money saving tips

Steps to Reduce Your Cost of Living

Scarsdale CPA Paul Herman has all the answers to your personal finance questions!

Cost of living reduction tips from scarsdale accountant

Keep more money in your wallet with these savings tips!



Like taxes, bills are a part of life that are never pleasant but have to be dealt with regardless, but can also be made less painful to face when the numbers are smaller. Here are some handy cost-cutting tips to get you started.

  • See if your utility has a subsidizing program to make your home more energy-efficient. If that turns up nothing, you can still caulk your windows and check the insulation to make sure it has a high enough “R” factor.
  • Use fluorescent lights instead of incandescent bulbs for lights that are constantly on.
  • Maintain the thermostat at the highest and lowest temperature for comfort in the summer and winter, respectively.
▼ What can I do to reduce the cost of my phone bill?

  • Verify that your long-distance charges are competitively priced. Research which long-distance carrier will give you the best rate and switch if you are not with that carrier.
  • Use the phone book instead of dialing “Information.”
  • If you have children at home, block all “900″ numbers.
  • Stay in touch with relatives and friends through e-mail.
▼ What can I do to reduce the cost of my mortgage?

  • Think about paying down your mortgage. This is an effective way for saving and raising net worth for many people. Make a decision to pay a specific amount more than the mortgage principal and faithfully stick to it.
  • Think about refinancing your mortgage. Determine if refinancing your mortgage will save you money. Calculate to see if the costs for refinancing are worth a reduction in your monthly payments. If you intend to remain in the house for at least five years, the common guideline is that at least two points reduction will make it worthwhile to refinance.

Scarsdale  accountant Paul Herman is here to help you with all your personal finance needs. Please contact us for all inquiries and to receive your free personal finance consultation!

Herman and Company CPA’s proudly serves Scarsdale NY, Rye NY, Mamaroneck NY, Mount Kisco NY, Bronxville NY, Tarrytown NY, Greenwich CT and beyond.

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Coverdell Savings Accounts

Scarsdale CPA Paul Herman at Herman & Company CPA’s has all the answers to your personal finance questions! The following is an explanation on Coverdell Education Savings Accounts by the IRS:

A Coverdell Education Savings Account (ESA) is a savings account created as an incentive to help parents and students save for education expenses.The total contributions for the beneficiary (who is under age 18 or is a special needs beneficiary) of this account in any year cannot be more than $2,000, no matter how many accounts have been established. College Saving Tips from Scarsdale CPA with CoverdellThe beneficiary will not owe tax on the distributions if, for a year, the distributions from an account are not more than a beneficiary’s qualified education expenses at an eligible education institution. This benefit applies to higher education expenses as well as to elementary and secondary education expenses.

Generally, any individual (including the beneficiary) can contribute to a Coverdell ESA if the individual’s modified adjusted gross (MAGI) income is less than an annual, constantly changing maximum. Usually, MAGI for the purpose of determining your maximum contribution limit is the adjusted gross income (AGI) shown on your tax return increased by the following exclusion from your income: foreign earned income of U.S. citizens or residents living abroad, housing costs of U.S. citizens or residents living abroad, and income from sources within Puerto Rico or American Samoa. Contributions to a Coverdell ESA may be made until the due date of the contributor’s return, without extensions.


Here are some key points to keep in mind about Distributions from Coverdell Accounts:

  • Distributions are tax-free as long as they are used for qualified education expenses, such as tuition and fees, required books, supplies and equipment and qualified expenses for room and board.
  • There is no tax on distributions if they are for enrollment or attendance at an eligible educational institution. This includes any public, private or religious school that provides elementary or secondary education as determined under state law. Eligible institutions also include any college, university, vocational school or other postsecondary educational institution eligible to participate in a student aid program administered by the Department of Education. Virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions are eligible.
  • The Hope and lifetime learning credits can be claimed in the same year the beneficiary takes a tax-free distribution from a Coverdell ESA, as long as the same expenses are not used for both benefits.
  • If the distribution exceeds qualified education expenses, a portion will be taxable to the beneficiary and will usually be subject to an additional 10% tax.  Exceptions to the additional 10% tax include the death or disability of the beneficiary or if the beneficiary receives a qualified scholarship.

