How To Avoid Being House Poor

How Much Home Can I AffordEarlier this year, I published the post Is Being House Poor Limiting You? While no one ever thinks they will fall into being house poor, it does happen to some. Due to this, when asking yourself the question “how much home can I afford,” it’s best to think about ALL of the expenses that go into homeownership.

There are many “hidden” costs that go into homeownership that many do not think about when buying a home. While some homes may seem affordable, there are many factors and expenses to think about.

According to recent data from Zillow:

  • U.S. homeowners on average spend more than $9,000 per year in hidden homeownership costs and maintenance expenses
  • U.S. homeowners pay an average of $6,042 per year in unavoidable hidden costs: homeowners insurance, property taxes and utilities
  • U.S. homeowners pay an average of $3,435 per year in annual optional costs including house cleaning, yard care, gutter cleaning, carpet cleaning, and pressure washing.

That’s a lot of extra money each year that many homeowners do not realize that they may need to pay for.

By not knowing about these costs, a person may become stressed due to the amount of debt they may rack up from being house poor. It may also delay retirement, lead to a house being empty (there might be no money left to decorate), and more.

There are things you can do though so that you can make sure you don’t fall into a house poor situation, though. When pondering the question “How much home can I afford,” think about the many tips below.

 

Add up all of the costs.

Buying a home can easily lead to being house poor if you don’t do enough research. This can limit you because you may be even more house poor than you originally thought.

When some families buy a home, they don’t think about the total cost of homeownership. While you may be able to afford the monthly mortgage payment, you may not be able to afford everything else if you don’t do your research.

Before you say “yes” to a home, I recommend you add up all of the extra costs that you may have to pay for if you decide to buy a specific home.

Other homeownership costs include:

  • Gas. Many homes run on gas in order to have hot water, to use the stove, and so on.
  • Electricity. Generally, the bigger your home then the higher your electricity bill will be.
  • Sewer.  This isn’t super expensive, but it is generally around $30 a month from what I’ve seen.
  • Trash.  This isn’t super expensive either but it does cost money.
  • Water (and possibly irrigation).  Water bills can vary widely. I know many who live in areas where the average water bill is a few hundred each month.
  • Property taxes. Property taxes can vary widely from town to town. You may find yourself looking at two similar houses with similar price tags, but the property taxes may vary by thousands of dollars annually. That is a LOT of money. While it may seem small when compared to the actual home purchase price, remember that you have to pay property taxes annually and a difference of just $3,600 a year is $300 a month for life.
  • Home insurance. Home insurance can be cheap in some areas but crazy expensive in others. Don’t forget to look into the cost of earthquake, flood, and hurricane insurance as well as that can add up quickly depending on where you live.
  • Maintenance and repairs. Even if your home is brand new, you may have to pay for repairs, which is something that many don’t realize. No matter how old your home is, repair and maintenance costs will eventually come into play.
  • Homeowners association fees. This can also vary widely. You should always see if the house you are interested in is in an HOA because the fees can be high and there may be rules you don’t like as well.
  • Home furnishings. Furnishing your home can be done cheaply, but I know some who buy huge homes but can’t afford to put anything in them, such as a table, a bed, and so on. Why own a $500,000 house if you don’t have any furniture?

Related: Home Buying Tips You Need To Know Before You Buy

 

Buy for less than what you are approved for.

Many potential homeowners are approved for home loans that are somewhere around 30% to 35% of their salary before taxes.

That’s a lot of money. This amount is before taxes as well, which means that your actual monthly home payment would be a significant portion of your take-home income each month. Many who buy at the full approval amount cannot afford their homes due to the fact that it is such a significant percentage of what they earn.

If you don’t want to be house poor, then you should make sure to buy a home that is less than what you are approved for. You should also add up all of the costs of owning a home and make sure it is an amount that you are comfortable with.

Related posts:

  • Renting Out A Room In Your Home For Extra Money
  • How To Live On One Income
  • Ways To Make An Extra $1,000 A Month

 

Have an emergency fund.

An emergency fund isn’t just to protect you from your job. They also exist to help you in case something goes wrong with your home.

Your roof could spring a leak, a tree may fall on your home, a pipe may burst, there may be an electrical problem and more. Homes have many things that go into them and you never know if something may need to be fixed.

By having an emergency fund, you will have a fund that will help you if something were to go wrong. It will be you be more prepared so that you don’t have to take on any debt in order to help pay for an expense.

What would you say to someone who asks “How much home can I afford?” Do you know anyone who is house poor?

 

The post How To Avoid Being House Poor appeared first on Making Sense Of Cents.

Source: makingsenseofcents.com

How to Start Investing in Peer-to-Peer Loans

How to Start Investing in Peer-to-Peer Loans

Back in the day, if you needed a personal loan to start a business or finance a wedding you had to go through a bank. But in recent years, a new option has appeared and transformed the lending industry. Peer-to-peer lending makes it easy for consumers to secure financing and gives investors another type of asset to add to their portfolios. If you’re interested in investing in something other than stocks, bonds or real estate, check out our guide to becoming an investor in peer-to-peer loans.

Check out our personal loan calculator.

What Is Peer-to-Peer Lending?

Peer-to-peer lending is the borrowing and lending of money through a platform without the help of a bank or another financial institution. Typically, an online company brings together borrowers who need funding and investors who put up cash for loans in exchange for interest payments.

Thanks to peer-to-peer lending, individuals who need extra money can get access to personal loans in a matter of days (or within hours in some cases). Even if they have bad credit scores, they may qualify for interest rates that are lower than what traditional banks might offer them. In the meantime, investors can earn decent returns without having to actively manage their investments.

Who Can Invest in Peer-to-Peer Loans

How to Start Investing in Peer-to-Peer Loans

You don’t necessarily have to be a millionaire or an heiress to start investing in peer-to-peer loans. In some cases, you’ll need to have an annual gross salary of at least $70,000 or a net worth of at least $250,000. But the rules differ depending on where you live and the site you choose to invest through.

For example, if you’re investing through the website Prosper, you can’t invest at all if you reside in Arizona or New Jersey. In total, only people in 30 states can invest through Prosper and only folks in 45 states can invest through its competitor, Lending Club.

Certain sites, like Upstart and Funding Circle, are only open to accredited investors. To be an accredited investor, the SEC says you need to have a net worth above $1 million or an annual salary above $200,000 (unless you’re a company director, an executive officer or you’re part of a general partnership). Other websites that work with personal loan investors include SoFi, Peerform and CircleBack Lending.

Keep in mind that there may be limitations regarding the degree to which you can invest. According to Prosper’s site, if you live in California and you’re spending $2,500 (or less) on Prosper notes, that investment cannot be more than 10% of your net worth. Lending Club has the same restrictions, except that the 10% cap applies to all states.

Choose your risk profile.

Becoming an Investor

If you meet the requirements set by the website you want to invest through (along with any other state or local guidelines), setting up your online profile is a piece of cake. You can invest through a traditional account or an account for your retirement savings, if the site you’re visiting gives you that option.

After you create your account, you’ll be able to fill your investment portfolio with different kinds of notes. These notes are parts of loans that you’ll have to buy to begin investing. The loans themselves may be whole loans or fractional loans (portions of loans). As borrowers pay off their personal loans, investors get paid a certain amount of money each month.

