Expecting a raise or bonus soon? Learn how to make the most out of any extra money you have coming in!

Optimizing Your Raise or Bonus

Even though I do believe that diversifying your income is a smart money move, let's not ignore the most common one that most people have – your nine to five job.

This is a steady paycheck for work that you hopefully enjoy.

Besides the paycheck, things like benefits can be a huge plus for you. Depending on where you work, you could also receive bonuses and if things are looking good, raises.

Okay. So you may be getting a raise because you switched jobs and companies still.….

Even if neither of those is the case, you two could be getting money this summer in the form of the advance child tax credit payments.

Today, we're going to show you how to make sure that any extra money you receive helps you achieve your family and financial goals faster.

That's why I'm so glad Joe Mecca is here. He's the vice president of communications over at Coastal Credit Union and our go-to savings guy.

In this episode, we'll get into:

  • how these advance payments work with the child tax credit
  • a checklist to help make sure that your financial foundation is solid
  • t ideas on how you can layer and optimize your money.

Are you ready? Let's get started!

Resources to Maximize and Manage Your Money

Want to make sure your dollars go further? Here are resources mentioned in the episode as well as additional handy tools to stay on top of your money!

If you're still sorting out what goals you want to pursue and plans that you want to set up, please join us in our Thriving Families group on Facebook.

We're all about helping one another out with our family and financial goals.

We'd love to see you there!

Thank You to Our Sponsor Coastal!

Support for this podcast comes from Coastal Credit Union! If you’re living in the Raleigh Durham area and looking to bank better, come check out Coastal today.

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How the Advance Child Payments Work

Since the advanced child tax credit payments are coming up next month, I want to cover some of the most common questions I'm hearing from parents.

Mandatory disclaimer, even though I've been a contributing writer at TurboTax, I am not a tax expert.

There are a few key things you need to know about with the child tax credit.

In years past this tax credit has been $2,000 per qualifying child. For this tax year (2021) it has increased.

  • If you have kids five and under, it's going to be $3,600.
  • If your kids are six through 17 at the end of 2021, it's going to be $3,000.

So that's the first difference – an increase.

The second is this – you will be getting half of that credit in advance as monthly payments starting in July.

Are We Eligible for the New Child Tax Credit? 

Before we get into the payment scenarios, I do want to note that there are some income thresholds to get the full tax credit.

  • If you are single filer or you're married and filing a separate return, that threshold is 75,000.
  • If you're filing as a head of household, it's $112,500.
  • If you're married and filing a joint return or filing as a qualifying widow or widower, it's $150,000.

If your adjusted gross income exceeds that then the tax credits begin phasing out. [The IRS has all the details here.]

Let's take a quick moment to go over some scenarios so that you can have a better idea of how that would look.

Let's say that you just had a baby this year. (First of all, congratulations!) If this baby is your only kid with this tax credit, you would qualify for the $3,600.

Half of that $1,800 would be paid to you each month from July to December giving you an extra $300 a month.

Now let's say you have two kids, a four year old and a nine-year-old. You would qualify for 6,600 dollars in tax credits.

Half of that 3,300 would be split into six payments from July to December. Each month, you would have $550 deposited.

I hope that makes sense.

How You Can Use That Child Tax Credit to Improve Your Family Finances

This tax credit money can be used in so many different ways. For some parents, it can offset a bit of the cost of raising kids now.

It can also be used for future expenses. I know some are talking about using that money to start or increase their five 29 contributions.

Or you can put this money towards your family's financial goals, which can benefit everyone. An example is paying off your high interest debts; that frees up cashflow now and in the future that you can use for your kids and other family needs.

How do you know what's the best path for you?

That can be the tricky part, which is why I think you'll enjoy my conversation with Joe Mecca on how to optimize your money!

Getting a Raise? Here's How to Make the Most Out of It

Elle Martinez: A lot of people in our community, once a year they do reviews and in some cases, this is raises.

