Topic: MONEY

How to Speak to a Someone at the IRS

Getting through to an IRS representative takes time, so before you call, look for answers online at irs.gov. Start with Tax Information for Individuals or try the IRS’s list of Complex Tax Topics for more complicated situations. For refund questions, search the Tax Season Refund FAQ page and use the embedded search feature. 

If the IRS website doesn’t answer your specific question, here’s what to know about speaking to a representative at the IRS.

WHICH NUMBER TO CALL AT THE IRS

The main IRS phone number is 800-829-1040, but the agency maintains different departments with their own phone numbers to help callers with specific areas. Help lines are open Monday through Friday. Here’s a list of primary departments to call:

Note: Alaska and Hawaii residents should follow Pacific time. Puerto Rico phone lines are open 8 a.m. to 8 p.m. local time. 

  • Individuals: 800-829-1040, 7 a.m. to 7 p.m. local time
  • Businesses: 800-829-4933, 7 a.m. to 7 p.m. local time
  • Nonprofit taxes: 877-829-5500, 8 a.m. to 5 p.m. local time
  • Estate and gift taxes (Form 706/709): 866-699-4083, 8 a.m. to 3:30 p.m. Eastern time
  • Excise taxes: 866-699-4096, 8 a.m. to 6 p.m. Eastern time
  • Overseas callers should use the International Services page
  • Callers who are hearing impaired: TTY/TDD 800-829-4059

If you have a question about something even more specific, like a missing child tax credit payment or how to order a tax transcript, the IRS has additional phone numbers for those kinds of questions. NerdWallet maintains an extensive list of lesser-known IRS phone lines. 

WHAT TO EXPECT AND BEST TIME TO CALL THE IRS

Unfortunately, it’s not easy getting a live person at the IRS on the line to talk to you—the agency received more than 100 million calls in 2020. Don’t give up, but do be strategic. 

Hold times during tax filing season (January-April) will average around 13 minutes, according to the IRS, while post-filing calls (May-December) average 19-minute wait times. But if you call at peak times, you could wait up to an hour or longer. 

Extended holds are difficult to avoid, but East Coast callers have found that calling early, before 9 a.m. local time, may reduce the wait time. On the West Coast, calling after 5 p.m. can help. 

INFORMATION TO GATHER FOR YOUR IRS CALL

Because tax information is highly confidential, you’ll need to be prepared to verify who you are once you’re speaking to an IRS representative. Gather the following documents so you can refer to them during the call. You’ll likely need to answer some highly specific questions to proceed:

  • Social Security numbers (SSN) and birth dates
  • Individual Taxpayer Identification Number (ITIN) for taxpayers without a Social Security number
  • Filing status — single, head of household, married filing joint, or married filing separate
  • Prior-year tax return 
  • Tax return you’re calling about
  • Any correspondence the IRS sent you

If you’re calling about specific forms or accounts, you’ll want to have as much information on hand as possible. 

CALLING THE IRS ON BEHALF OF ANOTHER PERSON 

If you’re calling on behalf of someone else, you’ll need authorization (either verbal or written) to discuss their account. For verbal consent, that person must be on the line with you in order to authorize the discussion with the IRS representative. Verbal consent, also known as an oral disclosure, is limited to the current conversation – you’ll need verbal consent every time you start a new conversation with the IRS. 

On top of that, you’ll also need:

  • Their taxpayer name, and SSN or ITIN
  • Their tax return you’re calling about
  • Valid Form 8821, Tax Information Authorization or Form 2848, Power of Attorney and Declaration of Representative
  • Your preparer tax identification number or personal identification number (SSN or ITIN)

If you’re calling about someone who is deceased, you’ll need a copy of that person’s death certificate and either a court approval letter or a completed copy of IRS Form 56 (Notice Concerning Fiduciary Relationship).

HOW TO HANDLE THE CONVERSATION WITH AN IRS REPRESENTATIVE

When you do call, keep in mind that IRS representatives handle basic questions and issues related to your tax return. They may not be able to help with particularly complex questions. And just like many other industries, the IRS is experiencing processing delays due to the pandemic. That might also affect your experience on the phone. Bring your patience. 

Taxes are stressful, but IRS representatives aren’t your enemy. They want to help you. The more prepared you are going in, the easier and more productive the conversation will be. Know what you want before the call starts.

If you’re calling to set up a repayment plan for back taxes, it’s important to understand you can’t negotiate the outcome. The IRS has very specific guidelines for how plans are constructed. The representative should be able to walk you through your options.

WHEN TO CONSULT A TAX PROFESSIONAL

If the online or phone resources don’t address your issue, you may be better off scheduling a face-to-face appointment with your local IRS office. 

Taxes can be complicated. If you have multiple sources of income, own your own business, have investments, or have accounts in foreign countries, you likely would benefit from working with a CPA or other certified tax expert.

Want to Refinance Your Mortgage?

Some people can still get a lower rate on their current home loan, however — and save some money in the process.

An estimated 472,000 well-qualified homeowners can still refinance their mortgages by at least 0.75 percentage points, according to the data and analytics company Black Knight. Doing so would save these homeowners an average of $309 per month on their mortgage payments — or about $3,708 per year.

Outside of cost savings, there are other reasons why refinancing now could make sense. If you are nearing the end of the fixed-rate period on an adjustable-rate mortgage, refinancing into a fixed-rate loan lets you lock in a steady rate that won’t change periodically. Another option is a cash-out refi, which allows you to use the equity you’ve gained in your home to pay off higher-interest debt.

Mortgage refinancing isn’t a quick process: the average closing time on a refi loan was 52 days in June, according to ICE Mortgage Technologies. So if a refinance makes sense for your budget, the sooner you start the better.

Here’s exactly how to do it, broken down into seven steps to help move the process along.

1. Set a refinancing goal

Most homeowners refinance in order to get a lower interest rate and, as a result, reduce their monthly payments. However, that’s not the only reason to refinance.

Different loan types offer different advantages.

You may want to switch from an adjustable-rate mortgage to a fixed-rate mortgage to guarantee a permanently lower rate. Maybe you want to switch from a 30-year loan to a 15-year loan to pay off your mortgage faster. If you have enough equity, you may also be able to save on mortgage insurance by switching from an FHA loan to a conventional mortgage.

Perhaps you’ve recently run up against major medical bills, unexpected home repairs or other expenses that are weighing you down financially. If you’ve built up enough equity in your home, a cash-out refi will not only let you refinance your loan but also take out extra cash.

Knowing what you want to accomplish with a refi will help you determine the type of mortgage product you need. Consider all the options to see which works best for you.

2. Check your home equity

You may be able to qualify for a conventional refi loan with as little as 5% equity in your home, according to Discover Home Loans. However, most lenders prefer you have at least 20% equity.

If you have more home equity, you may qualify for a lower interest rate and lower fees, as lenders will view borrowers who have higher equity as less of a lending risk. More equity also means that you are less likely to end up owing more than the home is worth if home prices fall.

To get an estimate of your home equity, subtract your current mortgage loan balance from your home’s current market value. The result will be your home equity. Contact a knowledgeable local real estate agent to get an idea of your home’s value. Zillow’s home price estimate can also be a rough starting point too.

You should also prepare your home for an official appraisal, which will be part of the refinance application process. Have documentation about any improvements you have made to the home handy. (For example, did you add a bathroom or replace an old roof?) It won’t hurt to clean and organize your home to get it in showing condition.

3. Check your credit score and credit report

Before making any loan decisions, it’s important to check your credit score, as well as your credit report.

Your credit score will in large part determine how favorable a rate a lender will offer. The higher your score, the lower the rate you’ll qualify for and the lower your monthly payments will be. If you have a low score, look for ways to improve your credit score well before applying for a loan.

Your credit report shows the information your score is based upon. It’s where you can check if there are any errors that may be negatively affecting your credit score. If you find mistakes in your report, you can contact the credit bureaus to have these items removed. Be prepared to provide documentation proving the mistake.

As part of the consumer protections put in place by the CARES Act, you can get a free weekly credit report from any of the major reporting bureaus until December 31, 2022. (Typically, you’re entitled to one free report from each credit reporting company per year.)

You should also be aware of what factors could cause a temporary hit to your credit score. Applying for credit cards, personal or auto loans just before, at the same time, or just after applying for a refi will lower your score, albeit temporarily.

Financial Stress Leads to Symptoms of Depression, PTSD

The origins of mental illness are varied and complex. There are a nearly limitless number of reasons why mental illness happens, from biological causes to environmental influences.

One contributing factor that has the potential to impact nearly everyone at some point in their life is personal finance. Researchers have repeatedly found a clear link between mental and financial health.

In many instances, that link is cyclical – poor financial health leads to poor mental health, which leads to increasingly poor financial health, and so on. But researchers have also concluded that mental health issues – including depression, anxiety, and certain forms of psychosis – are three times more likely to occur when an individual is in debt.

Additionally, a data analysis by personal loan company Payoff found that 23 percent of respondents to a financial health survey reported experiencing symptoms of post-traumatic stress disorder (PTSD) due to their personal finances. These respondents admitted to irrational or self-destructive behavior motivated primarily by a desire to avoid the reality of their financial problems.

The implication here is not simply that poor financial health may lead to poor mental health. Much more important is the logical inverse: that taking active steps to ensure our financial health is very likely to pay positive dividends on our mental health as well.

COMMON SIGNS OF DEPRESSION

Are your personal finances having a negative impact on your mental health? That may not be immediately clear.

Per the National Institute of Mental Health (NIMH), these are the most common symptoms of depression:

  • Persistent sad, anxious, or “empty” mood
  • Feelings of hopelessness, pessimism
  • Feelings of guilt, worthlessness, helplessness
  • Loss of interest or pleasure in hobbies and activities
  • Decreased energy, fatigue, being “slowed down”
  • Difficulty concentrating, remembering, making decisions
  • Difficulty sleeping, early-morning awakening, or oversleeping
  • Appetite and/or weight changes
  • Thoughts of death or suicide; suicide attempts
  • Restlessness, irritability
  • Persistent physical symptoms

Regardless of whether or not your particular symptoms are rooted in financial distress, if any of this sounds like you, it’s important that you speak with as qualified mental health professional.

If you’re feeling suicidal, please call 1-800-273-8255. The National Suicide Prevention Lifeline is free, confidential, and available 24/7. 

STEPS FOR DEALING WITH FINANCIAL STRESS

If your finances are causing you mental harm, there are steps you can take to reduce the noise, refocus your attention, and start making positive changes.

FIGURE OUT WHAT MATTERS THE MOST TO YOU

If your finances are causing you mental distress, a good first step is actually a step backwards.

“Take the time to clearly define your financial goals and understand your values, both as an individual and as a family,” suggests Maura Attardi, MMI Director of Financial Wellness. “Defined goals help us understand if our spending habits are pushing us in the right direction, while our values help us determine if our goals are realistic and meaningful. Also, there may be conflicting values within a relationship or family, which can cause a lot of stress. Getting everything in alignment relieves stress, reduces interpersonal friction, and makes financial decision-making much easier.”

Once you’ve reached consensus on your financial priorities, you can begin to address the specific causes of your mental distress.

“Taking an honest and open look at why we spend money the way we do can also be helpful in alleviating stress and determining the steps we need to take,” says Attardi. “If the issue is overspending, try to determine what inner voids you’re trying to satisfy through spending money, and then replace your expensive coping techniques with something that might be easier on your pocketbook, like free yoga classes, reading, or exercising.”

BEGIN THE CONVERSATION WITH SOMEONE YOU TRUST

“In addition, finding someone that you can be completely honest and open with about your financial situation can help,” says Attardi. “Where we may only be able to see the bleakest possible financial future, a credit counselor, a friend, or an objective family member can help open our eyes to some of the positive options we have available.”

Simply talking about your stresses and anxieties can offer incredible relief. You’ll realize quickly that you’re not alone – many of us struggle with money in one way or another. But perhaps most importantly you’ll be released from the burden of feeling like you’re hiding something.  

MAKE A PLAN AND KEEP IT SIMPLE

A little progress can make a world of difference. Simply feeling like things are moving in a positive direction can reduce stress and create a growing sense of contentment.

Once you’ve identified your values and goals and unburdened your soul a bit, you can get to work. Create a plan to help you achieve your goals. Make the steps small, clearly defined, and reasonable. Set yourself up for success by creating a series of achievable benchmarks that will slowly but surely guide you to your destination. And don’t hesitate to celebrate your wins. Feel good about all the boxes you check!

GET PRIVATE, CONFIDENTIAL SUPPORT

If you need help finding a positive financial path, consider speaking with one of MMI’s certified credit counselors. Debt and budget counseling is always free and can go a long way toward alleviating your financial stress by providing you with expert, judgment-free advice and access to helpful resources.

Mental illness is very common and no one should ever feel ashamed or embarrassed to admit that they need help. Once again, if you or someone you know is dealing with symptoms of depression, anxiety, or any other mental illness, please seek assistance from a qualified mental health professional in your area. For helpful mental health resources, visit MentalHealth.gov (a division of the U.S. Department of Health & Human Services) and NAMI.org.

How to Protect Yourself From Credit Card Theft

Last fall, I received an email that appeared to be from my web host. The email claimed that there was a problem with my payment information and asked me to update it. I clicked on the link in the email and entered my credit card number, thinking that a recent change I’d made to my site must have caused a problem.

The next morning, I logged onto my credit card account to find two large unauthorized purchases. A scammer had successfully phished my payment information from me.

This failure of security is pretty embarrassing for a personal finance writer. I know better than to click through an email link claiming to be from my bank, credit card lender, or other financial institution. But because the email came from a source that wasn’t specifically financial (and because I was thinking about the changes I had made to my website just the day before), I let myself get played.

Thankfully, because I check my credit card balance daily, the scammers didn’t get away with it. However, it’s better to be proactive about avoiding credit card theft so you’re not stuck with the cleanup, which took me several months to complete.

Here’s how you can protect yourself from credit card theft. 

Protecting your physical credit card

Stealing your physical credit or debit card is in some respects the easiest way for a scammer to get their hands on your sweet, sweet money. With the actual card in hand, a scammer has all the information they need to make fraudulent purchases: the credit card number, expiration date, and the security code on the back.

That means keeping your physical cards safe is one of the best ways to protect yourself from credit card theft. Don’t carry more cards than you intend to use. Having every card you own in a bulging wallet makes it more likely someone could steal one when you’re not paying attention and you may not realize it’s gone if you have multiple cards.

Another common place where you might be separated from your card is at a restaurant. After you’ve paid your bill, it can be easy to forget if you’ve put away your card (especially if you’ve been enjoying adult beverages). So make it a habit to confirm that you have your card before you leave a restaurant.

If you do find yourself missing a credit or debit card, make sure you call your bank immediately to report it lost or stolen. The faster you move to lock down the card, the less likely the scammers will be able to make fraudulent charges. Make sure you have your bank’s phone number written down somewhere so you’re able to contact them quickly if your card is stolen or lost.

Recognizing card skimmers

Credit card thieves also go high-tech to get your information. Credit card skimmers are small devices placed on a legitimate spot for a card scanner, such as on a gas pump or ATM. 

When you scan your card to pay, the skimmer device captures all the information stored in your card’s magnetic stripe. In some cases, when there’s a skimmer placed on an ATM, there’s also a tiny camera set up to record you entering your PIN so the fraudster has all the info they need to access your account.

The good news is that it’s possible to detect a card skimmer in the wild. Gas stations and ATMs are the most common places where you’ll see skimmer devices. Generally, these devices will often stick out past the panel rather than sit flush with it, as the legitimate credit card scanner is supposed to. Other red flags to look for are scanners that seem to jiggle or move slightly instead of being firmly affixed, or a pin pad that appears thicker than normal. All of these can potentially indicate a skimmer is in place. 

If you find something that looks hinky, go to a different gas station or ATM. Better safe than sorry.

Protecting your credit card numbers at home

Your home is another place thieves will go searching for your sensitive information. To start, you likely receive credit card offers, the cards themselves, and your statements in the mail. While mail theft is relatively rare (it’s a federal crime, after all), it’s still a good idea to make sure you collect your mail daily and put a hold on it when you go out of town.

Once you get your card-related paperwork in the house, however, you still may be vulnerable. Because credit card scammers are not above a little dumpster diving to get their hands on your credit card number. This is why it’s a good idea to shred any paperwork with your credit card number and other identifying information on it before you throw it away.

Finally, protecting your credit cards at home also means being wary about whom you share information with over the phone. Unless you’ve initiated a phone call of your own volition — not because you’re calling someone who left a voicemail — you should never share your credit card numbers over the phone. Scammers will pose as customer service agents from your financial institution or a merchant you frequent to get your payment information. To be sure, you can hang up and call the institution yourself using the main phone number.

Keeping your cards safe online

You should never provide your credit card information via a link in an email purporting to be from your financial institution or a merchant. Scammers are able to make their fake emails and websites look legitimate, which was exactly the reason I fell victim to this fraud.

But even with my momentary lapse in judgment about being asked for my payment information from my “web host,” there were other warning signs that I could’ve heeded if I had been paying attention. 

The first is the actual email address. These fake emails will often have a legitimate looking display name, which is the only thing you might see in your email. However, if you hover over or click on the display name, you can see the actual email address that sent you the message. Illegitimate addresses do not follow the same email address format you’ll see from the legitimate company.

In addition to that, looking at the URL that showed up when I clicked the link could’ve told me something weird was going on. Any legitimate site that needs your financial information will have a secure URL to accept your payment. Secure URLs start with https:// (rather than http://) and feature a lock icon in the browser bar. If these elements are missing, then you should not enter your credit card information.

Daily practices that keep you safe

In addition to these precautions, you can also protect your credit cards with the everyday choices you make. For instance, using strong, unique passwords for all of your online financial services, from shopping to banking, can help you prevent theft. Keeping those strong passwords safe — that is, not written down on a post-it note on your laptop — will also help protect your financial information.

Regularly going over your credit card and banking statements can also help ensure that you’re the only one making purchases with your credit cards. It was this daily habit of mine that made sure my scammers didn’t actually receive the computer they tried to purchase with my credit card. The fact that I check my balance daily meant I was able to shut down the fraudulent sale before they received the goods, even though I fell down on the job of protecting my credit card information. 

Why Keeping Your Money in the Stock Market Is Especially Important Right Now

If you’re invested in stocks and constantly checking on your portfolio, you probably haven’t had a great few weeks. The S&P 500 dipped into bear market territory on Friday, the Dow Jones Industrial Average is down around 15% for the year, and the tech-heavy Nasdaq has fallen 28% in 2022.

Even though the market declines may make you feel uneasy, keeping your money in the stock market now is likely a good move long term. That’s because the market’s best days tend to happen right around the market’s worst days. Between January 1, 2002, and December 31, 2021, seven of the S&P 500’s best days occurred within just two weeks of the index’s 10 worst days, according to J.P. Morgan Asset Management’s 2022 “Guide to Retirement” report.

“The pendulum in the stock market swings very, very wildly,” says Jack Manley, a global strategist at J.P. Morgan Asset Management. “When things get out of whack, they swing back very quickly.”

Why the stock market’s best days are so close to the worst days

Markets today are fundamentally different from how they were 10 years ago, Manley says. That’s because technological innovation has led to developments like high-frequency trading, which involves large volumes of shares being traded at high speeds. But it’s also led to a boom in retail investing.

We especially saw that boom during the pandemic. COVID-19 kept many people at home, where they took up investing as a hobby. Stimulus checks from the federal government gave retail investors more money to buy stocks, cryptocurrency and such, or it provided them with funds to invest for the first time.

Meanwhile, online trading platforms like Robinhood made commission-free trading easy and allowed people to buy fractional shares, meaning they could invest in a company like Tesla(which has traded at more than $1,000 per share) with as little as a single dollar.

“Information moves a whole lot more quickly,” Manley says. “It is that much more easy to be an investor in today’s world.”

The combination of fast-moving information and more market participants means that the stock market in general is more volatile than it used to be, Manley says.

Just take a look at the last month. The S&P 500 was down 3.6% on April 29, which marked one of the worst days of the year for the index. But just a few days later on May 4, the index was up nearly 3% for one of its best days, according to data from J.P. Morgan Asset Management. And back in 2020, March 12 — the S&P 500’s second worst day of the year — was immediately followed by its second best day of the year.

The market is used to being overbought or oversold, meaning there’s no real “happy medium,” Manley adds.

How to Avoid a Utility Shutoff

CONTACT THE UTILITY COMPANY

First, reach out to the utility company directly and let them know your situation. There are humans on the other end and if you can’t afford to make payments they might have some options to help keep the lights on. 

Depending on the company, they might lower your payments, temporarily take you off the hook for upcoming payments, or drop late fees. For instance, PG&E, which is located in Northern California, offers relief options such as reduced payments. The Florida Public Utilities has expanded billing options and payment options for those experiencing financial hardship. Do some poking around to see if your utility company offers similar routes. 

If you were in good standing and paid your bills in a timely manner, there may be a better chance that they’ll be open to working with you on coming up with solutions. 

APPLY FOR A RELIEF PROGRAM

There might also be information on the websites of the utility company. Depending on where you live and your situation, different forms of relief might be available. Along the same lines, relief programs and assistance agencies might be able to provide help should you need it. You can also try 211.org and FindHelp.org for a listing of local organizations and resources that can help meet your basic needs in a crisis. 

Besides letting you know what forms of financial relief are available, these assistance agencies can also help you stay informed of any changes at the national or local level that could impact your rights and protections.

SEE IF AVERAGE BILLING IS AN OPTION

As we use more gas in our homes during the winter months and more electricity in the warmer months, we tend to see our bills spike in tandem. Many utility companies offer what’s known as budget billing or average billing, which looks at records of the total amount you paid in utilities over the course of a year. That number is then divided into 12 equal payments. The average that’s calculated will be what you pay each month (with changes to account for any significant fluctuations). 

Average billing could come in handy in a number of ways. First, it bumps down the amount you paid during typically peak seasons. Next, it makes for easier planning. Instead of anticipating your utility bills to be $75 one month, $200 the next, paying the same each month means you can aim to set that money aside ahead of time, and won’t fall short with another bill. 

TRACK YOUR ENERGY USAGE 

To get a better idea of how much it will cost you over the course of a year, track how much gas and power you are expending. You can track your usage using affordable devices such as a handheld wattage meter or by way of a smart app that measures the energy usage in your home. By tracking your usage, you can get a better idea of how much energy you use in your home, and make tweaks to be savvier with your usage. 

REDUCE ENERGY USE 

To save on energy, make it a habit to turn off lights and devices when you’re not in a room. You can also look into a smart plug, which you can schedule to turn and off at certain times, but could also track how much energy you’re using. Just be sure to wait for a sale so you can scoop up the best deals on smart plugs. 

Another tactic? Think up creative solutions to using energy. For instance, if it’s safe to do and you have the space to accommodate it, consider using a propane gas tank in lieu of a standard stove. And LED lights typically are more energy-efficient than standard lightbulbs. Try using candles, a camping lamp every so often, or those little tea lights that are powered by a small cell battery. There are also inexpensive ways to insulate your home. Every little bit can help.

LOWER YOUR LIVING EXPENSES

Ok, so you’ve found ways to cut back on your energy use. To free up money to help afford to pay your utilities, expand your money-saving savvy to include overall living expenses. You might’ve already done a round of cutbacks when you were first laid off or furloughed. 

Look for unexpected ways you can cut back further. Nix subscriptions, find ways to save on groceries, cut back the costs of staying physically fit — let no expense go unexplored of its money-saving potential! 

Not having enough to keep the lights on and the heater going during the cooler months is a scary, unsettling thought indeed. But know there are resources at your disposal, and things you can do in your power to prevent it from happening.

Stocks Are Rallying

The S&P 500, an index commonly used to measure how stocks are doing overall, jumped 2.8% Tuesday, while the Dow Jones Industrial Average and the the Nasdaq Composite closed up 2.4% and 3.1%, respectively. Tuesday marked the largest one-day percentage gains since June 24 for all three indexes, and a welcome relief for investors. The S&P 500 was up around 0.9% during trading midday Wednesday as well.

While financial markets for much of the last two years were buoyed by stimulus money from the government and near-zero interest rates, stocks have been struggling after hitting their peak in January amid sky-high inflation and rising interest rates.

The S&P 500 fell into a bear market in June and was still down around 18% for the year at Tuesday’s close.

The truth is that rallies like Tuesday’s during an overall downturn are common, and they certainly don’t mean stocks have hit bottom or are going to recover all their losses in a hurry.

“Bear markets are typically thought of as periods of relentless declines in the market where stocks do nothing but trade lower,” analysts at Bespoke Investment Group wrote in a note to clients Tuesday. “The reality of bear markets, though, is that they often include periods of extreme countertrend rallies, sucking investors in along the way.”

What past stock market downturns tell us

If history repeats itself, rallies as big as even 5% or more don’t necessarily mean the bear market has bottomed.

Look at the dot-com bust. Between the S&P 500’s peak in March 2000 to its low in October 2002, the index lost 49% — but along the way it saw 11 different rallies of 5% or more, according to Bespoke.

It’s a similar story around the financial crisis of 2008: The S&P 500 experienced 12 different rallies of at least 5% between October 2007 and March 2009, when it lost 57% of its value.

Home prices decline at rates seen close to a decade ago

In August, existing homes sales fell 0.4%, marking the seventh straight month of declines and sliding 20% from the same month a year ago. Year-over-year sales dropped from $5.99 million in August 2021 to 4.8 million in 2022.

Meanwhile, the median home price, while still rising 7.7% in August on a year-over-year basis, fell 6% in the past two months. After reaching a record all-time high of $413,800 in June, it dropped to $389,000 in August.

Rate of home price decline

One average, cumulative two-month declines generally tends to be in the 2% range, said NAR Chief Economist Lawrence Yun during a Q&A with reporters after the report was released.

“So that cumulative 6% decline is certainly unusual,” said Yun.

The last time it fell by more than 6% over two months was in September 2013 when it fell by 6.5 %, according to NAR data shared with USA TODAY.

Climbing mortgage rates

“The housing sector is the most sensitive to and experiences the most immediate impacts from the Federal Reserve’s interest rate policy changes,” said Yun. “The softness in home sales reflects this year’s escalating mortgage rates.

Mortgage rates went from 2.87% for a 30-year fixed mortgage the week ending August 26, 2021 to 5.5% the week ending August 25, 2022, according to Freddie Mac.

“Mortgage rate always has the biggest impact on home sales,” said Yun. “So one can have a job creating environment, but the higher mortgage rate clearly knocks off the home buying potential.”

As prices continue to decelerate, Yun said he would not be surprised if there’s only 3% or lower year-over-year increase in median prices by December.

Housing inventory

Total housing inventory in August stood at 1,280,000 units, a decrease of 1.5% from July and unchanged from the previous year. Unsold inventory sits at a 3.2-month supply at the current sales pace, up from 2.6 months in August 2021.

“Inventory will remain tight in the coming months and even for the next couple of years,” Yun added. “Some homeowners are unwilling to trade up or trade down after locking in historically-low mortgage rates in recent years, increasing the need for more new-home construction to boost supply.”

Why is It So Hard to Talk About Debt?

Talking about debt is even more taboo and embarrassing to boot. In a recent survey commissioned by Questis, a finance startup, 56 percent of respondents revealed they believe discussing money is taboo. Debt was such a taboo topic that 3 in 5 (58 percent) respondents admitted to faking financial stability on social media. 

Why Do We Feel Uncomfortable Talking about Debt?

When we’ve absorbed the cultural messaging that debt is bad, opening up about it is even more difficult. Why is that? For many people, money is something we believe we should be able to handle on our own. We buy into the idea that success is earning and saving money, and so, conversely, debt is a sign of failure. 

We may feel guilty about the reasons why we’re in debt, and we may feel ashamed about our inability to better manage the situation. 

Shame and guilt are cousins, but they’re slightly different from each other. When we feel shame, we focus our feelings inward and see our whole self, and our character, in a negative light. We feel guilt, on the other hand, when something we did resulted in a poor outcome. 

Staying silent about money issues can only feed shame and guilt. The silence affects our ability to develop good money skills. Opening up about debt—and being willing to talk about money—are the only ways through to financial health. 

How to Cope with Emotions Around Debt

First, it’s important to remember that debt is quite common. It can happen to anyone, for many different reasons, including divorce, job loss, medical emergency, major home repairs, or needing to financially support a family member or friend. Typically, most of these situations are entirely out of our control.

Second, it’s important to understand that debt isn’t a sign of personal failure – it’s not a reflection of your character. While you may worry that people will judge you for it, remember that your debt doesn’t define you. Try your best to be kind to yourself – give yourself some grace for experiencing what is a very stressful situation.

Third, remember that your debt is temporary, even if it feels all-encompassing and you can’t see a way out of it right now. You may feel overwhelmed, but with the right plan and some hard work, you can make debt a part of your past. There is absolutely a light at the end of the tunnel.

How to Talk to Your Loved One Who Has Debt

Perhaps you’re not the person struggling with personal debt, but your spouse or family member is. If you can see they need help, approach them with empathy and understanding. Make it clear you’re not judging. Also, emphasize that your love and acceptance isn’t contingent on their financial success.

Don’t dwell on the how and why of the debt—they don’t need to defend their actions. Instead, focus on the achievable steps you can take together to start addressing the debt. Help them feel supported. If you’re able, offer to help them create a plan or put some of those steps into action. If they need to talk to someone else, help them find a trusted friend or professional to ask for support.

How Do I Stop Robocalls From Scamming Me?

In 2021 alone, phones in the U.S. were pummeled by more than 50 billion robocalls, according to YouMail, a robocall blocking and analysis company. That’s more than 150 calls for every person in the country. In July, that number was 3.8 billion.

The result? Many of us just don’t answer our phones unless we recognize the number.

The damage done can have serious consequences, intended and not. In addition to fraudulent marketing, ignoring unknown numbers could prove dangerous – take the hiker lost on a mountain in Colorado who was reported to have ignored repeated telephone calls from Lake County Search and Rescue because they didn’t recognize the number. Consequently, the hiker didn’t even know anyone was searching. It’s a behavior common to most of us. A 2019 Consumer Reports survey found that 70% of Americans don’t answer the phone if they don’t recognize the number. 

Are Robocalls Legal?

In general, unless a company has your written permission, it is against the law to contact you via robocall, especially if the caller is trying to sell something. There are some exceptions. According to the Federal Trade Commission, these types of robocalls are permitted by law:

  • Messages that are purely informational as long as the caller isn’t also trying to sell you something.This includes calls about flight cancellations, for example, or reminding you about an appointment or letting you know about a delayed school opening.
  • Debt collection calls. A business contacting you to collect a debt can use robocalls to reach you. But robocalls that try to sell you services to lower your debt are illegal and are probably scams.
  • Political calls to landline phones, as long as they contain required identifying information.
  • Calls from some health care providers, such as from a pharmacy reminding you to refill a prescription.
  • Messages directly from charities. But if a charity hires someone to make robocalls on its behalf, unless you are a prior donor or member of the charity, the robocall is illegal. They also must include an automated option to let you stop future calls.

How to Avoid Robocalls

Quilici offered the following advice:

  1. Get a robocall blocking app on your cell phone. This will filter a lot of the bad guy calls so you don’t have to worry about them.
  2. Let calls from unknown numbers roll to voicemail. 
  3. Do your homework before calling a number back – generally, if they claim to be a bank, say, go to the bank’s website and call the number there, and do not just call back the number that called you.
  4. Finally, if you do answer, never give out personal information and hang up if asked for it.

You can also forward suspicious text messages to 7726 (or SPAM). This free text exchange with your wireless provider will report the number, and you will receive a response thanking you for reporting it.

In addition, the FCC offers the following advice:

  • Don’t answer calls from unknown numbers. If you answer, hang up immediately.
  • Be aware: Caller ID showing a local number does not necessarily mean it is a local caller.
  • If you answer the phone and you are asked to hit a button to stop getting the calls, hang up. Scammers often use this trick to identify potential targets.
  • Do not respond to any questions, especially those that can be answered with “Yes.”
  • Never give out personal information such as account numbers, Social Security numbers, mother’s maiden name, passwords or other identifying information in response to unexpected calls or if you are at all suspicious.
  • If you get an inquiry from someone who says they represent a company or a government agency, hang up and call the phone number on your account statement, in the phone book, or on the company’s or government agency’s website to verify the authenticity of the request. You will usually get a written statement in the mail before you get a phone call from a legitimate source, particularly if the caller is asking for a payment.
  • Be wary of pressure for information immediately.
  • If you have a voicemail account, be sure to set a password for it. Some voicemail services are preset to allow access if you call in from your own phone number. A hacker could spoof your home phone number and gain access to your voicemail if you do not set a password.
  • If you use robocall-blocking technology, tell that company which numbers are producing unwanted calls so they can block those calls for you and others.
  • To block telemarketing calls, register your number on the Do Not Call List. Legitimate telemarketers consult the list to avoid calling both landline and wireless phone numbers on the list.

Someone Took Out a Loan in Your Name. Now What?

If this happens to you, getting the situation fixed can be difficult and time-consuming. But you can set things right.

If someone took out a loan in your name, it’s important to take action right away to prevent further damage to your credit. Follow these steps to protect yourself and get rid of the fraudulent accounts.

1. File a police report

The first thing you should do is file a police report with your local police department. You might be able to do this online. In many cases, you will be required to submit a police report documenting the theft in order for lenders to remove the fraudulent loans from your account.

2. Contact the lender

If someone took out a loan or opened a credit card in your name, contact the lender or credit card company directly to notify them of the fraudulent account and to have it removed from your credit report. For credit cards and even personal loans, the problem can usually be resolved quickly.

When it comes to student loans, identity theft can have huge consequences for the victim. Failure to pay a student loan can result in wage garnishment, a suspended license, or the government seizing your tax refund — so it’s critical that you cut any fraudulent activity off at the pass and get the loans discharged quickly.

In general, you’ll need to contact the lender who issued the student loan and provide them with a police report. The lender will also ask you to complete an identity theft report. While your application for discharge is under review, you aren’t held responsible for payments.

If you have private student loans, the process is similar. Each lender has their own process for handling student loan identity theft. However, you typically will be asked to submit a police report as proof, and the lender will do an investigation.

3. Notify the school, if necessary

If someone took out student loans in your name, contact the school the thief used to take out the loans. Call their financial aid or registrar’s office and explain that a student there took out loans under your name. They can flag the account in their system and prevent someone from taking out any more loans with your information.

4. Dispute the errors with the credit bureaus

When you find evidence of fraudulent activity, you need to dispute the errors with each of the three credit reporting agencies: Experian, Equifax, and TransUnion. You should contact each one and submit evidence, such as your police report or a letter from the lender acknowledging the occurrence of identity theft. Once the credit reporting bureau has that information, they can remove the accounts from your credit history.

How to Get Preapproved for a Mortgage

It pays to learn about the mortgage process so that you’re ready when the right house comes along. Here’s what to know about mortgage preapproval and prequalification. 

WHAT PREAPPROVAL FOR A HOME LOAN MEANS

When a mortgage lender preapproves you, they’re stating they would be willing to provide you with a loan of a specific amount. It’s a tentative declaration that isn’t a commitment, but it tells you the lender determined what your finances are and feels comfortable loaning you the specific amount listed in the preapproval letter. That number gives you a ballpark range of what you can afford when you shop for a house. 

IS PREAPPROVAL REQUIRED?

Generally, no, but some sellers may require it. Preapproval shows house sellers that you’re a serious buyer, and if you’re shopping in a competitive region, being preapproved can give you a leg up. 

REQUIRED DOCUMENTS FOR PREAPPROVAL

Getting preapproved is similar to applying for a mortgage. Every lender will have slightly different requirements, but you can expect to be asked to provide the following information:

  • Social security number
  • Address 
  • Proof of income and employment information
  • Recent W-2s (1099s if applicable)
  • Bank account information

HOW IS PREQUALIFICATION DIFFERENT FROM PREAPPROVAL?

Prequalification is much easier and more informal than preapproval. Prequalification requires only basic information. In fact, some lenders may not even need to pull your credit report to prequalify you for a loan. Prequalification primarily benefits you, the buyer. It can help you understand your mortgage budget (how much you can afford to borrow), so you can set your expectations when you begin shopping for a house. Prequalification typically requires sharing the following information with a lender:

  • Income 
  • Assets (including savings)
  • Expenses
  • Debts
  • Credit score

With that information, the lender should be able to give you a rough idea of how much of a mortgage loan you might qualify for. Use it as a gauge rather than a sure thing. 

HOW LONG DOES THE PREAPPROVAL PROCESS TAKE?

The length of time for preapproval will vary by lender. You could have an answer in less than 24 hours or it could take up two weeks. But most lenders will let you know if you’re preapproved within a few business days. 

How long your preapproval lasts will also vary by lender. Generally, you can expect you’ll need a new preapproval after 90 days. However, it’s important to understand that preapproval isn’t a guarantee of a specific loan amount, and the further you get from your initial preapproval date, the more likely it is that changes to your finances might lead to a change in terms. (For example, maybe you forgot to pay a hefty credit card bill and your credit score took a hit, which no longer qualifies you for your preapproved interest rate.) Even if your preapproval hasn’t expired, the loan terms you get when you apply for a mortgage could look different from the deal you were expecting. 

FINDING A GOOD LOAN OFFICER 

Word of mouth, talking to friends, and consumer reviews are a good way to find a trustworthy loan officer. If you’re using a realtor, that person might have a relationship with a loan officer that they can vouch for. 

Ideally, you should try to get preapproved with multiple lenders to see what kind of rates and offers you can get.

ARE LARGE LOAN COMPANIES TRUSTWORTHY?

It’s certainly fine to use larger companies like Rocket Mortgage or Better Mortgage. They may have more modern conveniences than smaller companies have, such as a faster approval process, for example. Just like any option, make sure you know what you’re getting into and compare options whenever possible.

Tangled Titles Disrupt Generational Wealth: How Homeowners Can Respond

According to a 2022 Bankrate survey, 74% of Americans rank homeownership as the highest gauge of prosperity. Despite its challenges, most people still consider homeownership a vital part of the American Dream. 

However, these efforts are undermined by tangled titles, a property title that doesn’t accurately reflect a homeowner’s claim to a residence. Most often, tangled titles happen when a homeowner dies without a will. As a result, children or grandchildren may live in a deceased relative’s home without ever transferring the deed to their name.

This puts heirs at a practical and financial disadvantage, preventing the probate process from properly transferring property after death without a will. It also puts them at risk of housing instability. The results can ruin generational wealth as people can’t access the home’s equity, sell the property, or transfer ownership to heirs. 

Simply put, tangled titles disrupt generational wealth for families across the US, making it more difficult for people to climb out of poverty or advance prosperity by leveraging their most valuable asset – their homes.

UNDERSTANDING “TANGLED TITLES” 

While tangled titles only impact a small percentage of homeowners, they play an outsized role in disrupting generational wealth. In addition to preventing people from accessing a home’s value, property title issues make it difficult for people to purchase insurance or receive benefits from federal or local agencies, while at the same time obligating them to pay real estate taxes and fulfill the practical responsibilities of homeownership. 

It subjects people to the burdens of homeownership without many of the most impactful benefits. What’s more, tangled titles primarily impact the Black community. A census analysis by a local PBS and NPR affiliate found that 87 percent of tangled titles belong to Black-owned homes. 

The causes are both tragic and historical. For generations, Black people were locked out of the judicial system. Meanwhile, they chose not to consolidate heirship and didn’t list just one person in a will because it offered some protection against racist and unethical entities that might try to take their homes away. If bad actors didn’t know who owned a property, it was more difficult to force them out. 

There was also an element of culture. Purposefully tangled titles meant that there was “family land” or a “family home”. It meant that no matter what happened, family members would always have a place where they could gather. 

An analysis of tangled titles in Philadelphia by the Pew Charitable Trusts demonstrates the impact on homeowners and communities. According to the analysis, Philadelphia has more than 10,400 tangled titles for homes with a median value of nearly $89,000. While the home values are lower than the citywide average, these properties are collectively worth $1.1 billion, a significant amount of family wealth that goes untapped and unused. 

The consequences can be devastating and far-reaching. Tangled titles mean that people don’t legally own their homes, and resolving the conflict can be difficult and expensive. 

HOW HOMEOWNERS CAN RESPOND TO A TANGLED TITLE

There are several ways that heirs can resolve a tangled title.

Families can decide to transfer the deed to one person’s name, split the property between multiple people, or form a cooperative. This can be expensive, but it doesn’t have to be. In addition to the cost, this process is often slow and setbacks are common, requiring genealogy records and other references that are challenging barriers for many people. 

Regardless of the approach, resolving tangled titles can be a costly, time-consuming process that many homeowners can’t afford. Fixing a tangled title requires a specialized attorney, which means people have few options when selecting legal counsel. Pew Charitable Trusts estimates that total costs, including subsidized legal counsel, fee waivers, and other public assistance, exceed $9,000. 

There are several excellent companies helping people address tangled titles, and nonprofit organizations are a good place to start. Unfortunately, there isn’t a big national organization that does this work. Consequently, there often aren’t enough financial or personnel resources to get to everyone quickly, and the longer it takes, the more protracted the problem becomes. Contacting your local legal aid organization is a good way to connect with groups that can help.

Right now, homeowners can protect themselves and their heirs against tangled titles by formalizing an estate plan that describes the intentions for the property while designating one person to inherit the property to avoid future title issues. Taking care of a tangled title before it becomes a critical issue can preserve wealth and minimize disruption.

While MMI doesn’t offer services for untangling titles, this problem often arises when homeowners face financial hardship and need to extract value from their homes. Anyone struggling with repaying credit card debt, balancing income and expenses, or recovering from a natural disaster can contact MMI today to find answers and develop solutions with the help of a qualified representative. Confidential counseling is free and available online for your convenience.

Homeownership is considered one of the foundational elements of building and transferring generational wealth. Tangled titles disrupt this process, requiring more resources, greater awareness, and a comprehensive response to help people keep and capitalize on their most valuable asset.

Cheaper flights are finally here for travelers

The average domestic airfare per ticket will drop to $286 round-trip this month, down 25% from May when the average round-trip ticket topped $400, according to Travel booking app, Hopper’s pricing forecast released this week. The average fare should remain below $300 through September, before notching upwards ahead of the holidays.

Don’t expect air travel to get any easier as fares drop, though, with trip delays and cancellations remaining a stubborn problem. For the smoothest flight, the two key tips are timing both booking and your travel right.

“Many airlines plan to maintain capacity below 2019 levels through the end of the year to prevent future disruptions,” Andrew Heritage, senior economist at Hopper told Yahoo Money, “meaning more customers vying for fewer available seats this fall and holiday season.”

Air fares are sinking more than usual from their summer peaks in time for fall getaways. But time is of the essence when it comes to snagging a deal.

The average domestic airfare per ticket will drop to $286 round-trip this month, down 25% from May when the average round-trip ticket topped $400, according to Travel booking app, Hopper’s pricing forecast released this week. The average fare should remain below $300 through September, before notching upwards ahead of the holidays.

Don’t expect air travel to get any easier as fares drop, though, with trip delays and cancellations remaining a stubborn problem. For the smoothest flight, the two key tips are timing both booking and your travel right.

“Many airlines plan to maintain capacity below 2019 levels through the end of the year to prevent future disruptions,” Andrew Heritage, senior economist at Hopper told Yahoo Money, “meaning more customers vying for fewer available seats this fall and holiday season.”

Why prices are dropping

A dip in fall ticket prices is generally not noteworthy. Airfares typically fall between 10% and 15% as demand in late August through mid-October dips when kids go back to school, the weather gets cooler, and carriers are eager to boost travel.

“But this year’s decline from the highs of summer is steeper than usual,” Heritage said. “High jet fuel prices and pent-up demand coming out of two depressed summer seasons” pushed this summer’s airfares during the peak vacation months to abnormal highs.

Airfare for June and July averaged $357 per round-trip ticket versus $285 last year, according to Hopper data.

Currently, U.S. Gulf Coast jet fuel is $3.34 per gallon, up from $1.88 a year ago, according to the U.S. Energy Information Administration (EIA) data. In late April, the price per gallon briefly topped $5 and has hovered around $4 per gallon most of the summer. Jet fuel prices typically account for anywhere from 15% to nearly a third (30%) of an airline’s operating expenses, according to Heritage.

What to Know About Credit Card Consolidation

But if you start losing track of the different balances and what you owe, the monthly payments can feel overwhelming. 

Credit card consolidation brings multiple credit card debts together into a single debt, and therefore a single monthly payment. It can make monthly bills easier to manage and offer you peace of mind. But is consolidating your credit cards really worth it? That depends on a few factors. 

PROS AND CONS OF CONSOLIDATING

Broadly speaking, consolidating can be helpful when it achieves the following for you: 

  • Reduces the number of payments you need to manage
  • Reduces your interest charges
  • Creates a faster timeline to becoming debt-free

The downside? Consolidating credit card debt doesn’t do you any good if you’re simply kicking the can down the road. In other words, if consolidating doesn’t help you pay down your debt, moving it around doesn’t gain you any benefit. 

In fact, consolidation could make your debt situation worse if your old credit cards remain open and you’re still struggling with the original issues that got you into debt in the first place. You might end up charging to your old cards while you’re also paying off a consolidation loan, taking on even more debt than you had before you consolidated. 

So, if you do decide to consolidate, make sure you understand the terms of the new payment and the interest rate, and be sure to make a plan for paying off your debt. 

THREE WAYS TO CONSOLIDATE CREDIT CARD DEBT

DEBT CONSOLIDATION LOAN 

You can consolidate multiple credit card debts into an unsecured loan. This process involves shopping for a personal loan and weighing the available options. You may want to begin by checking with your bank or credit union to find out what terms they offer. 

When you apply for a debt consolidation loan you’ll need to fill out some paperwork, provide evidence of your financial situation, and submit to a credit check. A poor credit score may make it difficult to land a consolidation loan with the kind of terms that will make debt repayment easier for you. If you’ve already begun missing payments, you may have hard time qualifying for many consolidation loans.

If you’re approved, the loan is used to pay off all your outstanding credit card balances, setting them back to zero. The lender may or may not require you to close the other credit cards. Then you start making payments on the loan. 

BALANCE TRANSFER 

With this method, you transfer all your card balances to a new credit card, somewhat similar to a debt consolidation loan. You find an appropriate card with favorable terms, such as 0% introductory APR for 12-18 months, apply, and hope to be approved. As with a consolidation loan, the better your credit score, the more likely it is that you’ll be approved. 

If you’re approved, you then use the new card to pay off the balance on your other cards, effectively transferring those balances to the new card and then making payments on that one card. 

This method can help you get ahead if it comes with a 0% interest rate, but keep in mind it will bounce back to a regular APR once the introductory rate is over. Many promotional rates may also expire immediately in the event that you miss a payment. 

DEBT MANAGEMENT PLAN 

A debt management plan (DMP) includes some of the better attributes of a consolidation loan (single monthly payment, reduced interest rates), but isn’t a loan and doesn’t require strong credit to qualify.

To begin a DMP you connect with a nonprofit financial counseling agency to review your finances and ensure that a DMP is a good fit. At MMI, you can complete this process entirely online. If the DMP makes sense for you, you’ll begin your plan by making payments to the agency handling your DMP, who will in turn make payments to your creditors. Your creditor accounts are closed as part of the process, and most creditors offer significantly reduced interest rates for participating on a DMP, which is why most plans are paid off in less than four years. You can also cancel your DMP at any time, which makes it a slightly less risky option.

HOW CONSOLIDATION AFFECTS YOUR CREDIT SCORE AND OTHER TIPS

How debt consolidation impacts your credit score depends entirely on the method you choose. Taking out a consolidation loan may temporarily lower your credit score due to the credit inquiry and the fact that the average age of your accounts will go down. (Older accounts are better for a good credit score, and your consolidation loan is brand new.) 

Closing old accounts usually hurts your credit score temporarily, so any method that involves closing accounts can ding your credit, at least in the short term. Keep in mind, if debt consolidation helps you make on-time payments and successfully reduce your debt, the benefits can soon outweigh the hit to your credit score and your score should recover quickly.

Debt consolidation isn’t a magic bullet. It can be a very helpful tool if you’re committed to reducing your debt, but to make it work, you need to have a plan and timeline in place to guide you out of debt.

Home sellers are realizing it’s no longer their housing market

A growing number of home sellers have been forced to readjust their home prices in recent weeks. According to Redfin, an estimated 6.1% of homes for sale during the four weeks leading to June 19, asked for a price drop – a record high as far back as the data goes, through the start of 2015.

That comes as mortgage rates hit 5.70% last week and are nearly 2.5 percentage points higher than the beginning of 2022, relegating some buyers to the sidelines with busted budgets.

“If you overprice your home in any market, you’re going to feel resistance,” Lizy Hoeffer, owner and mortgage broker at Cross Country Mortgage LLC, said. “In the last three years, sellers have been able to get basically whatever they want for their house. We’re just not in a market like that right now.”

‘Buyer budgets don’t stretch as far as they used to’

The dream of homeownership is slipping out of grasp for many would-be buyers as costs rise.

“Homeowners thinking about moving should know that while recent sellers have enjoyed favorable housing conditions that included high prices and fast sales, the tide is shifting,” Realtor.com Chief Economist Danielle Hale, told Yahoo Money. “Higher rates and home prices mean that homebuyer budgets don’t stretch as far as they used to.”

According to Realtor.com, rising mortgage rates have increased the monthly mortgage payment on a median-priced home an estimated 60% more than last year. The median monthly mortgage payment has jumped by $513 from the start of the year through May, according to a recent report from MBA.

For instance, in the most populated county of Washington State, King County, the average price is over $1 million, according to Adriana Perezchica, real estate broker and owner of Via Real Estate Group. Despite the challenges, Latinos there – which comprise a large portion of her clientele – are buying in the outskirts for an average of $550,000.

Homeownership: Understanding Hidden Costs

DOWN PAYMENT 

How much do homebuyers put down as a down payment on their new homes? Because home prices vary so greatly by region, it’s difficult (if not impossible) to find an average dollar amount. According to a 2021 survey by the National Association of Realtors, however, the average down payment is 12% of the purchase price. 

That average varies significantly depending on the age of the homebuyer. Young homebuyers (ages 22-30) only put down 6% on average, depending on the cost of the home, while older homebuyers paid more than 20%. Why the discrepancy? Older homebuyers tend to already have a home (and equity in that home). Younger homebuyers relied more heavily on savings (84%), while older homebuyers drew on the sale of their previous home (55-60%).

HOME SALE CLOSING COSTS

On top of your down payment, you’ll have other closing costs. These are the fees associated with purchasing a house. They could include the following: 

  • Loan origination fee
  • Points—these are optional, paid in exchange for a lower interest rate 
  • Home inspection report
  • Appraisal 
  • Credit report
  • Deed recording
  • Notary fees

Some of these fees may be paid by the seller if you negotiate that outcome. Closing the sale typically takes 30-45 days before you can move in. 

INSURANCE/TAX COSTS

On top of these fees, there are also several types of insurance costs that might be rolled into your mortgage payment through a mortgage escrow account. These include the title insurance policy premium (if you buy title insurance), homeowner’s insurance, property taxes, and a private mortgage insurance premium. 

Your mortgage lender manages these premiums through the escrow account, and you pay monthly allotments to your lender. For you, it’s all part of the mortgage payment, and you may not even realize what portion is the actual house payment, and what portion is homeowner’s insurance or property taxes. 

Not everyone needs private mortgage insurance (PMI): buyers who put down less than 20% for their down payment are typically required to purchase this insurance because it protects the lender if you default on the loan. 

COMMON HOME MAINTENANCE COSTS

Now that you own a home, there’s no landlord to call if your dishwasher begins to malfunction or if your roof starts to leak during a heavy rainstorm. It’s up to you to handle any repairs or replacements, and these costs can be a shock to new homeowners. 

If, during the buying process, your home inspection turns up any unexpected discoveries, such as a leaky roof, you can advocate for the seller to address the issue before you close. But they may say no, so it’s important to factor in future potential costs to your overall budget. 

Here are few other costs you likely didn’t need to think about as a renter. 

Heating and cooling systems. If your furnace or AC unit break, you’ll probably need to call an HVAC professional for repairs. Even a healthy system will need to be serviced, usually twice a year.

Plumbing. This includes maintenance of sinks, toilets, dishwashers, washing machines, and any of the associated pipes. You might be able to handle a simple sink blockage yourself, but a deeper pipe blockage might require a professional. 

Roofing. A new roof can set you back a pretty penny.

Painting. An exterior professional paint job also isn’t cheap, but it extends the life of the house and minimizes other rot repair. 

Pest control. Infestations of carpenter ants, borer beetle, or mice can cause true damage to foundational elements of the home.

Landscaping. Many people handle their own lawns and gardening, or soon learn to, but tree trimming might require a professional. 

Appliances. They can stop working suddenly and it’s up to you to service or replace them. 

Lighting and electrical work. Replacing lighting might be a feasible DIY project, but more complicated electrical work may require a professional. It’s always best to play it safe with electrical systems to avoid injury.

Home furnishings. When people buy a new home, they usually want to upgrade furniture and décor, paint the interior, and purchase new linens for the bathroom and bedroom. But buying new items all at the same time can put a real dent in your budget if you haven’t planned for it.

Home utilities. You may be accustomed to paying some utilities as a renter, but with a new home, you may have new bills you didn’t cover as a renter. These can include garbage, water, sewer, and recycling. Even if you did pay those bills while renting, they may be higher in your new home if it’s bigger. 

By factoring various costs into your overall budget, you can prepare for the costs of homeownership and not purchase more house than you can afford.

What Beginners Should Know About Credit Cards

Credit cards let you spend money you might not otherwise have, which is both the biggest pro and the biggest con of credit cards as a concept. Used mindfully as a tool, credit cards open up all types of convenient doors, but if used unwisely, they can also dig you into a financial hole. 

THE UPSIDE AND DOWNSIDE OF CREDIT CARDS

The Pros. Putting purchases on a credit card and paying off the balance within a short period of time is more than just convenient. 

  • Using credit allows you to purchase and enjoy things you want or need without having to wait until you’ve saved enough money. 
  • It also saves you from having to take a costly short-term loan for an unforeseen emergency. 
  • Credit cards often reward you with points for your spending, which you can often utilize for cash back, money toward travel, and other bonuses. 

The Cons. The ability to spend money you don’t actually have can be extremely damaging if you don’t have the means to repay your new debt quickly. Because the money doesn’t feel “real,” it’s all too easy to keep whipping out the card with no thought to what happens when the bill comes due.

The key is to spend within your means and pay off credit card balances in full every month (if possible) to avoid interest charges and any possible account delinquencies. In other words, don’t expand your spending just because you can. 

HOW CREDIT CARDS WORK 

A credit card gives you access to a revolving line of credit from a card lender. Revolving credit is credit you can keep using over and over as long as you repay some or all of your balance each month. The amount you borrow can’t usually exceed the account’s limit, although some accounts may allow you to go over, but charge fees in the process. 

The card itself is simply a fast way to share your information with vendors to authorize the transfer of borrowed funds from the lender to the vendor. 

Before you get the actual credit card to use, you sign an agreement with the card lender. The agreement spells out how much you can borrow (your credit limit), when payments need to be made, what fees are involved, and how your interest rate will be calculated and charged.

HOW INTEREST WORKS

Your credit card comes with an annual percentage rate (APR). That’s the interest rate charged on any balance not paid off each month. The lender charges you interest in exchange for lending you money. APR is used to calculate how much your credit card debt is going to cost on top of the account balance itself. The higher the APR, the more interest you will owe on any balance carried over month-to-month. 

In its most basic form, your APR determines how much interest will accrue after one year. For example, let’s suppose the APR on your credit card is 25%. If you have $1,000 in credit card debt, a 25% APR would end up costing you roughly $250 in interest over one year.

HOW CREDIT CARDS BUILD YOUR CREDIT SCORE

In many ways, credit cards are a requirement for building a strong credit history and a solid credit score. You have to use credit (wisely) to get access to more credit. That’s the only way to prove your creditworthiness to lenders. Simply avoiding credit is possible, but it can put you in a vulnerable position later by leaving you with no credit history. 

To establish a good credit record, stick with the following guidelines: 

  • Never miss a payment. Payment history is typically the biggest factor in most credit scoring models. Even a small number of delinquencies (months when a due balance went unpaid) can drive down your score. 
  • Don’t max out your cards. Avoid using any more than 50% of your credit limit if possible. The more of your available credit that’s being used, the more detrimental that is to your credit score.
  • Keep accounts open. The older your accounts, the better. Avoid constantly opening new accounts and closing old ones. 

BEST WAY TO START FOR NEW CREDIT CARD USERS

If you’re just starting on your credit-building journey, your options may be limited. One option is being added to another user’s card (such as the card of your parent or guardian). A better option is to start with a secured credit card. 

Secured cards are backed by an initial deposit from the card holder, typically no more than $500. Your deposit functions as your card’s credit limit. You can then use the card just like you would any other card to make purchases and pay the monthly balance. 

Although it may feel like you’re essentially borrowing from yourself, you are actually borrowing from the lender and building a credit history. The deposit is there as collateral to eliminate risk to the lender. If you don’t pay your bill, the lender reimburses themselves from the deposit.

After certain period of time (usually 6 to 12 months), the card will convert to a normal credit card and your deposit will be returned.

TIPS TO AVOID CREDIT CARD DEBT 

If you establish good habits around credit card use, you can use it successfully as a tool and not wind up in trouble. Try sticking to these rules:

  • Treat credit like you would a debit card and avoid spending money you don’t have on things you don’t need. If you’re spending money you don’t have, make sure that you have a plan to manage the debt.
  • Repay your monthly balance in full every month—or as often as you can—to avoid paying interest fees. 
  • Set up your payments so they post automatically. Missing a payment can be costly.
  • If debt starts to feel overwhelming, don’t avoid it! Too many people avoid their monthly statements and stop answering the phone once things start going in the wrong direction. Unfortunately, avoiding the problem inevitably just makes it worse.

The bad vibes economy

This is perhaps not the best way to run a business, but it is indicative of the current mood — a lot of people have a sense that something’s just off in the economy, or it’s about to be. There’s this nagging sentiment that we’re in a precarious spot, that there’s some economic boogeyman lurking just around the corner.

This sense of dread is so pervasive that it might surprise you to hear that many aspects of the US economy are generally in good shape right now. The unemployment rate is low, and the labor market is strong. Job openings are at near-record levels, and many workers who want to find something better are doing so. Household and corporate balance sheets are strong. Business profit margins are coming down some but are not disastrous. The stock market is faltering, but the worst troubles seem to be concentrated to the high-flying tech sector that was bound to cool off a bit. Stock market investors are still much wealthier than they were five, 10 years ago. 

The elephant in the room is, of course, inflation, which is high and, for most consumers, just incredibly annoying. Rising prices are cutting into wage gains for workers. The average price of gas nationally was $4.91 as of June 7, climbing just as many Americans get ready to hit the road for the summer.

“Everything else is going swimmingly, but the inflation is painfully high. People can’t get around that, psychologically,” said Mark Zandi, chief economist at Moody’s Analytics. Add to inflation over two years of a pandemic, war in Ukraine, mass shootings, and political dysfunction, and it makes it hard to say you feel good about anything, including the economy. “It’s just a noxious brew that’s come together and is weighing very heavily on the collective psyche at this point.”

The Federal Reserve is tightening monetary policy to try to combat inflation, which could push the economy into a recession. Regardless, the breakneck pace of the recovery from the pandemic recession is slowing down.

The economy isn’t terrible, but a combination of factors make it feel like it is — and that it’s only going to get worse, even though that’s not at all a foregone conclusion.

Inflation, not fun

Inflation in the US is at levels the country hasn’t seen in decades, and people, frankly, hate it. A recent poll from FiveThirtyEight and Ipsos found that over half of the country says inflation is the most important issue facing the country, well ahead of issues such as political extremism, gun violence, and climate change. Pew found that 70 percent of Americans say inflation is a very big problem, with no other issue coming very close.“IT’S JUST A NOXIOUS BREW THAT’S COME TOGETHER”

Inflation can be really painful for consumers, especially on items such as food and gas that they can’t really skip buying. It’s also always staring them in the face in a way that other facets of the economy are not, at least not so obviously.

If you have gotten a raise over the past year — and many people have — it was likely a one-time thing. “It’s not like every week your boss is like, ‘Hey, we gave you another raise.’ With inflation, it’s a constant creep,” said Nick Bunker, economic research director at Indeed. Gas prices, in particular, are almost unavoidable, even if you’re not filling up your tank. “How many goods and services do we have where the price is prominently displayed on large signs?”

The inflation issue weighs heavily on how people perceive everything else to be going. Many members of the public appear to believe the country is already in a recession. That is very unlikely to be the case, though the economy did shrink in the first quarter of the year.

The way people say they feel about the economy doesn’t necessarily align with how you might expect them to if the country were in a dire economic situation. Consumers are still spending, though more appear to be dipping into their savings to do so (and it’s not clear if they’re taking home less due to inflation). In late 2021, a survey from the Fed found that Americans were reporting the highest levels of financial well-being since the survey began in 2013, even though their perceptions of the broader economy declined. The Atlantic’s Derek Thompson recently named the scenario a sort of “everything is terrible, but I’m fine” situation. 

The University of Michigan’s consumer sentiment index in May fell to its lowest level since August 2011, driven down by how consumers feel about conditions for buying houses and durable goods and their outlook about the future of the economy because of inflation.

“We’re at levels that would be consistent with a bigger recession,” said Claudia Sahm, a former economist with the Federal Reserve. “There is no way, given the labor market, given consumer spending, that right now we are in a recession.”

Sahm pointed out that last time consumer sentiment was so low, the US was in the midst of the debt ceiling crisis and still climbing out of the Great Recession, and there was turmoil in Europe. Essentially, a lot of things were bad. Now we’re in a similar scenario — people feel bad about a lot of things, which translates into how they’re feeling about the economy. Consumers are “just really pissed off about the world,” Sahm said. There’s still Covid, there is again turmoil in Europe, there’s growing anger over politics. Practically no one says they’re happy about the direction of the country. “When we think about the world, the economy, it’s not so separable.”

A recession isn’t for sure looming, but it feels like it is

In early June, JPMorgan Chase CEO Jamie Dimon warned an economic “hurricane” is on the horizon, citing the Fed shrinking its balance sheet and the Russia-Ukraine war’s impact on commodities prices in his reasoning. “Right now, it’s kind of sunny, things are doing fine, everyone thinks the Fed can handle this,” he said. “That hurricane is right out there, down the road, coming our way. We just don’t know if it’s a minor one or Superstorm Sandy.”

How Does a Mortgage Work?

WHAT IS A MORTGAGE?

A mortgage is a type of loan specifically used to purchase a piece of property such as a primary home, a second home, rental, condo, or apartment. A mortgage is an agreement between you and a lender, such as a bank or credit union, that gives them the right to reclaim the property if you fail to make the payments as agreed. The property is used as collateral to secure the loan; you won’t technically own the property outright until the mortgage has been paid in full. 

A mortgage comes with terms and conditions related to the principal (the amount you borrowed), fees, interest rate, a repayment period (when it’s paid in full), and a payment schedule that tells you what the monthly payment is and when it’s due. 

