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    Teenager counting savings

    By Donna Freedman

    Some of us think wealth is unattainable. Hard work is expected, but building a fortune isn't on our radar of possibilities.

    We believe the rich will get richer, and the rest of us will stay right where we are - unless, of course, we slide backward.

    But such pessimism is unwarranted. It may not happen overnight, but people of moderate means can and do leverage their dollars to build wealth over time.

    The best news? Some of the most effective tactics for achieving wealth don't cost a dime.

    Here are seven crucial steps to getting richer over time.

    1. Set a goal

    It isn't enough to simply say, "I want to invest in real estate." That's more of a pipe dream than a goal. You need to create a road map to get you from here to wherever it is you want to be.

    For example, if you are considering investing in real estate, take concrete steps to learn more about what it will take to reach your goal. Such steps might include:
    • Educating yourself about the local rental market, such as learning about current vacancy rates and how much rent you can charge per month.
    • Determining how much money it will take to get your dream off the ground.
    • Figuring out how long it will take to set that cash aside.
    • Researching avenues that can help you achieve your dream, such as buying foreclosed properties at auction.

    2. Create a budget

    Create a budget that will get you to the goal you have set. Figure out how much you pay for necessities - a mortgage or rent, your monthly food bill, and other such costs - as well as optional purchases you make each month.

    Then, subtract any extras - for example, keep basic cable but eliminate pay-per-view movies. Or, budget for a month's worth of groceries but drop all but an occasional night out for a restaurant meal.

    Once you know your true expenses, subtract that figure from your take-home pay. That should give you a better idea of how much you will have available to save for your wealth-related goal.

    3. Track expenses

    Budgeting is important, but your spending estimates may not be as accurate as you think. Check your numbers by tracking expenses for at least one month. This will show you exactly where your money is going.

    Once you start tracking your daily expenses, you might be surprised to find that $300 a month is dribbling away on small, inconsequential purchases - apps, lunches out, magazines, music downloads - that you previously overlooked.

    Decide to cut such purchases in half, and you'll have an extra $1,800 a year for your wealth-building goals.

    Our friends at PowerWallet can help you both track expenses and find ways to reduce costs. Note that this doesn't have to mean massive deprivation - instead, it is simply a smarter use of available funds instead of blindly pitching dollars at wants and needs.

    4. Live below your means

    Once you have a viable budget in place, stick to it closely as possible. Put any savings away for retirement or in another type of investment portfolio.

    From our Solutions Center: Find a better online brokerage

    This doesn't mean you can't ever have fun again. But you have to weigh the opportunity cost of each splurge. The more you live below your means now, the wealthier you are likely to become in the future.

    5. Nix any debt

    If you have money left over each month, you definitely should save it - unless you have debt. In that case, it often makes more sense to use any "extra" money to pay off current obligations instead of saving or investing it.

    Remember, living according to the "minimum payment due" philosophy is guaranteed to keep you in shackles. Instead of merely paying the minimum, pay as much as you can toward your bills so you never have to pay interest again.

    Once the debt is gone, your new budget should keep you from falling back into the red.

    6. Negotiate ways to raise pay and lower costs

    A powerful way to build wealth is to increase the amount of money coming in while decreasing the amount going out.

    With that in mind, negotiate a pay raise. If possible, lay the groundwork now to get a raise in the new year.

    Just as important, keep finding ways to lower expenses so you are squeezing more money from your paycheck. You'd be surprised what's potentially negotiable:
    • Medical care. Some doctors and dentists will give you a discount if you pay cash at the time of service.
    • Credit card interest. If you've been making payments on time and have a decent credit score, ask the cardholder to lower your interest rate. (And while you're at it, look for a better deal on a credit card - such as one that pays rewards.)
    • The cable bill. Call up the provider and ask for a lower rate. Emphasize your other options, such as switching to competing cable companies or dropping cable in favor of Netflix and Hulu.

    7. Think past today's needs

    Eventually, you will get used to the new, more frugal lifestyle. But even as you are basking in the glow of your savings success, it can be tempting to slip back into old patterns.

    When that temptation arises - and it will - remember to think past today's needs, and to instead focus on tomorrow's wealthier future.

    This is a crucial attitude adjustment. Stop thinking you have to have everything you want as soon as you want it. An "instant gratification" attitude is a huge impediment to building wealth.

    Instead, continue to look for ways to trim expenses large and small. For example, since shelter is another huge chunk of most people's budgets, maybe it's time to look for a cheaper place to live. Other ways to save include:
    You don't have to live in a cardboard carton and subsist on cold oatmeal. But you do have to remember the opportunity cost of the dollars that leak from your wallet.

    What are your favorite wealth-building tips? Share them in our Forums. It's a place where you can swap questions and answers on money-related matters, life hacks and ingenious ways to save.


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    College textbooks books stack  stack of student reading material

    By Brandon Ballenger

    Most college students will return to campus later this month, and they'll spend a lot of money on textbooks.

    Students at public four-year colleges spent an average of $1,225 on books and supplies during the 2014-15 school year, according to the College Board.

    The total was even higher for private four-year colleges ($1,244) and public two-year schools ($1,328).
    Anything you can do to offset such costs helps. Following are 11 strategies to save on your textbooks.

    1. Contact your professors now

    Class may not start for weeks, but chances are the textbooks for your course have been selected. Professors have to give college stores advance notice so the stores can order copies.

    So email your professors and ask for the syllabus, or the required textbook list. That way, you can snag the cheapest copies before your classmates get the chance.

    Talk to students who have had your professors before. Such students might still have copies of the textbooks you need and sell them at a cheap price.

    2. Visit the campus library

    Why pay for a book when you can borrow it free? If you're quick enough, you may be able to get one of the library's precious few copies. If it's checked out, see if you can reserve a copy that's due back soon.

    The only flaw in this strategy is that you might not be able to check out the book for the entire semester. So, this strategy may work best for texts that will be used only briefly during the course of a semester.

    Don't forget digital libraries. Many out-of-copyright works are available on sites such as Project Gutenberg and Bartleby.

    3. Buy used

    Used books have to be in decent condition for stores to resell them. The savings can be significant, especially on an older edition.

    On several occasions in college, I bought used books online for less than $10 (including shipping) when the new price was $60 or more. None had significant defects - sometimes they had a little highlighting or writing. Nor were they missing anything essential for the class.

    From our Solutions Center: Help with student loan debt

    4. Check rentals

    Companies like Chegg, BookRenter and CampusBookRentals helped create an active market for textbook rental. Many college bookstores now offer the option, which can save you one-third or more in costs compared with buying. (If you rent from an online store, shipping usually is covered.)

    Just be aware that if the book is relevant to your major and you might reuse it, the savings might be greater if you buy the text. It can be hard to tell whether you'll need a book again. But if the book is by an author important to the field, the odds increase that buying makes more sense.

    I had books overlap in different English classes, and I also reused a few books from undergrad in my graduate courses.

    5. Look for digital

    As the number of tablets and e-readers grows, so does the selection of digital textbooks. And you can also rent digitally. Amazon suggests you can save up to 80 percent with its Kindle rentals, and you don't even need to buy a Kindle - there are compatible reading apps for computers and smartphones.

    6. Compare prices

    Prices can vary widely for both new and used copies, and online isn't always cheaper.

    At a minimum, check at and in addition to your school bookstore and any nearby off-campus competitors.,, and can help you compare.

    7. Make sure you get everything

    Sometimes books are packaged with software, codes for required online access, digital content, study guides, or workbooks. If the course requires any of that stuff, make sure your copy includes it - or that you will still come out ahead financially even if you have to buy such materials separately.

    8. Know the rules

    Understand the refund policy when you buy, so you don't get burned if you end up not needing a book or if you drop a class. Unwrapped or marked-up books might prevent you from getting a full refund.

    9. Keep receipts

    Not only will you need these for returns, but you also might want them for tax deductions.


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    Self-employed and loving it!

    By Marilyn Lewis

    Being your own boss definitely has its advantages - flexibility, upward mobility, the chance to take your business in the direction you choose - but at tax time, being self-employed can be a challenge. Here's a look at what's expected of you when you go to work for yourself.

    Self-employment tax

    Like everyone else, if you're self-employed, you'll pay personal income taxes by filing Form 1040 on or before April 15. In addition, however, the self-employed also have to pay self-employment (SE) tax, which is a combination of Social Security and Medicare taxes.

    You probably know that when you're an employee, 6.2 percent of your gross pay is withheld from your paycheck for Social Security. What you may not know: Your employer also pays the government another 6.2 percent, bringing the total contribution for Social Security to 12.4 percent of your pay, up to $118,500.

    Your employer is also responsible for paying another 2.9 percent of your pay into Medicare, with no limit.

    When you're self-employed, however, you're covering all this yourself. You pay the entire 12.4 percent of Social Security, plus the 2.9 percent for Medicare. So while employees pay 6.2 percent of their earnings for Social Security, the self-employed pay more than 15 percent.

    If your business earned $400 or more in net profit, you'll owe SE tax. If your business netted less than $400, you may not need to even file a 1040. You may owe tax on your self-employment income even you aren't self-employed full time or if your solo work is just a sideline. To know if you owe SE tax, subtract your business expenses (more on this below) from your business income using IRS Schedule C (Form 1040), Profit or Loss From Business.

