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3 Reasons Your Tax Refund Might Not Be As Big As You’re Expecting

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09ba4dd1-bbe3-4f1f-9400-940dc6df347fEveryone tells you not to plan on having a tax refund. If you’re living paycheck-to-paycheck, though, you know where every dollar is going. You might be counting on that money to give you the breathing space you need.

Even if you’re a little further ahead than that, you may still have made plans for your tax refund. You might be planning to pay off a credit card from the holidays or hoping to put a down payment on a car. You might just be hoping to take a little vacation over spring break!

Whatever your plans for the money, it’s a good idea to temper your expectations. Unfortunately, you can’t count on the same tax refund you got last year. Here’s why.

1. Student loan garnishments. 

If you’re behind on your student loans, you might not see much of your refund. If you don’t have much of an income, it’s easy to get behind and it’s hard to catch up. Student loan companies know that, for people with minimal income, tax refunds are a source of a big chunk of money. Also, since it’s not a regular source of income, the rules regarding garnishment are more lenient. Ordinarily, creditors are only allowed to take 15% of your discretionary income if you have one loan, or 25% if you have multiple loans. For a tax refund, the Department of Education can instruct the IRS to apply the full amount of any tax refund you’re due to the balance of your loan.

Even if you’re paid off in full, it might be wise to check with your spouse. This process can also apply to your refund for his or her defaulted student loans. As far as the IRS is concerned, you’re one taxpayer with one set of obligations.

This process can apply to federal student loans, federally subsidized loans and some private loans. You’ll receive a notice of proposed offset from the IRS. You have 65 days from receipt of the notice to object to the offset. Deferments can be provided for up to 3 years for economic hardship and unemployment. They may be provided indefinitely for individuals seeking an advanced degree or for people with disabilities.

It’s also possible the “loan” may just be a paperwork error. If you’ve unenrolled from classes but haven’t yet received a repayment from the school, for instance, you might get your refund back with a short letter. The notice of referral will provide you instructions to request a review.

2. You made more money.

Usually, getting a raise is something to celebrate. If you got one this year, that’s good news for your career future. It’s less good news for your refund. The refund is the difference between what you paid in taxes and what you ended up owing. Your taxes are withheld from your paychecks assuming they stay the same all year. If you got a raise in June, then you were effectively under-withholding for the first half of the year.

Beyond the difference in payment, you may find your raise puts you just above the threshold for credit programs. Credits like the Earned Income Tax Credit (EITC) have income eligibility requirements. If you made more money this year than you did last year, you may not qualify. The same is true for subsidized insurance premiums through the Affordable Care Act (Obamacare). If your income changed after you obtained coverage, you may have to hand back a part of that subsidy.

The EITC is fairly significant, particularly if you have kids. It may be worth your time to look for other deductions you can take to get your gross income under the threshold. Consider working with a professional tax preparer, too.

3. You were the victim of identity theft.

The past few years have seen an increase in tax returns filed fraudulently on behalf of victims of identity theft. A crook uses your Social Security Number and fabricates financial information to get a hefty tax refund, then cashes the check. You’re not only out your tax refund, but also may be facing criminal charges for the phony info on “your” return.

With cuts to the IRS budget this year, its enforcement and investigation of these crimes has dropped. You should contact the IRS immediately if you receive notice that more than one tax return was filed using your Social Security number or if you are issued a W-2 (an income statement report from your employer) by an employer you don’t recognize. These are red flags that someone is fraudulently using your identity.

The FTC recommends you contact the IRS’s Specialized Protection Unit at 1-800-908-4490. You should also prepare proof of your identity, like a copy of your drivers’ license, Social Security card, or passport. The IRS has a form, IRS ID Theft Affidavit Form 14039, that will start the investigative process. Recovering from this crime will take time, but you will get the refund you’re due.

10 Tips to Save Money on Your Upcoming “Big Game” Football Party

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superbowl-partyIt’s that time of year when millions of people start to talk about the “Big Game.” Aside from the game itself, these football parties are pretty big events. If you’re trying to keep to a budget this year and not spend as much on food or drinks, here are a few things to keep in mind:

Have a Potluck

One of the cheapest and easiest ways of hosting a “Big Game” party is to have a potluck where everyone brings their own dish. This not only saves you money, but also saves you time which can be even more important so you aren’t spending all your time in the kitchen and you can actually enjoy the game as well. Whether your guests want to buy something to bring or make it themselves, this is a great alternative to a traditional party where the host makes everything themselves.