We have many teachers, as a part of our community. As they start the new school year or any job where you're getting a raise, you want to make those dollars go further.

Especially After the year we had last with COVID and just focusing on getting through that year.

I wanted to talk about any tips on how to approach this high level view with your raise- what things to maybe talk about or consider.

Joe Mecca: Yep and I always like to tell people this works for a raise, this works for even a bonus in a short term.

It's a great opportunity for you to take Just take a look at your personal financial situation and then make some adjustments to make sure you're working your way toward your goals, especially before it happens.

Maybe take some time before it actually hits your paycheck to plan out what you're going to do next.

Create Your Family's Financial Game Plan

The first thing I would tell people get prepared for the short term. If you haven't reviewed your budget in a while, and if they're listening to you, I hope that it review your budget.

Now is a great time to do that. You take a look at where your money's going, understand what you're spending your money on, understand what you're setting aside money for and where that's going.

Does what you're setting aside for paying your bills, match your current spend because your bill habits change with time, your utilities might go up or you might cancel something. That may shift a little bit.

Yeah. Overall, just you can look at your budget. I always like to tell people to look at the 50/20/30 rule. I know, you shared that with people in the past.

  • Set aside 50% of your income and make sure you're paying your necessities. Paying down debt.
  • 20% to savings and then
  • the rest – 30% – for discretionary spending.

I actually like to be a little bit more aggressive and try to put the 50 towards the savings, but

Elle Martinez: -because you're a hardcore saver.

Why You Need an Emergency Fund

Joe Mecca: Yeah, it takes a while to work up toward that, but in the short term get yourself, toward those percentages. Next, make sure you do it in an emergency fund.

Another thing that I always love to talk about is making sure people, we have have money set aside for emergencies because they do happen.

There've been plenty of studies that show that half of the population doesn't have enough set aside to cover a $400 emergency. So if you don't have that, Use this as an opportunity.

Then look beyond that. I know the experts usually say three to six months living expenses are good emergency fund. Again, I would prefer to see more because as we saw in the last year, sometimes an emergency can last a year.

Elle Martinez: Yeah. Who would have thought of that? Like no one came into 2020 thinking that.

[You] definitely want to have that financial cushion where you're both comfortable with it.

Pay off Your Debts (or at least Refinance)

Joe Mecca: Yep. Then the last piece on the short-term stuff is you take a look at your debts.

Do you have some higher interest or high rate loans that you might be able to refinance?

I know that's not really taken advantage of the pay increase, but while you're looking at that stuff, make note of it.

This might be the ideal time to refinance some of this debt or consolidate some of this debt to something that's going to be a little bit lower cost.

As long as you're laying it all out in front of you at the time and examining your financial situation, then go ahead and do that.

Building Up your Investments

Joe Mecca: Once you're comfortable with the short term stuff, now you need to be thinking about the future.

I'm not a financial advisor, so I'm not going to be give you financial advice.

I'm going to tell you what's worked for me and what I always like to share you know, if you have a retirement plan, a 401k, or especially if we're talking about teachers, it's a 403(b), are you taking advantage of that?

Are you at at least trying to get your match? If your employer offers a match and you're not putting in that much into the plan, then you're missing out. So I would say take a look at that.

Let's say you got a 2% or 3% increase in your salary. Might be an ideal time for you to do a 1% increase in what you're contributing to your retirement fund.

If you do that over time, eventually now you're up to like 15 or more percent and you can really start making some progress toward, toward your retirement by just adding to it at 1% at a time.

If you two or 3% increase, if you can put 1% towards your retirement you're not going to notice. You're not going to miss it when you get your check.

You're not going to have that lifestyle increase of suddenly you've got more on your check. You know, put, put the focus into taking care of yourself first, taking care of your future self.

So I always like to say, great opportunity to examine your 401k or 403b and bump it up another percent.