HOW DO I QUALIFY FOR A MORTGAGE AND WHAT IS INVOLVED? 

Qualifying for a mortgage starts with finding a lender willing to offer you a loan based on your specific financial profile. You can apply directly with a lender or you can work with a mortgage broker, who will help you find a lender. The broker’s job is to compare lenders and find loan terms that work for you. They’ll also handle all the documents, verify your income, pull your credit score, and negotiate terms with the lender. 

Typically, the lender will pre-qualify you for a mortgage that is worth a certain amount. Pre-qualification is a hypothetical: if you applied for a home loan, this is what we’d be able to offer you. You’ll need to provide some basic information about income, expenses, and debts, and possibly consent to a credit pull. 

Getting approved is more involved. Most lenders will consider your credit score, which also partially determines the type of mortgage available to you. The higher your credit score, the better the terms regarding interest, loan principal amount, and other loan features. A low credit score might mean you don’t qualify for a mortgage with certain lenders. 

Your loan officer will let you know what documents are needed, but they’ll likely ask for your recent tax documents (W-2s and returns from recent years), recent paystubs, and recent bank statements.

WHAT IS A DOWN PAYMENT? 

A down payment is the amount you contribute to the purchase of a home from your own funds. The bank loans you the balance remaining after your down payment to purchase the property. For example, if you purchased a $200,000 home with a $40,000 down payment, you’d need a $160,000 mortgage to complete the sale. You’d own 20% equity in the property, and the lender would own 80%. 

Generally, the more you can pay upfront, the better. Larger down payments typically mean better terms. The less equity the bank has in your home, the lower the risk is to them, and the better the terms for you, including a more favorable interest rate. A larger investment also means a smaller mortgage and a smaller monthly mortgage payment. 

However, it’s important not to sacrifice your financial security by stretching too thin for a down payment you can’t afford. You’ll want to seriously consider your budget before deciding on the amount of your down payment. Make sure you have enough in reserve for emergencies, home repairs, and other financial surprises. 

DIFFERENT TYPES OF MORTGAGES

CONVENTIONAL MORTGAGES

Lenders issue conventional mortgages to consumers with good-to-great credit (typically a 620 or higher FICO score) who can afford a substantial down payment. These mortgages aren’t backed by the federal government. If you put down less than 20% of the sale price as a down payment, you may be required to carry private mortgage insurance (PMI). Also, your debt-to-income ratio can’t be over 43% for most loan programs, though some allow as high as 50%. 

GOVERNMENT-INSURED MORTGAGES

These three government-backed loans are an option for certain homebuyers with lower credit scores and not much savings for a down payment:

FHA LOANS

The Federal Housing Administration (FHA) backs loans, typically for borrowers with lower credit scores. If you have a FICO score of 580 or higher, you can secure 96.5% funding. You’ll need to provide the other 3.5% as a down payment. For a lower FICO score (as low as 500) you can still get 90% funding with a 10% down payment. 

FHA loans also require mortgage insurance, regardless of your down payment amount, but it functions differently from PMI. These loans include two mortgage insurance costs. One is called Upfront Mortgage Insurance Premium, an upfront fee of 1.75% of the loan amount, which you can roll into your loan amount or pay during closing. The other is called Mortgage Insurance Premium (MIP), a monthly premium, typically between 0.45% and 1.05% of the loan amount. You can’t get rid of the monthly premium unless you refinance into a different loan type. 

VA LOANS 

VA loans are backed by the U.S. Department of Veterans Affairs, so they’re limited to members of the U.S. military and their families. Typically, a VA loan doesn’t require a down payment, PMI, or minimum credit score.

USDA LOANS 

Backed by the U.S. Department of Agriculture, USDA loans are intended for low-to-moderate income families in rural areas. The property you’re purchasing needs to be located in an eligible rural area as defined by the USDA. Depending on your income level, you may or may not need to provide a down payment. You will have to pay an upfront fee of 1% of the loan value (can be rolled into the loan), as well as an annual fee, which is determined by loan amount, income level, and other factors.

FIXED-RATE VERSUS ADJUSTABLE LOANS

Mortgages come with different time-frame terms and interest rates. 

  • Fixed-rate loans lock you into the same interest rate for the life of the loan. Typically, fixed-rate mortgages are for 15 or 30 years, but other term lengths may be available (up to 30 years). These loans provide consistency for budget planning. 
  • Adjustable-rate mortgages (ARM) come with variable interest rates, typically tied to market conditions. For the first few years, the rate is usually fixed and then begins regularly adjusting, sometimes as frequently as every six months. The interest rate may be lower than a fixed-rate mortgage during the “fixed” portion, but it can spike over time and become unaffordable. If you don’t plan to sell or refinance in the near future, an ARM is riskier than a fixed-rate mortgage. 
  • Interest-only mortgages let you pay only toward the interest for a certain period of time, usually five years. After that period, the payments increase as you start paying toward the principal. You might choose this option if you plan on selling or refinance quickly, or if your income will increase before the payments do. 
  • Balloon mortgages behave as a typical conventional 30-year mortgage does for 5-10 years, and then the remaining balance comes due all at once. It’s another product that’s best if you plan to sell or refinance before the big payment comes due. 

DO I NEED PRIVATE MORTGAGE INSURANCE? 

You’ll likely need private mortgage insurance (PMI) if you take a conventional mortgage and can’t provide a down payment of at least 20% of the home’s purchase price. PMI provides extra protection to the lender if you default on the mortgage. When a lender owns more than 80% of the equity in a property, there’s an increased risk to them that they may not be able to fully recoup the original loan amount if the house is foreclosed and re-sold.

In the event of defaulting, the lender will want to re-sell the property to recoup the loan amount – but home values can be volatile. So, until you have paid down the balance below 80% of the original sale price, you’ll have to pay this added insurance cost.

What to Do After Losing Your Job

It’s a terrible way to feel, but there’s always something you can do. Creating a plan and taking real action is the best way to combat that negative feeling and put yourself in a position to weather the storm. If you ever find yourself facing an unexpected unemployment, consider the following ten steps to be your unemployment checklist. 

DECIDE BETWEEN RESIGNATION AND TERMINATION 

How the job ends matters. If you find yourself able to choose between voluntarily resigning or being fired, think carefully before choosing. In certain instances if a work situation is untenable and the writing is on the wall, you may consider resigning in order to avoid the potential stigma of having been fired. Sometimes an employer may inform you that you are being fired and then offer to let you quit if you’d prefer. It seems like a kind gesture, but usually it’s nothing of the sort. 

Voluntarily resigning may make future job interviews less tricky, but by doing so you also forfeit your right to unemployment benefits. Which is more valuable to you – the unemployment check or the job reference? Be clear on what you’re agreeing to and what that impact is going to look like. In the immediate aftermath of learning that you’ve lost your job, you may make a snap decision based on the high emotion of the moment. Take a little time before deciding. It makes a big difference. 

FILE FOR UNEMPLOYMENT

Presuming you haven’t resigned or been fired for cause (meaning that you were fired for engaging in an illegal or unethical behavior), you’re likely eligible for unemployment benefits. The amount of your benefits will vary depending on your prior income and the process for application is different in every state. So go to your state’s unemployment office website and begin that process immediately. The sooner you apply, the shorter you’ll have to go without at least some income. 

CONTACT YOUR CREDITORS

Even with unemployment benefits, your money is going to be extremely tight until you find a new job. And when you’re in a financial crisis, one of the first expenses to suffer is going to be your creditor payments. 

Get out ahead of that inevitable issue by contacting your creditors directly to let them know about the situation. Many creditors offer short-term hardship programs that could significantly reduce your payments for six or 12 months. Some may even let you miss a set number of payments. (It’s important to note, however, that in most of these hardship programs interest continues to accrue, meaning you won’t fall behind, but your balance may increase.) 

See what your creditors can offer you. Some won’t be able to do anything for you, at which point you’ll have to weigh the cost of keeping your accounts current against the more important cost of maintaining your household. But at the very least, you need to pick up the phone and see what’s possible. 

MAKE A DECISION ON HEALTH INSURANCE

Maintaining your health insurance coverage through COBRA can be expensive, but dealing with a medical emergency while uninsured can be even more costly. You need to decide what you’re going to do about health insurance while you’re laid off. If you have the ability to be added to a spouse’s insurance plan, begin that process right away. 

MAKE AN HONEST ASSESSMENT OF YOUR FINANCES 

How much is unemployment paying you? How much do you have in savings? What are your living expenses? Where can you cut back? 

You’re not going to be able to wing it at this point, so it’s important to create a detailed list of your available funds and ongoing financial responsibilities. You may also want to sort your expenses into different categories based on priority. 

CREATE YOUR UNEMPLOYMENT BUDGET 

Once you have the raw numbers it’s time to create a spending plan to see you through your unemployment. Bear in mind, your finances may be especially irregular during this time, so you might consider using short-term, week-to-week budgets, especially if your unemployment checks arrive weekly. 

Understand what elements of your budget are optional and which are not, and try to keep your expenses as basic and necessary as possible. 

PREPARE YOURSELF TO BECOME A JOB APPLICANT 

Being a good job applicant has never been as simple as just having the required skills and experience. As a job applicant you are essentially a product that needs to be sold. And just as cautious consumers do a lot of research before making a purchase, so too do employers research their applicants before making a hiring decision. 

Becoming a desirable job applicant begins with a well-constructed resume, but it goes much further. Consider your online presence. We’d like to imagine that our social media accounts are a part of our civilian life, so to speak, and shouldn’t have any bearing on our job prospects, but that’s simply not the case. If it’s online, it’s more than likely public, and you have to assume that the things you post on social media could very well be viewed by someone in charge of evaluating you for a job. 

So think about how you present yourself online. Don’t go on Facebook and badmouth the company that let you go. Don’t go on Twitter and say things – even as a joke – that a reputable company wouldn’t want to be associated with. If you need to clean up your social accounts, now’s the time. 

GO TO WORK FINDING A NEW JOB

When you’re unemployed, your job becomes finding a new job. It’s time-consuming and often very defeating, but you need to treat your job hunt like the work that it is. Be diligent. Put in the hours. Set aside a specific portion of the day for job hunting tasks and be consistent. If you mirror your job hunting hours with your previous working hours, it can help you to maintain a schedule and avoid the kind of lengthy periods of inactivity that can lead to anxiety or depression. 

DON’T NEGLECT YOUR HEALTH, HOBBIES, AND RELATIONSHIPS

Just because your budget needs to tighten up doesn’t mean that no need to stop living your life. People in the midst of unemployment very often begin to isolate themselves because they’re too ashamed to be around friends and loved ones. Joblessness also has a tendency to lead people to stop taking the time and effort to exercise and maintain their hobbies and interests. 

Adding additional layers of misery to an already difficult situation isn’t going to improve anything. Be sure to stay active during a layoff. Spend the necessary time hunting for a new job, but once those tasks are over, let them go and focus on personally fulfilling ways to spend your time. Stay physically and mentally fit. Continue interacting with friends and family. Don’t forget to continue being you

FOCUS ONLY ON THE THINGS YOU CAN CONTROL 

Finally, during the course of your unemployment, there will be things you can control and things you cannot. It’s natural to worry about things that are out of our control, but try to focus your time and energy on the things you can actually do to actively improve your situation. Let go of everything else. Eventually, with a lot of hard work and determination, you’ll make it through to the other side. But until then, stay positive and stick to the plan.

How to Get an Emergency Loan if You Have Bad Credit

Not only is the cost a source of stress, but so is the emergency itself. It’s normal to experience a double dose of anxiety, fear, and worry in these situations. 

Other common debt triggers include medical emergencies, divorce or separation, job loss or reduction, major home repairs after a natural disaster, or stepping in to help another family member. 

Many families don’t have wiggle room in their budget to handle sudden, unexpected costs, and recent inflation has made paying bills that much harder. Nearly two-thirds of American families live paycheck-to-paycheck, according to a 2022 LendingClub report. Even folks who earn six figures are struggling to cover costs, depending on where they live, with 48% living paycheck-to-paycheck. 

If you have bad credit, it’s even tougher to find a lower-interest personal loan (also called an installment loan). Poor credit compounds the situation because it reduces your options. Here’s what to know about emergency personal loan products if you have bad credit. 

HOW DOES YOUR CREDIT SCORE AFFECT EMERGENCY LOAN TERMS? 

The lower your credit score, the more limited your options are for a favorable loan. A poor credit score may lead to a higher interest rate, higher fees, or a low loan amount—or you might not qualify for a loan at all. Traditional banks and credit unions use your credit score as one component to calculate your loan terms. 

However, these institutions typically don’t provide small personal loans ($3,000 and under). You’re probably going to be limited to payday loans, or an online lender such as Upstart, Best Egg, or Avant. 

Because some of these online lenders specialize in serving borrowers with poor credit, a low credit score may not be a barrier. These alternative lenders may weigh evidence of satisfactory income more heavily than credit score. However, you won’t have access to low interest rates with a low credit score – those are reserved for consumers with stellar scores. 

WHAT RISKS SHOULD I BE AWARE OF WITH EMERGENCY PERSONAL LOANS?

Try to avoid payday loans (or fast cash loans) whenever possible. These lenders charge high interest rates and may require you to pay back the loan in full within 14 days or by the end of the month, which can be difficult for someone facing a financial emergency. 

Beware of companies offering guaranteed loans for an upfront fee. These loans may be scams because no one can guarantee you’ll receive a loan. Legitimate lenders won’t ask for an upfront fee to guarantee a loan.

Research lenders and look for online reviews. Make sure you understand the terms being offered. Interest rates and fees on small, personal loans tend to be high, even from legitimate online lenders, especially on loans for people with poor credit. Rates will usually be higher than the lender’s advertised rate, which is almost always reserved for those with pristine credit.

LESS RISKY ALTERNATIVES TO AN EMERGENCY LOAN

Savings. If you have savings to dip into, that’s the best way to avoid the high-interest trap of an emergency loan. Of course, many people with a financial emergency don’t have adequate savings to cover it. If you don’t, consider whether you could borrow from family or friends or ask for an advance on your paycheck. 

Credit card. Believe it or not, putting an unexpected expense on a credit card, even one with a high APR, is usually a better bet than taking an emergency loan from a payday or online lender. If your card doesn’t have a sufficient credit limit or you don’t have a credit card, work on building credit and opening a card so you have a working alternative before an emergency pops up.

Retirement savings. If you have a 401(k) or IRA, you may be able to borrow against the balance in the account. The particulars of the loan or withdrawal will depend on the rules of the retirement savings account you’re trying to borrow against. If you’re making an early withdrawal from an IRA, you should expect to pay a fee (typically 10%). If you’re taking out a loan against your 401(k) you may be barred from making further contributions until the loan is repaid. Borrowing against your retirement comes with risks, so make sure you understand what’s at stake before borrowing. 

Payday alternative loan. If you belong to a credit union that offers payday alternative loans (PALs), you might be able to qualify. They’re a much more affordable option to payday loans or online lenders. If you aren’t a member of a credit union that offers these types of loans, ask about eligibility requirements for membership. PALs come in small amounts ($1,000 and below), interest rates are capped at 28%, and they allow repayment in one to six monthly installments. 

WHERE CAN I GET AN EMERGENCY PERSONAL LOAN? 

If you have no alternative but to turn to a payday or online lender, MMI recommends exploring the online lender option first. It’s a better option than risking a debt-trap cycle with a payday lender. Three online lenders that are well-reviewed are Upstart, Best Egg, and SeedFi. 

If cash is so tight that an unexpected emergency can throw your finances into total disarray, it’s time to talk to an expert. The debt and budget experts at MMI can help you evaluate your budget and create a plan to shed debt, trim your spending, and start saving for rainy days. We’re here to help with confidential counseling.

‘Transformative’ retirement reform package passes the House and heads to the Senate

“Oftentimes in this chamber you will hear the phrase transformative,” said Ways and Means committee chairman Richard Neal (D-MA) as the bill neared passage. “Sometimes it’s hyperbolic but on this occasion, this is transformative legislation.”

Expanding on a landmark 2019 retirement bill, the bill aims to further expand Americans’ ability to save for retirement and increase their options for doing so. If it passes the Senate, SECURE 2.0 could be a boon for savers from people still paying student loans to retirees behind on their bills.

“SECURE 2.0 is fundamentally designed to make it easier for people to save,” Susan Neely, American Council of Life Insurers President and CEO, told Yahoo Finance Live on Monday. She added there’s “a lot going on in this bill that will be great for retirement savings and it has momentum, thank goodness.”

The bill unanimously cleared the House Ways and Means committee about 11 months ago. Despite the bipartisan support, it languished as lawmakers wrangled over a separate retirement proposal that Democrats had hoped to include in the now-moribund Build Back Better Act.

Now, the resurrected SECURE 2.0 — endorsed by outside groups like AARP and the Red Cross — heads to the Senate where lawmakers of both parties have expressed support for the ideas contained in it and advocates hope it could earn a vote in the upper chamber in the coming months.

“In this bill, we take serious steps to address the savings gap,” Rep. Kevin Brady (R-TX), another of the bill’s key backers, said on Tuesday. “I’m hopeful the Senate picks it up and moves it quickly.”

Here are a few ways the bill could change the way Americans save for retirement.

New options for those nearing retirement

Proponents note Secure 2.0 will give retirees — who are living longer than previous generations — more flexibility as they manage a longer retirement.

For one thing, it gives workers more options for “catch-up” contributions as they near retirement, up to $10,000 per year. Another key provision gradually raises the age for taking mandatory distributions from 401(k) plans or IRAs to 75 from 72.

Some lawmakers want to take things even further with required minimum distributions. “My goal is to get rid of it completely,” Brady said of the age restrictions on distributions during an appearance at the Bipartisan Policy Center Solutions Summit streamed on Yahoo Finance in 2020.

On Monday, Neely also highlighted provisions that will makes annuities or other lifetime income options more accessible which, she said, “can be really really helpful in rounding out your retirement.”

A recent study found that one in three adults have less than $5,000 in retirement savings and nearly half (46%) have taken no steps to prepare for the likelihood that they could outlive their savings.

Automatic enrollment and increased access

According to the latest government data, only about half of private sector workers participate in a retirement plan at work. Many don’t participate because they have no access, but many simply haven’t signed up for available benefits.

To remedy this situation, the bill would push more employers to automatically enroll new employees into their company’s retirement plan if one is offered. Studies have shown that employers with auto-enrollment retirement plans have higher rates of participation.

The bill also includes inducements to help employers, particularly small businesses and nonprofits, with the daunting start-up costs of offering new plans. Employers can also receive credits for matching workers’ contributions. Currently, only 42% of part-time workers have access to a retirement plan at work.

An idea around student loans and retirement

One part of the bill that will surely get the attention of younger people would allow people to save while paying down student loans.

The idea here is to allow businesses to contribute to employees’ retirement accounts when workers make student loan payments. In other words, if you put $100 towards your student loan, your company could “match” it with up to $100 going into a retirement plan like a 401(k).

Data from Bankrate suggests that college graduates with student loans often have to delay other priorities. Thirty-four percent report having delayed emergency savings, 23% say they have delayed buying a home, and 29% have delayed retirement savings.

In a recent webinar co-hosted by Yahoo Finance and the Bipartisan Policy Center, Rep. Fred Keller (R-PA) touted these provisions in particular as “a thing that I think everybody can get behind because it’s incentivizing people to save.”

Brady adds that the provision “really recognizes reality of newer and younger workers in the workforce and finding smart ways to begin to help them to save.”

Are Fast Cash Loans Legitimate?

Also known as “payday loans,” these short-term loans are marketed as a helpful stopgap to consumers who have no savings. They’re meant to be a short-term loan fix that you pay back as soon as your paycheck arrives. That sounds enticing, but is it too good to be true?

Fast cash loans are legitimate, and they’re legal in 37 states. But that doesn’t necessarily mean they’re a good idea. In practice, people who are already struggling to make ends meet struggle even more to repay these kinds of loans. According to a recent Consumer Finance Protection Bureau report, nearly half of those who took a payday loan rolled it over at least one payday, accruing fees along the way.

Taking out a fast cash loan can create a vicious cycle of repeat borrowing and exorbitant fees that cost much more than the original financial shortfall itself. Here’s what else you should know about them.

HOW A FAST CASH LOAN WORKS

FAST CASH LOANS ARE TYPICALLY SMALL

Many states have set limits on the allowable limit, typically around $500, though some states allow a higher limit. This interactive map by Experian shows each state’s limit. The National Conference of State Legislatures also provides details on allowed limits and fees by state.

INTEREST RATES TEND TO BE HIGH 

Fast cash loan rates are typically higher than the rate offered by a traditional lender. Some payday lenders charge a transaction or finance fee instead, which can be costly. Fees may range from $10-$30 per $100 borrowed, according to the CFPB. On a two-week borrowing period, a $15 fee per $100 equals a nearly 400% annual percentage rate. By comparison, a traditional credit card’s APR typically runs 12-30%.

Let’s say you borrowed $500—that’s a $75 fee. Even a $20 fee on a $200 loan can create difficulties if things are so tight that you had to borrow to get to next Friday.

THE REPAYMENT PERIOD IS SHORT 

Usually, repayment is required within 14 days, or possibly within the month. It’s guaranteed through an automated withdrawal from your bank account or a post-dated check, and the lender pulls the owed amount as soon as your paycheck is deposited.

PAYDAY LENDERS AREN’T TRADITIONAL BANKS OR CREDIT UNIONS 

Quick cash loans are offered through payday loan stores or stores that offer financial services, such as pawn shops, rent-to-own stores, or stores with check-cashing services.

NO CREDIT CHECK IS REQUIRED 

Unlike traditional financial institutions, fast cash lenders aren’t really concerned about your past credit history. Your credit score is almost never considered, nor is your employment history or debt-to-income ratio. According to the CFPB, all you need is a bank account in decent standing, identification, and a steady source of income.

It’s important to note that your credit score isn’t affected (positively or negatively) by a fast cash or payday loan. That’s because these lenders don’t tend to report the loan, or the payments, to any credit reporting bureaus. So, unless you default on a loan and it gets sold to a collection agency, it’s unlikely to ever show up on your credit report or impact your credit score.

ALTERNATIVES TO A FAST CASH LOAN

Coming up with an alternative may not be easy if you and your extended family are already on financial thin ice. But, if possible, you’d be better off dipping into your savings if you have it, or using your credit card, which has preferable fees compared to payday loans. You might consider borrowing from friends or family or asking for an advance on your paycheck. All of these options are typically preferable to taking a fast cash loan. 

If you do decide to take a fast cash loan, you should always read reviews and check with the Better Business Bureau first. Also, double-check the fine print and make sure the fees don’t exceed the maximum in your state.

WHAT TO DO WHEN YOU ALREADY HAVE A FAST CASH LOAN

We recommend prioritizing paying off the fast cash loan as soon as possible, no matter what your other financial commitments are. Make it your top priority to get out from under the fees, even if those fees feel manageable now. 

If you’re able, cut your spending in other areas to come up with the cash to pay off the loan. Or take temporary, extra work to bring in additional money. If you’re juggling multiple debts, you may be able to roll these debts into a consolidation loan through a traditional lender with more reasonable fees. 

For military families, be aware that the Military Lending Act provides protections to members of the military. Perhaps most relevant, lenders cannot charge more than 36% interest (including fees), which protects members from exorbitant payday loan fees.

What Does the Navient Student Loan Settlement Mean for Borrowers?

In January 2022, Navient, one of the country’s largest student loan servicers, reached a $1.85 billion settlement over allegations it defrauded students with deceptive and predatory loan practices. The settlement resolves a lawsuit brought against Navient by 39 state attorneys general, and it provides some borrowers with student loan relief. 

The allegations: Navient directed struggling borrowers toward costly forbearance plans rather than into more appropriate income-driven repayment (IDR) plans. As a result, borrowers accrued unnecessary interest that bloated their loan balances and pushed them further into debt. Had borrowers received appropriate guidance, they could have been placed in an IDR plan with reduced payments, in some cases as low as $0 per month, depending on income. 

WHAT KIND OF STUDENT LOAN RELIEF DOES THE SETTLEMENT PROVIDE? 

The settlement provides two kinds of relief. Keep in mind, it’s limited and doesn’t apply to many borrowers. 

Private student loan cancellation. Borrowers who took out private student loans with Sallie Mae to attend for-profit colleges between 2002 and 2014 may be eligible for loan cancellation (aka discharge). The balance or a portion of the balance you owe could be canceled, and any payments made after June 30, 2021, could be refunded. 

Eligible borrowers may include those who were issued a subprime loan (made to borrowers with low credit scores) or those who attended a specific non-profit school. Check the settlement information for a list of schools. 

Restitution. Borrowers with federal student loans who were steered into long-term (2+ years) forbearance periods—periods of no payment—rather than receiving counseling on income-driven repayment plans may receive a “restitution” payment of $260. Loan forgiveness isn’t being offered to these borrowers. 

WHAT SHOULD I KNOW ABOUT ELIGIBILITY?

To be eligible for federal loan restitution—the $260 payment—you must be a resident of one of the 39 states that sued Navient. The restitution-participating states are: AZ, CA, CO, CT, DC, DE, FL, GA, HI, IA, IL, IN, KY, LA, MA, MD, ME, MN, MO, MS, NC, NE, NJ, NM, NV, NY, OH, OR, PA, TN, VA, WA, and WI. 

To qualify for cancellation on certain private subprime loans, borrowers must reside in any of the above restitution-participating states, or Arkansas, Kansas, Michigan, Rhode Island, South Carolina, Vermont, or West Virginia. A military address postal code also qualifies. 

Review the information at navientagsettlement.com for more details on eligibility. 

WHAT SHOULD I DO IF I THINK I QUALIFY? 

You don’t need to take any action to receive benefits, so if you’re not sure you qualify, don’t worry. Navient will notify all borrowers (in writing) who receive private loan cancellation or restitution payments.

Right now, the best thing is to make sure your contact information is up to date with the U.S. Department of Education and Navient. Go online to studentaid.gov to review and update your information and then call or go online to Navient to review or update your information for any private loans. 

If your loans are canceled due to the settlement, you may owe taxes on the forgiven amount. It’s worth checking with a qualified tax professional about the tax implications. 

HOW THE PUBLIC SERVICE LOAN FORGIVENESS (PSLF) WAIVER FACTORS IN

As part of the settlement, Navient must reform its counseling practices. The servicer is required to explain forbearance, deferment, and income-driven repayment plans to borrowers, as well as help them determine the best repayment option for them. 

Navient is also required to educate borrowers about Public Service Loan Forgiveness (PLSF) for federal loans and notify them about the PSLF limited waiver available through October 31, 2022. 

If you work in qualified public service (a 501c3 or a government job), you might benefit from the waiver, whether your loans are held by Navient or another servicer. PSLF still requires that you be working for a qualifying public service employer, but it has eased other requirements. 

You might qualify for forgiveness if you have any of the following: 

  • Direct Loans not in repayment through a qualifying income-driven repayment plan 
  • FFEL, Perkins, or other federal student loans not consolidated into a Direct Loan
  • Payments that were disqualified because they were late or partial payments

Make sure to apply before October 31, 2022.

WHAT ELSE TO KNOW ABOUT STUDENT LOAN FORGIVENESS

The Department of Education offers several federal forgiveness programs besides PSLF. There’s also the Teacher Loan Forgiveness program, or you might be eligible for forgiveness in your state if you work in a particular profession. It’s worth researching. 

Forgiveness is also offered through Income-Driven Repayment Plans. In one of these plans, you make qualifying income-based payments for 20 or 25 years, depending on the plan, after which the balance is forgiven. Private student loans aren’t typically eligible for forgiveness. Keep an eye on studentaid.gov for updates on student loan forgiveness, who qualifies, and where to learn more. 

IF YOU WON’T BENEFIT FROM THE NAVIENT SETTLEMENT, WHAT CAN YOU DO? 

Even if you aren’t included in the Navient settlement, your federal student loans may qualify for discharge if you believe you were defrauded or deliberately misled by false promises or misrepresented information. The primary reasons someone might qualify for discharge: 

  • False certification. Discharge for false certification applies to borrowers who think their school falsely certified their eligibility to receive loans. For example, if the institution falsely certified your ability to benefit from the program, falsely certified your eligibility for the program, or signed your name to the application or promissory note without your authorization. 
  • Unpaid refund discharge. If you withdrew from the school, and it didn’t properly refund the loan when you withdrew, you could be eligible for the portion of the loan not refunded to be discharged. 
  • Borrower defense against repayment discharge. Finally, if you believe the school misled you, engaged in misconduct, or violated state law, you may be eligible for discharge. Examples include misrepresenting graduates’ job placement rates, employment prospects, accreditation status of programs, ability to transfer credits, and program completion claims.

Start by submitting your complaint through the Federal Student Aid Feedback Center or by calling 877-557-2575 for the Federal Student Aid Ombudsman Group. The ombudsman group can help you understand your rights, assist in identifying and evaluating your options for resolving specific concerns, and refer you to the appropriate resources.

The discharge application forms can be found on the StudentAid.gov website. Review the information before applying: unpaid refund discharge, false certification discharge, or borrower defense discharge. 

A financial shock could wreck retirees’ or pre-retirees’ finances

According to a recent Society of Actuaries survey, about half of the pre-retirees report experiencing some type of unexpected financial shock, as well as more than 4 in 10 retirees. And, 1 in 5 pre-retirees report that these shocks have reduced their assets by 25% or more and reduced their spending by 10% or more.

The good news is that far fewer retirees report these reductions, according to the 2021 Retirement Risk Survey Report of Findings. For example, just 1 in 10 retirees (11%) report that shocks reduced their assets by more than 25%.

Pre-retirees least prepared for a crisis

Other key findings: When asked what they could afford to spend out of pocket on an emergency without jeopardizing their retirement security, half of pre-retirees report that they could only afford to spend $10,000 or less and more than half of retirees could afford no more than $25,000. Black/African American pre-retirees (61%) are more likely than pre-retirees in general (40%) to be impacted by an unexpected expense of up to $10,000.

Among retirees, Black/African American respondents (58%) and Hispanic/Latino (52%) said they are not able to spend $10,000 without it affecting their retirement security. This was much greater than the general retiree response (32%), according to the Society of Actuaries survey.

So, what to make of all this? How might you, be you a pre-retiree or retiree, better prepare for unexpected financial shocks?

Build an emergency fund

Most financial planners recommend that you have at least three to six months of living expenses set aside for, well, emergencies or financial shocks, such as a new roof or dental work.

“Early in my career, I had a 90-plus-year-old client say to me regarding financial assets, ‘You never know what it will take to get you out of this world,’” said Bill Harris, a certified financial planner with WH Cornerstone Investments. “Her life wisdom was spot on. I use that quote to tell pre-retirees with ‘constrained’ or under-funded retirement assets that life has its unexpected turns. We also tell pre-retirees, ‘You can never ever save enough for retirement. An emergency fund is always needed.’”

Build a reserve fund too

Unexpected spending shocks are a reality at any age, said Roger Whitney, host of the “Retirement Answer Man” podcast. “When they happen in retirement – after income from work ends – they aren’t as easily absorbed or worked through,” he said. “To be better prepared, create options for your future self to deal with a shock. Building cash reserves above a normal emergency fund, eliminating debt to lower fixed monthly payments, or working part time can help create financial slack to help you be agile as your retirement life unfolds.”

Do I Need to Pay Taxes on Unemployment?

That’s a big change from last year when you filed your 2021 tax return on 2020 income. For 2020 federal tax returns, the American Rescue Plan of 2021 allowed an exclusion of up to $10,200 per individual, but that tax break wasn’t extended for 2021. 

As the April 15 income tax filing deadline approaches, you need to be prepared to pay federal taxes on unemployment compensation you collected in 2021. You could be hit with some sticker shock. Here’s what to know. 

WHY UNEMPLOYMENT BENEFITS ARE TAXABLE

Unemployment benefits are treated like regular income. Your benefits get reported to the IRS and are subject to federal income tax. The amount you received during the year gets added to your overall taxable income. Although the benefits aren’t specifically taxed (nothing is withheld unless you opt in), it’s that total amount of income that shapes your tax bill. 

Most states with a state income tax also collect taxes on unemployment benefits, but some do not. Check the table at the end of this article to see if your state taxes unemployment benefits and what the rate is. You can find more details about each state’s approach in this guide.

The main difference between unemployment and regular wage income is that you don’t pay Social Security or Medicare taxes on unemployment benefits (listed as FICA taxes). Also, the percentage you pay on your benefits is determined by your income bracket. For example, if you’re a single filer and you earned between $9,951 and $40,525, you fall in the 12% federal tax bracket for 2021-2022. 

HOW TO HANDLE A TAX BILL IF YOU’RE STILL UNEMPLOYED 

You may be feeling the financial pinch if you’re still unemployed. If you can’t afford to pay your tax bill, the IRS offers a few options. 

First, contact the IRS right away to explain your situation and find out if you’re eligible for an alternative payment plan. They can discuss your options with you and set you up on a repayment plan, such as a short-term repayment plan within 180 days or a long-term installment plan over 72 months. It’s peak tax season right now, so it may not be easy to get through right away. Try to be patient. 

If you’re not able to pay anything at all, the IRS may decide your account is “currently not collectible.” That designation temporarily delays their collection process. 

Keep in mind, your tax debt doesn’t go away. Penalties and interest may accrue on the unpaid amount during this “not collectible” period. You’ll also be expected to pay fees and interest on any installment plan as well. Going forward, if you can afford to pay a little bit toward next year’s tax bill, that’s advisable to avoid a lump sum in April. 

HOW TO AVOID A HEFTY TAX BILL ON UNEMPLOYMENT BENEFITS

To avoid being socked with a large bill come tax time, you can voluntarily choose to withhold a portion from your unemployment benefits so you don’t get stuck with a tax bill or lose out on a refund you were expecting. 

Unless you absolutely can’t manage to pay throughout the year, it’s highly recommended you opt in to withholding a certain amount. The agency that pays your unemployment benefits will withhold a flat 10% to cover all or a portion of your tax bill. 

Once you’ve returned to work, it’s worth making sure you have the correct amount withheld to avoid a surprise bill. Use the IRS tax withholding calculator to see how much you should withhold. 

WHAT ELSE TO KNOW ABOUT UNEMPLOYMENT TAX WITHHOLDING 

Even though the IRS recommends you withhold a certain amount from your unemployment benefits to cover taxes, your wellbeing comes first. Of course, avoiding a big tax bill is preferable, but if money is extra tight, it’s more important to pay your utility bills and keep food in your pantry. You can always work out a way to repay your bill with the IRS later. Better that than letting your fridge go unstocked. 

Are you still unemployed? Take a look at our unemployment resource. We are here to help. If you’re back to work but dealing with a hefty tax debt because of your time away from work, talk to an MMI credit counselor. We may be able to help you address your other debts and bring some balance to your budget.

Chart: States that tax your unemployment benefits

StateTaxes unemployment benefits?If so, how much?
AlabamaNo 
AlaskaNo 
ArizonaYes  Same guidelines as federal
ArkansasYesAK has made an exemption for 2020 and 2021 tax years; income tax range is 2% to 5.5% depending on income
CaliforniaNo 
ColoradoYesFlat income tax rate of 4.5% for 2021, 4.55% in 2022
ConnecticutYesSame guidelines as federal
DelawareYesDE has made an exemption for 2020 and 2021 tax years; income tax range is 2.2% to 6.6% depending on income
DCNo 
FloridaNo 
GeorgiaYesSame guidelines as federal
HawaiiYesIncome tax range is 1.4% to 11%
IdahoYesSame guidelines as federal
IllinoisYesFlat income tax rate of 4.95%
IndianaYesFlat income tax rate of 3.23%; some unemployment benefits may also be tax deductible
IowaYesIncome tax range is 0.33% to 8.53% depending on income
KansasYesSame guidelines as federal
KentuckyYesFlat income tax rate of 5%
LouisianaYesSame guidelines as federal
MaineYesIncome tax range is 5.8% to 7.15%
MarylandYesSame guidelines as federal; 2020 and 2021 tax year exemptions for those with gross adjusted income at or below $75,000 (single) or $100,000 (married filing jointly)
MassachusettsYesFlat income tax rate of 5%; 2020 and 2021 exemptions for up to $10,200 of unemployment benefits if household income is below 200% of federal poverty level
MichiganYesFlat state income tax is 4.25%
MinnesotaYesIncome tax range 5.35% to 9.85%
MississippiYesIncome tax range is 3% to 5%
MissouriYesSame guidelines as federal
MontanaNoUnemployment benefits will be taxed beginning in 2024
NebraskaYesSame guidelines as federal
NevadaNo 
New HampshireNo 
New JerseyNo 
New MexicoYesSame guidelines as federal
New YorkYesSame guidelines as federal
North CarolinaYesFlat state income tax rate of 5.25%; drops to 4.99% in 2022 and continues to drop each year until it reaches 3.99% in 2027
North DakotaYesSame guidelines as federal
OhioYesSame guidelines as federal
OklahomaYesSame guidelines as federal
OregonYesIncome tax range is 4.75% to 9.9%
PennsylvaniaNo 
Rhode IslandYesIncome tax range is 3.75% to 5.99%
South CarolinaYesSame guidelines as federal
South DakotaNo 
TennesseeNo 
TexasNo 
UtahYesSame guidelines as federal
VermontYesIncome tax range is 3.35% to 8.75%
VirginiaNo 
WashingtonNo 
West VirginiaYesSame guidelines as federal
WisconsinYesIncome tax range is 3.54% to 7.65%; a portion of unemployment benefits may be exempt
WyomingNo 

Six Key Benefits of Good Credit

But if you’re new to credit you may not be entirely sure what the fuss is all about. Why exactly do you need good credit? Here are the biggest reasons why you should care about your credit score, and why building good credit is worth the effort.

GOOD CREDIT SAVES YOU MONEY

If you ever plan to buy a house, own a car, and use a credit card to buy anything, you’re going to want to want a high credit score. 

Simply put, your credit score goes a long way toward determining what kind of interest rate you’re going to get from lenders. The higher your credit score, the more faith lenders will have in your ability to pay them back. When lenders feel confident in your ability to pay them back, they’re more willing to offer low interest rates. And the lower the interest rate, the less that loan or line of credit is going to cost you.

Fool.com has a nice breakdown on how your credit score can change your interest rates and what those changes mean in terms of monthly payment and total interest paid over the life of the debt. Someone with excellent credit can expect to pay hundreds less per month and tens of thousands less in total for a mortgage as compared to someone with average or below average credit. If you carry any amount of credit card debt, a high interest rate can be extremely costly. 

GOOD CREDIT CAN HELP YOU LAND A JOB

A recent nationwide survey of hiring professionals found that 25% used credit checks as part of the hiring process. Why? It’s not that they’re looking for your credit score (they aren’t able to see that). Instead, they’re looking for potential red flags.

While you may not think your credit history says much about your ability to do a particular job, if your credit report shows signs of an inability to successfully manage your finances that might be disqualifying for some positions. Ultimately, it may just be another data point to consider when weighing your application against other, similarly qualified applicants.

GOOD CREDIT CAN REDUCE YOUR CAR INSURANCE BILL

Over 90% of car insurance companies review your credit when determining what insurance premiums to charge. Insurance companies, like employers, aren’t interested in your score, but they are interested in the positive behaviors that make up your score. A spotless payment history, for example, makes you seem more likely to pay your auto insurance bill on time every month.

Basically, if you do a good job managing your credit and debt obligations then insurance companies will assume that you’ll also manage your insurance obligations just as well. 

GOOD CREDIT MAKES IT EASIER TO OPEN UTILITY ACCOUNTS

When it come time to open an account for a utility service, your credit report is crucial. You may not think of electricity as a form of lending, but functionally it’s not much different from a credit card: you spend as little or as much electricity as you like each month and at the end of the cycle you get a bill for what you’ve spent.

Utility companies prefer seeing that you’re someone who pays their other bills on time and doesn’t become overextended. The kind of good behavior that raises your credit score also makes you more trustworthy in the eyes of the gas company.

Poor credit doesn’t mean you’ll automatically be denied service, but it will be harder, and you may have to pay a deposit before you can establish an account.

GOOD CREDIT MAKES FINANCIAL RECOVERY EASIER

Whether you’re unemployed for a lengthy period of time or simply coming up short for the month, good credit makes it easier to stay afloat and manage your recovery once things are back to normal. Most importantly, having good credit makes it easier to borrow money at an affordable rate, which makes any debt you accumulate during a setback that much easier to repay when your income has returned.

GOOD CREDIT GIVES YOU PEACE OF MIND

Having good credit doesn’t shield you from every possible problem, but it does take a little bit of that burden away. Which is important, because over half of all Americans report feeling anxious about their finances, with the majority citing debt as their biggest reason for feeling anxious.

So, while good credit isn’t everything, it is a big part of your overall financial health. Good credit can help turn around a difficult situation and make a good situation even better.

How to Calculate Debt to Income Ratio and Why it’s Important to Know

It’s useful for you to know your DTI, too, because it can help you identify whether you need to make changes to your budgeting and spending. The higher your DTI is, the less money you have for other household expenses outside of debt. It’s also a sign that you might have trouble with an unexpected expense and could fall behind on your debt obligations. 

HOW TO CALCULATE YOUR DEBT-TO-INCOME RATIO

Calculating your DTI isn’t hard. It just involves a bit of math and a debt-ratio formula. You can use our Debt-to-Income Ratio Calculator to find yours. 

First, add up your monthly debt payments, such as a mortgage, car loan, student loans, and credit cards. These are formal debt agreements that are different from variable expenses like, say, childcare, groceries, or utility bills. While your mortgage is a debt, rent is not and shouldn’t be included in your DTI ratio.

Divide your total debt figure by your gross monthly income to get the ratio (percentage) of debt to income. To find your gross monthly income, divide your gross annual salary by 12. 

Here’s how the math works for someone with monthly payments for a car loan, student loan, and credit cards, with an annual gross income of $45,000: 

Monthly debts:

  • Car: $250/month
  • Student loan: $500/month
  • Credit cards: $450/month.
    • Total: $1,200/month

Annual gross income: $45,000 ÷ 12 = $3,750 gross monthly income

Monthly debt payment ($1,200) ÷ gross monthly income ($3,750) = 32% DTI 

Keep in mind, lenders calculate your DTI using your minimum monthly credit card payment, not the total you owe on the card

THE IDEAL DEBT-TO-INCOME RATIO 

As a rule, the lower your DTI, the better for you. However, there is no set ideal ratio because if you own a home — a significant debt — your DTI is going to be much higher than if you rent.

However, if you don’t own a home, and you’d like to qualify for a mortgage, it’s a good idea to get your DTI under 40% because anything above 40% could disqualify you from certain mortgage programs (more in a minute). 

HOW YOUR DEBIT-TO-INCOME RATIO AFFECTS YOUR CREDIT SCORE

In short, your DTI doesn’t impact your credit score. Your credit utilization ratio might seem related to your DTI, but it’s a different animal. Credit utilization measures how much of your credit limit you’re using. For example, if you spend $6,000 of your $12,000 card limit, you’re using 50% of your credit (the optimum percentage is 30% or less). That’s credit utilization. It’s a factor in your credit score, but it doesn’t affect your DTI, and the two aren’t directly related. 

The main reason a high DTI matters is that it indicates you could struggle to meet your debt payments consistently. If you start missing payments, then your credit score will almost certainly take a hit. 

HOW TO REDUCE YOUR DEBT-TO-INCOME RATIO IF IT’S HIGH

Really, there are only two ways to reduce your debt-to-income ratio: increase your income or reduce your debt. 

If your day job makes for a full schedule, it might be tricky to increase your income, but people do pick up side hustles for additional income.

Reducing debt might be a better option for bringing down your DTI, particularly if you carry a lot of credit card debt. That means reviewing your spending and cutting back where you can. 

A third option is to downsize — either your house or your car — to a less expensive choice. Moving house isn’t easy, but it might be worth exploring. 

Consolidating your unsecured debts (such as credit cards) can be a way to reduce your monthly payments without having to qualify for a loan. Following a debt management plan, such as MMI’s option, is one way to bring down your monthly payment. 

WHAT TO UNDERSTAND ABOUT DEBT-TO-INCOME RATIO FOR SEEKING A MORTGAGE 

Lenders know, from historical trends, that borrowers with a high DTI tend to struggle to make their payments and are more likely to default on their loans. That’s why lenders often won’t agree to lend to someone with a high DTI — the borrower is too risky to the lender. 

If you’re planning on buying a home, assess whether you’d qualify for a mortgage. These loan programs, for example, require specific limits (2022):

  • FHA loans allow a maximum DTI of 43%
  • USDA loans allow up to 41%
  • Conventional loans allow a maximum of 45% but can be as high as 50% under certain circumstances

It’s important to understand the DTI calculation includes the new mortgage payment. For example, to qualify for an FHA loan, your existing debt and your new mortgage payment must not exceed 43% of your gross monthly income. 

FHA has another ratio, which is called mortgage payment expense to effective income. It’s a simple calculation: new housing payment (principal, interest, taxes, insurance, mortgage insurance, etc.) divided by gross monthly income. This number cannot exceed 31% to qualify for an FHA loan. 

If your DTI is higher than or close to these ratios, you’ll need to make some changes before you can qualify for a mortgage. Reduce your debt, increase your income, or buy a lower-cost house. 

WHAT ELSE TO KNOW

Your DTI is most important when you’re trying to qualify for a loan. It’s not something people necessarily track regularly like their credit score. But it’s still a good idea to periodically review your DTI’s general direction. If it’s increasing over time, that might be a sign that you’re spending more than your income can accommodate, which can quickly become a major problem if unaddressed. 

If your DTI is too high to qualify for a loan or has been steadily growing over time, your best bet is reducing your debt ASAP. A debt management plan is one way, but nonprofit experts can help you review all your options. Begin your free analysis online and receive personalized recommendations today.

When and How to Ask For a Raise at Work

SELF-EVALUATION: DO YOU DESERVE A RAISE?

Of course, we all want to make more money. The question is whether or not you deserve to make more money. And while that may seem like a cold way to look at things, your ability to plead your case with actual facts and figures will go a long way. So, do you have a good case?

Before you make your request, ask yourself the following questions:

  • Do you meet and exceed the expectations of your job description?
  • Are you known as a person who gets things done?
  • Do you take on additional responsibility outside the realm of your job description?
  • Do others look to you for advice and leadership?
  • Are you constantly increasing your knowledge of your industry?
  • Would at least one person at work describe you as indispensable to the company?
  • Do you deliver consistent or exceptional results?

If you can convince your boss that many or all of those statements are true about you and your work, you’ll be that much closer to getting your raise. 

TIPS ON ASKING FOR A RAISE

Even if you feel confident about the quality of the work you do, asking for a raise can be intimidating. Following are some tips to help the process go smoothly.

KNOW YOUR WORTH

When asking for a raise, it’s important to know what you bring to the table. Make a list of your accomplishments and contributions to help strengthen your case.

  • Show quantifiable success (for example, the percentage you have helped increase sales or the amount of money you have helped the company save by implementing a certain procedure). Consider the success of projects you’ve supported. Provide clear numbers if possible.
  • Highlight your unique skills and experience. What can you do that no one else can?
  • Provide positive peer feedback. Emails from coworkers and clients praising your work can serve as social proof that you are worthy of a raise. Did you get a great work review last year? Use it to help show your established history of quality work.

DO YOUR RESEARCH

Consult with others in your industry and conduct research online to find out what the going rate is for your position. Be sure to consider your level of experience, education, and city of residence as all of these factors will have some bearing on salary.

PICK THE RIGHT TIME TO ASK

Before asking for a raise, consider your organization’s finances. It’s often less expensive for a company to pay slightly more for an employee who already knows the job than it is to hire and train a new employee. 

That being said, there are certain times when your company’s finances are tighter than others, and there are times when the budget is more receptive to change. Be sure to take into consideration your employer’s financial outlook when planning to ask for a raise.

LEAVE YOUR NEEDS OUT OF IT

You may have extremely valid personal reasons for why you want or even need to get a pay increase, but those reasons should rarely be part of the negotiation process. Raises are primarily rewarded based on merit and past success. No matter how much your boss may want to help support you, they’ll have a hard time justifying a potential raise if you haven’t earned it in some quantifiable way.

HAVE YOUR ANSWERS READY

Expect follow-up questions. Your boss may want to ask questions about the numbers you provide, the projects you cite, the salary comparisons you use, and anything else that may come up as part of your pitch. Be familiar with any claims you make so that you’re prepared in the even that your boss wants a deeper discussion on those items.

THINK WIN/WIN

The relationship between employee and employer should be based on mutual benefit. When you discuss your salary with your employer, try to keep this balance in mind. Be assertive in asking for what you think you deserve, but leave ultimatums like “give me a raise or I quit” out of the discussion unless you are really ready to move on to a new job. 

Remember that if your company cannot grant your request for a raise right now, increased benefits and vacation time are other “wins” that your employer may be willing to discuss in lieu of a higher salary.

EXAMPLE SCRIPT OF ASKING FOR A RAISE

You should feel free to speak in your own manner, but it may be helpful to practice your pitch ahead of time. You may even want to write it down if that helps (although I wouldn’t recommended reading a prepared statement as part of your pitch).

Here’s a basic template to help you get started:

I appreciate you taking the time to meet with me. I wanted to discuss my recent performance and the possibility of a salary adjustment.

In the past year, I’ve worked on a number of major initiatives that have increased revenue and improved efficiency. My work on [project name] helped us [achievement], and my contributions to [project name] resulted in [achievement].

Considering my expertise, skills, and years with the company, as well as comparable salaries in this region, a salary increase of [desired increase] is fair. Can we make that work?

WHAT IF YOUR EMPLOYER SAYS NO TO A PAY RAISE?

Your employer may decline a salary increase for a number of reasons, which is why keeping the relationship amicable when you are discussing a pay raise is important. A “no” now is not necessarily a “no” forever. Strive to enhance your worth at the company by increasing your knowledge of your industry and broadening your work responsibilities.

Is Buying a House a Good Investment?

A 2021 Lending Tree survey found that 88 percent of Americans would rather own a home than rent. It’s easy to see why: owning your own home represents both freedom and wealth. Owning a space means you can do whatever you want with that space, without needing to run it past a landlord first. And homeownership is a foundational way to build wealth, as most homes increase in value over time.

But buying a home is a massive and expensive undertaking. And with that freedom comes a ton of new responsibilities and potential costs.

HOW DO YOU KNOW IF HOMEOWNERSHIP IS RIGHT FOR YOU? 

The idea of homeownership may be enticing, but when is buying a home a good idea for you? There are a few areas to consider.

WILL YOU NEED TO MOVE AGAIN IN THE NEAR FUTURE?

Buying a home isn’t a lifetime commitment, but unless you’re flipping a property, it may not be in your best financial interest to buy and sell a home in short order. There are the costs associated with closing on a mortgage. So unless the value of your home has already increased (and it may have, depending on the market), you may need to stay in your house for a while in order to avoid losing money on the transaction. 

Additionally, it’s important to note that markets are volatile. During some periods it may be very easy to find a buyer, and during others it may take months or even years to sell your property. Which is why buying a home can be tricky if you aren’t settled, at least for the near future.

CAN YOU HANDLE BEING RESPONSIBLE FOR EVERYTHING THAT GOES WRONG?

Things happen when you own a home. Plumbing problems. Issues with heating, electricity, wildlife, and more. You don’t necessarily have to have the skills to fix all of these problems on your own, but they’re your responsibility. You have to find someone who can fix it and then pay them, because there isn’t a landlord to handle that for you.

DO YOU FEEL CONFIDENT IN YOUR ABILITY TO PAY?

Buying a house is an investment and a commitment. No one plans on defaulting on a home loan, but a large factor in the collapse of 2008 was the thousands (if not millions) of consumers who had been talked into purchasing homes they couldn’t afford. Your financial situation should be the primary consideration when buying a house – not how “good” the market is at that moment.

WHEN IS A HOUSE A GOOD INVESTMENT?

Generally speaking, a house is almost always a good investment simply because home values usually go up over time. That’s not a guarantee, of course, and it’s not the only factor to consider when trying to decide if buying a specific house will be a good investment for you. When weighing your housing options, be sure to examine these key points.

YOU CAN REASONABLY EXPECT THE PROPERTY’S VALUE TO ADEQUATELY INCREASE OVER TIME

While it’s fair to say that most houses will increase in value over time, those numbers rarely move in a straight line. Values fluctuate constantly for a variety of reasons. Prices may suddenly skyrocket due to temporary scarcity in the market. And those same prices may plummet during periods of major economic upheaval. There’s no way to know exactly how much your house will be worth in ten years.

There are, however, trends that develop over time. Home values in particular neighborhoods may rise faster than those in other neighborhoods. Certain styles or sizes of home may be gaining (or losing) popularity.

If you’re thinking of your home as an investment and not simply the place where you keep your stuff (which is a perfectly valid way to look at your home, by the way), then you’ll want to consider all aspects of your home’s potential value. Are there major public works projects on the horizon that may make the neighborhood more or less appealing? Are climate changes making an area more disaster-prone? Consider all of these angles and more before making your purchase.

THE COST OF REPAIR AND MAINTENANCE MUST BE LOWER THAN THE PROJECTED INCREASE IN VALUE

You will inevitably need to sink money into your new home. The amount will vary, depending on the age and condition of the home at the time of purchase. There’s also the possibility that the house will simply be lacking certain features that you desire. 

All of that work will add value to your home. But will it add enough value to become a net positive investment? That’s what you need to figure out. A fixer-upper can be a good, low cost investment or it can be a money trap if you’re not careful. If you’re thinking of your new home as an investment, you need to be mindful of what you spend on upgrades and monthly maintenance. If you put more into a home than you can reasonably expect to get back out once it’s time to sell, then that house may not be a good investment for you.

THE EQUITY YOU CREATE SHOULD BE GREATER THAN THE AMOUNT YOU MAY HAVE SAVED BY RENTING

Few people actually own their homes outright. It’s much more common to take out a mortgage and use the proceeds to buy your home. Over time, you build equity by making payments, narrowing the gap between what your house is worth and how much you still owe the lender.

That equity is key, because even if you never pay off your mortgage in full, it represents a sort of return on your investment. When you sell the house, that equity comes back to you. It’s why so many people favor owning a home to paying rent. You don’t build equity while paying rent.

That said, if renting were cheaper than paying a mortgage (plus the other costs associated with owning a home), you’ll want to verify that the difference isn’t greater than the amount of equity you’re creating each month. It’s probably unlikely that this would be the case, but if there’s chance that the money you save from renting were greater than the equity you earn through owning, that’s something you should consider.

WHEN IS A HOUSE NOT A GOOD INVESTMENT?

If a house costs you more than it earns you, by definition it’s not a good investment. 

More importantly, though, a house is a bad investment when you can’t afford it. Even if the value of the property increases, if the cost of the house puts your monthly finances in jeopardy, then it’s a bad investment. If the cost of the house has you worried that someday you may lose your home, that’s a bad investment. A house should never be a burden.

Can Creditors Freeze My Bank Account?

The simple answer is “yes” they can do that. But before you panic, know that if they do so legally, you’ll have plenty of notice.

REAL PROPERTY VERSUS UNSECURED DEBT

If you have secured debt, like a vehicle or home, you’ll receive notices demanding payment or you’ll be in default. If that happens, they’ll repossess your car or foreclose on your home. But in most cases, they won’t come after your bank account.

Unsecured debts though, like personal loans and credit cards, don’t have that option. There’s nothing for them to repossess so they have to find another way to get their money. And there are a few avenues they can choose to take.

For instance, if you owe money to the IRS, there’s a very good chance they will eventually freeze your accounts and garnish your wages until you’ve paid up. But they will send you plenty of notices to warn you this will happen if you don’t pay. 

If this is your situation, the best option is to contact them and work out a payment plan. As long as you are meeting your payment obligations, they will not go after your bank accounts or wages. If you owe a significant amount, it may be beneficial to get a tax professional to handle negotiations with the IRS; they can often be successful in reducing the penalties and interest that has been added on to your tax obligation.

CAN A CREDITOR FREEZE MY BANK ACCOUNT WITHOUT TELLING ME?

No matter who you owe, there will always be some amount of warning before they take an action as extreme as having your accounts frozen. If you owe money to a credit card company, for example, they must first receive a judgment against you in court before they can freeze your bank account.

This means that they have to serve you with papers notifying you that they are suing you. You will also receive notification from the court as to the date of your scheduled court appearance. You can skip it, but if you do the case will most likely be decided against you. If you attend, you’ll at least have the opportunity to argue your case and maybe reduce the amount you owe or set up a payment plan.

If the creditor receives a judgement against you, they will then have permission to seize your bank account. Depending on the state you live in, your bank may or may not notify you in advance.

HOW LONG CAN A CREDITOR FREEZE MY BANK ACCOUNT?

Once your account is frozen, it goes into a holding period for about two to three weeks. During this time, the money is still in your account, but you are not able to access it. This gives you time to take action of your own, either settling with the creditor or counter-suing them.

Keep in mind; they can only freeze the amount you owe. If your account balance is $5,000 and you owe your creditor $3,000 in debt and court costs, you’ll still have access to $2,000. The frozen funds will remain frozen until the debt is repaid to the satisfaction of court order, the judgment is overturned, or an alternative arrangement is reached.

YOUR OPTIONS

If this happens to you, you have a couple of options. You can contest their lawsuit, especially if you were not properly served. By law, they have to notify you in writing of the court proceedings. If you were not notified, you have grounds to contest. 

Alternately, you can immediately file for bankruptcy. By doing so you can recoup some or all of the money that was frozen if you can have your bank account labeled as “exempt” in your filing. If this is the case, it’s best to hire a bankruptcy attorney.

Ultimately, the best way to avoid these actions altogether is to work with your creditors to come up with a payment plan you can both agree to. It’s not in either side’s best interest to sink money into court fees, so start the conversation as soon as possible.

Two big hurdles keep many Americans from saving for retirement

There are two big reasons for the lack of savings — and one of them is not easily solvable. Many workers don’t have employer-provided retirement accounts, while others simply don’t have anything to save.

“Access to a retirement plan is an important driver — roughly half of American workers don’t have that,” said Craig Copeland,EBRIsenior research associate. “Many workers are low-wage workers throughout their careers and really don’t have enough money to save in a retirement plan. They are trying to pay off debts to just make ends meet.”

No access to an employer’s retirement plan

Traditional employer-based retirement plans are typically not available for contractors, freelancers, gig economy workers, and part-time workers. And only 42% of small businesses with less than 100 employees offer retirement benefits, according to a LIMRA 2019 study.

“Why small businesses don’t offer retirement benefits to their employees is pretty straightforward,” said David Deeds, the Schulze Professor of Entrepreneurship at the University of St. Thomas in St. Paul. “They didn’t need to in order to hire and retain employees in the previous labor market, weren’t required to by state or federal governments, and the perceived costs and complexity (real or imagined) of managing retirement benefits kept at least half of small business from offering retirement benefits.”

Even without a workplace retirement savings plan, those with earned income can still contribute to an IRA, said Greg McBride, chief financial analyst at Bankrate.com.

“You can open an IRA with a brokerage, mutual fund company, your bank or credit union in many cases,” he said. “Have an automatic monthly transfer from your checking account into your IRA to automate retirement savings.”

A handful of states – Oregon, California, and Illinois – now offer auto-IRA state-sponsored retirement savings plans to workers without employer-sponsored plans. Other states are considering crafting similar offerings. These state-facilitated programs automatically enroll workers in moderate risk, low-cost retirement savings accounts called auto-IRAs.

Three-quarters of Americans say they would participate in state-supported retirement programs if offered one in their state, according to a survey by the National Institute on Retirement Security, a nonprofit, non-partisan research and education organization.

“State-sponsored retirement savings plans offer the best chance in the near term to increase the number of Americans with access to payroll deduction retirement savings plans,” wrote David John, deputy director of the Retirement Security Project at the Brookings Institution think tank, Mark Iwry, senior fellow in Economic Studies, and William Gale, director of Brookings’ Retirement Security Project, in “Wealth After Work,” which explores solutions to help all Americans gain access to retirement savings accounts.

It’s not a foolproof way to get workers to save. For instance, for the Oregon plan that began in 2017, about one-third of eligible workers opt out.

How to Use Charity Care Programs to Reduce Your Hospital Bills

For patients with no health insurance, limited coverage, or insufficient savings, a stay in the hospital can be financially devastating.

If you’re staring at an unexpectedly huge hospital bill there may be some relief available to you in the form of “charity care.”

WHAT IS CHARITY CARE IN HEALTHCARE?

Charity care is another term for financial assistance and relief programs offered by hospitals to their patients. These charity care programs are intended to help reduce costs for patients by providing discounts or waiving some fees outright.

DO ALL HOSPITALS OFFER CHARITY CARE?

Thanks to the Affordable Care Act (ACA), all nonprofit hospitals must offer some form of financial assistance or charity care to their patients. Failure to provide this assistance could result in the loss of their nonprofit status.

According to the most recent data available, approximately 57% of hospitals in the United States are nonprofit, so there’s a better than 50/50 chance that your hospital has a federally-mandated charity care program. And if your hospital isn’t a nonprofit? You may not be out of luck. Many for-profit hospitals also offer financial assistance programs.

DO I QUALIFY FOR HOSPITAL CHARITY CARE?

While the ACA mandates that nonprofit hospitals offer financial assistance programs, it leaves the parameters for those programs up to the individual hospitals. This means that you’ll need to consult with your local hospital and review their policy to know whether or not you might qualify for relief.

That said, most programs are based on income and your household’s relationship to the federal poverty level (FPL). Once you know the requirements for your hospital, you can use this FPL calculator to see if your income is within the necessary threshold to be eligible for aid.

HOW DO I APPLY FOR CHARITY CARE FROM MY HOSPITAL?

It’s important to begin the application process as soon as possible. While aid may still be available even after your bill has gone to collections, you’ll make your life easier by beginning the process as soon as you’re able (which may mean starting before you’ve even left the hospital).

FIND YOUR HOSPITAL’S CHARITY CARE POLICY

The ACA requires that nonprofit hospitals not only offer financial assistance, but also that they post information about this program online. Unfortunately, the requirements don’t go much further than that.

Some hospitals will be more transparent than others when it comes to their charity care policies. You may be presented with information as soon as you check in. You may have to dig through their website. If you don’t receive information upfront, your best bet may be to use your search engine of choice and enter the name of the hospital and “financial assistance” or “charity care.”

If you prefer, you can call the hospital directly and ask for information. Many hospitals have dedicated team members available to discuss your bill and talk you through your options, including any available charitable care programs.

PREPARE AND SUBMIT YOUR CHARITY CARE APPLICATION

The requirements will be different for every hospital, but you should expect to complete an application and submit some supporting documents. These documents will be used to verify for your need and may include pay stubs, previous tax returns, unemployment benefits statements, and more.

Be sure to follow the directions and provide all the required information. Failing to submit required documents may delay your application or get your request denied outright.

You may also have to submit the completed application via fax or mail, depending on the hospital. It’s an inconvenience, but hospitals are rarely set up to handle these kinds of requests entirely online.

