Women and Money Archives - Curtis Financial Planning

Charitable Giving, Part 3: Tax-Smart Ways to Give to Charity (Part 1)

Charitable Giving, Philanthropy, Tax Planning, Women and Money / By Cathy Curtis / February 28, 2023 March 3, 2023

If you’ve read the first two articles in this blog series, perhaps you’ve put some thought into how much you want to give to charity each year and to whom. In the second half of this series, we’ll discuss tax-smart ways to give to charity. Tax laws can be dense, so bear with me as I explain the strategies as clearly as possible!

The first thing to know about charitable giving and taxes is that you must itemize on Schedule A of Form 1040 to deduct your charitable donations for the year.

Your total itemized deductions must exceed the standard deduction for you to reap the tax benefit of giving to charity. In 2023, the standard deduction is $13,850 for single filers and married couples filing separately, $27,700 for joint filers, and $20,800 for heads of household.

Fortunately, if you typically take the standard deduction and the amount you give to charity each year doesn’t push you over the threshold to itemize, there are strategies you can employ to maximize your tax savings.

To maximize your tax savings, consider the following tax-smart ways to give to charity:

#1: Bunching

Suppose you’re a non-itemizer but get close to the standard deduction because you max out the State and Local Tax (SALT) deduction at $10,000. Then, you may want to consider a strategy referred to as “bunching.”

How Bunching Works

Bunching is a tax-smart way to give to charity where taxpayers combine or “bunch” their charitable donations into one tax year so they can itemize their deductions.

Suppose a single taxpayer usually gives $3,000 to charity annually. Meanwhile, their other qualifying itemized deductions (such as state and local taxes, mortgage interest, and medical expenses) amount to $10,000 for a total of $13,000 in deductions.

Thus, it would make sense for this taxpayer to take the standard deduction of $13,850 and not itemize. But let’s say instead they give two years of their charitable budget, or $6,000, in one year.

In this case, they would itemize since their total deductions ($16,000) exceed the standard deduction. If this person is in the 24% tax bracket, their tax savings from charitable donations would be $516 for the year.

This strategy or something similar can be repeated over time, creating multi-year tax savings.

#2: Donor-Advised Funds as a Tax-Smart Way to Give to Charity

In the above example, we assumed the taxpayer wrote a total of $6,000 in checks and mailed them to their preferred charities in one year. Then, they skipped donating to charity in year two.

But there are other tax-smart ways to give to charity that can be even more financially advantageous than bunching and allow for giving each year. One example is to utilize a donor-advised fund (DAF).

How DAFs Work

A DAF is a registered 501(c)(3) organization that can accept cash donations, appreciated securities, and other non-cash assets. Thus, if you hold highly appreciated securities in a taxable investment account, you may benefit greatly from donating to a DAF.

Here’s why. Suppose instead of writing checks for $6,000 to various charities, the same taxpayer in the example above transfers $12,000 worth of Apple (AAPL) stock with a cost basis of $35/share into a DAF. The stock is worth $160/share on the day of the donation.

The taxpayer can take a tax deduction of $12,000 (the current market value of the shares they donate) on that year’s tax return. They also avoid paying the capital gains taxes they would have incurred by selling the stock outright. This amounts to a savings of over $1,400 ($9,375 gain x 15% long-term capital gains tax rate).

Once they donate their shares to a DAF, the fund sponsor can sell the shares tax-free. The taxpayer can then invest the proceeds within the DAF and let the funds grow tax-free over time. In addition, they can designate which charities they want to receive grants from the DAF going forward.

Like bunching, donating to a DAF allows you to take a potentially large tax deduction in the year you make the donation. Yet unlike bunching, you don’t have to decide which charities to donate to right away. Instead, you can donate your $3,000 as planned each year from funds in your DAF.

Key Advantages of DAFs

Flexibility: Donors can recommend distributions to multiple charities over time without having to manage individual grants to each organization.
Tax benefits: Donors can claim an immediate tax deduction for the full amount of their donation, subject to certain limitations.
Investment management: DAFs typically offer a range of investment options and professional management services to help grow the value of the donations.
Privacy: Donors can choose to remain anonymous when making recommendations for grants, if desired.
Legacy: DAFs can provide a way for donors to involve their family in philanthropy and pass down charitable values and traditions to future generations.

Limitations of DAFs

Keep in mind that DAFs are not free. According to a 2021 study by National Philanthropic Trust, the average total fee for DAFs was 0.96% of assets per year. This fee includes administrative fees, investment management fees, and any other fees the DAF provider charges.

