Do you have a lot of medical bills that you pay on each month? Could those medical bills be deducted from your tax bill this year? I was helping my mother take care of all of her finances after my dad passed away. I didn't realize how many bills she had coming in each month for medical treatments that my dad had undergone months, even a year earlier. I started doing some research about medical bills and tax deductions. If you have medical bills, take a minute to read through this blog to gain some knowledge that can help you decide what you can do when tax time comes around.
For anyone who is new to investing or is looking for ways to increase net worth, it is quite important to understand some of the basics of investing in order to build wealth. There is a lot involved with investing, and it can be confusing deciding what type of investments to choose. Do you want to remain traditional with stocks and mutual funds, or do you want to be "radical" and go with forms of passive income such as investing in films? Whatever you choose, the following are some basics that will help you build your net worth.
If you are young and just entering the world of investing, it is important that you get started as soon as you have an income. The earlier you begin, the more time you have to make money. This is due in part to compounding interest. Basically, you invest your money in an account that pays you interest. Over the years, the amount of interest compounds on a monthly or annual basis, depending on the type of account you choose. This means that the interest on your money continues to increase as time goes by, as long as you do not touch the money in the account. By the time you are ready to retire, you will be sitting on a really nice amount of money, depending on the type of retirement accounts in which you choose to participate.
Diversify Your Portfolio
One of the first tips you will receive from an investment advisor is to spread the wealth around a diversified portfolio. You need to have a healthy mix of stocks, bonds, mutual funds, and retirement savings plans in your portfolio. Another important component of your portfolio should include some passive income streams. Passive income comes from an investment that you make one time, and then you continue to see a stream of income from it on a regular basis, whether that is monthly, bi-annually, or annually.
Some examples of passive income include investing in films, rental property, and peer-to-peer lending. Keep in mind that passive income is not always a get-rich-quick component of a portfolio. Many times, you have to invest both money and time into a project before you can see any significant return. However, having some passive income in your portfolio can provide a nice side income in addition to your other investments and build your wealth more quickly.
In order to build wealth, it is ideal that you avoid debt as much as possible. This is one of the most important components to building wealth. Avoid taking on a mortgage that is too big for your budget. Also, do not invest in anything that does not use your own money. For instance, you may be interested in investing in films. Let's say you have a friend who wants to make an independent film and has come to you for financial assistance. You think it is a good idea and want to be a part of the project. Once the film is made, it flops and makes absolutely no money.
If you paid for the project using your own funds, you can have an advantage on your tax return by taking it as a capital loss on investment. If you paid for the project using your credit card, you may find yourself in a bit of a pickle. Credit card debt is not something you can write off on your taxes. You not only will be responsible for the money you spent on the film, but also any accrued interest. Furthermore, depending on your debt to income ratio and the cost of the project, you seriously risk your credit score by investing using credit.
By keeping these tips in mind, you are well on your way to increasing your net worth. Whether you choose investing in films or other forms of passive income, or you mix it up with other forms of investment, just getting started is over half of the battle. Contact an accountant, like Teri J Henderson, CPA, P.A., for more help.Share