One last tip: include a letter, even if it’s not required. Charity care programs tend to be much more flexible than loan applications. Even if you’re slightly outside of the normal requirements, you may still be able to successfully argue your case. Provide any necessary details that may not be included in your application. If nothing else, it always helps to remind the people reviewing these cases that you’re a real human and what this help would mean to you and your family.

IF REJECTED YOU CAN STILL APPEAL

It may take a few weeks (or months if your hospital is backlogged), but eventually you’ll get a decision. If your application is denied, you’ll receive information about why you didn’t qualify. In most cases, you should also receive information on appealing the decision. Be sure to appeal – it may mean more work, but it’s worth it if the payoff is cutting thousands off your hospital bill.

WHAT IF MY CHARITY CARE APPLICATION WAS REJECTED?

If your appeal is also denied, you may want to look elsewhere for assistance. There are many organizations out there that specialize in connecting patients to financial resources. Here are just a few:

  • DollarFor.org is an organization dedicated to advocating for patients with overwhelming medical debt. If you’re not having much luck on your own, they may be able to help.
  • Good Days supports patients with certain chronic and life-altering diseases. Review this list to see if they’re accepting new enrollments for your specific condition.
  • HealthWell Foundation provides funds to offset the cost of copays, policy premiums, and other out-of-pocket costs.
  • PAN Foundation is another organization that connects patients to funding for specific conditions and may be a good resource if your hospitalization was connected to one of these conditions.

If you’ve exhausted all of your options on the medical side, you may want to look for ways to reduce other debts or increase your income. If you’re feeling unsure about where to turn, consider speaking with a nonprofit credit counselor to discuss your options.

How to Prepare for the End of COVID Student Loan Forbearance

That pause on payments has been extended several times, most recently in late December 2021 with student loan forbearance now scheduled to end on May 1, 2022. That gives borrowers time to prepare before they need to resume making loan payments sometime after May 1. Here’s what to know — along with some tips if you’re still struggling financially.

CREATE A NEW BUDGET WITH YOUR STUDENT LOAN PAYMENT 

Start by logging into your loan servicer’s portal to review your payment due date, payment amount, and interest rate. If you don’t recall who your servicer is, you can find out by logging into your account at studentaid.gov. 

Next, review your income and monthly expenses. You may need to make adjustments in other expense categories to account for your loan payment and bring your expenses in line with your income. 

READ ALL CORRESPONDENCE FROM YOUR LOAN SERVICER! 

Watch for paper statements and emails in the next couple of months and be sure to respond if it’s required. If you moved or changed your email or phone number during the student loan pause, be sure to update your contact information in your loan servicer’s portal and the studentaid.gov portal. 

RE-AUTHORIZE AUTO-DEBIT

If your loan payment was auto-debited, it may not start again automatically. If you haven’t made any payments during the student loan forbearance period, you’ll need to re-authorize your loan servicer to resume auto-debit payments. Some servicers may allow you to set it up and authorize online — check your servicer portal to see what’s allowed.

DETERMINE IF YOU NEED A REDUCED PAYMENT

If your income is lower than it was before the pandemic, the first step is to explore options for adjusting your student loan payment for your lower income level. You may qualify for a reduced payment through an Income-Driven Repayment Plan (IDR).

Log into your studentaid.gov account and find the loan simulator. Run the simulator to see what your loan payment would be on different IDR plans and which ones you’re eligible to use. If you find a plan that offers a more affordable payment, you can apply through studentaid.gov or contact your loan servicer. 

If you were already on an IDR plan before the pandemic but your income has decreased further, you don’t have to wait for your annual recertification date to recertify to a lower payment. You can ask your servicer to review your current income for a new payment. There’s an IDR application process at studentaid.gov. 

AN INCOME-DRIVEN PLAN CAN HELP EVEN IF YOU’RE UNEMPLOYED 

Even if you’re unemployed (or have a very low income), IDR plans offer relief. Some plans offer payments as low as $0 and still count as a payment. Also, on some IDR plans, the U.S. Department of Education subsidizes (pays for) the interest for the first three years — or even indefinitely, depending on whether you have subsidized or unsubsidized loans. Income-driven plans are worth exploring as a first option. Use the loan simulator at studentaid.gov or contact your loan servicer for help. 

CONSIDER ANOTHER TYPE OF POSTPONEMENT

If an IDR plan does not work for your situation, the next option to explore is deferment. That’s a temporary postponement of payments. There’s also forbearance, a temporary reduction or postponement of payments. Your eligibility for either will depend on the type of hardship you’re experiencing. 

Generally, deferment is available to borrowers coping with economic hardship, unemployment, cancer treatment, or being called to active-duty military service. Forbearance is available for financial difficulties, medical expenses, change in employment, or other reasons your loan servicer will consider. 

For borrowers with subsidized loans, deferment is preferable to forbearance because interest doesn’t accrue on subsidized loans. It does accrue on unsubsidized loans, however, and on all loans in forbearance status. To qualify for either, you’ll need to determine the eligibility criteria and consider if the temporary postponement helps more than an IDR plan. 

Review eligibility criteria at “Get Temporary Relief” on studentaid.gov or contact your servicer to discuss. It’s best to reach out before May 1, 2022, to ensure any changes are determined before payments are due. 

STUDENT LOAN FORGIVENESS ELIGIBILITY

You might be eligible for federal student loan forgiveness or discharge under a few different programs or circumstances, but it’s all in the details. Usually, forgiveness is tied to working for a certain kind of employer, like an eligible 501c3 nonprofit, or working in a public service job. 

One program is Public Service Loan Forgiveness. The PSLF program forgives the remaining balance on certain federal loans after borrowers make 120 on-time payments in a qualified IDR plan. As part of the CARES Act, the federal government gave borrowers credit for each month of loan forbearance as if they were making payments toward both the PSLF program and the IDR plans. In other words, all those months of no payments since March 2020 count as payments for PSLF. 

Another program is Teacher Loan Forgiveness. If you’re working toward that, the CARES Act waived the requirement that your teaching service be consecutive years of service if your service was temporarily interrupted because of the pandemic. 

Finally, if you were permanently and totally disabled during the suspension, you may complete a Total and Permanent Disability Discharge application via DisabilityDischarge.com. 

MORE BUDGET IMPACT: CHILD TAX CREDIT EXPIRATION

The expanded Child Tax Credit under the American Rescue Plan expired on Dec. 31, 2021. This means if you’re a borrower with children at home, you won’t continue to receive $250-$300 per child per month — unless there’s additional action from Congress. That loss may impact your budget significantly. It’s important to create a budget that accounts for your student loan payment’s added expense as well as the possible loss of child tax credit payments if they end.

TACKLE NON-STUDENT LOAN DEBT

Finally, if credit card debt is taking up a significant portion of your monthly budget, consider focusing on repaying this debt – particularly if you have limited options for your student loans. A debt management plan can help accelerate your repayment and create significant savings in the process.

Whichever path you choose, be sure to act quickly and not wait until you’ve begun to feel overwhelmed by your debt payments.

Yearning to travel in 2022?

“We have five trips for this year in the planning phase,” says Brill. “We’ve basically decided there is no budget constraint.”

Brill is lucky. He’s a retired pharmacist who lives in Finksburg, Maryland, and he’s been saving his pennies for travel. The pandemic and the surprise delta variant helped him save even more.

“My wife and I desperately want to get back to traveling,” he says.

He’s not alone. Allianz’s latest Vacation Confidence Index showed that summer vacation spending hit $150 billion in 2021, a new high. “And 2022 should be even bigger,” predicts Daniel Durazo, an Allianz spokesman.

Households earning over $100,000 a year have about $1.4 trillion to spend on discretionary items such as remodeling homes, local trips, and now more long-haul destinations, according to AAA’s research.

“Americans have more discretionary funds since they did not spend much in 2020 and 2021 because of the pandemic,” explains Paula Twidale, senior vice president of travel for AAA.

But how do you figure out your travel budget for this year? And what are some of the expert strategies for building a better vacation budget? Just as the pandemic changed travel, so also has the conventional wisdom on travel budgeting.

How to calculate your 2022 travel budget

Not everyone has an unlimited travel budget. This year, Thomas Mustac is planning a weekend trip to see one of his favorite bands, the Red Hot Chili Peppers. It’s a quick weekend trip to Hungary from where he lives in Croatia, so he’s allocated $300 for it, not including the tickets.

“I think one of the biggest budgeting mistakes is bringing exactly how much money you need,” says Mustac, who works remotely for a communications firm in Orlando. “You are risking that worst-case scenario.”

Laurel Barton is watching her budget, too. She’s making plans to travel to Europe next fall and is already looking for inexpensive plane tickets. So far, she’s had no luck. She likes to fly business class on long-haul flights, but prices keep rising.

“So the budget is blown from the start,” says Barton, a guidebook author from Forest Grove, Oregon.

That’s not stopping her from going, though.

“Our mantra is, ‘Postpone nothing,'” she says.

There are ways to figure out what you can afford. The personal finance company Quicken offers a free Vacation Budget Calculator on its site. Add your travel expenses and the number of people, and it comes up with a total and per-day vacation cost. The calculator is useful for remembering items that are easy to overlook, like ground transportation and travel insurance.

But experts and travelers tell me the best way to determine how much to budget for your 2022 vacation is to look at past trips. How much did you budget for those? How much did you actually spend?

Expert advice for travel budgeting next year

“The first thing you need to consider with your 2022 travel budget is the potential increase in fares and hotel rates,” says Baruch Silvermann, a financial expert and CEO of The Smart Investor newsletter. “As domestic travelers returned to air travel, fares increased.” In 2022, that could also happen with hotels and international fares. Silvermann recommends booking early, when prices are relatively low, to avoid going over budget.

Another tip: Add some padding to your travel budget. Jeffrey Zhou, an experienced traveler who runs a financial services company, says having a little extra in the vacation budget can keep you out of trouble when things go wrong.

“Plan for the worst-case scenario,” he advises. “Put enough money aside so that you could easily buy an extra plane ticket for each person you’re traveling with. For most domestic budgets, this would be about $300 per person.”

Actually, it’s better to overestimate your expenses for 2022, according to Silvana Frappier, owner of North Star Destinations, a full-service travel agency in Boston. Most travelers don’t think about the law of supply and demand.

“Travel has changed, and with more demand for safety and restrictions, prices will be higher,” she says.

But whatever you do, make sure you have a budget. Even open-ended trips should have some kind of plan, according to experienced travelers.

Ahmed Mir, the managing editor of a beverage website, is planning a tour of Southeast Asia this year but hasn’t decided where to go yet.

“I’m budgeting about $5,000 for the travel, not including the airfares,” he says. “I think this is a pretty reasonable amount, given that exchange rates against the dollar are generally favorable, so my budget will probably allow me to travel in comfort.”

Understanding Credit Card Interest Rates

Not so fast.

Before you sign up for a credit card, be sure you carefully review the fine print, especially if you have poor credit and are working to improve your credit score. The credit card agreement’s terms will become part of a legal agreement between you and the creditor. You’ll want to know those details, including: 

  • What annual percentage rate is being offered and if it expires after a promotional period.
  • How the lender calculates the interest.
  • Any fees you’ll owe due to balance transfers, late and/or missed payments, or other violations of the credit card agreement. 

The first step is understanding the APR and how it works.

WHAT IS APR?

The APR is the rate of interest that a credit card company charges you in exchange for lending you money. APR is important because it’s used to calculate how much your credit card debt is going to cost you above and beyond the account balance itself. The higher the APR, the more interest you will pay on balances you carry month to month.

In its most basic form, your APR determines how much interest will accrue after one year. For example, let’s suppose the APR on your credit card is 25 percent. If you have $1,000 in credit card debt, a 25 percent APR would end up costing you $250 in interest over one year. 

In reality, calculating credit card interest is rarely that simple.

HOW DOES APR WORK? 

Credit card companies usually calculate interest daily, making your daily periodic rate a more realistic number for determining how much you’ll pay in interest. To calculate your daily periodic rate, divide the APR by 365 (the number of days in a calendar year). As an example, the daily period rate on a credit card with a 25 percent APR would be 25 ÷ 365 = 0.068 percent (or 0.00068 in decimal form). Some lenders use 360 instead of 365, and the math changes accordingly. 

When credit card companies calculate interest daily, here’s how the arithmetic works on a credit card with an APR of 25 percent (daily periodic rate of 0.00068) with the following balances and a 30-day billing cycle:

  • Balance of $10 for 29 days
  • •alance increases to $800 on day 30
  • Calculate the average daily balance:
    • $10 x 29 days = $290; add $800 x 1 day; $290 + $800 = $1,090; 
    • Divide $1,090 ÷ by 30 (the number of days in the billing cycle) = $36.33 average daily balance
  • Multiply the average daily balance of $36.33 by the daily periodic rate of 0.00068; $36.33 x 0.00068 = $0.025 
  • Multiply $0.025 x the 30 days in the billing cycle; 0.025 x 30 = $0.75 in interest

HOW TO SHOP FOR A GOOD APR ON A CREDIT CARD WHEN REBUILDING CREDIT

If you’re looking for a new card but you have poor credit, you’ll need to shop around, then compare and evaluate the credit card offers available to you. In general, the lower the interest rate you can get, the better.

Start by checking the current average credit card interest rate, which as of late November 2021, was just over 16 percent.

With a low credit score, you may not qualify for the lowest APR offers because lenders will consider you a higher risk. If you’re trying to improve your credit to get better interest rates in the future, you may want to consider a secured credit card, which is backed by a cash deposit that acts as collateral should you miss a payment.

Whatever type of credit card account you open, a key step to rebuilding your credit is to avoid missing any future payments and do your best to stay in good standing by paying on time. As your credit score improves, so will the credit card offers that you receive.

WHY CREDIT CARD APR CAN INCREASE

Some credit cards come with low/no interest introductory periods. These rates are temporary by design and your APR will increase once the promotional period is over.

Your APR may also increase if you fail to follow the terms of your credit card agreement, most commonly by missing a payment. Each lender sets its own rules and guidelines. The agreement will list the APR for your account and the reasons why a credit card issuer can change the APR and/or charge fees. 

If your APR increases, look at what your agreement says about violating the terms, such as making a late payment or not making a payment at all. Some lenders may reinstate your previous APR if you get your account current by making the minimum payment (or more) by the monthly due date for a certain period of time. With other lenders, the inflated APR may be permanent. If you’re not sure after reviewing your agreement, contact your credit company and ask.

HOW TO MANAGE A HIGHER APR

If the increase in your APR is permanent, you have a few options:

  • Transfer the balance to a different account. If you have another credit card with a lower interest rate, you may be able to transfer the balance (for a fee). Read the agreement or call the credit company to ask what they can offer. 
  • Open a new credit card that accepts balance transfers. Carefully review the agreement for the new credit card to be sure it offers a lower interest rate and that you understand the terms for the APR, fees, etc. 
  • Pay off the balance and stop using the card. If you can’t bring down the APR, work to pay off the balance as expediently as you can. After that, just don’t use that card anymore. Canceling a credit card is one way to prevent future use, but keep in mind that closing an account, especially one you’ve had for a long time, may cause your credit score to drop because the age of your accounts is part of the calculation in most credit scoring models.

HOW TO PAY OFF MULTIPLE CREDIT CARDS WITH DIFFERENT APRS

If you carry over balances every month or have hit your credit limit on more than one credit card, you’ll want to develop a strategy for paying off the cards and improving your credit.

Two popular strategies are known as “snowball” and “avalanche.”

To use the snowball strategy, begin by identifying the credit card with the smallest balance. Then follow these steps:

  • Pay the minimum amount due on your other credit card accounts.
  • Put anything extra toward repaying the smallest account.
  • Once the smallest account is paid in full, move to the next smallest account.
  • Use whatever extra you were paying on the first account toward the next one.
  • Continue working from smallest to largest until your biggest credit card debt is paid off.

The avalanche strategy takes a different approach by focusing on the credit card accounts with the highest APRs, which cost you more on a per dollar basis.

To use the avalanche strategy, start by identifying which of your credit cards has this highest APR. Then, follow similar steps as the snowball strategy: 

  • Pay the minimum amount due on your other credit card accounts.
  • Put anything extra toward repaying the account with the highest APR.
  • Once the highest APR account is paid in full, move on to the account with the next highest APR. 
  • Use whatever extra you were paying on the first account toward the next one.
  • Continue working from highest APR to lowest until all your credit card debt is paid off.

Many people working to get out of credit card debt find the snowball strategy to be more satisfying, in part because it creates more budget flexibility as each debt is repaid and those payments are no longer necessary. However, targeting high interest debts will save you money in the long run. You’ll need to evaluate your options and pick the approach that works best for your situation.

IF YOUR CREDIT CARD BILLS ARE TOO MUCH TO HANDLE

Unfortunately, the people whose APR increases due to a missed payment are often those who can least afford to have their rates go up. If your credit card payments are too much to handle, talk with an MMI credit counselor to see if a debt management plan (DMP) could help to get you out of credit card debt. 

DMPs offer a structured repayment program in which you make a single payment to a nonprofit credit counseling agency (such as MMI) which disburses funds to your creditors on your behalf. Your creditors are often willing to work with a DMP and reduce your interest rate as you work to pay your debts. The average APR for accounts included on a DMP with MMI is less than 7 percent.

How to Organize Your Personal Household Finances

BUILD YOUR FILING SYSTEM

Start out with your household filing system. And yes, you may end up with two filing systems: one for physical paperwork and one for digital documents. Of course, you can bring everything together by either printing or scanning documents as needed, but that’s ultimately up to you. The important thing is that you create a system to hold and categorize your important pieces of paperwork.

It’s helpful to have folders set up for each major category—some examples include: health, job, banking, credit cards, taxes, investments, home, automobiles, insurance, major purchases, and other loans. On a weekly basis, review all of the documents that have arrived in the mail or landed in your inbox and sort everything into these folders. While some items can be thrown out (after being shredded), you’ll want to save insurance papers, receipts for major purchases, account statements, pay stubs, health forms, and anything related to your taxes. 

Also: create a folder for the current year taxes. Having everything in one place will make things easier come tax time.

SEPARATE YOUR BILLS

Household bills—anything that’s waiting to be paid—should be filed using a separate system. Sort your bills by due date and add them to the folder of the month they are due. You can also track bills in a personal finance program, spreadsheet, or with a money management app.

It’s best to pay household bills on a weekly basis, although if you only have a few bills, you can pay them bi-weekly or monthly. Online bill pay systems are a great way to stay organized, save money on stamps, and get your payments cleared quickly. Otherwise, you’ll need to make sure that you write and mail your checks well in advance of the due date so that you aren’t charged a late fee.

CLEAN YOUR FOLDERS REGULARLY

On a regular basis, either semi-annually or annually, go through each of your folders and clear out anything that’s no longer needed. If any of the folders are getting too full, separate them out by year, and store newer information in the front of your file drawer, so that it’s more accessible.

How long should you keep your documents? Depends on the document. Most tax documents should be kept for at least seven years. Receipts for major purchases and title information should be kept for as long as you have the corresponding item. Statements and other documents that are received on a monthly basis can be tossed after a year (or less).

While organizing can take some time in the beginning, having all of your financial information sorted appropriately will make day to day bill paying and home financial management easier for you.

Freezing Your Credit Can Protect You Against Identity Theft

The biggest reason consumers reported for not freezing their credit was because they didn’t think it was necessary. To a lesser degree, some respondents (11%) avoided putting their credit on ice because they mistakenly believed it will impact their credit score or that they’ll have to pay to freeze or thaw their credit.

Of the 73% of consumers who believed their personal information had been impacted by a data breach, only 3% froze their credit after receiving a data breach notice, the survey found.

“A credit freeze is generally considered the most effective tool to prevent new accounts from being opened in your name,” Eva Velasquez, President and CEO of the ITRC, said in a press release announcing the survey results. The online survey took place last summer and covered 1,050 U.S. adult consumers.

Here’s what to know about freezing your credit:

What is a credit freeze?

Putting a freeze on your credit halts access to your credit report, so bad actors won’t be able to open a new credit account in your name. They’re completely free.

The process also blocks you from opening up new accounts. But don’t worry if you want to apply for a new rewards credit card or other type of credit — you can lift the freeze temporarily to do so, the Federal Trade Commission explains.

When should you freeze your credit?

Hackers just won’t quit. By the end of September, the number of publicly reported data compromises in the U.S. had already surpassed the total number of compromises in 2020 by 17%, according to the ITRC.

By now, you may be familiar with the notifications companies send out when they’ve been breached, like the note the popular trading app Robinhood sent to users last month when millions of people had their emails or full names exposed, and around 310 had their birthday and zip codes exposed in a data breach.

If you are notified that your data has been compromised — or if you lose your wallet — it’s a good idea to protect your information by freezing your credit so that criminals can’t use the stolen information to open a new account in your name.

Who Qualifies for Student Loan Forgiveness?

As of late 2021, more than 43 million Americans owe an average of $39,351 in student loans. If you are one of them and struggling to make your loan payments, you’ll want to understand what options are available for student loan forgiveness and how to find out if you qualify.

WHAT IS STUDENT LOAN FORGIVENESS?

The term “loan forgiveness” means the borrower is no longer required to repay some or all of their loan. Eligibility is usually determined by the type of job the borrower holds and the type of student loan they have.

Student loan forgiveness is generally a component of an assistance plan for borrowers who cannot make payments on the standard, 10-year repayment plan that’s part of their loan agreement. Typically, a borrower will pay the least in interest — and repay their loan the fastest — by following their 10-year standard plan. You can save money and pay off the loan even faster by putting more money, such as a tax refund, toward your student loan. 

If you cannot make your loan payments and want to explore repayment options, visit studentaid.gov and use the loan simulator to input your situation and see loan repayment options. The loan simulator will calculate estimated payments for all the federal repayment plans for which you are eligible. Once you have considered the pros and cons of each option, you can determine the best fit and enroll if you would like to proceed.

HOW TO GET FEDERAL STUDENT LOANS FORGIVEN

The U.S. government offers several student loan forgiveness programs for federal student loans, and each program has different eligibility requirements. These programs are not automatic. It’s up to you as the borrower to identify what program you may be eligible for, then work through enrollment requirements.

TEACHER LOAN FORGIVENESS PROGRAM

This program forgives principal up to $17,500 on certain federal loans after borrowers have taught for five complete and consecutive years in low-income schools. Loan forgiveness amounts are either $5,000 or $17,500 depending on the teaching field and other criteria. Teacher Loan Forgiveness is not taxable in the year forgiven under current IRS rules. 

  • Learn more about the Teacher Loan Forgiveness Program, including eligibility requirements and how to apply.

PUBLIC SERVICE LOAN FORGIVENESS PROGRAM

This program is designed to help borrowers who have large student loans but earn less working in the public service or for 501c3 nonprofits than they could earn in other sectors. For those who qualify, the PSLF program forgives the remaining balance on certain federal loans after borrowers have made 120 on-time payments on a qualified repayment plan. However, whether a borrower will have a loan balance after making 120 payments depends on many factors, including their income and the size of their loan debt; some borrowers may not have a balance left to forgive. 

The PSLF program has many variables, including the types of federal student loans you have, the repayment plan you selected, and the type of job you hold. PSLF forgiveness is not taxable in the year forgiven under current IRS rules.

  • Learn more about the Public Service Loan Forgiveness Program, including eligibility requirements and whether you qualify.
  • Use the loan simulator on studentaid.gov to determine whether PSLF may be a good option for your circumstances.
  • If you are considering applying for PSLF or wonder if you qualify and you have been making payments on your student loan for some time, take time to review the PSLF waiver information. The U.S. Department of Education recently announced changes that could help more borrowers qualify for PSLF. The waiver program is only available through Oct. 31, 2022, so applying now is a good strategy, even if you aren’t sure if you will complete the PSLF process. 

PERKINS LOAN CANCELLATION

Prior to 2018, universities extended Perkins Loans to students with exceptional financial need. Perkins Loans are no longer offered, but borrowers continue to make payments on their balance. These borrowers may qualify for Perkins Loan cancellation based on their profession and a formula that forgives a certain percentage of the loan balance for each year of service. Cancellation of a Perkins Loan typically forgives up to 100 percent of the loan balance over 4-5 years of employment or volunteer service in fields including teaching, medicine, and law enforcement. 

  • Learn more about Perkins Loan cancellation.
  • Contact your university for more information on Perkins Loan cancellation.

INCOME-DRIVEN REPAYMENT FORGIVENESS PROGRAMS

The federal government offers several income-driven repayment plans for various types of federal student loans. These programs are designed for borrowers who have low salaries relative to their student loan balances and don’t earn enough to make payments under a standard repayment plan. 

Under an income-driven repayment forgiveness plan, a borrower makes lower payments for 20 or 25 years (depending on the plan and types of loans). At that point, any remaining loan balance will be forgiven. However, making payments for 20 or 25 years may mean that the total amount you repaid is significantly more than what you would have paid on the standard plan. In addition, the amount forgiven is generally taxable income under current IRS regulations, although the American Rescue Plan provisions make discharge of remaining balances exempt from taxation through 2025.

  • Learn more about income-driven repayment plans and how to submit a request.
  • Use the loan simulator on studentaid.gov to determine whether what loan forgiveness options may work for your circumstances.

FORGIVENESS PLANS FOR CERTAIN PROFESSIONS

There are state and federal plans that assist in repaying or forgiving student loan debt for certain professions. Several programs provide loan repayment or forgiveness for military service for those in medical and legal professions. In addition, some state programs provide partial repayment of federal and/or private loans for borrowers in medical, legal, and teaching professions. 

ARE FORGIVENESS PROGRAMS AVAILABLE FOR PRIVATE STUDENT LOANS? 

Private loans are a contract between the lender, such as a bank, and the borrower. In general, private student loan servicers have not offered loan forgiveness. Some may offer loan short-term forbearance – a temporary postponement or reduction in your payments – but may charge you a fee. To explore what’s possible, contact your private student loan servicer to discuss options. 

Some employers or state grants or programs may provide repayment assistance for private loans. To find out, check with your employer and the student financial aid agency in your state.

WHAT STUDENT LOAN FORGIVENESS PROPOSALS ARE UNDER CONSIDERATION?

Given the size and scope of student loan debt in the U.S., public officials are continuing to review options for providing relief. For example, on Oct. 6, 2021, the federal government announced a temporary expansion of the PSLF program to allow borrowers to receive credit for payments that previously did not qualify for the program. 

On Nov. 11, 2021, U.S. Secretary of Education Miguel Cardona noted that recent reforms to the forgiveness process would result in over 30,000 veterans and service members seeing an estimated $2 billion in student loans forgiven in the immediate future. These reforms include automatically crediting service members for their years of service (removing the need to complete and submit paperwork) and expanding the credit to include the time when loans were in deferment or forbearance due to active military service. 

For income-driven repayment options, the U.S. Department of Education is reviewing the implementation of the Expanded Income Contingent Repayment Plan, but details are not yet available.

WHERE CAN I CHECK FOR UPDATES ON STUDENT LOAN FORGIVENESS?

Always check studentaid.gov, run by the Office of Federal Student Aid within the U.S. Department of Education, as the most accurate and authoritative source of information and updates about federal student loan forgiveness. Many private websites provide information, but their details may not be correct or up-to-date, and those organizations may be selling services related to student loans. 

For information and updates about state programs for student loan forgiveness, check the student financial aid information website for your state.

Are Debt Collectors Allowed to Text Me?

Text messages, along with emailing and direct messages on social media, are allowed as part of an update to the Fair Debt Collection Practices Act (FDCPA). The rule changes were drafted and implemented by the U.S. Consumer Financial Protection Bureau (CFPB) to modernize the guidelines first issued more than 40 years ago, well before text, email and social media existed.

THE NEW RULES REQUIRE A WAY TO OPT OUT

To contact you by text, debt collectors must follow two basic requirements (which also apply to phone calls, email, and social media DMs):

  • They can only get in touch during reasonable hours, 8am to 9pm.
  • Every message must include instructions for a simple, easy-to-use way you can opt out of receiving future communication through that method.

Beyond those two rules, there’s no limit on the number of texts a debt collector can send you. To be prepared, it’s important to know your rights and your options, including ways to make sure the message is really from a debt collector and not a scam artist.

IF YOU GET A TEXT ABOUT A DEBT, VERIFY IT’S LEGITIMATE

Like every other form of communication, texting has become a tool of choice for scammers looking to fool recipients into sharing personal and financial information. 

If you receive a text purporting to be from a debt collector, do not share personal or sensitive information via text message, especially if it’s from someone you do not know. Instead, ask for validating details so you can confirm the debt and the person texting you are legitimate.

Under the CFPB rules, debt collectors must provide details that validate a debt, either at the first point of contact or within five days after the first conversation. The validation information they send you must include:

  • The name of the current creditor
  • Instructions on how to obtain contact information for the original creditor if the debt has been sold
  • The amount of money owed

In addition, you should request the name and contact information for the collection agency in case that’s different from the current creditor.

If the debt information is not familiar, the next step is to get a copy of your credit report, which will list any current debts that you owe. Every consumer is entitled to receive a free copy of their credit report each year from each of the major credit reporting bureaus. Visit annualcreditreport.com to request your free copy.

Once you get your credit report, check to see if the debt cited in the text message is on the list. If it’s there, look for the name of the collection agency that contacted you. If that agency is listed, it’s very likely the debt and the debt collector is legitimate. 

But what if the collection agency isn’t listed in the credit report, or something about it seems off? In that case, contact the original creditor to ask if the debt was sold or for the name of the firm contracted to collect on the debt. If your debt was sold multiple times, you may need to trace back each change of hands to make sure you end up speaking with the right collection agency.

HOW TO COMMUNICATE WITH DEBT COLLECTORS

If you’ve validated the debt and confirmed the debt collector who texted you is legitimate, you can decide if and how to respond. Options include:

  • Continuing the conversation via text message
  • Calling the debt collector directly 
  • For larger debt collection agencies, using their website chat tool to communicate with representatives

Most debt collectors will allow you to set up a repayment plan. If you’re able to make a lump sum payment, you may want to negotiate a debt settlement for less than the full balance, which the debt collector may be willing to accept depending on your type of debt.

An important step to take before a conversation is understanding your state’s statutes of limitations on debt. Each state has its own laws detailing how long you are legally responsible for old, unpaid debts, and it’s worth your time to do a bit of research to be informed about your situation. 

Whatever way you choose to communicate, be sure to take notes about each exchange, including who said what and any agreement you reach. If you agree to a settlement or repayment plan, ask for the full details in writing so you have confirmation of it.

KNOW YOUR RIGHTS: WHAT TO DO IF DEBT COLLECTORS DON’T FOLLOW THE RULES

If a debt collector continues to text after you have opted out, keep a record of your interactions with that person – the dates, times, and messages exchanged. That record will support your case if you decide to file a complaint, which you can do at the federal or state level: 

  • The Federal Trade Commission, at reportfraud.ftc.gov
  • The Consumer Financial Protection Bureau, at consumerfinance.gov/complaint
  • Your state’s attorney general at consumerresources.org/file-a-complaint (click the map for your state)

TO MAKE YOUR CASE, BE SURE TO SUBMIT THE FOLLOWING INFORMATION:

  • Your record of interactions with the debt collector 
  • The date and time of when you opted out of text message, ideally with screenshots showing the request submission

Lastly, keep in mind that conversations with debt collectors can be challenging. Don’t allow yourself to be bullied or pushed around. 

Remember that you have rights, and debt collectors must follow the law. While it’s perfectly normal to feel guilty or downhearted about having debt in the collection process, your situation is more common than you may realize – and no one deserves to be treated poorly as a result.

Understanding Your Credit Score

he higher your credit score, the lower the risk you represent to the lender. That’s important because the best terms and interest rates will be offered to applicants with scores in the higher ranges.

While two people with very different credit scores might both be offered a loan, for example an auto loan, the person with the low score might be required to have a substantial down payment and be offered a much higher interest rate than the individual with the high score. The person with the lower credit score is going to pay more for the use of credit than an individual with a high score.

WHAT IS A GOOD CREDIT SCORE?

FICO, the company that created the most widely used credit score, has a score range of 300-850. FICO provides the following ranges as a guide:

Credit Score RangesRating
<580Poor
580-669Fair
670-739Good
740-799Very Good
800+Exceptional

Lenders usually have internal lending guidelines and set their own ranges for what they consider to be “poor,” “good,” or “excellent” credit scores. Their ranges may, or may not, match FICO’s guide.

HOW IS A CREDIT SCORE CALCULATED?

While the exact formula that FICO uses to calculate a credit score is proprietary, they have identified the five key factors, in order of how they are weighted:

  • Payment history: 35%
  • Amounts owed: 30%
  • Length of credit history: 15%
  • New credit: 10%
  • Types of credit used: 10%

Bear in mind that your credit score is a snapshot in time and may fluctuate from month to month depending on your circumstances. Don’t focus on the exact score from month to month, but rather where your number falls within the ranges. 

HOW TO CHECK YOUR CREDIT SCORE

If you don’t have a recent credit score, it’s a good idea to get your current number – especially if you’re about to make a major purchase and don’t want any surprises. You have several options for getting your score.

Check first with financial institutions, creditors, and commercial companies where you have accounts. They often provide credit scores to customers for free, sometimes with a requirement that you sign up for certain services like identity monitoring. If you don’t have access to a free credit score, you can purchase your credit score from FICO at myfico.com.

HOW TO GET YOUR CREDIT REPORT

FICO and other organizations that issue credit scores calculate your number using information from your credit report, which is handled by three national credit bureaus – Experian, Equifax, and TransUnion. To better understand your credit score, you’ll need to review your credit report.

You can get a free copy of your credit report from each of the credit bureaus once per year by submitting a request through AnnualCreditReport.com. Typically, you can only get a copy of each credit report for free one time per year, but there are exceptions:

  • If you are denied credit, the Fair Credit Reporting Act requires that credit bureaus provide you with a free copy of the credit report used in the decision.
  • Due to the COVID pandemic, the three credit bureaus are making free credit reports available weekly through AnnualCreditReport.com until April 20, 2022. This access has been very helpful for making sure creditors are reporting accurately based on various COVID pandemic relief requirements of the federal CARES Act and American Rescue Plan.

HOW TO REVIEW YOUR CREDIT REPORT

Once you get your credit reports, review the information for each credit entry carefully to check it for accuracy. If any information is inaccurate, you can dispute it through the credit bureau’s website. If you see items on your report that you believe are fraudulent, you could be a victim of identity theft. If you believe you are a victim of identity theft, visit the  Federal Trade Commission website to learn how to recover.

HOW TO HANDLE NEGATIVE ITEMS IN YOUR CREDIT REPORT

If you have some negative items in your credit report, those items will most likely not be removed for at least seven years from the date the negative activity occurred. Making payments on time going forward will continue to improve your score, and lenders typically give greater weight to more recent history. 

It might be tempting to close some of your credit accounts, but in most cases, keeping credit accounts open is likely to help you, not hurt you. While potential creditors do look at the amount of outstanding credit you have available, they also look at the length of your credit history, as well as your credit utilization. Closing older, lesser-used accounts actually can impact your score in two ways:

  1. by decreasing the length of credit history and 
  2. by increasing the percentage of your total credit you are using. 

New credit, which is one of the factors used in calculating the score, includes the number of recent account inquiries as well as the number of new accounts opened.

HOW TO IMPROVE YOUR CREDIT SCORE 

If your credit score isn’t in the range you’d like, there are no shortcuts to improving the number immediately. However, applying good credit practices over time can help bring up your score. Here’s are key steps to take:

  • Make payments to creditors on time and in full. This is the most impactful way to improve or maintain your credit score. Make at least the minimum payment, if not more. Be sure to make payment by the due date because payment history is 35% of your credit score calculation.
  • Take care of any delinquent payments. If you have missed payments that are considered delinquent, it is important to make up those payments as soon as you can and stop the reporting of delinquent status. While not all creditors report on time payments, they do report payments that are delinquent. They also consider the length and severity of delinquencies.
  • Make sure that you aren’t using the full credit limit available to you. The amount of money you owe relative to your credit limits on revolving debt is called your credit utilization. It makes up 30% of your credit score calculation. A high level of credit utilization can push your credit score down, even if you are paying off your balances in full each month. If you have high balances compared to your credit limit, focus on paying them down to improve your credit score over time.
  • Report different types of financial data. For a fee, alternative credit-building services can provide the credit bureaus with your payment history for expenses including rent and utilities, and that can make a positive impact on your credit score. Be sure to review pricing to ensure these services are worth the cost within your circumstances. 

HOW CAN A DEBT MANAGEMENT PLAN HELP IMPROVE MY CREDIT SCORE?

For consumers who are struggling with credit card debt and have a low credit score, a debt management plan can help you rebuild credit and contribute to improving your credit score over time. 

While there is no immediate way to get a higher credit score, MMI has found that consumers who enroll in a debt management plan and follow it see improvement within the first year, then see continuing gains as their payment history improves and their credit utilization goes down.

To determine how a debt management plan might impact your credit score, MMI reviewed multiple years of anonymized data for clients we have worked with. Here’s what we found:

  • Clients who enrolled in a DMP – and stayed enrolled – had a 43-point average increase in their credit score over the first year.
  • Those clients saw a cumulative 62-point average increase in their credit score over two years.
  • Clients who completed a debt management plan saw their credit score increase an average of 88 points

MMI clients who received one-time debt counseling, but who didn’t do a debt management plan, also saw improvements, although not as much:

  • An average 23-point increase over the next year.
  • An average 37-point increase over two years.

HOW TO GET HELP REBUILDING CREDIT AND YOUR CREDIT SCORE

If you’re struggling with credit card debt and looking for a way to improve your credit score, we can help. A debt management plan sets up a strategy for you to make consistent monthly payments to your creditors. Some creditors may choose to bring accounts enrolled in a debt management plan to “current” status despite previous missed payments, and that change is shared with the three credit bureaus. 

Making consistent payments, stopping delinquent status, and paying down credit cards will all make a positive impact on your credit report and your credit score over time.

One Common Finance Question:

You’d probably assume that once a debt is charged off and handed over to a debt collector, the balance won’t change. In fact, quite a few people intentionally allow accounts to land in collections in the hopes that they can settle the whole thing for less than what’s owed. So it’s pretty upsetting to learn that yes, in certain circumstances debt collectors are within their rights to continue adding fees to your debt after they’ve purchased it.  

HOW TO DETERMINE WHAT YOU ACTUALLY OWE TO A DEBT COLLECTOR

While it’s possible that the debt collector has been within their rights to add fees to your debt, you shouldn’t just take their word for it. The first thing you need to establish is the details of where the debt came from, how much it was originally, and how it got to be the amount it is now. 

The Fair Debt Collection Practices Act (FDCPA) requires that all debt collectors provide written validation of the debt they’re attempting to collect. This means they need to give you all of that information within five days of making first contact with you.

If you don’t think the amount of debt is correct, you can send a written dispute to the collection agency. All collection activities should stop until they’ve responded to your dispute. 

However, once they’ve provided you with a document outlining all of the fees and interest charges that caused your debt to continue swelling, post-charge-off, the ball is back in your court. Which leads to the next question: are those fees and interest charges legal? 

Unfortunately, yes, they are.

COLLECTION AGENCY FEES – WHAT ARE LEGAL?

Debt collectors can charge you interest, up to the maximum amount outlined in the original contract. It’s generally listed as the “penalty rate” in credit card contracts and it can soar past 30 percent, depending on the creditor. 

Often states will cap the amount of interest a debt collector can charge, but those caps are for accounts that do not explicitly state a maximum interest rate (like a medical debt). 

If the collector has validated the debt and shown you that the increased charges are legitimate, your next best step is to either work out a repayment plan or ask about the possibility of removing the extra fees in exchange for a full, one-time payoff of the original debt. You need to remember that debt collectors purchase old debts for pennies on the dollar. If the debt was $190, they likely purchased it for 60 percent of that. If the debt’s been sold multiple times, this collector likely paid even less. They may say no, but often they’ll be happy to collect what they can and be done with your account.

How Much House Can I Afford?

Before you begin the home buying process, however, it’s vitally important that you understand exactly how much money you can afford to spend on a house. While it can be a bit heartbreaking to find the home of your dreams, only to discover that’s out of your price range, it’s considerably worse to actually buy a house and then find out that you can’t actually afford to live there.

So how to go about setting your homebuyer price range?

DETERMINE HOW MUCH MORTGAGE YOU QUALIFY FOR

To determine how much you can realistically afford, you’ll want to determine how much you will have for a down payment. In general, you will need to have at least 10 percent of the home’s price for a down payment. If you want the best loan terms, you should aim to have at least 20 percent for a down payment. 

When making lending decisions, banks also consider the cost of housing in comparison to your income. Your monthly housing expenses, including your mortgage, taxes, and insurance should be no more than 28 percent of your monthly income. Of course, your other debts also play a factor. In general, lenders want your total debt-to-income ratio – which includes things like credit card debt, child support payments, and student loans – to be no more than 36 percent.

On top of all of that is your credit history. The better your credit score, the higher the likelihood that you’ll qualify for a mortgage with reasonable terms. If your credit is average or poor, you may be able to overcome that with a long employment history and strong source of income, but the mortgage will likely be much, much more expensive. This may mean bring down the total loan value that you can qualify for.

If you’re ready to start house-hunting, you may want to begin by mortgage shopping first to see if you can get pre-approved and up to what amount. 

UNDERSTAND THE NON-MORTGAGE COSTS OF OWNING A HOME

One of the many reasons why some people prefer to own a home instead of rent an apartment is that the money you spend on your mortgage payment each month goes toward creating equity in your home. It’s a form of investment and should you someday sell your home, you’ll get some of that money back. You might even make money in the process. Money spent on rent, however, doesn’t earn you any equity.

But what rent often does get you, however, is maintenance. It gets you repairs for normal wear and tear. If a pipe bursts and the ceiling in your apartment needs to be replaced, it’s going to cost a lot of money – but it won’t cost you a lot of money. 

So while your mortgage will almost certainly be your biggest expense as a homeowner, it won’t be your only expense. You’ll have new taxes to worry about. You’ll have water and trash bills you may not have paid before. You’ll need to hire your own plumbers and HVAC specialists. You’ll need to buy lawnmower or hire someone else to take care of your lawn or trim your trees. You may want to install a security system. Oh, and homeowners’ insurance is going to be more expensive than renters’ insurance.  

Those costs will all be different depending on where you live and various aspects of the house you ultimately buy, but it’s important that you consider those costs and how they’ll all fit into your budget before you start house-hunting.

HOW MUCH SHOULD YOU SPEND ON A HOUSE?

Ultimately, the final selling price of the house isn’t the issue; it’s how much the house costs you each month. There’s no firm number that everyone has to follow, but based on averages, it’s usually in your best interests to never dedicate any more than 35% of your total budget to housing expenses

Again, your personal circumstances may be different, but once you’re spending more than a third of your available money on housing, you run the risk of becoming “house poor.” This means that you may no be able to balance the costs of maintaining your home with all of your other needs.

Owning a home is a great joy for many people, but it can be a terrible challenge when the cost of living in a house is more than you can afford. Do your research and happy house-hunting!

How to Negotiate Your Debt

Now, when it comes time to repay your debts, your first thought may be, “Do I really have to pay all of this back?” 

The answer to that is, “Well…it depends.” 

It is possible to negotiate down certain debts, but there are a lot of conditions to consider. Here’s what you should know:

ACCOUNTS IN GOOD STANDING ARE DIFFICULT TO NEGOTIATE

Your credit card company is very unlikely to offer to forgive any amount of your debt, especially if your accounts are current. Same goes for most lenders, especially when the loan is secured with real property (like a house or a car). There’s really no incentive to let you pay less than what you owe.

If you’re struggling with your payments, some creditors may be able to offer some form of short-term hardship program, and some may even be able to reduce your interest rate if you make the request, but if you’re hoping to get your debt reduced or completely absolved, there’s not much chance of that happening. 

YOU MAY HAVE MORE LUCK NEGOTIATING ONCE A DEBT HAS BEEN CHARGED OFF

Once a debt has become severely delinquent, the creditor will likely charge off the debt for their own tax purposes. It’s important to note that you’re still responsible for the debt. After the charge off, the original creditor may sell the debt to a third party, which will begin making efforts to get you to pay them for the debt. 

Because they purchased your debt for less than what’s owed, a debt collector is much more likely to be willing to discuss a reduced payoff of your debt. This is called a settlement.

THE MORE YOU CAN PAY AT ONCE, THE LESS YOU’LL HAVE TO PAY IN TOTAL

The goal for debt collectors is to maximize the profit on any given debt. But they’re also trying to earn that profit as quickly as possible. Time is money, after all. While many will let you make monthly payments, they’ll almost always accept less in total if you can make a large enough one-time payment.

So while they’d prefer to get the full amount, as long as they can exceed their investment most debt collectors are very willing to talk. Keep this in mind when attempting to negotiate with a debt collector. They probably won’t agree to a settlement that results in a loss for them, but if the choice is between making a small profit or nothing at all, they’ll probably be able to work with you.

NEGOTIATE SERVICE COSTS UPFRONT IF POSSIBLE

Medical and service-related debts usually have more leeway for negotiation. That doesn’t mean private practices or large hospitals will definitely forgive portions of your debt. It just means that there’s a general recognition that medical debts are often overwhelming and many patients need assistance repaying those debts. 

The best time to talk about pricing and repayment options is actually before any procedure has been performed, but that’s often not possible, especially in an emergency situation. 

Once you’ve received a bill and verified with your insurance that the amount you owe is accurate, contact the applicable billing department and discuss the situation. Many hospitals have hardship programs to help defray the cost of medical expenses, in which case you may need to provide certain documents and complete the required paperwork. 

Whatever caused the debt in the first place, if you don’t feel like you’ve got the financial ability to repay everything that you owe, take the time to speak with a certified financial counselor. There may be a solution available that you hadn’t considered. At the very least, a trained counselor can help you understand your options and walk you through the steps you need to take to reach your goals.

Which Debt Should You Pay Off First?

Finding the answer just takes a little time to get organized and crunch a few numbers. Here are the steps to help you determine which debts should be getting your attention right now.

FOCUS ON “BAD” DEBTS FIRST

Debt has different categories, and yes, there is such a thing as good debt. A mortgage or loans for education are generally considered “good debt” because they’re investments of a sort. Your home has value (and may gain value over time), and an education helps increase your earning potential. In addition, some of this debt is tax-deductible, which creates less of a tax burden. As long as the rates on these types of debt are reasonable and you’re able to continue to pay on time, these debts don’t need to be at the top of your pay off list.

Bad debt isn’t so much debt that’s evil, as it’s just debt with some character flaws. This is the kind of debt you’ll likely want to pay off first. These debts include credit cards, unsecured personal loans, medical debts, and more. These debts cost you money without representing a clear, continued benefit. They also usually come with higher interest rates than mortgages and student loans.

EXPLORE REFINANCE AND CONSOLIDATION OPTIONS

Mortgages and student loans are usually not the debts you’ll want to prioritize, because they’re investments, and perhaps more importantly, because the interest rates on these loans are usually much, much lower than other kinds of debt.

But while you may not want to focus on either, it’s important to keep in mind that both come with variety of refinance and consolidation options. If debt is a problem, and you can’t balance your monthly expenses because your debt repayments are too high, you may want to consider refinancing or consolidating debts where possible. Refinancing your home or your student loans may not accelerate your repayment, but there’s a good chance it may help make your month-to-month budgeting a little easier. 

USE MATH TO DETERMINE WHICH DEBT WILL BENEFIT YOU THE MOST TO PAY OFF

Paying off debt with a high interest rate before anything with a low interest rate will allow you to save money in the long-run. Paying $500 towards a loan with an 18 percent interest rate will be far more beneficial than paying $500 towards a loan with a 5 percent interest rate.

Paying off a debt with a higher interest rate first may not be the best priority every time, though. You may want to consider targeting debts with lower balances. This can serve two purposes – first, it frees up money to direct towards other debts, and second, it feels pretty great to pay off an account. Don’t discount the mental boost you can get from clearing a few of your smaller debts away before focusing on the big ones.

When determining which of these debts to pay off first, consider all factors. What is your interest rate? How much will you end up paying if you take longer to pay it? And can it be paid fairly quickly if you focus on that debt above others?

CONSIDER YOUR CREDIT SCORE

Another consideration in deciding what to pay off first is how it will affect your credit score. If you have a large purchase coming up (home or car) that you’ll need a good credit score for, paying down credit cards that are near their limit will likely improve your overall score. Improving your debt ratio can not only improve your credit score, it can help to lower the interest rate on any new loans.

CONSIDER CREDIT COUNSELING

Whatever debt you decide to pay off first, create a plan and budget for the extra payments. Staying focused and sticking with your payoff plan will help you get all of those bad debts paid off sooner.

If you’re feeling stuck or just need a second opinion, don’t hesitate to connect with a certified credit counselor. Nonprofit credit counseling is free and provides direct advice and crucial education to help you make the best decision about your debts.

How to Manage and Pay Off Debt When You’re Unemployed

But there’s probably one big question on your mind: How do I manage my debt? 

There are several steps to take if you are dealing with debt and unemployment:

APPLY FOR UNEMPLOYMENT BENEFITS

While you may earnestly want to keep up with your bills, if you don’t have the necessary income, it’s almost impossible to keep making payments on your debts. When your paychecks are paused, reduced, or cut off entirely, it’s important to consider your cash flow and how you can keep at least some money coming in.

Chris Tuck, a CFP® and wealth advisor at SJK Wealth Management, explains, “Claiming unemployment benefits is a great way to make sure that you are able to pay your current bills.”

The rules for unemployment vary by state, but you’ll want to file for unemployment as soon as possible. Even though the benefit amounts are based on a percentage of your previous salary, every dollar counts when you’re dealing with debt payments and other monthly expenses.

The first step is to file with your state and contact the State Unemployment Insurance agency.

CREATE TEMPORARY INCOME IF POSSIBLE

It may be difficult to immediately replace your primary source of income. While you work on getting back into a fulltime position, you may want to consider temporary or part-time positions to help create at least some income.

A good place to start would be flexible side hustles with low start-up costs. If you have a car, you can sign up for a rideshare program or work part time as a delivery driver. Whatever you can do to safely bring in income will help increase your options and make managing your debts a little easier.

ASK ABOUT STUDENT LOAN FORGIVENESS FOR THE UNEMPLOYED

If you have student loans and you’re temporarily out of work, you may have options. Most federal student loans are eligible for some period of forbearance or deferment

As soon as you know that your income will be reduced, connect with your loan servicer to discuss available options and begin the application process. While deferment may add additional interest costs and both options will increase the length of time spent repaying your loans, both options will provide immediate financial relief and prevent your loans from falling into delinquency.

ASK ABOUT CREDIT CARD HARDSHIP OR DEFERMENT PROGRAMS

The more you can do to pause your debts during unemployment, the better. While the overall goal is to eventually pay everything off, once you start missing payments and becoming delinquent, paying off a debt gets harder and harder. 

That’s why you should reach out to your creditors before you start missing payments. They may be able to place you on a hardship program or a temporary deferment. They also may not be able to help at all. You won’t know until you reach out for help, though, so check in with your creditors as soon as possible.

UNDERSTAND WHAT YOU CAN AFFORD

Whether or not you can continue to make payments on your debts will depend largely on what your budget says. If you have adequate savings and at least some amount of income thanks to either unemployment benefits or a temporary position, you may be able to safely continue making your payments. 

It’s important that you set your priorities and spend accordingly. If you have no income and minimal savings, for instance, you probably can’t afford to spend money on anything other than the essentials. Remember that the safety and wellbeing of you and your family comes first. That means shelter, food, and good health come well before credit card payments. 

If you need help understanding what you can afford, consider speaking with a certified credit counselor. Counseling is free and designed to help you understand the best ways to reach your financial goals. If you’re feeling overwhelmed, a confidential, judgment-free session with a credit counselor is a great first step. 

EXPLORE ALL OF YOUR OPTIONS

The ideal option is usually to keep making payments in full every month until your debts are all gone. Unfortunately, when your income is compromised this option may be impossible. Depending on how long you’re unemployed, you may find that a debt management plan or debt settlement make sense for your situation. Or it might be that bankruptcy makes sense for you. 

“It’s not often that we advise bankruptcy, but the laws exist for a reason,” says Tuck. It can be a difficult process to navigate and it will likely damage your credit deeply, but that doesn’t mean it isn’t right for you. “Sometimes it is the only viable option,” says Tuck.

DON’T LOSE HOPE

Debt and unemployment can be a difficult combination, especially when you’re confused about what steps to take. As you navigate the nuances of debt and unemployment, don’t lose hope. Even if it doesn’t feel like it in the moment, you’ll make it through.

Warning Signs Someone is in Debt

“Obviously I want to believe him when he says he doesn’t owe debt right now,” the writer goes on to say, “but it’s pretty obvious I have my doubts because I am asking you for advice. Why do those letters come? Is he in debt right now? How much debt does one accumulate and for how long before those letters start coming?”

WHAT DO CREDIT CARD DEBT RELIEF LETTERS MEAN?

It’s understandable to be concerned about a loved one who’s previously struggled with debt – especially if they’ve been inclined to try and hide their problems in the past. However, letters simply promoting some form of debt repayment program are not a clear indication of a current problem.

“Credit card relief” is often (but not always) another way to say debt settlement. Companies offering debt settlement or credit card relief to consumers who have struggled with debt in the past are essentially just advertising their services to the population most likely to need those services. It has nothing to do with someone’s actual current circumstances. Keep in mind, a debt settlement company does not have the right to pull someone’s credit report, so there’s no way for them to know who is in debt and who isn’t.

It is possible, though, that the debt settlement company sent these letters as the result of a direct inquiry from the consumer. The family member in question may have contacted the settlement company looking for information about the solutions they offer and received the letters as a result. If this were the case, obviously it would be an indication that they are at least concerned about their debt.

CLEAR WARNING SIGNS OF DEBT PROBLEMS

Everyone’s experience with debt (and shame, for that matter) looks a little different, so the signs of a growing problem with debt will differ from person to person. That said, there are a few common signs that someone you care about is struggling with debt.

RECEIVING COLLECTION LETTERS OR PHONE CALLS

Here’s the part of the article where I remind everyone that you really shouldn’t be going through someone else’s mail. Stealing mail and tampering with mail are both felony offenses. And while there’s no law against taking a good long look at the unopened envelope of a letter addressed to someone else living in your house, you should always strive to do your best to respect the privacy of others.

That said, if you notice a loved one has started receiving letters from companies you can identify as collection agencies, that’s an indication they may be struggling with debt. If they begin receiving multiple phone calls a day that they either ignore or hang up on immediately, that could be a sign that someone is attempting to collect on an unpaid debt.

SPENDING DOESN’T MATCH INCOME

Assuming you have some sense of a loved one’s financial situation, you can probably tell (without knowing all the details) when their spending seems out of line with their means. If you they make lavish purchases that seem well beyond what they can normally afford, or if you know for a fact that their income has dropped (or stopped outright) but they continue to spend as normal, those can both be warning signs that they’re leaning on credit and creating debt.

BECOMING EVASIVE ABOUT FINANCES

Personal finance can be a very personal subject. Quite a few people don’t like to discuss the coming and going of their money. If you’re concerned about someone’s debt situation, what you’re really looking for is a change in how they talk (or don’t talk) about money. If they seem overly defensive about purchases or more closed off than usual, that may be a sign that something is wrong.

CONTINUALLY ASKING TO BORROW MONEY

We all hit hard times and there’s nothing particularly odd or worrisome about a trusted loved one asking to borrow money to help them through a difficult time. Routinely asking to borrow money, however, is a major red flag. At the very least, continually asking for money suggests a major problem that needs to be investigated. 

If you have reason to believe that someone you care about may be struggling with debt, your best bet is to simply let them know that you’re there, that no one is judging them, and that help is available should they need it.

How to Rollover a Retirement Account

If you’ve transferred jobs more than once, you may find yourself with several retirement accounts at various employers. So what do you do about all these old retirement accounts?

DECIDE WHAT OPTION BEST SUITS YOUR NEEDS

You usually have four options when it comes to managing old retirement accounts. You can leave the accounts alone (assuming that’s allowed by your old plan); you can move the accumulated assets into your new account (assuming that’s allowed by your current plan); you can cash out the old account (understanding there will likely be penalties involved); or you can roll it all into an IRA.

Rolling over your retirement accounts into an IRA (Individual Retirement Account) is often the best bet. Not only does this consolidate your assets into one place, making them easier to keep track of, but IRAs usually offer more investment options and flexibility than a 401(k). Rolling over to a 401(k) can be a bit tricky, and if you do it incorrectly, you may find yourself paying a penalty.

Make sure you understand your options and the consequences of each before making your decision. Consider speaking with a retirement specialist if you need additional guidance.

FIND A BROKERAGE FIRM

You’ll want to select a brokerage firm, so be sure to do some research before deciding which firm you’d like to use. 

If you already have retail accounts, you may want to open your account with the same firm. In some instances, you might even be eligible to receive discounts if your assets are over a set minimum amount. Ask about fees, including low balance fees and annual fees, and choose an account with features that best serve your needs.

CONTACT THE PLAN ADMINISTRATOR TO INITIATE THE ROLLOVER

Once you’ve chosen a brokerage company and opened the account, contact the plan administrator for the plan in question and ask for a direct rollover. With a direct rollover, the proceeds of your 401(k) account will be sent directly to the IRA trustee rather than you. This saves you some money, because if the funds were sent to you, tax withholdings would be kept, and you may be subject to a penalty.

PICK YOUR INVESTMENTS

Once the money arrives in your new account, you may want to meet with your brokerage firm to decide how to invest your money. With an IRA, you usually have a good deal of flexibility with your investment options, so you’ll want to develop an investment strategy that supports your goals.

When you rollover your account, you may be tempted to use the assets to pay current debts. Keep in mind that by using retirement assets for current spending, you’ll not only jeopardize your retirement security, you’ll also be subject to tax withholding and (often very steep) penalties.

Here’s how Social Security’s looming shortfall could affect your retirement plans

Social Security’s surplus reserves are expected to run out in 2033, one year earlier than previously estimated, according to the Trustees of the Social Security and Medicare trust funds. That means the entitlement program will only be able to pay out 76% of scheduled benefits at that time if nothing is done to boost the fund.

“People who are looking to retire in their early 50s or in the next 10 or 15 years can probably expect less than 80% of that benefit,” Kristen Carlisle, general manager of Betterment for Business, told Yahoo Money.

The economic fallout brought on by the pandemic changed Social Security’s funding outlook. Employment, earnings, interest rates, and GDP dropped significantly last year and will recover gradually over the next two years. The pandemic also elevated the mortality rate, slowed the birth rate, and reduced, all of which affected the shortfall projections, the report said.

hat’s only exacerbated the already hamstrung agency.

“Social Security has been paying out more than they’ve been taking in,” Scott Thoma, retirement strategist at Edward Jones, told Yahoo Money. “At some point in time, there won’t be any reserves left for them to pull from.”

Thoma said the government can enact the same levers it pulled four decades ago like increasing the full age of Social Security eligibility and payroll taxes, but it’s a matter of prioritization and the country’s other pressing problems.

“There’s a lot of things that they see that are higher near-term priorities,” he said. “It’s not like it’s not an issue. It’s just a 2033 issue versus a 2021 issue.

Assess your retirement savings

Americans should factor the potential reduction into their retirement plans. Financial experts encourage a retirement plan stress test for multiple outcomes relating to health, employment, and living expenses, and when to file for Social Security benefits, which should be treated as a supplement to savings.

“[Social Security isn’t] going to be the sole cushion for you after you stop working,” Carlisle said. The program was conceived to provide for only 30% to 40% of your pre-retirement income and not fully support retirement, Carlisle said.

Considering the average individual Social Security benefit is around $1,500 monthly — or $18,500 annually — the average per year would equal $14,060 after the 24% benefit reduction. That’s a loss of nearly $90,000 over the course of a 20-year retirement.

To calculate what your benefits will look like after the estimated reduction, use your Social Security statement. Take the estimated monthly benefits based on the different filing ages and then reduce it by a quarter, Thoma suggested. That figure is what you can expect per month.

If that’s not enough — in addition to your own savings — savers over 50 can contribute more than the annual maximum to their retirement accounts, known as catch-up contributions. Younger savers should take regularly contribute as much as they can to employer-sponsored plans or IRAs or Roth IRAs that can be set up independently.

“You want to make sure that you’re taking advantage of retirement programming as it exists before you turn 50,” she said.

How to Manage Unexpected Medical Bills

While unpaid medical bills can harm your credit and cause potential legal issue if left unaddressed, there is often some flexibility when it comes to repayment. And unlike most credit card and loan debt, medical debt rarely accrues any sort of interest charges or penalties. If you’re stuck with a large medical bill, take the following steps to help bring down the cost and create a repayment plan that fits your budget.  

REVIEW MEDICAL BILLS FOR ACCURACY

If you are facing significant medical debt, the first thing you should do is to review all of the medical bills to make sure they are completely accurate. Check dates of service, as well as the services performed and the doctors performing them. Don’t be afraid to ask your provider to walk you through the bill and explain all the charges. Healthcare often involves a lot of moving parts and personnel, so there’s always a chance that items have been entered incorrectly.

If you find anything that’s incorrect, ask that the charge be investigated and, if not valid, removed from your bill.

REVIEW YOUR INSURANCE POLICY TO SEE WHAT’S COVERED

Next, you should verify which charges were (or were not) covered by your insurance. Were any of your claims denied? Does your policy have an out-of-pocket cap and have you met it yet?

To ensure that you’re getting the most out of your insurance, you’ll really need to understand the terms of your policy. If something doesn’t seem to add up, contact your insurance provider for more information. If you believe that a claim was denied incorrectly, you have a right to appeal the denial. There are some simple errors, such as incorrect billing codes, that can cause your insurance to reject the claim. There’s a good amount of legwork involved, but ensuring that you’re getting the maximum insurance coverage possible is an important way to keep your medical bills in check.

CONTACT YOUR MEDICAL PROVIDERS TO SEE IF YOU ARE ELIGIBLE FOR AN ASSISTANCE PROGRAM

Once you know exactly what your true financial obligation is, contact your medical providers to see if there is any assistance available. Many hospitals offer assistance programs to can help reduce your bills. Unfortunately, you usually have to ask to find out if you are eligible. 

You should also ask about available payment options – you may be able to negotiate a long term payment plan that works better for your budget.

AVOID BORROWING MONEY TO PAY MEDICAL DEBTS

It may be tempting to put your medical debt on a credit card, but that’s not usually a good idea. As noted before, medical debt is usually interest-free, so the debt itself isn’t costing you additional money. Once you move the debt onto a credit card or loan, however, you’ll almost always start accruing interest charges, meaning you’ll be paying both the debt and the new interest charges on the debt. 

Perhaps worse, though, you may also no longer be eligible for financial assistance or payment options from your medical billing company once you’ve already “paid” the debt by putting it on your credit card. If you have to borrow money to pay a medical debt, it’s likely better to wait and see what you can work out with the provider first before paying anything.

Easy Side Hustles With Low Startup Costs

If you’re looking for an easy side hustle to start earning extra money, the first question you may ask yourself is, “What kind of side hustle can I afford to start?” After all, most freelance work is going to require some form of investment on your part.