In addition, DAFs come with a number of rules, including minimum balance requirements, minimum grant requirements, deadlines, and grant approvals.

Many DAF providers require a minimum initial contribution ranging from $1,000 to as much as $25,000. Once you establish the fund, there’s typically a minimum balance requirement between $5,000 and $25,000. If you fail to meet these minimums, the provider may change additional fees or penalties.

In addition, some DAF providers may have minimum grant requirements ranging from $50 to $250 or more. And because most people actively grant at the end of the year, there may be deadlines for making grants to ensure timely processing.

Lastly, DAF providers must approve grants before disbursement to ensure the recipient is an eligible charitable organization and that the grant doesn’t violate IRS rules or regulations. However, disapproval of a grant is rare.

Despite these limitations, the potential benefits make DAFs a tax-smart way to give to charity worth considering in many cases.

Popular DAF Providers

While there are many donor-advised funds (DAFs) in the United States, the most popular providers tend to be large financial institutions and nonprofit organizations. Examples include:

Fidelity Charitable: Fidelity Charitable is the largest DAF provider in the US, with over $35 billion in assets and more than 200,000 donor-advised funds.
Schwab Charitable: Schwab Charitable is the second-largest DAF provider in the US, with over $20 billion in assets and more than 180,000 donor-advised funds.
Vanguard Charitable: Vanguard Charitable is a DAF provider affiliated with the investment firm Vanguard, with over $14 billion in assets and more than 80,000 donor-advised funds.
National Philanthropic Trust: National Philanthropic Trust is a nonprofit organization that offers DAFs and other philanthropic services, with over $8 billion in assets and more than 18,000 donor-advised funds.
Silicon Valley Community Foundation: Silicon Valley Community Foundation is a community foundation that offers DAFs and other charitable services to donors in the Silicon Valley region and beyond, with over $13 billion in assets and more than 4,000 donor-advised funds.
DonorsTrust: DonorsTrust is a nonprofit organization that offers DAFs and other philanthropic services to donors who prioritize limited government, personal responsibility, and free enterprise.

It’s worth noting that there are many other DAF providers in the US, and your choice of provider will depend on your specific philanthropic goals and financial situation. You must do your due diligence to understand the fees, rules, and requirements if you’re considering this tax-smart way to give to charity.

Next: Tax-Smart Ways to Give to Charity Part 2

Hopefully you now have a better understanding of why bunching and DAFs can be tax-smart ways to give to charity. In the final article of this blog series, I’ll share a few more giving strategies that can help you maximize your impact and tax savings.

In the meantime, please visit our Resources page for more information on this topic and beyond.

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Charitable Giving, Part 2: Which Charitable Organizations Should You Donate To?

Charitable Giving, Estate Planning, Philanthropy, Tax Planning, Women and Money / By Cathy Curtis / February 23, 2023 February 23, 2023

Which Charitable Organizations to Donate To

This article is part two in a four-part blog series focused on charitable giving and will address the question: Which charitable organizations should you donate to?

Once you’ve decided how much money to give to charity each year, you can focus on the recipients. According to Giving USA Foundation, the types of charities that tend to receive the most donations are:

Religious organizations
Educational institutions
Human services such as food banks, disaster relief organizations, and homeless shelters
Health-related charities such as hospitals and medical research centers
Arts and culture charities such as museums, orchestras, or theatre groups

Many people tend to respond to end-of-year donation solicitations they receive by email or mail and give to the same organizations every year. But if you want to be more proactive about your giving, spend some time thinking about the issues or causes you care about and find the organizations that impact those issues or causes most.

Smaller organizations may have a greater need for your dollars than larger organizations. As such, you may want to take advantage of opportunities to give to local organizations, such as theatre or educational groups.

For example, I donate to a local organization called Foodwise, whose mission is “to grow thriving communities through the power and joy of local food.” Not only do I admire their mission, but I was also previously a board member and get a lot of pleasure from attending their events.

Another example is a client of mine who donates to a swim club she belongs to that’s organized as a 501(c)(3) organization. The swim club was renovating its clubhouse, so she donated dollars specifically to help get this project completed. Another client gives to a hiking club because she’s an avid hiker.

A Word About 501(c)(3) Organizations When Deciding Which Charitable Organizations to Donate To

Suppose you’re eligible for tax deductions for charitable giving. (Ordinally, you must itemize deductions on Schedule A of your Federal Tax return to receive a tax benefit.) In that case, you should ensure that the organization you donate to is a 501(c)(3) organization.