If there is a balance in the Coverdell ESA when the beneficiary reaches age 30, it must generally be distributed within 30 days. The portion representing earnings on the account will be taxable and subject to the additional 10% tax. The beneficiary may avoid these taxes by rolling over the full balance to another Coverdell ESA for another family member. For more details, see IRS Publication 970, Tax Benefits for Higher Education (at or call 800-TAX-FORM (800-829-3676).   


Roth IRAs for Kids

If you have a child who works, consider encouraging the child to use some of the earnings for Roth IRA contributions. All that is required to make a Roth IRA contribution is having some earned income for the year. Age is irrelevant. Specifically, your child can contribute the lesser of: (1) earned income or (2) $5,000.

By making Roth IRA contributions for just a few years now, your child can potentially accumulate quite a bit of money by retirement age.

Tips from Scarsdale CPA Paul Herman on Saving for Retirement

The earlier the better when it comes to starting a Roth IRA.

Realistically, however, most kids will not be willing to contribute the $5,000 annual maximum even when they have enough earnings to do so. Be satisfied if you can convince your child to contribute at least a meaningful amount each year. Remember, if you are so inclined, you can make the Roth IRA contribution for your child.

Here’s what can happen. If your 15-year-old contributes $1,000 to a Roth IRA each year for four years starting now, in 45 years when your child is 60 years old, the Roth IRA would be worth about $33,000 if it earns a 5% annual return or $114,000 if it earns an 8% return. If your child contributes $1,500 for each of the four years, after 45 years the Roth IRA would be worth about $50,000 if it earns 5% or about $171,000 if it earns 8%. If the child contributes $2,500 for each of the four years, after 45 years the Roth IRA would be worth about $84,000 if it earns 5% or a whopping $285,000 if it earns 8%. You get the idea. With relatively modest annual contributions for just a few years, Roth IRAs can be worth eye-popping amounts by the time your child approaches retirement age.

For a child, contributing to a Roth IRA is usually a much better idea than contributing to a traditional IRA for several reasons. The child can withdraw all or part of the annual Roth contributions-without any federal income tax or penalty-to pay for college or for any other reason. (However, Roth earnings generally cannot be withdrawn tax-free before age 59 1/2.) In contrast, if your child makes deductible contributions to a traditional IRA, any subsequent withdrawals must be reported as income on his or her tax returns.

Even though a child can withdraw Roth IRA contributions without any adverse federal income tax consequences, the best strategy is to leave as much of the account balance as possible untouched until retirement age in order to accumulate a larger federal-income-tax-free sum.

What about tax deductions for traditional IRA contributions? Isn’t that an advantage compared to Roth IRAs? Good questions. There are no write-offs for Roth IRA contributions, but your child probably will not get any meaningful write-offs from contributing to a traditional IRA either. Any additional income will probably be taxed at very low rates. Unless your child has enough taxable income to owe a significant amount of tax (not very likely), the advantage of being able to deduct traditional IRA contributions is mostly or entirely worthless. Since that is the only advantage a traditional IRA has over a Roth IRA, the Roth option almost always comes out on top for kids.

By encouraging kids with earned income to make Roth IRA contributions, you’re introducing the ideas of saving money and investing for the future. Plus, there are tax advantages. It’s never too soon for children to learn about taxes and how to legally minimize or avoid them. Finally, if you can hire your child as an employee of your business, some additional tax advantages may be available.

Westchester CPA Paul Herman is here to answer all of your personal finance questions. Please contact us for all inquiries and to receive your free personal finance consultation!

Herman and Company CPA’s proudly serves Scarsdale NY, Katonah NY, Mount Kisco NY, Rye NY, Bedford NY and beyond.


Any U.S. tax advice contained in the body of this website is not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.