If you don’t want to manually choose notes, you can set up your account so that it automatically picks them for you based on the risk level you’re most comfortable with. Note that there will likely be a minimum threshold that you’ll have to meet. With Lending Club and Prosper, you can invest with just $25. With a site like Upstart, you have to be willing to spend at least $100 on a note.

Should I Invest in Peer-to-Peer Loans?

How to Start Investing in Peer-to-Peer Loans

Investing in personal loans may seem like a foreign concept. If you’re eligible to become an investor, however, it might be worth trying.

For one, investing in personal loans isn’t that difficult. Online lenders screen potential borrowers and ensure that the loans on their sites abide by their rules. Investors can browse through notes and purchase them.

Thanks to the automatic investing feature that many sites offer, you can sit back and let an online platform manage your investment account for you. That can be a plus if you don’t have a lot of free time. Also, by investing through a retirement account, you can prepare for the future and enjoy the tax advantages that come with putting your money into a traditional or Roth IRA.

As investments, personal loans are less risky than stocks. The stock market dips from time to time and there’s no guarantee that you’ll see a return on your investments. By investing in a peer-to-peer loan, you won’t have to deal with so much volatility and you’re more likely to see a positive return. Lending Club investors, for example, have historically had returns between 5.26% and 8.69%.

Related Article: Is Using a Personal Loan to Invest a Smart Move?

But investing in peer-to-peer loans isn’t for everyone. The online company you’re investing through might go bankrupt. The folks who take out the loans you invest in might make late payments or stop paying altogether.

All of that means you could lose money. And since these loans are unsecured, you can’t repossess anything or do much to recoup your losses.

You can lower your investment risk by investing in different loans. That way, if someone defaults, you can still profit from the loan payments that the other borrowers make. But if you don’t have enough loans in your portfolio you’re putting yourself in a riskier predicament.

Final Word

If you’re looking for a way to add some diversity to your portfolio, investing in peer-to-peer loans might be something to think about. There are plenty of benefits that you can reap with this kind of investment. Before setting up an account, however, it’s important to be aware of the risks you’ll be taking on.

Photo credit: Â©iStock.com/bymuratdeniz, ©iStock.com/M_a_y_a, ©iStock.com/sirius_r

The post How to Start Investing in Peer-to-Peer Loans appeared first on SmartAsset Blog.

Source: smartasset.com

Ms. Independent: Top 10 Cities Where Millennials Live Alone

Kelley Libby lives in an apartment with a view of the Richmond, VA skyline from her balcony. She rides her bike downtown regularly for dinner and a show, or sometimes to take a cool dip in the river.

A top-of-the-millennial-pile 34 years old, she is among the 15 percent of millennials who live alone in Richmond, the metro area where a greater share of millennials live solo than anywhere else in the country. Others in the top 10 are Pittsburgh; Buffalo; Columbus, OH; Virginia Beach; Cleveland; New Orleans; Austin; Kansas City and Oklahoma City.

Millennials-Blog

“With home prices and rents rising as fast as they are, it’s a common assumption that young adults in many cases cannot afford to live alone,” said Zillow Chief Economist Svenja Gudell. “Though that may be true in some markets, there’s still a large number of amazing places across the U.S. that are prime for millennials to thrive independently. These are places where young adults can easily find jobs at a competitive salary, and where housing expenses won’t eat up the majority of their income, enabling them to save more.”

Low rents help

Rents are relatively easy on the budget in many of the metros where millennials live alone. In Richmond, people of all ages typically spend 26 percent of their incomes on rent, compared to 30 percent nationally, according to Zillow Research. In a place where millennials living solo make a healthy $49,500 a year (median) and employment is up 3.6 percent since a year ago, that makes for an attractive package.

“It’s a good place for young, single people, because there’s lots to do as far as cultural activities and outdoor stuff,” said Libby, who’s a public media producer working on a national project called Finding America. She pays $960 a month for her 1-bedroom, which is in a new apartment complex and has that sweet balcony.

It’s also a great place to settle down, and many of her friends are snapping up real estate. “I have so much more of a chance to buy a place here than I would in big, popular cities,” she said.

She lived for several years in nearby Charlottesville, where “I couldn’t dream of buying a house.” The median home value there is $232,700, well above Richmond’s $193,200, according to Zillow data.

‘I don’t need 100 channels on cable’

With 21 percent of millennials still living with their mothers, and 32 percent of all working-age adults living with someone else, it can be a big deal when millennials step out on their own.

Often they do it in places where rents are more affordable — areas like Pittsburgh, Kansas City and Oklahoma City, where rents take up around 25 percent of people’s incomes. They also go solo in metros like Virginia Beach where they can afford to buy homes, and places like Austin with strong employment growth.

Malory Berschet has lived on her own in Columbus for a year, following stints with her parents and with a college roommate. She enjoys it, but she’s had to cut back to make her $1,125 monthly rent.

“My biggest thing was spending money like I was made of money,” said Berschet, who’s 25. “I would eat out all the time or buy lunch rather than pack it. And I don’t need 100 channels on cable.”

Millennials living alone make $38,800 a year (median) in Columbus, where people spend 26 percent of their incomes on rent.

Berschet knows coworkers at Cardinal Health, where she’s a market manager, who save money by living in Dublin, the suburb where the company is headquartered. They pay less in rent and have better commutes, Berschet said, but “they’re a good 20 minutes from downtown.” She likes being close in, where she can easily walk or Uber to visit friends and eat out.

Less solo-friendly cities

At the other end of the spectrum, she has a friend who’s moving to San Francisco and said the rent is $3,500 for an apartment smaller than Berschet’s 1-bedroom — which makes her place seem like a steal.

Only 9.4 percent of millennials live alone in the San Francisco area. It’s not the smallest share of independent millennials in the country — that’s Riverside, CA, with 6.1 percent. They make good money — $66,000 for millennials living alone in San Francisco and $72,000 in Riverside (medians) — but people who live in those places spend 46 percent and 36 percent of their incomes, respectively, on rent.

Prices like that can make roommates — and even Mom’s basement — look mighty appealing.

Related:

  • Space for One: Rentals in Cities Where the Most Millennials Live Alone
  • Would You Rather: Rent in the City or the Suburbs?
  • Hip Suburban Living Is a Magnet for Millennials

Source: zillow.com

75 Personal Finance Rules of Thumb

A “rule of thumb” is a mental shortcut. It’s a heuristic. It’s not always true, but it’s usually true. It saves you time and brainpower. Rather than re-inventing the wheel for every money problem you face, personal finance rules of thumb let you apply wisdom from the past to reach quick solutions.

I’m going to do my best Buzzfeed impression today and give you a list of 75 personal finance rules of thumb. Some are efficient packets of advice while others are mathematical shortcuts to save brain space. Either way, I bet you’ll learn a thing or two—quickly—from this list.

The Basics

These basic personal finance rules of thumb apply to everybody. They’re simple and universal.

1. The Order of Operations (since this is one of the bedrocks of personal finance, I wrote a PDF explaining all the details. Since you’re a reader here, it’s free.)

2. Insurance protects wealth. It doesn’t build wealth.

3. Cash is good for current expenses and emergencies, but nothing more. Holding too much cash means you’re losing long-term value.

