Handling your personal finances is essential to comfortable living, but it can be much easier said than done when you don’t really understand what’s going on. And with so many misunderstandings floating in the air, getting a full grasp on the subject may feel impossible. Maggi Tax is here to help clear up some of these misunderstandings so that you don’t fall victim to them!
1. No Investment Account Type Is “Safer” Or “Riskier” Than Another
Some people may opt out of their 401K in favor of an IRA or Roth IRA (or vice versa) because they believe that one account type is safer than the other. However, what makes an investment risky has to do with the stock that’s being invested in, not the account that you’re using to invest with. Technically, you can invest in the exact same stocks in an IRA as you can in a 401K. One of the main differences between these accounts involves the rules that you must follow in order to use them. Some may have a funding limit while others may have penalties for pulling out early.
2. Diversifying Funds Does Not Dilute Your Ability To Make A Profit
If someone tells you that there’s no point in making a multitude of small investments because you won’t make as much of a return, then they don’t understand the first rule in safe investing. You should never put all of your eggs in one basket, and that’s especially true when receiving stocks. If you put your entire savings into a single stock and it doesn’t turn out in your favor, then there’s not much you can do. But by having a diverse investment portfolio with a wide range of various stocks, it’s easier to control your overall profit.
3. Transferring Funds Between Investment Accounts Can Be Risky
Just because your accounts allow you to transfer funds from one to another doesn’t mean that it’s always the safe way to go. Depending on how much is in each account and how much you plan on transferring, you may end up paying taxes on the same transferred amount for both accounts. Before you move your funds around, it’s best to think twice and ask for expert advice if needed.
4. Bonus Income Can Be Taxed Even After Employer Deductions
If you’ve noticed that your employer has already taken out a portion of your bonus income for taxes, don’t assume that you’re out of the woods. The rate that they go by may not be the same as yours, and it’s very possible that you would need to pay the difference when tax season rolls around. The next time you get bonus pay, just be prepared for the possibility of paying back a little extra later on.
5. Filing Taxes Earlier Or Later Doesn’t Change The Payment Due Date
Regardless of when you decide to file your taxes, everyone has a set date on when they need to pay what they owe. You can’t postpone this date by filing early or late, so don’t count on this misunderstanding to work in your favor or else you may find yourself scrambling at the last minute to gather the money for payment.
Need Help Understanding Your Finances? Call Maggi Tax Today!
Hopefully, we’ve cleared up some misunderstandings that you may have been wondering about. But if you still need help sorting out your finances, call Maggi Tax at (727) 799-1701 to schedule a complimentary consultation! We’ll gladly sit down with you to carefully look over your finances and discuss goals to create a personalized plan just for you.