Shift Up Your Savings and Investment Contributions

Elle Martinez: Yeah. That does make a difference. When we were first married, just out of college for my husband, I had my internship. Even then we're like, let's put in just enough for that free money.

At that time it was not much right? But years passed, we didn't notice that money.

These small changes, you don't feel and much pain, if any, but then you see compound interest you that advantage of time and building up that habit, it does make a huge impact on your finances later on.

Joe Mecca: Even if you're maxing it out, still do that exercise because all you're going to do at that point is you might just hit your max earlier in the year.

That just frees up more to do with later on in the year, you might have a larger check later in the year to do some other saving investing, or spend it on something that you really need or want.

It's worth doing that exercise year over year, over year.

Again, once you do it, it might not seem like much at first, but when you've done that over several years, you can really make a big dent in one year you're doing an increase in percentage.

So you're contributing more and more and more toward your retirement. Again, there's tax benefits to doing that, depending on how you've got that structured again, not giving tax advice, not giving investment advice.

Health Savings Accounts

If you have access to a health savings account, and I know a lot of people have high deductible health plans this is also a good opportunity to take a look at that.

Are you contributing what you can to that plan?

If I had to guess most people are not maxing out their health savings, but you know, as an individual, I think this year, but $3,600 into a health savings plan. Family plans double that $7,200.

Again, those are tax advantage plans as well. That allows you to save for either current or future health care costs that the money is yours to keep one wants it in that account.

It's not like a use lose it, flexible savings spending plan. Just a great way to be saving up for, cause you never know when you're gonna have a future health care expense.

So to plan for that now, it could be just putting a few extra dollars more out of every paycheck into, into an HSA and saving up that way.

Maxing Out Your IRAs

If you're eligible for an IRA and you're not currently maxing that out, take a look at that. Eligible employees now can do up to $6,000 a year into an IRA account.

There's two different versions of the traditional and a Roth. They both have different rules and different tax implications as well. But again, good opportunity to look at that stuff there.

If you're comfortable with all those look at different savings options, you can look at investing options.

That's, where you might want to sit down and talk with a financial advisor and really get some direction on where to put some excess money.

But yeah, for majority of people in the short term, it's getting your budget in place and then start focusing on saving for your future. And then if you're already saving for your future, beefing that up just a little bit each time.

Approach Your Finances as Layers

Elle Martinez: Yeah. I mean, it's brick by brick. You're building that financial foundation.

We mentioned last year, but that was really a stress test for a lot of people's finances through no fault of their own, where something comes up, we're all experienced, some kind of pressure.

I think that was , if you could take a key takeaway is do your best to have your financial safety net or cushion, whatever you want to call it in place as best as possible.

Then once that's in place, then you have more options.

You have some peace of mind too, to save for a dream. Whether that's a retirement, a career pivot you're saving for a family house, you know, or could be investing for the future. Maybe you want to speed up that retirement date.

However you want to play around with that, but you gotta have that foundation, right?

I know we talked about several goals, but I want to hone in a little bit more about savings in investment options. You mentioned IRA, as an option as well.

Choose the Best Bank Accounts for You

Coastal has a lot of different accounts especially on the saving side so do you mind just going over a couple of them?

Joe Mecca: For a lot of people they're saving for short-term goals. I'm going to focus on really the short-term stuff, and then the things that products that coastal offers. A lot of people use our go green checking account.

Even though it is a checking account, it does pay a dividend

. A lot of people will use that as their savings vehicle because they use that account to do their transactions once every month. But that's where they can also earn a dividend too. So it's a way to kind of boost your savings.

In the short term, a lot of people like to keep money separate and they don't like to mix their transactional money they're spending money with their savings. So coastal offers a companion to go green checking. It's actually the go green money market.

That's actually where I prefer to do most of my savings. So I do my transactions out of the checking account that helps me earn a higher dividend out of the money market account.

I like to keep money in the money market account for all my short-term goals.