4. Time is money. Wealth is a measure of how much time your money can buy.

5. Set specific financial goals. Specific numbers, specific dates. Don’t put off for tomorrow what you can do today.

6. Keep an eye on your credit score. Check-in at least once a year.

7. Converting wages to salary: $1/per hour = $2000 per year.

8. Don’t mess with City Hall. Don’t cheat on your taxes.

9. You can afford anything. You can’t afford everything.

10. Money saved is money earned. When you look at your bottom line, saving a dollar has the equivalent effect as earning a dollar. Saving and earning are equally important.

Budgeting

I love budgeting, but not everyone is as zealous as me. Still, if you’re looking to budget (or even if you’re not), I think these budgeting rules of thumb are worth following.

11. You need a budget. The key to getting your financial life under control is making a budget and sticking to it. That is the first step for every financial decision.

12. The 50-30-20 rule of budgeting. After taxes, 50% of your money should cover needs, 30% should cover wants, and 20% should repay debts or invest.

13. Use “sinking funds” to save for rainy days. You know it’ll rain eventually.

14. Don’t mix savings and checking. One saves, the other spends.

15. Children cost about $10,000 per kid, per year. Family planning = financial planning.

16. Spend less than you earn. You might say, “Duh!” But if you’re not measuring your spending (e.g. with a budget), are you sure you meet this rule?

Investing & Retirement

Basic investing, in my opinion, is a ‘must know’ for future financial success. The following rules of thumb will help you dip your toe in those waters.

17. Don’t handpick stocks. Choose index funds instead. Very simple, very effective.

18. People who invest full-time are smarter than you. You can’t beat them.

19. The Rule of 72 (it’s doctor-approved). An investment annual growth rate multiplied by its doubling time equals (roughly) 72. A 4% investment will double in 18 years (4*18 = 72). A 12% investment will double in 6 years (12*6 = 72).

20. “Don’t do something, just sit there.” -Jack Bogle, on how bad it is to worry about your investments and act on those emotions.

21. Get the employer match. If your employer has a retirement program (e.g. 401k, pension), make sure you get all the free money you can.

22. Balance pre-tax and post-tax investments. It’s hard to know what tax rates will be like when you retire, so balancing between pre-tax and post-tax investing now will also keep your tax bill balanced later.

23. Keep costs low. Investing fees and expense ratios can eat up your profits. So keep those fees as low as possible.

24. Don’t touch your retirement money. It can be tempting to dip into long-term savings for an important current need. But fight that urge. You’ll thank yourself later.

25. Rebalancing should be part of your investing plan. Portfolios that start diversified can become concentrated some one asset does well and others do poorly. Rebalancing helps you rest your diversification and low er your risk.

26. The 4% Rule for retirement. Save enough money for retirement so that your first year of expenses equals 4% (or less) of your total nest egg.

27. Save for your retirement first, your kids’ college second. Retirees don’t get scholarships.

28. $1 invested in stocks today = $10 in 30 years.

29. Inflation is about 3% per year. If you want to be conservative, use 3.5% in your money math.

30. Stocks earn 7% per year, after adjusting for inflation.

31. Own your age in bonds. Or, own 120 minus your age in bonds. The heuristic used to be that a 30-year old should have a portfolio that’s 30% bonds, 40-year old 40% bonds, etc. More recently, the “120 minus your age” rule has become more prevalent. 30-year old should own 10% bonds, 40-year old 20% bonds, etc.

32. Don’t invest in the unknown. Or as Warren Buffett suggests, “Invest in what you know.”

Home & Auto

For many of you, home and car ownership contribute to your everyday finances. The following personal finance rules of thumb will be especially helpful for you.

33. Your house’s sticker price should be less than 3x your family’s combined income. Being “house poor”—or having too expensive of a house compared to your income—is one of the most common financial pitfalls. Avoid it if you can.

34. Broken appliance? Replace it if 1) the appliance is 8+ years old or 2) the repair would cost more than half of a new appliance.

35. Used car or new car? The cost difference isn’t what it used to be. The choice is even.

36. A car’s total lifetime cost is about 3x its sticker price. Choose wisely!

37. 20-4-10 rule of buying a vehicle. Put 20% of the vehicle down in cash, with a loan of 4 years or less, with a monthly payment that is less than 10% of your monthly income.

38. Re-financing a mortgage makes sense once interest rates drop by 1% (or more) from your current rate.

39. Don’t pre-pay your mortgage (unless your other bases are fully covered). Mortgages interest is deductible, and current interest rates are low. While pre-paying your mortgage saves you that little bit of interest, there’s likely a better use for you extra cash.

40. Set aside 1% of your home’s value each year for future maintenance and repairs.

41. The average car costs about 50 cents per mile over the course of its life.

42. Paying interest on a depreciating asset (e.g. a car) is losing twice.

43. Your main home isn’t an investment. You shouldn’t plan on both living in your house forever and selling it for profit. The logic doesn’t work.

44. Pay cash for cars, if you can. Paying interest on a car is a losing move.

45. If you’re buying a fixer-upper, consider the 70% rule to sort out worthy properties.

46. If you’re buying a rental property, the 1% rule easily evaluates if you’ll get a positive cash flow.

Spending & Debt

Do you spend money? (“What kind of question is that?”) Then these personal finance rules of thumb will apply to you.

47. Pay off your credit card every month.

48. In debt? Use psychology to help yourself. Consider the debt snowball or debt avalanche.

49. When making a purchase, consider cost-per-use.

50. Make your spending tangible with a ‘cash diet.’

51. Never pay full price. Shop around and do your research to get the best deals. You can earn cash back when you shop online, score a discount with a coupon code, or a voucher for free shipping.

52. Buying experiences makes you happier than buying things.

53. Shop by yourself. Peer pressure increases spending.

54. Shop with a list, and stick to it. Stores are designed to pull you into purchases you weren’t expecting.

55. Spend on the person you are, not the person you want to be. I love cooking, but I can’t justify $1000 of professional-grade kitchenware.

56. The bigger the purchase, the more time it deserves. Organic vs. normal peanut butter? Don’t spend 10 minutes thinking about it. $100K on a timeshare? Don’t pull the trigger when you’re three margaritas deep.

57. Use less than 30% of your available credit. Credit usage plays a major role in your credit score. Consistently maxing out your credit hurts your credit score. Aim to keep your usage low (paying off every month, preferably).

58. Unexpected windfall? Use 5% or less to treat yourself, but use the rest wisely (e.g. invest for later).

59. Aim to keep your student loans less than one year’s salary in your field.

The Mental Side of Personal Finance

At the end of the day, you are what you do. Psychology and behavior play an essential role in personal finance. That’s why these behavioral rules of thumb are vital.

60. Consider peace of mind. Paying off your mortgage isn’t always the optimum use of extra money. But the peace of mind that comes with eliminating debt—it’s huge.

61. Small habits build up to big impacts. It feels like a baby step now, but give yourself time.

62. Give your brain some time. Humans might rule the animal kingdom, but it doesn’t mean we aren’t impulsive. Give your brain some time to think before making big financial decisions.

63. The 30 Day Rule. Wait 30 days before you make a purchase of a “want” above a certain dollar amount. If you still want it after waiting and you can afford it, then buy it.  

64. Pay yourself first. Put money away (into savings or investment accounts) before you ever have a chance to spend it.

65. As a family, don’t fall into the two-income trap. If you can, try to support your lifestyle off of only one income. Should one spouse lose their job, the family finances will still be stable.