    If you owe self-employment tax, use a different 1040 form, Schedule SE (Form 1040), to report your income. Transfer your bottom line amount from Schedule C to the SE 1040.

    The IRS explains the details at IRS Self-Employed Individuals Tax Center.

    Schedule C-EZ

    You might be able to use the simplified Schedule C-EZ if you meet the following criteria:
    • You earn a profit.
    • You have expenses of $5,000 or less.
    • You have no employees.
    • You have no inventory.
    • You are not using depreciation or deducting your home's cost.

    The IRS has help deciding between Schedule C and C-EZ.

    Click here and learn to slash your taxes with our new tax course!

    Quarterly tax payments

    Self-employed workers estimate how much Medicare, Social Security and income tax they owe and pay it in quarterly installments. Use Form 1040-ES, Estimated Tax for Individuals (PDF) to calculate and pay quarterly taxes. It has a worksheet that helps estimate what you owe and vouchers to submit with your quarterly tax payments.

    You'll need last year's tax return to complete it. If this is your first year of self-employment, you'll estimate, making up any difference in subsequent quarters.

    In addition, there are other requirements. Your specifics will depend on the type of corporate structure you've chosen.

    Corporation types

    Depending on how your business is incorporated you may have other tax reporting requirements. The IRS describes business structures and their tax filing requirements here.

    Typically, self-employed workers, including contractors, operate as "sole proprietors." Few one-person and small businesses become corporations as these have more complex tax and legal requirements.

    Some small or one-person businesses use the S Corporation (S Corp) structure, though. The Small Business Administration, comparing incorporation options for businesses, says that "one of the best features of the S Corp is the tax savings for you and your business." However, forming and operating an S Corp requires strict operating and reporting procedures that not every small business wants to undertake.

    If you are curious about an S Corp, ask a tax adviser with expertise in this area to help you weigh the pros and cons.

    Sole proprietors

    You may be thinking, "Uh oh, I didn't incorporate at all." Breathe easy. The most common structure used by small-business people is a sole proprietorship. You don't need to do anything special to declare yourself a sole proprietor, as long as you are the only owner.

    Tax-wise, this is the easiest approach. For details on IRS filing requirements see the IRS forms for sole proprietors.

    Limited Liability Companies (LLCs)

    An LLC is a business structure established by your state that may give you some advantages, including some protection from personal liability. (The SBA has more on LLCs.) But having an LLC doesn't affect how you file taxes - you just file as a sole proprietorship, an S Corporation or whatever business structure you've chosen to use.

    State taxes

    Paying state and local taxes is another obligation of self employment. Each state and local government has its rates and rules. The IRS offers links to each state's tax authority. Check with your city government for local rules.

    Business deductions

    You can deduct "ordinary" and "necessary" business expenses by subtracting them from your income. Here's the test, from IRS' section on deducting business expenses:

    An ordinary expense is one that is common and accepted in your industry. A necessary expense is one that is helpful and appropriate for your trade or business.

    Independent workers' deductions can include costs for travel, retirement savings, entertainment, insurance, license fees, taxes, and office equipment and software. These articles have the details on taking deductions:
    More deductions

    Some of your business expenses can be deducted only partially - your costs for a car used for both personal and business transportation, for example. If 30 percent of your car's use is for business, you'll deduct 30 percent of the vehicle's costs.

    As an alternative, you can deduct all of your business mileage, so keep a record with odometer readings for the start and end of each business trip and consult this chart for mileage rates the IRS allows.

    Some business costs - investments that become business assets - are treated differently. They are capitalized, deducted over a number of years. Nolo explains deductions versus capital expenses.

    Do you have experience paying taxes as a self-employed person? Share with us in comments below or on our Facebook page.


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    Aloe Blacc Performs Opening Night Free Concert At Super Bowl City

    By Kimberly Palmer

    For football players, managing money is easy to fumble. Unlike most people, they often earn huge paychecks early in their careers, when they have the least experience handling money, and then those paychecks can abruptly drop off when they retire from the game. HBO even created an entire television series, "Ballers," starring Dwayne Johnson, around the concept. Former NFL wide receiver Terrell Owens, former quarterback Dan Marino and former quarterback Vince Young have filed for bankruptcy, lost millions in bad investments and defaulted on loans, respectively.

    Last year, the National Bureau of Economic Research found that 16 percent of players drafted by NFL teams between 1996 to 2003 filed for bankruptcy within 12 years of leaving the NFL. Those public troubles are part of the reason one former star, Phillip Buchanon, turned himself into something of a financial superhero last year, penning a guide to money, "New Money: Staying Rich," after his football retirement. The NFL's Player Engagement Department also runs financial boot camps for players and the NFL Players Association, a union, invests in financial literacy education, too.

    All those efforts might be paying off: Recent coverage of the Redskins players' lifestyle choices have centered around their frugality. A widely-shared January Wall Street Journal article revealed that some players are biking to work, driving beat-up vans and living in low-rent apartments. Their penny-pinching habits were attributed partly to their personalities, life experience and the availability of cheap housing near their training facility.

    At this year's Super Bowl on Feb. 7, the money-football connection will break new ground: SunTrust Bank will sponsor the first Super Bowl ad to promote financial wellness, with the goal of getting Americans thinking and talking about managing their money. We're used to seeing promotions for beer, snack food and cars, but for personal finance? Not so much.

    "We thought having an ad in the Super Bowl would help start a movement. This is an attempt to start a conversation around what needs to be done," says Brad Dinsmore, head of consumer banking for SunTrust. "It became really clear that one of the biggest issues facing Americans is financial stress - the stress associated with managing money ... It's not only impacting clients' financials, but their health and happiness."

    That's true for people of all ages, says Brian Ford, ​SunTrust's financial well-being executive. According to research from the American Psychological Association, almost three-quarters of Americans feel stressed about money. "If you look at millennials, it's that much worse. Most run out of money between paychecks," Ford says. That's why developing financial confidence through sound money management is so important, he adds. "We see people are stuck, and they need to be inspired."

    SunTrust hopes that after seeing the 30-second ad, which will air during the break before the last two-minute warning​ in the fourth quarter of the game, will drive people to the SunTrust website, which offers financial tools and quizzes to encourage people to manage their money. The company also hopes that viewers take to social media to share their thoughts using the hashtag #onUp.

    The ad was created by director Dante Ariola​ and revolves around the concept of holding one's breath. "You're not really enjoying moments in life if you are stressed about your finances," Ford explains, just as you're not fully present when you're holding your breath.

    The visual impact of holding your breath is powerful and relevant to money worries, Dinsmore adds. "If you're spending your time worried about money, you won't have time to spend on the people you love and the moments that matter in life," he says.

    Over on the SunTrust website behind the campaign,, visitors are encouraged to take a quiz on their "mental wealth" level and read articles about money management, from how to save more to how to plan and budget. Visitors can also sign up by email to "join the movement" and receive updates. Ford says the goal of the campaign is not to promote products or services but to address the country'sfinancial stress and get people talking about what they can do.

    "We find a lot of Americans are not comfortable talking about the issue, are embarrassed or aren't sure what to do. It seems overwhelming. The biggest thing is to take the first step," Dinsmore says, by committing to taking control over your money management.

    If they succeed in getting the millions of people watching the Super Bowl to do that, that would be reason for a touchdown celebration.


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    Young couple laugh together as they relax on sofa

    By Jim Gold

    Money remains a leading cause of stress in romantic relationships, according to surveys released ahead of Valentine's Day.

    But that doesn't mean you should avoid discussing finances, they say.

    In a Country Financial Security Index Survey called "'Til Debt Due Us Part," more than 9 in 10 of the 1,000 respondents told the insurance company it is important to discuss finances with their significant others.

    About 7 in 10 surveyed said they prefer to start conversations about personal finances within the first few months of a relationship or sooner. Joe Buhrmann, manager of financial security at Country Financial, says in a press release:

    If you haven't discussed money with your valentine, consider starting the conversation sooner rather than later. Talking about finances as your relationship is budding can help quell financial quarrels down the road.

    Millennials in the survey were more accepting of a significant other's debt level. Nearly 2 in 3 said they would rather date a college graduate with significant student loan debt than someone who doesn't hold a college degree.

    Also, 2 in 3 millennials were concerned with their love interest's debt, compared to nearly 8 in 10 of the general population. Almost 9 in 10 Americans over age 65 believe a significant other's debt should cause concern for someone who is single and dating.

    While money management isn't the greatest first-date topic, financial compatibility is a key ingredient in building a lasting romantic relationship, says a survey about financial deal breakers.

    More than 5,000 people responded to the question, "Which of the following are the most significant financial deal breakers for you in a relationship?"

    Their answer choices:
    • Overspending: 37.6 percent
    • Secretive about finances: 35.9 percent
    • Too much debt: 32.6 percent
    • Too cheap: 19.8 percent
    • Poor credit: 18.2 percent
    • Doesn't make enough money: 13.9 percent

    "The biggest three financial deal breakers are about equally important to Americans - spending habits, debt and financial honesty," says Elyssa Kirkham, the lead GOBankingRates reporter about the study. "These are things that the partner has direct control over and can readily change, but if left unaddressed, can cause some of the biggest issues in a relationship."