A 501(c)(3) organization is a tax-exempt nonprofit in the U.S. that must operate exclusively for religious, charitable, scientific, literary, or educational purposes. It addition, the organization must not engage in political or lobbying activities or provide private benefits to any individual or group.

It’s also important to note that if you contribute money through crowdfunding platforms such as GoFundMe, Kickstarter, or Indiegogo, these donations are typically not tax deductible. That’s because the individual fundraising campaigns aren’t tax-exempt organizations.

Investigating the Charitable Organizations You Donate To

There are several ways to investigate charities to ensure they’re using your charitable donations properly.

One well known charity evaluation organization is Charity Navigator, which provides ratings and financial information on thousands of nonprofits and assigns a rating based on their performance.

Another is GuideStar, which allows you to search for nonprofits by location, mission, or types of work.

How Many Organizations Should You Donate To?

Lastly, many clients ask me if it’s better to give a large amount of money to one organization or spread their donations among several organizations. I’ve found that this is a personal decision.

Some people care about so many things that they want to spread their money widely. Meanwhile, others prefer to have a more significant impact on just a couple of organizations.

One thing I know for sure: try and give at times other than just the end of the year. The charities will appreciate it, plus you won’t get that anxious feeling that you haven’t done enough on December 31. In addition, if you write checks or take advantage of Qualified Charitable Distributions (QCDs), you’re more likely to meet the deadline to get a tax deduction in the year you donate.

Next: Giving Strategically

The first half of this blog series has focused on how much to give and which organizations to donate to. In part three, we’re going to explore various ways to give strategically, so you can make more of an impact with your donations while enjoying the associated tax benefits.

In the meantime, please visit our resources page for additional details on this topic, and stay tuned for more.

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Charitable Giving, Part 1: How Much Should You Give to Charity?

Charitable Giving, Estate Planning, Tax Planning, Women and Money / By Cathy Curtis / February 15, 2023 February 16, 2023

This article is the first in a four-part blog series focused on charitable giving and will address the question: How much should you give to charity?

There’s a great need for charitable donations from private sources these days, and with those donations, the world can be a better place. If you have a desire to donate money but aren’t sure how much, to whom, when, and how to benefit from applicable tax laws, this blog series is for you.

How Much to Give to Charity Each Year

As a financial planner, clients often ask me for my recommendation on how much they should donate to charities each year. Because I understand my clients’ financial situation thoroughly, this is not an unusual question. I can provide a suggestion based on their cash flow or tax situation.

But with something as personal and individual as charitable giving, I prefer they determine the amount themselves.

What I’ve found helpful in guiding clients is sharing statistics on how much others give to charity. And as it turns out, there’s a psychological explanation as to why this is helpful.

It’s called “informational social influence,” and it occurs when people do not know the correct (or best) action to take. Instead, they look to the behavior of others as an important source of information and act accordingly.

How Much Do Others Give to Charity?

Americans are charitable, donating hundreds of billions of dollars annually to needy organizations. Although there are significant differences in how much Americans give, higher-income households tend to give a higher proportion of their income to charity than lower-income households (unsurprisingly). However, demographic factors, such as age, education, race, and geography, also come into play.

According to data from Giving USA Foundation, the average individual donation among all income levels in 2020 was 2.5% of income. But individual households earning over $200,000 per year gave a more significant percentage—on average, 4.5%.

According to the same report, households in the Northeast and Upper Midwest gave, on average, 3% to 4% of their income to charity. Meanwhile, households on the West Coast gave approximately 1% to 2% of their income to charity.

Of course, these are averages, and the actual percentages of income people in these regions donate depend upon many factors.

How Tax Deductions Impact Charitable Giving

Once I become familiar with my clients’ charitable giving goals, I include the discussion of “how much” in my annual tax planning meetings.

Why? Because the tax code provides incentives for individuals to make charitable donations by allowing them to deduct these gifts from their taxable income. Indeed, if you’re charitably inclined, you may be able to meaningfully reduce your tax burden each year.

Of course, there are rules and guidelines as to who can deduct such donations and to what extent. I will expand on these nuances later in this blog series.

In the meantime, I hope you find this information useful in determining how much you’d like to give to charity each year. Please check out our other resources for additional details on this topic and stay tuned for more.