66. Every dollar counts. Money is fungible. There are plenty of ways to supplement your income stream.

67. Savor what you have before buying new stuff. Consider the fulfillment curve.

68. Negotiating your salary can be one of the most important financial moves you make. Increasing your income might be more important than anything else on this list.

69. Direct deposit is the nudge you need. If you don’t see your paycheck, you’re less likely to spend it.

70. Don’t let comparison steal your joy. Instead, use comparisons to set goals. (net worth).

71. Learning is earning. Education is 5x more impactful to work-life earnings than other demographics.

72. If you wouldn’t pay in cash, then don’t pay in credit. Swiping a credit card feels so easy compared to handing over a stack of cash. Don’t let your brain fool itself.

73. Envision a leaky bucket. Water leaking from the bottom is just as consequential as water entering the top. We often ignore financial leaks (e.g. fees), since they’re not as glamorous—but we shouldn’t.

74. Forget the Joneses. Use comparisons to motivate healthier habits, not useless spending.

75. Talk about money! I know it’s sometimes frowned upon (like politics or religion), but you can learn a ton from talking to your peers about money. Unsure where to start? You can talk to me!

The Last Personal Finance Rule of Thumb

Last but not least, an investment in knowledge pays the best interest.

Boom! Got ’em again! Ben Franklin streaks in for another meta appearance. Thanks Ben!

If you enjoyed this article and want to read more, I’d suggest checking out my Archive or Subscribing to get future articles emailed to your inbox.

This article—just like every other—is supported by readers like you.

Source: bestinterest.blog

A Comprehensive Guide to 2020 Tax Credits

Couple preparing tax returnsEvery year, people’s lives change in ways that affect their taxes. They may start a higher education program or have a child, and others take on elderly parents as dependents. These situations can change their eligibility for tax credits. In addition, federal, state and local governments sometimes adjust rules about credits, so it is crucial to understand what credits you can take. Navigating the world of tax credits and deductions can be confusing. That is why a trusted financial advisor can help you find every tax credit you are entitled to.

What a Tax Credit Is (and Isn’t)

Tax credits encourage people to spend money by giving them credit toward that expense. For example, one of the most common tax credits is the Child Tax Credit. Taxpayers who have children under the age of 17 receive a credit to help reduce the cost of raising a child. Another popular tax credit is the Lifetime Learning Credit (LLC). The LLC encourages people to pursue further education by crediting part of the overall cost back at tax time.

A tax deduction lowers one’s taxable income, thus reducing the tax liability. If a person receives a deduction, he decreases the amount from his income, which lowers his taxable income. The lower a person’s taxable income, the lower the tax bill.

By contrast, a tax credit decreases the tax bill rather than a person’s taxable income. So, if a person has a $100,000 salary and has a $10,000 deduction, the taxable income will be $90,000. If the person in this example is taxed at a rate of 25%, the tax bill will be $22,500. If that same person has a $10,000 credit instead of a deduction, he will be taxed at 25% of their $100,000 income and owe $25,000 in taxes. However, he will then be credited $10,000 and owe only $15,000.

Some tax credits are refundable, but most are not. A refundable tax credit, which is different from a tax refund, can be given to taxpayers even if they do not owe any taxes. Additionally, a refundable tax credit can be given in addition to a tax refund. A nonrefundable tax credit means that a person will get the tax credit up to the amount owed. For example, if a person owes $2,000 in taxes and receives $3,000 in nonrefundable credits, that will simply erase her tax bill. If she gets $3,000 in refundable credits, she will receive a $1,000 tax refund.

Some common tax credits for individuals include:

  • Child Tax Credit
  • Earned Income Tax Credit
  • Credit for Other Dependents
  • Adoption Credit
  • Low-Income Housing Credit
  • Premium Tax Credit (Affordable Care Act)
  • American Opportunity Credit
  • Lifetime Learning Credit

Child Tax Credit

The Child Tax Credit is a refundable credit up to $1,400 and offers up to $2,000 per qualifying child age 16 or younger. Parents of children who are 16 or younger as of Dec. 31, 2020, can qualify for this tax credit. For someone to be eligible for the Child Tax Credit, the modified adjusted gross income must be under $400,000 if the parents of the child(ren) file jointly and $200,000 for any other person filing.

Additional requirements to qualify for the child tax credit include that the person filing must have provided at least half of the child’s support in the calendar year, and the child must have lived with the person filing for at least half the year. There are some exceptions to this rule, and it is best to discuss the child tax credit with a tax advisor.

Child and Dependent Care Credit

The cost of childcare, eldercare and other in-home care in the U.S. is high and tends to rise each year. If a couple is married and files jointly and has paid expenses for the care of a qualifying child or dependent so that one or both can work, they are likely eligible for the Child and Dependent Care Credit.

To qualify for the Child and Dependent Care Credit, the taxpayers must have received taxable income. This is because the credit is designed to help individuals who need to hire a caretaker to stay in the workplace.

Additionally, there are several qualifiers on the person being cared for. A child must be under age 13 when the care was provided. A qualifying spouse must be unable to take care of himself and have lived in the taxpayer’s home for at least half the year. A qualifying dependent must be physically or mentally incapable of caring for himself, have lived with the taxpayer for at least half the year and is either a dependent or could have been a dependent of the taxpayer. A taxpayer can claim up to $3,000 of expenses for one child or dependent and up to $6,000 for two or more children or dependents.

There are limits on who can provide care to qualify for this tax credit. The caregiver must not have been the taxpayer’s spouse, a parent of the child being cared for or anyone else listed as a dependent on the tax return. Additionally, the caregiver can’t be a child of the taxpayer.

Any child support payments you’ve received won’t be counted as taxable income. And if you’re the one making the child support payments, the income you used to do so won’t be tax deductible.

Federal Adoption Credit

Families that grow through adoption might be eligible for the Federal Adoption Tax Credit. Adoption can be an expensive process, and as families take on the burden of legal fees and more, the Federal Adoption Credit can help to decrease the burden when filing taxes.

To be eligible for the full credit, adoptive parents must earn $214,520 or less, regardless of their filing status. The credit is up to $ 14,300 per eligible child. An eligible child is any person under the age of 18 that is mentally or physically unable to take care of themselves. Eligible expenses include court costs, attorney fees, home studies and other travel expenses related to the adoption. The Federal Adoption credit is nonrefundable, so it will not produce a refund.

There are several rules for the Federal Adoption Credit, so it is important to speak with your tax advisor before claiming this credit. For example, if you received employer-provided adoption benefits, you may not claim the same expenses that were covered by your employer for the Federal Adoption Credit.

Credit for Other Dependents

Form 1040

The Credit for Other Dependents is a tax credit available for taxpayers who do not qualify for the Child Tax Credit. For example, someone who has a child age 17 or older or has other adult dependents with an Individual Taxpayer Identification Number might qualify for this credit. This tax credit amount is $500 for each dependent that qualifies for the tax credit. The credit is available in full to a taxpayer who earns $200,000 or less and decreases on a sliding scale as that person’s income increases.

An example of someone eligible for the Credit for Other Dependents is a single person filing who has a child dependent that is 17 years old and another child who is 21 and in college. Both children would likely qualify as dependents, and each would be eligible for the $500 credit. Another example is if someone has an adult relative living with him listed as a dependent on his tax return. In any case, the dependent must be a U.S. citizen, national or resident alien.

