State Law and Your Finances

You might be surprised at how many different finance-related outcomes are based on state law.

When it comes to money, it’s easy to assume that it’s the same no matter where you are. After all, there are some basic financial rules that can be followed in order to live within your means and build wealth.

But what about when things get a little more complex?

Once you start throwing in financial outcomes related to divorce and insurance, as well as taxes, you might find that your state law is a little bit different than you might expect — especially if you are used to living in another state.

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State Taxes

The taxes collected by your state, and the rate of taxation, varies. One of the difficulties I had for a long time as a freelancer was remembering to account for state taxes. We often focus so much on what we owe the federal government that what we owe the state comes as a surprise come April.

Make sure that you figure state taxes into any equation that involves money. You don’t want to come up short in this area. Find out what taxes your state collects (some states don’t even collect income tax), and think about the tax rate in your state. If you have a more traditional job, chances are the taxes will be withheld for you. If you are self-employed, you will have to remember to pay your state taxes on your own.

Insurance

Every state requires car insurance. However, the way this insurance requirement is enforced differs from state to state. Each state has its own requirements for the minimal amount of liability coverage, as well as the process for settling claims.

Other types of insurance are included as well. States have their own licensing requirements for insurance agents, and you will find that there are different laws related to life and homeowners insurance, as well as other types of insurance.

And now, with the state health exchanges running as a result of the Patient Protection and Affordable Care Act (PPACA, or Obamacare), there are different plans depending on the state. And, of course, health insurance offerings have always differed from state to state.

Insurance is one of those things that you have to pay attention to, depending on the state you live in.

Divorce

While you probably don’t want to think about divorce, and it’s certainly not something most people plan for, it’s important to understand your state laws when this situation comes up.

Divorce laws are different in each state. There are community property states that have different requirements, and every state has its own standards when it comes to figuring out how to divide assets, and how to assign custody of children.

Many states also have the provision for mediators so that it’s possible for you to save money on lawyer costs. As long as you use a state-approved mediator, it’s usually possible to work out your own divorce settlement or arrangement, without a judge getting involved and without paying lawyers.

Other Financial Situations

There are other financial situations that depend on state law. Real estate transactions, car buying and registration, banking laws, consumer protection, rental laws, and other laws can all be different, depending on where you live.

While the federal government sets minimums for the whole country in some cases, states are free to add their own provisions on top of what’s federally mandated. If you are concerned about a financial transaction in which you are engaged, make sure you check the laws in your state. Where you live might make a difference.

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