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S5E1: Overspending? Here’s How to Get Your Spending Habit Under Control This Year

Financial Finesse Podcast / By Cathy Curtis / February 13, 2023 February 13, 2023

Take Control of Your Spending Habit Once and For All

In this episode, Cathy shares her tips and strategies for getting your spending habit under control once and for all this year.

Welcome to Episode 1 of the 5th season of the Financial Finesse podcast!

Today I’m going to talk about spending—specifically, how to get your spending under control. Many of my clients told me that one of their goals for 2023 is to get their spending on discretionary items under control. (In other words, the things you really don’t have to have.)

And they may not have a spending problem per se. But they know their spending is probably one of the things that’s keeping them from reaching their longer-term financial goals, and/or it’s just making them uncomfortable. They don’t feel right about their spending habits.

I have to admit, I can relate to this because I have a little bit of a clothing infatuation. I love anything new, and I love clothing and accessories. So, I’m going to be right there with you in working on getting my own spending habit under control this year.

Episode Highlights

[02:11] What do habits have to do with spending?
[03:23] Identifying your biggest spending weakness or weaknesses.
[06:05] What are your spending triggers?
[08:45] Setting your new budget for the year ahead.
[10:32] How to find ways to support yourself in reaching your goal.
[16:23] Determining your values and aligning your spending accordingly.
[17:33] Download our free e-book, How to Take Control of Your Spending This Year.

Links Relevant to this Episode

How to Take Control of Your Spending This Year Blog Series:

1: Reduce Your Spending By Creating Healthy Habits

2: Identifying Your Spending Weakness

3: What Triggers Your Overspending Habit?

4: Budgeting And Tracking Your Spending

How to Take Control of Your Spending This Year (Free e-book)

The Happiness Spreadsheet (Free e-book)

Enjoy the Full Episode

Other Ways to Enjoy this Episode

Read the Full Transcript

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How to Take Control of Your Spending This Year, Part 4: Budgeting and Tracking Your Spending

Budgeting Help, Women and Money / By Cathy Curtis / January 31, 2023 February 6, 2023

This article is part four of a four-part series to help you reduce your spending this year. In part three, you identified what triggers your overspending habit. This week, I’ll share tips and tricks for budgeting and tracking your spending.

Budgeting and tracking your spending can provide benefits beyond simply saving more money. It also allows you to invest more, pay off debt more quickly, and even retire earlier in some cases! Plus, it can offer a sense of control and accomplishment and reduce financial stress.

Setting a New Budget

Previously, you identified how much you spent in the last 12 months on your spending weakness. Now, it’s time to set a new budget for the next 12 months.

Of course, it’s helpful to choose your new spending goal within the context of a comprehensive cash flow and financial plan. However, to keep the task smaller and more doable, I suggest setting a budget of at least 25% less than you spent the previous year on your spending weakness.

For example, if you spent $10,000 last year, set a budget of $7,500 for the next 12 months. Reduce by a more significant percentage if you feel like your spending was way out of control last year!

Depending on your spending weakness, it may be helpful to set a monthly budget instead. For example, if clothing is your weakness and on average you spent $1000 a month last year, your new budget will be $750 a month. Setting a monthly spending limit rather than a yearly goal may help you stick your budget longer term.

Tracking Your Spending

Once you’ve decided on an amount, you need to create a system for tracking your spending.

You can accomplish this task either digitally or manually; the most important thing is that you do it on at least a monthly basis. If you wait until the end of the year, you lose the benefit of being able to modify your behavior if necessary.

One idea: Save all your receipts in a folder (online or physical). Then, at the end of each month, add them to a spreadsheet and subtract the total from your total budget. Another idea is to download an app like Mint or Goodbudget that tracks and categorizes your spending.

How to Stick to Your New Spending Plan

Budgeting and tracking your spending are indeed important steps. Yet it takes focus, patience, and perseverance to actually stick to your new spending plan.

In other words, changing your behavior is hard. To get your spending under control once and for all, you’ll need a set of tools and resources that support you in achieving your goal.

