’s mortgage rates will affect your monthly and long-term payments.
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$1,161 Your estimated monthly payment
Total paid$418,177
Principal paid$275,520
Interest paid$42,657
Paying a 25% higher down payment would save you $8,916.08 on interest charges
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Paying an additional $500 each month would reduce the loan length by 146 months
By plugging in different term lengths and interest rates, you’ll see how your monthly payment could change.
Mortgage Rate Projection for 2024
Mortgage rates increased dramatically for most of 2023, though they started trending back down in the final months of the year. As the economy continues to normalize this year, rates should come down even further.
In the last 12 months, the Consumer Price Index rose by 3.5%, a significant slowdown compared to when it peaked at 9.1% in 2022. As inflation slows and the Federal Reserve is able to start cutting the federal funds rate, mortgage rates are expected to trend down as well. But because inflation has been somewhat sticky in recent months, mortgage rates have remained elevated so far this year.
For homeowners looking to leverage their home’s value to cover a big purchase — such as a home renovation — a home equity line of credit (HELOC) may be a good option while we wait for mortgage rates to ease. Check out some of the best HELOC lenders to start your search for the right loan for you.
A HELOC is a line of credit that lets you borrow against the equity in your home. It works similarly to a credit card in that you borrow what you need rather than getting the full amount you’re borrowing in a lump sum. It also lets you tap into the money you have in your home without replacing your entire mortgage, like you’d do with a cash-out refinance.
Current HELOC rates are relatively low compared to other loan options, including credit cards and personal loans.
When Will House Prices Come Down?
We aren’t likely to see home prices drop anytime soon thanks to extremely limited supply. In fact, they’ll likely rise this year as mortgage rates drop.
Fannie Mae researchers expect prices to increase 4.8% in 2024, while the Mortgage Bankers Association expects a 4.1% increase in 2024.
Lower mortgage rates will bring more buyers onto the market, putting upward pressure on prices. But prices aren’t currently expected to increase as much as they have in recent years.
Fixed-Rate vs. Adjustable-Rate Mortgage Pros and Cons
Fixed-rate mortgages lock in your rate for the entire life of your loan. Adjustable-rate mortgages lock in your rate for the first few years, then your rate goes up or down periodically.
So how do you choose between a fixed-rate vs. adjustable-rate mortgage?
ARMs typically start with lower rates than fixed-rate mortgages, but ARM rates can go up once your initial introductory period is over. If you plan on moving or refinancing before the rate adjusts, an ARM could be a good deal. But keep in mind that a change in circumstances could prevent you from doing these things, so it’s a good idea to think about whether your budget could handle a higher monthly payment.
Fixed-rate mortgage are a good choice for borrowers who want stability, since your monthly principal and interest payments won’t change throughout the life of the loan (though your mortgage payment could increase if your taxes or insurance go up).
But in exchange for this stability, you’ll take on a higher rate. This might seem like a bad deal right now, but if rates increase further down the road, you might be glad to have a rate locked in. And if rates trend down, you may be able to refinance to snag a lower rate
How Does an Adjustable-Rate Mortgage Work?
Adjustable-rate mortgages start with an introductory period where your rate will remain fixed for a certain period of time. Once that period is up, it will begin to adjust periodically — typically once per year or once every six months.
How much your rate will change depends on the index that the ARM uses and the margin set by the lender. Lenders choose the index that their ARMs use, and this rate can trend up or down depending on current market conditions.
The margin is the amount of interest a lender charges on top of the index. You should shop around with multiple lenders to see which one offers the lowest margin.
ARMs also come with limits on how much they can change and how high they can go. For example, an ARM might be limited to a 2% increase or decrease every time it adjusts, with a maximum rate of 8%.
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The term “six figures” refers to any annual six-digit salary that falls within the $100,000 to $999,999 range. Securing a post-graduate degree or attaining a highly in-demand position can help you earn six figures over time.
How Much Money Is Six Figures?
A six-figure salary can range anywhere from $100,000 to $999,999 annually. If a person had an annual income of$500,000, here’s what their payments would look like before taxes and deductions:
Salary Breakdown
$500,000 per year
$240
per hour
$9,615
per week
$19,231
every 2 weeks
$41,667
per month
$125,001
per quarter
$250,002
every six months
Please note that this breakdown doesn’t include taxes, which can vary depending on your state and filing status. This breakdown will also vary depending on a person’s exact salary and not what they’re expected to receive.
What Percent of America Makes Six Figures?
When you remove demographics such as infants, students, and stay-at-home spouses and focus only on full-time workers,around 18% of all earners in the US make at least six figures.
Conversely, the median American household income in 2023 was approximately $44,225. This number will fluctuate when one examines factors like the location, education, and health of certain populations.