Supermarket Deals

Since the “Big Game” is such an iconic event, grocery stores and brands often put popular party food items on sale during the weeks leading up to the game. Keep an eye on your local grocery store flyers for these deals so that you can buy any of your intended snacks for well below retail price.

Coupons

If supermarkets are eager to get into the hype of the game by advertising big sales on certain products, then you can bet that manufacturers are as well. This is definitely a great time to scour for coupons on certain items. Whether it’s looking on the manufacturer’s website, social media, the Sunday paper, or at the grocery store, keep an eye open for coupons that will help you save money, and make sure to use them when you’re buying your party necessities.

Make Foods That Cater to a Lot of People

While it might be tempting to go all out and create a number of smaller dishes and plates, it’s much less expensive to make a huge dish of something. For example, a giant pot of chili or a giant batch of nachos will be a lot less expensive than several rounds of appetizers. Opting for a single item that will taste good and be filling can save a ton of money on party food.

BYOB

If you’re hosting a party with alcohol involved, you might want to consider telling your guests to bring their own drinks. Alcohol can be pretty expensive, especially if you’re buying for a lot of people. Not only will it be cheaper for you, but you won’t have to deal with any complaints about the brand of beer or hard liquor you buy. You’re more than welcome to buy some alcohol to accommodate your guests, but it’s still a good idea to ask them to bring something of their own to even out the expenses.

Decorations

Some people don’t decorate for football parties while other people go crazy with decorations. If you’re looking to decorate for your party, consider picking up some decorations from a dollar store or other inexpensive store in team colors rather than branded with team logos. There’s no need to spend a lot of money for decorations that you’re probably going to throw away within 24 hours. Moreover, dollar stores have can have a surprisingly large section of party decorations.

Buy in Bulk

If you’re having an extremely large party where buying in bulk is appropriate, then you should go for it! A lot of guests means that you’ll need more food, drinks, and paper or plastic utensils, and it’ll usually be much cheaper to buy all of that in bulk rather than individually at the supermarket. But before you run out to Costco, Sam’s Club, or BJ’s, take the time to compare prices of all the stores around you to make sure that buying in bulk really will be financially to your advantage.

Don’t Splurge

You should think twice before you splurge on decadent desserts or expensive alcohol or a new flatscreen TV. While it may be tempting to have expensive foods or the latest TV in order to impress your guests, spending more money than you need isn’t always a smart idea. You don’t want to regret your spur of the moment purchases the next time you look at your bank account, after all. If you’re seriously thinking of buying expensive items in time for the big game, do your research and make sure that you’re getting the best deal.

Delivery

While it’s always nice to prepare and cook your own meals and snacks for a party, sometimes delivery is the cheaper alternative. Since the “Big Game” is such a huge deal, many pizza places or other takeout places have special deals. It’s worth considering whether or not ordering delivery is a better option for your party.

Take Stock of What You Have

Of course, one of the most important things to remember when you’re trying to host a frugal party is to take stock of what you already have. Whether this is food items you can serve or decorations that you may have forgotten about, there’s nothing worse than going out to buy something you already own. A few days before the party, go around and take stock of what you own and what you truly do need.

Happy saving and good luck to this year’s NFL teams!

4 Times You Should Ignore Good Financial Advice

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finances-e1303266500480It’s so great when someone gives you advice that helps you make a positive change in your life. Sometimes, we can truly learn from the experience and the tips that others provide. However, there are other times when we need to learn to ignore the advice given to us by other people. While it’s often well-meaning, sometimes the advice that other people give can lead us down the wrong path entirely.

Especially when it comes to financial tips and advice, sometimes people become set in a certain way of thinking, or they believe a financial myth because it has been told to them by someone else. It’s important to make your own financial decisions. There are certain financial tips that are either out-dated or conditional. Some tips are just wrong all together.

Here are four financial tips that you definitely should ignore, and how to spot poor financial advice.

1. Avoid credit cards. Credit cards can be dangerous. According to Lifehacker, they make it easy to spend money, we can easily feel peer pressure to use them because so many other people do, and of course, the interest can really add up.

However, credit cards are not all bad, as long as you use them responsibly. If you can afford to pay the balance off immediately, there is no harm in using a credit card. There are actually several positive aspects of credit cards, including the fact that most credit card companies protect you against fraudulent charges (whereas if someone steals $200 in cash, you probably are not getting it back). Also, many credit cards come with excellent rewards.