You can do multiple accounts. I actually like to keep it all in one account and then I keep a spreadsheet and segment out-

Elle Martinez: I'm not surprised with the spreadsheet.

I'm a fan of the spreadsheet spreadsheet. You're a super saver.

Joe Mecca: Yeah, and I do like to like segment out, like I'm saving for a car I'm saving for a trip. If I ever get to travel again and savings for some other things I want to do around the house.

For me, it's okay put all that short-term stuff into the money market account. It's separate from the money I'm spending. It earns a dividend so it's going to grow a little bit each month. It's accessible when I need it.

The other option is to do a certificate account CD. Everybody knows CDs. Those are a little different cause they're they're time bound. You're agreeing to put money on deposit for a set period of time with traditionally the benefit of getting a little bit higher rate on that.

That's good if you've got a kind of little further out goal that you're trying to save for.

So now you're talking about, I want to pull together the down payment on a house. And my goal for that is to do that three years or five years or whatever.

You can set aside money at a yeah, put it in a three-year certificate, put it in a five-year certificate and set it aside.

That way the money's locked up. You can't really touch it. There it's yours. If you really have an emergency, you can get it back out.

What you're doing is you're agreeing to put it on deposit for a longer period of time in exchange for a little bit, a little bit better return. Yeah. Again, those are all insured products too.

They're guaranteed by NCUA up to it's a $250,000 per account. Just great safe, kind of boring savings vehicles, but savings savings yeah exciting if you make it. Exciting. Yeah.

Elle Martinez: Well, we had enough ‘excitement' in 2020. We can just do boring this year, and progressing.

When You Need a Financial Advisor

Joe Mecca: Now if you do have longer term savings goals and you mentioned saving for college or are you doing retirement planning? Are you, are you looking for things that are furthered up?

That's why I say go talk to go talk to a financial advisor. Coastal offers coastal wealth management to all of our members.

You can sit down with financial advisor and work through things like retirement planning and investing. You're doing a 529 college plan and really trying to look at the stuff that's further down the road.

You know may involve More variety in the types of financial investments that you have access to a little bit more risk, a little bit more, potentially more reward, but yeah, that's where you really want to sit down with somebody and lay out your plans and say, here's what I want to do.

Here's when I want to do it and have them help you work backwards from there and decide like what type of, what type of risk you're willing to take and how much you want to put into those certain types of investments. With the hope that over time, you're gonna be well situated to reach those savings goals.

For the short term stuff, I love savings products. I love the money market. I love certificates. They're reliable.

There's a reason that everybody's still offering them, you know, after decades and decades and decades of financial services, because they're really solid products for short-term savings.

Coastal's Wealth Management Team

Elle Martinez: I do believe you should layer your money and finances based on the timeframe and everything. Before we wrap up, I definitely want to point out with the wealth management team.

I've met a few of them and I have to say two things stuck out to me. Of course you want this with a financial advisor, very knowledgeable about specific things, but they genuinely are people oriented.

We were giving general advice, which is helpful for a lot of people, but when you're coming up with a plan for those big milestones

  • if you know you're saving up for college,
  • if you're planning for retirement,

It is incredibly helpful to have someone sit down, look at your particular situation, look at all the numbers and give you a personalized, crafted plan.

Joe, in case anyone is listening is here in the triangle area of North Carolina and they want to start maximizing their finances, whether it's saving more or maybe sitting down and crafting that plan, what's the best way they can find out more about Coastal?

Joe Mecca: I would say, start with our website. It's Coastal24.

You can go there, you can research all the products and services that we offer. Even open an account online start conversation with wealth management advisor, see some of our other services that we offer too.

We're very consumer oriented and, and are really geared toward people who just want to want to take the next step in their finances financial journey.

Our motto is bank better to live better. That's really our goal. That's our mission. We're gonna help you. We're gonna help you live better.

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Music Credit

Our theme song is from Staircases. Additional music by various artists from Audiio.

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