Your car payment is due in three days and you're not sure how you'll pay the bill.Last month, your landlord threatened to evict you when your rent check did not arrive on the first of the month.
If this scenario sounds familiar, you may be experiencing finance-induced stress.From time to time, all of us suffer from it, to one degree or another. Financial stress is simply a fact of modern life.
No matter how hard we work, no matter how diligent we are at trying to save our money, we may find that we have great difficulty paying all of our bills.This can be particularly true if we've been hit with a major traumatic event,such as the death of a spouse, a divorce, or a serious illness.
Financial stress can be felt in a number of ways.For example, you might have difficulty sleeping at night because you are worrying about your finances.You might find yourself short-tempered and, as a result, you might be experiencing conflict with your spouse.You may find yourself yelling at your children for minor infractions, or you may even be hit with panic attacks at work.
The fact is, financial stress can cause you tremendous physical and psychological discomfort.It can lead to anxiety, depression, high blood pressure even stroke. As a result, financial stress is actually a serious, though often unrecognized, health concern.In essence, your financial problems may be making you sick.
But how do you address what can seem to be an insurmountable problem'To begin with, it is important that you go to your doctor and have a complete physical. State your symptoms, and note that you believe that financial stress may be the cause.Your doctor might then refer you to a psychiatrist for anti-anxiety medication, or to a therapist who can help you work through your problems.
Next, consider consulting a certified financial planner. He or she can help you to realize your short-term and long-term financial goals.Don't be embarrassed to let the planner know the extent of your financial problems. Remember that the only way to really attack finance induced stress is to meet the difficulty head-on.Trying to dodge the problem pretending that things are not as bad as they are will only exacerbate your troubles in the end.
Your financial planner will probably want you to come up with a workable budget.It is important to be realistic when crunching numbers.It does little good for you to come up with a budget that looks fine on paper, but that doesn't work in the real world.
Make sure that you budget for all the essentials food, shelter,clothing, medical care.And also try to budget for long-term priorities, such as college savings or retirement.Also, don't forget to allot at least a small portion of your budget to recreation and entertainment.You'll need a few diversions in order to be a less stressed individual.
In the beginning, you might want to track every single expenditure that you make.This can be difficult, especially if you are not used to that kind of record keeping.But it can be quite instructive.You might not realize, for instance, just how much money you're spending each month on lattes, or how much you are devoting to the daily lottery drawing.By doing the record-keeping, you might discover ways that you can trim your budget without really feeling the pinch.
It is also highly important that you save a portion of your money in order to pay for the unexpected.From time to time, all of us are hit with bills that seem to come out of the blue.Your savings will act as a kind of insurance policy against disaster.
With some money in the bank even if it is a small amount in the beginning you'll be better able to weather the financial storms that come your way.And you might find those middle-of-the-night worries disappearing, knowing that you are doing all you can to get your finances under control.
Financial Emergency! It is unpredictable yet it happens to all of us. Whether it's college tuition for your daughter, unexpected medical bills from an accident in the yard, covering the higher than expected closing costs on your new home or avoiding foreclosure or eviction because spending got out of hand; you're going to need money fast.
As one of the requirements for the tax exempt status of your Solo 401k, distributions of funds from your Solo 401k are limited to termination of employment, retirement, disability, death, plan termination or inservice distributions after age 59.5. Severe options for those needing a temporary cash infusion.
Your Solo 401k to the Rescue.
To cover those immediate situations, the IRS allows Solo 401k's to provide two sources of funds: Number one is a loan of up to the lesser of $50,000 or one-half of your vested account balance. Number two is the hardship disbursement of salary deferral contributions for financial hardships. Loans from your retirement account must meet the provisions of section 72(p) which requires that the: ?Loan satisfies the five year repayment term requirement (15 years for residential loans). ?Loan satisfies the level amortization schedule of consistent repayments. ?Loan satisfies the enforceable promissory note contract agreement requirement, and ?Loan satisfies the amount limitations of the lesser of $50,000 or one-half the vested account balance.
Loans are optional features of a Solo 401k plan and should a plan sponsor decide not to provide for loans because of the additional administrative complexity and cost, there remains the safe harbor Financial Hardship provisions. So called because limiting financial hardship requests to only preapproved IRS conditions eliminates the requirement to justify the decision to approve or disapprove the request based on facts and circumstances.
These financial hardships must satisfy one of the following IRS preapproved conditions: ?Medical bills unreimbursed by insurance ?Secondary Education for yourself, spouse or dependents ?Purchase of your primary residence or ?Avoid foreclosure or eviction
These hardship disbursements are not considered Solo 401k distributions with the option to be rolled over to IRAs or other qualified plans. But what happens if the solo 401k financial hardship does not meet one of these criteria? The request is denied and the consequences must be endured.
The IRS recognized that there were other significant events that could qualify as financial hardship and with IRS Regulation 2004-TD-9169, the IRS added two additional circumstances to the list of approved financial hardships.
1.Funeral Expenses and 2.Cost of Uninsured Repairs on your Primary Residence.
These two new additions bring the approved circumstances to a total of six. The changes to the safe harbor hardship rules resulting from the IRS regulations is the second set of changes to the hardship rules since GUST. The first set of changes occurred when EGTRRA reduced the holdout period for elective deferrals from 12 to 6 months. Please note that all of the changes to the hardship rules since GUST apply only to plans that use the safe harbor criteria for hardship withdrawals. To add these two additional situations to the financial hardship provisions of your Solo 401k requires an amendment. Such an amendment should adopt the safe harbor financial regulations by reference so that any future additions are incorporated without additional amendment.