    If you need to get your spouse on board with a savings plan, see our tips here.

    How does money affect your relationship? Sound off in our Forums. It's the place where you can speak your mind, explore topics in-depth, and post questions and get answers.


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    For sale sign hanging in front of house

    By Maryalene LaPonsie

    Is your house your castle? Or an albatross around your neck?

    Your answer might depend a lot on your mortgage. Getting an affordable property at a great rate can make you feel as if life couldn't be any sweeter.

    But ask anyone who bought a house with a mortgage they didn't understand and couldn't afford, and they will likely tell you their house has brought them nothing but frustration and tears.
    If you'll be in the market for a new place soon, make sure you avoid the following six mortgage mistakes.

    1. Not reviewing your credit first

    At least six months before you go to your first open house, you need to go to That's the official site to get free credit reports issued by the big three reporting agencies: Experian, Equifax and TransUnion. You're entitled to one free credit report from each agency annually.

    From our Solutions Center: Find a better mortgage in seconds

    In addition to your credit reports, it's also critical to see your credit score. Some banks and credit cards now offer the most widely used credit score, the FICO score, as a monthly perk for their customers. If you're not lucky enough to have access to a free score, you'll have to pay FICO $19.95 to see yours.
    You can get free scores at sites like and, but they won't be FICO scores.

    You'll need your credit score to be in great shape if you want the best rates. A 2013 study from the Federal Trade Commission found 5 percent of consumers had errors on their report that could result in less favorable loan terms. If you're among that 5 percent, you want to find any errors and correct them before applying.

    And if your credit score simply stinks, you can try these tips for raising it fast.

    2. Failing to get preapproved

    The next mistake you can make when applying for a mortgage is failing to get preapproved.

    Getting preapproved by a bank is one way to avoid the heartbreak that comes from falling in love with a house you can never buy. It may also give you an edge if there are multiple offers for the same property. A seller will feel more confident selecting a bid from someone with a mortgage preapproval rather than a person who hasn't even begun the process.

    However, don't get carried away by whatever preapproval amount you receive from the bank. Remember, what the bank thinks you can afford and what you can actually afford may be two different things. A lot of people lost their homes in the Great Recession because they were given loans they couldn't pay back. Don't make the same mistake.

    3. Not shopping around for the best rate

    The Consumer Financial Protection Bureau says nearly half of mortgage borrowers don't shop around, and that's a big mistake. Seasoned shoppers search for the best deals on soap, furniture and cars, but some fail to look for a better mortgage rate.

    It may be convenient to use your primary bank for a mortgage, but that could also be expensive if its rates aren't competitive. According to Bank of America, for every 0.25 percent you can reduce your interest rate on a $200,000 mortgage, you'll save $30.55 per month. Over a 30-year period that can add up to a lot of extra cash.

    To review current mortgage rates, visit the Money Talks News Solutions Center.

    4. Ignoring mortgage fees

    While you're investigating rates, don't forget the fees. Many mortgages come packed with fees of all kinds. Some - such as your county recording fee - are likely fixed, but others are negotiable.

    Before your closing, you should be provided with a good faith estimate of the fees. Ask your lender to review what they are for and then see if you can negotiate a lower price. These are a few of the fees likely to have the most wiggle room:
    • Loan origination fee
    • Application fee
    • Broker fee
    • Underwriting fee
    5. Not having cash for a down payment

    Not having a down payment stashed away can sink your prospects of getting a mortgage. After being bitten by the housing market crash, traditional lenders shy away from giving mortgages to those bringing nothing to the table.

    Zillow says you generally need to have a down payment of between 5 and 20 percent to qualify for a conventional loan. And if you put down less than 20 percent, be prepared to pay mortgage insurance.

    6. Not understanding your mortgage terms

    Underwater mortgages weren't the only problem homeowners faced during the Great Recession. An untold number of people also lost their houses simply because they signed on the dotted line without understanding what the heck their mortgage entailed.

    For example, people thought they'd hit the jackpot with adjustable-rate mortgages, known as ARMs. Homeowners were fine for the first few years while their mortgage rate was fixed and low. But when it reset to the current market rate, that affordable monthly payment suddenly wasn't so affordable.

    A 2008 report from the Federal Reserve Board found that more than 75 percent of the subprime loans issued from 2003-2007 before the housing market crash were "short-term hybrids" that worked like ARMs. By 2008, more than 21 percent of these subprime loans were seriously delinquent.

    The moral of the story is to always understand what you're signing up for. It's not enough to know what your monthly payment is today. You also need to ask if the interest rate can change and if so, when and by how much will it increase.

    If you're not comfortable with the loan terms or don't understand them, it's better to walk away than to make an expensive and potentially life-altering mistake.

    What's your experience with borrowing to buy a home? Share in the comments in our Forums. It's the place where you can speak your mind, explore topics in-depth, and post questions and get answers.


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    BJTFW1 Man in Uncle Sam's costume taking money from wallet, studio shot  Man; in; Uncle; Sam's; costume; taking; money; from; Se

    By Geoff Williams

    On the list of things you hate, somewhere in there is probably learning that something you didn't think you had to pay tax on, you do.

    Any money that comes into your life can be taxable, says San Diego-based tax attorney Sam Brotman.

    "Technically, under Internal Revenue Code Section 62, the IRS can find a way to tax almost every way of receiving money ... Even finding $20 on the street would be considered taxable, and the IRS would want their fair share of the money that you receive," he says.

    On a practical note, Brotman says most people don't report that $20 bill, and "the reality of the situation also is that the IRS does not have enough enforcement resources to come after people who forget to declare little items on their return. It would cost them more to come after those people than they would get in tax revenue for the government."

    Still, $10 you won from a lottery ticket and $1,000 in winnings is another story. If you want a heads up on what unusual monetary situations are taxable, and what you should be reporting when you file, read on.

    Employee awards. Were you an especially productive employee last year? You may have some bad news coming.

    "Rewarded for doing good work? Cash awards or bonuses from your employer are taxable. So are vacation trips for meeting sales goals," says Robin Solomon, a tax and benefits attorney with Ivins, Phillips & Barker in the District of Columbia.

    On the plus side, Solomon adds, "An exception applies for noncash employee achievement awards - such as a gold watch or iPod shuffle - presented for your length of service or safety achievement. These are generally not taxable if valued below $400."

    The same goes for other nominal (that is, cheap) holiday gifts, Solomon says. So if you were given a Christmas ham, she says you don't have to worry.

    Gambling wins. When you win the Powerball, the IRS takes a nice chunk of that money. But did you know it is entitled to smaller lottery wins, too?

    "Any gambling wins, including lottery and fantasy sports, are income," says Bob McKenzie, a Chicago tax attorney with Arnstein & Lehr. But there is an upside, he adds: "You can deduct your gambling losses against winnings."

    Money won in a lawsuit. You sued someone or settled out of court, and it all worked out in your favor. It's not all good news, unfortunately. You may have to pay the IRS, says Michael Eckstein, a tax accountant based in Huntington, New York.

    "Unbeknownst to most, legal settlements and awards can be taxable. Their taxability is usually complicated and often depends on the details of a particular case," Eckstein says. "To oversimplify things, the taxability of compensatory damages depends on what loss the award was meant to make whole, whereas punitive damages are generally taxable."

    Canceled debt. If you've been financially struggling for a while and finally achieved a minor or major victory, talk about disappointing news.

    "If you are in financial trouble and are able to negotiate a cancellation of all or a portion of your debt, whether it is a mortgage, credit card or other personal loan, the amount canceled is considered income to you," says Anthony Criscuolo, a Florida-based certified financial planner with Palisades Hudson Financial Group. (For those wondering, debt canceled in a bankruptcy case is a different matter, and you won't be taxed for that, Criscuolo says.)

    Even a personal loan from a friend or family member that was forgiven is considered taxable income, Criscuolo says.

    That said, he adds, "One workaround is to specifically document the forgiven loan as a gift."

    If the money is really serious - and in this case, that would be anything over $14,000 - you probably want to bring in a tax professional, and the person who forgave the loan will likely need to file a gift tax return.

    Alimony. It may be a lifesaver to get that relief from your ex-spouse, but, alas, "you will definitely be paying a tax on it," says David Hryck, a tax lawyer with Reed Smith in New York City.

    But it isn't all bad news. "If you're receiving property payments or child support payments, those will not be taxed," Hryck says.

    Renting out a room. Have you used Airbnb or another online site to rent out property? You may (or may not) be in the clear.

    "According to the IRS, if your rental period is less than 15 days, you do not need to pay tax on the profits. After 15 days, you should be paying tax on the profits," Hryck says.

    Found money. Remember the $20 bill you found? There's actually a name for that situation, Hryck says. It's "the treasure trove tax. Let's say you found an envelope of money. You should be paying tax on the sum. Same would hold true if you bought a car and there was a hidden amount of cash in the trunk," Hryck says.

    Class-action settlements. So a bank, gym or phone company or some other business did you wrong by charging fees that were later declared illegal by a court, and you received some money. Great - says the IRS.

    If you accept settlement proceeds, "even if they are small, that information is usually reported to the IRS, and the IRS often does come after you for tax on those amounts," Brotman says.

