Monday Night Finance- Volume 40

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Best App for Tracking Expenses and Receipts

Are you an organized person? Or does your desk look like a Tasmanian devil has spun across it. Likewise- how good at you are finding things. Are your keys always on a hook by the door or do you have to run around the house like a cheetah with its hair on fire to find them as you scurry off the door on your way to work. Receipts are ubiquitous. You get one with small purchases, like a cup of coffee, but also big “purchases” like an MRI. Typically receipts don’t feel important. In fact, you’ve already paid for the thing and you’re ready to move on with your life. However, receipts can be important if you run your own business or have a health savings account.

When you’re tracking your expenses, you know exactly how much you spend each month. You can then build up a portfolio that supports your actual lifestyle. You’re in control and don’t have to chase an arbitrary number chosen for you by someone who may make a percentage of the money they help you invest.

The IRS allows you to deduct certain types of spending from your taxes. Let’s say you are a solopreneur with a small side hustle. Your business may bring in $10,000 a year total, but maybe you spent $4,000 buying supplies and promoting your business. The IRS allows you to deduct those $4,000 of business expenses. However, if you’re ever audited, you need to show Uncle Sam that you had legitimate business expenses totaling $4,000 (i.e. you need receipts). How your organize your receipts is your own business. You could shove them in a shoe box or hide them under the mattress. Or, you could use CountAbout to safely store each receipt online as soon as your expenses show up. Gov Worker walks you through how to store receipts in CountAbout.

TradingView: A 2020 Review

Stocks are a great vehicle for building wealth. Historically, the growth of the total stock market has greatly outpaced inflation. The government encourages people to invest in stocks by creating tax-incentivized accounts for people to invest for retirement (like 401(k)s and IRAs). Given that stocks are a great wealth creation tool, many people have exposure to the stock market in one form or another. While most people are pretty hands-off on their investments (many people never change their 401(k) allocation from the default), others like to do a deep dive and try to maximize their gains in the market.

TradingView is a powerful charting system for traders and investors of all experience levels. On top of that, it has a social network where people share ideas, scripts, and set up topic-based chats to discuss their views.

If you’re a hands-on investor, this article by Compounding.Works is for you. In it, they do a deep dive into TradingView, a powerful technical analysis tool. Technical analysis of stocks involves looking at the chart of the stock price and trying to base where it will go next based off of patterns. Technical analysis of stocks is a complicated area and there is a lot to learn. TradingView helps breaks this information down for novices while providing useful tools for experts as well. If you’re interested, the article by Compounding.Works provides a great background on charting with examples of the S&P 500. Beyond charts, TradingView provides a community and buy/sell/hold ratings on stocks as well. Check out the article for a full explanation of the software.

United States Income Tax Brackets, Explained

Are you an accountant? If so, you can breeze through the next few paragraphs. If you’re not an accountant, how well do you think you understand US Tax law? People talk about 32% vs 35% tax brackets, but what does that actually mean? Does the IRS take 35% of your money if you are a high income individual? In this post, Darcy of WeWantGuac breaks down how to understand the tax system in the US actually works vs. how it is often portrayed by politicians.

But understanding tax brackets is easier said than done. There’s a lot of misunderstanding around how tax brackets work and how much money someone really has to give to Uncle Sam.

Darcy points out that one of the major confusions with the US tax system is that we have a marginal tax system. When we talk about tax brackets, we are talking about the amount that the last dollar you earned is taxed. However, if you’re in the 32% tax bracket, you still are only paying 10% tax on the first $9,700 you earn, (19,400 if married filed jointly). Another common misconception is that if you get a raise that puts you into a higher tax bracket, you’ll end up losing money. That is not the case. Let’s say you make $80,000 (24% tax bracket) and get a raise to $85,000 (32% tax bracket, the cutoff is $84,200 if single). If you didn’t understand tax brackets, you might think that you might end up losing money. (i.e. 80,000*(1-.24) is bigger than 85,000*(1-.32)). But you only end up paying 32% tax on the difference between $85,000 and $84,200. So you still come out ahead even though you move to a different tax bracket. Check out the article for an even deeper dive into understanding how taxes work.