Lifetime Learning Credit

To promote education in the United States, the IRS created a tax credit called the Lifetime Learning Credit (LLC). This credit is for qualified tuition and expenses paid for qualified students at qualified institutions in the United States.

To claim the LLC, a person, their spouse or their dependent must pay qualified higher education expenses. Additionally, the student must be enrolled at an eligible educational institution. Eligible educational institutions are colleges, technical schools and universities offering education beyond high school. All qualified educational institutions are eligible to participate in a student aid program run by the U.S. Department of Education. The IRS publishes a list for people to search if their school is a qualified educational institution.

To receive the LLC, a person must have received a 1098-T tuition statement from the higher education institution. The credit is worth 20% of the first $10,000 that a person spends at the higher education institution. For example, if a person started school at a university in the fall semester and tuition cost $10,000 or more, that person would receive a credit of $2,000. The LLC is not refundable, so a person can use the credit for taxes who owe but will not receive the credit as a refund.

Additionally, the LLC has income limits. In 2020, a person’s income must be $69,000 or lower if filing single and less than $138,000 if filing jointly to receive any of the LLC. To be eligible for the full LLC amounts, a person can earn up to $118,000 filing jointly or $59,000 filing single.

The Retirement Contribution Savings Credit

The Saver’s Credit, or the Retirement Contribution Savings Credit, has been around since the early 2000s. It was created to help low- and moderate-income individuals save for retirement. Depending on a taxpayer’s income, the Saver’s Credit is worth 10%, 20% or 50% of her total savings contribution up to $1,000, or $2,000 if a person is filing jointly.

For example, if a person is filing single, her income qualifies her for the 50% credit tier, and if she contributes $2,000 to an IRA, she can receive a credit of $1,000. The maximum credit is $1,000, so if the same person decides to contribute $2,500 to an IRA, she will still receive a $1,000 tax credit.

Earned Income Tax Credit

An Earned Income Tax Credit (EITC) reduces the tax bills for low- to moderate-income working families. The credit ranges from $538 to $6,660 depending on a taxpayer’s filing status, how many children they have and their earned income. This amount changes every year, so be sure to verify the EITC with a tax advisor or verify with the IRS.

To qualify for the EITC, a taxpayer must have earned taxable income from a company, running a farm or owning a small business. People who do not earn an income, are married filing separately or do not have a Social Security number are not eligible for this credit. Additionally, people who earned over $3,650 in investment income are ineligible for this tax credit.

To earn the maximum EITC, a single filer can earn $50,594 or less, and a joint filer can earn $56,844 or less and have three or more dependent children. The amount of the EITC credit decreases if a taxpayer has fewer children.

American Opportunity Tax Credit

The American Opportunity Tax Credit (AOTC) is available to eligible students in the first four years of higher education. Students must be pursuing a degree or other recognized credential, be enrolled at least half time for at least one academic period or semester, not have received the AOTC or the Hope credit for more than the past four years and not have a felony drug conviction at the end of the tax year.

Students may receive up to $2,500 of credit for the AOTC. The credit is refundable up to 40%, so if a student is eligible for the full $2,500 and receives a tax return, the student can receive up to $1,000. The credit is awarded for 100% of the first $2,000 of qualified educational expenses and 25% of the next $2,000 of educational expenses. Therefore, if a student pays at least $4,000 in educational expenses, he will receive the full $2,500.

To prove they are eligible, students must receive a 1098-T from their educational institution. A taxpayer’s modified adjusted gross income must be $80,000 or less, or $160,000 or less for a married couple filing jointly to receive the full AOTC. If the student is a dependent, the taxpayer may claim the AOTC when filing taxes.

An example of someone claiming the AOTC is a parent who earns $79,900 and has a student in the first four years of a degree program. Another example of someone eligible is a student who is not a dependent of anyone and works part-time, earning $80,000 or less. If you are unsure if you or your family qualifies for this tax credit, be sure to speak with a tax advisor.

The Takeaway

IRS buildingThere are many tax credits that American taxpayers can take advantage of. These credits were created to encourage spending in specific areas of the economy and help low- and moderate-income families prosper. In addition to tax credits, there are plenty of other ways to keep more money in your pockets during tax season. Be sure to check out the IRS website to learn more about other tax credits, including the Residential Energy Efficient Property Credit, Foreign Tax Credit and more.

Tips on Taxes

  • Navigating the world of tax deductions and credits can be cumbersome and confusing. That is why it is so valuable to work with a financial advisor. Finding one doesn’t have to be difficult. SmartAsset’s matching tool can connect you with several financial advisors in your area within minutes. If you’re ready, get started now.
  • Using a free tax return calculator can help confirm that you did your arithmetic correctly … or indicate that you may have missed a credit or deduction.

Photo credit: ©iStock.com/grejak, ©iStock.com/Ridofranz, ©iStock.com/Pgiam

 

The post A Comprehensive Guide to 2020 Tax Credits appeared first on SmartAsset Blog.

Source: smartasset.com

What Is the Self-Employment Tax?

Working for yourself, either as a part-time side hustle or a full-time endeavor, can be very exciting and financially rewarding. But one downside to self-employment is that you're responsible for following special tax rules. Missing tax deadlines or paying the wrong amount can lead to expensive penalties.

Let's talk about what the self-employment or SE tax is and how it compares to payroll taxes for employees. You’ll learn who must pay the SE tax, how to pay it, and tips to stay compliant when you work for yourself.

What is the self-employment (SE) tax?

In addition to federal and applicable state income taxes, everyone must pay Social Security and Medicare taxes. These two social programs provide you with retirement benefits, disability benefits, survivor benefits, and Medicare health insurance benefits.

Many people don’t realize that when you’re a W-2 employee, your employer must pick up the tab for a portion of your taxes. Thanks to the Federal Insurance Contributions Act (FICA), employers are generally required to withhold Social Security and Medicare taxes from your paycheck and match the tax amounts you owe.

In other words, your employer pays half of your Social Security and Medicare taxes, and you pay the remaining half. Employees pay 100% of federal and state income taxes, which also get withheld from your wages and sent to the government.

When you have your own business, you’re typically responsible for paying the full amount of income taxes, including 100% of your Social Security and Medicare taxes.

But when you have your own business, you’re typically responsible for paying the full amount of income taxes, including 100% of your Social Security and Medicare taxes.

Who must pay the self-employment tax?

All business owners with "pass-through" income must pay the SE tax. That typically includes every business entity except C corporations (or LLCs that elect to get taxed as a corporation).

When you have a C corp or get taxed as a corporation, you work as an employee of your business. You're required to withhold all employment taxes (federal, state, Social Security, and Medicare) from your salary or wages. Other business entities allow income to pass directly to the owner(s), so it gets included in their personal tax returns.

You must pay the SE tax no matter if you call yourself a solopreneur, independent contractor, or freelancer—even if you're already receiving Social Security or Medicare benefits.

You must pay the SE tax no matter if you call yourself a solopreneur, independent contractor, or freelancer—even if you're already receiving Social Security or Medicare benefits.

How much is the self-employment tax?