Fortunately, there are quite a few side gigs out there that don’t require a lot of money, materials, or equipment upfront. Here are a handful of side hustles that require very little investment to start:

DOG WALKING

If you love pups, why not consider taking up being a professional dog walker? All you need is some experience with dogs, dog leashes, doggy poop bags, and a sturdy pair of sneakers. Since you’ll be walking (it’s right there in the name), you’ll also want to be in relatively good shape. Dog walking platforms such as Wag! and Rover make it easy to open an account and set up a profile.

Once you land your first few reviews, you’ll have an easier time landing more gigs. You can get a dog walking certification if you’d like to boost your credit, but it’s not necessary to get started. According to Glassdoor, the average hourly wage for a dog walker on Wag! Is $16 and $17 if you’re a dog walker for Rover.

HOUSE SITTING

Want a change of scenery and get paid for it? Sites such as Nomador and Trusted Housesitters have listings of homeowners that are looking for a solid, reliable people to watch over their homes while they’re away on vacation or business trips. All you need is a clean record, strong communication skills, and a pleasant demeanor. Of course, any prior experience house sitting or watching over pets is a bonus.

FOCUS GROUP PARTICIPANT

Want to get paid for voicing your political views, or for test-tasting a new brand of chewing gum? The eligibility requirements depend on the study, but if you fall within a certain age, gender, or ethnicity, you could make some easy money for being part of a focus group.

Depending on the type and length of the study, you could be raking in anywhere between $50 to $200 a study. Check out opportunities to participate either online or in person on Focus Group or 20|20 Panel.

ONLINE PAID SURVEY

Similar to being part of a focus group, you can side hustle by taking paid surveys. You can earn either cash or gift cards, and can rake in anywhere from $5.00 to $30.00 a survey. Fair warning: They can get tedious pretty fast. And you can either sit for a stretch of time or break up surveys into smaller chunks.

Earning a decent chunk of change is definitely a matter of volume — the more you do, the more you earn. The best part of online surveys is that you can do them in the comfort of your home, relaxing in a pair of sweats, and on your own time. Popular online survey sites include Swagbucks, Survey Junkie, and CashKarma.

FOOD DELIVERY

You don’t need a car to deliver food from restaurants to businesses and people’s homes. While having your own set of wheels could certainly come in handy, many popular food delivery services, such as DoorDash, Postmates, and Grubhub, allow you to deliver food via scooter or bike. You’ll just need a method of carrying the food around.

What’s nice about food delivery is that if you like staying busy, you can also stagger with other “easy” side hustles, such as being a rideshare driver.

BABYSIT

Do you go “ga-ga” for babies? Then consider taking up babysitting. You can scour local listings on sites such as Care.com or Urbansitter. You’ll need to be reliable, responsible, and have a way with children. If you have a certification in CPR or disaster training, it could make you a more attractive kid-sitter. But besides having some experience caring for children under your belt, you probably don’t need a lot of equipment or supplies to get started.

Taking up a side hustle with relatively little investment upfront makes it easier to get the ball rolling. What’s more, you can test out the waters. If you don’t want to continue pursuing a particular side hustle, you won’t have to worry about having put in a lot of resources and time upfront. You can try out a bunch of side hustles to see which ones are most profitable or jive best with you.

What Happens When You Get Evicted?

As a result, tenants who are behind on their rent could soon be facing off with their landlords to prevent being kicked out of their homes.

As of the first week of July, nearly 6.4 million households were behind on rent. That’s about 15% of all renter households and represents an estimated total back rent of $21.346 billion, according to the National Equity Atlas. That works out to an average of $3,300 per household.

At the height of the pandemic, 19% of all rental households were behind on rent. The original eviction moratorium plus all its extensions have prevented an estimated 2.45 million eviction filings since the beginning of the pandemic, according to the Eviction Lab.

What the eviction process is like

At risk renters can take a small bit of comfort from the fact that evictions don’t happen overnight. There is a lengthy legal process that varies depending on the state, and sometimes the county or city, you live in.

While the timeline and certain details will differ by location, the general process looks like this:

For renters facing eviction due to lack of payment, the legal process to remove you from the home begins with a Pay or Quit Notice, more commonly known as an Eviction Notice. You should receive the notice by certified mail, as well as having a copy of the notice placed on the entry to the rental unit in question.

Once you’ve received the notice, you’ll usually have 30 days to either pay the back rent due or vacate the property. If you move out before the landlord files a legal complaint, you could still be sued in civil court for any back rent due. If you do neither, then the landlord can file an eviction complaint with the courts. You’ll be notified of the court date and have the opportunity to present your case as to why the eviction should not proceed.

If the judge rules in favor of the landlord, you’ll be given a number of days to leave the property. If you don’t vacate within the prescribed time period, the landlord can then bring in law enforcement and have you forcibly removed.

The Five Pillars of Great Credit

Because there’s money involved (and often a great deal of money) it makes sense that lenders want a credit score they can trust. That’s why credit score providers, like FICO and Experian, keep the formula used to create your score a secret. If borrowers can manipulate their scores, then those scores are no longer an accurate gauge of risk, and if that’s the case, then the scores become meaningless. 

Fortunately, just because we don’t know the whole formula doesn’t mean we’re completely in the dark when it comes to building strong credit. In fact, we have a pretty good idea what really matters when it comes to good credit. 

WHAT DO YOU NEED TO ACHIEVE A GREAT CREDIT SCORE?

All credit scoring models take into consideration the following five categories: payment history, amount currently owed to creditors, length of personal credit history, amount of new credit recently acquired, and types of credit currently in use.

Each category says something distinctive about you and your risk as a potential borrower. In order to maximize your credit history and reduce your risk in the eyes of lenders, you should strive for the following:

A CLEAN PAYMENT HISTORY

The most important category is also the simplest to master. A positive payment history includes no missed payments. Borrowers who do not fulfill their obligations are considered riskier than those who do. The circumstances behind a missed payment, unfortunately, do not matter. Make consistent, on-time (and in-full) payments and you will be on your way to an exemplary credit history. 

A LOT OF AVAILABLE CREDIT

An overextended borrower is a risky borrower. This is a complex category, but the standard rule of thumb has long been to avoid using more than 40 percent of the credit available to you. The closer you come to maxing out your available lines of credit, the riskier you appear in the eyes of lenders. Keep an eye on your debt levels, especially if you plan on applying for additional credit in the near future.

You can use this calculator to figure out how much of your credit line is still available.

A LONG (AND POSITIVE) PERSONAL CREDIT HISTORY

Lenders are most apt to feel comfortable lending money to a borrower who has been using credit successfully for many years. That’s why it’s important to begin using credit responsibly at a young age. A long history of smart credit usage will have a very positive impact on your credit score.

This is usually measured by the age of your current credit accounts. The older, the better. That’s why you should be wary of closing old accounts in favor of newer ones – there may be a hit to your credit (at least temporarily).

A REASONABLE AMOUNT OF NEWLY ESTABLISHED CREDIT

As noted in the previous category, lenders like to see that you’ve been successfully managing your credit and loan accounts over long periods of time. When you’ve recently taken on new debt, it makes you riskier, because there’s no established history of success managing that account. This is why you may find that your credit score dips a bit after opening a new account. You need to prove all over again that you can handle the new debt. 

This is a relatively minor category, but it’s important to keep in mind, especially if you intend to acquire multiple new loans or sources of credit within a short span of time. 

A VARIED MIX OF CREDIT TYPES

Building good credit is essentially a cycle of using today’s credit to prove to tomorrow’s lenders that you can be trusted with their money. In order to maximize your credit score and minimize your perceived risk as a borrower, you need to prove that you can handle many different types of credit. A borrower who has used credit cards responsibly, but has never shown that they can handle a loan, is simply riskier than a borrower who has successfully handled all types of credit. 

A COMPASS, NOT A ROADMAP

So even though we don’t have a map to a particular score, we know what direction we must travel in order to build a strong credit history. Focus on being the kind of borrower you would lend to, if the tables were turned. If you borrow wisely and fulfill your obligations, your credit score will reflect your true creditworthiness in due time.

5 Ways to Adjust Your Credit Card Strategy

As summer quickly approaches and things re-open in the U.S., it is prime time for enjoying many of life’s most fun activities — travel, dining out, sports, and more — or maybe even some big life changes like moving or a new job. Especially if you expect spending shifts as a result, it’s a great time for taking stock of where you stand financially and re-setting your credit card strategy to help you meet your money goals for the rest of the year. Think of it as an opportunity to focus on what’s working, take advantage of new opportunities, and recalibrate your spending patterns. Here are five simple ways to do so.

Check Your Credit Report

It’s always a good time to check your credit report, but doing so mid-year can be especially useful if you’re planning for any big, upcoming purchases (such as home buying, which can often occur during the summer, and which I’m considering at the moment). Staying abreast of any changes on your credit report can help you address any issues, but can also alert you to opportunities. If you credit score has increased recently, for example, you may qualify for higher credit limits or lower interest rates on loans or credit cards. You can get a full credit report for free once per year at freecreditreport.com. For more frequent credit monitoring, some credit cards even provide free monthly FICO credit scores.

Plan Ahead for Big Purchases

One of the best aspects of responsible card use is enjoying rewards for your purchases. The Bank of America Customized Cash Rewards Card is an especially useful tool, because it allows you to change your 3% cash back category every month. So, since I know I’ll be traveling to see family in August, I can change my category to “travel” that month from my usual choice of “dining.” Plus, with an introductory 0% APR offer lasting more than a year, you can plan for big purchases — such as home remodeling, or new furniture. You can even set your monthly cash back category to your intended purchase category to layer your rewards. Combine this with a banking loyalty program, and you can layer your rewards together. As an added bonus, because I am a Bank of America Preferred Rewards member, I’m able to boost my cash back earnings even higher.

Review Your Rewards

The summer is also the perfect time to review card rewards earned to date. Mid-year can be a useful time to review the rewards you’re receiving, how much you’ve earned in rewards, and reset your rewards strategy, if needed. You can also plan for ways to use your card in order to maximize your earnings in the remainder of the year. Plus, loyalty programs often add or change their offerings, making card use even more rewarding in various ways, so check in with your credit cards to determine whether you’re enjoying the full range of benefits available.

Monitor Card Changes

Has your card’s APR changed since last year? If your credit has improved, do you now qualify for zero APR card offers, lower interest rates, or premium cards? Have there been other changes to your card program, such as terms of service, offerings, or card benefits like concierge services or purchase protections? Mid-year is a good time to refresh your understanding of your card’s features, and adjust your strategy accordingly.

Review Your Spending & Budget

Many credit cards allow you to see your spending history by category, so that you can track your monthly spend and expenses against your budget. Summer is an ideal time to review your spending to date, assess whether you’re meeting your budget goals, and re-formulate intentions for the rest of the year. As many businesses re-open, and new spending opportunities are again available, your habits or spending may change to reflect the post-pandemic economy. Think about how you want your spending habits and budget to look. For example: If you’re ready to travel again (which the majority of Americans are, according to a Bank of America survey), should that be re-added into your budget? If your work commute is back, are you incorporating that into your monthly expenses? Your credit card can be an excellent tool for tracking your spending, ensuring you stay within budget. And your rewards can even be another way of ensuring you stay within budget — especially if you get cash back.

Someone Took Out a Loan in Your Name. Now What?

If this happens to you, getting the situation fixed can be difficult and time-consuming. But you can set things right.

If someone took out a loan in your name, it’s important to take action right away to prevent further damage to your credit. Follow these steps to protect yourself and get rid of the fraudulent accounts.

1. File a police report

The first thing you should do is file a police report with your local police department. You might be able to do this online. In many cases, you will be required to submit a police report documenting the theft in order for lenders to remove the fraudulent loans from your account.

2. Contact the lender

If someone took out a loan or opened a credit card in your name, contact the lender or credit card company directly to notify them of the fraudulent account and to have it removed from your credit report. For credit cards and even personal loans, the problem can usually be resolved quickly.

When it comes to student loans, identity theft can have huge consequences for the victim. Failure to pay a student loan can result in wage garnishment, a suspended license, or the government seizing your tax refund — so it’s critical that you cut any fraudulent activity off at the pass and get the loans discharged quickly.

In general, you’ll need to contact the lender who issued the student loan and provide them with a police report. The lender will also ask you to complete an identity theft report. While your application for discharge is under review, you aren’t held responsible for payments.

If you have private student loans, the process is similar. Each lender has their own process for handling student loan identity theft. However, you typically will be asked to submit a police report as proof, and the lender will do an investigation.

3. Notify the school, if necessary

If someone took out student loans in your name, contact the school the thief used to take out the loans. Call their financial aid or registrar’s office and explain that a student there took out loans under your name. They can flag the account in their system and prevent someone from taking out any more loans with your information.

4. Dispute the errors with the credit bureaus

When you find evidence of fraudulent activity, you need to dispute the errors with each of the three credit reporting agencies: Experian, Equifax, and TransUnion. You should contact each one and submit evidence, such as your police report or a letter from the lender acknowledging the occurrence of identity theft. Once the credit reporting bureau has that information, they can remove the accounts from your credit history.

If your credit score took a hit due to thieves defaulting on your loans, getting them removed can help improve your score. It can take weeks or even months for your score to fully recover, but it will eventually be restored to its previous level.

5. Place a fraud alert or freeze on your credit report

Without The CDC’s Eviction Ban, Millions Could Quickly Lose Their Homes

“It’s devastating,” said Safiya Kitwana, a single mom with two teenagers living in DeKalb County, Ga., who lost her job during the pandemic. Like 7 million other Americans, Kitwana has fallen behind on rent.

Kitwana and many other renters had been protected by a ban on evictions from the Centers for Disease Control and Prevention, but the U.S. Supreme Court effectively blocked the CDC from extending the eviction moratorium past the end of July. And Congress didn’t have the votes to extend it.

Kitwana fears what could be next.

“A marshal coming to your door,” she says. “I’ve seen it happen where they just throw your stuff out in the parking lot.”

Kitwana says it’s painful to think about her kids going through that.

Help was supposed to be on the way. Congress set aside nearly $50 billion to help families like hers pay the back rent they owe and avoid eviction. But that money flowed to states and counties, which created hundreds of different programs to distribute it. And many so far have managed to get just a small fraction of the money to the people who need it.

In Kitwana’s case, she applied for the help and she was approved.

But DeKalb County officials worried they might run out of that federal money because so many people needed help. So to try to spread the money around, they made a rule — the county would pay landlords only 60% of what renters owed. And to get that, landlords had to agree to forgive the remainder of the debt or split the difference with the renter and drop the eviction case.

But, as NPR previously reported, some landlords like Kitwana’s said that wasn’t enough money and moved ahead with the eviction process.

The CDC moratorium expiring has created a new sense of urgency in states and counties around the country. In DeKalb County, it has also prompted some big changes. A county judge has now put in place an emergency two-month local eviction ban.

“This is a godsend, really, for tenants,” says Michael Thurmond, the county’s top elected official. He’s also announcing another big change.

“Landlords will be receiving an increased amount of revenue to cover back rent,” says Thurmond. The new rules will reimburse landlords for 100% of the back rent they are owed going back as far as 12 months. Thurmond expects the rules to be formally approved on Tuesday — welcome news for thousands of renters nearing eviction in the county.

That means Safiya Kitwana should now be able to avoid eviction by paying her landlord everything she owes. In addition, the new program gives renters like her three months’ rent going forward to get back on their feet.

“It is a huge relief,” she says. “I just didn’t know what I was going to do.”

When Will Your Next Monthly Child Tax Credit Payment Arrive?

Parents from all over the country cheered when they received their first child tax credit payment. Getting up to $300-per-child each month (depending on the age of the child) can be a lifesaver for families who are struggling financially because of the pandemic. But Americans had to wait for months after the program was announced before receiving any money. Now that the first round of payments has been delivered, the waiting begins again for the next round of direct deposits, checks, and debit cards.

The IRS sent payments to approximately 35 million families on July 15. Additional payments will follow each month through the end of the year according to the schedule below. As it stands right now, the payments will not carry over into 2022 (although President Biden wants to extend them beyond this year), so plan accordingly.

Schedule of 2021 Monthly Child Tax Credit Payments

PAYMENTDATE
1st PaymentJuly 15, 2021
2nd PaymentAugust 13, 2021
3rd PaymentSeptember 15, 2021
4th PaymentOctober 15, 2021
5th PaymentNovember 15, 2021
6th PaymentDecember 15, 2021

Retirement expert details ‘3 things you got to do’

“There are essentially three things you got to do to prepare for retirement,” Caroline Bruckner, Kogod Tax Policy Center’s managing director, recently told Yahoo Finance Live. “Number one, you got to save in a preferably tax-advantaged retirement saving plan. Number 2, you have to have your individual savings outside of that.”

“And then number three, people tend to rely on Social Security” for retirement, especially women, which often is not enough, Bruckner said. She encourages Americans to look at individual retirement accounts or IRAs.

“IRAs [and] Roth IRAs are things that most Americans don’t necessarily utilize in the way that they should,” Bruckner said.

For people who don’t have access to a workplace retirement, Bruckner pointed out that setting up an IRA or a Roth IRA can be done online with relative ease and minimal expense, depending on your income.

“The income eligibility rules are fairly generous for most low and moderate-income Americans,” she said, “particularly those that don’t otherwise have access to a retirement plan.”

IRAs and Roth IRAs don’t come with the benefit of automatic paycheck deductions like 401(k)s or 403(b)s, but Bruckner said that “thoughtful taxpayers” can use their annual tax refunds, instead.

Throw that money into an IRA if they don’t otherwise have access to a retirement plan, forget about it, and just let it grow,” she said. Annual IRA contributions are capped at $6,000 and $7,000 for people over age 50.

Investing in other accounts like “traditional retirement savings plans” like IRAs and 401(k)s “can really help substantiate an overall retirement saving strategy.”

“The earlier you can start saving, the faster that money will grow and help substantiate your retirement,” she said.

What is Debt Forgiveness and What Does It Cost?

In other words, the idea of having your debts forgiveness by your creditors is an appealing one. And debts are sometimes forgiven, but there are often costs associated with debt forgiveness. This is what you need to know about debt forgiveness, including when you might qualify and why debt forgiveness is rarely ever free. 

WHEN IS A DEBT FORGIVEN?

Debt forgiveness can come in many forms. If you have an account in collections, you may attempt to negotiate with the collector by offering to pay a portion of the debt in exchange for having the remaining debt forgiven. As an example, let’s see you owe $10,000 on a charged off credit card account. You ultimately agree to settle the debt for $5,000, with the remaining $5,000 being forgiven.  

If you foreclose on your home, or are forced into a short sale where the sales price doesn’t cover the remaining mortgage, the lender may forgive all or a portion of the remaining debt. 

On certain federal student loans, if you’ve made the required payments over a set period of time (usually between 10 and 30 years), whatever is left of your remaining balance may be forgiven. 

Essentially, in any scenario where you owe money and don’t eventually make a full repayment, part or all of the remaining balance may be considered forgiven debt. Nearly any debt could potentially be forgiven (or at least partially forgiven), but whether or not that happens is almost entirely up to the lender or whoever owns the debt. Forgiveness needs to be in their interests, as well, so if you’re perfectly capable of repaying a debt in full, there’s little chance of a lender offering to forgive any portion of the debt in question. 

WHAT DOES DEBT FORGIVENESS COST YOU?

Because debt forgiveness is most commonly connected to settlement, there are two major costs to consider: the cost of the settlement itself (that is, the portion of the debt you do pay), and the tax you pay on the forgiven debt. If you’re using a third party to negotiate your settlement, there will be additional costs and fees associated. 

As for the settlement amount itself, it will vary, but typically falls around 35-50% of the original debt amount. And if you’re using a settlement company, they typically charge 15-25% of the total debt (though some charge based on what you saved, and others may use totally different pricing methods).

So, using the $10,000 example again, in order to get out of the debt, you’ll likely need to pay the creditor between $3,500 and $5,000, while paying the settlement company $1,500 to $2,500. Using the low end, we’ll say you started with $10,000 in debt, spent $5,000 (including settlement company fees) and had $6,500 forgiven. Not free by any measure, but at least you’re out of debt and saved $5,000 in the process.   

However, just because you’re square with your creditors doesn’t mean you’re square with the government. Forgiven debt is almost always considered taxable income. 

“How can debt be income?” you may ask. Well, I suppose you have to look at it this way – you were provided with money, goods, or services in the amount of your debt. In the above example, from a tax perspective you got a free $6,500. But of course, nothing is actually free, so now you need to pay taxes on that $6,500. 

Any time a creditor forgives a debt in excess of $600 they are required to send you a 1099 form reflecting the amount of the forgiven debt, which you must then add to the “Other Income” section of your personal tax return for that year. It should be noted that creditors are required to send you this form because they themselves are claiming your forgiven debt as lost income. If you have a forgiven debt that’s less than $600 you still need to claim it on your taxes – creditors just aren’t required to send notification in that instance. 

The impact on your tax return could be major or minor, depending on a lot of factors, such as your income bracket and the amount of the forgiven debt. If you have questions or concerns about how to complete your tax return, be sure to speak with a qualified tax professional. 

EXCEPTIONS TO THE RULE

You should generally assume that if your debt is being forgiven, you are going to have to pay taxes on the balance. But there are definitely exceptions to that rule. 

Your forgiven debt might not be taxable if: 

IT’S A RESULT OF A PERSONAL BANKRUPTCY

All debts discharged through bankruptcy are generally not taxable. 

YOU ARE INSOLVENT IN AN AMOUNT GREATER THAN THE FORGIVEN DEBT

Insolvency is when your debts outweigh your assets. If you currently owed $10,000 more in debt than you held in assets, and then had a creditor forgive $3,000 in debt, you would not have to claim that $3,000 as additional income. If they forgave $11,000 in debt, however, you would have to claim $1,000 as income.

YOU COMPLETED THE TERMS OF A CAREER-SPECIFIC STUDENT LOAN REPAYMENT PLAN

If you made all of the required payments on a public service loan forgiveness, teacher loan forgiveness, law school loan repayment assistance, or National Health Service Corps Loan Repayment program your forgiven debt is not considered taxable. Any forgiven debt resulting from any other student loan repayment plans, however, including income-based and income-contingent plans, is taxable. 

There are a few other unique exceptions, including exceptions for student loans that were discharged due to the death or permanent disability of the student, but those relatively rare. Again, if you have specific questions about how debt forgiveness may impact your personal tax return, please contact a tax specialist. It’s what they do. 

In almost every case, the benefit of a forgiven debt far outweighs the tax consequences, but it’s important to be aware of those consequences and plan accordingly. Free money almost always costs you something in the end.

How Housing Stability Programs Can Help Protect Your American Dream

As our team here at MMI discussed during a recent webinar, that fallout has been especially harsh for low-to-moderate income, Hispanic, and BIPOC individuals. With multiple relief programs set to expire in the second half of 2021, these households will likely experience a new set of burdens, including payment shock as long deferred bills begin hitting their budgets. For homeowners in particular, the possibility of another major financial crisis is very real. 

Thankfully, the American Rescue Plan Act of 2021 includes millions of dollars for housing counseling services aimed at those facing housing instability, including potential eviction, default, foreclosure, loss of income, or homelessness. In addition, up to $46.55 billion has been made available to states and local governments to provide financial support to eligible households though emergency rental assistance programs. 

For me, each announcement of a new housing stability program hits close to home because a housing stability program changed the trajectory of my own recovery during the Great Recession. If you’re skeptical on the value of housing counseling, or simply unsure if it’s right for you, hopefully my story will help you understand how life-changing these housing stability programs can be.

FINDING STABILITY IN A CRISIS 

In 2007, I bought a 1930s bungalow at the height of the housing bubble. It was near the outer limits of my budget, given the inflated market at the time, but it was by no means extravagant. I fully financed the purchase and moved in, excited to start my life in a new neighborhood and in a new relationship. 

But as life has a way of doing, a curveball was soon thrown my way. Just a year later, I was laid off from my union job at a global financial services company where I had worked for nearly seven years. In a panic, I cut expenses, added roommates, and downgraded my vehicle from a new SUV to a well-used economy car. But it wasn’t enough. 

After a brief stint of unemployment, I found a new job, ironically as a financial counselor at a nonprofit called Clearpoint, which later became part of Money Management International. I was grateful to have a job with all the layoffs and downsizing across the country, but my new salary was significantly less than when I had purchased my home. I was one of the millions of Americans experiencing underemployment during a recession. 

An Obama-era federal housing stability program was a significant part of my recovery. While I was not behind on my mortgage payments, I was struggling to balance all the financial commitments that come with homeownership. On top of adjusting to the true cost of owning a home, I also had student loans and credit card debt. 

The Home Affordable Modification Program (a now-expired program known as HAMP) reduced my loan interest rate and made the monthly payment much more affordable. In addition, annual incentive payments were applied toward the balance over the course of the modification, helping to reduce the principle. I was so grateful that I volunteered to share my story to promote the program and, as a counselor, encouraged my clients to apply. 

Now, more than a decade later, I have just sold the home I so desperately tried to keep during the Great Recession and am moving on to the next chapter in life. Thanks to a lot of hard work and a timely housing stability intervention, I was able to protect my credit and make my homeownership a success. 

Last fall, I shared my experience once again with Money, in the hopes that it helps others find the encouragement and support they need during the current economic downturn. For those experiencing housing instability, whether due to the pandemic or any other unique situation, you aren’t alone. There are programs available to help you through difficult times. The best way to start is to openly communicate with your lender or landlord and connect with a nonprofit housing counselor right away. Help is just a click or phone call away.

Which Debt Repayment Strategy Does the Most for Your Credit Score?

Debt repayment is a marathon, after all. Most of us are always working on at least one debt, and when you’re juggling multiple debts, it’s smart to wonder which debt to target first. If building your credit score is your top money goal, it’s helpful to understand how debt impacts your score, so you can make an informed decision on how to tackle that debt.  

Standard disclaimer to start: there’s never any guarantee that any credit-related action you take will improve your credit score by any amount. We know in a very general sense what most major credit scoring models use as a basis of their calculation, but the actual formulas used are complex and proprietary. It takes a long time and a lot of hard work to build a great credit score. 

UNDERSTANDING HOW DEBT IMPACTS YOUR CREDIT

To begin, here’s a quick reminder of the major factors examined in the FICO scoring model, which is one of the more popular, widely-used models: 

  • Payment history (35 percent) 
  • Amount owed to all creditors (30 percent) 
  • Length of credit history (15 percent) 
  • Amount of new credit (10 percent) 
  • Types of credit in use (10 percent) 

As you can see, how much you owe is the second most important factor in your score. Assuming that you’ve been able to make your monthly payments consistently and haven’t opened a ton of new accounts recently, simply paying down your debts is the likely the most impactful thing you can do for your credit score.

REDUCE YOUR CREDIT UTILIZATION RATIO 

Your credit score judges your “amount owed to creditors” level not as a measure of your overall debt, but as ratio of debt to available credit. If you used $5,000 of a $10,000 credit limit you would have the same credit utilization ratio (50 percent) as someone who used $500 of a $1,000 credit limit. 

Generally speaking, the lower your credit utilization ratio is the better it is for your score. Most experts suggest trying to stay below 30 percent utilization, with your score likely to suffer once you go over 50 percent. 

It’s important to note, however, that FICO factors credit utilization in two ways – on an account-by-account basis and as an overall reflection of your debts and limits. This means that if the utilization ratio is low on most of your cards, but one of your accounts is close to maxed out, that will likely have a negative impact on your score. 

So, if you have multiple credit cards and you’re trying to decide where to concentrate your repayment efforts, check the limits on each card. If you’ve got any accounts where you’re using more than 50 percent of the available limit, that may be where you want to start. If the utilization ratio is below 30 percent for all of your cards, then you may want to focus on whichever account has the highest interest rate. 

LINES OF CREDIT VS. CREDIT CARDS

When it comes to lines of credit, it can be tricky to pin down their impact on your score. Different scoring models use different rules and they can vary pretty wildly. 

The confusion is in how you classify the line of credit – as revolving credit or as an installment loan. Only revolving credit accounts are factored into your credit utilization ratio. Installment loans are considered differently. 

A regular line of credit, like a business line of credit, is usually considered to be revolving credit and would be treated exactly the same as a credit card. 

A home equity line of credit (HELOC), however, may be considered revolving credit or an installment loan. In many cases it depends on the size of the available credit. A general rule of thumb is that a HELOC over $50,000 is usually factored as an installment loan, while anything below that is considered a revolving line of credit. 

So which should you pay off first? Again, it’s difficult to know for sure. I would suggest that if your line of credit is on the smaller side, treat it the same as a credit card and use the rules listed above. If it’s a relatively large HELOC, it’s probably in your best interests to pay the credit card debt first. 

And while we didn’t address it here, the same goes for mortgages, car loans, and student loans – if credit building is your focus, work on reducing your credit card debt, while keeping your loans current.

Non-tax filer families can now sign up for the new monthly child tax credit

The IRS debuted on Monday its new non-filer sign-up tool so families can ensure they’ll get the credit and monthly payments starting July 15.

In addition to enrolling for the child tax credit, the tool will help people register for their third $1,400 economic impact payment as well as claim the recovery rebate credit if they did not receive previous stimulus checks they were eligible for, according to the agency.

“We have been working hard to begin delivering the monthly Advance Child Tax Credit to millions of families with children in July,” IRS Commissioner Chuck Rettig said in a statement. “This new tool will help more people easily gain access to this important credit as well as help people who don’t normally file a tax return obtain an Economic Impact Payment.”

The new portal is only for people who have not filed a 2019 or 2020 tax return and who did not use the IRS non-filers tool in 2020 to register for economic impact payments. With the online tool, people will be able to give the IRS their personal information, including name, address and Social Security number, as well as details about their children ages 17 and under and their direct deposit information.

The portal was developed by Intuit and delivered through the IRS Free File Alliance.

One more IRS portal is coming

Another portal set to launch later in June will help families who have filed a 2019 or 2020 tax return that’s been processed by the agency give more current information about their household. This is important for families who have more eligible children in 2021, have had a change in marital status or a significant drop in income — all of which could mean they’re owed larger monthly checks through the credit.

This portal will also allow families to opt out of receiving the monthly payments, meaning they’ll get the full credit amount when they file 2021 taxes, as the monthly payments are an advance on a 2021 tax credit.

The child tax credit was enhanced by the American Rescue Plan, signed into law by President Joe Biden in March. The new credit increases the annual benefit per child age 17 and younger to $3,000 from $2,000 for 2021. It also gives an additional $600 benefit for children under the age of 6.

The full expanded benefit is available to all children 17 and under in families with 2020 or 2019 adjusted gross income of less than $75,000 for single parents and $150,000 for a married couple filing jointly, and ends for individuals earning $95,000 and married couples filing jointly making $170,000, though they’d still be eligible for the regular child tax credit.

For families getting the full credit, payments will be $300 per month for children under the age of 6 and $250 per month for those between the ages of 6 and 17.

Most families — roughly 80% — will get the payments via direct deposit on the 15th of each month, unless the day falls on a weekend or a holiday, according to the IRS. Those without direct deposit information will receive either paper checks or debit cards, the agency said.

The monthly payments will continue through the end of the year. When families file their 2021 tax return next year, they’ll get the second half of the enhanced credit as a refund. If families don’t send the IRS updated information that would have led to a larger monthly payment, they can claim the rest of the credit they’re owed when they file 2021 taxes.

Do You Need Short-Term Disability Insurance?

The answer for some may be short-term disability insurance. Should you fall ill, become diagnosed with a medical condition, or get into an accident that prevents you from working for awhile, short-term disability can replace some of your income until you’re back on your feet.

“Short-term disability is important because it can protect your savings and investment accounts in the chance that you are temporarily unable to work due to a disability,” says Ben Smith, founder and financial planner of Cove Financial Planning. “Without coverage, many people are forced to take on debt, draw on their cash reserves, or worse, their retirement savings, in order to pay bills and living expenses in an instance where they are not earning an income due to a disability.”

Nearly every worker could potentially benefit from having short-term disability insurance, but there are some instances where having that extra protection is even more important.

YOU’RE SELF-EMPLOYED

If you work for yourself or have a small number of employees, you’ll definitely want to consider getting short-term disability insurance. 

“Doctors, veterinarians, CPAs, and similar professionals who have their own practices are often self-employed and may not have the coverage, and also may be earning high incomes that lead to expensive month-to-month lifestyle costs,” says Ian Bloom, a CFP® and Financial Life Planner for Nerds. “In some cases, a disability would exhaust their savings rather quickly.”

You’ll also want to consider short-term disability insurance if you’re a full-time freelancer. Freelancers don’t get sick leave or get coverage through an employer. So if they’re unable to work, and their cash flow takes a halt, it could put them in financial peril.

YOU DON’T HAVE ENOUGH IN SAVINGS

It might be okay to forego short-term disability coverage if you have six months worth of income in savings, as well as a considerable cushion beyond that, points out Bloom. When figuring out whether you have enough in savings to cover your living expenses when you’re disabled, keep in mind that if a disability occurs, you’ll likely have medical expenses — doctors’ visits, treatments, medication — in addition to your regular monthly expenses.

On the flip side, let’s say you have a large cash reserve. In that case, you might not need short-term disability. “This means that they may be able to ‘self-fund’ a potential temporary loss of income during a disability,” says Smith. And if your spouse or partner has a high-income job, and they can cover household expenses for a short time, you may not necessarily need to be covered with short-term disability.

“Every situation is different, so it’s important to learn about your unique options and needs,” says Smith.

YOUR EMPLOYER DOESN’T OFFER IT

If your employer doesn’t offer short-term disability, it might be worth looking into getting it on your own. And even if your employer does offer short-term disability insurance, it might not be enough for your potential financial needs. 

To gauge this, review the coverage amounts and terms with your employer. You’ll also want to assess what your current living expenses are, and tack on additional expenses for medical treatment. If the current coverage doesn’t match your costs, you may need add additional coverage on your own.

TIPS FOR SHOPPING FOR SHORT-TERM DISABILITY

A few pointers if you’re thinking of hopping on a short-term disability plan:

LOOK FOR COVERAGE THROUGH YOUR EMPLOYER FIRST

You might be able to get coverage through your employer, which is typically less expensive than buying a private plan, explains Smith. What’s more, it’s usually easier to get coverage through a group plan. When it comes time to re-up on your company benefits, be sure to ask about short-term disability coverage if that’s something you’re interested in.

SEE IF THE STATE YOU LIVE IN OFFERS SHORT-TERM DISABILITY

Only five states in the U.S. offer their own short-term disability programs: California, Hawaii, New Jersey, New York, and Rhode Island. The coverage amounts and time periods vary. Even if you live in a state that offers it, you might still want to get additional coverage to make sure you have enough to live on should you need it.

CHECK THE ELIMINATION PERIOD

An elimination period is the amount of time you must wait until your insurance coverage kicks in. For example, a 14-day elimination period means you must wait 14 days after you become disabled before receiving any benefit from the plan. Elimination periods for short-term disability are usually are typically 7 or 14 days, while some might be up to 30 days. “In most cases, the longer the elimination period, the lower the cost of insurance will be,” says Smith.

And even if you hop on a short-term disability plan, you could still need some cash reserves to cover your expenses until the elimination period ends.

What Does It Mean to Go into Foreclosure?

If you took out a mortgage, you borrowed money to purchase your home and put up the home as collateral. Foreclosure is the legal process that allows the lender to repossess a home when borrowers fall far enough behind on their payments.

Facing eviction and losing the time, equity, and love you’ve put into a home can be a sad and scary prospect. But it’s important to remember that even if you’re months behind on your mortgage payments, there may be ways to remedy the foreclosure and keep your home. Or, if your goal is to move to a more affordable home, there could be alternatives to foreclosure that can save you money, time, and may not hurt your credit as much.

In either case, understanding the process can help homeowners identify where they stand and their options.

WHAT HAPPENS DURING FORECLOSURE?

Foreclosures can be governed by a combination of federal, state, and local laws. The foreclosure process, relevant terms, laws, your rights, and the timeline can, therefore, vary depending on where you live and the agreement you have with a lender. However, the processes tend to follow a similar path:

THE BORROWER MISSES A MORTGAGE PAYMENT

Missing a single payment won’t immediately lead to losing your home, but it’s the first step towards a foreclosure. Once a borrower misses a payment or pays less than the total amount due, the mortgage could become delinquent.

The lender, mortgage service or a collection agency may start reaching out to the borrower to inform them of the missed payments. It may also notify you of different options you have to help avoid foreclosure and keep your home.

THE LENDER SENDS A DEFAULT NOTICE

The timeline can vary, but often around three to six months after you miss a mortgage payment, the lender will send a letter or notice that your loan is in default. The notice may also tell you how much you currently owe, including past-due payments and fees, and how long you have to bring your loan current.

The notice could also be posted on the door of the home and a record of the notice might be filed with the local county office. You may see this letter referred to as a Notice of Default or lis pendens (“suit pending”).

PRE-FORECLOSURE BEGINS

If you don’t bring your loan current by the deadline, the lender can begin the foreclosure process. The pre-foreclosure period may be one to several months long, during which you still have options to avoid the foreclosure by repaying the amount owed, selling your home, modifying your loan, or coming to another agreement with your lender.

THE FORECLOSURE PROCESS OFFICIALLY STARTS

The lender may be able to pursue different types of foreclosures:

JUDICIAL FORECLOSURE

A judicial foreclosure is an option in every state, but isn’t required everywhere. The judicial foreclosure process goes through the courts, and you will be sent a notice of the pending lawsuit. If you don’t respond, the lender will win a default judgment. Generally, if the lender wins the suit, an auction date for the home will be chosen, and the local court or sheriff will then sell the home at the auction.

NONJUDICIAL FORECLOSURE

Some states allow lenders to pursue a prescribed foreclosure process outside of the courts. The process can vary, but often takes at least a month and involves one or more notices informing you of how much you owe, how you can bring the mortgage current, and when the home will be put up for sale.

THE HOME IS OFFERED FOR SALE

Either the lender, a representative of the lender, a local court, or the sheriff may sell the home via an auction. Or, in some cases, the lender simply takes ownership of the home. The lender will also become the owner if the home isn’t sold at the auction.

Depending on the state, you may have the right to repay the entire amount due and reclaim your home as long as the auction hasn’t ended. In some states, you may even have the right to buy the home back after it was sold at auction.

THE BORROWER IS ASKED TO LEAVE OR IS EVICTED

Once a new entity takes ownership of the home, you may receive a notice that you have to leave the house. You could have anywhere from a few days to several weeks to vacate, and sometimes a new owner will offer you money to move out quickly and leave the home in a good condition.

If you don’t leave, the new owner may take steps to forcibly evict you. The eviction process could also take several days to several months. Although you’ll be able to stay in the home longer, having an eviction on your record could make it harder to find a rental in the future.

YOU MAY HAVE OPTIONS IF YOU’RE FACING FORECLOSURE

Foreclosure doesn’t happen overnight, and the lengthy process isn’t a desirable outcome for borrowers or lenders.

Generally, acting sooner is better than waiting. Even if you haven’t missed a payment yet, reaching out to your lender and letting it know you expect to have trouble in the future could be a helpful first step that leads to avoiding foreclosure proceedings altogether.

Your lender may have programs that can temporarily, or sometimes permanently, lower your monthly payments. The U.S. Treasury Department and Department of Housing and Urban Development (HUD) also have many programs aimed at helping borrowers avoid foreclosure.

As the process and programs can vary depending on where you live and your mortgage agreement, speaking with a trained professional is often be a good idea. Some attorneys specialize in housing cases, including foreclosure defense, that may be able to help.

How to Prepare for the End of a Mortgage Forbearance

For those with federally-backed mortgages, the CARES Act suspended potential foreclosure until May 2021, and created a path to extended mortgage forbearance for those who needed to divert their mortgage payments to other essentials.

According to a study from the New York Federal Reserve, by May 2020 approximately 7% of all mortgage accounts were in forbearance. American homeowners had jumped at the chance to push back their mortgage payments until they had a clearer picture of how COVID-19 was going to impact their finances.

Interestingly, that broad interest didn’t last. The New York Fed found that by June 2020 the trend was already reversing, with more consumers exiting a forbearance than entering one. As of March 2021, the forbearance rate was 4.2% of mortgage accounts. 

The concerning issue, however, is not the overall number of mortgages in forbearance – it’s that the homeowners currently in forbearance don’t seem well positioned to recover once their forbearance ends. Per that New York Fed study, the households taking advantage on the extended forbearance period are more likely to:

  • Be first-time homebuyers
  • Live in lower-income areas
  • Be one or more months past due on their mortgage payments

While overall forbearance numbers are down, the majority of those currently on a mortgage forbearance entered their forbearance on or before June 2020. In other words, there is a worryingly large population of homeowners who were struggling with new mortgages before the pandemic began, who’ve been on a forbearance since they were first available, and who will likely only come out of forbearance when their 18 months is up.

So what should these and other homeowners do to prepare for the end of their forbearance?

REFINE YOUR POST-FORBEARANCE BUDGET

Whether you’re making payments during your forbearance or not, it’s crucial that you understand what life is going to look like financially once your forbearance ends. Review your spending. Consider any other expenses that may be currently paused, but will need to be factored into your budget.

If you’ve got the income necessary to handle your full mortgage payment, then you’re all set. But if you’re coming up short you may need to consider taking additional steps to ensure that you don’t fall (further) behind.

PURSUE A REFINANCE

Depending on the status of your loan and your overall credit profile, you may be able to qualify for a mortgage refinance. Per the Federal Housing Finance Agency (FHFA), even if you’re currently in forbearance, you may be eligible for a refinance as long as you’ve made at least three consecutive monthly payments.

Of course, a refinance may extend the length of your repayment period and there are additional costs to consider, but if your goal is to stay in your house and your post-forbearance mortgage payments won’t allow that, then it may be the best path forward.

PREPARE TO SELL YOUR HOME

Home prices are skyrocketing at the moment. That’s bad for prospective homebuyers, but great for home sellers and may provide a potential solution if your post-forbearance outlook isn’t positive. 

What you don’t want is to be forced to sell your home after falling behind on your payments. If downsizing your home or becoming a renter (at least until prices begin to fall) is the best way to stabilize your budget, it’s better to be proactive.

WORK WITH A HOUSING SPECIALIST

If you’re concerned about your mortgage – no matter what your forbearance status might be – you should consider working with a HUD-certified housing counselor. MMI’s housing experts can help you review your options and get you started on the best path for you, your home, and your financial stability. 

If you’re not sure if your problems can be solved with better budgeting, or whether or not it makes sense to refinance or sell your home, a housing counselor can help. 

Everything You Need to Know about the Child Tax Credit Payments

The payments are an advance on the annual child tax credit, which – under normal circumstances – is factored into your annual tax return, and would be distributed as part of your tax return (if applicable). Instead, a portion of the tax credit will be delivered to eligible households throughout the course of the year, with the intention of helping families (and specifically children) who need the money right away. 

WHO’S ELIGIBLE FOR THE CHILD TAX CREDIT ADVANCE?

Similar to the coronavirus stimulus payments, eligibility is based primarily on your most recent reported annual income. You may still be eligible for some amount of the tax credit if your income is over the threshold, but not the full amount.

The income cut-offs are:

  • Individuals – up to $75,000
  • Single parent head of household – up to $112,500
  • Married couples filing jointly – up to $150,000

If you make less than the stated maximum for your filing status and you claimed an eligible child on your tax return, you should expect to receive your first payment on July 15.

It’s important to note that the credit is fully refundable. You don’t need to have earned income (or owe income tax) to qualify.

HOW MUCH WILL YOU GET FROM THE CHILD TAX CREDIT ADVANCE?

In addition to authorizing advanced payments on the credit, the American Rescue Plan of 2021 also increased the maximum tax credit amount per child. The tax credit is now $3,600 for children under 6, and $3,000 for children 6 and up. The credit amount was previously $2,000 per child.

The advance will be 50% of your total credit, spread out over 6 monthly payments. The remaining credit amount will be factored into your 2021 tax return. 

Your child’s age on December 31 is key. Children who turn 18 before the end of 2021 aren’t eligible. Similarly, children who turn 6 before the end of the year won’t be eligible for the higher credit amount.

WHAT DO YOU NEED TO DO TO GET YOUR CHILD TAX CREDIT PAYMENT?

If you haven’t yet filed your 2020 tax return, be sure to do so as soon as possible. The IRS will use your 2020 return to calculate your credit amount. 

If you’ve already filed your taxes, you don’t need to do anything. The IRS will make payments by direct deposit, paper check, and debit card (you will very likely receive payment the same way you received your stimulus payment).

If you don’t want to receive this advance, the IRS will be providing a way to opt out of these payments. Be sure to check IRS.gov as we get closer to July 15.

Seven Ways to Improve Your Chances of Buying Your Dream Home

Dreaming about your ideal home is all well and good, but once you find the perfect home, will you be able to get a mortgage for your forever home? If you ever want to make your homeownership dreams a reality there are a few actual, proactive steps you should be taking to make yourself the kind of borrower lenders dream of working with.

USE CREDIT AND USE IT CORRECTLY

First, let’s establish two crucial facts. One, lenders hate risk. And two, mortgages – by the simple nature of their size – are risky.

Lenders are looking for low risk applicants. They’ll almost certainly dive into your financial history and employment status to get an accurate picture of how reliable you may be, but that deep dive usually begins (and sometimes ends) with your credit report and score.

Having a low credit score will often disqualify you immediately from many types of loans (and certainly from most loans with favorable terms). If you’re interested in buying a home someday – even if that day is years in the future – start using credit wisely today. The only way to build a strong credit history is by using credit. You don’t have to carry a balance and you don’t have to go into debt. You simply need to have a few open credit accounts that you use regularly and repay immediately.

KEEP ALL YOUR ACCOUNTS IN GOOD STANDING

Lenders want to feel confident that you can be relied upon to pay them back as promised. There are a lot of factors they’ll consider on that front, but perhaps the most critical bit of evidence is whether or not you’ve been reliable in the past. That extends to all financial obligations. Have you made your required payments, on time and in full?

Minor slip-ups happen, so one mistake doesn’t mean you’ll never get that dream house. But the more thoroughly you can demonstrate that you take your obligations seriously and follow through on your commitments, the more comfortable lenders will feel giving you a mortgage without astronomical fees and sky high interest rates.

REDUCE OR ELIMINATE YOUR OTHER DEBT OBLIGATIONS

Repaying your debts (and not creating new ones in their place) serves two purposes. It usually helps build your credit score, and it will reduce your debt-to-income ratio. We’ve already discussed why having a higher credit score can help you, so here’s what you need to know about your debt-to-income (DTI) ratio:

Debt-to-income ratio captures the percentage of your monthly income that’s eaten up by debt repayment. If you have a lot of debts and they take up a high proportion of your income, that makes you risky to potential lenders. When debts already consume so much of your paycheck, it becomes more and more likely that you’ll eventually falter and struggle to repay all those debts.

Many lenders may even have pre-established cutoffs, where if your DTI goes above a certain percentage (over 40 percent is usually a red flag for most lenders), your application will be automatically denied. That’s why it’s a good idea to focus heavily on debt repayment before getting ready to purchase a new home.

BE FINANCIALLY CONSISTENT

Financial fluctuation is not your friend – at least not when you’re trying to buy a home. Lenders prefer applicants that make a consistent income, with consistent expenses, living a consistent financial lifestyle. That kind of consistency (preferably over a stretch of two or more years) make it easier for lenders to forecast your ability to repay.

If you’re self-employed and find that money tends to come and go, buying a home is not impossible. It just means you need to do your best to strengthen the other six areas discussed in this article.

STAY IN YOUR JOB

As an offshoot of financial consistency, it helps quite a bit to be stable in your employment. The longer you’ve been in your current job, the better (from an underwriting perspective).

Of course, the job market isn’t quite what it once was (Americans now stay in a job for an average of less than five years – and even that is continually shrinking), and it’s relatively rare for anyone to stick with a job from day one to retirement. So don’t fret and worry that you need to stay in a less than ideal job situation for the sake of your dream house. Just keep in mind that if you just started a new job, you may want to wait at least six months (if not the recommended two years) before applying for a mortgage.

BRING CASH – LOADS OF IT

Having cash up front is a great way to reduce a lender’s risk and earn more favorable terms for yourself. How much do you need? Well, as much as you can reasonably afford.

Having a large down payment can help you on two fronts. First, if you have at least 20 percent of the loan’s value to put down up front, you can avoid having to purchase private mortgage insurance (PMI). Lenders require PMI (on top of your regular homeowners’ insurance) in instances where the borrower has less than 20 percent equity in their home. As with most things “loan,” this is done to help mitigate the lender’s risk.

Secondly, a borrower with plenty of cash on hand is just generally more appealing for a lender. The more equity you can start with, the less risk there is for the lender. Of course, you don’t want to invest more up front than you can reasonably afford, and you definitely don’t want to sink all of your available savings into your home. You can’t easily access that equity if there’s ever an emergency, so make sure you’ve got an adequate emergency savings built up and close at hand.

STAY MODEST

I know we’re talking about “dream homes” here, but you can do yourself a big favor by keeping your dreams at least somewhat restrained. Ultimately, when a lender is considering whether or not to extend you a mortgage, they’re asking themselves, “Will this person be able to repay the debt on time, in full, and as agreed upon?” The bigger, grander, and more expensive the house, the more likely it becomes that you may one day struggle to make your payments. 

So while it’s okay to dream, try to dream in moderation. If you look at the costs of your dream home, grit your teeth, and say, “I think we can make this work,” it might be in your best interest to keep looking until you find something a little less expensive.

Will student loan forgiveness ever happen? What we know so far

President Joe Biden has said he supports canceling $10,000 in student loans per borrower.

Facing pressure from other Democrats, progressives and borrowers, Biden has now also asked his Education secretary to prepare a memo on his legal authority to wipe out as much as $50,000 each for all.

“I think the odds of some student loan forgiveness being enacted is as good as it has ever been,” said higher education expert Mark Kantrowitz.

Still, nothing is certain, and many borrowers have a lot of questions while they wait to learn the fate of their debt, which can impact everything from when and if they’re able to buy a home to the careers they pursue.

Here are some answers, based on what we know at the moment.

When could forgiveness happen?

If Biden chooses to cancel the debt through executive action, in theory borrowers could see their balances reduced or eliminated pretty quickly. But such a move may be met by court challenges, which could lead to delays.

A clearer picture may soon emerge.

“If Biden decides he can do it via executive order, I expect we’ll hear about it by June or July,” said Betsy Mayotte, president of The Institute of Student Loan Advisors.

If the White House opts to leave student loan forgiveness to Congress, Democrats would likely use the budget reconciliation process to get it done.

That’s because that process allows them to pass legislation with a simple majority, which is all they have. Other bills typically must garner 60 votes to advance, thanks to Senate procedural rules. Republicans are largely hostile toward the idea of a student debt jubilee.

The next budget reconciliation process will likely be in the fall.

Can I count on my student loans being forgiven?

Although the odds of student loan borrowers getting their balances reduced or eliminated have never been greater, “until legislation is signed into law, you can’t count on anything,” Kantrowitz said.

Currently, there are pending reports from the U.S. Department of Education and the Justice Department on whether the president has the legal authority to implement loan forgiveness through executive action, Kantrowitz said. It’s still unclear when the findings will be published.

In the meantime, he added, “borrowers should not take any precipitous action in anticipation of loan forgiveness.”

How much could be forgiven?

At the moment, the main point of contention among student loan forgiveness proponents is over how much debt should be scrapped: $10,000 or $50,000.

If all federal student loan borrowers got $10,000 of their debt forgiven, the outstanding education debt in the country would fall to around $1.3 trillion, from $1.7 trillion, according to Kantrowitz. And roughly one-third of federal student loan borrowers, or 15 million people, would see their balances reset to zero.

What Does It Mean to Be “In Debt?”

Between car loans, mortgages, student loans, credit cards, medical bills, and so on, if you’re participating in society, you’ve probably got debt.

But just because you’re carrying debt, doesn’t necessarily mean that you consider yourself to be “in debt,” right? Which raises the question: exactly when do you go from simply having debt, to being “in debt?”

Honestly, there’s no one correct way to look at it. There are, however, three criteria that can help you decide if you’ve just got debt, or if debt’s starting to get you.

YOUR DEBT’S EATING TOO MUCH OF YOUR BUDGET

A healthy financial ecosystem requires a balance of give and take. In other words, money comes in and money goes out. That’s all perfectly normal. 

And debt can be a perfectly healthy part of that flow. The question, though, is whether or not your debt is consuming too much space in your budget. 

What’s too much? There’s no hard and fast rule, but 36% is a popular rule of thumb. What that means is that you don’t want your non-mortgage debt payments to account for more than 36% of your income. 

Of course, the cost of living varies depending on where you live, and so it may be easier (or harder) to carry more debt depending on what your other costs look like. But generally speaking, if your debt-to-income ratio is nearing (or exceeding) 40%, that’s a warning sign, and you may well and truly be in debt.

Use this calculator to see how much of your income is devoted to debt repayment.

YOUR DEBT’S COSTING YOU WAY MORE THAN IT’S GETTING YOU

Quite a bit of debt is a form of investment. A house is an investment. A college education is an investment. A car is an investment (although one that depreciates alarmingly fast).

Ideally, the money we spend should come back to us in some way, either as more money, as good health, as peace of mind, as increased opportunities, etc. You may not like the amount of student loan debt you’re carrying, but if it helped you land a high paying job, you probably don’t think of it negatively.

On the other hand, if you’ve got a massive student loan bill and the career opportunities are slim pickings and you’re barely scraping by, then you may not think too kindly of that debt.

Generally, when a debt’s just creating more costs and not offering any tangible value, it’s more likely to feel like a burden, while you – by extension – feel deeply in debt.

YOUR DEBT’S CONSUMING TOO MUCH MENTAL AND EMOTIONAL REAL ESTATE

Finally, you don’t necessarily need an equation to determine if you are or aren’t “in debt.” You probably already know, simply based on how your debt makes you feel.

  • Do you think about your debt regularly?
  • Do you worry about your debt (enough to read articles about whether or not you’re technically “in debt”)?
  • Do you fantasize about a life without debt?

A healthy amount of debt shouldn’t give you heartburn and it shouldn’t be something you think about much more than once or a month or so. No matter what the numbers say, if your debt is sticking with you and causing you regular distress, that’s enough to say that your debt is a problem.

Ultimately, being in debt is more about whether or not your debt is preventing you from living the life you want. If your debt is a barrier to better options or a weight that’s keeping you from making progress, it doesn’t really matter what you call it – it just matters that you get rid of it.

Should I Pay Off an Old Debt?

It’s a great question, because there are two totally unrelated issues at stake when it comes to an old debt like this: the impact on your credit and your legal responsibility to the debt in question. 

NOTHING WILL CHANGE HOW LONG AN ITEM STAYS ON YOUR CREDIT REPORT

There’s a fairly common misconception that you can inadvertently “reset the clock” on delinquent items on your credit report. Just when you thought it was going to disappear from your credit report, you make a critical mistake and now your credit report (and credit score) gets dinged for another seven years. Fortunately, that’s not possible.

The Fair Credit Reporting Act was amended in 1996 specifically to prevent unscrupulous collectors from taking actions that kept delinquent items alive on your credit report for years and years and years. 

Now it’s pretty cut and dry. The reporting period runs for seven years and 180 days from the date of the last delinquency or missed payment. It doesn’t matter when the account was charged off, when it was sold or if you ever paid a single penny towards the debt. That means that if you missed a payment due date over seven and half years ago, and never made any payments from that point, the account in question is very likely to have fallen off of your credit report by now. 

(As an aside, it’s important to remember that even if you pay off an account all delinquencies still stay on your credit report until the reporting period is over. The difference is that the account is listed as paid, rather than unpaid, which is definitely better for you.)

THE STATUTE OF LIMITATIONS CAN RESET WITH CERTAIN ACTIONS

The idea of “restarting the clock” comes from the statute of limitations for collecting on a debt and has nothing to do with how the debt is reported by the credit bureaus. Broadly speaking, once the statute has expired, your legal responsibility to repay the debt goes with it.

The statute of limitations is set by each state, so the timeframe varies. It’s completely separate from your credit report. In fact, if you live in a state where the statute is greater than 7 years, a collector could sue you for a debt that’s already fallen off of your report.

The statute of limitations in your state doesn’t protect you from being sued, necessarily, but if you can prove that the applicable statute has expired, you should be able to get your case dismissed.

Crucially, making a payment, agreeing to a repayment plan, or, in some instances, simply confirming that the debt is yours can revive the debt and restart the clock. So it’s important that you know whether or not the applicable statute has expired before making a decision.

THERE ARE RARELY DRAWBACKS TO PAYING OFF AN OLD DEBT

So what should you do about an old debt? The answer really depends on your unique circumstances. 

Generally, if you have the funds to pay off a debt they’re really aren’t many drawbacks to doing so. It certainly won’t hurt your credit to pay off an old debt, and while it may “revive” the debt that really doesn’t matter once the debt’s paid off (just make sure you keep adequate records of everything). 

Either way, your old delinquency will fall off your report after seven years regardless of what you decide to do (or not do). But in the meantime, anyone looking at your credit report will see that unpaid debt. If you’re considering getting a loan or looking for a new job or even moving into a new home or apartment, it might be worth it just to be certain that you don’t miss out on something good because of a really old debt.

Monthly Payments of the 2021 Child Tax Credit Will Begin in July

For this year only, the credit amount for many families is increased from $2,000 per child to $3,000 per kid ($3,600 for children under age six), 17-year-olds qualify, and the credit is fully refundable.

One additional major element of the new child tax credit regime requires the IRS to make advance payments of the credit to qualifying families in 2021. The IRS will base eligibility for the credit and advance payments, and calculate the amount of the advance payment, based on previously filed tax returns. It will first look to your 2020 return, and if a 2020 return has not yet been filed, the IRS will look to your 2019 return. The advance payments will account for half of a family’s 2021 child tax credit. The amount a family receives each month will vary based on the number of children in the family, the ages of the kids and the amount of the family’s adjusted gross income. Families who qualify for the full $3,000 or $3,600 credit could see checks of $250 or $300 per child for six months. Families with higher incomes who qualify for the $2,000 credit will get monthly payments of $167 per child for six months. 

The American Rescue Plan also requires the IRS to develop an online portal so that you can update your income, marital status and the number of qualifying children. So, if your circumstances change in 2021 from your last filed federal tax return, and you believe those changes could affect the amount of your child credit for 2021, you would be able to go onto that portal once it is up and running and update it for the correct information. Also, people who want to opt out of the advance payments and instead take the full child credit on their 2021 return could do so through that same online portal.

RS Commissioner Charles Rettig said today in testimony before Congress that the IRS fully expects to launch the portal by July 1 as required under the law, with advance payments going out on a monthly basis to eligible families beginning in July. That means many families who qualify for the child tax credit should receive six payments in 2021, one each month from July through December. This is very good news because just last month Rettig warned that the IRS might not be able to have the portal set up in time and that sending monthly payments out would be difficult. Rettig acknowledged today that the IRS is not historically an agency that is used to sending out periodic payments and that there is a lot of work still to be done in creating this huge undertaking. He estimates that a minimum of 300 to 500 agency employees will be involved in the program. He also said that, though the online portal will be launched by July 1, it is sure to need future enhancements and adjustments as taxpayers begin to enter data into the tool. In other words, don’t be surprised to see snags, at least in the beginning.

How to Collect a Missing Stimulus Payment

Setting aside whether or not $600 is an adequate amount, most Americans are grateful to get something after months of financial hardship and uncertainty. The problem, however, is that some recipients aren’t getting their payments because they’re hitting closed or incorrect accounts. If you’re still waiting on your check, here’s what you need to do:

VERIFY THAT YOU HAVE A PAYMENT COMING

For starters, are you eligible for a stimulus payment? If you received money during the first round of economic impact checks back in the spring of 2020, you’re almost certainly eligible for the second payment, which is $600 per U.S. citizen or resident alien, plus $600 per qualifying child. (If you filed taxes jointly with your spouse, you’ll receive $1,200 for the pair of you.)

The amount of your stimulus may be reduced if your adjusted gross income (AGI) is too high. Per the IRS, you’ll get the full amount as long as your AGI does not exceed:

  • $150,000 if married and filing a joint return or if filing as a qualifying widow or widower;
  • $112,500 if filing as head of household; or
  • $75,000 for eligible individuals using any other filing status.

Over the threshold? You may still get a check, but the payment will be reduced by “5% of the amount by which your AGI exceeds the applicable threshold.”

CHECK WHERE YOUR PAYMENT IS HEADED

Payments are going out digitally and by mail, with most direct deposit payments already out the door and in accounts by now. There was no action required on your part, by the way – just like before, payments were sent out automatically based on the info from your 2019 tax return.

To verify the status of your particular payment, use the IRS’ Get My Payment tool. This will tell you the where and when of your stimulus payment. The IRS really doesn’t want you to call (they don’t have the capacity to help over the phone), so this online tool is your best bet for up-to-date info.

YOUR TAX PREP PROVIDER MAY HAVE YOUR FUNDS

Because payments on both stimulus checks are tied to your most recent tax return, if you used a third party tax prep company like H&R Block or Turbo Tax, your money may have ended up there. 

H&R Block has already announced how they plan to handle client payments, while Turbo Tax’s parent company issued a statement noting that they would reject any stimulus payments back to the IRS (note – this doesn’t mean your money is gone, it just means Turbo Tax doesn’t want to be responsible for handling these payments).

Long story short: if you used a tax prep service and it looks like that’s where your payment was sent, be sure to check their website or contact their customer service for more info.

CHECKS WON’T BE REISSUED

If your check is headed to the wrong place or was deposited into a closed account, you can still get your funds, but it may not be as immediate as you’d like.

The IRS has already stated that they won’t be able to reissue any checks. Instead, if you were due a payment and it never made it to you, you’re advised to claim the “Recovery Rebate Credit” on your 2020 tax return. Technically, this stimulus payment is already a tax rebate, but most of us will receive it in the form of an advance. By claiming the credit on your tax return, you’ll either see your refund increase by the amount owed to you, or have your tax bill decrease by the amount owed.

After having waited so long for this assistance, it’s understandably upsetting to have to wait even longer to receive your share, but unfortunately that seems to be the only option. Be sure to prep and file your taxes early this year to get access to any funds owed to you.

The Pros and Cons of Paying Off Your Debt Early

Not so fast. In some cases, paying a debt off early doesn’t save you all that much money. Let’s take a look at the pros and cons of paying down debt before you have to.

Pro: You’ll save thousands of dollars in interest

You can’t take out a loan without paying interest. You also can’t carry a credit card balance without paying interest. And the longer you owe money, the more interest you’ll pay. Let’s say you buy a car for the price of $25,000, and you borrow $20,000 at an interest rate of 3 percent on a 60-month loan. That could mean more than $1,500 in interest payments over the course of five years. What a waste, right?

So whether it’s a car loan or credit card debt, the sooner you wipe it out, the more money you’ll save in interest payments, and depending on the balance, this could mean hundreds or even thousands of dollars.

