Two Practical Personal Finance Lessons For College Students

by?Andrew D. Schwartz CPA

?(Originally written for the September 2016 newsletter.)

Last week, my wife and I dropped off our older child at college to start his freshman year.? He is eager to spend the next four years taking classes in a variety of interesting subjects while working towards his degree.

A lot of what college kids learn, however, is learned outside the classroom.? My wife (who is a Certified Financial Planner) and I feel we already planted the seeds for a few practical personal finance lessons as part of our son?s preparation for his freshman year.

Budgeting Basics:

Sticking to a budget is helpful for businesses as well as for households.? While some people put together very detailed budgets each year, my son opted for a much simpler alternative to track whether he will end up sticking to his budget each semester.

Earlier this summer, my son opened his own checking account along with a companion savings account, and then deposited all of his paychecks from his summer job, plus any graduation gifts he received, into his new savings account.? He feels he earned enough during the summer to have built a sufficient stash in his savings account to cover his books and spending money for the entire freshman year.

Here is the step that will help him learn about budgeting basics.? In order to make this pool of money last throughout both semesters, he only transferred enough money from his savings account into his checking account to cover one semester?s projected spending.? Doing so lets him easily monitor his spending as compared to his budget.

If there is any money left over in his checking account at the end of the first semester, then he successfully met his budget.? Alternatively, if he ends up dipping into his savings before Semester One ends, he knows he?ll need to increase his budget for the second semester, which means he?ll probably need to get a job over winter break and/or work on campus when he returns to school in January in order to meet his second semester spending needs.

Begin to Establish a Credit History

My son is also taking this opportunity to begin to establish his own credit history.? At the same time that he opened his companion checking and savings account, he also applied for a low-limit credit card connected to these accounts.? I believe the limit for his credit card is just $800.

Each month, he plans to make a few purchases using his credit card.? To make sure he won?t miss making the monthly credit card payment (which would end up hurting his credit score), he already set up for the full balance of the credit card to be? ?autopaid? out of his checking account prior to the card?s due date.

Establishing a consistent history of utilizing credit and then paying off the balance due in a timely fashion is a great way to establish a credit history and build up one?s credit?rating.? Graduating with 48 months of consistently good credit history will be very valuable to someone entering the work force, looking to purchase or lease a vehicle, hoping to rent an apartment, or doing anything else that would require someone to pull a credit report.

(Check out our recorded presentation:?Financial Cleanup: Your Credit Report.)

Two Great Lessons:

Learning how to budget and taking steps to establish and improve one?s credit are two practical personal finance lessons that my son won?t be taught in the 40 or so college classes he?ll be taking over the next four years.? Instead, he has already begun to learn these two useful lessons as part of his college experience before even stepping foot into his first undergrad class.

Andrew Schwartz To Present Free Online CPE Seminar on Growing A Niche Practice


Thursday, Sept. 26, 2019

11:00 am ? 12:00 pm (Pacific

Price: FREE


In a profession where many CPAs and accountants operate as generalists, specializing within a niche can provide a huge competitive advantage.??Many firms have realized that the more focused their practices become, the more their practices grow.? Plus, clients and prospects will travel further, wait longer, and?also pay higher fees to work with a specialist.

In this course, Andrew Schwartz CPA shares how he generates meaningful industry specific benchmarking information to help clients and prospects within his niche better understand how their businesses are doing. Many viewers will leave the course with a new excitement to?commit to a niche?and will realize how easy it is to turbocharge their specialty by benchmarking.

After attending this event you will be able to:

  • Recognize how specializing within a niche is preferable in today?s competitive business environment
  • Discover easy and efficient ways to benchmark
  • Identify four categories of benchmarking data
  • Learn from real-life benchmarking examples created by Andrew for his niche client base

Making Estimated Tax Payments To Avoid IRS Penalties

by Richard S Schwartz CPA CVA

If your tax situation may be changing this year as a result of receiving additional investment or consulting income that you were not expecting when you had met with your tax preparer last spring, you most likely will need to pay to the government additional taxes related to this income. Often, this type of income has no taxes being withheld from it. Therefore, we recommend that taxpayers be proactive and aware of the different methods of prepaying taxes to avoid IRS penalties for paying too little in taxes during the year.

Below are the primary methods of prepaying taxes to the IRS during the year to prevent the assessment of IRS penalties when you file your taxes.

  • Mail payment with estimated tax payment vouchers.?The IRS allows taxpayers to mail in a check with quarterly estimated tax payment vouchers. The tax payment coupon to be used is?Form 1040-ES, Estimated Tax for Individuals.?Payment should be made payable to United States Treasury. The quarterly payment due dates are April 15, June 15, September 15 and January 15.
  • Make online tax payments via the IRS website.? Taxpayers can pay quarterly estimated tax payments directly through the?IRS website?(same quarterly due dates as noted above). Access the IRS website at and then go to the link ?Make a payment?. Taxpayers can specify the payment amount and the bank account to have the funds withdrawn from via a direct debit from their bank account. There is no fee for this payment method. Or taxpayers can similarly make a tax payment using their credit card. There is a 2% transaction fee for this type of payment. To pay estimated tax payments using either of these two options via the IRS website, go to the link:?
  • Increase withholdings from your paycheck. Perhaps the easiest way to pay extra taxes into the IRS is through your paycheck. You can instruct your employer to have additional taxes withheld for your pay for each pay period. Typically, this type of payroll tax withholding request would be communicated through the employer?s human resources department using the?W4 form. Alternatively, many companies allow you to make changes to your tax withholdings online via an employer website.

Generally, as long as you have 100% of your prior year tax liability (110% if your prior year adjusted gross income exceeded $150,000), or 90% of your current year tax liability paid to the IRS via a combination of estimated tax payments made evenly over the year and federal taxes withheld from your pay, then the taxpayer will not be subject to an underpayment of tax penalty. However, as there is a bit more complexity involved in paying estimated taxes to avoid an underpayment of tax penalty, we recommend having a discussion with your tax preparer prior to paying estimated taxes or adjusting your tax withholdings from your paycheck on your own.

2019 Tax Amount Updates

  • For 2018, the standard deduction for a single individual is $12,000 and for a married couple is $24,000. A person will benefit by itemizing once allowable deductions exceed the applicable standard deduction. Itemized deductions include state and local income taxes (or sales taxes) AND real estate taxes limited to $10k per year, mortgage interest, charitable contributions, and medical expenses in excess of 7.5% of income in 2018 and 10% of income after that.
  • Starting in 2018, personal exemptions are no longer deductible.?
  • The?maximum earnings subject to?social security taxes is $132,900 for 2019,?up from $128,400 in 2018.
  • The?standard mileage rate?is $.58 per business mile?as of January 1, 2019, up from $.545 for 2018.
  • The?maximum annual salary deferral?into a?401(k) plan?or a?403(b) plan?is $19,000 in 2019, up from $18,500 in 2018.? And if you?ll be 50 or older by December 31st, you can contribute an extra $6,000 into your 401(k) or 403(b) account this year.
  • The?maximum annual contribution?to your?IRA?is $6,000 in 2019, up from $5,500 for 2015 through 2018.? And if you turn 50 by December 31st, you can contribute an extra $1,000 that year.? You have until April 15, 2020 to make your 2019 IRA contributions.

Tax and Financial Planning Calendar for August 2019

Month Income Taxes Saving and Investing
  • 3rd quarter estimates due 9/16/19
  • ?Calendar year? Corporate and Partnership tax returns on extension are due 9/16/19
  • SIMPLE/IRAs and Safe-Harbor 401k?s need to be set up by 10/1