Here are a few ideas for changing your behavior and creating new, healthier habits:

Find a replacement activity for shopping. When you think about going to a store or hopping on the internet, read a book, call a friend, or watch a movie instead. Choose something pleasurable and stimulating that doesn’t cost money.
When you go to a store, be prepared. Make a list of what you want to buy and stick to it. This preparation will help you avoid impulse purchases.
Delay your purchase. Take a day or two to think about whether you need it.
Avoid peer pressure. Don’t shop with friends who encourage you to buy things you don’t want or need.
Don’t tempt yourself. Plan different routes when you are out and about to avoid your favorite stores and unsubscribe from email lists that entice you to spend money.
Find a new hobby that doesn’t involve spending a ton of money. For example, play a new sport, start a creative project, or learn to play a musical instrument or speak a new language.
Keep your goals front-of-mind. Add a sticky note to your laptop with your budget goal, or read books and articles or listen to podcasts or audio books about habits, conscious spending, and personal finance.
Practice self-awareness. When you are angry, tired, sad, or frustrated, go for a walk or meditate instead of shopping. Keep a journal about your experience and emotions while trying to change your behavior.
Repurpose your discretionary funds. Take some of your savings and donate to your favorite charity.
Hold yourself accountable. Tell your friends that you are trying to cut back on your spending and want their support, or hire a coach or financial advisor to help you reach your broader financial goals.
Visualize your future self. Think about what you’ll gain if you get your spending under control. Then, create a vision board depicting what you see and how you feel.

What Will Motivate You to Stop Overspending?

In addition to changing your behavior, you may need to adjust your mindset around spending altogether. Otherwise, it’s easy to slip back into bad habits.

One thing I’ve found helpful when trying to create a new habit is to identify my “why.” In other words, why is it so important to you to get your spending under control? What are you giving up by overspending? What’s the opportunity cost?

Some of you may want to retire early, but your current spending is keeping you from doing so. In effect, your spending habit may be keeping you from spending more time with your family, pursuing your lifelong dream of writing a novel, or just feeling more at ease on a daily basis.

Or maybe your why is to get out of credit card debt. Instead of putting hundreds or thousands of dollars each month towards your credit card balances, you could be contributing that amount to a retirement account, HSA, or donor-advised fund. You may also sleep better at night knowing you’re debt-free.

Take time to journal about what why you want to stop overspending and what it would feel like to get your spending under control. Then, ask yourself these questions: What would I do with the time and money I save? What could I accomplish instead? How would my attitude about myself change?

Budgeting and Tracking Your Spending for the Long Run

Lastly, people tend to be motivated by what they value. Ask yourself if your current spending aligns with your values. If not, this can be a powerful motivator when it comes to budgeting and tracking your spending.

If you aren’t sure what your values are or need some prompting, consider downloading The Happiness Spreadsheet. This free eBook is full of exercises to identify your values and align your spending with what matters most to you. It also has a list of other helpful resources to guide you in getting your spending under control.

If you’ve been following this blog series, I hope you now have a strong foundation to create healthier spending habits in 2023 and beyond. You may also find the other resources on my website helpful as you continue your personal finance journey.

Lastly, remember we’re in this together. Please feel free to connect with me, keep me posted on your progress, and ask questions.

Good luck, and here’s to a prosperous 2023!

Download my FREE E-BOOK: How to Take Control of Your Spending This Year

Love this blog series? Download my free e-book, How to Take Control of Your Spending This Year, for tips and strategies you can quickly put into action to get your spending habit under control.

If you found this information interesting, please share it with a friend!

How to Take Control of Your Spending This Year, Part 3: What Triggers Your Overspending Habit?

Budgeting Help, Women and Money / By Cathy Curtis / January 25, 2023 February 6, 2023

This article is part three of a four-part series to help you reduce your spending this year. In part two, I took you through a simple exercise to help you identify your spending weakness. This week, we’re going to determine what triggers your overspending habit.

People overspend for many reasons, even when they know it’s detrimental to their finances. Unfortunately, overspending can become a habit. And habits only break if you want them to.

Breaking any pattern can be challenging, but you can change your behavior with persistence and a plan. Here’s your next step for getting your spending under control in 2023.

Figuring Out Your Triggers

Oftentimes, something else triggers our habits, such as an external stimulus, an emotion, or even another habit. If you tend to overspend, chances are something is triggering this habit.

You may or may not be aware of what triggers your overspending habit. If you don’t, take some time to reflect on and journal about when your overspending habit started, what triggered it, and what continues to activate it.

From my experience working with women clients, here are a few common scenarios:

They have a good income or resources but have unrealistic expectations about how much they can spend. This situation frequently happens with women who experience a “sudden-money” event, such as a large inheritance, bonus, a big raise, a new highly paid job, or a liquidity event. Once the spending starts, it’s hard to stop.
They use shopping to deal with negative emotions such as loneliness or anxiety— or shopping as “retail therapy” to numb themselves instead of confronting what is bothering them.
They’ve stopped keeping track of their spending, don’t have a budget, and have yet to learn how much they can afford to spend while still reaching their other goals.
Shopping, which started as a pleasurable pastime, has slowly become more like an addiction. The excitement of buying something new and better (online or in a store), and the camaraderie with friends and shop owners, all combine into a positive reinforcement loop that can get out of control.
A life-changing event happened, such as divorce, the death of a spouse, a new home or relocation, and they haven’t adjusted their spending to their new reality.