Con: You may have paid off most of the loan interest already

Most loans have something called an “amortization schedule” that maps out how much you’ll pay in interest and how much you’ll pay in principal each month. With many loans — especially mortgages — you pay most of the interest in the early years and pay mostly principal later on.

For example, let’s say you have a 30-year loan of $300,000 with a 5 percent interest rate. Using this handy amortization calculator, this means you’ll pay $1,610 per month. (For simplicity purposes, I am not including taxes and insurance in this calculation.) A typical amortization schedule shows that you will pay $1,250 per month in interest payments at first. But toward the end of the lending period, your interest payments are much lower. By the time you have three years left on the loan, you’ll pay a little over $200 in interest per month and it will continue to decline from there.

If you are fairly late in the loan term, there’s not a major financial advantage to paying your loan off early. You’re practically borrowing money interest-free at this point, so you might as well hold onto your cash or use it for something else.

Pro: You free up cash for other things

Your mortgage is $1,500 a month. Your car payment is $200 per month. Your student loan payment is $180. The minimum payment on your credit card balance is $250. If you’re locked into these payments each month, you may not have a lot of money left over for other needs or wants. Debt prevents you from having true financial flexibility. Pay those debts off early, and breathe easier knowing you’ve freed up a significant amount of cash.

Con: You could deplete your emergency fund

Your drive to pay off debt early may be strong, but where is that money coming from? It’s not easy for most people to pay off the $20,000 left on a mortgage in one fell swoop, for example. If you do have that much cash available, you need to make sure it’s not coming out of your emergency fund. It may feel good to pay off a debt, but when you have no money left to cover a medical emergency or job loss, you’re playing a dangerous game. It’s best to keep at least three months worth of living expenses on hand in cash, and avoid the temptation to raid it just to pay off a debt early.

Pro: You’ll sleep better

For many people, carrying debt from month to month is physically and mentally exhausting. It weighs on you. And that’s totally understandable. Everyone has their own comfort level with debt, and if you simply can’t stand the thought of even a small debt burden, pay those loans off in full if you can. In many cases, paying off a debt early offers a mental and financial freedom.

Con: You might stop building credit

Believe it or not, paying off debt early may actually hurt your credit. If you insist on always clearing debts in full long before they are due, you may cease to have enough credit history to get a favorable rating from credit agencies. As long as your debt burden is not too high, making consistent, regular payments on debts and paying bills on time is the best way to build strong credit.

21 Smartest Money Moves to Make in 2021

Pop the Champagne (in a safe, outdoor setting) because 2021 is finally here. Even in a pandemic, a new year is an opportunity for a fresh start. Vaccines are coming, the economy is slowly returning to normal, and you’re perfectly poised to improve your financial life.

And Money is here to help.

We’ve compiled a list of the 21 smartest money moves you can make in 2021. Fix your budget, maximize your savings, spice up your resume and more with our guide. While these aren’t necessarily easy, we looked for things that could realistically be accomplished with a few hours (or in some cases days) of effort.

See how many you can complete!

Finance Your Future

1. Get Serious About Saving

If Americans ever doubted the importance of saving, the coronavirus pandemic has made it clear just how necessary a financial cushion can be. A study from the Pew Research Center found that 41% of all adults in the U.S. have had trouble paying their bills and making housing payments since the pandemic began, while a study from Clever found that 61% of Americans said they don’t expect to have any emergency savings by the end of 2020. That’s why in 2021, it’s time to get serious about saving — even if you think you’re already in a comfortable financial position.

Financial advisors often encourage people to follow a 50-30-20 rule when dividing up their take-home pay, with 50% of your income going towards living expenses like rent and groceries, 30% for recreation or entertainment, and 20% going into savings. But for people who are just starting to save (or even those who are already on the right track), jumping from zero to 20 can be a daunting task — and sometimes downright impossible. That’s why it helps to set incremental goals, according to Kristen Euretig, a certified financial planner and founder of Brooklyn Plans.

She recommends starting with a number you can actually commit to, even if it’s just a few dollars and gradually adding more as you get comfortable. For example, start by saving 5% of your monthly income in January and then increase that amount by one percentage point each month. By December you’ll have tripled the money going towards an emergency fund each month. “Saving is a long game, and it’s a situation where the tortoise wins every time,” says Euretig.

— Kenadi Silcox

2. Actually Earn Something on Your Cash

One additional obstacle savers face right now: Low interest rates make it hard to earn much, even in CDs and so-called high-yield saving accounts offered online. The good news is there are better options if you are willing to put in a little extra legwork.

One good place to look is high-yield checking accounts (also known as rewards checking accounts), according to Ken Tumin, founder of DepositAccounts.com. Some of these pay as high as 4% (compared to less than 1% for most CDs). Of course these accounts, mostly offered through credit unions and regional banks, do have some caveats, typically requiring a certain number of electronic transactions per month and limiting the amounts on which they will pay out top dollar.

For example, Consumers Credit Union’s Reward Checking account offers up to 4.09% interest on $10,000 or less, although there are some hefty stipulations. To earn the full amount, members need to make at least 12 monthly debit card purchases and deposit $500 each month. To earn the maximum interest, members also need to spend $1,000 each month using a CCU Visa credit card. However, account holders can opt out of the credit card and still get a comfortable 2.09% APY.

— Kenadi Silcox

3. Reconsider Small Caps 

It’s been hard out there for shares of so-called small-cap companies, those with market values below $2 billion or so. While tech giants like Apple and Amazon have seen business actually improve during the pandemic, smaller companies, whose financial prospects tend to be tied closely to the overall health of the U.S. economy, have struggled mightily: While large-cap stocks have returned 14% over the past three years, small cap core stocks have returned just 8.7%.

The silver lining: Historically, once the economy begins to pull out of a recession, investors tend to warm to small caps and their returns can sling-shot ahead of those of bigger, steadier names. Looking at the past 11 recessions small-cap stocks beat larger ones by more than six percentage points on average, in the six months immediately after the recession ended, according to brokerage firm LPL.

While the U.S. economy isn’t out of the woods yet, the prospect of an effective COVID vaccine has many Wall Street analysts hoping small stocks could turn the corner in 2021. “Small caps may have history on their side,” wrote Invesco portfolio managers Matthew Ziehl, Adam Weiner and Jason Farrell in a recent blog post.

— Ian Salisbury

4. Invest Your Conscience with an ESG Fund 

With issues like racial justice and climate change on young investors’ minds, so-called ESG (or environmental, social and governance) funds have been gaining fans. By the end of September, U.S. sustainable funds attracted a record $31 billion in new investment dollars, according to Morningstar. The strategy is also getting the attention of some of the biggest names on Wall Street. In its annual letter to clients, BlackRock said the company was making sustainability integral to the way it manages risk and constructs portfolios.

As an investor, it’s nice to think that you can easily sort “good” companies from “bad” ones. But that’s not always the case. “There are some notable shortcomings that the industry still has to iron out,” says Jennifer Coombs, associate professor at the College for Financial Planning specializing in ESG investing. Among these concerns is that the handful of agencies that grade companies on their adherence to ESG principles tend to vary widely in their approaches.

Click Read More for 17 more tips.

14% of Americans with retirement savings have already tapped into those funds

(Excerpt, click Read More below for full article)

Yet while lawmakers made it easier to take a withdrawal from your retirement savings, many experts say that it should not be the first step you take if you’re struggling financially. First make sure that you have explored and exhausted the other options available to you, says Kevin Mahoney, a CFP and founder of Washington D.C.-based advisory firm Illumint.

Depending on whether you’re employed or not, refinancing existing debt may help. Or you might be able to tap home equity. And don’t overlook family and friends who may be able to help with temporary assistance. “No matter the specific circumstances, a retirement withdrawal should stay down as far as possible on the list of potential options,” Mahoney says. 

“Withdrawing money from a retirement account is a reasonable move in a worst-case financial scenario,” Mahoney says. But make sure you’re only taking the money if you really need it.

If you tap into your 401(k) or other retirement accounts, make sure you’re using the money to pay off outstanding debts or cover an income gap during this difficult time, says Michael Kelley, an Ohio-based CFP and founder of Kelley Financial Planning. Don’t take it out to have an extra financial cushion or to make a big purchase, like a car.

And if you did take money from your retirement savings, give yourself a break, DuQuesnay says. “No one predicted that a global pandemic would cause 30 million Americans to lose their jobs in just six weeks,” she says. “Do what you need to do to get through the current crisis, then evaluate a path forward.”

5 Renovations That Don’t Increase Your Resale Value

The first major home renovation my husband and I ever undertook was insulating the walls of a 1921 Craftsman bungalow we shared in Columbus, Ohio. This project made the house a great deal more comfortable in the winter and the summer, since the existing insulation was the least expensive option available in the 1920s — making it completely inadequate for maintaining heat in the winter or coolness in the summer.

Unfortunately, despite the undeniable improvement to our comfort, we found that our new insulation did nothing for our resale value. Even though we had put nearly $5,000 worth of work and materials into this renovation, we didn’t see that money and effort reflected in our sale price when we had to move several years later.

Not all renovations are going to increase your resale value. That doesn’t necessarily mean you should forgo working on your home if you won’t see the value when it’s time to sell. For instance, I would definitely insulate that house again, even knowing that the money is only going to improve my comfort. 

But there are some home renovation projects that you just can’t expect to recoup your investment on. Knowing that, you should consider how long you intend to live in your house and whether you’re renovating just to increase your home’s value before jumping into any of these home improvement projects.

1. Invisible improvements

Insulating our bungalow was the kind of invisible improvement that had to be done, but didn’t appear to change the house. Unlike “sexier” improvements like updating a kitchen or bath, or even putting on a new roof, invisible improvements don’t change the look of the house. These are things like re-grading the yard to keep water from getting into the basement, updating the HVAC system, tuck-pointing bricks and chimneys, and replacing gutters.

While these improvements often have to be done to protect your house, the downside is that you may not recoup the cost of these improvements when it comes time to sell. It can be helpful to think of these renovation expenses as a way of protecting your home’s current value, rather than as a way to increase your future resale value.

2. Swimming pool

While homeowners in Arizona, Florida, Hawaii, and Southern California may find that having a swimming pool is a big selling point for their homes, this isn’t going to be the case nationwide. According to HomeAdvisor, the average cost to install a pool is over $27,000. That doesn’t include the annual maintenance costs, ranging between $500 and $4,000. It’s these maintenance costs, plus the work that homeowners will have to either do themselves or contract out in order to keep their pool sparkling clean that will turn off many potential buyers. Add in the additional insurance requirements that homeowners with pools will need to purchase, and it should be clear why many prospective buyers would rather not invest in a home that comes with a pool.

This is why you should only commit to the cost of installing a pool if you truly want to use it yourself and expect to stay in your home for at least five years. Otherwise, it might make more sense to invest in a membership to your local pool. 

3. Bathroom and kitchen upgrades

Remodeling your bathroom and/or kitchen is an excellent way to increase your home’s value, right? Yes and no. While replacing dingy tiling and updating old appliances will definitely help your home shine for potential buyers, there’s such a thing as going overboard with your bathroom or kitchen upgrades.

Specifically, if you add granite countertops, custom-made cabinets, stainless steel appliances, and ceramic tiles to your kitchen and bathroom, but the rest of the home is still an ordinary suburban home, potential buyers will see the house as a work-in-progress, rather than a home that feels move-in ready. Over-improving the bath and kitchen could make buyers think that it’s not worth the effort to try to get the rest of the house to match.

4. Built-in high-end electronics

We may all dream of living in a George Jetson house — where every possible electronic need you have is already built in — but committing to this kind of renovation may hurt your resale value. 

There are a couple of reasons for this. First, while your personal movie theater (with remote-controlled state-of-the-art projector) may be exactly what you want from your home, a potential buyer may just see a room that will need to be torn out and remodeled as soon as they move in. Plus, technology advances at a breakneck speed, so your cutting-edge electronics will soon look as dated as shag carpeting and harvest gold refrigerators.

If you need or want built-in high-end electronics in your home, make sure you’re installing them for your own pleasure and comfort, because it’s unlikely a buyer will appreciate them too.

How to Prepare for the End of an Eviction Moratorium

At the local level, governments have provided these moratoriums as a way to keep people in their homes during this difficult time. However, an eviction moratorium doesn’t prevent your rent or mortgage from falling further and further behind and once a moratorium ends you’ll need to bring yourself current or face a potential eviction. 

Of course, if your financial outlook hasn’t improved (or hasn’t improved dramatically), staying in your home will be a challenge. Here’s how you can prepare yourself for the end of an eviction moratorium:

KNOW YOUR RIGHTS

Eviction moratoriums vary depending on where you live. So you’ll want to do some research on COVID-19 eviction moratoriums in your city, state, and county. Here are a few things you’ll want to look into: 

  • How long an eviction moratorium is in place for. Some locales have extended moratoriums so be sure to understand the protections in your specific county or city.
  • Whether you’ll be on the hook for any nonpayment fees or penalties. You most likely won’t need to pay for fees or penalties for not making your rent during a moratorium. However, this could change once it’s been lifted, or after the grace period to pay outstanding rent ends. 
  • How to be offered protection under an eviction moratorium. You might only be eligible if you’ve suffered an economic setback, are on unemployment, or if your business has been hit hard financially. 
  • How much time you have to pay back in rent or mortgage payments you owe. This varies depending on the locale. In some places, it’s 3 months after an eviction moratorium is lifted. In other areas, it’s 6 months or 12 months. During this time, you cannot get kicked out for deferred rent. 

NEGOTIATE FOR LOWER RENT 

If you can afford to, pay something now. Not only does it show your landlord that you’re a responsible tenant, but it also means you’ll owe back less money down the line. 

Try to work out an agreement with your landlord. While it might seem intimidating, start by approaching your landlord as a teammate. And your situation is a problem to work out together, suggests Tilden Moschetti, a real estate attorney of the Moschetti Law Group. “Everything is negotiable,” says Moschetti. “Most landlords want to work out arrangements to get caught up.” So come up with a plan to get caught up on your payments — which we’ll get to in just a bit.

A pro tip: It’s often easier to negotiate when there are no intermediaries between the tenant and owner, explains Alexander Lerner, a realtor with Figure 8 Realty in Los Angeles. In other words, the landlord is an individual or is a family-run operation versus a property management company. 

Be upfront about your situation. “Tenants should be honest and forthcoming with as many details as they feel comfortable sharing,” says Lerner. “The more you can show that you have been impacted financially and need assistance, the greater the likelihood you will find the person on the other side being amenable to negotiation.”

Put yourself in your landlord’s shoes. As Lerner, who works with landlords and is one himself, points out, landlords don’t want to be in a situation where you’re defaulting on your lease or aren’t unable to pay at all. In turn, they’d probably rather know that you’re going to pay a reduced amount. 

If you aren’t able to cover any rent, it puts the landlord in a position of having to find a new tenant when the rental market might not be as strong as when you rented out the place. Or needing to pour resources into getting you evicted or collecting on any money owed. 

Let’s say your rent is $2,000 a month. And it takes the owner a month to find a new tenant. In that case, they’d be missing out on one month’s rent. But if your rent got bumped down to $1,800 for four months, they’d only be losing $800. So it’s worth their while to keep you around but bump down your rent. 

“Plus, there’s no guarantee — given a lot of the current economic uncertainty — that a landlord will be able to find someone to rent right away, which could mean that the unit will stay vacant longer,” says Lerner.

COME UP WITH A PAYMENT PLAN 

Your payment plan depends, of course, on your financial situation. If you’ve been laid off and are receiving unemployment benefits, you might be able to afford to pay half of your rent now. Once you are gainfully employed again, you can drum up a plan to make up whatever remains.

If you’re out of work and have zero income coming in, you might have to skip rent payments for now, and get on a more aggressive repayment plan, where you’re paying, say, your rent plus 20% for a year or what have you.

Whatever your case might be, it’s essential to plan ahead. Your plan should be feasible and in step with your current financial situation. 

Should things change, keep your landlord looped in and make sure they’re on board. Try to think of any payment plan as a win-win. If you need more time to pay off whatever rent is owed, communicate this to your landlord as soon as you can. This especially rings true if you were a tenant in good standing that stayed on top of your payments before the pandemic. If you’ve got a positive payment history before everything went sideways, your landlord might be flexible and give you a few options so you won’t need to uproot. 

WHAT TO DO IF YOU GET EVICTED

Evictions are a loss for both parties involved, points out Anderson Franco, Esq., a San Francisco-based tenant attorney. “Tenants don’t want to lose their homes, and landlords don’t want the expense of a vacancy or eviction,” he says. “As such, it behooves both tenants and landlords to negotiate mutually beneficial terms that could allow the tenant to remain in their home and avoid the landlord-eviction expenses.” 

If you look just at the numbers, reducing your rent might generate less money for the landlord. But let’s say you end up defaulting on your rent, and the landlord ends up needing to evict you. That’s extra money and time they need to dole out on evicting you. Plus, they’ll need to find a new renter, which takes time, and potentially lost rent money during the vacancy. 

In the worst-case scenario and you are in danger of getting evicted, know your rights. The process of eviction, including the timeframe and your responsibilities, will depend on the laws in your state of residence. No matter where you live, be sure to keep track of all communications from your landlord or lender. You can seek more information and help from a non-profit agency that can provide free legal guidance to tenants. Some might even offer free mediation. 

Finally, it may come to pass that there’s no path forward other than leaving the property. Once that decision has been made, you’ll want to refocus your financial and mental resources towards finding temporary or long-term shelter.

The 6 Absolute Worst Ways to Cash In Your Travel Points

Travel credit cards make it easy to earn all kinds of rewards ranging from airline miles to hotel points and flexible travel credit. While the value of the points you earn will vary depending on how you redeem them, it’s not unheard of to receive 2 cents per mile or point in value from airline miles or hotel points for certain, high-value redemptions. 

On the flipside, you can also redeem your rewards for some pretty awful items, and even ones that let you get half a cent in value or less. That doesn’t make these redemptions “wrong” per se, but it does mean you’re effectively leaving money on the table when compared to other options.

If you have a travel credit card, a hotel rewards card, or a flexible travel credit card that lets you redeem points for airfare, hotels, and more, here are the redemption options you should avoid.

1. Merchandise

Many rewards currencies let you cash in your points for merchandise. With some rewards portals, for example, you can redeem points for purchases made through Amazon.com or at Apple stores.

While this isn’t the worst option in the world, redeeming points for electronics, small household appliances, and other types of merchandise will typically get you one cent per point in value, and often a lot less. 

Delta SkyMiles offers some of the worst merchandise redemptions you can find. For example, they want 141,880 miles for a 10.5-inch iPad Air with Wi-Fi. This same model currently costs only $649 at Apple.com, so you’d be getting significantly less than half a cent per point.

While it may seem tempting to use points for merchandise (free is free, right?), if you can bank enough points for something of higher value, it’ll be worth the wait. 

2. Low value transfers to airlines

Most travel rewards enthusiasts know that transferring points to airlines can help you get more bang for your buck, but you have to remember this isn’t always the case. High value airline transfers can be a good deal, but not all programs are created equal.

For example, it’s common to transfer your points to the card issuer’s airline partners and receive at least 2 cents per point in value when you go to redeem. That’s because your points will typically transfer 1:1, with the exception of certain airlines.

But some programs offer paltry transfer ratios. For example, the IHG Rewards program lets you transfer points to airline programs like Air France/Flying Blue and Alaska Airlines, but you’ll only get 2,000 airline miles for every 10,000 hotel points you transfer. 

Takeaway: not all points transfers are equal. Sometimes it makes sense to lose points in the transfer just to be able to use the points, but when you’re sacrificing thousands of points just for the privilege of transferring, you’re better off finding a different travel partner to use the points for.

3. Trading airline miles for hotel stays

If you have a bunch of airline miles you can’t seem to use, it might be tempting to cash them in for hotel stays through the airline’s portal. This isn’t the end of the world, and redeeming miles for hotels is better than letting them expire. Still, you won’t get very much value in return if you choose this option. 

Take the American AAdvantage program, for example. You can use miles to book free hotel stays, but redemption values are not great. For random dates I chose this year, they wanted 188,500 miles for a free stay at the Ritz-Carlton Bal Harbour in Miami at the same time a paid stay would set you back $1,185 per night. That means you would get a lot less than 1 cent per point in value, which is a significantly lower value than you’d receive if you cashed in your miles for flights. 

Don’t be in so much of a hurry to book your entire trip on points when saving them for your next trip will give you much more value.

4. Gift cards

Almost every rewards program lets you cash in your points or miles for gift cards, and this can be a decent value if you don’t have the option to redeem for travel. However, you may receive less than one cent per mile in value if you cash in airline miles from an airline loyalty program for gift cards, and even flexible programs might only give you 1 cent in value per point with this option.

Cashing in travel rewards for gift cards should really only be your last resort if you find you absolutely cannot travel or your miles are about to expire. 

5. Magazine subscriptions

Please don’t ever cash in your miles for magazine subscriptions, even though several programs including Delta SkyMiles advertise this option. With Delta’s “MagsforMiles” program, for example, you can get six to 228 issues of various magazines like People and The Wall Street Journal in exchange for your miles. 

12 Money Mistakes You’re Teaching Your Kids

“Children observe and soak up everything, including how you use and talk about money,” said money and budgeting expert Andrea Woroch. “In fact, family attitudes toward spending and saving and mom and dad’s financial habits directly shape how children will value their own money in the future. It’s critical that parents understand how their own habits will influence their children and that they need to model the behavior they want their children to adopt.”

While kids can absorb many beneficial financial lessons from their parents, they also tend to take in less helpful ones as well. HuffPost asked Woroch and other financial experts to break down the kinds of harmful money messages kids learn from their caregivers ― and to share the types of approaches parents should try instead. Read on for their insights.

1. Money is a taboo topic.

“There’s a taboo out there that talking about money is bad, especially if you’re in debt, and that it’s shameful,” said Woroch. “When you don’t talk about money in your own household because you don’t want your kids to worry or because you don’t think it’s important that they are involved, you’re teaching your kids not to talk about money, and you restrict the opportunity for learning valuable money lessons early on.”

Tim Sheehan, co-founder and CEO of the family-focused financial literacy app Greenlight, echoed this sentiment. He believes that not discussing money at all with children leaves them in the dark when it comes to understanding what money means, how to get it and the right ways to manage it.

“Parents can start by helping their kids learn the ropes of decision-making,” Sheehan said. “Start small by explaining why you choose to spend money on groceries instead of takeout.”

Because so much of money management today happens on cellphone apps, children don’t observe things like bill-paying the way they did in the past. So parents need to “perform” money a bit to make sure their kids see them engage with finances and feel empowered to develop opinions about it, rather than simply getting lectured on the topic.

“I ask my children questions about money, which establishes that money is a thing we talk about,” said financial therapist Amanda Clayman. “These talks also demonstrate that people have questions without easy answers when it comes to money, that this is something you don’t have to be ashamed of, and that I’m a trusted source you can come to for help making decisions.”

2. Money is always around, no matter what. 

The experts who spoke to HuffPost emphasized the importance of helping kids understand that people earn money from work and that it doesn’t simply “grow on trees.”

“It can start with something as simple as a chore,” Sheehan said. “This helps kids make the connection that, ‘If I do this work, then I’ll earn money.’ Then, kids can set a saving goal and work towards it. It teaches them about making real-world trade-off decisions instead of giving in to instant gratification.”

In addition to teaching kids about earning money, Sheehan believes that chores like hosing down the car or taking out the trash can help kids become generally more responsible and prepared for adulthood. As for families that don’t pay for household chores, they can look to neighborhood jobs or other ways to demonstrate that money is earned, not given.

3. Financial literacy is just a grown-up thing.

In addition to not talking about money, many parents don’t let their children gain experience managing money. But there are countless age-appropriate ways for kids to learn financial literacy and practice these skills.

“Start a small business,” suggested financial expert Kim Kiyosaki. “It’s key to learn the language of money. Kids can learn things such as income and expenses, profit and loss, cash flow, inventory, marketing, and the value of their time. This is hands-on, and it’s fun. And the learning is tremendous.”

She recommended businesses like mowing neighbors’ lawns, selling a product online, opening a lemonade stand, shining shoes, or even finding lost golf balls on local courses, cleaning them and selling them to golfers.

Kiyosaki shared other ways to teach kids about money, like buying a few shares of a company familiar to your children (like Disney) and letting them watch the price fluctuations and learn about the stock. Another approach is buying a 1-ounce silver coin. Or, you can leave it up to your kids.

“If your child wants a new toy or gadget, ask them, ‘How could you earn the money to buy it?’” she said. “Let them get creative.”

“You can’t teach your child the difference between needs and wants, or even the value of saving, if you are continually swiping a credit card for everything.”- KUMIKO LOVE, FINANCIAL COUNSELOR AND CREATOR OF THE BUDGET MOM

4. Money talk only evokes negative emotions. 

“Children are wired to be attuned to the emotions of their caregivers, so they start to notice associations,” Clayman explained. “They might notice if conversations about money seem to be tense or if their parents get upset and start talking about money when they ask for something. These form an emotional context that kids tend to grow with and bring into their financial lives as adults.”

6 Easy Ways to Simplify Your Financial Life

If you’re looking for some easy ways to simplify your finances, consider these straightforward ways to master money management:

1. Create a financial calendar: Many of us start the year with great intentions, but we fall off track along the way. I always recommend creating a budget as an essential piece of money advice, and I’m going to make a slightly different suggestion for those of you who already have a budget — make a financial calendar. Store your calendar on your phone or tablet, so you can set reminders and create a list of major financial tasks you intend on completing, along with their due date. For example, you might remind yourself to complete your taxes by early April, compile all of your tax documents by March 1, and increase your 401k contributions for the year by January 15. You can also use it to set financial goals, such as the date by which you hope to save $2,000 for a vacation, or to track goal milestones toward paying off debt.

2. Ditch the Paper: Paper bills, credit card statements and other financial documents can become easily disorganized. Take a moment to request all of your financial documents be switched to e-delivery, and if you have old files of paper document you still need, start scanning them into an e-format. They’ll be easier to retrieve and use, less likely to be misplaced, and may allow you to make better financial choices when you can see everything at once.

3. Clean Out Your Wallet: If you’re savings-conscious like me, your wallet is probably overflowing with retailer loyalty cards and coupons. These are powerful tools for reducing costs with perks like free shipping, early access to sales, and other special promotions and discounts. However, having too much plastic in your wallet can also leave you feeling disorganized, scattered, and less likely to use these many programs regularly. Consider downloading apps for your favorite loyalty and coupon programs, or better yet, an app to consolidate all of your accounts in one place.

4. Streamline Credit Cards: While you’re cleaning out your wallet, consider the myriad rewards credit cards you may have. You’re less likely to use multiple rewards cards as intended, and more likely to run up needless fees. I recommend using a single rewards card, such as Bank of America® Cash Rewards credit card, that allows you to switch your cash-back category on a monthly basis. That means a single card can earn you top-notch cash back for online shopping, travel or many other common shopping categories. You’re more likely to get all the cash back you deserve and can save on fees associated with juggling multiple cards.

What Causes a Credit Card to Stop Working?

Credit card technology has taken a leap forward in the past decade-plus, with new features that make transactions faster and safer. But that doesn’t mean your cards won’t fail you at the most inconvenient time.

So why do credit and debit cards stop working? There are two big picture reasons: there’s something wrong with the card, or there’s something potentially wrong with your account.

REASONS YOUR CREDIT CARD MAY MALFUNCTION

Most credit cards these days come equipped with at least two mechanisms to complete your transaction: the classic magnetic strips and the more recent computer chips. On top of that, many cards now offer contactless payment through an antenna connected to that computer chip.

Which means that if one option isn’t working, you may be able to try a different method with the same card. 

Still, if you’d rather not risk it either way, here are some of the most common reasons why a card may malfunction.

EXPOSURE TO STRONG MAGNETS

The magnetic strip on your credit card doesn’t play well with other magnets, although it takes a fairly strong magnet to actually cause your card to stop working. Bringing your card into a room where an MRI machine is operating could do it, for instance.

To be safe, limit your cards exposure to magnets and magnetic devices.

THE MAGNETIC STRIP IS SCRATCHED

This is likely the most common physical reason for a credit card to stop working. If the magnetic strip gets roughed up enough it may eventually become unreadable.

Be gentle with your plastic and try to keep your cards together in a wallet or money clip.

THE CARD IS DIRTY

If enough dirt or debris gets between your card’s strip or chip, the card reader may not be able to process the transaction. Luckily, this is the easiest one to remedy – you can wipe the card down with a clean cloth, or even use adhesive tape to pull off offending particles. While soap and water probably won’t ruin the card, it’s better to keep your card dry and soap-free.

THE CARD IS DAMAGED

It takes a lot to make the chip in your credit card stop working, but bending, cutting, crushing, or otherwise mangling your card will do the job. Most modern credit cards can survive years of normal wear and tear, but we all have our limits. Extended exposure to water (particularly salt water) can cause your card to stop working, too.

THERE’S SOMETHING WRONG WITH THE READER

Sometimes it’s not your card’s fault! There may be an issue with the card reader at the store. There may be an issue with the system tasked with authorizing and process the payment. Or you may be inserting your card incorrectly. More times than not, a card failure can be resolved by just trying again, or swiping instead of dipping.

REASONS YOUR ACCOUNT MAY NOT BE WORKING

Sometimes the card itself is fine – it’s the account at the other end that’s got an issue. Here are the most common reasons your card isn’t working (that aren’t the card’s fault):

YOUR CREDITOR SUSPECTS FRAUD

A creditor may temporary freeze your account if there’s been enough “suspicious” activity to warrant a closer look. This usually means transactions in strange places, at strange frequencies, or for strange amounts. Basically, if the card issuer has reason to suspect that you’re not the one using the card, they may put it on lockdown until they make contact with you to confirm whether or not the transactions are legit.

YOUR CARD NEEDS TO BE REPLACED

Creditors will send a new card when the old one expires, or if the old one was lost or compromised. If you’re trying to use a card that’s expired or one that’s been replaced, it likely won’t work.

Conversely, your new card won’t work until you activate it, which is another reason your card may not be working.

THE BILLING INFORMATION DOESN’T MATCH

Many transactions, particularly online ones, require more info than just your card number. If the information on file with your credit card doesn’t match the info you provided, the transaction won’t go through. If you’ve moved recently, make sure to update your address on all of your financial accounts. The wrong ZIP code is a pretty common reason why transactions sometimes don’t go through.

YOUR ACCOUNT IS MAXED OUT

Many credit and debit accounts provide a little wiggle room for going above and beyond your credit limit/available balance (at a premium to you), but if there’s not enough money or available credit to cover the transaction, it likely won’t go through.

Help! I’m Afraid to Retire, Even Though I Can Afford to

I am seeing an interesting pattern in discussions with my clients about retirement — and it’s certainly not one I was expecting. Instead of worrying about whether they’ll have enough saved to enjoy retirement, they’re worrying about whether they’ll enjoy retirement at all.

It seems like discussions about retirement start almost as soon as we get our first job. Whether it’s saving as much as possible in your 401(k) plan or making an annual IRA contribution, the focus is always on having enough money to retire and enjoy all the things they’ve been dreaming of doing. For some, the big plans include traveling to far-flung destinations; for others, it’s spending time with family, finally moving to that place you love to visit on vacation, or volunteering.

As financial planners, we talk about these dreams as goals and put dollar amounts on them with anticipated timeframes around when you could expect to achieve them.

Nearing Retirement, Client Has Second Thoughts

As we diligently make progress on achieving those retirement dreams, we don’t spend as much time as we should thinking about what life may actually look like in retirement. Just last week, I spoke to a client who says she would like to retire at the end of this year. We have been working toward her economic freedom for years, and she has enough assets to be able to make all the dreams she has expressed come to fruition. We got to the end of the financial plan discussion and I was all set to celebrate starting the countdown to the long-awaited retirement date.

But there was a pause, and then she said, “I don’t know if I can actually start to withdraw the money and feel good about it. I have been so focused on saving, investing and planning for years that I don’t know how I will feel about starting to take money out, even if it’s for things I think I want.”

She went on to say that she always thought she wanted to move to another state to be close to her extended family, but she now realizes that they are going to be busy with their own lives, and it won’t just be fun all the time like when she visits now. And if her family won’t be able to see her multiple times a week, then maybe she doesn’t actually want to live in that state and make a major lifestyle adjustment to weather she doesn’t enjoy year-round and not being able to walk on the beach every day.

She shared that she worries that the photography and golf hobbies that she feels like she never has time to enjoy now won’t be enough to fill her days. She has traveled extensively already, and the list of places she still wants to visit is getting shorter. In other words, her biggest worry about retiring is what she is going to do with her time when she retires — even though she says frequently, even now, that she can’t wait to stop working.

I have had similar conversations with physician clients who start our discussions by telling me that they are very stressed, and the only thing they want to do is close their practice as soon as financially possible. And yet, when we work through their wealth management plan and show that they have more than enough assets to walk out the door tomorrow, they can’t do it. For some people, retiring from being an expert in their field or having a prestigious job feels like giving up part of the identity they have worked very hard to earn.

Coping Tips If You’ve Got Cold Feet for Retirement

So, what do you do when the hardest part about retirement is actually retiring? The most successful transitions to retirement I have helped clients implement start years before the planned retirement date or have elements that help ease them into decisions. Here are some ideas to make retirement the next step in a journey, not a final destination:

  1. Consider slowing down at work instead of stopping completely. Working part-time allows you to have the best of both worlds: Continued income and a day-to-day sense of purpose, as well as the time to pursue hobbies, travel and leisure. The physician who wanted to walk away from his practice is now only working three days a week, happy to still be caring for patients while being able to participate in his teenager’s school and sports activities.
  2. Try before you buy. If relocation is in your retirement plans, you can similarly take a new location for a test drive before committing to living there full-time. In the case of the client who might want to live by her family but really likes her current home, I recommended that she rent a house for a year in the new state to see if she can deal with the weather, and if her extended family’s lifestyle suits her before she sells her current home. She can rent out her current home for some income, or she can just come back home for a break during the very hot or cold months in the new state.

Major Debt Collection Changes Coming in 2021

For a quick refresher, the new rules are basically updates to the Fair Debt Collection Practices Act (FDCPA), which sets guidelines for how debt collectors can behave when attempting to collect a debt from consumers. The FDCPA is over four decades old at this point, so an update was arguably overdue.

The Consumer Financial Protection Bureau (CFPB) has actually been working on this update for over five years now. The rule changes are an attempt to modernize the FDCPA and better account for how consumers and creditors communicate in the 2020s.

Here’s how these changes will impact you and the process of debt collection.

STRICTER LIMITS ON COLLECTION CALLS

The core rules of the FDCPA remain in place. That means debt collectors still can’t:

  • Call before 8am or after 9pm (local time)
  • Threaten or harass you
  • Tell your friends or family about your debt
  • Contact you at work (after you’ve asked them not to)

One issue the text of the original FDCPA didn’t cover was how often a creditor could call you. This new rule sets hard limit of one call per day. However, if the collector actually talks to you, they can’t call again for at least seven days.

On top of that, you’ll no longer have to send a letter to request that collectors stop calling you. You can make that request on the phone and collectors will now be obligated to stop trying to contact you that way.

COLLECTORS WILL BE ALLOWED TO TEXT, EMAIL, AND DM YOU

The only two communication methods mentioned in the original FDCPA are phone calls and letters, and it’s fair to say that both methods have fallen out of favor with many (if not most) consumers in recent years. 

The new rules provide guidelines for collectors contacting you through text message, email, and social media. There are two basic requirements for collectors using these communication methods:

  • Like with phone calls, they need to keep their outreach to reasonable hours (8am to 9pm); and 
  • Every text, email, and DM needs to include instructions on how to opt out of receiving future communications through that method.

It’s important to note that “social media” is limited to private communications. They aren’t allowed to Tweet at you or post about you on Facebook. Only direct, non-public messages are permitted.

VALIDATING DEBTS IS GOING TO BE A LOT SIMPLER

Perhaps the most consumer-friendly change is the new requirement that collectors need to provide validation of the debt in question either at the point of first contact, or within five days after the first contact. 

Prior to this rule change, if you wanted clear details on where the debt came from and an itemized breakdown of the charges, you’d have to request this validation yourself and collectors would have 30 days to comply. Now the onus will be on collectors to provide this information upfront and in an easy-to-understand format. 

COLLECTORS CAN’T REPORT ON A DEBT BEFORE CONTACTING THE CONSUMER

There’s good news on the credit report front. Collectors will now be prohibited from reporting on a collection debt to the credit bureaus until they’ve:

  • Spoken to the consumer in person or over the phone about the debt; or 
  • Sent the consumer a message about the debt through mail or email.

If the collector is reaching out via letter or email, they have to wait a reasonable amount of time (14 days seems to be the guideline) to ensure that the message was delivered. 

This gives consumers a fair chance to deal with a collection debt before it hits their credit report.

COLLECTORS CAN’T SUE FOR EXPIRED DEBTS

Debts don’t really “expire,” but each state does maintain statutes of limitations that spell out how long a creditor has to take legal action to collect an unpaid debt. Once that statute of limitations has passed (which can be anywhere from three to ten years, depending on where you live), the creditor or collector may still try to sue you, but if you can prove that the statute of limitations have passed, you’ll almost certainly win the case.

Of course, many consumers don’t know this, which some collectors may use to their advantage by using threats of a lawsuit to coerce the consumer into making a payment.

The new rules of the FDCPA explicitly prohibit collectors from threatening to sue on debts where the statute of limitations has passed (these are referred to as “time-barred” debts). 

TWO MAJOR DRAWBACKS TO THESE NEW RULES

While these changes are largely consumer-friendly and should improve many elements of the debt collection process, there are two big drawbacks.

First, while it’s nice to be able to pick and choose your preferred method of communication (particularly if you’re interested in working with the collection company), things could get hectic and frustrating fast with collectors on the phone, in your DMs, in your inbox, in your texts, and on and on. 

Conspicuously absent in these new rules is a limit to how often collectors can text, email, and DM you. Unlike phone calls, there is no one-a-day cap on messages sent through these other methods. Your only protection is to opt out, but there’s no universal opt out. You’ll need to opt out of each source individually.

Second, the increase in digital communication is almost certainly going to come with an increase in scams. You’ll need to be on alert to separate the real collectors from the fakes, which will likely just add to the already overwhelming amount of noise.

How to Deal with a Shockingly Big Utility Bill

If your lights stayed on during the cold front, however, you may be facing a different kind of crisis. Many Texans buy their electricity wholesale, which can be a great deal most of the year. Unfortunately, the market price of electricity spiked drastically during the deep freeze. Electricity that might normally cost 12 cents per kilowatt hour, jumped up to $9 per kilowatt hour (an increase of more than 7,000%). 

As a result, families across the state are suddenly dealing with enormous electricity bills, with many on the hook for thousands of dollars in charges. 

While unexpected spikes are always a possibility with any variable rate utility, it’s hard to imagine that anyone was prepared for these kinds of prices.

If you find yourself stuck with an enormous utility bill as a result of a natural disaster, severe weather event, or smaller scale misfortune, here are some of the initial steps you should take to protect your finances.

BE PATIENT

A big bill takes your breath away. We’ve probably all had those moments when we first lay eyes on an unexpected medical bill or car repair quote and the number nearly puts you on the floor. 

It’s easy to panic, but it’s important that you stay calm and patient when faced with an almost inexplicably huge bill. The last thing you want to do is make a hasty decision that comes back to bite you.

As in the case of the Texas electric bills, there may be relief coming, but that can take time. Until you know what aid is available, avoid taking any actions that may make it difficult to get relief later (charging the bill to your credit card or emptying your savings, for example).

DISABLE AUTOPAY

If you have automated payments in place, you may want to cancel those as a precaution, particularly if your autopay is set to take whatever’s due straight from your account without any additional approval. You can reinstate your preferred payment method once things are sorted with you and the utility company.

KNOW YOUR RIGHTS

In the immediate aftermath of the severe winter event in Texas, the state’s utility commission enacted a temporary moratorium on electricity shut-offs for nonpayment, protecting families faced with unmanageable bills. 

Check to see what protections are in place where you live. If you stop making payments while you wait for aid, will you still have access to your utilities?

CONTACT YOUR PROVIDER

Start the conversation with your utility provider as soon as possible. Ask what they can do for you. At the very least, they should be able to help you create a payment plan. Ultimately, what you really want is relief or forgiveness, but that may require government intervention.

In the meantime, figure out what you need to do to keep your utilities running until more information is available.

EVEN OUT YOUR SPENDING

If no help is coming you may have to work that new, unexpected cost into your monthly budget until the charges are paid off. If that’s the case, consider working with a trained, nonprofit financial counselor to reorganize your spending. 

5 pandemic-driven financial habits worth keeping

As the pandemic shut down the world around her, Ashli Smith , an Atlanta resident and mom to a newborn, says she set up autopay for her recurring bills to help her stay organized and avoid late payments. “With everything going on, plus being a mom, I don’t want to forget to pay something or someone,” she says.

While the pandemic caused incredible financial stress and uncertainty, it also led many consumers like Smith to form new financial habits worth keeping, including saving more and spending less. A NerdWallet survey found that most people who formed new financial habits plan to continue them into 2021.

Here are five habits to consider sticking with even as life starts to return to normal:

1. SPEND LESS, SAVE MORE

For many Americans, spending less amid the pandemic came naturally because of income loss or fewer spending options after restaurants and travel largely shut down. NerdWallet’s survey found that among those who said they picked up new financial habits during the pandemic that they plan to carry into 2021, 58% said they were cutting back spending on “wants” and 36% said they were cutting back spending on “needs.”

“If your job was eliminated or your pay was reduced, then you’ve probably decreased spending and gotten used to a lower monthly budget,” says Eric Simonson, certified financial planner and owner of Minneapolis firm Abundo Wealth . “As soon as that income returns, it would be an amazing opportunity to keep expenses the same but save all of that new income.”

Natalie Slagle, founding partner at Fyooz Financial Planning and a CFP based in Rochester, Minnesota says, “For those who were furloughed or laid off, the No. 1 priority is replenishing savings.” For those who got used to spending less, she says, “we encourage them to sustain that habit so their cash flow can go toward building up their emergency fund at a higher rate than what was possible before the pandemic.” That way, it’s easier to handle the next crisis, whether it’s income loss or an unexpected expense, without taking on more debt.

2. STICK WITH A BUDGET

In the NerdWallet survey, 39% of those who adopted new habits that they plan to carry into 2021 said that one of those habits was sticking to a budget.

“So many people have looked at their budgeting and spending during (the pandemic), often for the first time,” Simonson says. “It’s important to stick with this post-pandemic, since keeping a budget is part of a healthy financial plan.”

Many people turned to budgeting to help regain a sense of control that the pandemic took from them, he adds. “The financial habits you’ve been forced to learn and adopt have the power to create huge, positive, lasting change if you stick with them,” Simonson adds. Continuing to budget makes it easier to generate long-term savings and avoid debt, for example.

3. MINIMIZE TRAVEL EXPENSES

Among survey respondents, 40% said one of the new habits they plan to continue in 2021 was cutting back on travel spending.

“One reason we saw our clients enjoy lower expenses (during the pandemic) is because they didn’t go on their planned vacations,” Slagle says. “Not only did that cut expenses, but they also have flight vouchers and unused travel miles to spend.”

As travel begins to start again, Slagle says she’s helping clients plan on using some of those savings and credits on their next trip to avoid overspending.

4. EARN EXTRA INCOME

Based on the study, among those who developed new financial habits, just over a quarter said they picked up a side hustle or extra work to make money. Kevin Mahoney — a CFP and founder of Illumint , a financial planning firm for millennials based in Washington, D.C. — says earning a side income can help provide financial stability during uncertain times, which is why he encourages his clients to consider it.

“Supplemental income mimics an emergency savings fund. People who can consistently generate self-income are better prepared to withstand financial volatility,” he says.

Biden Signs Stimulus Bill

The push for a third stimulus check started in December before the second round of $600 payments were even authorized. So, we’ve had to wait a couple of months to see how this would all play out. But, on Thursday, President Biden signed the American Rescue Plan Act, which authorizes another round of stimulus checks. So, finally, we now know that a third round of stimulus payments is coming…we just don’t know exactly when they will arrive.

According to White House Press Secretary Jen Psaki, some people could start receiving electronic payments as soon as the March 13-14 weekend. This would just be the first wave of payments. More stimulus check payments would then be sent over the following weeks.

When second-round stimulus checks were authorized in December, the IRS started issuing electronic payments in less than one week. So, it shouldn’t come as too much of a surprise if the tax agency is able to repeat that feat and start sending payments within days this time around, too. Psaki recently noted that the IRS is “building on lessons learned from previous rounds to increase the number of households that will get electronic payments, which are substantially faster than checks.”

We don’t know yet how long it will take to distribute all payments. Hopefully, it will be a matter of weeks, not months, before the vast majority of third stimulus checks are delivered. We shall see.

Nevertheless, whether it’s in a few days or a couple of weeks, at least we know the payments will be sent soon. And since the IRS has bank account information for more Americans than it did when first-round stimulus checks were being processed, they will be able to deposit payments directly into bank accounts for most people. This will speed up the payment process considerably. That’s good news for Americans who have lost income because of the pandemic and desperately need the extra cash.

Tracking Your Third Stimulus Check

We expect the IRS to fire up the popular “Get My Payment” portal again so that you can track the status of your third stimulus check. The online tool lets you:

  • Check the status of your stimulus payment;
  • Confirm your payment type (paper check or direct deposit); and
  • Get a projected direct deposit or paper check delivery date (or find out if a payment hasn’t been scheduled).

For first-round stimulus checks, you could also enter or change your bank account information to have your payment directly deposited into your account. But that feature wasn’t included in the tool for second-round payments. So, we’re not sure if you’ll be able to provide or update bank account information for the upcoming round of stimulus payments.

However, for first-round stimulus checks, you couldn’t use the “Get My Payment” portal to track the status of your payment if you didn’t file a tax return. Instead, there was another online tool that non-filers could use to give the IRS with the information it needed to process a payment. The non-filers tool wasn’t used for second stimulus checks, though. We don’t know if the tool will be used for third stimulus checks.

Calculating Your Third Stimulus Check Amount

Under the American Rescue Plan, every eligible person will receive a $1,400 third stimulus check “base amount.” For married couples that file a joint tax return, the base amount is $2,800. Then, for each dependent in your family, an additional $1,400 will be tacked on.

But not all people will receive the full amount. As with the first two stimulus payments, third-round stimulus checks will be reduced – potentially to zero – for people reporting an adjusted gross income (AGI) above a certain amount on their latest tax return. If you filed your most recent tax return as a single filer, your third stimulus check will be phased-out if your AGI is $75,000 or more. That threshold jumps to $112,500 for head-of-household filers, and to $150,000 for married couples filing a joint return. Third-round stimulus checks will be completely phased out for single filers with an AGI above $80,000, head-of-household filers with an AGI over $120,000, and joint filers with an AGI exceeding $160,000.

The Case Against Paying Rent with a Credit Card

Generally speaking, however, charging rent payments to a credit card is a bad idea. While it certainly adds convenience and can help keep you afloat if you’re short one month, the cons largely outweigh the pros – especially if you’re charging rent on a regular basis.

If you’re thinking of using a credit card to cover your next rent payment, consider the following reasons why you shouldn’t.

COSTLY FEES

Most sizeable apartment complexes and rental management companies offer some form of online payment portal, where you can make payments through a bank account or credit card. Even if you rent from an individual landlord who’s not set up for online payments, there are a ton of services that still allow you to make rent payments via credit card. Plastiq and RentTrack both process credit card payments and send them on to your landlord on your behalf (usually in the form of a paper check).

Another feature all of these services have in common is hefty fees. Most charge a service/processing fee on credit card payments of just below 3% of the rental payment. If your rent is $1,000, for example, you may be charged an additional $25-30. Taken as a one-time fee that might seem acceptable, but if you’re making every payment this way, you’ll end up spending an extra ~$300 in fees on the year.

While there are plenty of credit cards out there with great rewards programs, it’s unlikely that any points or cash back reward is going to be worth more than the cost of the service fee.

INTEREST CHARGES

Beyond the immediate processing fees, charging your rent also opens you up to potential interest fees if you haven’t repaid the bill before the end of the associated billing cycle. The amount of these interest fees will depend on the terms of your credit card and how long it takes you to repay the borrowed rent. If it takes you multiple months to complete your payoff, you’ll likely be accruing additional interest charges every month along the way.

No matter how long it takes to pay off your credit card, you’re better off not spending money on interest charges if you can help it.

REDUCED AVAILABLE CREDIT

Most of us have a finite amount of credit available. Even if you have a fairly large credit limit, charging your monthly rent means two things:

  1. There’s less credit available for other needs or emergencies. The credit tied up in your rental payments won’t be available again until you repay that debt. In the meantime, you may be financially shorthanded, particularly if you need to make another large purchase, or if you run into an emergency and need to access a large portion of your credit limit.
  2. Your credit may take a temporary hit. Nearly all credit scoring models base some percentage of your credit score on the amount of available credit that’s currently in use. The closer you are to your credit limit, the more negatively your score will be impacted. In other words, the lower your credit utilization ratio, the better that is for your credit score. 

WHAT ABOUT EMERGENCIES?

Of course, the reason credit card charges for rent were on the rise in 2020 is because many families had limited income and couldn’t afford to pay their rent any other way. It’s perfectly okay to use credit to help survive a crisis situation – that’s one of the primary reasons why you work so hard to have a strong credit history in the first place.

There are some instances, however, where you should make sure that using credit isn’t doing more harm than good.

Are you always one payment behind? If your rent is due before your next paycheck, it’s natural to turn to credit to tide you over. But if your rent is always due before your next paycheck, you may need to make some changes to your budget so that you’re not spending paychecks before they hit your bank account. 

Are you always just a little short? If you’re using credit to cover a persistent shortfall in your budget, you may be walking a dangerous line, especially if your debt keeps going up and up. It’s possible you don’t have enough income to cover your expenses. Fortunately, there may be simple tweaks you can make to even out your spending and stop relying on credit.

There’s no shame in using credit cards to manage an emergency. But if you’re continually relying on credit to help cover major expenses like rent that may be a sign of growing financial problem.

How to Get Out of a Bad Co-signing Situation

While it may be easy to say, “Too bad – work on improving your credit score,” that work takes time. And when it comes to things like housing or transportation (in the case of a car loan), there’s usually no time to spare.

So, despite all the warnings, you offer up your primo credit history and co-sign on the loan. Most co-signers are family members. It’s easy to see why a parent or sibling would want to help a loved one get what they need, even with the risks attached.

But then…you notice that your credit score has taken a dive. Looking further, you find that payments are being made late or not at all. They may be family, but their inability to follow through is costing you. You may even have collectors calling you (your name is on the loan, after all).

So how do get your name off a co-signed loan?

SEE IF REFINANCING IS AN OPTION

Co-signing for a loan or credit account makes you just as responsible for that account as your family member or friend. Your credit will be impacted if payments are missed and collectors have every right to come after you for what’s owed.

If things aren’t quite so dire yet, you can see if the co-signer is able to refinance what’s owed onto a new loan or account that’s only in their name. This gets you off the hook, although any damage you took before the original loan was paid off will still be on your credit report. 

Unfortunately, this is…pretty unlikely. If the borrower couldn’t get a loan without help to begin with and now you’re trying to get out of the loan because things are going poorly, there’s very little chance they’ll be able to get approved on their own now. This is the ideal path out from under a bad co-signer situation, but it’ll be very difficult to pull off. 

REPAY THE LOAN DIRECTLY

The best option is the one you’re going to be the least excited about. If you’ve co-signed on a loan and the other co-signer isn’t holding up their end, the path of least harm to yourself is to assume full responsibility for the loan and start paying it directly. 

Of course that’s not “fair” and probably not at all within the spirit of the initial agreement you made with the borrower. But here’s the thing: your agreement with the borrower doesn’t matter. Perhaps, if you put something in writing and took the steps to create a formal contract, you may be able to eventually seek compensation directly from the borrower. But in the meantime, you already have a contract with the lender. In co-signing the loan, you were essentially saying, “If they can’t pay, I will.”

So if you’re concerned about the potential damage to your credit and the chance of a creditor taking you to court for an unpaid loan (which is a very real possibility), then it’s in your best interest to start proactively paying the loan yourself.

You can work with the borrower (if they’re responsive) to create a repayment plan, but in the meantime, your priority should be to protect your own finances and get the loan in continued good standing.

WORK WITH THE LENDER

If assuming the payments for a co-signed loan is beyond your financial capacity, it may be worth your time to contact the lender to discuss any available options. There’s a good chance they may not be able to do anything for you, but you may be able to work out a revised payment plan that keeps the account in good standing. Again, a lender isn’t required to do this, but it’s still worth a phone call.

SOME IMPORTANT THINGS TO KEEP IN MIND ABOUT CO-SIGNING

Because co-signing is often pitched as “helping out” a friend or loved one, it’s important to remember that lenders, creditors, and leasing agents really don’t care all that much about any agreements or “understandings” you may have with the borrower/applicant.

  • You can’t remove yourself from a loan contract just because the other borrower isn’t holding up their end. Your responsibility doesn’t end until the contract is fulfilled and the loan is repaid.
  • Ownership and liability are two separate things. If you co-signed on an auto loan for someone’s car, but aren’t on the title, you’re responsible for the loan that paid for the car, but have no claim to the car itself. You may think that if you paid for it, you must also own it, but that’s not always necessarily true.

Unfortunately, the co-signing horror stories are very real. A bad co-signing situation can be extremely costly, terribly damaging to your credit, and almost impossible to escape. 

If you’re considering co-signing to help a friend or family member, be cautious and keep this information in mind. There are situations where co-signing can be mutually beneficial and there’s nothing wrong with wanting to help a loved one, but it’s important to remember that if things go south, it may be long, hard road to recovery.

What Does It Mean If Your Credit Card is Charged Off?

WHAT’S A CHARGE OFF?

Charge off is an accounting term. It basically means that the account in question is a loss for the lender. 

When a lender or servicer charges off an account, they’re essentially claiming the lost profits for the purposes of lowering their tax liability. It’s a standard course of action for accounts that have gone unpaid for an extended period of time (most credit cards will charge off once they reach 181 days past due, though installment loans and other debts may reach charge off at different times). Your account will be closed as a result (if it hasn’t been closed already).

It’s incredibly important to remember, however, that a lender charging off an account doesn’t mean that the associated debt goes away. Legally speaking, your obligation to repay the debt does not change, even after the account is charged off. This is basically just a bookkeeping move from the lender to save a little money on their end.

WHEN IS AN ACCOUNT CHARGED OFF?

Different lenders will have different policies when it comes to charging off delinquent accounts. As a rule of thumb, lenders won’t charge off an account unless it’s seriously delinquent – again, most credit cards need to be 181 days (or six billing cycles) past due. The account will likely be well into the debt collections process by that point, and may even be serviced by a third party debt collection agency.

Don’t expect to be notified of a charge off. Instead, you’ll likely be receiving communications from the lender’s collection department or a third party debt collector. Those collection activities can continue long after the debt’s been charged off.

DO YOU STILL OWE MONEY ON A CHARGED OFF ACCOUNT?

You are absolutely still responsible for the repayment of debts even after they’ve been charged off. 

A lender choosing to charge off an account does not change any of the agreed upon terms and conditions of the original agreement. Interest can still accrue. Fees and penalties can still be added. 

Don’t make the mistake of assuming that a charge off absolves you of your obligations to the debt. It doesn’t.

CAN YOU NEGOTIATE ON A CHARGED OFF ACCOUNT?

The one potential bright side of having your account charged off is that you may be able to negotiate a settlement for the outstanding balance. This is essentially how debt settlement programs work – you allow an account to go unpaid and become severely delinquent; once it’s charged off you may be able to settle with the account owner for a fraction of the full balance.

Of course, there are drawbacks to this scenario. Missing payments on your debts (intentionally or otherwise) will almost definitely cause your credit score to drop. No matter what happens after, those negative marks will stick around for seven years, so the damage may take a few years to shake. It’s also important to keep in mind that forgiven debt (the amount of the debt you don’t pay) will likely need to be claimed as income on your taxes, which could result in a bigger tax bill.

All that said, if your account has changed off because you simply couldn’t afford the payments, settlement can be a useful solution for both parties – the lender recovers some amount of what’s owed to them and you get to put the debt behind you, usually for a much more affordable amount.

CAN A CHARGE OFF BE UNDONE?

You can make arrangements with the lender or collection agency to repay the debt, either in full or partially as part of a settlement, but you won’t be able to “undo” the charge off. Your account can’t be reopened and you can’t remove the negative marks from your credit report.

The Secret to a Quarantine Staycation that’s Actually Fun

If your vacation plans have been waylaid, how can you enjoy a vacation without straying too far from your stomping grounds? 

While many places in the U.S. are starting to allow businesses to reopen, and stay-at-home mandates have been relaxed to safer-at-home orders, if you’re playing it safe and trying to minimize the risk for yourself and others, you probably won’t be traveling anytime soon. 

To help fill that summertime void, we’ve drummed up some ideas for a fun quarantine staycation: 

BREAK OUT OF YOUR ROUTINE

While maintaining healthy habits and routines can be a good thing, there are also benefits to mixing things up. Studies reveal that routines can set us in autopilot. It could mean losing touch with your emotions and senses. 

During your staycation, find small ways to break out of your daily doldrums. Take a different route on your neighborhood walk, and hone in on one of your senses. For example, take deep breaths while you take a stroll around the neighborhood. Smell different flowers and plants on your walk. Or order dishes from local restaurants that you’ve never tried before. Has it been years since you’ve hopped on your bike? Dust it off and take it for a spin. 

Breaking out of your routine could be as simple as switching rooms you sleep in during your staycation. It might sound a bit silly, but waking up from a sleeping bag in your living room floor, or letting the kids sleep in the master bedroom, could be enough to enliven your senses. 

GO ON A MISSION-BASED STAYCATION 

Give your staycation a twist by centering your trip around a mission. See if you can find the best sandwich in town by ordering takeout at a few of the best cafes and sandwich shops on Yelp. Or if you have a sweet tooth, see if you can go on a hunt for the best chocolate caramel cupcake in your area. 

I’ve gone on little themed-based missions where I live in search of the best donut or pastor taco. It’ll help you discover new eats in your neighborhood and give you an excuse to check out the menu of a restaurant you might’ve previously overlooked. 

HOST A WEEK OF MOVIE NIGHTS 

If you live in a household of cinephiles,have you and each member of your family choose a movie you can watch together. If you live alone, you can organize a group viewing party on Netflix Party or Disney Plus Party. Toss together a charcuterie board featuring a spread of your favorite meats and cheeses. And have plenty of treats on hand for the kids. 

If you and your family are a bunch of art lovers, enjoy virtual tours of museums. 

PUT ON YOUR CULINARY CAP 

If you love to cook, think of recipes you’ve wanted to try. See if you can recreate dishes in the region or country you were planning to travel to this summer. With the extra time on your hands, ferment some napa cabbage and make some homemade kimchi. Or dice up some ginger, and add sugar and water and make your own ginger bug to create homemade ginger ale. 

CAMP IN YOUR BACKYARD 

Pitch a tent in your backyard and cook up some hot dogs or roast smores over your grill. When it gets dark, you can gather around and tell spooky stories. During the day, you can romp about outside and form designated areas for play, art and crafts, and rest and relaxation. 

GET OFF YOUR COMPUTER 

If you’re burnt out from all those Zoom calls during the quarantine, limit time spent on electronic devices. Go on a social media break, and don’t answer work emails if possible. And treat your staycation just like you were taking a proper holiday. Put up an “I’m on vacation” auto-responder on your work email, and try not to think about work. 

EXPLORE LOCAL NATURE

Whether it’s a hiking trail or urban park, spend some time outdoors. You can pack up a picnic lunch and inhale some fresh air and learn about flora and fauna in your area. 

Before you venture out, check online to see if your chosen outdoor spot is indeed open and if there have been any adjustments in the hours. And of course, be sure to practice social distance, wear a mask when outdoors, wash your hands frequently, and carry hand sanitizer with you. 

COME UP WITH A PLAN FOR THE MONEY SAVED 

If you’ve had to cancel summer travel plans, see if you can get a refund for that airfare or train ticket. And because you’re saving money by not traveling, those funds can go toward another goal. Which of your money goals is most pressing? For instance, you could squirrel it away into an e-fund, or put it toward debt repayment. If you can afford to, consider tucking it away for next year’s vacation fund. 

Whatever you decide to do for your quarantine staycation, focus on what it is about travel that you enjoy. Maybe it’s seeing new sights, exploring new terrain, trying fresh cuisines, spending time with your family, or taking a break from work. While you might not be able to travel, creating a staycation that’s rooted in what’s most important to you will make for time off at home that provides what you need.

Tips for Achieving Your Financial New Year’s Resolutions in 2021

Given the way 2020 unfolded, if you’re making a financial resolution for the new year, a lot of new considerations may be coming into play – whether that’s changes in your financial situation and outlook or new spending habits and priorities. As an unprecedented year comes to an end, here are a few tips that may be helpful if you’re sitting down to map out 2021.

  • 1. Set Short- and Long-term Goals. Instead of making the sweeping promise that you will generally “be better with money” moving forward, break down what you hope to achieve in a set of specific goals, spanning from short-term to long-term. Maybe it’s to pay off student loans in the next three years, buy a home within ten years and make sure you have enough saved for retirement in the long-term. Especially when you don’t know what the future might hold, this could help you maintain a sense of control. Also, you can more easily chart your progress, reassess and course correct as needed.
  • 2. Keep Up with Good Habits. Many Americans were fortunate enough to be able to improve their finances in 2020 — putting more aside toward savings or taking advantage of opportunities like mortgage refinancing. Of course, not everyone is in a position to save more, but if you can, continue to keep your foot on the gas, whether that’s shoring up savings or staying on the lookout for opportunities, like refinancing, that may be unique to the current times.
  • 3. Clean Out Your Wallet. Do you have credit cards floating around in your wallet or desk drawer that haven’t been used for years? Do you have a travel-centric credit card but rarely take trips? It might be a good time to reassess what you’re carrying, whether it fits with your spending habits and how you can simplify. One option if you don’t want to juggle multiple cards is the Bank of America® Cash Rewards credit card, which allows you to earn 3% cash back on purchases in a category of your choice — including online shopping, gas, dining, travel, drug stores, or home improvement/furnishings — and you have the ability to change that category each month. If you expect your spending to change next year (perhaps you are doing a lot of online shopping now but would like to start dining out and traveling more when you can), this card can adapt with you as your priorities change.

How to Complete an End-of-Year Debt Assessment

If you’ve been too busy to sit down and take a closer look at your debt, the end of year is the perfect time. Here are some simple tips for assessing your debt and setting a plan for the next year: 

MAKE SURE YOUR DEBT LOAD IS MANAGEABLE 

Debt isn’t inherently bad and it’s entirely possible to have a completely manageable amount of debt. But for a debt load to be manageable, two things need to be true: you need to be able to comfortably afford the costs of your debt, and any growth in your debt needs to be in proportion to your income and financial capacity. In other words, you need the income to handle your debts, and income was a challenge for a lot of consumers in 2020. 