How Does Education Affect Earning Six Figures?
Having a higher education can create more opportunities to earn a six-figure salary after college. Postgraduate degrees in Science, Technology, Engineering, and Mathematics (STEM) fields are often requirements for high-paying occupations.
Below are their median salaries, according to the Bureau of Labor Statistics. Keep in mind that median salaries don’t reflect the highest or the lowest paying positions:
Higher education is synonymous with increased student debt, but at least five college degrees are worth the money in the long run. Medical degrees, engineering programs, industrial management studies, and computer science degrees fall under this umbrella.
Can You Make Six Figures Without a Degree?
It’s possible to earn $100,000 or more each year without a college degree by pursuing certain occupations. Roles in this category often require preliminary and on-the-job training, as well as multiple certifications.
Choosing this route can also help you avoid some of the most frequent student loan mistakes, such as borrowing more money than you need and slowing down your financial growth.
Commercial Airline Pilot
The median salary for airline and commercial pilots was $148,900 in 2023. Securing a pilot’s license is the first barrier to entry for this role, though it will take years to gain the necessary experience for the most lucrative positions.
Air Traffic Controllers
The high level of responsibility and focus required of air traffic controllers results in a high compensation of about $132,250 annually. An individual’s performance and personal experience can pave the way for higher wages over time.
Air traffic controllers only need an associate degree to get started, though this role requires extensive on-the-job training.
Police Officer or Firefighter
Police officers and detectives, along with firefighters, can earn larger salaries based on their experience and location. For instance, the salary and benefits for police officers in California total around $117,822 annually and include health and dental insurance.
Hard Labor Jobs
Hard labor jobs often pay very well to compensate for the physical risks and immense technical knowledge that these roles demand. In 2022, power plant operators earned a median salary of $97,570. As technology and energy continue to become more important to society, the demand and compensation for these roles will almost certainly rise.
Athletes and Sports Competitors
World-famous athletes and sports competitors like LeBron James, Lionel Messi, and Naomi Osaka earn millions of dollars each year, but many of their contemporaries also earn fantastic salaries without ever needing a degree. Talented athletes with the proper opportunities earned a median salary of $94,270 in 2022.
Real Estate Agent
Real estate brokers and sales agents can earn six-figure salaries without a college degree. Instead, they will need to invest time and money into securing a real estate salesperson license—which, in California, for example, can cost upwards of $500 once all fees are accounted for.
Real estate agents largely earn income from commissions, so they’ll have to gain experience and build up their network of clients to hit that six-figure mark.
Making Six Figures From Your Investment Strategy
A certified financial advisor is best qualified to help you understand how your investments can grow in the future. A strong investment strategy combined with the proper resources and economic conditions can also help someone earn six figures annually.
Potential investment options include:
Pretax retirement savings plans
Stocks, bonds, treasuries, and cryptocurrencies
Real estate and REITs (real estate investment trusts)
Compound interest helps funds grow exponentially based on the amount you’ve deposited and any additional contributions you add. To see this concept in action, you can use our 401(k) calculator and try out multiple scenarios.
Normally, compound interest accounts can generate 5% to 8% interest each year based on your retirement investments. Jobs that provide employees with 401(k) matching contributions can generate hundreds of thousands of dollars by the time you reach retirement age (around 65 years old).
What Are the Best Ways to Start Earning Six Figures?
Keep these strategies in mind if you strive to make at least $100,000 annually:
Consider earning a postgraduate degree. Postgraduate STEM degrees may pave the way for higher-paying roles after graduation.
Avoid student loans to the best of your ability.
Research vocations that don’t require post-graduate degrees.
Consider attending a trade school or a technical college.
How to Increase Your Income in Your Current Role
You have several options to increase your revenue in your current career.
Consider switching companies every few years. Competitors may pay more for experienced workers from other companies.
Pursue promotions within your current organization whenever possible.
Explore entrepreneurship once you’ve gained enough practical experience and saved up a set amount of capital.
2024 Tax Brackets for Single and Joint Filers
As your salary increases, so will your tax obligations for each year. The Internal Revenue Service disclosed the following income tax bracket structure for 2024:
Percentages
Single Filers
Joint Filers
35%
$243,725
$487,450
32%
$191,950
$383,900
24%
$100,525
$201,050
22%
$47,150
$94,300
12%
$11,600
$23,200
Maintain Strong Credit With Credit.com
No matter how you plan to increase your revenue, maintaining strong credit is pivotal. Good or even excellent credit can help you secure lucrative loans and could even open the door to higher-paying positions. With Credit.com’s ExtraCredit® subscription, you can get reliable updates about your credit score and insight into your credit information with resources, tools and strategies to help you know where to work and progress for credit security.