Taking Control of Your Overspending Habit

Contemplating and writing down your reasons for overspending can be a helpful step in getting your spending back in alignment with your financial goals. Take your time and dig in as deeply as possible to determine what triggers your overspending habit before going on to the next step.

In part four of this series, we’re going to take action by setting up a budget and a system for tracking your spending. In the meantime, I invite you to check out these free resources to help you better understand and take control of your personal finances.

Download my FREE E-BOOK: How to Take Control of Your Spending This Year

Love this blog series? Download my free e-book, How to Take Control of Your Spending This Year, for tips and strategies you can quickly put into action to get your spending habit under control.

If you found this information interesting, please share it with a friend!

How to Take Control of Your Spending This Year, Part 2: Identifying Your Spending Weakness

Budgeting Help, Women and Money / By Cathy Curtis / January 17, 2023 February 6, 2023

This article is part two of a four-part series to help you reduce your spending this year. In part one, I shared a simple hack to help you create healthier spending habits. This week, I’ll take you through an exercise to help you identify your spending weakness.

It’s common wisdom that the way to complete a big task is to break it down into smaller parts and then tackle each task one at a time. Otherwise, overwhelm can set in, and nothing gets done. I’ll suggest a similar approach to tackling the “big task” of overspending.

What Is Discretionary Spending?

We all spend money on a lot of things, necessary and discretionary. For this exercise, we’ll define discretionary spending as spending on items you could survive without if you wanted to.

Examples may include an extensive collection of clothing, art, household knick-knacks, jewelry, shoes, accessories, make-up, books, or electronics. Alternatively, you may overspend on discretionary experiences such as excessive travel, entertainment, or dining out.

First, Identify Your Biggest Spending Weakness

Your first task in cutting discretionary spending is to identify your biggest spending weakness. For example, if you feel shame (or at least discomfort) about the amount of money you spend on something, it’s likely your spending weakness.

Most of you know your spending weakness, so choosing will not be difficult. However, for those who need more clarification, analyzing your past expenses can help you find your answer.

I encourage you to choose only one spending category at a time to keep things simple. (Breaking down a big task into smaller tasks helps get things done, remember?) That way, you are more likely to make progress. Of course, if you want to, you can add more categories or items and follow the next steps for each.

Next, Calculate How Much You Spent Over the Last 12 Months

After identifying your spending weakness, the next step is to write down how much you spent over the last 12 months on this item. While you can estimate this dollar amount, it’s better to look at your credit card and checking account statements to determine your actual spending. Otherwise, it’s easy to rationalize and make excuses when you’re guessing.

Got your number? Congratulations. I know that confronting money issues is hard, especially if it brings up uncomfortable feelings like regret, remorse, or shame. So let the feelings happen, but then let them go. Thank yourself instead for starting this journey to get back on track.

Continuing Your Journey

In the next article, we’ll go through an exercise to help you discover what triggers your overspending.

In the meantime, I invite you to check out these free resources to help you better understand and take control of your personal finances.

Download my FREE E-BOOK: How to Take Control of Your Spending This Year

Love this blog series? Download my free e-book, How to Take Control of Your Spending This Year, for tips and strategies you can quickly put into action to get your spending habit under control.

If you found this information interesting, please share it with a friend!

How to Take Control of Your Spending This Year, Part 1: Reduce Your Spending by Creating Healthy Habits

Budgeting Help, Women and Money / By Cathy Curtis / January 10, 2023 February 6, 2023

This article is the first in a four-part series to help you reduce your spending this year. I’ll be sharing the knowledge and experience I’ve gained over the last 20 years creating financial plans and guiding women to take control of their finances to help you develop healthier spending habits.

I know many people scoff at the idea of New Year’s resolutions. But I don’t. I believe it’s an opportunity to try and jump-start new habits.

Yes, you can start a new behavior in March or September, but something about a new year motivates me—and maybe you, too. Plus, it helps if the habit you’re trying to change causes you distress, so you’re motivated to work on it throughout the year.

For example, many people want to reduce their discretionary spending. They intuitively know that their spending is getting in the way of achieving their financial goals, but they don’t know what to do about it.