“When income is limited, people prioritize their daily expenses over debt,” says Brandy Baxter, an accredited financial counselor and founder of Live Abundantly. And when you’re out of a job, you might need to resort to digging deeper into debt to make up for reduced income. “On the surface, this strategy seems to make sense,” says Baxter. “However, without a cash infusion or an income increase, your debt will only continue to grow and create a bigger challenge in the future.” 

Do you have the income to support your debt? Was your income reduced or cut off for a period during the previous year? If there’s a gap there, you may want to prioritize debt repayment next year, either through increased earning, decreased spending, or a structured repayment plan.

GRADE YOUR PROGRESS 

Just like how a teacher calculates grades at the end of a semester, you can take a good look at your debt to see where it stands, explains Baxter. First, look at your credit card statements. Has your credit usage increased during the year? Have you had to take on a personal loan, or incurred medical debt? It’s also a good time to sit down and calculate how much interest you paid throughout the year. 

If a debt has defaulted, and you’re not sure where your debt is exactly, contact the creditor to see if it’s been moved to a collections agency. You’ll also want to review your debt to make sure you’re aware of the total balance, interest rate, and your monthly payment. 

Where are you versus where you started the year? And, more importantly, where are you versus where you want to be? Do you feel like things are moving in a positive direction? If not, it may be time to reach out for a little additional support.

Baxter suggests taking a look at the section of your credit card statement that shows you how long it’ll take to pay off your debt if you made only the bare minimum payment. It could be eye-opening how long it could take — and how much you would pay in interest fees alone.

REACH OUT TO YOUR CREDITORS

Your creditors want you to succeed. And by succeed, we mean that they want you to pay back your debts and then borrow more in the future. Defaulting for missed payments is bad for both of you. 

During these difficult economic times, creditors and lenders are often willing to talk to you about your situation and explore options to make your debt more manageable. Some credit card companies have some information on forms of relief on their website. That can be a good place to start if your debt has been trending in the wrong direction this year. 

“If you’re a client that has been in good standing and has never missed a payment, reach out to them to see what they might be able to lower the interest rate before you find yourself missing payments,” says Baxter. “Remember: The answer is always no, if the question is not asked.” 

If you’re not feeling positively about where things are headed, connect with your creditors to ask about waiving late fees, temporarily pausing payments, or lowering the monthly payment amount. 

LOOK INTO REPAYMENT OPTIONS 

If it’s time to take a more focused approach to debt repayment, there are ways you can potentially lower your monthly payments, interest fees, or both. For instance, debt consolidation lumps all of your unsecured credit card debt into a single payment. That may make it easier for you to manage your debt, particularly if the consolidated payment is lower and the interest rate is an improvement on what you were previously paying. However, debt consolidation loans usually require a strong credit score to qualify, and if you’ve been struggling your score may have been dinged already. 

Another standard option is a balance transfer, where you move your credit card debts to a new card, often with a low introductory interest rate. While a balance transfer could potentially save you money during the intro period, there’s usually a balance transfer fee, which is anywhere from 3% to 6% of the outstanding balance. And of course that low interest rate often only lasts 6-12 months. 

Besides debt consolidation and refinancing, you can also look into a debt management plan (DMP), which is similar to a debt consolidation loan: you make one payment and there’s usually pretty substantial savings on interest charges. A DMP isn’t a loan, however, making it a great option for consumers with a low credit score.

At the end of a particularly challenging year, it’s important to take stock and set an appropriate course for the year ahead. There will always be plenty of factors in life that you simply can’t control, so focus on what you can do, make a plan that suits your goals, and never hesitate to ask for help when you need it.

How to Turn Your Retirement Savings into Retirement Income

I have been working a long time on retirement planning that creates more and safer income for retirees. So long, in fact, that I sometimes forget the subject is new to most investors. They get much of their financial information from their advisers — who often simply treat these investors as “de-accumulators.” Another way to describe their message is, “Invest like you did when you were 55, only more conservatively.” In my opinion, that is not helpful guidance.

Please consider this article as a reference tool on a new way to plan and manage your retirement that you can come back to periodically to refresh your understanding. By the end of the article, I hope to answer your basic questions about the new Income Allocation planning and how it can benefit you with a more secure retirement.

Income Is the Foundation of Your Retirement Plan

Most eras in history are unsettled, but it sure seems we’ve got a lot going on now, and much of it makes us uncertain about how to plan for the future.

Interest rates are low and are expected to stay low for an extended period. The markets are volatile, making “stay the course” a particularly gut-wrenching choice. Add a pandemic to the mix. As you prepare for — or enter — retirement, you want to be able to celebrate. That means satisfying your desire for a self-sufficient lifestyle (while anticipating expenses such as unreimbursed medical or caregiver costs, or the premiums to cover these costs) even as you spoil the grandkids.

And that means income. A good retirement income plan is one that allows you to enjoy your retirement and provide the necessary cash flow that will create peace of mind.

Build Income Certainty into Your Retirement Plan

For the past several years I have been working to educate consumers about the pitfalls of typical Asset Allocation planning for retirement. That is the name for an approach to investing and retirement spending that leaves you with the risk of running out of money. Asset Allocation by its name allocates your savings among a range of investment categories — stocks, bonds and cash — then tests to see if that “plan” can deliver a desired level of income to your age at passing. There is rarely a distinction between dividends, interest, capital gains and withdrawals of capital — and the tax effects thereon. And, of course, what happens if you outlive your plan?

I advocate starting with a focus on income, and specifically allocating your sources of income among dividends, interest, withdrawals from your IRA and annuity payments. The annuity payments (replacing the pension that doesn’t exist for most new investors) are guaranteed for your life, are backed by highly rated insurance companies and complement your Social Security payments.

Why Annuity Payments? Why Now?

Income Allocation is not simply the act of adding annuity payments to your retirement mix. Instead, it integrates annuity payments with your other income sources to provide the most income with the lowest taxes and fees — and the lowest risk — to allow you to enjoy the rest of your life.

Some advisers say annuity contracts are too complex. They often confuse income annuities, intentionally or not, with index or variable annuities. (In fact, I introduced a “living benefits guarantee” to the variable annuity business leading in large part to its growth as a $1 trillion industry, and so I know the difference.) Advisers may want to talk about an annuity’s high fees and confusing crediting rate formulas; once again these are not features of annuity payment contracts. These contracts are really quite simple: Guaranteed payments are deposited monthly into your savings or checking account while you are alive, and optionally while your spouse is alive, or to a beneficiary if you pass before the investment is paid out. A good annuity agent shops the market of highly rated companies to get the highest income for your investment.

Best Online Fundraising Platforms

For the unacquainted, crowdfunding is when one raises money for a project, cause, or business endeavor through donations of small amounts. This money is pooled for a common goal. 

As they say, you can go a long way with a little help from your friends. Luckily, there are a ton of easy-to-use online platforms dedicated to helping you collect cash. But which platforms are best for which scenarios?

To help you decide, let’s take a look at some of the best crowdfunding options around: 

KICKSTARTER 

Founded in 2009, Kickstarter is one of the early crowdfunding platforms. To date, Kickstarter has helped raise over $5.4 billion, and over 191,000 projects have been successfully funded. 

Kickstarter is designed for innovators, makers, and entrepreneurs who have a business idea, creation, or endeavor they need help funding. To offer an incentive for donations, there are usually rewards for different tiers.

Note that unlike other crowdfunding platforms, Kickstarter is all-or-nothing funding. In other words, if you don’t reach your goal, you don’t get any money you raised. Another feature about Kickstarter is that campaigns undergo a review process and need to get approval.

Cost: Kickstarter charges a 5% fee on the amount you raised (often referred to as a platform fee), plus there are processing fees between 3% to 5%. So you’re looking at anywhere from 8% to 10% in total fees. If you don’t hit your reward, you don’t need to pay any fees. 

Best For

  • Launching a new product
  • Growing a small business

If you have an idea for a business or artistic project you’d like to launch, or need help developing a product, or scaling or growing your company, Kickstarter may be the right choice for you. It can also be a good platform if you want to use Kickstarter to market your product or business endeavor. If that’s the case, you could use it to raise part of your funds. 

GOFUNDME 

GoFundMe has traditionally been known to be a crowdfunding platform for those who have experienced an unexpected emergency. Memorial funds, disaster recovery, and exorbitant medical bills are common fundraising themes. They can also be used to fund celebrations, such as graduations and honeymoons, and raise capital to start a business. 

According to its website, GoFundMe has helped raise over $9 billion dollars and over 120 million donations have been made through its platform. Unlike Kickstarter, rewards aren’t offered for different tiers. And you don’t have to go through a screening process to launch your campaign. In other words, anyone can go start crowdfunding on the platform basically immediately. 

Cost: GoFundMe charges a 2.9% processing fee (plus a flat $0.30) on every donation. There is no platform fee. 

Best For

  • Health and disaster-related requests

While the platform can be used for almost any kind of fundraising, the simplified structure makes it better suited for charitable requests. Since you don’t need to get the green light before launching your campaign, GoFundMe might be best if time is of the essence, and you need to secure some funds sooner than later. 

FUNDLY 

Instead of raising money for a business idea or to launch a product or service, Fundly is dedicated solely to fundraising for charity or a cause. Nonprofits and individuals can both raise money. As you might expect, the most common campaigns are related to medical and health expenses, kids and family, and education and schools.

One benefit Fundly pushes is easy integration with Facebook. If you’re active on Facebook (and your target donors are there as well), this integration can simplify the marketing process and get your request out to the right people. 

Cost: There’s a platform fee of 4.9%, and a payment processing fee of 2.9% (plus another flat $0.30 per donation). 

Best For

  • Personal/charitable requests
  • Users who need help getting the word out

Fundly seems to work best for those who need money to take care of urgent costs related to childcare, education, kids, or medical or health care expenses. 

PATREON 

Patreon is primarily for creators who have an audience and would like to ask for financial support in return for sharing their works. This includes artists, writers, YouTubers, gamers, performers, and everything in between. 

Patreon offers creators a platform where they can distribute a wide variety of content, including tutorials, webinars, artwork, podcasts, coaching sessions, and more. There’s a support tier system, and each tier comes with different benefits. Unlike other fundraising platforms, however, donations are usually subscription fees, which roll over every month. The expectation is that you’ll be producing work on a regular basis (although, technically that’s not a requirement).

Cost: There are three membership tiers for creators: Lite, Pro, and Premium. Patreon Lite charges 5% of the money you bring in, Patreon Pro takes 8%, while the Premium level takes 12%. The more expensive membership tiers come with additional features and tools. 

Best For

  • Dedicated content creators

If you’re a creator and you have the drive and time to create content on an ongoing basis, then Patreon might be for you. However, the support of your fans hinges on your commitment to creating more content, or being available for coaching or mentoring sessions.

KO-FI 

A newer kid on the crowdfunding block, Ko-Fi is part freelancing platform, part crowdfunding platform. It allows users to set up shop and offer their services or products, with payments coming through one-time donations, rolling monthly subscriptions, and direct purchases. 

If you’re not ready to commit to something long-term or ongoing, such as regular offerings to your audience, then Ko-Fi is a good place to start. It works well as a “casual” fundraising platform and may be a good in-between option for hobbyists looking to generate extra income on the side. 

Cost: While Ko-Fi itself doesn’t take a fee, there is a standard payment processing fee (which varies depending on the amount and location of the donation. It’s free to set up shop. However, Ko-Fi offers a Gold tier, which is $6 a month. Instead of just the $3 tip, the Gold tier allows you to choose how much your “tip” is and how you get paid. Plus, you can glean insights through analytics and post exclusive rewards. 

Best For

  • Entrepreneurs looking to get their feet wet
  • Creators who don’t want to commit to a monthly reward schedule

Ko-Fi is a great first stop for anyone who’s interested in offering products, services, or content, and isn’t quite ready to create content on an ongoing basis. 

SHOULD YOU USE A FUNDRAISING PLATFORM?

If you’re intrigued by the idea of raising money through a crowdfunding platform, it’s best to know the pros and cons. All in all, crowdfunding platforms are nice because they don’t require much time or resources to get started. Plus, you don’t have to worry about paying anyone back. 

On the flip side, successful crowdfunding campaigns typically require a lot of time and energy to launch and execute. You might find yourself emailing every single person you know to hit your goals. And of course, you’ll want to be mindful of the fees, terms, and also the limitations of each platform.

Ultimately, the success of your campaign comes down to some things you can control (your messaging and how well you promote yourself) and some things you can’t control (the financial capacity of the people you’re asking). In most instances, there’s not much harm in at least trying, but success is far from guaranteed: GoFundMe campaigns have about a 90% failure rate.

Why Having No Credit is the Same as Having Bad Credit

I learned the hard way that avoiding credit may seem like a smart way to save yourself from future hardships like debt and overspending, but it’s much more likely to cause a different sort of hardship when you discover that having no credit history is the same as having a very bad credit history. And while it’s completely reasonable (and advisable!) to be extremely cautious with credit, avoiding it altogether can be a recipe for disaster.

So here’s what happened, what I learned, and why developing a healthy relationship with credit is a much better goal than never using credit at all.

THE RATIONALE FOR AVOIDING CREDIT

I was a saver growing up. I liked having money, but not nearly as much as I was afraid of not having money. Even from a young age, I was predisposed to reducing risk and avoiding regret. 

When I got older, that urge to avoid risk influenced how I managed my money. The financial education I received basically boiled down to “credit cards lead to credit card debt, which leads to shame, social rejection, and maybe even bankruptcy.” There didn’t appear to be a healthy middle ground, so I stuck to cash and debit cards for a decade-plus. It just seemed safer and it kept me out of debt, which had to be a good thing, right? 

GOOD CREDIT MEANS PROVING YOURSELF

While not being in debt was certainly nice, that continued avoidance of any and all credit and loan products wasn’t actually a good thing. 

Since we tend to think of credit scoring as demerit-based (because it seems like the only things on there are notations of the few times you messed up) there can sometimes be an assumption that by not using credit – and therefore not having any mistakes – our credit should be “good” (if not perfect). That was my thinking, anyway. As I desperately avoided credit card offers at all turns, I thought I was actually preserving a spotless credit history. Of course, that wasn’t the case. 

That’s because a credit score is a product, created by credit reporting agencies, and sold to potential lenders. The purpose of this particular product is to help lenders understand how risky it will be to extend credit to certain individuals (or companies). Credit reporting agencies, therefore, need that product (the score) to be as accurate as possible, or else lenders won’t use it. 

What that ultimately means is that if you don’t have enough of a credit history, then credit bureaus don’t have enough information to assign you a score that they feel would be an accurate representation of your riskiness as a borrower. How can they know how risky it is to lend you money when you’ve never borrowed money before? 

HAVING NO CREDIT IS EXPENSIVE

My great credit awakening came when my car broke down for the last time and I found myself in a position all too familiar to many Americans: I didn’t have enough saved. I wasn’t prepared for such a singularly large expense. In fact, I barely had enough for a down payment on the cheapest used car on the lot. 

The moment of enlightenment happened in the financing office, where an increasingly exasperated loan officer did his best to get me the funds needed to buy a truly underwhelming car. In the end, I got the loan and the car, along with an interest rate so embarrassingly high, I can’t bring myself to share it here.

That’s when the loan officer explained the issue at hand: “You don’t have any credit history. Like, none. At all.” 

Lending money is risky, you see. In order to mitigate that risk, lenders set standards and protocols for who they will and will not lend to. With no credit history and no credit score, I simply didn’t meet the standards for a lot of creditors, who rejected me one after the other. (Seriously, I got at least a dozen different “Here’s why we rejected your application for credit” letters afterward.) 

The lender that did agree to finance my car was required – by their protocols – to charge me an exorbitant interest rate in order to mitigate the risk. 

That’s how the cheapest car on the lot ended up costing me about as much as a new car.

MAKE CREDIT AN ALLY, NOT AN ENEMY

Ultimately, my extremely expensive cheap car was a valuable lesson in why I couldn’t ignore credit any longer. On top of maintaining timely auto loan payments, I opened a secured credit card, which I used regularly (and paid off immediately, thanks to the power of online banking). After the secured card graduated to a regular, unsecured card, I refinanced the car loan and opened a second card with a higher limit and better terms. 

To this day I make my payments on time and avoid carrying a balance. And that’s basically it, but it’s been enough to build a strong credit history and a high credit score. That credit score helped me buy a house and a new car (for my wife – the expensive cheap car, long since paid off, continues to be an inexplicably good investment).  

There are a lot of good reasons why you might want to avoid using credit. And if you’ve been burned by credit before, you may be especially inclined to live a plastic-free life from now on. But in the long run using credit responsibly will serve you much better. Take my word for it.

Will COVID Change Our Habits Permanently?

Such an impactful event also brings up questions of how people are coping and which new habits will stick when we no longer have to worry about the coronavirus. We talked to some experts to find out how COVID has changed us and what changes may be still to come.

FIGHT, FLIGHT, OR FREEZE

Looking back at how people initially responded to the coronavirus outbreak offers some insight into how a crisis can impact us. 

“First and foremost, COVID is affecting our mental health by creating an initial stress response: fight, flight, and freeze,” says Dr. Alex Melkumian, founder of the Financial Psychology Center in Los Angeles. 

Perhaps you’ve seen or experienced some of these responses. People “fighting” by updating their LinkedIn profile and jumping into a job hunt. Flight and freeze might look like avoiding the situation and putting off everything until the last minute. Although, a similar lack of response can come from optimism bias—the belief that everything will work out okay. 

Of course, there’s more at play than an initial response, and people react differently depending on the situation. For example, after a layoff some people may avoid filing for unemployment due to shame or pride rather than a flight or freeze response. 

Crisis responses have also played out in different ways on a large scale. If you think back to the early days of the pandemic (a lifetime ago), you’ll remember how panic-buying led to toilet paper shortages. 

SOME FINANCIAL HABITS ARE ALREADY CHANGING 

Over half-a-year in, people have had time to adjust, develop new routines, and implement changes. Some of these might not be habits, per se, but they can still have a long-term impact. 

“A lot of what holds people back is that they think there’s all the time in the world to get it done,” says financial therapist Lindsay Bryan-Podvin. “When the reality hits… the fire burns to get things going.” Many of her clients are finally crossing things off their financial to-do list, such as getting life insurance or writing up a will. 

A McKinsey & Co. survey from October 7, 2020, offers more insight into what types of financial habits may be changing: 

  • Most people are cutting back on discretionary spending.
  • About 23% to 25% of people recently started using food or grocery delivery services for the first time, or are using them more often. Of those, over half plan to continue using these services after the coronavirus subsides. 
  • A small group (12% to 13%) is trying curbside store and restaurant pickup for the first time, and about half of that group plans to continue using curbside pickup. 
  • More than two-thirds of people are trying new shopping methods, brands, or stores. Many are “trading down” to find cheaper brands and retailers. 
  • Since the pandemic, people are increasingly aware of how companies care for their employees’ safety (23%) and a company’s purpose or values (17%).
  • The increased use of social media, wellness apps, online streaming, and online fitness programs may continue post-pandemic. Topping the list of changes that may continue is an offline activity—regularly cooking.

Katherine Milkman, a professor at the University of Pennsylvania’s Wharton School, also recently shared some insights on what habits can be “sticky” in an interview on the Slate Gist podcast and article by Joe Pinsker in The Atlantic

For example, it’s not hard to imagine someone developing a preference for a lower-cost brand or more convenient services. But washing your hands for 20 seconds might not stick when there’s no fear of a virus. 

TRAUMAS MAY STAY WITH US 

Specific habits aside, there could be a lasting impact on people’s relationship with their work and finances. 

Even before the pandemic, the American Psychological Association’s annual Stress in America survey from 2019 found that most people listed work and money as one of their most significant sources of stress. The pandemic and resulting layoffs has only exacerbated those stressors. 

“This is our Great Depression,” says Melkumian. “The level of anxiety and concern and worry could be exponential to where we were before. From a mental health standpoint, we’ll see an increase in financial trauma.” 

There’s no single answer to how this plays out. The pandemic is affecting households in drastically different ways, and even those who are impacted in similar ways may have different responses. 

“How much we’re going to be ruled by fear, caution, worry, anticipation, and doomsday scenarios is going to be part of our overall psychology and how we approach finance,” says Melkumian. “There may not be answers until we get there, but we need to beware of our psychology.” 

He also draws the connection between financial stressors and the resulting impacts on how you may interact with your spouse or kids, and your overall wellbeing. “In turn, how does that affect your physical health? What happens to your family and identity as a provider and contributor?” Melkumian asks. 

BUT THIS IS ALSO AN OPPORTUNITY FOR CHANGE 

While the pandemic can cast a foreboding shadow over everything, if you can get out of crisis mode, it can also be a significant opportunity to rethink your life and the habits you want to change. 

As Bryan-Podvin shared, some of her clients have done this by checking off some of their financial to-dos. She’s also observed a growing interest in making more drastic lifestyle changes. “They’re starting to consider what life would be like if they downsized housing and could retire earlier, or spend more money elsewhere,” she says. What might have been a daydream before has become a more realistic option. 

“Obviously there’s a lot of uncertainty. We’re in a limbo pattern of not knowing when we can resume normal life,” says Melkumian. “But I’d love COVID to be the call to action to improve and increase our financial consciousness, awareness, and literacy.”

How to Eat Right When Resources are Tight

hese wellness tips might be met with an eye roll if you work 40-plus hours a week. Being squeezed on time, money, and space is the unholy trifecta that can have you spiraling into making poor lifestyle choices.

If you don’t have access to a full kitchen, or if you work a ton and don’t have the luxury of cooking every night, it might be easier to nuke a frozen dinner in the microwave or order your favorite greasy combo meal from the McDonald’s drive-thru. Eating well when you’re tight on resources is entirely possible. Let’s take a look at how it can be done: 

BUY INEXPENSIVE, NUTRITIOUS INGREDIENTS 

Look for low-cost, nutrition-packed ingredients that have a long shelf life. This includes grains, beans, and rice. If you have a freezer, frozen foods are as nutritious as their fresh counterparts. As an added bonus, the nutrients in certain frozen veggies are sometimes “frozen in,” making them more nutritious than fresh veggies. 

You can also save by eating less meat. Since there’s a meat shortage, you can save money and hassle by eating plant-based more frequently. 

There are some great, free resources to help you eat well on a budget. The Environmental Working Group (EWG) researched over 1,200 foods to assess their nutritional value, price, and environmental impact. While the guide is from 2012, the research remains sound. You can do a search for the top foods and make those items staples going forward. 

INVEST IN A CROCKPOT 

There are many inherent joys of having a crockpot. The convenience factor is a big one. Namely, you just toss in a bunch of ingredients, set the timer and put a lid on it, and let it do its thing for a few hours. You don’t need a kitchen or tons of space to have a slow cooker, either. All you need is an electrical outlet.

Some easy, nutritious meals you can make with a crockpot are veggie chili, which requires some veggies, beans, water, and spices. You can also concoct a quinoa mixture with grains, cilantro, and some veggies. You might be able to find a quality slow cooker at a home goods or discount retailer for cheap. You can also scour online marketplaces like Craigslist or Facebook Marketplace to find a used one. 

Other kitchen tools that might help you save on time but are a little bit of an investment upfront include an air fryer, or Instapot. Air fryers are a popular choice to make healthy veggie snacks. 

KEEP LOW-COST STAPLES ON HAND 

To make sure you get your nutrients in and eat a balanced diet, make sure you keep a rotating selection of food staples on hand. For instance, tinned fish — think sardines, tuna, or cod liver — are packed in protein and vitamin D, but are quite affordable. They go well with a side of crackers or cucumbers. You can even mix them with some mustard or hummus. 

Other food items that are relatively cheap include beans, rice, and grains. You can easily buy these in bulk. To switch things up, experiment with different combinations of spices. Most spices are typically low-cost, and you’ll be surprised at how much you can change the flavor of a dish by playing around with different sauces and condiments. 

CARRY SNACKS WITH YOU 

If you’re always on the go, cut back on highly processed foods and fast food meals. Not only are prepackaged salty snacks and candy low in nutrition, but they tend to be more expensive. 

Instead, go for simple, minimally processed snacks when you’re out and about — nuts, trail mix, apples with some peanut butter, roasted chickpeas, or popcorn with a bit of nutritional yeast sprinkled on top are reliable options. 

These snacks can also help you fill up more quickly, so you end up eating less. And swap out the prepackaged stuff for bulk items, and pack your own. You’ll get more bang for your buck, and you can mix things up as you please. 

SHOP IN YOUR PANTRY 

Before you head to the market, take inventory, and see what’s already in your fridge and pantry. Try using up existing food items before embarking on another shopping trip. If you want to bring things up a notch in terms of commitment, try a 30-day no-spend challenge, where you try to only use what’s in your home. You can only buy items that are a necessity, or to replace something that’s run out. It’ll urge you to be more creative! 

Eating well when resources are tight isn’t as challenging as it seems. It requires a bit of know-how. But really, it’s all about making some minor adjustments, being efficient as to how much time you spend preparing food, and doing a bit of research to see which foods offer the most nutrition for the lowest cost.

Ten Money Topics You Should Always Discuss with Your Partner Before Committing

As a culture, we struggle to talk openly about a lot of topics, but money is perhaps the one that causes the most discomfort. There’s so much pride and fear and sometimes shame wrapped up in the size of our paychecks, the depths of our debts, and those little three digit numbers that make up our credit scores.

So it’s no surprise that new couples aren’t always comfortable having some pretty crucial conversations about money and our relationship with personal finance. But whether or not you’re headed toward marriage, it’s really important that all couples take the time to understand one another and get on the same page. That doesn’t mean they have to agree or share all the same values. It just means that by having these conversations and understanding one another, they’ll be better able to make compromises that satisfy both parties.

With that in mind, here are ten topics you should always try to explore with your partner. You don’t have to dive into every topic all at once, but the more you know, the more comfortable you’ll both feel.

FAMILY INFLUENCE

How did your family handle money when growing up? You may not immediately recognize the influence of your parents or caregivers in the way you approach money, but it’s there. Your relationship with money – for better or for worse – is shaped largely by how your family dealt with money during your younger year.

So ask each other:

  • What did you like/not like about the way your family handled money?
  • What about the way you manage money feels like a reaction to how your parents managed money?

SPENDING VERSUS SAVING

How much do you prioritize saving money? Some of us are more naturally inclined to focus on saving money for rainy days or big picture goals, while others focus more on the here and now. Understanding how you and your prioritize your available funds (and why) can help mitigate hard feelings down the line.

Try asking each other:

  • How much savings is “enough” savings?
  • What would you do if received an unexpected $1,000?

HAVING VERSUS EXPERIENCING

Do you prefer spending your money on things you can keep or memorable experiences? When it comes time to make some big decisions with your collective money, this can be a major dividing line. Understanding what your partner values and what makes them happiest can help you find a middle ground that satisfies both parties.

Ask each other:

  • What’s the best gift you ever received?
  • Would you rather save up for a special gift (new TV, new car, etc.) or a dream vacation?

MONEY STRESS

Different people have different thresholds for financial stress. For some people, getting calls from creditors is a minor irritation. For others, there mere thought of carrying a credit card balance is enough to cause a minor panic attack. It’s important to know what your partner considers a “problem,” especially if your radar is tuned quite differently.

Try asking each other:

  • What makes you worry about money?
  • How would you feel if you got a collection call?

DEBT SITUATION

Debt doesn’t need to be a mark of shame or a relationship deal-breaker. But if you can’t openly discuss your general debt situation that can become a major issue down the line. Remind yourself that it’s perfectly okay to carry debt. The issue is always how you’re able to balance that debt against your other expenses and goals. A good partner should be an ally, but they can’t help you if you’re not able to be honest.

Begin by asking each other:

  • How do you feel about your debt?
  • Do you have any debts that you think we should focus on?

CREDIT SITUATION

While your partner’s previous credit challenges won’t show up on your report, his or her bad credit could cause problems when applying for joint credit, particularly for big picture items, like a new car or a mortgage. 

The important thing to remember about credit is that you can absolutely improve a poor score over time. If you’re able to be open about your current credit situation, you can work together to make the necessary improvements that will have you prepared for when your ready for some of those big picture purchase.

Start the conversation by asking each other:

  • How do you feel about your credit?
  • Is there anything about your credit history you’d like to work on improving?

JOINT ACCOUNTS

Different couples handle money differently. Having separate accounts can be a practical way to share financial responsibilities while maintaining individual freedoms. However, many couples who agree on spending habits find that a joint account works well for them. The key to either choice will always be open and consistent communication.

Try asking each other:

  • Would it make it easier if we created a joint account for joint expenses?
  • Do you feel comfortable having an account that we both control?

JOINT DECISIONS 

It may be helpful to define what each of you considers a “big” financial decision. One potential key to a happy financial life is to vow to make all big financial decisions together. For that to work, though, you’ll need to be on the same page when it comes to your definition of “big.” After all, one of you might consider a television a huge purchase, while the other might be thinking more along the lines of a car.

Ask each other:

  • What kind of purchases would you want to be consulted on?
  • What dollar amount feels like too much to spend without telling you first?

DAY-TO-DAY MONEY MANAGEMENT

Sometimes one member of a relationship loves managing the money and the other one just doesn’t. It’s perfectly okay for one half to do most of the financial driving, but only if that’s the agreement you’ve reached mutually. No assumptions, no unexpressed expectations. Once your finances become interwoven, make it clear how you want to share the work. Ideally, neither side should feel cut out of the process or asked to do things they aren’t comfortable doing.

Begin by asking:

  • How comfortable do you feel managing bills and other household financial responsibilities?
  • How much do you want to know about where our money goes and how much we’ve saved?

FINANCIAL GOALS

Everyone, whether they’re in a relationship or single, should take the time to set financial goals. Those goals will help guide your decision-making and provide some helpful structure to your spending plan. You just want to make sure that your goals are aligned and that you’re flexible should things shift in the years to come.

Ask each other:

  • What are your top three goals?
  • How quickly do you want to achieve those goals?

These conversations aren’t always easy to start, but once you have one or two, they’ll become easier and easier. The worst thing you can do is hide your feelings and your financial challenges from one another.

How to Read and Understand the Fine Print in Credit Card Offers

However, plenty of credit cards hide predatory terms in the fine print. Lots of them even couch those bad deals in terms that make them sound like good deals. When you’re considering opening a new credit card account, make sure you understand and agree to these finer points. 

Here are six specific features to review, what to look for, and when to walk away:

1. REWARDS TERMS AND LIMITS

With rewards cards, for every dollar you spend, a percentage of that purchase is applied to a benefit for you. This might be a cash rebate, frequent flier miles, a credit on your account, or a combination of the above. The idea is that you get something of value back, in proportion to how much you spend.

WHAT TO LOOK FOR 

Review the rewards program’s exact details and write them down on a separate piece of paper. Specifically, look for:

  • What you get back
  • How much you get back per purchase
  • If there are any thresholds or limits
  • What fees are associated with the program
  • The process for using your rewards

Some cards may offer high rewards, but cap them at a level beneath the card’s fees. If, for instance, you get 5% cash back on a prepaid card that costs $7 per $100 you load on it, you’re losing money on that deal.

Similarly, consider how you’ll use the card. If you plan to keep it as an emergency resource without putting regular spending on it, then 3% cash back with a $75 annual fee is worse than no rewards.

2. TERMS OF LOW-INTEREST RATES

Although the average credit card interest rates fall between 12.99% APR and an APR in the low 20s, you can find offers with zero interest. These are almost universally introductory offers with a much higher interest rate after an initial period. 

WHAT TO LOOK FOR

These low interest rates may be a trap, resulting in you paying higher interest later. Find out how long the introductory period lasts and the exact interest rate that kicks in after it expires. Also, look to see if there are ways you can lose the initial rate early. For example, many cards end the deal the first time you make a late payment. 

Be extremely wary of cards that offer a long-term low interest rate. In many cases, these offers come with high fees. Although there is no interest, the costs can add up to the equivalent of an APR of more than 20%.

3. LATE OR MISSED PAYMENTS

Almost every card available charges a late fee if you make your payment past the due date. These run between $28 and $39, according to research by U.S. News & World Report, and they’re added to your interest-accruing balance. This can sting, especially in a month when you already have trouble paying your bills.

WHAT TO LOOK FOR 

Look carefully at the policies for what happens if you miss payment due date. Beyond the loss of an introductory interest rate, it can also bump up your regular interest rate. Read the policy carefully, and ask questions. Some cards might also suspend rewards or benefits after a late payment. 

4. BALANCE TRANSFER SPECIFICS

You can save on interest from high-balance cards and loans by putting the balance on a card with a low-interest balance transfer offer. This works out well for them because they’re getting business you were doing with another company — and because most people end up carrying that balance after the offer expires. 

WHAT TO LOOK FOR 

The most important information here is the length of the low-interest balance transfer offer and how the issuer prioritizes your payments. Calculate how likely you are to pay off or make a dent in the balance within the low-interest period, and then run the math on how long after that you’ll be accruing fees. 

Prioritizing payments tells you whether the money you pay on the card goes first to the transferred balance or any purchases you made with the card. Because both accrue interest at different rates, this can make a surprising difference in how long it takes to pay your balance off. 

Finally, look very hard at the balance transfer fee. It’s typically 3% to 5% and accrues immediately upon the transfer, which can make a huge difference to your bottom line. For example, moving money from a card with a 15% interest rate to a card with a 12% interest rate and a 5% fee could end up costing you more than just staying put. 

5. FEE STRUCTURE

The card looks great, offering a high credit limit, flexible terms, great rewards, and small benefits and bonuses for cardholders. The interest is even lower than you expected for somebody with your credit rating. So, what’s the catch? Check out the fees.

WHAT TO LOOK FOR 

Those too-good-to-be-true offers often have hidden costs in the form of a variety of fees. Annual fees, processing fees, monthly service charges, foreign transaction fees, exchange fees, and a host of other flat or percentage-based fees can show up on our statement. Added up, they can be the equivalent of APRs well above other cards you qualify for, or even higher than the law permits under usury statutes.

Go through the user agreement until you’ve tallied up every possible fee, then add them together. Then use the APR and what balance you imagine you’ll carry to calculate the card’s full and actual cost. In other words, don’t let great perks trick you into opening a card that costs more than it’s worth.

6. BELLS AND WHISTLES

Many higher-end cards come with a variety of small, but convenient, extra benefits for cardholders. For example, one card may give you a free Netflix account. Although these perks aren’t the core purpose of opening a credit card, they can make life more enjoyable and be used as a tie-breaker between two otherwise similar offers.

WHAT TO LOOK FOR 

Nothing is truly free, and most perks come with some sort of a trade-off. Some may even comes with a fee. If the perk is a subscription or membership, there may be a flat annual or monthly fee for access. Find out what the cost is, then compare it to what you would likely spend on that service outside of this credit card offer (assuming you even want that service).

All in all, because they aren’t money-makers for the credit card company, these added extras can leave a lot to be desired when it comes to quality. Read the offer details carefully to be sure you know what you’ll be receiving.

FINAL THOUGHT

This analysis isn’t just for new credit cards you’re considering opening. It can also help you make purchasing and payoff decisions as you work your way out of debt. For example:

  • Understanding the late payment policies of different cards can help you choose which to skip paying during a lean month.
  • Knowing the limits and details of your miles or cash-back offers can help you understand which one to use for specific situations.
  • Remembering the actual fees and interest paid each month can guide which card you aim to pay in full first.

Whether you’re looking at new credit, old balances, or what to do next with what you already have, understanding these fine points will help you master your credit instead of letting it master you.

Do You Need an LLC to Start a Business?

Some people may even put off working for themselves because they think they need to form a company first. However, with many types of work, you can start and build a successful business without registering a limited liability company (LLC) or forming a corporation. 

WHAT IS A LIMITED LIABILITY COMPANY?

A limited liability company (LLC) is a legal entity that’s separate from you, the business owner. You register an LLC with a state—it doesn’t necessarily need to be the state where you live—and the state’s laws dictate the costs and responsibilities of the business’s owners. 

Often, there is an initial filing fee with the state and requirement to file a report (and possibly pay an additional fee) every year. You may also need to register your business with your city, which can come with its own requirements and fees.

You can do the process yourself, or hire a company to help you prepare and file the paperwork. However, forming an LLC isn’t a requirement if you want to run a business. You can start a business simply by beginning to sell products or services to others, and you’ll have what’s known as a sole proprietorship. 

In fact, if you’ve worked as a contractor (perhaps for a rideshare or delivery app) and received a 1099-MISC, you may have already filed your taxes as a business owner, even if you didn’t realize it. A sole proprietorship can be a great way to start as there’s no additional cost to get started. However, there are also good reasons to form an LLC. 

FORM AN LLC TO LIMIT YOUR LIABILITY

Unlike an LLC, a sole proprietorship doesn’t draw a legal distinction between the business owner and the business. One reason many business owners form an LLC is for this extra layer of separation and, as the name implies, to limit their liability. 

For example, if you have a sole proprietorship and one of your customers gets hurt using your product, the customer may sue you for damages. You could be personally liable, and all your personal assets could be at risk if you lose the lawsuit.

If your LLC sold the product, the customer may only be able to sue the LLC, but not you personally. As a result, the LLC may have to pay for damages. However, even if the LLC doesn’t have enough assets to cover the cost, the other party might not be able to go after your personal assets. 

The level of protection than an LLC offers can depend on a number of factors, including your involvement with the business and whether you’ve taken adequate steps to separate your personal and business finances. If you’re registering an LLC for liability protection, it’s best to speak with an attorney who can help you draft the necessary documents and advise you on how to separate and protect your personal assets. 

CHOOSE A TAX OPTION THAT CAN SAVE YOU MONEY

Whether or not you’re looking to limit your liability, you may also be able to benefit from different tax rules that you can choose for the LLC. 

By default, an LLC isn’t a separate tax entity—it’s a pass-through entity. This means that the money the business makes or loses gets passed through to the owners’ personal tax returns. It will be as if you’re running a sole proprietorship (or a partnership if you have business partners), and you’ll use the same tax forms.

However, you can also elect to have your LLC taxes as either a C corporation or S corporation, and use those tax rules instead. Being taxed as a corporation can add new responsibilities and costs, such as running payroll for yourself, but you may save more on taxes than you spend on administrative fees. 

As with hiring an attorney to discuss the legal protections an LLC can offer, you may want to hire an accountant who is familiar with your industry and state to discuss the tax options. For a one-time fee, many accountants can create a side-by-side comparison of the total tax liability with each option. 

DECIDING IF AN LLC MAKES SENSE FOR YOU

More complex situations can make the business entity choice particularly important. For example, if you’re forming a business with several partners or if you plan on raising money from investors, then there are different trade-offs to consider. But for solopreneurs and freelancers, the decision to form an LLC often comes down to how risky their business is and whether they can save money on taxes. 

If you’re just starting and there’s not much risk involved, sticking with a sole proprietorship often makes sense. As your business grows, you can reevaluate the situation and decide if you want to transition to a limited liability company. 

How to Stay Safe When Shopping Online

There was a time when shopping from home was the height of convenience and luxury. Eventually, the idea of just picking up your phone and buying a tub of laundry detergent was so commonplace it hardly seemed notable.

And of course, nowadays making purchases online isn’t entirely about convenience. If you’re looking to limit face-to-face contact and reduce your potential exposure to contagious diseases, online shopping can certainly help.

But shopping online does create an entirely different set of risks – risks to your identity and your financial security. The basics of safe online shopping have remained fairly consistent in the past decade-plus, but it’s always a good idea to refresh yourself and ensure that you’re following all the best practices. If you’re making purchases online, make sure you’re taking these steps every time.

KEEP YOUR DEVICE AND YOUR BROWSER UP-TO-DATE

Malware is constantly evolving. To stay ahead of the curve, software developers are continually updating operating systems and browsers, shoring up weaknesses and vulnerabilities. You may miss out on some of these important tweaks if you’re not updating to the latest version, so stay alert for updates and install them as they become available.

USE ANTI-VIRUS PROTECTION AND SCAN YOUR DEVICE REGULARLY

Most modern anti-virus programs update automatically and runs scans in the background on a regular basis, so you won’t have to do anything on your own. But if for some reason there is no anti-virus protection on your device, or if you need to schedule scans manually, be sure to take care of that, or else you may risk malware infiltrating your device and exposing your personal information.

ONLY MAKE PURCHASES WITH TRUSTED VENDORS AND THROUGH SECURED WEBSITES

If you’re making an online purchase with a new vendor for the first time, take a quick moment to do a little research. Check reviews on third-party websites to see if others have had positive experiences. You may also want to check their listing on the Better Business Bureau.

Once you feel comfortable, be sure to verify that your transaction is being processed through a secure website. Just check the full website address – if it starts with “https” the website is secure.

PAY WITH A CREDIT CARD OR TRUSTED DIGITAL PAYMENT PLATFORM

The last thing you want is for thieves to get access to your bank account. Should your credit card number be compromised, you’ll have the ability to dispute and likely reverse any charges with the card issuer. Digital payment platforms like Paypal offer similar security features.

For an extra layer of security, avoid allowing vendors or your browser to save payment data.

USE STRONG, UNIQUE ACCOUNT PASSWORDS

The stronger and more complex your password, the harder it becomes for a hacker to guess their way to the correct combination. Meanwhile, using unique passwords for all of your accounts protects you in the event that one of your accounts is compromised – either locally (someone saw your password) or via a data breach. It’s no fun to have one of your accounts compromised, but it’s much worse to have all of them compromised, one after the other.

USE TWO FACTOR AUTHENTICATION WHEN POSSIBLE

Two factor authentication adds an additional security layer when accessing accounts or completing certain transactions. One of the most common forms is receiving a text message (to the cellphone number associated with your account) with a special code you need to enter before you can continue. If someone nabs your password, but not your cellphone, they won’t be able to access your account.

AVOID USING PUBLIC COMPUTERS OR UNSECURED WI-FI NETWORKS

If you can’t vouch for the security on a device, don’t use it to submit or share sensitive personal information. The same holds true for public or unsecured Wi-Fi networks. When making online purchases, it’s safer to use a secured personal Wi-Fi network or your cellular network.

TRACK PURCHASES, SAVE RECEIPTS, AND REVIEW YOUR BANK STATEMENTS REGULARLY

Keep a record of what you bought and take a look at your creditor/payment accounts often to verify that there are no strange charges showing up. You should also verify that the amount on your receipts matches what came out of your account.

NEVER EMAIL SENSITIVE DATA

Email just isn’t an especially secure way to transmit sensitive data (like credit card numbers). Be wary if a vendor ever asks for you to complete a transaction via email.

Online shopping isn’t the wave of the future – it’s how we conduct business in the here and now. New threats will always emerge, but as long as you do your best to stay safe, you should be able to shop without (too much) worry.

Best Debt Repayment Apps

And some days, those numbers and figures might be swirling around your head in a befuddling jumble. 

In our modern age, you can lean on financial technology to assist. Enter debt repayment apps. In a nutshell, these apps can help you get a handle on your payments, keep track of your debt load, and assist in figuring out how much you’ll be paying in interest based on different timeframes. 

The good news is there’s a bounty of options. Here are our top picks for debt repayment apps: 

UNDEBT.IT 

Undebt.it is a simplified debt repayment online platform that employs different debt payoff methods to tackle your debt. You can choose some payoff options, including the debt snowball, the debt avalanche, the hybrid plan, the highest monthly payment, or the highest monthly interest paid. 

According to its website, Undebit has helped knock out over 700,000 debts. What’s more, there are currently over 120,000 active users, and $8.7 billion of debt is being paid down. 

Features include picking different payoff plans for each debt, sifting through and exporting the payment history for each debt balance, seeing your projected payoff date, and the total interest. 

There is a premium version available, which includes a handful of added features such as payment reminders via text, integration with a Google Calendar, and an at-a-glance view of your payment planner. 

Pricing: Free for the basic plan, and $12 for the premium version. 

DEBT PAYOFF PLANNER 

The Debt Payoff Planner is a solid choice for those who don’t want to create a separate login to track their debt payments. To date, the app has helped over 200,000 pay off debt with custom payoff plans, and successfully crush over $200 million in debt. 

This particular debt repayment tool enables you to choose a debt repayment strategy. You’ll also gauge how long it’ll take you to pay off the remaining balances on your debt. 

How it works: You punch in the current balance of the loan, the APR, and the minimum payment. You can choose between two popular debt payoff methods: The avalanche method or the snowball method. Debt Payoff will come up with a custom plan tailored to your needs. You can also opt to pay an additional amount to get ahead of your debt repayment. 

There are two versions: basic and pro. The pro version includes the following features: 

  • The ability to print your plan 
  • Web access 
  • Payment reminders 
  • Charts that show how your debt balance goes down over time if you follow a payment plan 

Available on iOS and Android

Pricing: Free for basic version: The pro version is $1 to $5 a month, depending on the time commitment 

DEBT MANAGER AND TRACKER PRO

The Debt Manager app boasts multiple features, including access to a summary of all your debt and outstanding balances in one place, plus any money owed to you. You can track anything from standard debt such as loans and credit cards, microfinancing, P2P loans, and cash owed to individuals like your friends and family. 

One thing to note is that unlike other debt repayment apps, it doesn’t seem to offer repayment tactics and timelines. However, if you’re looking for a debt repayment app that helps you keep track of all types of debt, it might be worth checking out. 

Available on Android

Pricing: $2.49

ALWAYS KEEP YOUR INFORMATION SAFE 

While apps like these strive to keep your information safe, they do require that you share potentially sensitive data. When using any type of technology that involves personal, sensitive information, you’ll want to take proactive steps to protect your data. 

Finally, although these debt repayment apps and online platforms can help you stay on top of your debt and potentially help you save on interest, in the end, they’re merely tools. The value is all in how you use them. It’s ultimately up to you to make it a priority to pay off debt and figure out how to juggle debt repayment while juggling a bunch of other financial goals.

6 Ways Being Self-Employed Can Impact Your Credit

axes are more complicated. Health insurance is expensive and difficult to navigate. Even at-work injuries and gaps in income usually covered by government programs are out of reach. 

Credit is one of the farthest-reaching categories. Lenders prefer W-2 income to self-employed earnings, even when an entrepreneur is making more each month. Here are six specific ways being self-employed can create roadblocks for your financial goals, with insights on how you can overcome those roadblocks.

1. IT CAN BE DIFFICULT TO GET A LOW INTEREST RATE

You might be approved for a loan, maybe even with no more hassle than somebody with a regular job. The trouble is when you look at your statement and see how much that loan costs.

Your credit is all about risk from a lender’s perspective, and banks consider the self-employed a higher risk than people with a regular job. You’ll pay more interest on a similar loan than you would with employment earnings. As a result, every borrowed dollar costs you more — sometimes much more. 

The Solution

You have two ways to mitigate this issue. First, look at the fine print on every loan you’re offered. Find the nominal APR (annual percentage rate) and the actual price you’ll pay after fees and escalators. Don’t be shy about negotiating if that price is high.

Second, form a meaningful relationship with the bank where you hold your business accounts. Know the manager’s name, and say hi to the tellers. When it comes time to negotiate for credit, this can grease the wheels.

2. INCONSISTENT PAYCHECKS CAN LEAD TO MISSED PAYMENTS

You gave up a lot of things you didn’t like when you went to work for yourself, but one generally positive perks you let go of was predictable paychecks showing up on anticipated days. When you’re self-employed, your income ebbs and flows each month. It may be enough to get by, but it’s hard to set a budget with that kind of cash flow.

When business lags, it can get so low you have trouble paying all your bills. Missed and late payments go on your credit report, making it harder to get credit during the next slow patch — which means you have even more trouble paying your bills. This downward spiral can severely damage your credit and your business’s health. 

The Solution

You can solve this quickly by changing your relationship with your budget. Set a salary and pay it as W-2 income to yourself or take an owner’s draw. Base your monthly budget, including debt payments, on that amount. Any extra money you earn becomes a bonus once a month or once a quarter, which you can use for large purchases or fun indulgences. It takes a little organization upfront but is well worth the trouble.

3. LENDERS MAY NEED A TON OF ADDITIONAL DOCUMENTATION

When you’re looking for a loan as an employee, you just show a couple of pay stubs and tell the lender how to contact your boss to confirm that you work there. As a self-employed person, this process gets replaced by a much more in-depth look into your financial situation.

Your credit score won’t be enough proof that you’re a low-risk borrower. Lenders might ask for additional documentation such as a profit and loss statement, business plan, several years of company and personal tax statements, and even letters from vendors or your landlord. The process is more complicated and requires meticulous record-keeping.

The Solution

Keep all of your records. Keep them up to date. Keep them well-organized and easy to find, both in hard copy and electronic format. If you already do this, the keep doing it. If you don’t do it, you’re in for some work.

Get a list of the documents lenders are most likely to want when you apply for credit. Over the next several weeks, locate the materials you have and create the documents you don’t have. Make them look sharp, and store them someplace where you can find them easily.

4. YOU MAY BE TARGETED BY PREDATORY LENDERS

Predatory lenders love business loans. Regulations are more relaxed than those for personal credit, and the numbers can be much higher. You may have already received calls from them, offering you a high credit limit with unreasonably low requirements and stipulations. They’re more like loan sharks than traditional lenders. 

These loans tend to take advantage of desperate or inexperienced business owners, trapping them in a cycle of minimum payments and high interest. Usually, they come with one or more deal-breaking aspects, such as:

  • Exceptionally high interest rates (often more than 20%)
  • Hidden costs and fees spiking the effective interest rate to levels that would otherwise be illegal
  • A contract allowing the lender to debit payments from your account at will

Such conditions make for bad loans and can kill a business over time. Even if you make the payments faithful, these lenders often report late payments early and negotiate in bad faith. They can ruin your credit quickly, especially if you start to push back against their questionable policies.

The Solution

Apply two simple rules to any credit offer you’re considering. First, if the lender called you rather than the other way around, you should be cautious. Second, apply the well-worn advice that anything that seems too good to be true probably is, and move on.

5. YOU MAY LEAN ON PERSONAL CREDIT TO FINANCE BUSINESS EXPENSES

Because business credit is expensive and hard to get, many self-employed people end up putting business expenses on personal credit cards. Credit churn happens when you’re constantly using a personal card to cover operational costs, including inventory, payments to vendors, and similar expenses, and then quickly paying that personal debt with business income. 

This one’s not so much a problem as an opportunity with a downside. The churn puts you at risk of carrying a balance every month. When business revenues drop, that balance can harm your credit history by showing you’re borrowing more than you should. It also increases your business costs because you’re paying interest on those expenses.

The Solution

As we said, it’s also an opportunity. As Tim Ferriss says in The 4-Hour Workweek, you can run those expenses through a card that earns cash back, air miles, or other rewards. As long as you keep your balances paid each month, the churn can net you meaningful savings, tax-free.

6. YOUR REPORTED TAXABLE INCOME MAY BE TOO LOW FOR CREDIT APPLICATIONS

One benefit of being self-employed is charging some expenses to your business. Although you should never be abusive or dishonest, it’s common practice to drive a company car, expense office supplies, and apply part of your utilities and phone expenses to your business. These write-offs save on taxes but can cause credit issues.

For most self-employed people, the income they report on their tax returns doesn’t represent the buying power of their full earnings each year. This can be a problem when you’re trying to get credit and the lender wants to compare your reported income against the needs of the loan you want. 

The Solution

Unfortunately, there isn’t a reliable solution to this dilemma. If you report more income, you pay more taxes. If you report less income, your access to credit may suffer. Your best bet is to plan for your credit needs to the best of your ability. That way, you can at least adjust your tax strategy accordingly. 

FOLLOW CREDIT BEST PRACTICES NO MATTER WHAT YOUR EMPLOYMENT STATUS IS

For anyone, self-employed or not, it pays to keep your credit score as high as possible and your credit report clean. But this is especially crucial for the self-employed. A high enough credit score can overcome or alleviate most of the problems mentioned above. Keep yours healthy and robust with techniques like:

  • Checking your credit report regularly for problems
  • Paying your credit card balances down to zero whenever possible
  • Paying all bills on time
  • Negotiating directly with lenders if you can’t avoid paying late
  • Avoiding unnecessary applications for credit
  • Keeping zero-balance cards open and on hand, even if you don’t use them

There’s no guarantee that getting all the credit you need will be a cinch, even if you’re armed with a good credit score and reliable business records. But it’ll certainly be easier if you follow these tips and keep your credit healthy on a day-to-day basis.

Can You Afford to Homeschool?

When schools across the country closed their doors in the spring, many expected that the coronavirus pandemic would subside before class restarted in the fall.

Of course, COVID-19 persists, bringing far-reaching healthcare and economic consequences in its wake. In many places, soaring infections have made the start of school uncertain. 

As a result, some schools are opting to start the school year virtually, hoping extra time in isolation will reduce infection rates and allow more time to prepare for students back on campus. Meanwhile, other schools are deploying a hybrid approach, allowing some students to return to school buildings while others continue virtual learning. Of course, some are choosing to open for business as usual. 

Taken together, there is incredible uncertainty about the efficacy and responsibility of restarting schools. When coupled with broad disillusionment with earlier attempts at virtual learning, this reality is driving up the number of people considering or opting to homeschool their kids. According to a survey by Real Clear Education, a curation platform for educational issues, 40% of parents indicated that they were considering alternative options to traditional school structures. 

However, many education experts are encouraging families to make this decision carefully, noting that homeschooling is a significant undertaking for families. 

It can also have a substantial impact on personal finances, something that looms large for families navigating an uncertain economy. While we are not education experts at MMI, we know a thing or two about personal finances and we have homeschoolers in our ranks, including myself. To help you in the decision-making process, we asked our staff to discuss some of the financial considerations associated with homeschooling.

Here’s what we found. 

HOMESCHOOLING & YOUR BUDGET 

The costs associated with homeschooling will vary by household. However, everyone should evaluate these expenses – both direct and ancillary – before committing to full-time at-home education. 

SALARY

For several months, parents have been asked to play many roles at once. They were simultaneously employees, parents, teachers, and an exclusive support system. This isn’t sustainable, and opting to homeschool is committing to being your child’s primary educator. Although this arrangement is nuanced and somewhat flexible, it may require a parent to take reduced hours, a temporary leave of absence, or quit a job altogether. While families can find creative ways to both work and teach – including relying on extended family and tutors to provide additional academic support – it’s important to crunch the numbers and consider your options before making a decision. 

SOCIALIZATION

Peer-to-peer interactions continue to be one of the most valuable, intangible elements of in-person schooling. Parents choosing to homeschool will likely want to augment this through camps, clubs, sports or other extracurricular activities. While these activities are optional, they each come with a price tag that needs to be factored into your bottom line. 

WORKSPACE

A commitment to homeschooling might require updating or retrofitting space in your home for this purpose. Parents and students will need workspaces, supplies, and other upgrades to create a fertile learning environment. Some of these costs aren’t mandatory (or these features may already exist in your home), but understand the true costs of your workspace expectations, and factor them into your decision-making process.

ACADEMIC ASSISTANCE

Schools are outfitted with a plethora of academic resources that meet the needs of all types of learners. These “extras” come with a cost. Evaluate your child’s academic needs, and estimate the potential academic assistance costs required to provide a high-quality academic experience. 

CURRICULUM

Opting to use an individual curriculum is an up-front investment. There are entire organizations, blogs, and digital resources dedicated to this, which can help parents best understand the cost of academic curriculum. However, be careful not to assume that homeschooling can be completed on free resources alone.

HOW TO CONSOLIDATE COSTS

Homeschooling undoubtedly comes with a cost, but it isn’t necessarily a net loss. Before making a decision, carefully evaluate your entire household budget for potential savings. This might include: 

TRANSPORTATION

While homeschooling, can you consolidate your vehicles? Moreover, how much money can be saved if one parent is no longer commuting to work?

EATING OUT

When families are more home-based, they have the opportunity to be more thoughtful about diet and food plans, giving them more control over an often-overspent budget category. 

Employment & education-related spending. Eliminate costs associated with maintaining a professional wardrobe, licensing, and other job-related expenses. Similarly, parents might be able to save money by spending less on the school clothes and other items that typically accompany the on-campus experience. 

ENTERTAINMENT

The same circumstances that encouraged you to homeschool in the first place are curtailing travel and recreational opportunities. During this season, these budget savings can help make up some of the difference when choosing to homeschool. 

SHOULD YOU HOMESCHOOL?

COVID-19 has pulled back the illusion that we are entitled to a public education that is both academically rigorous while serving as a de facto daycare. All parents want to make the best decision for their children, and there likely isn’t a right or wrong answer when it comes to opting to homeschool (although the stress and long-term financial impact could be a factor). Parents should carefully evaluate their finances as part of a holistic assessment of homeschooling as a best practice for your family.

Ultimately, it’s important to remember that this decision doesn’t have to be permanent. In the years ahead, you can pivot and make adjustments. Just because you are making a change right now, doesn’t mean that you have to make this decision forever. Do your best to make an informed decision and remember you aren’t alone. 

How to Find and Claim Your Old Retirement Accounts

While the money you contributed is yours forever, accounts can sometimes get forgotten about in the shuffle. And, in some cases, you may not have even realized you’d had a retirement account if your employer automatically signed you up and withheld contributions. 

Whether intentional or not, you can wind up with a handful of retirement accounts at different companies and lose track of some of them over time. Former employers and plan administrators may lose track of your current contact information. 

Here’s how to check and track down old accounts, and what you can do to get your finances organized. 

FINDING OLD RETIREMENT ACCOUNTS

You may want to start by contacting your former employers and the plan administrators, the companies that ran the retirement plan. Sometimes, you’ll find that your retirement account is still there and chugging along as is, hopefully growing in value over time. If you want, you may be able to leave it there, although update the company with your current contact information so it can let you know about any important changes. 

However, it’s not always that easy. If your account had less than $5,000 in it when you left, the plan administrator can transfer the funds to an individual retirement account that was set up in your name. If it had less than $1,000, the company may have tried to send you a check for the amount to the address it had on file. You may also have trouble tracking down the account if the company went bankrupt or switched plan administrators, leaving it up to you to figure out who is holding onto the money now. 

One thing is certain—other companies don’t get to keep your money. If a company can’t figure out how to contact you, it has to turn unclaimed funds over to state agencies. You can start searching for your unclaimed funds in these databases:

  • The Unclaimed.org and MissingMoney.com databases are run or endorsed by the National Association of Unclaimed Property Administrators. It’s a good place to search for all sorts of unclaimed funds, not only forgotten retirement plans. 
  • The U.S. Department of Labor has an Abandoned Plan Search tool that’s specifically for retirement plans that don’t have a plan sponsor or plan administrator. This could help you track down a retirement plan if your former employer or plan administrator. 
  • The National Registry of Unclaimed Retirement Benefits can also help you find retirement plans if your former employer registered with the service. 

Once you find your account or money, you’ll still need to decide what to do with it. 

WHAT ARE YOUR OPTIONS FOR OLD RETIREMENT PLANS?

You generally have four options for dealing with money that’s in an employer-sponsored retirement account when you’re no longer working at the company:

  • Leave the money where it is: Although you might not be able to contribute to the account any longer, you may be able to leave the money in your former employer’s plan. Sometimes, you may need to meet a minimum account balance to qualify, such as $200 for a TSP or $5,000 for some 401(k)s. 
  • Transfer funds to a new employer-sponsored plan: If you have a new job with a company that sponsors a retirement plan, you may be able to “roll over” the money into your new employer’s plan. When this is an option, compare the previous and new plan’s fees, terms, and investment options to see which is best. 
  • Roll over to an individual retirement account: You can also move the money into an individual retirement account (IRA). An IRA may give you more control as you can choose where to open the account and invest in a wider range of funds. It’s also fairly easy to move from one IRA to another as the account isn’t tied to your employer. However, IRAs could have more fees, especially if you don’t have a lot of assets and don’t qualify for lower-cost investment funds. 
  • Cash out: You can also take the money out of retirement accounts completely. But unless you’re 59½ or older (55 if you just left the job), you may need to pay a 10 percent early withdrawal penalty in addition to income taxes on the money. 

PICKING THE BEST OPTION

Figuring out what to do can be difficult, as there may be complex tax and investment return implications for each decision. 

In many cases, unless you’re ready to retire, moving the funds into a new retirement account is often a good option. If your funds are in an IRA that was opened in your name, the IRA provider may be charging high fees. And, unless the old employer offers a much better plan than your current options, consolidating your money within a few accounts can make it easier to track your investments and help you qualify for discounts or benefits from plan administrators. 

The easiest way to do this is with a direct transfer, where the money never touches your hands. Otherwise, 20 percent of the money has to be withheld for taxes, and you only have 60 days to deposit the funds into the new retirement account or the withdrawal will be treated as a cash out. 

Fair warning, there can still be a lot of paperwork involved with a direct transfer. However, the company that you’re sending the money to will often be able to help you with the process. 

No matter what option you choose, if you’ve got old retirement accounts floating out there it’s in your best interests to track that money down sooner than later. The more you know about your retirement funds, the more options you may have the next time you’re faced with a major financial setback. At the very least, you’ll understand where you stand as you prepare for retirement.

How to Prepare for the End of a Credit Card Deferment

Financial calamities, like the current coronavirus pandemic, mean that credit card issuers may have to temporarily increase the scope of those hardship programs or else risk seeing millions of accounts defaulting simultaneously. The problem, however, is that sometimes the deferment ends before your situation has gone back to normal.

So let’s take a look at what happens when your credit card deferment ends, and what you can do to protect yourself.

VERIFY THE TERMS OF YOUR HARDSHIP PROGRAM

To start, make sure you understand what benefits are actually in place and for how long. At the outset of the coronavirus pandemic, many creditors were quick to offer a wide variety of COVID-related benefits, from waived fees to bonus perks to extended deadlines on existing rewards. Not all offered payment deferments and many only offered deferments on a case by case basis.

It should also be said that not all deferments are the same. The terms “deferment” and “forbearance” can sometimes be used interchangeably, but both can mean something different depending on your creditor’s policies. 

If you’re unclear on your responsibilities or when your hardship expires, connect with your creditor ASAP. Here are some questions you should know the answers to:

Is there a monthly minimum payment? While a deferment usually means that no payment is due during the specified period, a forbearance program may sometimes simply reduce the amount of your monthly minimum. Make sure you understand what your creditor expects from you each month.

When does the deferment end? Many of the deferments offered by creditors at the start of the pandemic were for 60 or 90 days, but you should verify when it started and when it’s scheduled to end.

Are you being charged interest or fees? In a student loan forbearance, interest charges are almost always accruing even as you aren’t making payments (which is one of the arguments against using a student loan forbearance). Most credit card deferment programs don’t charge interest during the deferment period, but that’s not universal. 

How much will you owe once the deferment ends? This is the big question. What will your new minimum monthly payment look like post-deferment? If you haven’t been charged any interest, it may be what it was before the deferment began. However, if your creditor expects you to “catch up” on your missed payments within a certain timeframe, you may be expected to make substantially higher payments.

ASK FOR AN EXTENSION OR NEW HARDSHIP

Assuming things haven’t gone back to normal and you still need help managing your credit card debt, your first step should be to contact your creditor before your current deferment ends and ask about an extension. 

