What the experts say
How the tax law affects divorces
The recently passed tax law “could make divorce an even more miserable experience,” said Ben Steverman in Bloomberg.com. Until now, people who paid alimony could deduct the payments from their taxable income. But for divorces after Dec. 31, 2018, alimony will no longer be deductible. As a result, nearly two-thirds of matrimonial lawyers say they anticipate divorce negotiations will “become more acrimonious,” because alimony payers will have less of a tax incentive to be generous to their former spouses. “Battles will ensue.” The changes allow “recipients to omit the alimony they receive from their taxable income, but divorce lawyers don’t expect that to offset the loss from a lower payout.” The overhaul may also have “lasting consequences for child support,” which is regularly calculated together with alimony.
Making the most of your tax refund
For many Americans, the potential of a “fat, four-figure refund check” is incentive enough to file their tax return, said Janna Herron in CBSNews.com. This year, seven out of 10 of us are expected to receive a refund. So “what will you do with Uncle Sam’s check?” With interest rates rising, reducing any credit-card liabilities and other “high-cost debt” should be a priority. Next, target your student or auto loans—whatever size your refund is, it can still shrink your payback time line. If you’ve dealt with your debts, establish a financial cushion with a rainy-day fund for financial emergencies. If all those bases are covered, invest the money. Consider something with “a higher risk tolerance,” such as a low-cost mutual fund or an exchange-traded fund through a brokerage.
Reward yourself with a savings plan
Want to save more money? First, aim low, said Russ Wiles in AZCentral.com. Americans have long struggled to save, and despite an improved economic outlook and tax reforms, our savings rate “doesn’t seem to be getting much better.” To get started, begin with an automatic deduction—a small, set percentage of each paycheck diverted into a savings vehicle. That will instantly grow your savings without you having to think too hard about the process. Set your initial targets “low enough” to gain some momentum later on. “Saving a small sum is better than getting frustrated and abandoning the effort entirely.” After achieving enough for an emergency cash reserve, set realistic new goals, and treat saving not as a chore “but as a bargain or reward.”