    So if you haven't picked up on the moral of the story yet, Brotman, who had the first word, can have the last one as well.

    "In short, you should report all the income that you receive within a given year. However, forgetting to report an item or two does not necessarily mean that you are going to get audited," Brotman says. "My advice is to be as careful as you can when preparing your taxes and to make sure that all the larger items are definitely reported."


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    Businesspeople working in corporate training facility

    By Maryalene LaPonsie

    Debt is a four-letter word of the bad kind, according to some people. The type of thing that shouldn't even be considered by responsible adults. However, not all finance professionals agree debt is something to be avoided.

    "Not all debt is created equal," says Gary Poch, vice president of global consumer services for Equifax. "There may be some types of good debt."

    Specifically, experts told U.S. News it may pay to go into debt for one of the following four reasons.

    Reason No. 1: To Buy a House

    For many people, home ownership is only possible through debt in the form of a mortgage. The average cost of a home sold in November 2015 was $374,900, according to the U.S. Census Bureau. That price makes it impossible for many U.S. families to pay cash for property, unless they save for years or even decades.

    That's not something people should have to do, says CEO Fred Schebesta. "I'm a big believer in saving money, but it's better to do some things while you're young," he says. Rather than waiting until the kids are grown and there is cash in the bank, taking out a mortgage at a younger age can improve a family's quality of life.

    Beyond that, a house is an appreciating asset that will grow in value over time. As a bonus, interest payments made on a mortgage can be included in itemized deductions for federal income taxes. Together, these factors add up to mortgages being a smart debt choice for many people.

    Reason No. 2: To Get an Education

    Despite chatter in some circles about a looming student loan crisis, many experts still say debt for educational purposes can be smart. "It's an investment in human capital," says Eric Meermann, a certified financial planner and portfolio manager with Palisades Hudson Financial Group in Scarsdale, New York.

    Meermann has personal experience with this type of debt. He took out loans to cover the entire cost of his education at the Stern School of Business at New York University. The debt has since been repaid, and it was money well-spent in Meermann's mind since it opened up the opportunity for greater income.

    Data from the Bureau of Labor Statistics backs up the assertion that higher education equates with higher income. The following are average weekly incomes by education level for adults ages 25 and older in 2014, the latest year for which numbers are currently available:Less than a high school diploma: $488
    • High school graduate with no college: $668
    • Some college or an associate degree: $761
    • Bachelor's degree only: $1,101
    • Bachelor's degree and higher: $1,193
    • Advanced degree: $1,386

    Even Schebesta, who isn't sold on the idea that everyone needs a degree, says debt for training or a technical course can be a good investment if it will unlock greater earning potential.

    Reason No. 3: To Start a Business

    Schebesta feels confident that taking out a loan for business purposes can pay off. "I saved my first company by borrowing $50,000 to cover payroll," he says. He was in his early 20s at the time, and the move allowed him to regroup and later sell the business.

    When small businesses need an inflow of cash, they typically either go into debt or raise equity through private investors. Although going into debt can be risky, particularly if the lender requires the business owner to be personally liable for payments, it can be an easier option than looking for investors who essentially become co-owners in the venture.

    Reason No. 4: To Take Advantage of Low Interest Rates

    The final reason why it might pay to go into debt is also a point of contention among financial experts. That reason is to take advantage of the current low-interest market.

    "If you want to buy a new purse and are thinking about putting it on a credit card with 15 to 20 percent interest, that's probably not a good decision," says Brandon Moss, certified financial planner and vice president of United Capital in Dallas. However, it may make sense to get a car loan at 2 percent rather than pulling cash from investments that are earning 6 to 8 percent.

    Meermann agrees it can be a smart move to take out a low-interest loan in order to let investments grow, but Poch isn't so sure. "I don't know that I agree with that advice," he says. Poch advises people to consider the term of the loan, the value of the car and how quickly it will depreciate before making a decision to finance.

    Using Debt as an Investment

    While these financial experts disagree on the details, they all agree that debt can be a useful tool, so long as it is used in a way that will generate cash.

    "What are the things that are going to create wealth over time? What are the things that are going to deplete wealth?" Meermann asks. Going into debt for the former - for houses that appreciate or a degree that could land a higher-paying job - can be smart while debt for the latter can be bad news.

    Still, people should carefully consider their financial situation before going into debt. A high debt-to-income ratio can reduce a person's credit score and may make it difficult to repay obligations. As Poch notes: "All debt can be bad if you don't pay on time.


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    Hispanic customer shopping in store

    By Josh Felber

    When we think of "cheat days," we tend to think of a sweet treat or indulgent meal that breaks a cycle of strict dieting. A cheat day is meant to satisfy cravings, and it's a great way to incorporate foods you normally wouldn't include in your diet without ruining your metabolism. Similarly, a financial cheat day can help you budget better and prevent an overindulgent, perhaps impulsive, shopping spree.

    There are plenty of financial resolutions that can help fatten your wallet this year. You can check your credit card history, increase your savings or adjust your lifestyle to live well below your means. The Internet and mobile apps make it easy to monitor spending, and even blogs like this one provide helpful tips on how to maximize your savings. But sticking to a strict money diet can be mentally exhausting, and even the most diligent saver can suffer the occasional slip up here and there.

    The discipline and patience needed to stick to your financial resolutions can be taxing, just like how following a strict diet can drive you crazy. Just like a cheat day when you diet, allowing yourself the occasional financial celebration can help you feel indulgent without going overboard. "Overspending and not showing cash available to support your debts can make it hard to get home mortgage financing or get a commercial or business loan," says Brad Hettich, founder of the finance and loan company Commercial Lending X. "But that does not mean you have to reserve all of your cash. I usually tell my clients they can still make a purchase here and there, but the key is not to overindulge every month but just occasionally, making it so most months they continue to build up their cash reserves."

    Culprits of Overspending and Indulging

    It's difficult to live a frugal lifestyle when we're surrounded by messages telling us to buy, buy, buy. We're pressured by our peers to spend money in order to keep up with our social lives; fashion trends encourage us to always be on the hunt for the latest styles so we can fit in with our friends. Shopping is a sport that requires time and mental energy. Last year, the National Association for Professional Organizers found that 54 percent of Americans feel overwhelmed by all the stuff they have, and 78 percent don't even want to deal with it. This habit of overspending has led to roughly $712 billion in credit debt owed by U.S. consumers, according to a NerdWallet analysis, and is why many financial advisors recommend planning and sticking to a monthly budget.

    Triggers such as stress or a bad day at work can also lead to trigger-happy spending habits that may leave you with buyer's remorse the next day. Extreme emotions like depression or sadness can encourage people to shop or make purchases as an easy way to cure their emotional state. Have you ever gone out and impulsively ordered something from Amazon when you were upset? Or how about dropping Benjamin's at a club to celebrate a bonus you received at work? Instead of waiting for a moment of overindulgence though, make it a point to reward yourself every now and then for your hard work. Small, semi-regular treats are a welcomed break from your regulated money diet and can provide an additional incentive to help you stay on track with your financial milestones.

    Moderation Is the Name of the Game

    A financial treat doesn't have to be a large purchase; it could be something as simple as buying a grande mocha from Starbucks or buying lunch instead of bringing leftovers to work. Or a financial indulgence can be an investment toward a more expensive reward, like a piece of clothing or a new bag. Giving yourself a specific reward or goal to work toward can help you to avoid temptation and keep you from spending your paycheck on a single item. It also helps to keep some sort of schedule in order to keep track of your financial rewards. Consider creating a calendar with an end goal so you can always keep your eye on the prize. For example, mark in your planner when you want to treat yourself with a trip to your favorite coffee shop.

    It's important to remember that financial cheat day's only work when they're incorporated into your regular saving habits. If you find you're overspending monthly, try holding on to your pay stubs and calculating how much you spend in one week. Consider switching to cash and leaving your debit and credit cards at home to avoid spending on a whim. Sometimes all it takes is bringing your lunch to work everyday to help you reach your financial goals and free up cash so you can reward yourself.


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    Woman shopping online with credit card

    By Matt Schulz

    Rewards junkies are always looking for a way to pile up more miles or points without getting on an airplane.

    The good news is that there are plenty of great ways to do that. Applying for a credit card with a big sign-up bonus is maybe the best example, but is hardly the only way. Dining in the right restaurants can get you extra points, too, as can buying items through a card issuer's shopping portal. There are seemingly as many ways to boost your miles as there are cardholders seeking to boost them.

    However, that doesn't mean every way to grab more rewards is a wise move. Take, for example, paying your taxes with a credit card.

    What a great idea! I have enough money to pay for my taxes, but why not just pay for it on my credit card and pocket the extra miles?

    It's simple: The math usually doesn't work.

    Here's why ...

    Most rewards credit cards give one point per dollar spent. Yes, those multipliers can be far higher in certain cases, especially when rotating bonus categories are involved. However, one point per dollar - in other words, a 1 percent return - is typical in the industry. That's all well and good until you notice that the typical convenience charge for paying taxes with your credit card ranges from 1.87 percent to as high as 3.93 percent.

    Paying 3 percent to get a return of 1 percent?