Did you know First Financial has a lower rate VISA Platinum Cash Plus Credit Card, great rewards and no annual fee? Apply today!*

2. Save first. It is absolutely essential to set savings aside each month toward future purchases, an emergency fund, and your retirement. If you don’t save now, you risk not having enough saved later. However, as important as prioritizing savings is, it isn’t always the right decision for each person. If you are drowning in debt, but you are setting aside hundreds of dollars each month toward savings (while your bills lay unpaid), you are probably making the wrong choice. There’s no use having savings if you are in a bad financial situation, and it’s getting worse because interest and late fees are piling up while you focus on your savings.

We offer a number of Savings Account options, click here to learn about our various accounts and to find one that fits your needs.**

3. Stick to your budget. Many Americans have a hard time sticking to their budgets (and many don’t even have one), and in general, you should try to stick to your budget. However, you actually need to be flexible when things change. If you go from a two-income household to a one-income household, and you are still living on a budget that was designed when you had a lot more money available, you could set yourself up for a lot of debt.

At the same time, when you get a raise, it’s appropriate to change your budget (even if you are just adding the extra income directly into savings or your retirement fund). Circumstances change, and inflation causes prices to go up, so it isn’t fair to yourself, or even responsible, to expect to have the same budget all the time. While in general you should try to stick to your budget each month, sometimes you need to reevaluate it.

Don’t forget to utilize our great financial calculators – they’re free and a great tool to help you get your finances on track.

4. Don’t take a risk. This is another piece of advice that is often well-meaning, but is given by people who usually are more interested in saving everything than taking risks. While it is important to save, unless you take risks, you probably won’t get very much interest back on your savings. People disagree about the best way to handle various financial decisions, but you have to determine what is right for you. You might lose a lot of money by taking a chance on a risky stock, or you might end up rich. Although diversifying your portfolio is often the smartest choice, it might not be the right choice for you. If you want to start your own business, but others advise you against it because of the risk of failure, you have to decide if the risk is worth it to you. There is very little financial advice that fits every single situation.

According to Fox Business, if you are trying to figure out if the advice you are receiving is bad, there are certain signs you should watch out for. If the person giving you the advice has a stake in your decision, they may not be presenting a fair picture. If you didn’t solicit the advice, that could be another sign to watch out for, and they might be trying to scam you. You should also avoid accepting advice that follows the one-size-fits all idea (like don’t take a risk).

Financial advice can be extremely helpful, whether it comes from a financial advisor or even a trusted friend or family member who really wants to help. Just make sure that the advice is really worth listening to. Also, remember to go with your gut. If someone suggests a financial move that you don’t feel good about, don’t do it. Whether the other person is intentionally leading you down the wrong path or not, your intuition might be trying to warn you.

Take advantage of the Investment & Retirement Center located at First Financial. If you have questions about retirement savings or investments, set up a no-cost consultation with our advisor to discuss your brokerage, investments, and/or savings goals. Call us at 732.312.1500 or stop in to see us!***

*APR varies up to 18% for purchases, when you open your account based on your credit worthiness. The APR is 18% APR for balance transfers and cash advances. APRs will vary with the market based on the Prime Rate. Subject to credit approval. Rates quoted assume excellent borrower credit history. Your actual APR may vary based on your state of residence, approved loan amount, applicable discounts and your credit history. No Annual Fee. Other fees that apply: Cash advance fee of $10 or 3% of the total cash advance amount—whichever is greater (no maximum), Balance transfer fee of $10 or 3% of the balance—whichever is greater (no maximum), Late Payment Fee of $29, $10 Card Replacement Fee, and Returned Payment Fee of $29. A First Financial membership is required to obtain a Visa® Credit Card and is available to anyone who lives, works, worships, or attends school in Monmouth or Ocean Counties.

**A $5 deposit in a base savings account is required for credit union membership prior to opening any other account. All personal memberships are part of the Rewards First program and a $5 per month non-participation fee is charged to the base savings account for memberships not meeting the minimum requirements of the program. Click here to view full Rewards First program details. Accounts for children age 13 and under are excluded from this program.

***Securities and advisory services are offered through LPL Financial (LPL), a registered investment advisor and broker/dealer (member FINRA/SIPC). Insurance products are offered through LPL or its licensed affiliates. First Financial Federal Credit Union (FFFCU) and First Financial Investment & Retirement Center are not registered as a broker/dealer or investment advisor. Registered representatives of LPL offer products and services using First Financial Investment & Retirement Center, and may also be employees of FFFCU. These products and services are being offered through LPL or its affiliates, which are separate entities from and not affiliates of FFFCU or First Financial Investment & Retirement Center.

