The ink on the fiscal cliff deal is now dry. But what does the agreement mean to your wallet today, tomorrow, and down the road?
The best guess is about three quarters of us will pay more tax this year than in 2012 as the holiday for the Social Security tax is over. It now goes from 4.2% back to the historic rate of 6.2%.
Let's put that in real numbers:
As far as tax brackets, the 10% and 25% that affect most of us remain the same. Ditto for the 28% and 35% brackets.
Taxes on stocks stay the same on gains and dividends -- except for very high income earners. Meanwhile, the Alternative Minimum Tax is permanently fixed.
Who will get clobbered? Just under 1% of people will pay much higher income taxes. The rate you may hear being talked about is 39.6%. But the effective rate for those folks will be much higher than that because of phase outs that manipulate taxes higher on high income earners. It could in fact be beyond 50%.
Estate taxes were about to snap back to very high rates, but now they don't kick in until you're talking about an estate valued at $5 million for individuals and $10 million for families. Anything above that, and 40% will be taken by Uncle Sam.
On the spending side, unemployment compensation will now be extended for almost the entire calendar year. Tax credits geared toward lower income folks continue, as do those geared toward families with kids.
What also continues is federal spending. That's the big issue. That's what makes the House vote on the fiscal cliff deal like a grain of sand next to a beach ball. It's the beach ball that's the problem!
If you're suffering from poor credit, there are several surefire ways to get your credit healthy again. Follow these tips and you'll be well on your way.
The remaining 20% of your credit score is comprised of what types of credit make up your credit mix (10%) and how much new credit you have in your life and how quickly you took it on (10%).
Just as there's no reason to obsess over your credit score, there's also no reason to ignore it either. What you don't know can hurt you. Fortunately, getting free access to your credit report and credit score can be easy.
At AnnualCreditReport.com, you can get a free copy of each of your credit reports once each year. In just a couple minutes, you can see how your credit is, but only once a year. This is the government-authorized clearinghouse for getting your credit reports from each of the main bureaus at no cost.
Then there's a site I've talked about called CreditKarma.com that allows you free access to both your credit report and your credit score. CreditKarma does this routinely; it's not just once a year.
Other sites that offer free non-FICO credit scores include Credit.com and Quizzle.com.
I'm looking at CreditKarma right now as I write this and it shows my credit score on the 850 scale. My (non-FICO) credit score is 769. That's a good score, but not a great one. (Editor's note: You won't be able to receive your free credit score from Credit Karma with a credit freeze in place.)
CreditKarma also tells me what factors make up my credit score. Their data shows my total debt, plus what I owe on credit cards, home loans, auto loans, student loans and personal/other loans.
Then they show my credit card utilization. I've told you before never to use more than 30% of your available credit. But if you really want top-drawer credit, keep it below 10%. I failed the test as I'm using 11% of my available credit, according to CreditKarma. So I'm not getting that booster shot, but I'm still in great shape.
Other factors CreditKarma tells me about are my on-time payments (that's 100% of all my payments); the average age of my credit lines (7 years, 4 months); the number of recent inquiries to my credit (2); and derogatory marks on my credit (0).
So I can get that instant snapshot and know if my credit is healthy or not.
Why does CreditKarma do this for free? Because it's all about data mining. I give up my privacy in return for providing them access to my information. Then with my information, they can turn around and barrage me with offers for credit cards, mortgage loans, car loans or whatever else.
I'm fine with trading my privacy for information. You may not want that. But it's the same thing that comes up with Mint.com, which is a great free budgeting and financial tracking tool, but they hammer you with solicitations too.
In my book, that's a fair trade. In yours, it may be a foul ball.