    You don't have to be an accountant to understand why that's a bad deal. Overpaying to get rewards is seldom a good idea. It's the same trap that awaits people who want to pay college tuition with a credit card. The convenience fee that you'll be stuck with will typically turn a sweet, alluring deal into a money-losing proposition.

    Can it ever work?

    That doesn't mean paying for taxes with a credit card can never make sense. Again, it's all about the math.

    The Internal Revenue Service lists four payment processors through which you can pay via credit card when you file electronically and then three other payment processors that let you pay your taxes via credit card over the phone. The phone-based options have the lowest convenience fees, ranging from 1.87 percent to 2.25 percent.

    If you have a cash back card that gives you 2 percent back on every purchase - the Citi Double Cash card, for example - and you opt to pay your taxes via the processor that charges the 1.87 percent fee, the math actually works in your favor, albeit narrowly. You'd pay 1.87 percent to get 2 percent back, turning a 0.13 percent profit. In real money terms, if you were paying a $5,000 tax bill with your credit card, you'd pay a $93.50 convenience fee in order to earn $100 worth of rewards - a $6.50 profit. It's not going to make you rich, obviously, but it is a profit nonetheless.

    The plan isn't foolproof, however. If you can't pay the balance off immediately, there's a good chance that all of your profit will be eaten up quickly by interest charges.

    Is it possible to write off the processing fee?

    In the long run, it might even be possible to boost your profit a bit further by writing off some of your processing fee. The credit card processing fee can be included as a miscellaneous deduction on Schedule A. According to the IRS, miscellaneous deductions include: tax preparation fees; unreimbursed employee expenses, like costs involved in searching for a new job; and other expenses, such as credit or debit card conveniences fees.

    It's not quite as simple as it may sound, though. In order to write off miscellaneous deductions, the total amount of those deductions must total at least 2 percent of your adjusted gross income - and you can only deduct the amount exceeding that 2 percent. Here's an example:
    • Say your AGI was $75,000 in 2015, and your miscellaneous deductions total $1,800.
    • You would be eligible for a write-off, since $1,800 is more than 2 percent of $75,000. (Two percent of $75,000 is $1,500.)
    • However, since you're only able to deduct the amount of deductions exceeding 2 percent, the amount that you'd be able to deduct would be only $300.

    So unless you have a really large tax bill or a lot of other potential miscellaneous deductions to include, it is probably best to not count on writing off that fee.

    The Bottom Line

    For most Americans, paying taxes with a credit card isn't wise, simply because of the math. It just doesn't make sense to pay a 2.5 or 3 percent convenience fee in order to get a reward of 1 percent back.

    If, however, you're willing to take the time to use the least expensive credit card processing option offered by the IRS and you can pay for it with a card that rewards you with at least 2 percent on purchases and you're absolutely, positively, beyond-a-shadow-of-a-doubt sure that you can pay the entire bill off immediately without paying your credit card issuer any interest, you might be able to make a profit by paying your taxes with a credit card.

    That profit would be tiny, though - about one-tenth of 1 percent. Knowing that, you're probably better off choosing another way to pay Uncle Sam and focusing your rewards efforts on more lucrative goals.


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    Businessman sleeping at desk

    By Jim Gold

    Money never sleeps. However, you should, especially if you want to keep your fiscal health.

    Just one night's lost sleep can cost you a bundle.

    "You need good self-control to make good financial decisions and plans," says Todd Kashdan, George Mason University psychology professor and co-author of "The Upside of Your Dark Side." "Sleep hygiene helps you get there."

    Kashdan tells that high-quality sleep is linked to better mental functioning,
    including self-control, a key to financial well-being.

    He says self-control includes the ability to:
    • Delay gratification
    • Resist temptations
    • Conduct complex analyses
    • Alter or resist your emotions as needed in the short-term

    "Each of these abilities will help you in making healthy financial decisions by considering the short-term and long-term view, by resisting the allure of immediate mood boosts and the pull to avoid anxiety-provoking situations," he says.

    Keeping control, maintaining your money

    Unfortunately, you may be sabotaging your own sleep, warns Joel Anderson, instructor and lead researcher for a Utrecht University, Netherlands, study of bedtime procrastination.

    Anderson says it is important to avoid bedtime procrastination. Bedtime procrastinators delay going to bed even though they expect their sleep-deprived selves to be worse off and don't have a compelling reason for delaying rest, he says.

    "A significant portion of sleep insufficiency is caused not by medical conditions like insomnia or sleep apnea, but by poor choice - everything from binge Netflix viewing to late-night knitting," Anderson says.
    Such procrastination can spark a "vicious downward spiral," he says.

    "Since resisting the tendency to procrastinate requires precisely the willpower resources that are undermined by not getting enough sleep, bedtime procrastination is likely to lead to even worse sleep deprivation, none of which is good for your decision-making, including financial decision-making," he says.

    A 2011 Duke University study revealed sleep deprivation not only impairs our ability to make decisions, but also leads us to be optimistic about financial decisions. Using a functional MRI on 29 participants who had to make gambling decisions, scientists showed that a night of lost sleep led to increased activity in brain regions that assess positive outcomes while decreasing activation in brain areas that process negative outcomes.

    How much sleep do you need?

    Last year, the nonprofit National Sleep Foundation revised its recommendations on how much sleep you should get.

    An 18-member panel of experts spent nine months reviewing 10 years' worth of research and voted on the appropriate amount of sleep for each age group. They focused on outcomes for memory, mood, performance and health conditions such as stroke and obesity while factoring in overall health and cognitive, physical and emotional health.

    NSF recommended amounts of nightly sleep vary by age:
    • Newborns (0-3 months): 14-17 hours (previously: 12-18 hours)
    • Infants (4-11 months): 12-15 hours (previously: 14-15 hours)
    • Toddlers (1-2 years): 11-14 hours (previously: 12-14 hours)
    • Preschoolers (3-5 years): 10-13 hours (previously: 11-13 hours)
    • School-age children (6-13 years): 9-11 hours (previously: 10-11 hours)
    • Teens (14-17 years): 8-10 hours (previously: 8½-9½ hours)
    • Young adults (18-25 years): 7-9 hours (new category)
    • Adults (26-64 years): 7-9 hours (no change)
    • Older adults (65+ years): 7-8 hours (new category)

    5 sleep tips

    Here are some tips from the Mayo Clinic to help you get a better night's rest.

    Manage stress: Start with the basics, such as getting organized, setting priorities and delegating tasks.

    Take a break when you need one. Share a good laugh with an old friend. Before bed, jot down what's on your mind and then set it aside for tomorrow.

    Stick to a schedule: Go to bed and get up at the same time every day, even on weekends, holidays and days off. Being consistent reinforces your body's sleep-wake cycle and helps promote better sleep at night.

    Limit food and drink: Don't go to bed either hungry or stuffed. Also, nicotine and caffeine take hours to wear off and can wreak havoc on quality sleep. Alcohol might make you feel sleepy at first, but it can disrupt sleep later in the night.

    Create a bedtime ritual: Do the same things each night to tell your body it's time to wind down - taking a warm bath, reading a book, listening to soothing music - preferably with the lights dimmed.

    Get comfortable: Create a room that's ideal for sleeping. Consider room-darkening shades, earplugs, a fan or other devices to create an environment that suits your needs. Choose a mattress and pillow that feel most comfortable to you. If you share your bed, make sure there's enough room for two. If you have children or pets, try to set limits on how often they sleep with you.

    Do you have any other sleep tips? Share them in our Forums. It's a place where you can swap questions and answers on money-related matters, life hacks and ingenious ways to save.


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    Credit report with score

    By Jim Gold

    It pays to repair a broken credit report, but avoid scams that could cost you thousands.

    Removing negative items from your credit report can help improve your FICO score, making it easier to buy or rent a home, get insurance, buy a car - and sometimes even make the difference in getting a job. A higher credit score can mean lower interest rates when you go to acquire a mortgage or car loan.

    For example, say you put 20 percent down on a $300,000 home. According to online mortgage calculators, like one we tested at Zillow, over the 30-year life of your $240,000 loan, at a 3.5 percent interest rate you'd spend $147,974 in interest; at 6 percent, you'd spend $278,013 in interest.

    From our Solutions Center: Free help with your credit score

    That's why so many people try to repair their credit. Many turn to professionals for help, but experts, including Money Talks News' Stacy Johnson, will tell you to be careful as there are many scammers out there.

    The Federal Trade Commission, for example, recently asked the courts to help shut down one allegedly bogus firm that traded on the consumer protection agency's name. The Los Angeles-area company called itself FTC Credit Solutions, but the initials really stood for First Time Credit Solution, the agency said.

    The firm's actions, it alleged, were typical of scammers illegally charging customers upfront fees, falsely promising they could remove negative information such as late payments, foreclosures and bankruptcies from consumers' credit reports and guaranteeing consumers a credit score of 700 or above within six months or less.

    While experts say there is nothing a credit repair company can do for you that you can't do for yourself, many consumers still turn to professionals. Prices on allegedly legitimate firms run $59 to $89 a month, according to some reports, and some charge an initiation fee.

    We've partnered with, accessible through our Solutions Center, to match you with reputable, trustworthy experts who can help guide you through the process of repairing your credit.