For 2020, the SE tax rate is 15.3% of earnings from your business. That's a combined Social Security tax rate of 12.4 % and a Medicare tax rate of 2.9%.

For Social Security tax, you pay it on up to a maximum wage base of $137,700. You don't have to pay Social Security tax on any additional income above this threshold. However, this threshold has been increasing and is likely to continue creeping up in future years.

However, for Medicare, there is no wage base. All your income is subject to the 2.9% Medicare tax.

So, if you're self-employed with net income less than $137,700, you'd pay SE tax of 15.3% (12.4% Social Security plus 2.9% Medicare tax), plus ordinary income tax.

Remember that your future Social Security benefits get reduced if you don't claim all of your self-employment income.

What is the additional Medicare tax?

If you have a high income, you must pay an extra tax of 0.9%, known as the additional Medicare tax. This surtax went into effect in 2013 with the passage of the Affordable Care Act (ACA). It applies to wages and self-employment income over these amounts by tax filing status for 2020:

  • Single: $200,000 
  • Married filing jointly: $250,000 
  • Married filing separately: $125,000 
  • Head of household: $200,000 
  • Qualifying widow(er): $200,000

What are estimated taxes?

As I mentioned, when you’re an employee, your employer withholds money for various taxes from your paychecks and sends it to the government on your behalf. This pay-as-you-go system was created to make sure you pay all taxes owed by the end of the year.

You must make quarterly estimated tax payments if you expect to owe at least $1,000 in taxes, including the SE tax.

When you’re self-employed, you also have to keep up with taxes throughout the year. You must make quarterly estimated tax payments if you expect to owe at least $1,000 in taxes, including the SE tax.

Each payment should be one-fourth of the total you expect to owe. Estimated payments are generally due on:

  • April 15 (for the first quarter) 
  • June 15 (for the second quarter) 
  • September 15 (for the third quarter) 
  • January 15 (for the fourth quarter) of the following year

But when the due date falls on a weekend or holiday, it shifts to the next business day. Your state may also require estimated tax payments and may have different deadlines.

How to calculate estimated taxes

Figuring estimated payments can be extremely confusing when you’re self-employed because many entrepreneurs don’t have the faintest idea how much they’ll make from one week to the next, much less how much tax they can expect to pay. Nonetheless, you must make your best guesstimate.

If you earn more than you estimated, you can pay more on any remaining quarterly tax payments. If you earn less, you can reduce them or apply any overpayments to next year’s estimated payments.

If you (or your spouse, if you file taxes jointly) have a W-2 job in addition to self-employment income, you can increase your tax withholding from earnings at your job instead of making estimated payments. To do this, you or your spouse must file an updated Form W-4 with your employer.

The IRS has a Tax Withholding Estimator to help you calculate the right amount to withhold from your pay for your individual or joint taxes.

How to pay estimated taxes

To figure and pay your estimated taxes, use Form 1040-ES, Estimated Tax for Individuals, or Form 1120-W, Estimated Tax for Corporations. These forms contain blank vouchers you can use to mail in your payments, or you can submit funds electronically.

When you have a complicated situation, including having business income, one of your new best friends should be a tax accountant.

For much more information about running a small business successfully, check out my newest book, Money-Smart Solopreneur: A Personal Finance System for Freelancers, Entrepreneurs, and Side-Hustlers. Part four, Understanding Business Taxes, covers everything you need to know to comply and stay out of trouble.

From personal experience, I can tell you that when you have a complicated situation, including having business income, one of your new best friends should be a tax accountant. Find one who listens well and seems to understand the kind of work you're doing.

A good accountant will help you calculate your estimated quarterly taxes, claim tax deductions, and save you money by helping you take advantage of every tax benefit that's allowed when you're self-employed. In Money-Smart Solopreneur, I recommend various software, online services, and apps to help you track expenses, deductions, and tax deadlines that will keep your business running smoothly.

Source: quickanddirtytips.com

The Highest Paying Trade Jobs On the Market

Pursuing a four-year degree or higher isn’t for everyone. If you fall into that group, it doesn’t mean you can’t get a high-paying job. There are a surprising number of trade jobs that pay salaries at or above careers that require a four-year degree. They pay well because they’re in demand and are expected to grow for the foreseeable future.

To earn that kind of money, you’ll need to land one of the best trade jobs. And while they may not require a four-year degree, most do require some type of specialized education, typically an associate’s degree (which you can often get from an online college). That has a lot of advantages by itself, because a two-year education is a lot less expensive than a full four-year program.

I covered the best jobs with no college degree previously, and this post is specifically about trade jobs. Choose one that interests you – and fits within your income expectations – then read the description for it. I’ve given you the requirements to enter the trade, the income, working conditions, employment projections and any required education. After reading this guide, you’ll already be on your way to your new career!

Benefits of Pursuing Trade Jobs

For a lot of young people, going to a four-year college is the default choice. But when you see how well the trade jobs pay, and how much less education they require, I think you’ll be interested.

Apart from income, here are other benefits to the best trade jobs:

  • You’ll need only a two-year degree or less, so you’ll save tens of thousands of dollars on your education.
  • You’ll graduate and begin earning money in half as much time as it will take you to complete a four-year degree.
  • Since trade jobs are highly specialized, you’ll mainly be taking courses related to the job, and less of the general courses that are required with a four-year degree.
  • Some schools provide job placement assistance to help you land that first position.
  • Since most of these jobs are in strong demand, the likelihood of finding a job quickly after graduation is very high.

Still another major benefit is geographic mobility, if that’s important to you. Since the best trade jobs are in demand virtually everywhere in the country, you’ll be able to choose where you want to live. Or if life takes one of those strange turns – that it tends to do – you’ll be able to make a move easily without needing to worry about finding a job. There’s an excellent chance one will be waiting for you wherever you go.

The Best Paying Trade Jobs

The table below shows some of the highest paying trades you can enter without a bachelor’s degree or higher. However, most do require at least an associate’s degree (AA) or equivalent education. Not surprisingly, occupations in the medical field are the most common.

The salary indicated is the median for the entire country. But there are large differences from one area of the country to another. Salary information is taken from the US Bureau of Labor Statistics, Occupational Outlook Handbook.

Trade Median Salary Education Requirement
Air traffic controllers $122,990 AA or BS from Air Traffic Collegiate Training Initiative Program
Radiation therapists $85,560 AA degree
Nuclear technicians (nuclear research and energy) $82,080 AA degree
Nuclear medicine technologists $77,950 AA degree
Dental hygienists $76,220 AA degree
Web developers $73,760 AA degree
Diagnostic medical sonographers $68,750 AA degree
MRI technologists $62,280 AA degree
Paralegals $51,740 AA degree
Licensed practical nurses $47,480 AA degree or state approved educational program

The table doesn’t list other common trades, like electricians, plumbers, elevator repair techs, welders or mechanics. To enter those fields you’ll usually need to participate in an apprentice program sponsored by an employer, though there may be certain courses you’ll need to complete.

The Best Trade Jobs in Detail

The table above summarized the best trade jobs, as well as the median salary and the basic educational requirements. Below is additional information specific to each job – and more important – why it’s a career worth considering.

Air Traffic Controller

Air traffic controllers coordinate aircraft both on the ground and in the air around airports. They work in control towers, approach control facilities or route centers. The pay is nearly $123,000 per year, and the job outlook is stable.