It’s hard to say whether or not a creditor is going to be willing to help you out a second time. Like most lending decisions, it usually comes down to some form of risk versus reward. And in many cases, the customer representative is simply working off a set of pre-determined guidelines. But it never hurts to ask. Just be prepared to explain your situation and know that it may take a few phone calls (and some persistence on your part) to get to a definitive answer.

REVIEW YOUR DEBT REPAYMENT OPTIONS

If you can’t get a new deferment in place, you’ll need to consider your situation and your options. Is it that you can’t pay the minimum required by your creditor or are you not able to pay anything at all?

If you need a lower payment to make it work, consider your options. If your credit is in good standing, you may benefit from a debt consolidation loan. If it’s difficult to get a loan with good terms, you can access a lot of the same benefits through a debt management plan.

Be proactive, though. If it’s your intention to keep your accounts in good standing and continue to pay, then figure out your debt repayment plan early. Once you start missing payments, you may find that some of your options have dried up.

PRIORITIZE YOUR AVAILABLE CASH

If your income is reduced or paused entirely, there’s only so much cash to go around. In a situation like that, debt repayment should naturally fall to the bottom of your budget priorities. 

Take the time to review your available money and routine expenses. There may be enough to keep some accounts current, while others become delinquent. It’s not a bad idea to let creditors know that you won’t be able to make your payments to them (even if they can’t offer you a new hardship).

Ultimately, you need to do what’s best for you and your family, and that may not include making payments to your creditors. 

CHECK YOUR CREDIT REPORT REGULARLY

Finally, if you’ve used a creditor hardship program of any type, it’s important that you review your credit report to verify how that account was reported during the hardship. Specifically, the CARES Act requires that creditors who offer deferments during the coronavirus pandemic not report those accounts as delinquent during the deferment period. In other words, the payments skipped during the deferment shouldn’t adversely impact your credit.

No matter the details of your hardship program, review your credit report frequently to see how your accounts are reported. If you see an error, be sure to request that your creditor correct their reporting as soon as possible.

The 5 Best Budget Tricks I Learned in Lockdown

And if you cut back on your spending during the last few months, you’re not alone. According to estimates from the Bureau of Economic Analysis (BEA), personal consumption among Americans dipped 13.6% (or $1.89 trillion) in April (as compared to March). 

As non-essential businesses start to reopen across the U.S. and life tries (successfully or not) to get back to normal, it’s not a bad idea to think about the budget-trimming tactics you picked up while cities and states were in lockdown. While you’ve probably come up with some great money-saving techniques, here are a few budgeting tricks I learned during the quarantine — and have stuck to: 

BATCH YOUR SHOPPING TRIPS 

Confession: I used to head over to the nearest discount grocery store to unwind. I’d sometimes go several times a week. As you might suspect, this typically led to impulse buys as I got a cheap thrill from the hunt for “amazing bargains.” 

After stay-at-home orders were mandated, and we were advised to limit our shopping trips, I got used to only grocery shopping once every two weeks. To limit my exposure, I made this one trip count and tried to get any and all shopping done before hustling home. Shopping with purpose (and a list) made me more efficient and helped me cut way down on my extracurricular purchases.

Leaving aside the fact that limiting my exposure is still a good thing, I’m staying dedicated to shopping rarely and efficiently. Meanwhile, I’m still working on finding some less costly ways to unwind. 

ACCESS THE BENEFITS OF ONLINE SHOPPING

While online shopping can cause you to spend more and buy things you don’t need, there are also a few tools in place that could help you save. For instance, consider online buying mainly essentials — groceries, household supplies, and personal care items. When you shop online, you have an easier time tallying the bill before you checkout. 

What’s more, you can also keep items in your cart before buying. For household items, I’ll add items into my virtual shopping cart throughout the month. Before I hit “checkout” I’ll go over the full list and make sure I still need everything I’ve picked out. This staves off impulse shopping. I also prefer to pick up in-store or opt for a curbside pickup. That way I won’t be tempted by items that catch my eye, which is a danger when you’re perusing the aisles. 

USE CASH-BACK REWARDS 

You can also use cash-back rewards on your credit cards — this is usually when you’re paying through PayPal, or making a purchase on Amazon. Instead of routinely redeeming my credit card points on ride-shares or gift cards, I’ve used cash-back rewards a few times during quarantine. Browser extensions like Honey can help you find promo codes and apply them automatically. 

For everything else, limit the amount of time you spend shopping. You can also limit your purchases. When I was in quarantine, I found myself squandering chunks of time surfing the web. In turn, those banner ads or an Instagram influencer account would entice me to buy something. I made a pact to allow myself only one non-essential online splurge a week. 

CONSIDER ECO-FRIENDLY ALTERNATIVES 

Going green can also put some greenback in your pocket. Due to shortages in household staples such as paper towels and toilet paper during quarantine, I started using eco-friendly choices that are also budget-friendly. I treated the last roll of paper towels in my kitchen as a sacred resource, and used them sparingly. Instead, I opted for cloth towels as much as possible. 

Instead of paying for Swifter pads, I bought a cloth pad that I could wash and reuse. And I used white vinegar and Simple Green, which is available in concentrate, to clean cookware and surfaces. 

REVIEW SUBSCRIPTIONS AND RECURRING BILLS REGULARLY

When the pandemic hit, I went through my living expenses to see which bills could be lowered, and which needed an adjustment. I switched car insurance providers from a policy where I paid in six-month chunks to a pay-per-mile policy. The coverage was pretty much identical to my previous insurer. Because I now batch my shopping trips and typically use my car to run local errands, I’ve saved an average of $50 a month on car insurance, or $600 a year. 

I also went through my subscriptions and found a home internet plan that was the same price, but with faster speeds, than my old internet provider. Other subscriptions and recurring bills I reviewed included streaming entertainment platforms, charges for money apps, services for my freelance business, and recurring domains. I decided to drop a few subscriptions for services that I wasn’t really using. 

Tips for Repaying Credit Card Debt After a Long Layoff

Here are some tips for getting your credit card balance back to zero after a long layoff: 

STRIKE A BALANCE

In a perfect world, you would be able to pour all your efforts into aggressively repaying your debts (new and old). The reality is that you’ll need to pay off credit card debt while juggling other needs — covering your rent, putting food on the table, restoring your emergency fund, etc. — and that takes a bit of awareness. 

To help you juggle your other financial priorities while paying off your credit card balance, jot down all your money goals. Then order them in order of urgency or importance. Last, figure out exactly how much you can reasonably put toward each financial priority. 

This is the time to get granular. Get specific and assign an exact dollar amount to each of your money goals. Next, figure out a target date as to when you’d like to hit each financial goal. 

LIVE LEAN 

You’ll probably have a hard time ramping up on your credit card payments if you’re also undergoing lifestyle inflation. If you’re starting to rake in some money, instead of going back to your old ways of spending, rework your budget. 

Figure out how much you’ll need to reasonably get by. Go through your list of expenses, and see where you can cut back. Easy wins include nixing or lowering the cost of recurring costs, such as memberships and subscriptions. Let’s say you can cut back on a streaming subscription service that costs $12 a month. That’s $144 a year back in your wallet. 

Big wins include cutting down on the three most significant categories — housing, transportation, and food. If you can slash monthly grocery spending by $50, you’ll have saved $600 a year. Or if you switch car insurance carriers, and save an average of $25 a month on your policy, that will earn you $300 a year. 

FIND WAYS TO MAKE MORE MONEY

While unemployment is at a record high, there are ways you can make a bit of extra scratch. For instance, sell some unwanted stuff. Grow herbs and veggies in your garden, and offer contactless pickup. 

Or you could see what kind of side hustles might suit you. Don’t feel comfortable doing frontline work? You could take up a work-from-home gig, such as being an online tutor, virtual assistant, or work in computer support. If you’re qualified, you could also potentially do in-home bike repairs and general lawn maintenance. Handy with a needle and thread? Set up an Etsy shop and sell customized face masks.

It’s not easy, and finding the time is a real challenge, but for a lot of people the fastest path to debt repayment and a balanced budget is more income. The key is finding ways to leverage your skills (and resources) to meet a consumer need. 

LOOK FOR CREDIT CARD RELIEF PROGRAMS 

A handful of credit card networks — Chase, Citi, Capital One, Apple, Discover, American Express, and Bank of America, to name a few — have been offering economic relief to cardholders who have been impacted by the coronavirus. Depending on your situation, you might be able to have late fees waived, have your payments paused temporarily, or your monthly payments lowered.

It typically depends on your situation. Reach out to your credit card company to see if you can request financial assistance. If you plan on giving the card issuer a ring, anticipate longer than usual wait times. 

KEEP WATCH ON YOUR CREDIT 

Of course, you’ll want to maintain the best practices to minimize damage to your credit score. While paying off debt, be sure to continue making minimum, on-time payments (presuming you can afford them). Plus, you’ll want to keep watch to ensure that your credit usage remains low. Otherwise, your credit score might take a hit. 

There are plenty of ways to check your credit score these days, including some popular money management apps and directly through select credit card issuers. Don’t just pay attention to the score, however. Be sure to review your actual credit reports often. You can access reports from the three major credit reporting bureaus through AnnualCreditReport.com. 

CONSIDER A DEBT REPAYMENT PLAN 

If you’re drowning in your debt, consider a debt repayment plan (DMP). Under a DMP,  you make a single payment for all your credit card debt. While it’s not guaranteed, for most consumers a DMP can lower your interest rates, waive late fees, or lower your monthly payments. The downside of a DMP is that you’ll likely have to close your credit cards. 

Paying off credit cards, while challenging, is certainly doable. The more you know and the greater vigilance you have around your situation, the better. In time, you’ll get that balance down. 

What the Payroll Tax Deferral Means for You

While it sounds like a positive move to help workers and self-employed folks, you’ll want to get your head around the facts and know the pros and cons that come with such a deferral. Here’s a breakdown of what it means, how it might impact you, and how to prepare should you owe back taxes when April rolls around: 

WHAT IS THE PAYROLL TAX DEFERRAL?

In a nutshell, your payroll taxes for Social Security could be put on hold until the end of 2020. This executive order mainly impacts two groups: eligible workers and their employers. 

If you’re an employee, what this means is that the employer portion of Social Security taxes is pushed back until the end of the year. In return, you’ll receive a four-month pay hike of 6.2%, explains Josh Zimmelman, a managing partner at the NY-based Westwood Tax & Consulting. This deferral went into effect on August 28th, 2020, and is in effect until December 31, 2020. 

HOW THIS MIGHT IMPACT YOU 

In the immediate, the impact for employees is fairly straightforward: less comes out of your paycheck, so your take home pay through the end of the year is higher. 

On the employer’s end, it could be more complicated, says Zimmelman. For one, if you’re an employer, you’ll need to adjust your payroll systems to provide this deferral to your employees. 

Plus, the repayment process could be an issue. “For their workers to repay the deferred taxes, employers would need to increase their withholding on future paychecks,” says Zimmelman. But if you’re an employee and you end up leaving the company before your employer boosts their withholding on your upcoming paychecks, you might be on the hook for paying back the difference. 

NO, IT’S NOT A TAX BREAK 

As one might expect, there are a few misconceptions around the payroll tax deferral. The biggest one? It’s not a tax break or a tax cut. “It’s just a deferral, so the taxes will need to be repaid the following quarter,” says Zimmelman. 

“So while it may result in slightly larger paychecks until December 31, starting in 2021, those same workers will likely see even smaller paychecks.” 

That’s because your Social Security withholding will likely double in order for you to pay back those deferred payroll taxes. 

Another common misconception? Is that it’s for all workers. It’s only available for workers who will benefit from this deferral. As Zimmelman explains, workers in the U.S. earning less than $4,000 on a pre-tax biweekly basis are eligible. This adds up to $104,000 annually. Plus, employers aren’t mandated to participate. “Some may not prefer to, because of the administrative challenges of repayment,” he says. 

If your employer decided to opt in to the deferral, they likely would have informed you prior to August 28th start date.

HOW TO PREPARE FOR INCREASED PAYROLL TAXES 

And just like how the deferral is for four months, you’ll have four months in 2021 — between January 1 and April 30, 2021 — to pay back the 6.2% of each paycheck that would have gone to taxes. Again, you won’t just go back to your old pre-deferral paycheck — you’ll be paying double the rate in order to catch up.

If your employer has opted into this payroll tax deferral, here’s how you can best prepare to pay back those taxes once the new year rolls around: 

KNOW WHAT YOU OWE

Tax rules, thresholds, limits, credits, deductions, and other relevant items often change each year, points out Riley Adams, a CPA, and founder of Young and Invested. So even if your financial circumstances haven’t changed, your tax bill might experience a shift. 

“Staying on top of these developments will help avoid any surprise come tax return preparation time each year,” says Adams. “It’ll also allow you to make financial changes, where possible, to account for these changes and potentially use them to your benefit.” 

LOWER YOUR LIVING EXPENSES

While you might be squeezed financially right now, try to do your best to bump down your living expenses. And if you’ve tackled the big three categories — food, transportation, and housing — and don’t think you can cut back any more, try again. By implementing small changes, you might be able to scale back on your spending. 

After you’ve focused on the big stuff, go down your list of fixed expenses and see if there’s anything you’ve overlooked. For instance, app subscriptions that renew automatically every year, domain names you purchased during a burst of inspiration, only to have forgotten about them. It might not seem like much, but a $5 savings adds up to $60 a year.

Remember: if you’re opted in to the deferral, you’re currently taking home a bigger paycheck. Spend what you need to, especially if you’ve fallen behind on important bills, but don’t forget that the income boost is temporary. 

RAMP UP YOUR EARNINGS, IF POSSIBLE

Given the timing delay of these payroll taxes, any impact you will experience will be temporary, points out Riley. If your employer does offer payroll tax deferral, you might be better off keeping your tax situation as is and find ways to boost your income by, say, 5% to 10%. Finding ways to increase your take home pay might be a better, long-term solution. 

If you’re looking to earn more money within a short period, consider side hustles that don’t cost a lot upfront and have a low barrier to entry — walking dogs and shopping and delivering food on platforms such as Instacart. 

The truth is, while the payroll tax deferral is well-intentioned, there’s probably not a lot of employers who are offering it to their employees due to the administrative hassle. This tax deferral really won’t have much of an impact on most workers, explains Zimmelman. Very few employers are likely to opt into the program. And those who were hit the hardest by Covid-19 and are unemployed won’t benefit from this. 

“If you’re one of the few employees who are eligible, you can use this extra money to help shore up your savings or pay down debts incurred during the pandemic,” says Zimmelman. “Just don’t forget that you will need to pay that back eventually and will likely do that via smaller paychecks next year.”

How to Rent When You Have Bad Credit

That’s because many landlords and property management firms require a credit check as part of the application process. And depending on your score and the requirements for the property, that credit pull may lead to your application being denied.

Why do landlords look at your credit report at all?

It’s probably helpful to understand why landlords are looking at your credit report at all. After all, they aren’t loaning you money, so why do they care about your creditworthiness?

In truth, however, your landlord is lending you something of value – the rental property itself. And just as banks and credit unions weigh the risk and reward of lending you money, property managers do the same thing before handing over the keys. 

So while your credit report and, more specifically, your credit score can’t tell a landlord exactly how you’ll behave as a tenant, they can tell a prospective property manager how you’ve handled other financial responsibilities. A bad credit score can be interpreted as you having a hard time staying current on previous debts and bills. If a landlord or property management firm is trying to minimize the risk of having tenants who fall behind on rent (or worse, ultimately require an eviction) they’ll likely see your credit score as a strong indicator of what to expect over the course of the lease. 

So it helps (a lot) to have strong credit score. And while it would be great if you could just fix your credit overnight, improving your score takes time – time you probably won’t have if you’re looking for new housing. So what can you do if your credit score is low but you need to find a new apartment? Here are some steps to take if you’re trying to rent an apartment with bad credit.

EXPLAIN THE ISSUES IN YOUR CREDIT HISTORY

There are a lot of reasons why your credit score can dip and you being irresponsible with money doesn’t have to be one of them. If you feel comfortable explaining the circumstances behind your poor credit score, go ahead and share that with the property manager. Landlords are more interested in your recent history, so if your low score is the result of something that happened years prior be sure to discuss that and share what you’ve been doing to improve your score and fulfill your responsibilities since then.

OFFER REFERENCES FROM PRIOR LANDLORDS

You can have a poor credit score and a spotless rental history, which is why it may be helpful to provide documentation from previous landlords. If you can show that you have a history of making your rent payments on time (in addition to all the other behaviors that make you a good tenant) then a poor credit score may not be as big of a deterrent.

BE WILLING TO PAY MORE UP FRONT

A security deposit is one way that landlords offset the risk of renting out their property. Should something happen, they can use those funds to cover any cleaning or repairs above and beyond what’s covered in the rental agreement.

The higher the risk, the more you may need to pay up front to mitigate that risk. This could be a larger than usual security deposit, or possibly even upfront rent payments for one or more months. Whatever you agree to, however, make sure it’s captured in the lease and you understand how that money will be used and how you can get it back (if applicable). You should also consider your financial capacity – while you’re likely under pressure to find an apartment, try not to overextend yourself. If the required deposit puts you in a dangerous position, keep looking.

ADD A CO-SIGNER

As a last ditch option, you can try to add a co-signer. The co-signer wouldn’t need to live at the property, but they would be equally responsible should you fail to meet your obligation. In other words, if you miss payments, the property manager could go after the co-signer for the back payments. 

Co-signing can put both parties in an awkward position, though, so be sure that you and the co-signer are comfortable with the arrangement and understand what’s expected.

Finding an apartment with a bad credit score is far from impossible, but it’s harder than the alternative. If you’re not planning on moving any time soon, now’s the ideal time to start working on your credit score. If we have tons of great articles on building a positive credit history, but if you’re interested in one-on-one help with your credit, consider working with a trained counselor to review your credit report and create a plan for long-term credit success.

Over 50 and Furloughed/Unemployed?

In 2014, the AARP Public Policy Institute’s Future of Work@50 sponsored a survey that examined how Americans over 50 had fared since the Great Recession. The resulting study, The Long Road Back: Struggling to Find Work after Unemployment, reported that 50% of older workers who had become unemployed in the prior five years were not working. Of those who did find work, 48% reported earning less than they had with their previous job. And that deficit could be substantial: A discussion paper by the Urban Institute’s Program on Retirement Policy found that re-employed men ages 50 to 61 received a median hourly wage that was 20% less than they had received previously, while men over 62 took a 36% salary cut.

If you’re currently unemployed or furloughed, I suggest that you realistically consider your chances of re-employment. Don’t continue to act (and spend) as if you’ll soon be receiving your former income — even if you’ve been furloughed. “Call it realism or pessimism,” writes Christopher Rugaber of the Associated Press, “but more employers are coming to a reluctant conclusion: Many of the employees they’ve had to lay off in the face of the pandemic might not be returning to their old jobs anytime soon. Some large companies won’t have enough customers to justify it. And some small businesses won’t likely survive at all despite aid provided by the federal government.”

I’m not saying these things to depress anyone — just the opposite, in fact. When it comes to your finances, I believe it’s best to plan for the worst and hope for the best. If you can be OK with a worst-case scenario, you’ll feel even better if the worst doesn’t happen. 

To create a plan that can help you get through an open-ended period of unemployment, I suggest you:

Evaluate your financial situation 

When considering your finances, assess your condition as if you are not returning to your previous position. What other sources of income do you have? What expenses?  Do you have any benefits available to you? Create a cash flow plan  so that you can see exactly where you are financially, and where you want to be.

Make any necessary changes

If you’ve unexpectedly lost your job, you may need to cut back on expenses. Put everything on the table. Do you really need two cars, or can you sell one? Is it time to downsize your house? You don’t need to make every cutback you ascertain, but I do think it’s important to identify any expenses that can be reduced, and to seriously consider them.

Think about taking Social Security early

 Though you may have planned to wait to take Social Security later, don’t discount taking it before your full retirement age. In fact, you may want to take it for a year as a sort of interest-free loan. That’s right: If you are 62 or older, you can opt to take your benefits and then change your mind. If you do so within 12 months, you can withdraw your Social Security application and repay the money you have received without interest, (although you will need to include any money withheld for Medicare premiums or taxes).

Don’t skip health care

If you’re eligible for Medicare, congratulations. If you’re not, can COBRA carry you until you’re 65? Or can you find a good plan on the marketplace? No matter what, don’t court disaster by leaving yourself or your family uncovered.

Smart Ways to Support Local Businesses During Quarantine

If you’re playing it safe and staying out of your favorite stores and restaurants, you may be wondering how you can keep supporting those businesses (so they’re still around when you’re ready to leave the house).

If you’re trying to support a local restaurant, the solution may seem simple: just boot up your favorite food delivery app and order some dinner. Unfortunately, while ordering up some food on your phone is great for convenience, it’s not always great for your local restaurants. 

That’s because food delivery platforms like Grubhub, Postmates, and UberEats charge enormous commission fees to businesses — we’re talking anywhere from 10% to 30%, and in some instances as high as 40%. That’s not to mention the additional fees pushed on to the customer. 

LetterPress Chocolate is a chocolatier based in Los Angeles that temporarily closed its shop out of an abundance of caution and currently relies on deliveries and online orders. As co-owner and chocolate maker David Menkes explains, these popular food delivery platforms can cut deeply into the profit margins of small businesses. At LetterPress Chocolate the cost looks like this: For every $10 a customer spends on chocolate, the food delivery platform takes $3, plus a $3 delivery fee. So while you’re spending $13, the business only gets $6. (And that’s leaving aside the tip for your driver – don’t forget to tip your delivery drivers!) 

Normally, these kinds of steep costs are easier to bear when balanced against “in-person” customers. Right now, however, these business have, at best, very limited in-person capacity, and at worst are restricted to takeout or delivery business only. 

So how can you better support your favorite local businesses? Here are a few ways to go about it: 

CONTACT THEM DIRECTLY 

Instead of ordering through a third-party platform, check the business’s website. Menkes set up a Weebly site through Square to offer curbside pickup. “It’s not without its glitches, but it allows our customers to order online and even schedule a pickup time,” he says. 

If an establishment is new to curbside pickup or delivery, there’s a chance that its website has yet to be updated or might have outdated info. When in doubt, just give them a ring and see what your options are. A local restaurant I love looked like it was only accepting orders through Postmates. But after giving them a call, it turns out that you can place an order directly. 

ORDER MERCHANDISE 

Besides ordering food from a food establishment, see if there are other ways you can patronize local businesses. They might have products that you can order online and have shipped to your home. For instance, LetterPress Chocolate ships nationwide, which has helped it stayed afloat as a big chunk of its income before the pandemic came from factory tours. 

HELP PROMOTE THE BUSINESS 

And if you’re on a budget, you can do your part by helping promote your most beloved establishments. Share a photo of a delicious meal you just enjoyed on Instagram. Write a glowing review on Yelp. Rave about them on Facebook. Bottom line: Helping spread the word about a local business is just as important as giving them your dollars. 

FOCUS ON A FEW BUSINESSES 

If you’re on a budget during quarantine but still want to support your businesses, pick just a few to order directly from. If you can afford to eat out once a week, rotate the restaurants you patronize. That way you won’t be traveling to a bunch of different eateries around town. Plus, you won’t be quibbling over the delivery fees and tips, and it won’t be as much of a strain on your wallet. 

ORDER A GIFT CARD 

Order a gift card that you or someone near and dear to you can cash in on later. By doing so, you’re helping the business boost sales and its cash flow, plus you’ll have something you can enjoy down the line. 

The efforts you make in putting as much money back into the local economy makes a big difference. “Thankfully, our customers have been super supportive since we closed our retail shop,” says Menkes. “Since it’s literally just the two of us, we can’t afford to get sick. That’s why we aren’t allowing anyone inside at all.”

How Retirees Can Protect their Portfolios

If they are forced to sell beaten-down stocks and mutual funds to pay the bills, they could inflict permanent damage on their portfolios, increasing the risk that they will outlive their savings.

That’s what happened during the Great Recession. Standard & Poor’s 500-stock index lost more than half of its value during the bear market of October 2007 to March 2009, and IRAs and 401(k) plans lost about $2.4 trillion in value just during the final two quarters of 2008. Investors who rode out the downturn recouped their losses in the 11-year bull market, but seniors who took withdrawals before the stock market recovered were left with locked-in losses.

Ideally, you have prepared for this calamity by sequestering enough in cash or other low-risk investments that, when combined with guaranteed sources of income, you can cover at least two years of living expenses. “It’s the equivalent of an emergency fund within your retirement plan,” says Andrew Houte, a certified financial planner in Brookfield, Wis. You’re even better prepared if you’ve adopted the bucket system, in which you divide your savings into cash, short- or intermediate-term bond funds, and stocks, based on when you’ll need the money.

Cut expenses. After years of stock market gains and a roaring economy, some retirees and near-retirees may have forgotten the lessons of the Great Recession. David Mullins, a CFP in Richlands, Va., says he recently received a call from a retiree who had invested 100% of his savings in stocks. On one day in mid March, his portfolio lost more than $112,000.

If you find yourself in that unfortunate position, look for ways to cut expenses so you can postpone selling stocks or funds for as long as possible. Review your wireless bills for services you no longer use (or never requested). While you probably don’t want to cancel Netflix until you’re allowed out of the house, look for other subscriptions you can do without.

Low interest rates offer other opportunities to cut costs. If you still have a mortgage, refinancing to a lower interest rate could lower your monthly bill and free up some cash. If your mortgage rate is more than one percentage point above current rates, it’s usually a sign that it makes sense to refinance. For help crunching the numbers, use The Mortgage Professor’s refinance calculator to enter the details of your current mortgage and your new loan to see how long you’d have to stay in your home to start saving money with a refinance.

Look into a reverse mortgage. For homeowners who are 62 or older, a reverse mortgage could provide a reliable source of income until the market recovers. A strategy recommended by some financial planners, known as a “standby reverse mortgage,” is designed for just this type of downturn. Under this game plan, you take out a reverse mortgage line of credit to cover your expenses until your portfolio recovers. If you maintain your home and pay taxes and insurance, you don’t have to repay the loan as long as you stay in your home.

Low interest rates have made these loans even more attractive. Under the terms of the government-insured Home Equity Conversion Mortgage, the most popular kind of reverse mortgage, the lower the interest rate, the more home equity you’re allowed to borrow. And if it turns out you don’t need the money, your untapped credit line will increase as if you were paying interest on the balance.

Be smart about Social Security. If the Great Recession is any guide, there will soon be a spike in claims for Social Security benefits, both by people who were forced to retire earlier than planned and by retirees who are worried about depleting their investment portfolios. Filing for Social Security benefits will provide a guaranteed monthly paycheck, which could allow you to postpone taking money out of your retirement savings. You can file for benefits as early as age 62, but if you do, your benefits will be permanently reduced by at least 25%. If you’re married and are the higher earner, claiming early could also reduce the survivor benefits your spouse will receive if he or she outlives you.

Waiting until full retirement age — 66 or older for those born after 1943 — will allow you to claim 100% of the benefits you’ve earned. If you wait to file for benefits until after you reach full retirement age, your payouts will grow by 8% a year until you reach age 70.

Married couples may be able to play it both ways. Have the lower-earning spouse file before full retirement age — as early as 62. Although that spouse’s benefits will be reduced, you can use that money to pay the bills until your portfolio has recovered. Meanwhile, the higher-earning spouse will be able to put off claiming benefits until full retirement age or later.

How Student Loan Borrowers Can Benefit from the CARES Act

These are especially stressful times for those with debt payments that continue to pile up even as the economy stalls. Fortunately, for the 5.2 million people paying on student loans, there is help and hope for a positive outcome. The CARES Act, one of several federal stimulus packages intended to steady the economy and support workers, offers relief for students and student loan borrowers.

Here are some of the key resources available under this new legislation.

HOW THE CARES ACT IMPACTS STUDENT LOANS

The CARES Act provides financial relief for federal student loan borrowers, including those with Direct, Direct PLUS, Direct Consolidation loans and FFEL or Perkins loans owned by the Department of Education. Notably, the CARES Act applies to all federal student loans, even those in default, which means that struggling borrowers at every stage can benefit from the student loan provisions of the CARES Act.

Borrowers with federal student loans receive an automatic administrative forbearance on loan payments from March 13, 2020 through September 30, 2020. This means that during this time, borrowers are not required to make payments, and auto-draft will be disabled. Additionally, the interest rate during this time is 0%, meaning interest will not accrue while payments are in forbearance.

FFEL Program loans owned by commercial lenders and Perkins Loans owned by academic institutions do not qualify under the CARES Act. However, borrowers have the option of consolidating these loans into a Direct Consolidation Loan, which would then be eligible for the forbearance. Perkins loans held by universities may also be eligible for a 90-day deferment, and borrowers should contact their schools for specific details.

Private student loans are not eligible, and private loan borrowers should review their loan agreement and contact their servicer to inquire about hardship options such as deferment, forbearance, or loan modification.

DEFAULTED BORROWERS HAVE MAJOR OPPORTUNITY

One of the biggest boons of this program is the benefit to those in student loan default. During the forbearance period, administrative wage garnishment, tax refund offsets, and Social Security benefit offsets will be suspended, and the stimulus check will not be subject to offset either.

Loan rehabilitation is often the path out of default. Typically, a defaulted borrower makes a reasonable payment arrangement with their servicer, which can be for as low as $5 a month in some circumstances. After making the arrangement, the borrower pays nine monthly voluntary payments, and the loan will be removed from default. Under the CARES act, the months of forbearance where borrowers make zero dollar payments will count towards the rehabilitation payments, and interest does not accrue during the forbearance.

This is one of the best opportunities ever presented for defaulted borrowers to get on the path to clearing their default. If you have defaulted student loans, don’t wait! Contact your servicer today about entering a rehabilitation program.

A CHANCE TO ESTABLISH SAVINGS

For student loan borrowers experiencing income disruption, this period of administrative forbearance can provide financial flexibility, allowing them to prioritize things like mortgage or rent, groceries, utilities, child care, and other essentials. Consumers can allocate the money that would otherwise go to student loan payments towards priority expenses.

Borrowers can also contact their other creditors to inquire about hardship plans or deferments on credit cards and mortgages in order to allocate available income or savings to the most pressing needs. Ultimately, everyone benefits when borrowers have the resources they need to fulfill their obligations and lenders want to make their customers’ long-term success possible.

For those who are not experiencing financial hardship, the administrative forbearance period is a great time to allocate money towards establishing or increasing a $1,000 emergency savings account, and afterward to pay down student loan principal. If a borrower makes a manual student loan payment, the entire amount will be allocated to paying down principal after paying any accrued interest prior to March 13, 2020. This is a great way to accelerate student loan payoff, save on interest, and decrease the total amount repaid.

For those enrolled in Public Service Loan Forgiveness (PSLF), the administrative forbearance period will count towards their 120 qualifying payments as long as they remain employed full time for a qualified employer and are on a qualified repayment plan. In that case, it may not make sense for a borrower to pay additional principal payments on their student loans, and instead those borrowers can benefit from contributing towards emergency savings and paying down other consumer debts.

ACCESSING HEERF GRANT OPPORTUNITIES

Another provision of the CARES Act provides a grant opportunity for currently enrolled students, whether they are student loan borrowers or not. Eligible students who incurred expenses related to the COVID-19 disruption of campus operations may be eligible for a grant through the Higher Education Emergency Relief Fund (HEERF) – Student Share.

These grants will be distributed through universities’ financial aid offices, so students should look for information from their university or contact the financial aid office to apply. Eligible expenses include those related to cost of attendance such as food, housing, course materials, technology, health care, and childcare. This is a grant, not a loan, meaning students will not need to pay back any money granted for qualified reasons.

Low-Cost Ways to Stay Fit During Quarantine

As we’re deep into the second month of sheltering-in-place, you’re probably feeling cooped up, listless, antsy, bored, or some combination of all those. Beyond staying socially healthy, you’ll also want to make moves to keep your physical well-being in tip-top shape.

Heading to the gym or local pool to lift some weights or get your cardio on isn’t an option for the time being, so what can you do to get moving and release some endorphins? If you’re on a tight budget, here are a few low-cost ways to stay healthy while in quarantine:

CHECK OUT FREE VIRTUAL CLASSES

As a lot of fitness studios are pivoting to digital platforms, poke around to see which studios offer free or donation-based, pay-what-you-can workouts. Here are a few of our favorites:

RYAN HEFFINGTON’S SWEATFEST

There’s a reason why the L.A.-based choreographer and dance studio owner has attracted a lot of buzz and thousands of attendees per workout. His hugely popular one-hour dance workout session on IG Live, Sweatfest, is donation-based. And there’s no obligation to contribute if you’re not able to.

Offered several times a week, these workouts provide a cathartic vessel to release stress, boredom, and anxiety. What’s more, his central message is to simply focus on love and peace and helping others.

If you’re looking to learn new dance routines, Heffington’s staff of seasoned dance teachers are offering weekly virtual classes via IG Live. This is through Heffington’s dance studio, The Sweat Spot, and is also donation-based payments.

YOGA WITH ADRIENE

There are scads of free workout videos on YouTube. If you’re itching to get your yoga on, check out Yoga With Adriene, who boasts over 7 million subscribers and hundreds of videos. Not sure where to start? Try one of her 30-day yoga challenges, which are centered around themes like “Yoga for Your Back,” “30 Days of Yoga,” or if you’re keen on a more introspective bent, “Dedicate.”

The equipment you need varies, but you can probably do most yoga workouts with a yoga mat, blanket, and a pair of foam blocks.

BEFIT

The BeFiT YouTube channel features a litany of vids from top trainers. These workouts range from cardio and strength to rebalancing and pilates. You can think of the BeFit channel as a catch-all of fitness workouts.

ORANGETHEORY AT HOME

A handful of fitness studios and gyms are offering free virtual workouts. Orangetheory recently released free daily online exercises that focus on everything from strengthening and toning different parts of your body to high-intensity interval training (HIIT).

FREELETICS

If you’re hopping on the calisthenics train, which is a popular type of workout that consists of exercises that primarily rely on your own bodyweight, check out the Freeletics app. There’s a handful of free workouts and one-off runs and drills.

If you want to tap into a guided training route, you’ll need to upgrade to its premium version Depending on the plan, it costs anywhere from $1.44 a week, or $73 a year, to $3.85 a week, or $200 a year.

COREPOWER YOGA

You can access its daily free streaming live classes or a weekly collection of online courses.

USE WHAT’S AROUND THE HOUSE

Chances are you might already have some forgotten exercise equipment nestled in your storage closets and underneath your bed. Before you commit to any exercise program, take stock of what you already own and build a workout around that.

For instance, I have a pair of five-pound weights and a yoga mat. Because I’m trying not to spend too much money on exercise gear, I’ve been doing mainly bodyweight exercises — think planks, pushups, and squats — and yoga routines.

INVEST ONLY IN INEXPENSIVE EXERCISE GEAR

No need to purchase a costly elliptical machine or a pilates reformer contraption. Those types of exercise equipment are not only expensive, but they take up a lot of space and can be a pain to get rid of once you’re done using them.

If you want to spend money on exercise gear, start with low-cost essentials such as a yoga mat, a set of weights, or resistance bands. You can probably find them on sale online. And if you’re going to spend money on more costly gear, make sure it’s worth the spend.

For instance, thinking of throwing down $50 on a set of resistance bands? Commit to using them in your workout several times a week for the next few months. Otherwise, you might find them tossed out alongside your partner’s neglected sparring gear.

STRIKE UP A DEAL

If you already have a gym membership, your gym might offer some virtual classes or online workouts that you can download from your desktop or app.

If you’re squeezed financially and would like to keep your gym membership to tap into the virtual offerings, reach out to your gym to see if they have any current discounts or promotions. 

21 easy home projects to tackle while you’re hunkered down

As the U.S. confronts the spread of the novel coronavirus, most of the country has now implemented stay-at-home orders. And while we grapple with how to pay rent, whether we’re headed into a recession, and how the virus is impacting the housing market, we’re also left with a more basic question: What should we do while we’re stuck at home?

There’s only so much comfort TV to binge-watch before restlessness kicks in, so for those of us that are able, this extended time indoors is an opportunity to tackle those long-avoided home projects. Of course, now is not the time to flock to the stores for nonessential items, so we’ve gathered a list of ways you can upgrade your space with things you probably already have at home.

From restyling your bookshelves to prepping your planters for spring, here are 21 easy projects you can do while social distancing at home.

Rearrange things for a fresh perspective

Renovating your entire living room or splurging on a new bedroom set likely isn’t in the cards at the moment, but that doesn’t mean you can’t make some changes.

Try a new furniture layout: It’s easy to get in a rut with the same ol’ furniture setup, but what if you tried something new? Move the couch to a different wall, adjust where your armchair sits, or mix things up by swapping rugs from one room to another. Even switching a lamp from a side table to another spot in your house could brighten up a space in new ways.

Bring out the “special occasion” dinnerware: There’s no better time to add a bit of drama to your table, so bust out the china, special silverware, or fancy wine glasses. Now that we’re all eating at home, it’s the perfect chance to sip and savor at the dinner table using our favorite pieces. Want to share the fun with a few friends or family? Try hosting a virtual dinner party.

Restyle your bookshelves: Even avid readers don’t change up their bookshelves all that often, so now is the time to rethink them. If you’re focused on the literature, arrange your books by alphabetical order or by theme. If aesthetics are the priority, remember these three tips from designer Emily Henderson: Declutter, use neutral colors, and focus on a few standout pieces.

Cleaning projects

There’s a lot of talk about cleaning these days, and rightly so. But beyond disinfecting all of your high-touch surfaces, it’s also past time to buckle down on the tasks you avoid doing.

Clean your vents and baseboards: Heating and vent covers accumulate dust over time, and cleaning them can help reduce allergens in your home and increase the efficiency of your air conditioning or heating unit. Vacuum the vents with a dusting brush attachment or wipe with a dry microfiber cloth—avoid using water or other cleaning products, because they can smear the dust.

You can also unscrew the vent covers and place them in a sink filled with hot, soapy water. But don’t rub them too hard or paint may come off. And while you’re at it, turn your HVAC unit off and change the air filter on your furnace.

Go under your bed: Vacuuming and cleaning the toilets are usually on the weekly to-do list, but when was the last time you cleaned underneath your bed? Don’t wait until the next time you move to clear out the dirt—move the bed, empty out any storage boxes you might have underneath, and vacuum the dust. Plus: You might be surprised at the things you’ll find (hello, missing phone charger).

Clean out your bathroom drawers: This is another task we put off when we don’t have the time. Our bathroom drawers take a lot of daily abuse; after emptying the drawers you’ll likely find hair, spilled makeup, toothpaste, and so on. Once the insides are free of gunk, toss the junk and reorganize what’s left.

Organizing

Where to begin? There’s no shortage of home organization projects that can yield big results, but the options below won’t require a trip to the store. Of course, if you want to buy new storage solutions, we’ve got you covered there, too.


Don’t forget to check out our 30 Days of Purpose and Productivity throughout April and our “Using Social Distancing to Grow” Bingo Card to track your progress.

Low-Cost Ways to Stay Socially Healthy During a Quarantine

After weeks of isolation, and with no clear end in sight, it’s perfectly natural if you’re starting to suffer from the mental strain of being homebound.

While we’re all pining for some sense of normalcy, it won’t be hard to return to our normal patterns any time soon. And unfortunately, neglecting our social needs could lead to serious repercussions: feelings of loneliness and frustration, and other mental health issues such as boredom, depression, and anxiety.

So how can we stay socially healthy in isolation? Here are some low-cost ways to stay active and have our social needs met during the quarantine:

SCHEDULE IN SOCIAL TIME

There are plenty of budget-friendly ways to enjoy social time. If you live with roommates, your partner or family, carve out time to enjoy a puzzle or round of board games, or to play music together. Of course, if you cohabitate with high-risk populations, such as those over the age of 65 and folks with pre-existing health conditions, you’ll want to definitely maintain social distancing and practice proper hygiene and precautionary measures.

If you live alone or would like to connect with those that live elsewhere, schedule in social time on digital platforms. For instance, schedule a social meetup on free video-chatting apps and meeting platforms such as Skype, Zoom, or Houseparty. FYI: Houseparty has partnered with Epic Games to play games such as Quick Draw and Trivia with family and friends. As mentioned, it’s absolutely free.

For family members who might not be as tech-savvy, you could schedule some quality one-on-one phone time or squeeze in a Facetime chat. So that it doesn’t interrupt your daily routine and other tasks, you can book social time during periods when you normally would hang out with loved ones, like during the evenings and weekends.

BE HONEST WITH YOUR SOCIAL NEEDS

If you lean toward being introverted, you might get a case of being oversocialized. How is that possible? Well, you might be bombarded with requests to hang out. New phrases such as “having a zoomy day” or “zoomed out” might come out of the pandemic.

Those who might be overwhelmed with online hangout invites, don’t be afraid to turn down an invite. Just because you’re mostly home doesn’t mean that you’re available. There’s certainly a difference. It’s perfectly okay to politely decline and express that you prefer to lay low for the evening.

If you need to be on a lot of video conference calls for work and need time to recharge, you might limit your social time or stagger them. For instance, as an introvert, I prefer to do fewer than two meetings or phone calls a day. Beyond that, I start to hit a wall.

MAKE THE MOST OF YOUR SPACE

Depending on your living arrangement and where you live, you might be cooped up indoors for most of the day or share tight quarters with family or roommates. And if you’re working from home and so are other co-habitants, you could feel stifled and suffer from pent-up energy.

Consider partitioning your space so that you have a specific area just to work. And if possible, set up work from home stations in separate areas. You’ll also want to be sure to communicate your working hours and boundaries to others. For instance, just because you now work at the kitchen table doesn’t give your partner liberties to park themselves next to you and complain about their co-workers.

Besides setting up designated spaces for work from home stations, to break up your days use different areas of your home for different purposes. You can have a designated space to work out, another for creative projects, and another to read or play video games. That might help you stick to a routine and offer a bit of space from those you live with.

And if you need time alone, don’t be afraid to ask for it. For instance, set quiet time hours. On the flip side, designate social hours if you feel like you’re under-socialized.

AVOID THE COMPARISON TRAP

Staying connected with friends, family, and peers is healthy – comparing your “quarantine output” with anyone else is generally pretty unhealthy and unfair to yourself.

We’ve all heard the stories of the 3rd grade classmate who finally finished their novel and the cousin who started an heirloom tomato garden. Some people are thriving in their environment and some people have successfully cashed in on their free time and/or inability to leave the house. But that’s not everyone. It’s not even most people. Most of us are just trying to do the best we can and make it through all of this terrifying weirdness.

So when you’re Zooming with your parents, don’t feel bad if your big update is that you reorganized your Blu-rays. It’s not a competition and you aren’t losing anything if you’re just trying to get by.

ENGAGE WITH YOUR COMMUNITY

Besides social apps and video hangout platforms, think of ways you can engage with your community. If you are healthy and practice safety, you could volunteer at a local food bank, or help a senior in your neighborhood buy groceries.

Prefer to stay indoors? Create themed meetups or events on Instagram live around your interests. If you’re a meditation ninja, schedule a mindfulness meetup online. Or if you would like to offer others resources or advice during these uncertain times, create an “ask me anything” thread on an online forum such as Reddit or via Instagram Stories.

While it’s certainly tough to get your social needs met during the quarantine, with a bit of ingenuity you can certainly maneuver your way to a healthy state. If you would like help during the coronavirus pandemic, MMI is here for you. We have a number of online resources to help you financially and beyond. Want to speak to a human? You can talk to our team of accredited counselors.

How to start composting at home

Perhaps the most important thing you can do for your garden is feed it with nutrient-rich compost. This mix of decaying vegetable matter, grass clippings, and leaves may not be glamorous, but it improves soil structure and provides the nutrients your plants need to thrive. And it’s easy to create your own compost in your backyard or patio, at little or no cost. But don’t delay: it takes about a year for compost to be ready to spread on your vegetable patch. Ready to start? Here are a few simple steps to composting at home:

Choose Your Container
Garden centers sell a variety of containers for making compost. You can buy a sealed composting bin that has a little door in it for adding organic matter—or a composting barrel on a stand that allows you to tumble it. Traditionalist might want to create a conventional compost heap. To do that, build a four-sided container from scrap timber that fits comfortably in a corner of your yard, says Nicholas Staddon, director of new plants for Monrovia, which grows more than 2,300 varieties and 22 million plants annually. It’s best to position your heap away from the house and any outdoor areas where people gather, as compost can get a little stinky when it’s not sealed in a container. 

Start Piling
If you an organic garden (or close to it), make sure everything you put into your compost is organic, notes Robert McLaughlin, CEO of Organic Bouquet in Maitland, Florida. “Don’t put chemically-treated produce in there or you’ll just be putting in chemicals.” Most of your compost should be vegetables and fruit, but paper, newspapers, small sticks, grass clippings and straw make excellent additions. “I’d venture to say the amount of chemicals in newspapers is so minor it won’t make a big difference,” reveals Staddon. If you find yourself short on organic matter, knock on your neighbors’ door and ask for their extra grass clippings or vegetable refuse. “You could be doing them a favor,” says Staddon. If you or your neighbors own horses, chickens, or goats, you can also add nutrient-packed manure.

Hit the Right Ratio
It’s important to keep a healthy ratio of carbon-rich matter and nitrogen-rich matter in your compost heap, says Nell Foster, horticulturist, gardening blogger and owner of Joy Us in Santa Barbara, California, which creates eco-conscious garden accessories. The fastest way to produce fertile, aromatic compost is to maintain a carbon-to-nitrogen ratio of approximately 25 to 30 parts carbon to one part nitrogen. If the carbon-to-nitrogen ratio is too high (excess carbon), decomposition slows down. If the carbon-to-nitrogen ratio is too low (excess nitrogen), you’ll end up with a smelly pile.

Good sources of carbon include (finely shredded) cardboard, corn stalks, straw, fruit, leaves, peanut shells, sawdust, pine needles and ashes. Sources higher in nitrogen are vegetables scraps, coffee grounds, clover, garden waste, grass clippings, manure, seaweed and hay. “Do a little research on composting before you start throwing things in,” says Foster. Also, don’t throw in things that have gone to seed or they’ll take root in your compost. For example, toss in a rotting jack-o’-lantern and you’re likely to find a plethora of pumpkins suddenly sprouting out of your compost!

Stir Regularly
It’s critical to turn your compost regularly with a garden fork. This aerates the soil, which speeds up bacterial activity. You can tell when compost is ready to use by how it looks; it should be broken down to a point where it has the appearance of rich, healthy soil.

Keep it Warm
Compost breaks down faster in warm conditions, so try to keep your bin or heap insulated from the cold. (That’s why so many bins are black—the color attracts the most sun. If you have a heap instead of a container, cover it with a black tarp for the same effect.) The ideal temperature for fast decomposition is between 140 and 160 degrees Fahrenheit. But don’t worry too much—the microbes in compost generate their own heat and some decomposition will continue to happen as long as your compost heap remains above freezing. 

Collect the Run-off
If your compost bin allows rainwater to flow through it and out the bottom, collect the drainage, says McLaughlin. This liquid is amazing fertilizing material—simply pour it around the plants in your garden. 

Put it to Work
When your compost is ready, begin adding it into your garden. After plants have taken root and are showing growth (around 10-12 inches), add about an inch of compost on top of the soil around the plants and blend it in, advises McLaughlin.


Don’t forget to check out our 30 Days of Purpose and Productivity throughout April and our “Using Social Distancing to Grow” Bingo Card to track your progress.

Is It Ever a Good Idea to Borrow From Your Retirement Fund?

While many people will advise you to never dip into retirement funds early, the reality is that you may have an immediate need and few choices. Rather than drawing a hard-line rule, learn how withdrawals and loans work so you can make an educated decision for yourself. 

WHY SHOULDN’T YOU WITHDRAW MONEY FROM RETIREMENT ACCOUNTS?

Retirement accounts are special because you’ve earmarked the money for retirement, a period when you likely won’t have much income and will need the savings. They also offer tax-advantages that can significantly increase how much money you’ll be able to accumulate over time.

Taking money out of the account can lead to several negative consequences:

  • You might increase your taxable income: If you’ve contributed to a pre-tax or “traditional” retirement account, you likely received a tax deduction for your contributions. When you withdraw the funds, you have to include the money in your taxable income for the year, which can increase how much you owe come tax time. This is true even when you withdraw money during retirement, but you may pay less tax then if you have less income for the year. 
  • You may pay additional penalties: Qualified retirement accounts, such as 401(k)s, 403(b)s, and IRAs may charge an early withdrawal fee of 10% if you don’t qualify for an exemption. The fee increases to 25% for SIMPLE IRAs if it’s been less than two years since opening your account. The fee is in addition to the income taxes you may pay on withdrawals.
  • You miss out on future growth: While you won’t feel the pain right away, withdrawing your money now means you’re stopping its growth. You can use an online calculator to estimate how much an early withdrawal will cost you in terms of taxes, penalties, and lost growth. 
  • You may lose protections from creditors: In some cases, creditors can’t go after your money if it’s in a qualified retirement account. Your 401(k) balances and over $1.1M in IRA accounts may even be exempt if you declare bankruptcy. However, creditors may be able to go after the money if you withdraw it from your qualified account.

You can’t avoid including withdrawals as taxable income unless you used a Roth IRA or Roth 401(k), in which case, you already paid income tax on the contributions. However, you may be able to avoid the early withdrawal penalty. And, if you borrow from your account rather than completely withdraw the funds, you might limit the overall impact.

HOW TO AVOID EARLY WITHDRAWAL PENALTIES

You won’t pay early withdrawal penalties once you’re 59½ years old. Even before that point, there are certain situations when you can qualify for an exception. 

For example, you may be able to take a penalty-free withdrawal if you become totally and permanently disabled or if you use the money for unreimbursed medical expenses that are over 10% of your adjusted gross income. 

These exemptions also vary depending on whether you have an IRA or a 401(k) or 403(b). With IRAs, you can take an early withdrawal to pay for health insurance premiums while you’re unemployed. You can also withdraw up to $10,000 to buy a home if you haven’t owned a home in the previous two years. But those two exemptions don’t apply to 401(k)s and 403(b)s. 

The IRS website has a complete list of exemptions.

YOU MAY BE ABLE TO TAKE A LOAN INSTEAD OF AN EARLY WITHDRAWAL

Another way to avoid an early withdrawal penalty is to take out a loan rather than withdraw the money. Loans aren’t available with IRAs, although there’s a workaround to take money out for 60 days, and are only sometimes available with other qualified retirement plans. 

If your retirement plan sponsor allows loans, they can offer several benefits over other types of loans:

  • There’s no credit check to qualify
  • It won’t show up on your credit report
  • The loan won’t count as income
  • The IRS allows you to borrow up to $50,000, although some plans may have lower limits
  • You’re paying interest to yourself
  • You may be able to repay the loan over a five-year period (or longer, if you use the money to buy a primary residence)

It’s not all good news, though. Taking money out of your retirement plan means you’ll still miss out on potential growth during that period. Plus, if you need the money when the market is down, you’ll be “selling low” and may wind up rebuying your investments at a higher price later.

Also, if you’re unable to repay the loan, the money could be considered an early withdrawal and you may have to pay income taxes and a penalty. And if you lose or leave your job while repaying the loan, you may have to repay the remaining balance by the due date of your next annual tax return. 

SO, WHEN IS IT A GOOD IDEA?

As with everything tax- and finance-related, there are fine-print details that may impact your specific situation. But now that you know the basics pros and cons of taking early withdrawals or retirement account loans, you can make a more informed decision. 

Yes, there are drawbacks to taking money out of a retirement fund. However, it may be an okay option when:

  • You’ve lost your job and need money for basic necessities.
  • You may otherwise lose valuable assets, such as your primary residence or vehicle. 
  • You can use the funds to pay off high-interest debt. 

Even so, you don’t want to jeopardize your future if you can avoid it. Many people struggle with finances during a large crisis, such as the coronavirus pandemic. However, creditors may also be willing to work with you to offer lower payments or temporarily pause payments.

Protecting Yourself from Coronavirus Scammers

We’ve seen this repeatedly in the wake of massive disasters. Now, as the coronavirus pandemic continues to evolve, we’re already seeing individuals across the globe attempting to take advantage of growing confusion and fear at the expense of those who are suffering most.

At the outset of the outbreak, this took the form of hording and price gouging, as individuals bought up massive quantities of crucial supplies (including face masks and Clorox wipes). Now, as various organizations begin rolling out relief solutions, we’re starting to see new scams develop. 

As you navigate this incredibly challenging situation, be on the lookout for the warning signs of a potential scam. Here are a few scams that have already appeared, but it’s a certainty that there will be more.

FAKE VACCINATIONS OR PREVENTATIVES

There isn’t a vaccination for COVID-19 currently available, and there are no commercial products that can make you immune to the virus. Beware on anyone trying to sell you a vaccine or a “cure”. If you’re going to invest in preventative measures, follow the recommendations of the Centers for Disease Control and Prevention and make sure you have the ability to wash your hands regularly and disinfect all commonly touched surfaces.

Beyond that, practice social distancing and use good judgment.

FAKE GOVERNMENT RELIEF CHECKS

There’s an ongoing discussion about what steps the government might take to help families and individuals through this crisis. With massive shutdowns and recommended (and sometimes required) self-isolation, there are a lot of workers who can’t make a living right now. There’s also been an enormous toll on multiple industries as consumers shy away from travel, entertainment, and more.

One option on the table is that the government will start cutting everyone a check. Leaving aside the logistics of how that might work and whether or not it’s the right idea, it’s absolutely the sort of situation scammers are looking to take advantage of.

The FTC recently released a few crucial tips on how to protect yourself from “fake government check” scammers:

You will not have to pay anything to receive your relief funds. Assuming this option moves forward, there is absolutely no way you will be asked to pay a fee to access your funds. Be extremely suspicious of anyone attempting to charge you upfront.

The government will not call you and ask for sensitive information. Do not give your Social Security number or private bank information to an unknown, unverified party over the phone.

Anyone offering something that doesn’t exist is probably a scammer. You best defense against any scammer is good information. Try to stay current on what is and isn’t happening. Until the government actually decides to start sending out relief funds, anyone claiming to help you receive those funds is likely trying to scam you.

BEWARE OF PHONY CHARITIES

There will always be unscrupulous people willing to manipulate the generosity and kindheartedness of others. Phony charity and crowdfunding schemes are a year-round scam, but they tend to increase exponentially in the wake of a disaster or crisis.

Make no mistake – giving to charity is absolutely a noble and worthwhile thing to do. Just make sure you do your research. Just because something has a lot of likes on Facebook doesn’t mean it’s legitimate. Try to stick to nationally recognized charities or local organizations you’ve personally verified. Your local food banks, shelters, and free clinics are great places to start.

Another thing to consider: how a charity wants you to donate. If they’re insistent on things like cash, gift cards, or a wire transfer – popular currency for scammers – they’re likely not legitimate. 

Unfortunately, scams like this aren’t going away anytime soon. And as this outbreak develops, we’re likely to see more and more attempts to trick consumers out of money they absolutely cannot afford to lose right now. So stay smart, stay vigilant, and if it seems too good to be true, it almost certainly is.

How to Safeguard Your Finances from Coronavirus

If you’re worried about coronavirus (or COVID-19, which is the particular strain of coronavirus that’s currently spreading quickly across the world) that’s completely understandable. News coverage of the outbreak is nearly constant and many countries are taking drastic measures to curb the spread.

How worried you should be is dependent on a number of factors, from your age to your overall health to where you live and where you’ve recently traveled. Even if you aren’t worried about the possibility of infection, there’s a very strong chance that you will eventually be impacted in some way by the virus. 

COVID-19 has already had enormous ramifications for the global economy and those ripples will inevitably reach consumers and workers across the country.

AVOID OVERBUYING 

It is extremely tempting to load up on everything you think you might need for the months ahead and hunker down until the worst of the outbreak has passed. And while minimizing inessential person-to-person contact is definitely a good idea during an outbreak, buying your local Target out of toilet paper and Clorox wipes isn’t the way to go.

For starters, it’s vitally important that you be smart with your money right now (for reasons we’ll explore in a moment). Secondly, there’s the matter of everyone else who needs a reasonable supply of those items. Mass overbuying leads to shortages, which both drives up the price for remaining goods and leaves a lot of people empty-handed.

Finally, take a moment to consider who’s most at risk during the outbreak. The elderly and the immunocompromised face much starker odds should they become infected. If you don’t fall into either of those categories, try to be reasonable when you stock up. Quarantines tend to last for 14 days – when stocking a preparedness kit, buy only what you and your family may need for two weeks. 

REDUCE EXPENSES WHERE YOU CAN

One of the most effective ways to slow the spread of a disease is to keep people away from other people. This may mean that your place of work is shut down for a period of time. For many people, not working means not earning any money.

That’s why it’s crucial that you ramp down your spending before a work stoppage. There’s no way to know exactly how the COVID-19 outbreak will play out, but it’s almost certainly going to get worse before it gets better. So if you’re working now and everything seems business as usual, act like it isn’t. Reduce spending on non-essentials and prioritize saving money – at least until the worst is over.

DON’T MAKE NON-REFUNDABLE TRAVEL OR EVENT PLANS

SXSW, an enormously popular film and music festival in Austin, Texas – with historically pricey tickets – was recently canceled. And at the moment, it looks like ticketholders aren’t going to get a refund. Coachella, another wildly popular spring music festival, is moving to the fall, leaving attendees scrambling to cancel or rebook travel arrangements.

All over the world, major events and gatherings are being canceled or postponed in order to limit potential exposure to COVID-19. Again, it’s hard to know exactly when things will return to “normal”, so in the meantime avoid making travel plans or purchasing any non-refundable tickets.

If you’ve already purchased tickets for events that may be (or already have been) canceled, you may have some protection if you made your purchase with a credit card. Some cards offer travel insurance, which can help minimize some of your potential losses. Connect with your creditor to see what benefits your card offers and if they can help any sudden changes of plan.

TALK TO CREDITORS AND LENDERS ASAP

Should you experience a disruption in income due to COVID-19, be sure to reach out to your creditors and lenders as soon as possible to let them know and see what they can do to help.

Banks in the United Kingdom are offering a three month deferment on mortgage payments. Italy recently declared a moratorium on all debt repayment. While we’ve yet to see what kind of financial relief will be available in the United States, major creditors are working to provide hardship programs for impacted customers. 

As with any hardship, the sooner you reach out and start the conversation with your creditors the better. The same is true for medical bills. If you incur any expenses during this period – or even if you’re still trying to repay an old medical bill – start a conversation with your provider about a repayment plan. Financial aid and assistance programs may be available, but you need to ask and advocate for yourself.

Being stressed and worried about COVID-19 and what it may mean for you is a completely reasonable reaction. The key is to avoid overreacting and potentially making the situation worse for yourself and others.

Should You Ever Pay for an Extended Warranty?

A few weeks ago, I noticed a slight crack on the screen on my Macbook. On top of that, a few letters on the keyboard fell off. While my partner’s cat was to blame, I would be footing the bill for repairs.

The good news? When I bought my laptop a few years ago, I had purchased a three-year extended warranty. After doing a bit of research online on what these repairs typically cost, I realized that I had spent $150 more on the warranty and per-incident deductible than what these repairs would cost out of pocket. In hindsight, I wish I had just gone with a different warranty or skipped it altogether.

While getting an extended warranty can quiet those “what if” hypotheticals and offer you peace of mind, at the end of the day is it worth it? Let’s dig in:

DO SOME RESEARCH BEFOREHAND

The thing with extended warranties? They, well, simply extend the length of the regular warranty, explains Michael Bonebright, a consumer analyst with DealNews.com. In other words, you’re not buying expanded coverage. That’s why they’re very rarely worth the cost.

“The vast majority of warranties only cover manufacturing defects, as opposed to problems caused by misuse or accidental damage,” says Bonebright. “Typically, you’re going to notice a manufacturing defect almost immediately.”

When I purchased the extended warranty for my laptop, I also purchased accidental coverage. This covers incidents such as water spilling onto my keyboard, or if someone accidentally stepped and cracked the screen.

Other things to check for: What exactly is covered, and if there’s a per-incident deductible. What’s more, check and see what options you have for getting an item repaired or replaced. Do you have to ship off that phone or laptop to the insurer’s repair center, or can you drop it off at a nearby repair shop and get reimbursed? If you’re itching to get your phone back, the few extra days you’ll have to wait could make a difference.

USE YOUR CREDIT CARD WARRANTY INSTEAD

Many credit cards offer extended manufacturer’s warranties. If you make the purchase with the credit card, they’ll usually match the manufacturer’s warranties or extend them for 12 to 24 months. Some credit cards require that you register the item after you buy it, so you’ll need to upload a copy of the receipt, and pop in some basic details.

GAUGE THE LIKELIHOOD YOU’LL NEED TO TAP INTO THE WARRANTY

Besides the ins and outs of a warranty, think about how likely it is you’ll need to get an item replaced. For instance, depending on your situation, a big screen TV might have a lesser chance of getting trampled on or suffer water damage, than say, your cell phone or laptop.

I travel quite a bit with my laptop, and like to work out of coffee shops and coworking spaces. And as my laptop is the main device I use to earn a living, I thought it would be worthwhile to invest in a warranty.

What’s more, is it a necessity, or is it more of a nice to have? Worst-case scenario: that item gets demolished, and you need to get it replaced. Instead of doling out cash for a warranty, you could save for a new one. Or maybe wait until you snag a good deal on it.

HANG ON TO RECEIPTS

If you do decide to get a warranty, make sure to hang on to your receipts, recommends Bonebright. “Whatever the length of the warranty, to get your item repaired or replaced you’ll need to show that it’s still within the warranty period, which means providing proof of purchase,” he says. “Without proof of purchase, the manufacturer may assume you bought the product as soon as it hit store shelves, and that’s likely to put you outside the warranty period, extended or otherwise.”

BEWARE OF RETAILER WARRANTIES

Another pitfall of extended warranties? They’re usually offered by a retailer instead of the manufacturer, says Bonebright. When a manufacturer’s warranty is offered, it usually offers expanded coverage. “AppleCare is one of the best warranties you can get, as it covers a whole host of problems,” says Bonebright. “Buying a retailer warranty for your Apple device is actually worse coverage in some cases.”

While an extended warranty is usually not worth the cost, you’ll want to do your homework and do an assessment for yourself. The best time is to do it when you’re not standing at check out, and might make a rash decision.  

Six Steps to Financial Success After a Career in Sports

The confetti had barely stopped falling at the Hard Rock Stadium in Miami, Florida, where the Kansas City Chiefs won the NFL’s 52nd Super Bowl, and many players were already grappling with one of the most consequential questions of their careers: Would this game be their last?

With the average NFL career lasting just more than three years, it’s a question that every player will have to consider sooner rather than later. Even professional athletes in less physically demanding sports face uncommonly short careers (typically less than ten years) that produce relatively high earnings before players enter a long retirement. 

This scenario is almost entirely unique to professional athletes who, even by modest standards, earn about thirty-six times the annual salary of the average worker. From an investment standpoint, this places athletes in an enviable position. Still, it’s one that can quickly go awry if they make bad financial decisions early on or fail to plan for a future without a seven-figure annual income. 