    Meantime, follow these four don'ts and five do's of credit repair.


    These gimmicks, experts say, indicate you may be dealing with a scammer:
    1. New number trick: Some credit repair agencies advise you to start a new credit file by getting a new tax ID number - CPN, credit profile number, or EIN, an IRS-issued Employer Identification Number - to use in lieu of your Social Security number. The new number may resemble a Social Security number. This trick is illegal. The FTC warns that scammers may be selling stolen Social Security numbers, often taken from children. By using a stolen number as your own, the con artists involve you in identity theft.
    2. Lying trick: Scammers may tell you to give false information on your applications. The FTC reminds consumers it's a federal crime to lie on a credit or loan application, misrepresent your Social Security number, or obtain an EIN from the IRS under false pretenses. You could go to prison instead of to the head of the credit repair class.
    3. Protest trick: Credit bureaus remove from your credit history the items that you protest - at least while they investigate. While those things are off your credit report, some people will apply for new credit. That's fraud.
    4. Upfront charges trick: The law requires credit repairs companies not to collect a dime from you before they perform any services.
    1. Get free copies of your credit reports: Visit to get a free copy of your credit report from each of the three credit reporting agencies, then thoroughly scrutinize the information in the reports for errors, omissions and fraudulent accounts. Be on the lookout for negative marks that should have dropped off your report because they're more than seven to 10 years old. Most bad items drop off in seven years.
    2. Fix errors: Notify the credit reporting agency online or by letter (see a sample by the FTC here). It will contact the other credit reporting agencies. A letter should include your name and address, the items in dispute, your argument and any supporting facts to support your claim, a formal request to resolve the issue. Send copies (not originals) of documentation that supports your claim the information is wrong. The credit reporting agency will have 30 days to investigate and communicate its decision.
    3. Request a goodwill adjustment: If your credit reports contain contents that are accurate but negative, write to your creditors and ask they remove the bad information right away. Be polite; they aren't required to comply with your request. However, Johnson notes, they may be more willing if you still have a business relationship with them.
    4. Know your rights: The Credit Repair Organizations Act (CROA) makes it illegal for credit repair companies to lie about what they can do for you or to charge you before they've performed their services. This law, enforced by the FTC, requires credit repair companies to explain:
    • Your legal rights in a written contract that also details the services they'll perform.
    • Your three-day right to cancel without any charge.
    • How long it will take to get results.
    • The total cost you will pay.
    • Any guarantees.
    5. Exercise your recourse: If a credit repair company you hired doesn't live up to its promises, the FTC says you have these options:
    • Sue them in federal court for your actual losses or for what you paid them, whichever is more.
    • Seek punitive damages - money to punish the company for violating the law.
    • Join other people in a class action lawsuit against the company, and if you win, the company has to pay your attorney's fees.

    For more on the do-it-yourself route, see our earlier story here.

    Have you tried to repair your own credit or used a professional? How'd it go? Share with us in comments below or on our Facebook page.


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    Older woman hula hooping in backyard

    By Jane Bennett Clark

    As the spouse of a Foreign Service officer, Cathy Lincoln moved frequently and changed jobs with each new post while raising two children. She had neither the time nor the inclination to pay attention to her retirement accounts. "I had a set-it-and-forget-it attitude," says Lincoln, 56, of Washington, D.C. After a divorce, however, she wanted to see if her investments were on course. Rather than run the numbers herself, she consulted an adviser at the Royal Bank of Canada, which administers her IRA. On the adviser's recommendation, she tweaked her investments and rolled a 401(k) held by a former employer into the IRA. The fine-tuning put her accounts in good running order, she says. "A financial adviser pulls it all together."

    SEE ALSO: SLIDE SHOW: 9 Smart Retirement Strategies for Women

    Planning for retirement is like taking a long road trip. At first, you put your plan on cruise control, letting your employer make some or all of the calls about how much to save and in which investments. Later, as your finances and priorities become more complicated, you take the wheel yourself, tweaking those investments and dialing up (or paring back) your contributions. By the time you're approaching retirement, you may want to turn over the driving to an expert (at least temporarily) who will look under the hood and calibrate your investments to your exact needs.

    No matter what stage you're in, your employer-sponsored 401(k) plan is key to getting you where you need to be. These pretax accounts, also called defined-contribution plans, now far surpass pensions as the retirement savings vehicle of choice among private companies. In 2014, more than 90 million Americans were covered by a defined-contribution plan, with assets totaling more than $6.5 trillion, according to Vanguard. The average account balance with Vanguard was $102,682. Employers played a key role in fattening those balances, bringing the average contribution rate to 10.4% of annual pay, including a 6.9% average contribution rate by employees.

    These six steps will help you get the most out of your 401(k) and take advantage of the momentum your employer offers.

    1. Get a head start

    Given the daunting prospect of financing your own retirement, you'd think that throwing money into your 401(k) from the start of your career would be a top priority. In fact, many young (and not-so-young) workers go with Plan B: procrastinating. In recent years, companies have countered that tendency to stall by automatically enrolling employees in the company plan. Workers are given the opportunity to opt out, but relatively few do. In 2014, employees whose plans included automatic 401(k) enrollment had an 89% participation rate, compared with 61% for employees in plans with only voluntary enrollment, according to a 2015 study of Vanguard plans.

    The gentle push to begin steadily saving makes for a powerful head start. A recent Wells Fargo study showed that people ages 55 to 59 had accumulated three times the retirement stash of those 60 or older. How so? The younger group had started saving consistently at 31, six years earlier than the older group. "It's only a six-year difference, but when you think about the power of six years of savings compounded over 25 years, that's significant," says Joseph Ready, director of institutional retirement and trust for Wells Fargo. "The message is, don't lose the power of time. Start saving as early as possible."

    2. Step up the pace

    The downside of relying on your employer to make your savings decisions is getting lulled into thinking you're saving enough. About half of participants who are automatically enrolled in a Vanguard 401(k) start at a 3% deferral rate, and many are content to stay there. "They think that this must be the right savings rate, and they leave it alone," says Ready.

    Lately, more employers have taken advantage of that very tendency by initially setting contributions at 4% or more and automatically hiking the contribution rate by one percentage point a year, most often up to 10%. Employers also increasingly offer a dollar-for-dollar match rather than the once-common 50 cents on the dollar. A recent survey of large employers by Aon Hewitt, a benefits consulting firm, showed that 19% of companies match contributions dollar for dollar up to the first 6% of salary, and 23% offer the match up to the first 3% to 5%. "Plan sponsors are trying to make the plan as appealing as possible. They're telling you to invest your retirement funds with them because they can help you the most," says Rob Austin, director of retirement research at Aon Hewitt.

    If your employer doesn't pave the way for you with automatic nudging, you'll have to get there on your own. Aim to contribute at least 10%, including the company match, within the first few years of your savings career; you should contribute more if you get a late start. Many retirement experts recommend saving as much as 12% to 15%, including the employer contribution, from the get-go. (Some 24% of Kiplinger readers who responded to a recent poll save 11% to 15% of their income for retirement, and 34% save more than 15%.) In 2016, you can kick in $18,000 and, if you're 50 or older, another $6,000 in catch-up contributions, for a total of $24,000.

    The get-go is also a good time to start contributing to a Roth 401(k), if your employer offers one. This option, offered by six out of 10 large employers, lets you contribute after-tax dollars to your account. Withdrawals are tax- and penalty-free if you have had the account for five calendar years and are 59 1/2 or older. Given that your salary and tax rate will likely go up as your career progresses, your early career is a good time to start funding a Roth. You can contribute the annual max to the Roth 401(k) or split your contributions between the pretax and after-tax accounts.

    3. Get the right mix

    Imagine someone handing you the keys to a powerful vehicle that you have little or no experience driving. You'd want to read the manual and maybe take a few lessons, right? Nah. The majority of people enrolled in a 401(k), currently the most powerful engine of retirement saving, have little interest in learning about plan details, much less poring over investments and coming up with a mix suited to their age and risk tolerance, says Kenny Phan, a 401(k) consultant in Phoenix. "I've been to many 401(k) meetings on investment options, and employees don't show up."

    Partly in response to such do-it-for-me investors, employers have added target-date funds to their 401(k) lineup and are using them as the default investment for participants who are enrolled automatically. Target-date funds put you mostly in stocks when you're in your twenties and grow more conservative -- say, a mix of 60% stocks and 40% bonds -- as the target date approaches. For instance, the Vanguard Retirement 2060 fund currently invests 90% of participants' holdings in stocks, reflecting the risk capacity of people whose retirement date is 44 years hence; by 2060, the mix will have adjusted to roughly 50% stocks and 50% bonds. In 2014, almost two-thirds of participants in Vanguard-administered plans had invested some or all of their accounts in target-date funds, up from 5% in 2005.

    Target-date funds are designed to be a one-stop solution, so you defeat the purpose if you also invest money elsewhere. That said, combining a target-date fund with other types of investments or other target-date funds can work if you're mindful of your overall asset allocation. With these funds, you can be confident that your portfolio will not only be appropriately allocated but also well diversified.