In part one of this series, I’m sharing the simple mindset shift that can help you reduce your spending once and for all.

January is an excellent month to begin a new spending plan.

You may have noticed that I’ve been using the word “habit” a lot. But what do habits have to do with spending?

Many of our behaviors become habits. Overspending or unconsciously spending is a habit, which is actually good news if you’re trying to reduce your spending.

Many experts—for example, James Clear, who wrote the book Atomic Habits—have shared their wisdom and strategies for breaking bad habits and replacing them with new ones. We’ll be leveraging the wealth of information available on this topic, as well as my own experience as a financial planner, to help you get control of your spending in 2023.

What does it take to develop new habits?

If you want to change your habits and reduce your spending this year, living in denial isn’t the answer. Your brain won’t like that. It will fight back too hard.

Instead, you’ll need to make thoughtful decisions about where to allocate your resources moving forward. Eventually, cutting back on spending will be something you want to do because you know it will get you to a better place.

Ready to reduce your spending? Let’s get started.

Each blog post in this series will focus on getting you to think and then take action. You will be writing, so get a pen and paper out, or boot up your laptop. By week four, you’ll have a new attitude and plan in place to help you reduce your spending and get back on track towards your financial goals.

Are you ready to get started? Great. In the next article, we’ll work on identifying your spending weaknesses.

In the meantime, I invite you to check out these free resources to help you better understand and take control of your personal finances.

Download my FREE E-BOOK: How to Take Control of Your Spending This Year

Love this blog series? Download my free e-book, How to Take Control of Your Spending This Year, for tips and strategies you can quickly put into action to get your spending habit under control.

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Clean Energy Tax Credits: What to Know Before You Buy

Tax Planning, Women and Money / By Cathy Curtis / November 15, 2022 November 15, 2022

Inflation Reduction Act & Clean Energy Tax Credits

The Inflation Reduction Act introduces several clean energy tax credits and rebates that may benefit environmentally conscious taxpayers.

As a California-based financial advisor who works primarily with women, I frequently have conversations with clients about socially and environmentally responsible investment strategies. But with the recent passage of the Inflation Reduction Act, many environmentally conscious investors are seeking new ways to put their values into action while potentially benefiting financially in the process.

If you’re considering making climate friendly upgrades to your home or vehicles, you may be eligible to claim thousands of dollars in potential tax credits and rebates. However, before purchasing a rooftop solar panel or electric vehicle, it’s important to understand the various clean energy incentives available—and how to use them to your advantage.

Clean Vehicle Credits

The Inflation Reduction Act extends the Clean Vehicle Credit through 2032. It also introduces new credits for purchasing used electric vehicles.

Specifically, if you buy a new electric vehicle (EV), you may be eligible for a tax credit worth up to $7,500. For a used EV, your tax credit may be worth 30% of the purchase price or $4,000, whichever is less. You may also qualify for additional incentives from state and local governments, depending on where you live. The caveat is that the new credits don’t go into effect until 2023. So, if you’re planning to purchase a used electric vehicle, you’ll likely want to wait until after the new year to maximize your potential tax benefit.

For new EV purchases, it’s a little more complicated. If you purchase a new EV in 2022, the Inflation Reduction Act stipulates that the final assembly of the vehicle must take place in North America. However, purchases of General Motors and Tesla car models aren’t eligible for a tax credit until 2023.

Car manufacturers must also meet two battery-related requirements for consumers to receive the full credit in 2023 and beyond. That means some EVs won’t immediately qualify for a tax break as manufacturers work to meet these rules.

Lastly, beginning in 2024, car buyers can transfer their tax credit to dealers at the point of sale. That way it directly reduces the purchase price. This can be particularly valuable for two reasons:

First, you won’t have to wait until you file your tax return to benefit financially.
In addition, transferring the credit to the dealer at the point of sale ensures you’ll receive the full benefit since the credit amount can’t exceed your tax liability. Meaning, if you owe $6,000 in taxes for the 2023 tax year and take the Clean Vehicle Credit worth $7,500, you lose the remaining $1,500.

Keep in mind there are new adjusted gross income (AGI) thresholds to be eligible for a new EV tax credit. In 2023, the AGI limit is $150,000 for single taxpayers and $300,000 for married couples filing jointly.

Residential Clean Energy Credit

The Residential Energy Efficient Property Credit was previously set to expire at the end of 2023. Now the Residential Clean Energy Credit, the Inflation Reduction Act extends it through 2034 and increases the credit amount, with a percentage phaseout in the final two years.