As a result, careful, intentional planning is required to ensure financial wellness well into retirement. Fortunately, while everyone is familiar with the horror stories from programs like ESPN’s Broke, which documents the plight of athletes who wasted their hard-earned income from their playing days, many athletes are well-positioned to execute on a financial strategy that positions them for the win. 

Professional athletes are no stranger to preparation. They are disciplined planners, fearless executors, and models of excellence. With the right plan, they can harness their high earnings during their playing days into a lifetime of financial well-being. To get started, here are six steps to financial success after sports. 

DETERMINE YOUR NET WORTH 

Simply put, it’s impossible to start a journey without first knowing the starting point. Net worth is the difference between assets and liabilities, and, from a planning perspective, it’s the first step to developing a personalized plan that maximizes opportunities while mitigating risks from debts and financial obligations.

While several free online calculators allow anyone to calculate their net worth, it’s easy to determine this amount just by listing assets and liabilities and identifying the difference between the two. 

This process is especially crucial for NFL players who often play without guaranteed contracts and who face the shortest playing careers because of the unique physical demands of their sport. However, regardless of an athlete’s sport, determining net worth is a critical first step that will help guide subsequent financial decisions. 

CREATE A BUDGET 

One NFL organization displays a message in their facility: “Discipline is choosing between what you want now and what you want most.” When planning for a sustainable financial future, a personal budget is a way to identify the things you want most and to chart a path that will make those dreams a reality. 

It also requires a unique amount of discipline. Budgets can help eliminate or manage debt, while establishing appropriate spending levels in different categories. In addition, it might be helpful to create a financial calendar that allots daily, weekly, and monthly evaluations of your ongoing financial picture. These brief assessments will help set your spending goals for the day, week, month, and year. 

REVIEW CREDIT REPORTS 

Debt isn’t necessarily a bad thing, but excessive amounts can make long-term wealth development difficult. Review your credit reports regularly to better understand your debt situation and determine which outstanding debts need to be eliminated. Ultimately, everyone should strive for a high credit score, which translates to lower borrowing rates, and, in the end, more money in your pocket. 

REDUCE SPENDING 

For many nuanced reasons, many professional athletes increased their spending during their playing careers, relying on high paychecks to fund a lavish lifestyle. Of course, in most cases, these spending habits aren’t sustainable forever, and athletes will need to reduce their cash outflow to pursue other priorities. 

Regardless of their sport, most professional athletes will need to reduce spending in exchange for a bright financial future that still meets their needs and wants. 

EVALUATE YOUR FINANCIAL TEAM 

Professional athletes are uniquely talented at their sports, but their success is often largely influenced by the coaches, trainers, and teammates who support and bolster their playing careers. The same can be true for financial planning. Plan to connect often with your financial advisors, CPAs, and other advisors in order to determine your priorities and navigate a smooth transition from career to retirement. 

Since professional athletes face unique financial planning opportunities, there are many athlete-specific support systems that can help. Just like every athlete didn’t make it to the pinnacle of their sport on their own, executing on a retirement plan isn’t achieved in a vacuum. Evaluate your team and, if necessary, add new players to help meet your financial goals. 

KNOW WHAT YOU DON’T KNOW 

In general, the athletes who are most successful at planning and executing on their long-term financial priorities are the ones who took action from the start. No one is born ready to make complicated financial decisions, and everyone is in the process of learning how to navigate their financial future. 

Therefore, those that engage in the process early and reach out for more information and resources are best prepared to reach their financial goals. The most successful people are willing to admit what they don’t know. And remember – no one has to go through this process alone. If you need help and support, contact Money Management International. We can provide the insights and tools necessary to help you get started today.

How to Protect Yourself and Your Rights When Working Side Gigs

According to the Freelancing in America 2019 report, which is released annually by Upwork and the Freelancers Union, 57 million American workers — or 35% — are freelancing.

That being said, many side hustlers and gig economy workers are armies of one and might be in the dark about their rights. If you find yourself steering through legal hot water, how can you best protect yourself and your side business?

Even if you’re side hustling to earn some cash on the side, it’s important to know how to best advocate for yourself should you find yourself in a financial or legal bind. Here’s how freelancers, particularly gig economy workers and side hustlers, can go about doing so:

UNDERSTAND HOW THE LAW APPLIES TO YOU

First things first: Gig economy workers need to know a few areas of the law and how the law applies to them, explains Tristan Blaine, Esq., an attorney for freelancers, author of Law Is Not for Lawyers (It’s for Everyone) and founder of Law Soup.

The most basic issue — and one that is in flux right now — is whether the law considers you to be an employee or an independent contractor. “As an employee, you have the protections of employment law, including required breaks and overtime pay,” says Blaine. “However, for many gig workers and freelancers, these issues are not a major concern, and they prefer certain freedoms of independent contractor status, such as the ability to take gigs or not.”

STAY ON TOP OF CHANGES IN THE LAW 

Keep in mind that state and federal laws on this issue are being written and rewritten right now, points out Blaine. “The good news is that gig workers currently have a unique opportunity to weigh in and advocate for their preference as to how their work should be treated by the law,” he says.

For example, the new gig worker law in California (AB 5) makes it far tougher for gig workers to be classified as independent contractors. The rules are changing on how to classify someone as an employee or an independent contractor. “But legislators are looking to ‘fix’ the new law,” says Blaine.” If you prefer to be an independent contractor rather than an employee, you should reach out to your elected officials to let them know.”

KNOW YOUR RIGHTS AS AN EMPLOYEE 

If you’re considered an employee, make sure to read up on all your employee rights, suggests Blaine. Employee rights vary by state and can change, so you’ll want to stay on top of any changes to state law. Does something seem off with an employer? If so, reach out to an employment law lawyer to discuss, says Blaine. “Most employment lawyers will offer a free consultation to determine whether you have a case,” says Blaine. “If they think you have a good case, they often take it on at no upfront cost to you, but will instead take a percentage of any money you win.”

That being said, know what the legal fees will be before you decide to work with an attorney. Depending on what you’re hiring them to do, some attorneys have a retainer or charge an hourly rate. If you’re asking an employment law attorney to review a contract, they might charge a flat fee.

FAMILIARIZE YOURSELF WITH CONTRACT LAW 

Let’s say you’re considered an independent contractor instead. A few things to note: As an independent contractor, you aren’t entitled to any employer benefits, such as health coverage, sick and vacation time, nor are you protected against discrimination laws designed to protect workers.

In that case, you should familiarize yourself with contract law, recommends Blaine. That’s so you can have an idea of whether a work-related contract is fair or not. It will also help you wrap your head around what a contract should or shouldn’t include in the type of work you do and the industries you do work in. 

“Of course, it’s always a good idea to have a lawyer review and potentially draft these contracts, if possible,” says Blaine.

Will the New FICO Credit Scoring Model Help or Hurt You?

Just when you finally think you’ve got this credit thing all sorted out, here comes FICO with another updated scoring model. And as with all new scoring models, it could be a very good thing for you…or a very bad thing. Here’s what you need to know about the new FICO Score 10.

REMINDER: YOU HAVE MULTIPLE CREDIT SCORES

First things first, whenever we’re talking about a new credit scoring model it’s important to point out that there are quite a few different scoring models out there. FICO is the most recognizable name in the game, but even FICO offers more than one scoring model.

So when we say, “These changes will impact your credit score,” what we’re really saying is that these changes will impact one of your credit scores. And that only really matters if a lender or other party is using that particular scoring model.

WHY DO CREDIT SCORING MODELS KEEP GETTING UPDATED?

When new credit scoring models are rolled out, they’re usually designed to better predict the behavior of individual consumers and borrowers. Certain factors are emphasized, others are de-emphasized or phased out altogether. New models strive to do a better job using the available data to help make good decisions. For the many competitive markets where consumer credit scores matter, the more precise a credit scoring model, the better.

You may not be personally impacted by the FICO Score 10 right away because the lenders you interact with may not be using the FICO Score 10. It’s still very important to pay attention to these changes, however, because they likely represent trends that will eventually make their way into other scoring models.

WHAT CHANGES WITH FICO SCORE 10?

The major upgrade for FICO Score 10 is the use of trended data. Historically, credit scores have been based off of a snapshot of your current credit report. Today’s credit balances and today’s credit utilization ratios helped form the basis of most scores. FICO Score 10 more carefully examines a consumer’s recent history and the trends that have developed over time to predict their creditworthiness.

The aim of the new model is to better identify risky behavior and adjust scores accordingly.

HOW YOUR SCORE COULD CHANGE

If the new scoring model works as intended, normal, traditionally healthy credit usage will continue to help build a strong score. You may also find yourself significantly less penalized for negative marks that don’t fit the pattern of your recent usage.

For example, a sudden spike in debt – whether from holiday shopping or an unexpected medical bill – should hurt your credit significantly less than it may have in past models, especially if your overall trends are positive. This new scoring model should do a better job of rewarding you for consistently positive credit behavior over time, even when things take a momentary dip.

On the flip side, however, certain risky credit behaviors that haven’t been factored into previous scoring models could cause your score to drop. One potentially significant factor is a rising debt load. If your debt levels are trending up – even if your credit utilization ratio is still looking okay – you may be seen as risky and your score could drop.

Similarly, if you consolidated your debts with a consolidation loan and then began accruing new credit card debt, that may likely be viewed as risky behavior and your score could be penalized as a result.

Top Financial Mistakes Students and Parents Make When Preparing for College

That’s quite steep, especially for someone young and still trying to get their bearings in the world. And depending on your child’s professional trajectory, they could potentially be saddled with student debt for decades. 

Want to make sure you get a handle on financing your child’s college education? If your kid is college-bound, here are some financial common mistakes parents and their kids should avoid, and what to do instead:

NOT THINKING ABOUT THE ROI 

The first thing that every parent and student need to think about is the return on investment of attending college, explains Robert Farrington, founder of The College Investor. “Sure, it can be difficult because it’s not just about money, but about your kid’s dreams, aspirations, and goals,” says Farrington. “However, paying too much—and borrowing too much—for college can lead to a lifetime of financial hardship.” 

A good rule of thumb? Never borrow more for college than the student is expected to earn in the first year after graduation, recommends Farrington. “For example, if your child wants to become a teacher, you shouldn’t borrow more than $35,000 to pay for school. If they want to be an engineer, there is more leeway to spend upwards of $60,000.” 

If your total loan amount is more than how much your child anticipates earning their first year out of college, it could limit choices on where they’ll be attending school. But by being smart on education spending, you can prevent overspending and financial hardship. If your child isn’t sure what they want to major in — or you would like to save on the overall costs of college — consider attending a community college first, then transferring, says Farrington. Or enroll in less-expensive schools that are in-state and living at home.

NOT CONSIDERING FINANCIAL FIT WHEN CHOOSING A COLLEGE

Besides a college being a strong fit academically, socially, and environmentally, you and your child should compare their total resources, explains David Levy, interim director of financial aid, scholarships, and veterans services at Rio Hondo College; and co-author of Filing the FAFSA. So look at college savings, contributions from income, scholarships, grants, and taking on a reasonable amount of debt against the full net price of the college. 

“If the total resources are equal to or exceed the four-year net price, the college is affordable,” says Levy. “But, if total resources fall short, you and your child might need to borrow excessively to cover the college costs. In turn, this might force the student to drop out of college or transfer to a less-expensive school when the financial realities set in.” 

Bottom line: In addition to whether the college is a good match for the student’s academic and social needs and career pursuits, it’s best to also consider whether the college is affordable. 

BORROWING TOO MUCH

Beware of over-borrowing, warns Levy. “If the total student loan debt at graduation is less than the annual starting salary, the student can afford to repay his or her student loans in 10 years or less,” says Levy.

Let’s say the total debt is more than their annual income. In that case, the student will probably struggle to make the student loan payments. In turn, to keep up with monthly payments your child might need to look into an alternate student debt repayment plan. For instance, the income-driven repayment plan, in which payments are based on your child’s income after they graduate; or an extended repayment plan. Both of these repayment plans lower the monthly payment by stretching out the term of the loan. 

“This means that the student will be in debt longer, thus delaying certain life-cycle events—possibly, even until their children enroll in college—and will pay more interest over the life of the loan.” So you’ll want to carefully review your child’s financial needs before they enter college and each subsequent year that they’re enrolled. 

COSIGNING A STUDENT LOAN

While you want to help alleviate your child’s debt burden and make it easier on them, you’ll want to set boundaries and be aware of how co-signing a student loan could affect your financial well-being. Parents need to understand that a cosigner is essentially a co-borrower, explains Levy. In turn, they’re on the hook to repay the debt. “The cosigned loan will affect the parent’s credit history, too,” he says.

So if your child is late with a student debt payment or defaults, it will ruin not just your child’s credit score, but yours as well. “Even if the student manages the cosigned loan responsibly, making every payment on time, the loan can affect the parent’s ability to borrow,” says Levy. “For example, if the parent wants to get or refinance a mortgage, the cosigned loan will count as part of their indebtedness, potentially affecting approval for the mortgage or the interest rate they are charged.” 

NOT APPLYING TO SCHOLARSHIPS EARLY

As you might’ve guessed, scholarships are one of the most under-utilized tools for most students. The reasons are many, points out Farrington. Scholarships can be hard to find, take time to apply to, and the odds of winning could be slim. 

But the beauty of scholarships is that they’re a form of “gift aid”—and the money is plentiful if students take the time to apply to as many as they can. Don’t forget to follow the instructions and provide all the required documents and information. You’d be surprised at how many people overlook that last step. “Following the instructions can give you a big leg-up on the competition,” says Farrington. 

Along the same lines, some students don’t apply to enough scholarships. While there’s no magic number, Farrington suggests applying to at least 40 to 50 if possible. Some of these scholarships have an application fee, so do your research beforehand and create a “scholarship fund” if you can. “The odds will be in your favor to pay for a good portion of your schooling if you follow this plan,” says Farrington. 

NOT PLANNING TO WORK DURING SCHOOL

One of the best things that college students can do, not only for their budgets but for their future careers, is work during school, says Farrington. “Beyond the extra money, working provides students with real-world career skills—specifically business communication and business problem-solving skills. These can’t be taught in a classroom. By working during school, you can develop these skills, and improve your post-graduation job prospects.” 

There’s no shortage of ways to work while in college: work-study programs, paid internships, or on-campus jobs. Scour listings at college career centers, or a job fair. You can also bypass traditional, on-site jobs and look for freelance gigs on boards such as Upwork or Fiverr. While at first you might not be making a ton of money, freelancing can give you a wide range of experience. It could eventually be more lucrative than, say, working a job on campus. 

FAILING TO FILE THE FAFSA

The FAFSA (or Free Application for Federal Student Aid) is your key to not only qualifying for federal grants, work-study and scholarships, but is also your key to unlocking federal student loans, explains Farrington. 

“You should plan on filling out the FAFSA every year, as early as possible,” says Farrington. “The reason? Many school-based awards are limited, and they go to those who file early and qualify. So, even if you may qualify, if you don’t file early enough, you won’t get an award.” 

You’ll want to file the FAFSA as soon as possible, adds Levy. You can file as early as October 1, and the FAFSA has an 18-month cycle. You’ll also want to check for state and school-specific deadlines. That way you don’t miss the cutoff. 

Plus, if you do need to borrow student loans, federal loans are the best—and not filling out the FAFSA won’t get you any federal student loans. 

Whether you’re trying to devise a plan to finance your child’s student loans, or coming up with a repayment plan to pay off student debt, Money Management International (MMI) is here to assist. Our team of accredited financial counselors can look at your situation and come up with advice, guidance, tools, and resources. 

The 6 Best Ways to Invest Just $100 Per Month This Year

The new year is the perfect time to ditch poor financial habits and pick up some new ones. Maybe you decided that this is the year you’ll finally pay off high interest credit card debt, or perhaps you’re using a budget for the first time in your life. Whatever your goals are, you probably know that it will take time and perseverance to get there. 

But how should you invest your money? If you have an extra $100 per month to spare, there’s more than one way to build wealth and finally get ahead. 

We reached out to financial advisors to find out how they would invest an extra $100 per month in the new year, and here’s what they said. 

1. Bump up your 401(k) contributions 

Colorado financial planner Mitchell Bloom of Bloom Wealth says your workplace 401(k) is a good place to start if your employer offers one, and particularly if you can qualify for an employer match. After all, an employer match you can qualify for is the closest thing to “free money” you’ll ever receive at work, so you might as well take advantage. 

You can strive to boost the percentage of your 401(k) contributions in order to funnel approximately $100 more into your account each month, but you may also be able to set aside a flat $100 in funds monthly if your workplace plan allows. 

Either way, money in a 401(k) plan can grow tax-free and compound over time, and you won’t have to pay taxes on distributions until you reach retirement age. 

Also note that if you don’t have a workplace retirement plan, all isn’t lost. 

Instead, you may want to “consider using a low-cost advisory firm like Betterment, where they will build a fully diversified globally allocated portfolio model with fractional shares so you can achieve diversification with a small investment amount,” says Bloom.

2. Save $100 per month in a Roth IRA

Jeff Rose of Good Financial Cents says that consumers can also consider saving money in a Roth IRA if they meet requirements to contribute. While this type of account requires you to invest money that has already been taxed, your contributions can grow tax-free and compound until you reach retirement age. Once you’re 59 ½ or older, you can withdraw money from a Roth IRA without paying income taxes, which is pretty sweet.

In 2020, most people can contribute up to $6,000 to a Roth IRA and traditional IRA account. However, individuals ages 50 and older can contribute an additional $1,000 for the year for a total of $7,000. 

Income limits do apply, however. Married couples who file taxes jointly can’t contribute to a Roth IRA if they earn over $206,000, and their contributions are phased out for incomes between $196,000 and $205,999. Single filers with incomes over $139,000 cannot contribute, and their contributions will be phased out for incomes between $124,000 and $138,999.

3. Save for emergencies

Also, consider saving for emergencies if you haven’t already. Financial advisor Jake Northrup of Experience Your Wealth says that your emergency fund should include at least three months of living expenses, but potentially more.

You’ll likely want to keep your emergency fund in an account you can access such as a high-yield savings account. While this means your emergency cash won’t bring in a huge return, this money can literally save your finances if you face a surprise medical bill you can’t pay or experience a job loss. 

Further, having a fully funded emergency fund can also help you avoid charging up credit card balances with exorbitant interest rates.

4. Save for future healthcare expenses in an HSA

Financial planner Taylor Schulte, who is also host of the Stay Wealthy Retirement Podcast, says that assuming an emergency savings fund is in place and high-interest debt is paid off, the best place to put extra cash is into a Health Savings Account (HSA). 

“The HSA is the magical unicorn of tax-advantaged investment accounts,” he says. “Unlike any other account, they are triple tax-advantaged.”

Schulte says this because you can invest up to certain limits on a tax-advantaged basis each year, then your money grows tax-free. When you take distributions in order to pay for qualified healthcare expenses, you won’t pay taxes then, either. 

There are some requirements in order to use an HSA, however, including the requirement that you have a high deductible health plan. For 2020, the Internal Revenue Service (IRS) defines a high deductible health plan as any plan with a deductible of at least $1,400 for an individual or $2,800 for a family, notes Healthcare.gov. Also note that any high deductible health plan’s total yearly out-of-pocket expenses must be less than $6,900 for an individual or $13,800 for a family. 

Morgan Ranstrom, who works as a financial planner in Minneapolis, MN, says you should strive to keep enough cash in your HSA to pay your insurance’s annual deductible in case of unexpected health costs, but beyond that you can invest the rest for long-term growth. 

“With regular contributions, potential investment growth, and minimal withdrawals, you’ll have an account that may be used to fund medical expenses in retirement without tax penalty,” he says. “How great is that?”

5. Pay off high interest credit card debt

While you may not consider debt repayment as an investment, the financial return can work similarly. Note that any debt you pay off is no longer charging an outrageous interest rate, and that means more money in your pocket each month that you can save or invest for the future. 

Debt expert Chris Peach, who teaches consumers how to pay off debt through his Awesome Money Course, says you should check to see the interest rate you’re paying on your credit cards, keeping in mind that the average credit card APR is well over 17%. 

“For most people, getting an 18% return on your investment every year is more like a dream come true than a reality,” he says. Fortunately, you can achieve that return by paying off high interest debt and saving the money you would normally pay toward interest each month. 

Let’s say you have a credit card balance of $10,000 at 18% APR and you’ve been making minimum payments on this card for years. Making the minimum payment of $200 each month would take you another 94 months to pay off the balance, which also results in $8,622 more in total interest paid, notes Peach. 

But what if you were able to invest $100 per month as an over payment on your credit card?

“Though it may not sound like a ton of money, $100 more per month will pay the balance off 47 months earlier and saves almost $4,000 in interest,” says Peach. “Not bad for a $100 monthly investment if you ask me.”

6. Invest in yourself

Fee-only financial advisor Russ Thornton, who focuses on providing retirement planning for women, says an investment in yourself can also pay off in a big way. “This could be used to buy books, audiobooks, online courses, offline courses, professional associations, personal training sessions, or something else,” he says. 

If you acquire new or deeper knowledge that could help you perform your job, it could help you get a bigger raise or even a promotion, whereas learning a new skill could help you create a side hustle that could ultimately help you bring in more income. 

You could even get involved with a professional association or networking group to build your network, says Thornton. “This could help with your current career or might open doors to new opportunities — both personal or professional.”

What to Do With a Windfall

However, making good decisions with a large infusion of cash can feel overwhelming, especially if your windfall comes about because of something negative. For instance, when I received a life insurance payout after my father passed away in 2013, the money was both emotionally charged and stress-inducing, and I was terrified of making a misstep.

If you’ve received a windfall, taking your time and making intentional decisions about the money will serve you better in the long run. Here’s how you can do that. 

Take a break before making any decisions

No matter how you received your newfound wealth, you’re likely to have a number of strong emotions associated with the event. And we all know that emotions and rational decisions can struggle to coexist. That’s why it’s a good idea to take a little time before you make any decisions whatsoever with your new money. 

If the money came to you because of a negative situation, such as a death in the family, the end of a lawsuit, or the sale of a beloved business, your emotions will inevitably color your view of the money. I personally found that I wanted Dad’s insurance money to no longer be in my hands, because having it was a reminder of my loss. 

Even if you have positive associations with the money (after a lucky weekend in Vegas or a surprise profit-sharing bonus from work), those fuzzy feelings may prompt you to make risky decisions to keep the good vibes coming. Letting some time pass between receiving your windfall and deciding what to do with it can help you view the money more dispassionately so you can make the best possible decisions with it.

So how long should you pause before deciding what to do? Depending on the size of the windfall, you might want to wait as long as six months (or longer) before making any decisions. This will give you time to process your emotions so that you’re psychologically ready to make these big choices.

Put it someplace safe

What you do with your money while you wait to make the big decisions depends partially on where your windfall came from. Life insurance benefits and other inheritance money can sometimes stay safely in the same account you’ll be paid from. In these cases, it’s common that your money will even earn some interest while it stays put. Simply keeping the money in place can be a good way to give yourself the emotional breathing room you need without worrying about making a preliminary decision.

Other types of windfalls, such as lottery winnings or an inherited retirement account, may give you the option of taking a lump sum or annual payouts. Choosing annual payouts (when available) will give you the opportunity to make lots of smaller decisions over several years, rather than overwhelming yourself with the need to make several big decisions at once. 

For when you have no choice but to take your entire windfall into your hot little hands, stashing it in a money market account or high-yield savings account can be a good way to keep it safe.

Consult a tax professional

The tax implications of your windfall could be a major deciding factor in how you choose to use it. Some types of windfalls, like life insurance benefits, can pass to you tax-free. However, for most types of windfalls, you can assume that Uncle Sam will want his cut.

For instance, the killing you made at the blackjack table is considered normal income to the IRS, which means you may have shifted into a higher tax bracket when you walked off with a cool $40,000. If you don’t plan for this shift in your income taxes, you may find yourself staring down a nasty surprise come tax time. Your CPA can help you figure out the best way to navigate your sudden bump in income. For instance, they might suggest that you maximize your tax-deferred retirement contribution this year to help offset your windfall.

If you sold a business, inherited taxable property or accounts, or even got a major bonus at work, a tax professional can help you determine the most tax-efficient way to access and enjoy your new wealth so that you’re not stuck holding the bag when the taxman comes calling.

Get your financial house in order

Before you start making it rain, it’s important to look at your current financial situation and see how your new money can make it better. 

If you’re carrying high-interest or revolving debt, using your windfall to pay it off (or at least pay it down) may not seem like a sexy use of the money. But reducing or eliminating your debt burden will give you more peace of mind and more financial freedom in the future. That money will turn into what feels like little windfalls every month when you don’t have to send most of your paycheck towards your debt.

Similarly, if you haven’t prioritized saving for retirement, your windfall can give you a great opportunity to improve your financial future. Maximize your 401(k) or IRA contribution this year (and enjoy the tax benefit), and use it as a springboard to send more money to your retirement every year thereafter.

Finally, keep some of your windfall as an emergency cushion. Knowing that you’ll be covered the next time a financial emergency strikes is a great gift to your future self.

Have some fun

It does feel good to receive a large amount of money, and having a little fun with it is a great way to enjoy it.

No matter how a windfall comes into your life, splurging on something that you couldn’t or wouldn’t otherwise have can be a great way to enjoy your good fortune. Deciding to use a set amount of money however you please is a life-affirming way to mark the occasion of your windfall.

Claim These Tax Deductions Even If You Don’t Itemize

Bulking up the standard deduction has let millions of taxpayers avoid the hassle of itemizing write-offs on their tax return because the bigger standard deduction would exceed their qualifying expenses.

But there’s a handful of tax breaks that people taking the standard deduction can still claim to lower their tax bill. Most of these so-called “above-the-line” deductions have no income limits, so anybody can claim them. And in addition to the direct tax savings from these breaks—for taxpayers in the 24% tax bracket, for instance, every $1,000 in above-the-line deductions will lower your tax bill by $240—your lowered AGI could enable you to claim other tax breaks that have income limits.

Individual Retirement Account

Contributing to a traditional individual retirement account (IRA) is a win-win move that lets you boost your retirement savings and trim your tax bill at the same time. The contribution limit is $6,000 ($7,000 if you’re 50 or older) for 2019, and if you don’t have a retirement plan at work (or your spouse does), every dollar of that can be knocked off your income. If you’re covered by a retirement plan at the office (or your spouse is) then that deduction might be limited by your income on your 2019 return.

You may make 2019 IRA contributions up until April 15, 2020.

Note that, for 2020, the contribution limits remain the same, but the income limits for the deduction are slightly higher.

Health Savings Account

Are you funding a health savings account (HSA) in conjunction with a high-deductible health plan (HDHP)? Smart move.

You get an above-the-line deduction for contributions to the HSA, assuming you made them with after-tax money. If you contributed pretax funds through payroll deduction on the job, there’s no double-dipping—so no write off. In either case, you need to file a Form 8889 with your return. The maximum contribution for 2019 is $7,000 for family coverage and $3,500 if you’re an individual (they are slightly higher for 2020). If you’re 55 or over at any time in the year, you can contribute (and deduct) another $1,000.

Self Employment Deductions

If you work for yourself, you have to pay both the employer and the employee share of Social Security and Medicare taxes—a whopping 15.3% of net self-employment income. But at least you get to write off half of what you pay as an adjustment to income. You can also deduct contributions to a self-directed retirement plan such as a SEP or SIMPLE plan (and those can cut big chunks off your income).

Also deductible as an adjustment to income: the cost of health insurance for the self-employed (and their families)—including Medicare premiums and supplemental Medicare (Medigap), up to your business’ net income. You can’t claim this deduction if you are eligible to be covered under a health plan subsidized either by your employer (if you have a job as well as your business) or your spouse’s employer (if he or she has a job that offers family medical coverage).

Educational Costs

If you paid college tuition for yourself, your spouse or a dependent in 2019, you may be able to deduct up to $4,000 in college tuition and fees. To qualify for the full deduction, your adjusted gross income must be $130,000 or less if married filing jointly ($65,000 or less if single). You can deduct up to $2,000 in tuition and fees if your joint income was $160,000 or less ($80,000 or less if single). There is no deduction if you earn more than that. (This deduction expired at the end of 2017; however, it was retroactively extended through 2020 in December 2019. You can file an amended return to claim it for the 2018 tax year.)

In addition, up to $2,500 in student-loan interest (for you, your spouse or a dependent) can be tax-deductible on 2019 returns if your modified adjusted gross income is less than $70,000 if you’re single or $140,000 if you are married and file a joint return. The deduction is phased out above those levels, disappearing completely if you earn more than $85,000 if single or $170,000 if filing a joint return.

Click Read More for Other Deductions on Your 2020 Taxes.

Savvy Ways to Lower Your Tax Bill

SAVE FOR RETIREMENT WITH AN IRA

The first option is perhaps the most well-known. If you have (or open) an individual retirement account (IRA), you can choose to make your 2019 contributions up until the April 15 tax filing deadline in 2020. To do so, you elect to have the money counted as a 2019 contribution, which is often an option when you electronically transfer the funds to your IRA.

If you have a traditional IRA, you may be able to deduct your contributions from your income when you file your tax return, which can lower your tax bill this year. You’ll need to add the contributions and earnings to your income when you start taking withdrawals from your IRA — ideally, after you turn 59 ½, or you may have to pay a penalty. 

Alternatively, you could contribute to a Roth IRA. Your contributions aren’t tax deductible, and won’t save you money now. But once you turn 59 ½, you can withdraw both your contributions and the earnings from your account tax-free. If you’re in a low tax bracket now, or expect your tax rate to be higher in the future, a Roth IRA may make more financial sense in the long run.

There are contribution and deduction limits based on your income — and higher limits if you’re 50 or older. However, for both traditional and Roth accounts, qualified low- to moderate-income households can receive a Saver’s Credit for their retirement account contributions. 

Tax credits are more valuable than deductions, as each $1 in credit lowers your tax bill by $1. A $1 deduction lowers your taxable income by $1, which may only lower your tax bill by 10 to 37 cents, depending on your tax bracket. 

BUILD YOUR MEDICAL SAVINGS WITH AN HSA

A Health Savings Account (HSA) is another type of tax-advantaged account that allows you to contribute up until the tax-filing deadline. An HSA is similar to an IRA in that the contributions can lower your taxable income. 

The money in an HSA is intended for medical expenses, rather than general expenses during retirement. However, some people use an HSA as an additional (or alternative) retirement accounts because of its triple-tax advantages. 

You can deduct contributions (like a traditional IRA), invest the funds tax-free, and then withdraw all your money tax-free (like a Roth IRA), if you use the funds for a qualified expense. These can range from prescriptions, vaccines, and tests to medical equipment and copays or deductibles, which are an inevitability as you age. You can also choose to pay for qualified expenses with non-HSA funds now and use the receipt to withdraw money from your HSA later — allowing your HSA to grow in the meantime. 

However, you will pay a penalty if you withdraw money from your HSA without a qualified medical or dental expenses. Additionally, to qualify for an HSA, you need to have a high-deductible health plan(HDHP), and there are annual contribution limits for HSAs. 

DON’T MISS DEDUCTIBLE BUSINESS EXPENSES

You don’t need to run a formal business or storefront to qualify for small business deductions. If you have a side hustle, you may already be a business owner in the eyes of the IRS. There’s a good chance you’re paying an extra self-employment tax, so make sure you’re also claiming all the business deductions you’re allowed to take.

For example, if you got work through a rideshare or delivery app, you may be able to get a deduction for each mile you drove while working. The apps may help you track some of the business expenses, but they might not catch everything. If you buy snacks or water for passengers, make sure you keep the receipts as those could be business expenses. Additionally, a portion of your cellphone bill might be deductible as a business expense. 

Other contract, freelance, or side gigs can also result in deductible business expenses. If you buy or make products to sell online, you could deduct your expenses from your business revenue. Or, perhaps you bought a computer that you use exclusively for contract work online — don’t forget to write that off. 

CLAIM ENERGY TAX CREDITS

If you’re a homeowner and you made energy-efficient upgrades to your home, you may be eligible for state and federal energy tax credits. The upgrades could include added solar panels or a solar-powered water heater, and the federal credit could be worth up to 30% of what you spent on the equipment and installation. You may have known about the tax credit already, as these are often expensive investments, but don’t forget to claim it when you file. 

GET YOUR TAXES PREPARED AND FILED FOR FREE

Paying your taxes and paying for tax preparation and filing often go hand-in-hand. However, most taxpayers qualify for free tax preparation and filing.

If you want to do your taxes at home on your computer, look into the software options from the Free File Alliance. There are free versions of tax software from major tax preparation software companies, including TurboTax and H&R Block. Federal tax return filing is also included, and some options come with free state filing as well. 

To qualify for Free File Alliance software, your adjusted gross income (AGI) can’t be higher than $69,000 in 2019, which means over 70% of people can use these free options. However, some software options may have lower AGI limits, or may offer free preparation but require you pay to file your state tax return.

If you’d prefer in-person help, the IRS’s Volunteer Income Tax Assistance (VITA) program offers free tax preparation, federal, and state filing for households who made $56,000 or less. There are VITA sites around the country where you can find trained volunteers who will prepare and file your tax return for you. Sometimes, you can even drop off your paperwork rather than sitting with the preparer. 

WHAT IF YOU RECEIVE A SMALL REFUND OR OWE MONEY?

In spite of doing everything you can to lower your tax bill, you might wind up with a smaller refund than you expected. Or worse, a large tax bill that’s difficult to repay. Even if you don’t like the numbers, make sure you at least file your tax return by April 15, 2020, or apply for an extension. Otherwise, you may have to pay a penalty for filing late. 

There are also penalties and fees for failing to pay your full tax bill on time. However, you can get on a repayment plan with the IRS, and it’s often a relatively easy process. You can even apply online if you owe $50,000 or less — or, $100,000 or less if you’re applying for a short-term plan. Getting on a repayment plan can reduce the penalty you’ll pay, although you’ll still pay interest on the past-due amount.

How to Pay Off Holiday Debt: A Step-by-Step Guide

A 2019 study conducted by CreditCards.com and YouGov Plc showed that more than half of consumers with credit card debt said the holidays are a good reason to borrow money. Even 26% of consumers with no debt at all said they might be willing to rack up debt over the 2019 holiday season. 

Once those bills start pouring in and the monthly payments start siphoning your paycheck, you could easily regret it. By that point, however, it’s too late.

If you’re in debt from the holidays and want to pay it off, you should consider consolidating and creating a plan to get out of debt once and for all. Here’s how to do it:

Step 1: Assess the damage and add up your debts

The first step to get out of holiday debt may be the hardest since you have to see your spending in black and white. Take the time to add up all your credit card balances and other debts from the holidays to see how much you owe. 

Crafting a plan for debt repayment will be a lot easier if you write down each of your debts along with the interest rate and the current balance all in one place. Here’s a good example of how your list might look:

Step 2: Choose a debt consolidation method

Once you know exactly how much debt you owe, you need to figure out the optimal way to consolidate your balances and pay them off. While there are a few other options to consider, the most popular products for debt consolidation include 0% APR credit cards and personal loans.

Balance transfer credit cards

Balance transfer credit cards let you secure 0% APR on balances transferred from other cards for anywhere from nine to 21 months. Some charge a balance transfer fee that is usually equal to 3% or 5% of your balance upfront, but the interest savings can be worth paying the fee if you get serious about your debt and knock it out quickly at 0% APR. 

Because balance transfer credit cards only let you save on interest for a short amount of time, this option works best for someone who can pay off their holiday debt on an expedited timeline. That’s because once your introductory APR period is over, the interest rate on your credit card will reset to a much higher variable rate. 

Personal loans

Personal loans let you consolidate debt with a low fixed interest rate, a fixed monthly payment, and a fixed repayment period. This means you’ll pay interest on your consolidated debt while you pay it off, but personal loans have low rates for consumers with good credit — even as low as 4.99% APR. That’s much lower than you’ll pay with a credit card since the average credit card APR is currently over 17%. 

Personal loans typically offer terms ranging from 12 months to 60 months, so they can be a better option for consumers who have a lot of debt and need plenty of time to pay it off.

Step 3: Pick the best repayment plan

The right debt consolidation method for you depends on a few factors — how much debt you have, how much you can afford to pay each month, and how long your debt will take to pay off. A good debt repayment calculator can help you determine your next best steps and which debt consolidation to go with, but you can also do some basic math to figure it out on your own. 

If you had $2,394 in debt to consolidate, here’s how your strategy might look with a balance transfer credit card:

For example, let’s say you signed up for a card that gives you 0% APR on purchases and balance transfers for 15 months, followed by a variable APR of 14.49% to 25.49%. This card doesn’t charge any balance transfer fees for balances transferred in the first 60 days, so you could make a fee-free transfer of your debts right away upon approval.

With 15 months to repay your holiday debt at 0% APR, you would need to pay $159.60 per month to become debt-free without interest within that time frame.

If you couldn’t pay that much each month toward your debts, you might want to go with a personal loan that offers a low fixed rate for several years. If you took out a personal loan that charged just 4.99% APR and let you pay off your debt over 36 months, you would only need to pay $72 per month to become debt-free over the course of three years. During that time, you would wind up paying $189 in interest on your loan. 

Step 4: Stay the course

Whatever debt consolidation option you wind up with, make sure you decide on a concrete plan and stick with it. If you don’t, you won’t pay off as much debt as you want and you’ll prolong the financial problems debt brings into your life.

If you’re worried about paying as much as you can toward your debts, it can also help to cut your spending for a while. Eat more of your meals at home, enact a temporary spending freeze, and stay in on the weekends for a few months instead of going out. With enough small cuts in your spending, you may be able to free up some extra cash to pay toward debt or start building a savings buffer. 

Also make sure that, while you’re in debt repayment mode, you’re not using credit or loans to rack up more debt. You’ll never pay off holiday debt if you keep digging throughout the year, so stop using plastic and switch to cash or debit instead.

27 Money Moves to Make Now to Prepare for 2020

Among the items on our to-do list: Trim your 2019 tax bill by pruning your portfolio and giving to charity. Boost your retirement-plan contributions. Cash in credit card rewards. We also suggest moves that will boost your bottom line in 2020 and beyond. Take a look.

Harvest Your Losses

You’ll trigger a capital gains tax bill if you sell winners in a taxable account (but not in a tax-deferred account, such as an IRA). But you can sell any stocks or mutual funds that have fallen from the price you paid and use the losses to offset your profits in other investments.

Line up your short-term losses with short-term gains, and do the same with long-term losses and gains. If losses exceed your gains, you can use up to $3,000 of losses to offset ordinary income. Any losses exceeding that can be rolled over—up to $3,000 per year—to future years.

Watch Out for Capital Gains Distributions

If you’re shopping for mutual funds for a taxable account, check the fund’s website before you buy. Otherwise, your investment could saddle you with a big tax bill.

During the month of December, many funds pay out dividends and capital gains that have built up during the year. If you own shares on what’s known as the ex-dividend date, you’ll have to pay taxes on the payouts, even if you reinvest the money.

Before you invest in a fund, call the fund company or check its website to find the date and estimated amount of year-end distributions. The estimates are often reported as a percentage of a fund’s current share price. A distribution of 2% to 3% of the share price probably won’t cause you a lot of tax headaches, but if the fund estimates it will pay out 20% to 30% of the share price, wait until after the distribution to buy—or consider investing in a different fund.

Check Your Withholding

The 2017 tax overhaul lowered tax rates across the board, but it also scrapped some popular tax breaks. As a result, some taxpayers who were accustomed to receiving a refund ending up owing the IRS when they filed their 2018 tax return.

If you were part of that band of disgruntled taxpayers, you may be able to take steps between now and year-end to avoid another April surprise. Use the IRS tax-withholding estimator tool to determine whether you need to file a new Form W-4 with your employer and increase the amount of taxes withheld from your paycheck between now and year-end. You’ll need your most recent pay stub and a copy of your 2018 tax return to help estimate your 2019 income. Because only a few pay periods remain between now and the end of the year, reducing the number of allowances you claim may not make enough of a difference in your withholding to affect your tax bill. Instead, go to line 6 on your W-4 form and fill in the dollar amount you’d like to have withheld.

Pay Some Bills

Unless your finances have changed significantly, you probably have a pretty good idea of whether you’ll itemize or claim the standard deduction when you file your 2019 tax return. If you plan to itemize (or you’re close to the threshold), now is a good time to prepay deductible expenses, such as mortgage payments and state taxes due in January.

Review Your Medical Bills

In 2019, you can only deduct unreimbursed medical expenses that exceed 10% of your adjusted gross income (in 2018, the threshold was 7.5%). That puts this tax break out of reach for most taxpayers. But if you had very high medical expenses this year—due to a major illness, for example—you may qualify.

And there’s still time to schedule appointments and procedures that will increase the amount of your deductible expenses. The list of eligible expenses includes dental and vision care, which may not be covered by your insurance. 

Click Read More for other tips.

Financial Resolution Ideas

For many, there are two burdens they want to eliminate in 2020: low savings and high debt.

Putting aside more money and paying down balances are the two top financial resolutions for 2020, according to a new survey from Fidelity Investments. That is followed by spending less.

That comes as the Federal Reserve found earlier this year that many adults could not afford to cover a $400 unexpected expense. Meanwhile, almost half of Americans have no rainy day fund, according to the Financial Industry Regulatory Authority.

They key to shoring up your safety reserves — and keeping your resolutions — is to map out how you’re going to get there.

Set clear savings goals

Start by setting a tangible goal you can reach in 2020.

That can include adding one month’s pay to your emergency fund. Ideally, your emergency fund should eventually grow to have six months’ or one year’s worth of living expenses saved.

You can schedule money to be directly deposited into a high-yield online savings account. Those accounts provide around 2% annual percentage yields, compared to about 0.2% at traditional brick and mortar banks.

Your goal could also be to boost how much you contribute to your retirement savings in your 401(k) plan or individual retirement account.

In 2020, you can put away as much as $19,500 in a 401(k), or $26,000 if you’re age 50 or over. For IRAs, you can save up to $6,000, or $7,000 if you’re 50 and up. And thanks to new legislation, you can continue to contribute to your IRA accounts no matter your age, as long as you have earned income.

The key is to identify a specific step, and then keep going.

Have a debt payoff strategy

Also try breaking down your goals to knock off debts into smaller, meaningful steps.

For example, you may strive to pay off 20% of your credit card debts.

Because the average credit card balances are roughly $8,700 per household, the idea would be to pay off $1,740 toward that debt. That would cost $145 per month, provided you transfer your balance to a 0% interest credit card.

A 0% interest credit card can allow you to combine your credit card balances by using a balance transfer. You will need to have good credit to qualify.

Next, identify a strategy for paying down those debts. You may want to start with small balances first to get momentum. Or, you could start with the debts with the highest interest rates first to help reduce the total you ultimately pay.

Identify ways to spend less

One surefire way to reach your financial goals faster is to spend less.

But to do that you need to have a plan. Just 42% of adults have a budget, according to the National Foundation for Credit Counseling.

Even if you do have a budget, it’s always wise to update your plan and look for more ways to cut corners.

Start by gathering all of your bills from the last three months.

Then, make a list of recurring expenses and rank them in order of importance. Put your necessities — housing, food and health care — at the top of the list.

Next, look for ways to start cutting expenses from the bottom. Ideally, you want to get to a point where your take-home pay is more than what you spend each month.

Be sure to look for ways to pare back your existing expenses. For example, look for ways to get lower rates on your renters, home and car insurance.

Revisit your subscriptions and memberships, such as to streaming TV services or the gym, and reevaluate whether they are necessary. You may also want to find a cheaper alternative — such as joining your local Y instead of a pricier brand-name gym.

Over the year, these small changes could save you hundreds, or even thousands, of dollars.

Common Tax Prep Mistakes for Freelancers

The truth? We’re busy running our own businesses. We have income goals, and aim to be strategic in everything from the clients we work with to how to boost productivity. As a solopreneur, we’re responsible for our own health insurance, have to save cash for vacation and sick days, and need to pony up for self-employment tax — all while living on an inconsistent income.

That being said, on top of meeting work deadlines and client demands, it’s easy to let our financial housekeeping fall to the wayside. And when tax season rolls around, when our bookkeeping is in a state of disarray, we hit the “panic” button. To spare the headache, stress, and costly mistakes, here are some common tax prep mistakes freelancers tend to make:

GETTING STUCK IN THE WRITE-OFF MENTALITY

Ever find yourself justifying a business-related purchase with the reason that you can simply “write it off” for taxes? I’ve heard fellow solopreneur friends buy fancy equipment that they don’t really need, or take an unnecessary work trip under the assumption that they’ll be “saving on taxes.”

But you’re not saving money by spending more of it. You’re simply lowering your taxable income. So unless you have a good reason to spend that money, it’s probably best to keep it sitting in your bank account.

“Spending to save on taxes makes no sense in many situations,” says Eric Nisall, a freelance tax expert and founder of AccountLancer. Nisall provides the following example: If you pay 30% in taxes, then every $100 you spend will potentially get you back $30. But if you keep the $100 and pay the $30 in taxes, you actually come out ahead. Doing some simple math, you can see that keeping $70 is greater than getting back $30, especially if you’re spending money on things you don’t really need.

There may be situations where it makes tax-sense to spend, but quite often you’re better off holding on to your money.

NOT USING PROPER ACCOUNTING SOFTWARE 

The first few years I freelanced, I went the cheapskate route and neglected to use proper accounting software. And when I did purchase a subscription to a cloud accounting software, it took me the third try to settle on a program that actually did everything I needed it to do. While I do pay a little more for my accounting subscription, I feel better about using software that accurately records my transactions and spits out reports in seconds. It’s easier for me to stay on top of my invoices, banking transactions, and business-related expenses. In turn, I know I won’t be missing deductions or overpaying Uncle Sam.

If you’re not sure which software to go with, try out a few and see which one works best for you. Many major services offer a free trial. You can also ask a tax professional, who can answer any questions you have, or help you with the initial setup.

FAILING TO REPORT ALL INCOME

This goes beyond your 1099s, explains Tai Stewart a tax professional and founder of the accounting firm Saidia Financial Solutions. Stewart explains that if a client has paid you more than $600 in the year, they’re required to issue a 1099-MISC. However, the income from the clients who paid you less than $600 also need to be included. “Don’t think that only the 1099s need to be reported,” says Stewart. “Your total income includes all the smaller invoice payments as well for businesses with cash-based accounting.”

So why shouldn’t you cut corners and skip reporting all of your income? Because trying to save on taxes by reporting less income could end up costing you more. “In the event of an audit, if it has been determined that you underreported income, you will be subject to additional taxes, penalties, and interest,” says Stewart. Be thorough and avoid an unpleasant conversation with the IRS.

NEGLECTING TO HAVE A SOLID BOOKKEEPING SYSTEM 

It’s important to maintain your day-to-day bookkeeping, points out Katherine Pomerantz, founder of The Bookkeeping Artist. However, we freelancers are too busy hustling and running our own businesses to take care of these day-to-day administrative tasks. 

I personally aim to tend to my bookkeeping at least once a week. I’ll check on my business-related expenses to ensure they’re properly recorded and categorized. And about once a month, I’ll send invoices to my clients. 

“A good bookkeeping system can help you stay disciplined, but for most freelancers the best option is sucking it up and hiring a bookkeeper. Or at least an assistant to help you send invoices,” says Pomerantz. “Remember: The less time you spend on admin, the more time you have to make money. Plus, tax time really will be a piece of cake without the last-minute scramble.”

NOT HAVING A HOLISTIC PLAN

In other words, are you looking at the larger picture and your financial needs as a freelancer? Pomerantz recommends you ask yourself the following: Are you saving for retirement? Are you keeping yourself healthy? Do you have insurance in case you’re ever disabled or can’t work? 

Looking at all aspects of your financial health can lead to greater tax savings. “Most people don’t consider these things when they plan for taxes, but each of these provides a significant tax break for a freelancer,” explains Pomerantz. 

What’s more, they protect freelancers against financial disasters. “You might not be worried about building these financial buffers now, but nothing makes tax time more stressful than not having the money to pay your taxes,” says Pomerantz. “These big-picture questions can protect your savings and help you file on time.” 

WRITING OFF DEDUCTIONS YOU DON’T QUALIFY FOR

Another mistake that freelancers make in the pursuit of saving money is claiming tax deductions they don’t actually qualify for, which could end up nipping them in the bud later on. Some commonly misapplied deductions? Stewart points that many freelancers try to deduct clothes — everyday clothes not exclusively used for the business aren’t deductible.

We freelancers are also sometimes guilty of trying to deduct home office expenses for spaces not used exclusively for operating business. Another popular misapplied deduction is meals, such as for regular, everyday lunches. Only meals relating to your business can be written off. If you’re unsure if your expense qualifies for a deduction, check out what the IRS lists as qualified expenses, or seek the advice of a professional.

Not staying on top of your financial housekeeping can certainly cost you tax-wise — in time spent, by overpaying, or by getting penalized for tax blunders. By minding these common tax prep mistakes, you can run a more efficient freelancing business. 

How to Free Up Cash in Your Budget Each Month

When you’re tight on money, spending on things that evoke joy or pleasure might not cross your mind. That seems like a champagne problem for those who have multiple zeros in their bank accounts.

But if all your income is going toward paying off bills or debt, you’ll start feeling deprived. And in turn, you might be tempted to reach for the shiny plastic only to find yourself with a more treacherous debt load.

You don’t have to get a huge raise at work or move into a tiny apartment with five roommates to have more money to spend on the things you want. For an influx of cash, here are a few easy ways to free up money each month:

TRACK YOUR SPENDING 

If you don’t know how much money is coming in, or where it’s going, how can you level-up on your finances? Before you can find ways to free up cash, track your spending. You can use a handy, free money management app  such as Mint or Clarity to take an at-a-glance look at your transactions.

Once you track your spending, you can see what your “trouble areas” are. From there, you can make the proper adjustments to make sure you’re spending within your limits.

NEGOTIATE DOWN YOUR BILLS 

One of the easiest ways to save is to negotiate with your current providers, points out Steven Donovan, a money coach and founder of Even Steven Money. Call your cellphone, cable, and internet provider (really anything with a monthly subscription) to ask for a lower rate.

Pro tip: If you’re a longstanding customer with a history of making on-time payments, you’ll have greater leverage to ask for a discount. It also helps to do a bit of research beforehand and know what competitors are offering.

Not sure how to go about negotiating? There are a handful of apps that will do the negotiating for you. “You can certainly cancel the service, but sometimes just asking for a lower price will save you money,” says Donovan.

USE WHAT YOU ALREADY HAVE 

This might seem like a no-brainer. But how often do we make a trip to the market for say, a stick of butter, only to come home to realize we have a few unused sticks stowed on the bottom shelf of our fridge?

Before you make a purchase, take stock of what you already own. Donovan suggests making a list before you head to the market. “I like to start with what we have in the house, followed by a meal plan for the week, then a list of ingredients that I need to make the meals,” he says. “It’s a great way to save money.”

Along the same lines, think of multiple uses for the same item. My vitamix doubles up as a blender and food processor. And I use my desk to store different parts of my drum kit. It’ll save you cash, and time spent shopping for stuff you could do without.

MAKE TRADE-OFFS WITH YOUR SPENDING 

Minimize spending on stuff you feel “neutral” or even “negative” about. That way you can spend more on stuff you value. Instead of spending purely out of habit, spend intentionally.

For instance, if you love to travel but don’t care much for fine dining, cook at home. That way you’ll free up some money to put toward your globe-trotter aspirations and checking things off your bucket list for travel.

Personally, I’m not much of a traveler. But I love quality noms. While I’ve stashed enough cash to trek over to a work conference and a few short camping trips for the year, I probably spend more than the average person on grass-fed meat, fish shipped straight from Iceland, and on organic, locally sourced produce.

Set up auto-transfer to save that money toward meaningful goals. Let’s say you save $20 each week on food by not going out to lunch. Put that $80 a month toward your travel fund. Or if you’d rather not spend money on snacks while on the go, every $7 you don’t spend on a pastry and drink could go toward your next vacation.

SELL YOUR JUNK 

Inspired by the KonMari method? Undergoing a purge of your belongings? If so, make some extra cash by selling unwanted items scattered around your house. There are plenty of online marketplaces — Letgo, OfferUp, Facebook Marketplace, and Decluttr — where you can sell your gently used stuff locally. Not only do you make an extra buck, but you will clear up the clutter in your digs. 

33 Best Things to Buy on Black Friday/Cyber Monday

‘Tis the season for retailers to slash prices on coveted items in a variety of product categories for the Thanksgiving holiday weekend including Black Friday. No matter if you plan to brave the in-store crowds looking for the best doorbusters or keep it cozy and shop online from the comfort of your couch, the deals are plentiful.

We talked with several smart shopping gurus to get the lowdown on which Black Friday bargains are worth your consideration at Costco, Amazon.com, Target and Walmart. This year, holiday shoppers can score up to 50% on everything from air fryers to toys to widescreen TVs. Take a look.

Amazon Black Friday Doorbusters and Deals

n true Amazon fashion, the e-commerce giant undercut the competition by kicking off its Black Friday specials several days earlier than most on November 22. Every day until November 29, online shoppers can go to Amazon.com/BlackFriday to find new deals on a wide variety of product categories for up to 50% off — from electronics to home goods to skincare.

BradsDeals.com’s Casey Runyan, Cheapism.com’s Saundra Latham and RetailMeNot.com’s Sara Skirboll to weigh-in on Amazon’s best Black Friday deals:

  • Alexa-Enabled Devices (i.e., Echo Show 5 bundle and Fire TV Cube) from $55 to $90 (discounts ranging from $30 to $35 off)
  • Kindle Kids Edition for $79.99 ($30 off)
  • Samsung Flat 82-Inch QLED 4K Q60 Series Ultra HD Smart TV for $1,797.99 ($2,002 off)
  • Shark IQ Robot Vacuum for $399.99 ($149.01 off)
  • Yedi 9-in-1 Instant Programmable Pressure Cooker for $79.96 ($20 off)
  • 23andMe Genetic Testing Kit for $99 ($100 off)

Costco Black Friday Doorbusters and Deals

Costco’s stores are closed Thanksgiving Day, November 28, but you will still be able to score early Black Friday deals at Costco.com. A word of advice: Shop the website first, because some Costco Black Friday deals are online-only.

DealNews.com’s Julie Ramhold and smart shopping experts at NerdWallet.com round up the warehouse club’s top Black Friday bargains:

  • Apple AirPods (second generation) headphones with wireless charging case for $139.99 ($35 off)
  • Apple MacBook Pro 13.3-inch laptop for $1,199.99 ($250 off)
  • Apple MacBook Air 13.3-inch laptop for $699.99 ($200 off)
  • Dyson Pure Hot + Cool Link 3-in-1 HEPA air purifier for $374.99 ($130 off)
  • Freedom Foundry men’s super plush flannel shirt for $11.99 ($3 off)
  • GoPro HERO7 camera bundle for $329 ($70 off)

Target Black Friday Doorbusters and Deals

Calling all Target shoppers! The big-box retailer will be offering deep discounts on some of the season’s most coveted items — from air fryers to Chromebooks — as part of its Black Friday sale.

For shoppers who are also Red Card holders, you’ll get early access to select doorbusters online starting on Wednesday, November 27. For in-store shoppers, locations open at 5 p.m. local time on Thanksgiving Day and will close at 1 a.m. Stores will reopen again on Black Friday (November 29) at 7 a.m.

BradsDeals.com’s Runyan, Cheapism.com’s Latham and TrueTrae.com’s Trae Bodge dish on which of Target’s Black Friday doorbuster deals are worth your time and money:

  • Amazon Echo Dot (3rd Generation) for $22 ($27.99 off)
  • Apple 10.2-Inch iPad (7th Generation) for $249.99 ($80 off)
  • Beats Solo3 Wireless Headphones for $129.99 ($170 off)
  • Elements 65-Inch Roku 4K UHD HDR Smart TV for $279.99
  • Hatchimals HatchiBabies for $29.99 ($30 off)
  • HP 11.6-Inch Chromebook for $99 ($100 off)
  • Ninja Foodi TenderCrisp for $169.99 ($60 off)
  • Samsung Galaxy S10, S10+ or S10 Note. Receive a $400 store gift card with purchase and monthly plan activation.
  • Soda Stream Fizzi Sparkling Water Maker for $49.99 ($40 off)
  • Tranquility 12-lbs. Weighted Blanket for $30 ($19 off)

Walmart Black Friday Doorbusters and Deals

If Walmart is on your list of stores to shop on Black Friday, get ready to score huge savings. The big-box retailer is going toe-to-toe with competitors in a variety of product categories — from clothing to small appliances to toys — and offering exclusive incentives to get customers in-store and shopping online.

Select deals will be available on Walmart.com starting at 10 p.m. ET on Wednesday, November 27, while in-store doorbusters go on sale starting at 6 p.m. local time on Thanksgiving Day.

Cheapism.com’s Latham, RetailMeNot.com’s Skirboll and TrueTrae.com’s Bodge dish on which of Target’s Black Friday doorbuster deals are worth your time and money:

  • Barbie Helicopter or Glam Convertible Car for $10 ($9.98 off)
  • Google Home Mini for $19.99 ($5 off)
  • Instant Pot Vortex 6-Quart Air Fryer for $49 ($50 off)
  • iRobot 670 WiFi Vacuum for $197 (nearly $50 off)
  • Neon Vector Two-Wheel Scooter (Non-Motorized) for $15
  • Paw Patrol Vehicles (Assorted Variety) for $5 ($4.84 off)
  • PlayStation 4 1TB Game Bundle for $199.99 ($117 off)
  • Philips 65-Inch 4K Android Smart TV for $278
  • Roku Ultra With JBL Headphones for $48 ($51 off)
  • Sleepwear Sets ranging from $4.75 to $10
  • Tranquility 12-lbs. Weighted Blanket for $30 ($19 off)

How to find the best deals on Black Friday and Cyber Monday

It’s finally here — the week when almost everything is on sale.

The National Retail Federation expects more than 165 million people to take part in the five-day shopping marathon from Thanksgiving Day to Cyber Monday.

All the hype and pressure to buy can be overwhelming, so you need to have a plan if you want to find the honest-to-goodness bargains. NBC News BETTER contacted a half dozen shopping experts to get their advice.

1. MAKE A LIST

If you just wing it without a shopping list and a budget, you could wind up deep in debt.

About 35 million Americans are still paying off holiday credit card bills from last year, according to the WalletHub’s 2019 Holiday Shopping Survey.

Your list should include what you plan to get each person and how much it will cost. Impulse shopping can bust your budget, so stick to your list.

“And when you’re shopping, keep a running total of your spending — it’s amazing how keeping tabs on your spending will protect you from busting your budget,” said Jack Gillis, executive director of the Consumer Federation of America.

2. DO YOUR HOMEWORK

Look at newspaper circulars and online ads to see which stores have the best prices on the items on your list.

“Different stores have different things on sale, so you really have to cherry pick the deals,” said Lisa Lee Freeman, cohost of the HotShoppingTips podcast.

Black Friday websites and apps can make this a lot easier. You can see Black Friday circulars at BFAds.net or sort the sales by category (e.g., clothing, TVs, toys or videogames) at Blackfriday.gottadeal.com.

Freeman uses FLIPP, an app that searches newspaper fliers to help you compare prices for the same item from store to store.

“This way, you don’t have to go through all the paper flyers physically and track everything, so it’s a really cool tool to have on hand,” she said.

Other recommended sites: BlackFriday.com, BestBlackFriday.com, TheBlackFriday.com, Brad’s Deals and DealNews.

3. EVALUATE THE DEALS

The sale prices offered on Black Friday and Cyber Monday tend to be among the best prices of the year, but not for all items and all product categories.

“We do expect there to be some good deals on toys for Cyber Monday, but historically there are even better deals if you wait until December,” said Julie Ramhold, consumer analyst at DealNews. “If you can wait, prices on winter clothing will be better in January.”

Consumer Reports says the biggest discounts on top-rated big screen TVs typically take place just before the Super Bowl.

“To separate the ho-hum deals from the good ones, you need to know the price history of that particular product,” said Edgar Dworsky, founder and editor of ConsumerWorld.org. “You can’t just look at the crossed-out price, the so-called ‘regular’ or ‘list’ price. Many retailers inflate those original prices to make it look you’re getting a great deal. The only way to know for sure is to check the price history for that item.”

Dworsky recommends Camelcamelcamel, a site that lets you compare today’s price to its price history at Amazon during the past year.

Freeman also likes Honey, a browser extension that not only finds and applies coupons automatically, but also provides the price history on many items.

4. RESEARCH THE PRODUCTS

“A low price on a lousy product is no bargain,” Dworsky cautions.

You can check the reviews on retail websites (but recognize that some of them may be fake) or see what professional product testers have to say at sites such as Consumer Reports, PCMag, Wirecutter or CNET. You can find some amazing Black Friday doorbuster deals on TV’s from lesser-known brands, but you may not be happy with their performance.

“A lot of times, when we review these TVs they’re in the lower part of our ratings,” said Jim Willcox, senior tech editor at Consumer Reports. “So, if it’s the main TV for your house, it may not be the best set for you to buy.”

5. CHECK STORE POLICIES IN ADVANCE

Most major retailers have a price-match policy, but there’s a good chance it doesn’t apply during Black Friday weekend. And be sure to find out about the return and exchange policies, especially for electronics.

6. START EARLY

Don’t wait until Black Friday. Many retailers are currently offering pre-Black Friday sales. Black Friday starts at JCPenney.com on Wednesday morning and at Walmart.com at 10 p.m. Wednesday.

“Most deals will be available online starting early Thanksgiving morning, so you can shop even before you sit down to your turkey dinner,” said Ramhold of DealNews.

7. GOING TO THE STORES? YOU NEED A PLAN

You couldn’t pay me to fight the Black Friday crowds, but some people love the excitement and the thrill of the hunt.

“Some doorbuster specials are in limited quantities, which means your chances of getting one are pretty slim,” said Willcox of Consumer Reports. “And remember, the whole idea is to get you into the store so that you can buy more profitable items once you’re there.”

If you’re headed to the stores on Thanksgiving Day when many major chains will be open or on Black Friday itself, you need a game plan.

Where do you want to shop and when do those stores open? Prioritize stores that have a limited quantity of the doorbuster item you want — and get there hours before the store opens.

One strategy is to go with a group of friends or family members. You can split up the stores to maximize those blockbuster deals and then meet up later to swap items.

A Guide to Socially Conscious Holiday Shopping

According to the National Retail Federation (NRF), the average American will spend over $700 on holiday gifts this year, totaling more than $465 billion.

“If that money was spent on socially conscious gifts that helped to make the world a better place, we could help to better the lives of millions of people while helping to tackle some of our world’s most pressing social, economic, and environmental challenges — all without spending any more money,” says Laura Hertz, CEO and co-founder of Gifts for Good, a gifting platform that supports charitable causes.

For the unacquainted, social good companies might offer goods made of eco-friendly, durable materials or provide services to help workers in developing countries. They might fold giving back to the community or supporting sustainable practices into their business model.

“It’s good for the economy because when you purchase more intentionally you are typically purchasing higher-quality items that cost the same or more than you would otherwise,” says Sunny Wu, founder of ourCommonplace, an online marketplace that features ethical and sustainable goods. “You’re als