    If you're assembling a portfolio on your own, be sure to include domestic large-company and small-company stocks, international stocks (including those in emerging markets), and domestic and international bonds. Also, make sure your investments reflect the appropriate risk for your age. A recent study by Fidelity showed that 11% of people ages 50 to 54 and 10% of people 55 to 59 had invested 100% of their 401(k) in stocks, leaving them dangerously exposed to a market downturn as they close in on retirement. "With 401(k)s, you only have to get two things right -- save enough and invest appropriately," says Jean Young, a senior research analyst with Vanguard Center for Retirement Research.

    4. Review fees

    A few years ago, news reports warned that excessive 401(k) fees were reducing individuals' retirement accounts by tens of thousands of dollars. But here's the good news: 401(k) fees, including investment management fees and administrative costs, have declined over the past few years. A recent report by BrightScope and the Investment Company Institute showed that the average cost of a 401(k) plan had dropped from 1.02% of assets in 2009 to 0.89% in 2013.

    One reason for the change is that since 2012, employers have been required to spell out 401(k) fees to plan participants, and plan administrators must disclose their fees to employers. "Because of those rules, employers and employees are more aware of the costs associated with the plans," says Phan. "And because employers have the fiduciary responsibility to evaluate their plan, they are making sure the fees are competitive with other plans."

    Fee disclosure rules have also changed the way plan sponsors -- that is, employers -- calculate admin­istrative fees, making them fairer and easier to understand, says Austin. In 2011, 83% of companies charged administrative fees as a percentage of assets. Now, 39% impose a flat-dollar amount per account. The median flat fee per person was $64 in 2015, according to NEPC, an investment consulting firm. Not only does the change mean that savers are paying equally for the same services, says Austin, but it "also gives participants a clear line of sight on fees."

    For all these improvements, you can't know how your 401(k) fees measure up unless you compare costs with benchmarks shown on the statement as well as with plans at similar-size companies (to compare plans, go to For instance, you might find that the fund you're invested in charges a higher management fee than a comparable one with the same performance, in which case you've got a clear signal to switch. Similarly, if the fee for administrative costs seems out of whack compared with other plans, bring the matter up with your employer.

    If all else fails, you could invest in a traditional or Roth IRA outside your 401(k), after contributing enough to the 401(k) to meet the match. In 2016, you can contribute up to $5,500 (plus $1,000 if you are 50 or over) to a traditional IRA or a Roth.

    5. Put the pedal to the metal

    If you're in your late forties or early fifties, you may have fallen off the savings track -- say, to cover college bills or buy a bigger house. Contributing less to your 401(k) for a few years won't devastate your retirement prospects, especially if you started saving early. But remember that retirement is your first priority, says David Meyers, a certified financial planner in Palo Alto, Calif. "You can't fix that. It's harder to retire on less than to live in a smaller house."

    Carving an extra $50 or $100 out of your budget to beef up your 401(k) is helpful, but ideally your earning power is now at a point that you can contribute the max, including the catch-up contribution. And if you have a high-deductible health plan that qualifies you for a health savings account, you can also save $3,350 a year if you're single ($6,750 for families) in 2016, with a $1,000 catch-up amount if you're 55 or over. Maxing out those two savings vehicles alone gets you almost $30,000 in pretax savings a year. "If you can do that for five or 10 years, you can really catch up," says Ready. "It's never too late."

    By this age, you probably have a decent idea of whether your income -- and thus your tax rate -- will go up or down in retirement. If your employer offers a Roth 401(k), consider contributing to it now, if you haven't funded it already. You'll probably want to go this route if you believe your tax bracket will go up in retirement rather than down. But even if your income will likely drop, you would be wise to squirrel away some money in a Roth in case tax policy changes, says Austin. "You'll have a buffer from taxes later," he says.

    6. Enlist the experts

    Has life gotten complicated? You'll need more help. "A 25-year-old in a retirement plan can simply pick a 2065 target-date fund," says Austin. "But when you get to 55, one person may have paid off his mortgage, another not. One might have a huge pension, another doesn't. And how do you fold in spouses? For those people, it's nice to have more input."

    Enter managed accounts, offered by more than half of employers as an option in their 401(k)s, according to the Aon Hewitt study. With these accounts, a professional advisory service will discuss your financial circumstances, perhaps both online and over the phone, and tailor a portfolio accordingly, periodically monitoring and rebalancing it. Managed accounts offer a high degree of personal advice, so they're most appropriate for investors who have complex finances -- say, multiple 401(k)s, a pension or company stock outside their retirement account, says Sangeeta Moorjani, senior vice president of Fidelity's Professional Service Group. "They realize they can't do it on their own." For that help, you'll pay a fee of about half a percentage point of your assets; some employers pick up the tab.

    If you don't have access to a managed account or want more face-to-face advice, schedule a few sessions with a financial adviser. Advisers streamline your accounts, coordinate your income and assets with those of your spouse, and assess your retirement readiness. Meyers, for instance, offers a portfolio review plus Social Security planning and a retirement income analysis. "Before I dive into a portfolio, I add up all retirement assets and all nonretirement assets to get an idea of the total picture and project what it will take to achieve the level of spending the client wants in retirement." The best part of his job? "Every now and then, I'll look at the numbers and say, 'You can retire yesterday.' That's really cool."


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    Save Bundles with President's Day Sales
    Did you know that President's Day weekend features some of the biggest sales of the year? While often overshadowed by "bigger" retail holidays, you can actually save bundles on President's Day - if you know what to shop for!

    Want to look presidential in a new peacoat? You can find winter apparel​ for as as low as 85 percent off, as retailers try to clear out their inventory to make room for their spring and summer lines.

    The same goes for electronics. Since tech companies tend to unveil their latest products early in the year, electronic retailers will be slashing prices on President's Day to make room on their shelves.

    Finally, maybe you're a "good candidate" for new furniture​. Since new furniture collections are usually released during the first two months of the year, you can save big this President's Day when furnishing your bedroom, or "home oval office."

    So remember, you don't have to be commander-in-chief to command big savings this President's Day.


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    It's OK to be a little fuzzy on this topic. It's also OK to feel a little paranoid if you observed your portfolio losing a lot of value due to the Fed's recent announcements. Just because someone has an IRA or a diverse portfolio, this doesn't mean that they understand the economic underpinnings that cause their portfolio values to rise and fall. In times like these, when just about everyone invested in the stock market is singing the blues, it's important to take some time to better understand various aspects of this complicated system. One key piece in this puzzle is THE FEDERAL RESERVE.

    What's Up With the Fed and the Stock Market?

    We hear a lot about the Federal Reserve. Politicians tell us that it needs to be broken up and/or audited. News media outlets bloviate about its role in interest rates all around the country. But what specific actions does that Federal Reserve play in the rise and fall of the stock market? If you ask many investors, they won't always have a clear answer for you.

    The real answer is multifaceted. While the Fed doesn't impact the stock market directly, it's decisions cause ripples that can make it rise or fall in seconds. Of the many things that the Federal Reserve does, its most important action related to stocks is its control of interest rates. The Federal Funds Rate is set by the Fed. This is the rate of interest that banks charge each other to borrow money. This interest rate is a benchmark for the interest rates extended to ALL BORROWING ENTITIES EVERYWHERE, whenever they borrow money for any purpose.

    Because you are not a bank with billions of dollars in available assets, you will be charged more interest for any loan you take out in your lifetime. Banks run almost no risk of defaulting when they borrow money from another bank. You on the other hand...

    This means that every person who takes out a mortgage loan, every business who borrows money to expand its operations, every teenager buying their first car: all of these will have interest attached to the loan. And it will always be at least as much as the Federal Funds Rate, usually a lot more.

    After the 2008 Financial Bubbleburst, the Fed lowered this rate as far as it could possibly go. They did this because it would motivate people at all levels of the economy to borrow, buy, and invest, thus spurring the economy through the tough times of the Recession. This sort of worked, but growth has recently stalled and economists are split over the best way for the Fed to act in response.

    Several months back, you may remember that the Fed raised the interest rate to (as much as) 0.5%. Historically, this is bottom-of-the-barrel low! It's also a sign that the Fed trusts the strength of the economy to support itself, at least somewhat. You've got to remember that this interest rate used to be in the 20's in 1980. If you have bought a house or started a business in the past couple of years, you have enjoyed a rare opportunity.

    So Why Does Raising the Interest Rate Make the Stock Market Freak Out?

    When it costs more for businesses to expand (due to the higher cost of borrowing), these businesses likely become less valuable to investors. Because the Fed's interest rate impacts every loan that happens in the entire country, no business is unaffected. People who are intimately involved in the stock market start to divest themselves of their suddenly devalued dividend potential, and the entire market drops. It doesn't matter that interest rates are historically low. Any increase hurts stock returns, and thus throws a temporary wrench in the markets.

    If you have an IRA or any other investment account, you are feeling the pinch at this moment. So are rich people, like Jeff Bezos. The thing is, the Fed must raise interest rates eventually, and the global market will just have to learn to deal with it. But with so much riding on the Feds' decisions, and no one wanting to repeat or exceed the Recession of 2008, you can understand why the Fed's under some pressure right now.

    So What Should I Do?