Securities and insurance offered through LPL or its affiliates are:

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10 Huge Mistakes to Avoid When Trying to Save Money

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downloadAddressing the issue of saving money is the most fundamental, yet neglected, aspect of personal finance in the U.S. today. According to a survey by Credit Donkey, almost 50 percent of Americans don’t have more than $500 in their emergency savings accounts, which not only puts a kink in savers’ finances in the event of an unforeseen expense, but also creates undue stress for failing to prepare a safety net adequately.

Here are the top 10 money mistakes Americans make when it comes to saving money.

1. Not budgeting.
There are a number of philosophies on the best approach to take when budgeting your money, but at times the thought of sitting down with statements, bills, and an expense sheet is just too stressful. This mind-set is an easy trap to fall victim to, but is one of the worst money mistakes to make if you want to grow your savings fund.

2. Saving too little.
It’s commendable that about half of Credit Donkey’s survey participants had saved up some cash; but often, individuals don’t save enough money to carry themselves through a challenging and sudden financial crisis. A common recommendation when it comes to the appropriate amount to save in a nest egg is about three months’ salary, or six months worth of expenses (i.e. mortgage, auto loan, utility bills, gas, etc.).

For instance, the average American makes $42,693 before taxes. Take away about 25 percent of that income for taxes, and the average person walks away with $32,020 annually. Three months of net income (the ideal emergency fund amount) is about $8,000 to help keep you comfortably afloat in an emergency.

3. Not setting specific goals.
Determining what exactly you’re saving for, and when you need to save by, is a helpful motivational guide to follow. It acts as a constant reminder of what you’re working toward, and lets you know when your efforts have been successful.

Examples of this include saving money for a down payment on a car in the next six months, or getting more specific like committing to saving $200 per month for the next six months, to achieve this goal.

4. Failing to track spending.
Creating a budget is the start of the savings process and setting a goal is the end of it, but there has to be a quantitative way to follow your progression in the time between. Tools such as Mint.com  or even a simple spreadsheet are great ways to avoid this money mistake.

5. Living paycheck to paycheck.
When budgeting your spending allowance, don’t stretch your money to the last dollar. Not allowing yourself about a $100 per month buffer sets you up for disaster, as small, seemingly harmless purchases quickly add up.

6. Overdrawing an account.
Overdrawing a checking account is usually the result of making one of these other money mistakes, but expensive overdraft fees are a cost you have complete control over. A $35 overdraft fee might not sting now, but as more pile up on your account statement, the damage can become apparent in a short period of time.

Simply put, overdrawing is a money waster and an entirely avoidable circumstance if you stay diligent with your savings plan.

7. Claiming the wrong tax withholding.
Claiming the lowest withholding allowance when it comes to your federal taxes is a mistake that Americans commonly make. When you do so, the government takes away more income taxes throughout the year, and you’re left with a fat tax return check.

Don’t let this windfall fool you — what you’re doing is essentially giving Uncle Sam an interest-free loan and getting nothing back in return. Instead, you can claim the withholding allowance you rightfully qualify for, and use the extra cash in each paycheck to grow your savings fund in a high-interest savings account.

8. Signing up for low deductibles.
One way to increase the amount of cash you can save each month is to lower your premium and raise your deductible for auto and health insurance. This means you assume more risk up front by paying a lower monthly premium, with the expectation to pay more out of pocket in the event you have to file a claim (which should be no problem if you’ve saved that emergency fund).

According to the Insurance Information Institute, increasing your deductible from $200 to $1,000 can lower collision and comprehensive coverage premiums by at least 40 percent.

9. Buying name brands.
More customers are employing frugal tactics like passing on branded products in lieu of a generic version. Similarly, retailers have caught onto the fact that shoppers are looking for a frugal alternative in today’s challenging economic times.

That’s not to say you should never splurge on a brand that’s worth it, but most generics are the same product as their pricier counterparts. Look for generic products on the lower shelves of grocers’ aisles.

10. Waiting.
One of the worst money mistakes you can make is procrastinating on getting started with your savings plan, since achieving a savings goal can take longer than you might expect. Paying $500 per month toward an emergency fund at the income outlined in mistake No. 2, for example, would take the average American 16 months to save up three months’ income.

Here at First Financial, we also encourage our members to come in at least once a year for an annual financial check-up – to sit down with a representative at any one of our branches to make sure you are currently placed in the correct Rewards First tier for you, and also that you are receiving the best value, products and services based on your financial situation. Give us a call at 732.312.1500 or stop in to see us today!