dsmWealth April 1, 2021

Compounded interest is a powerful economic tool. And Alejandro Hernandez thinks every young person should take advantage of it at their first opportunity, like maybe now, just as they’re set to graduate and land that first career job and enroll in an employer sponsored 401(k) plan.

“Even if it’s a few dollars squirreled away,” said Hernandez, dean of Drake University’s College of Business and Public Administration. After all, an investment that on average rises at a modest 6% a year—a cousin of interest compounding—will double in value in 12 years. By the end of a 40-year career, that original dollar will have grown 10-fold.

Hernandez has many thoughts on financial and money management acumen that will come in handy for young people. We asked him for only two more, though, so here they are: insurance and delayed gratification.

At age 26, the law says you get kicked off Mom and Dad’s health insurance plan. Hopefully you’ll be gainfully employed by then and will have access to your own health insurance. Great. But even if you aren’t working, or are still in college, there are plans that can be bought individually. Many universities offer health insurance plans to students. And there’s always the Affordable Care Act coverage, government-mandated. Yes, you’re healthy. But even young people can fall ill, and they can fall prey to all sorts of accidents.

“And don’t skip renter’s insurance,” Hernandez said. “Things happen.” Renters' policies cover damage from fires as well as theft and vandalism.

And then we have what may be the hardest part about money and youth—delayed gratification. This can be tough. Young people fresh out of school face huge demands on their monetary resources – starting a family, buying a house, buying a car. They also want to enjoy the good life—jetting to Cancun for a long weekend, hitting the newest bars, and grabbing front-row seats to the biggest band coming to town. But from which bank account do you draw the money to pay for all of this? You can only charge so much on your credit cards.

“This means you’re going to have to make some choices” to balance budget with lifestyle, Hernandez said. That new car might have a wait a while longer. There’s no shame in tooling around town in a car with 30,000 miles on it – they’re built to last nowadays.

Kiplinger's Ranks Iowa As a Tax-Unfriendly State

BY STEVE DINNEN

If you already live in Iowa, this will not come as a surprise. But if you’re retiring and considering a move to the Hawkeye State (how large an audience can that be?) Kiplinger’s Personal Finance magazine has a bone to pick with us as being an unfriendly state tax-wise.

In its recent listing of the least tax-friendly states, Iowa is ranked eighth. We’re one of the highest states in the nation on income taxes – topping out at 8.53%. Yes, Iowa does not tax Social Security income, and the state provides an exclusion for most types of retirement income. But Kiplinger’s notes that these are only modest concessions that most other states offer as well.

State and local sales taxes average out at 6.95%, which isn’t far out of synch with other states. (Nebraska, for instance is 6.94%; Illinois 8.82%.) But the state also gets a downgrade on property taxes, where the median rate is 11th-highest in the nation. Estimated taxes on a $250,000 home are $3,823 a year. Arizona and Nevada, both of which are among the most tax-friendly, charge just $1,543 and $1,333, respectively, for similarly valued homes. Additionally, Nevada has no state income tax, while Arizona’s equals Iowa’s top rate.

What Are Really Rich People Buying These Days?

BY JACOB BERNSTEIN FOR THE NEW YORK TIMES

Rich people who shopped too much used to be called collectors. Now they—and those belonging merely to the aspirational class—are all investors.

It’s not just that they’ve spent the last year splurging on stakes in untested, newly formed public companies that have yet to produce products, much less profits. It’s that during the pandemic, seemingly every luxury acquisition has become a so-called alternative asset class.

Rather than elbowing past each other for reservations at the latest restaurants from Marcus Samuelsson and Jean-Georges Vongerichten, or getting into bidding wars for apartments at 740 Park Avenue, they are one-upping each other in online auctions for jewelry, watches, furniture, sports cards, vintage cars, limited-edition Nikes and crypto art. READ MORE.

The Best Online and Mobile Tax Apps

BY KATHY HAAN FOR INVESTOPEDIA

According to the IRS, the average tax refund in 2020 was $1,869. To ensure the biggest refund possible, it’s important to check for every tax deduction and credit available to you. Online and mobile tax apps make this easy.

In addition to checking for credits and deductions, some tax apps even allow for expense and mileage tracking. Each tax app takes roughly the same time to go through the tax filing process, although some apps can auto-fill certain tax forms and offer live support to speed up the process. If you want an advance on your refund, some apps offer that, too.

We reviewed 20 different tax apps to determine the best options available. Features and costs were big considerations in our ranking. We also looked at ease of use and real customer reviews. READ MORE.