The Residential Clean Energy Credit is a 30% tax credit that applies to installation of solar panels and other equipment that makes use of renewable energy through 2032. The percentage falls to 26% in 2033 and 22% in 2034.

In addition, the credit is retroactive to the beginning of 2022. That means if you install a solar panel or similar equipment this year, you can qualify for the 30% tax credit on your 2022 tax return.

Energy Efficient Home Improvement Credit

The Inflation Reduction Act also extends the Nonbusiness Energy Property Credit and renames it the Energy Efficient Home Improvement Credit.

This is a 30% tax credit on the cost of eligible home improvements, worth up to $1,200 per year (as opposed to the previous $500 lifetime limit). The annual cap jumps to $2,000 for heat pumps, heat pump water heaters, and biomass stoves and boilers. In addition, roofing will no longer qualify for a tax credit.

Specifically, the annual tax credit limits for qualifying improvements are as follows:

$150 for home energy audits
$250 for any exterior door (up to $500 total) that meet applicable Energy Star requirements
$600 for exterior windows and skylights that meet applicable Energy Star requirements
$600 for other energy property, including electric panels and certain related equipment

The enhanced credit is available for projects you complete between January 1, 2023 and December 31, 2033, with some exceptions. Any projects you finish in 2022 aren’t eligible for new incentives. However, if you incur costs in 2022 for a project that you complete in 2023, these costs can count towards your tax break.

Additional Financial Incentives for Investing in Clean Energy

Finally, the Inflation Reduction Act creates two rebate programs to incentivize clean energy and efficiency projects. Unlike many clean energy tax credits, these rebates are offered at the point of sale. Thus, consumers can reap the financial benefit immediately.

The HOMES rebate is worth up to $8,000 for consumers who make energy efficient upgrades to their homes—for example, HVAC installations. Ultimately, the rebate amount depends on the amount of energy you save and household income.

Meanwhile, the High-Efficiency Electric Home Rebate Program offers taxpayers up to $14,000 for buying energy efficient electrical appliances. This rebate is only available to lower income households, and the rebate amount varies by appliance.

The timeline for these rebates to go into effect is less clear than the three tax credits mentioned above. Many experts believe they won’t be broadly available to taxpayers until the second half of 2023 as the Energy Department issues rules governing the programs.

How to Invest in Clean Energy Strategically

The Inflation Reduction Act creates a variety of financial incentives for taxpayers to invest in clean energy and energy-efficient projects. Those who take advantage of these clean energy tax credits and rebates can potentially save thousands on their taxes while doing their part to fight climate change.

However, to maximize these incentives, it’s important to time them correctly and use their constraints to your advantage. A trusted financial advisor like Curtis Financial Planning can help you incorporate these purchases and investments into your financial plan, so you can reap the greatest benefit. We invite you to connect with us to find out more.

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S4E5: The Insurance Lady Ruth Stroup Answers Your Biggest Questions About Insurance

Financial Finesse Podcast / By Cathy Curtis / September 15, 2022 September 15, 2022

The Insurance Lady Answers Your Biggest Questions About Insurance

Your Biggest Questions About Insurance Answered

My guest on today’s episode is Ruth Stroup. Ruth, AKA “The Insurance Lady,” is a Farmer’s agent in Oakland, California. Voted Best of Oakland seven times, The Ruth Stroup Insurance Agency is a community-oriented agency offering customized insurance solutions to businesses and families.

In this episode, Ruth and I discuss all things insurance, from what it covers and doesn’t cover to choosing the right policies and the obstacles that can get in the way of that. Specifically, we talk about wildfire risk in Northern California and how it may cause you to lose your homeowner’s insurance or your premiums to skyrocket. We also discuss what Ruth can and can’t do as an agent to help her clients navigate claims.

Later in the episode, Ruth provides a helpful overview of umbrella insurance, including common misconceptions about what it covers and how to determine if you need additional coverage. She also shares a little-known strategy she uses with her high-earning clients to protect their personal assets.

And be sure to listen to the end, when we talk briefly about earthquake insurance, another potential risk factor for California residents, and many of the common misconceptions surrounding it. Ruth also shares her tips for how she believes people should approach earthquake insurance and how to decide if it’s worth the high premiums.

And lastly, Ruth offers her response to people who believe insurance is just a racket. I learned so much during this conversation and Ruth shared so many great gems that I believe will benefit a lot of you listeners. I hope you enjoy the episode as much as I did.