Education/Training Required: You’ll need at least an associate’s degree, and sometimes a bachelor’s degree, that must be issued by the Air Traffic Collegiate Training Initiative Program. There are only 29 colleges across the country that offer the program. Some of the more recognizable names include Arizona State University, Kent State University, Purdue University, Southern New Hampshire University (SHNU), and the University of Oklahoma.

Job Challenges: The limited number of colleges offering the program may be inconvenient for you. The job also requires complete concentration, which can be difficult to maintain over a full shift. You’ll also be required to work nights, weekends, and even rotating shifts. And since the pay is high and demand for air traffic controllers expected to be flat over the next few years, there’s a lot of competition for the positions.

Why you may want to become an air traffic controller:

  • The pay is an obvious factor – it’s much higher than most jobs that require a bachelor’s degree.
  • You have a love for aviation and want to be in the middle of where the action is.
  • Jobs are available at small private and commercial airports, as well as major metropolitan airports.

Radiation Therapists

Radiation therapists are critical in the treatment of cancer and other diseases that require radiation treatments. The work is performed mostly in hospitals and outpatient centers, but can also be in physician offices. Income is well over $85,000 per year, and the field is expected to grow by 9% over the next decade, which is faster than average for the job market at large.

Education/Training Required: You’ll need either an associate’s or bachelor’s degree in radiation therapy, and licensing is required in most states. That usually involves passing a national certification exam.

Job Challenges: You’ll be working largely with cancer patients, so you’ll need a keen sensitivity to the patient’s you’re working with. You’ll need to be able to explain the treatment process and answer questions patients might have. There may also be the need to provide some degree of emotional support. Also, if you’re working in a hospital, the position may involve working nights and weekends.

Why you may want to become a radiation therapist:

  • You have a genuine desire to help in the fight against cancer.
  • The medical field offers a high degree of career and job stability.
  • The position pays well and typically comes with a strong benefits package.

Nuclear Technicians

Nuclear technicians work in nuclear research and energy. They provide assistance to physicists, engineers, and other professionals in the field. Work will be performed in offices and control rooms of nuclear power plants, using computers and other equipment to monitor and operate nuclear reactors. The pay level is about $82,000 per year, and job growth is expected to be slightly negative.

Education/Training Required: You’ll need an associate’s degree in nuclear science or a nuclear related technology. But you’ll also need to complete extensive on-the-job training once you enter the field.

Job Challenges: There is some risk of exposure to radiation, though all possible precautions are taken to keep that from happening. And because nuclear power plants run continuously, you should expect to do shift work that may also include a variable schedule. The biggest challenge may be that the field is expected to decline slightly over the next 10 years. But that may be affected by public attitudes toward nuclear energy, especially as alternative energy sources are developed.

Why you may want to become a nuclear technician:

  • You get to be on the cutting edge of nuclear research.
  • Compensation is consistent with the better paying college jobs, even though it requires only half as much education.
  • There may be opportunities to work in other fields where nuclear technician experience is a job requirement.
  • It’s the perfect career if you prefer not dealing with the general public.

Nuclear Medicine Technologists

Nuclear medicine technologists prepare radioactive drugs that are administered to patients for imaging or therapeutic procedures. You’ll typically be working in a hospital, but other possibilities are imaging clinics, diagnostic laboratories, and physician’s offices. The position pays an average of $78,000 per year, and demand is expected to increase by 7% over the next decade.

Education/Training Required: You’ll need an Associates degree from an accredited nuclear medicine technology program. In most states, you’ll also be required to become certified.

Job Challenges: Similar to radiation therapists, you’ll need to be sensitive to patient needs, and be able to explain procedures and therapies. If you’re working in a hospital, you may be required to work shifts, including nights, weekends, and holidays.

Why you may want to become a nuclear medicine technologist:

  • You have a strong desire to work in the healthcare field, participating in the healing process.
  • Nuclear medicine technologists are in demand across the country, so you can choose your location.
  • The field has an unusual level of job stability, as well as generous compensation and benefits.

Dental Hygienist

Dental hygienists provide dental preventative care and examine patients for various types of oral disease. They work almost entirely in dentists offices, and can be either full-time or part-time. The annual income is over $76,000, and the Bureau of Labor Statistics projects a healthy 11% growth rate over the next decade.

Education/Training Required: An associate’s degree in dental hygiene, though it usually takes three years to complete rather than the usual two. Virtually all states require dental hygienists to be licensed, though requirements vary by state.

Job Challenges: You’ll need to be comfortable working in people’s mouths, some of whom may have extensive gum disease or poor dental hygiene. But you also need to have a warm bedside manner. Many people are not comfortable going to the dentist, let alone having their teeth cleaned, and you’ll need to be able to keep them calm during the process.

Why you may want to become a dental hygienist:

  • Dental hygienists have relatively regular hours. Though some offices may offer early evening hours and limited Saturday hours, you’ll typically be working during regular business hours only.
  • You can work either full-time or part-time. Part-time is very common, as well as rewarding with an average hourly pay of $36.65.
  • Dental hygienists can work anywhere there’s a dental office, which is pretty much everywhere in the Western world.

Web Developers

Web developers design and create websites, making the work a nice mix of technical and creative. They work in all types of environments, including large and small companies, government agencies, small businesses, and advertising agencies. Some are even self-employed. With an average annual income of nearly $74,000, jobs in the field are expected to grow by 13% over the next decade. That means web developers have a promising future.

Education/Training Required: Typically an associates degree, but that’s not hard and fast. Large companies may require a bachelor’s degree, but it’s also possible to enter the field with a high school diploma and plenty of experience designing websites. It requires a knowledge of both programming and graphic design.

Job Challenges: You’ll need the ability to concentrate for long stretches, as well as to follow through with both editing and troubleshooting of the web platforms you develop. Good customer service skills and a lot of patience are required, since employers and clients are given to change direction, often with little notice.

Why you may want to become a web developer:

  • It’s an excellent field for anyone who enjoys working with computers, and has a strong creative streak.
  • Web designers are needed in just about every area of the economy, giving you a wide choice of jobs and industries, as well as geographic locations.
  • This is one occupation that can lead to self-employment. It can be done as a full-time business, but it can also make the perfect side hustle.

Diagnostic Medical Sonographers

Diagnostic medical sonographers operate special imaging equipment designed to create images for aid in patient diagnoses. Most work in hospitals where the greatest need is, but some also work in diagnostic labs and physician’s offices. The pay is nearly $69,000 per year, and the field is expected to expand by 14%, which is much faster than the rest of the job market.

Education/Training Required: Most typically only an associate’s degree in the field, or at least a postsecondary certificate from a school specializing in diagnostic medical sonography.

Job Challenges: Similar to other health related fields, you’ll need to have a calm disposition at all times. Many of the people you’ll be working with have serious health issues, and you may need to be a source of comfort while you’re doing your job. You’ll need to develop a genuine compassion for the patients you’ll be working with.

Why you may want to become a diagnostic medical sonographer

  • The field has an exceptionally high growth rate, promising career stability.
  • As a diagnostic medical sonographer, you’ll be able to find work in just about any community you choose to live in.
  • It’s an opportunity to earn a college level income with just a two-year degree.

MRI Technologists

As an MRI technologist, you’ll be performing diagnostic imaging exams and operating magnetic resonance imaging scanners. About half of all positions are in hospitals, with the rest employed in other healthcare facilities, including outpatient clinics, diagnostic labs, and physician’s offices. The average pay is over $62,000 per year, and the field is expected to grow by 9% over the next 10 years.

Education/Training Required: You’ll need an associate’s degree in MRI technology, and even though very few states require licensing, employers often prefer candidates who are. MRI technologists often start out as radiologic technologists, eventually transitioning into MRI technologists.

Job Challenges: Similar to other healthcare occupations, you’ll need to have both patience and compassion in working with patients. You’ll also need to be comfortable working in windowless offices and labs during the workday.

Why you may want to become an MRI technologist:

  • With more than 250,000 jobs across the country, you’re pretty much guaranteed of finding work on your own terms.
  • You’ll typically be working regular business hours, though you may do shift work and weekends and holidays if you work at a hospital.
  • Solid job growth means you can look forward to career stability and generous benefits.

Paralegals

Paralegals assist lawyers, mostly by doing research and preparing legal documents. Client contact can range between frequent and nonexistent, depending on the law office you’re working in. But while most paralegals do work for law firms, many are also employed in corporate legal departments and government agencies. The position averages nearly $52,000 per year and is expected to grow by 12% over the next 10 years.

Education/Training Required: Technically speaking there are no specific education requirements for a paralegal. But most employers won’t hire you unless you have at least an associate’s degree, as well as a paralegal certification.

Job Challenges: You’ll need to have a willingness to perform deep research. And since you’ll often be involved in preparing legal documents, you’ll need a serious eye for detail. You’ll also need to be comfortable with the reality that much of what takes place in a law office involves conflict between parties. You may find yourself in the peacemaker role more than occasionally. There’s also a strong variation in pay between states and even cities. For example, while average pay in Washington DC is over $70,000 per year, it’s only about $48,000 in Tampa.

Why you may want to become a paralegal:

  • There are plenty of jobs in the field, with more than 325,000. That means you’ll probably be able to find a job anywhere in the country.
  • You’ll have a choice of work environments, whether it’s a law office, large company, or government agency.
  • You can even choose the specialization since many law firms work in specific niches. For example, one firm may specialize in real estate, another in family law, and still another in disability cases.

Licensed Practical Nurses

Licensed practical nurses provide basic nursing care, often assisting registered nurses. There are more than 700,000 positions nationwide, and jobs are available in hospitals, doctor’s offices, nursing homes, extended care facilities, and even private homes. With an average pay level of over $47,000 per year, the field is expected to grow by 11% over the next decade.

Education/Training Required: At a minimum, you’ll need to complete a state approved LPN education program, which will take a year to complete. But many employers prefer candidates to have an associate’s degree, and will likely pay more if you do. As medical caregivers, LPNs must also be licensed in all states.

Job Challenges: As an LPN, just as is the case with registered nurses, you’ll be on the front line of the healthcare industry. That means constant contact with patients and family members. You’ll need to be able to provide both care and comfort to all. If you’re working in a hospital, nursing home, or extended care facility, you’ll be doing shift work, including nights and weekends.

Why you may want to become a licensed practical nurse:

  • With jobs available at hospitals and care facilities across the country, you’ll have complete geographic mobility as well as a choice of facilities.
  • You may be able to parlay your position into registered nursing by completing the additional education requirements while working as an LPN.
  • Though most positions are full-time, it may be possible to get a part-time situation if that’s your preference.

Start On Your Career Path by Enrolling in a Trade School

If you want to enter any of the trades above, or one of the many others that also have above average pay and opportunity, you’ll need to enroll in a trade school. However, in many cases it will be better to get the necessary education – especially an associate’s degree – at a local community college. Not only are they usually the least expensive places to get higher education, but there’s probably one close to your home.

Steps to enrolling in a trade school

Whether you go to a community college, a trade school, or enroll in a certificate program, use the following strategy:

  1. Develop a short list of the schools you want to attend to give yourself some choices.
    Make sure any school you’re considering is accredited.
  2. Do some digging and make sure the school you want to attend has a job placement office with a solid record of success.
  3. Complete an application form with the school, but be sure to do it well in advance of the beginning of the semester or school year.
  4. Apply for any financial aid that may be available. You can use the tool below to get started.
  5. Consider whether you want to attend on a full-time or part-time basis. Full-time will be quicker, but part-time will enable you to earn money while you’re getting your certificate or degree, as well as spread the cost of your schooling over several years.

Tax credits can help you afford your education

Even if you don’t qualify for financial aid, the government may still be able to help by providing tax credits. Tax credits can be even better than tax deductions, because they provide a direct reduction of your tax liability.

For example, the American Opportunity Credit is available for students for qualified education expenses paid for the first four years of higher education. The credit is $2,500 per year, covering 100% of the first $2,000 in qualified education expenses, plus 25% of the next $2,000.

Another credit is the Lifetime Learning Credit. It’s a credit for tuition and other education expenses paid for courses taken to acquire or improve job skills, including formal degree programs. The credit is worth up to $2,000 per tax return, based on 20% of education expenses up to $10,000 paid.

What to watch out for when looking for trade schools

When choosing a trade school it pays not to be too trusting. While that shouldn’t be a problem with community colleges, since they’re publicly accredited, there are a large number of for-profit trade schools that are not only expensive, but they often don’t have the best reputations. That isn’t to say all for-profit schools are scam artists, but the possibility is real.

Make sure the school is accredited by your state.
Don’t rely on assurances by the school that they’re accredited by some poorly known and totally unrecognized industry trade group.

Check out the school with reliable third-party sources.
This can include your state Department of Education, the Better Business Bureau, and even reviews on Yelp or other social media sites. If the school has burned others, you could be a future victim.

Interview people already working in your chosen field.
They’re likely to know which schools are legitimate, and which have a less than savory reputation.

Don’t ignore cost!
Don’t pay $30,000 at a for-profit school when you can get the same education for half as much at a community college. This will be even more important if you will be using student loans to pay for your education. Overpaying for school means you’ll be overpaying on your student loan.

How We Found the Best Trade Jobs of 2021

Just so you know our list of the best trade jobs isn’t just our opinion, we used the following methodology in including the occupations we did:

  • The occupations frequently appear on published lists of “the best jobs without a college degree”.
  • We focused on those occupations that appeared frequently across several lists.
  • We specifically chose fields that could best be considered semi-professional. That means that while they don’t require a four-year degree or higher, they do require at least some form of education, and in most cases, a certification. We consider this an important criteria, because career fields with a low entry bar can easily become saturated, forcing pay levels down.
  • As the table at the beginning of this guide discloses, statistical information for each of these occupations was obtained from the US Bureau of Labor Statistics, Occupational Outlook Handbook.

Summary: The Best Trade Jobs

If you’re a high school student, a recent high school graduate, or you’re already in the workforce and looking to make a career change, take a close look at these trade jobs. They pay salaries comparable to jobs that require a four-year college degree, but you can enter with just a two-year degree or less.

That will not only cut the time, cost, and effort in getting your education in half, but it will also enable you to begin earning high pay in only one or two years.

Pick the field that’s right for you, choose a reputable trade school or community college, then get started in time for the next semester.

The post The Highest Paying Trade Jobs On the Market appeared first on Good Financial Cents®.

Source: goodfinancialcents.com