    Don't freak out, please. If all of this comes as a surprise to you, this is an important lesson in the fundamental economics of American investing. And it doesn't mean that the bottom is going to fall out of your portfolio. Hopefully (and nobody can tell the future, no matter what they might say on the internet) the economy will continue to recover, and the stock market will grow based on internal robustness, not artificial support from the Federal Reserve.

    As I constantly remind people, sensible stock investing should be about the long game, not about blips in the radar. If you've followed past posts, you know that I always recommend Index Mutual Funds for at least a significant portion of every portfolio. You can track stocks at the new stock directory module on my website, for a closeup look at individual winners and losers. By investing in the strength of the stock market as a whole (the index fund approach) and learning about the inner workings of individual stocks (through the link I suggested), you'll be in a position to survive hard times and make decisions that take full advantage of the good times.

    The Fed will do what it does, and it won't always be in the best interests of your short term investment interests. The portrayal above is just one little sliver of what the Fed does. But by better understanding it, you'll be more likely to steer clear of investment fear-mongering, and stay the course to long term investment success!


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    Businessman wearing headphones while working late on laptop in creative office

    The Internet is a great place to launch entrepreneurial efforts. People have made money by creating useful products and functional websites, while others have found ways to make money in creative and interesting, yet strange, ways. Here is a sampling of some unusual online commerce.

    Online Eating - Mukbang, a combination of Korean words that mean eating and broadcasting, is quite popular in South Korea. Viewers tune in to chat and watch people eat, and donate cash-redeemable "star balloons" to the eaters. According to a Business Insider video, the most-viewed eater on the streaming service Afreeca TV earned a whopping $250,000 in 2013. "Gastro voyeurs" have around 3,500 online eaters to choose from, some of whom are sponsored by restaurants. So instead of "What do you want to eat tonight?" the question is, "Whom do you want to watch eat tonight?"

    Facial Advertising - Two lads from Great Britain hit upon the idea of paying off their student debt in a creative way - selling space on their face. Using only a makeup pencil, Ross Harper and Ed Moyse sold daily advertising space on their face for a full year. After initial sales at only a few dollars, the site caught on and the two ended up selling space for $600.

    The catch was that the duo would film themselves doing stunts or other attention-getting actions (some requested and paid for by the client) and post the results on their website,, which in turn directed traffic to the client's website. They managed to retire nearly $60,000 of their $80,000 debt before shutting the site down.

    Selling Shares in Yourself - Mike Merrill (aka KMikeyM) decided in 2008 to divide himself into 100,000 shares and offer himself as an IPO of sorts for $1 per share. Shares can be purchased at his website that embraces "Community through Capitalism." Shareholders do not receive money or dividends in return, but they can log in to cast votes on aspects of Merrill's everyday life, such as whether or not he should invest in a Rwandan chicken farm (yes) or get a vasectomy (no).

    As of this writing, the last vote was to "produce a live theatre production exploring the issues of identity and celebrity" with the title of Understanding Jason Bateman. Bateman is allegedly set to star in a movie being made about Merrill's life. Just another case of life imitating art imitating life.

    Wearing T-Shirts - The advertising principle strikes again with The site is no longer around, but its owner, Jason Sadler, made serious money by wearing T-shirts with a different company logo each day. In his first year, Sadler made $70,000 - and ended up making as much as $500,000 a year, by some reports. At one point, Sadler had a team of five t-shirt wearers, or human billboards, spread throughout the country and a client base that included Nissan and Starbucks. To increase the advertising value, Sadler posted videos of himself on various social media sites discussing his client of the day.

    Sadler has moved on to other ventures but continues to dabble in the world of unique methods of making money. He has legally changed his name twice for advertising money. Auctioning off his name in 2012 earned him $45,000 and the name Jason HeadsetsDotCom. In 2013, he became Jason for $50,000. He has most recently changed his last name to Zook, but that was for personal, not professional, reasons.

    While these are certainly strange ways to make money online, rest assured that there is a much deeper level of moneymaking strangeness out there on the Internet. Search for even more-out-there things at your own risk, and do not be surprised by anything that pops up in your targeted advertisements. Don't say we didn't warn you! Now, how much would you be willing to pay to watch me eat an egg salad sandwich?


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    Full Parking Lot

    By Allison Martin

    Thinking about retiring your current wheels? If so, it might be wise to skip a brand-new model and instead purchase a new-to-you vehicle.

    Buying a gently used car spares you the depreciation that befalls a new car as soon as you drive it off the lot. You'll save a lot of money while still getting a quality vehicle that will last for years.

    But before you buy, there's some homework required. That used car might look sleek, but you must find out if it is actually dependable.

    Here are some tips for doing research before you go car-shopping.

    1. Check reviews and ratings

    Have you ever bitten into an apple, only to be disappointed that it was brown and mushy to the core?
    The same principle applies to cars. It may look shiny, but after a few drives, you may realize it's just not the right fit for you. Or, it may disappoint in performance. Perhaps worst of all, you may find it is expensive to repair.

    Before you go for a test drive, check reviews and other sources of information on the Internet.
    First, simply do a search of "most complained about cars." You'll find an impressive amount of information from a variety of authoritative sources.

    Now, do the same for "most reliable cars." You'll find articles about ratings by organizations such as J.D. Power and Consumer Reports.

    You may also want to search "complaints" and the make, model and year of a vehicle you're considering. Forums can be very helpful.
    Other sources: 2. Analyze for affordability

    If the car is still in the running, the next step is to analyze its affordability. Take a moment to crunch a few numbers using an affordability calculator to determine if the monthly payment is feasible.

    Take into consideration the cost of the taxes, tag, title and any other add-ons. They could easily add up to thousands of dollars, depending on the purchase price of the car and your state of residence.

    Also, check out the model's depreciation trend. If the car has historically lost thousands of dollars in value year after year, the purchase may not make much sense.

    Finally, is the asking price too much? Sites like and Kelley Blue Book can help with that.

    3. Consider maintenance costs

    Now for the kicker: maintenance costs. The cost of labor isn't the only thing you should be concerned about - find out how much replacement parts cost. If you're thinking about purchasing a high-end foreign model, be prepared to absorb high maintenance and repair expenses.

    Once again, do an Internet search for "most expensive cars to repair" and "most expensive cars to own" and you'll find plenty of results.

    4. Compare insurance premiums

    The next line of business is auto insurance. Some cars cost a lot more to insure than others. Our friends at do an annual ranking of the most expensive and least expensive cars to insure, and allow you to search for the average insurance rate for a vehicle. Look for similar rankings from other sources as well.

    You may be able to get a better deal when you're actually shopping for insurance, but it's still smart to find out if the average insurance cost for the vehicle you're looking at fits into your budget.

    5. Check for recalls

    If a car is often recalled for mechanical issues, that's a red flag. Check out "What You Need to Know About Car Recalls" to find out about the recall history of the vehicle in which you are interested.

    6. Think about suitability

    Think hard about this one because you'll probably drive the vehicle for a long while. It may be tempting to purchase that sporty new two-door because the guy two houses down is offering it for an irresistible price. But if you have four kids in tow each day, the purchase just doesn't make sense.

    Do you have any additional suggestions? Let us know in our Forums. It's a place where you can swap questions and answers on money-related matters, life hacks and ingenious ways to save.


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    Market stall

    By Maryalene LaPonsie

    All told, the average American household spent $53,495 in 2014, according to the Bureau of Labor Statistics.

    While the bulk of that money went for housing, we still spent more than $1,786 on apparel and services, $2,728 on entertainment, and another $2,787 on food away from home. Then there is that mystery category, "all other expenditures," where we rang up, on average, $3,548.

    Wouldn't it be nice to spend a little less?

    Find the best price on everything you buy on our deals page!

    Fortunately, there are a number of tried and true ways to save money on virtually everything you buy. In fact, we call them our 15 golden rules to super savings, and here they are.

    1. Never buy new what you can buy used

    To start, if you want to save money on everything you buy, you should never buy new. Well, nearly never buy new. You might possibly want to buy new underwear from time to time.

    But for most everything else, let someone else take the depreciation hit. The average new car loses 11 percent of its value the moment it's driven off the lot according to insurance site After five years, new vehicles typically lose about 63 percent of their value.

    Cars might be the best-known example, but virtually everything depreciates over time. Jewelry, furniture, appliances, and even video games and movies can depreciate faster than you can say "impulse buy." Check out Craigslist, eBay and for practically new items being sold for a song.

    2. Save big with bulk purchases

    Let's say you use a lot of batteries. Why buy four batteries when you could buy 40? Buying in bulk can be an excellent way to lower your per-unit cost. Check out Amazon prices on Duracell AA batteries as an example. As of this writing, you can buy 10 for $8.35, get 20 for $10.10 or splurge on 40 for $14.70. (The 40-pack comes out to about 37 cents per battery compared to the 10-pack, at 83 cents per battery.) Plus, bigger packages come with free shipping. Bonus!

    However, not every bulk buy is a steal. If you're thinking about going the warehouse route, read this article on what to buy at warehouse stores before you start shopping.

    3. Tame impulse buys with a list

    It's hard to put a number on how much impulse buying costs us each year, but 84 percent of confess to making a purchase on the fly, according to a 2016 survey.

    Tame the tendency to impulse buy by limiting yourself to what's on your shopping list. Don't think that list is only for groceries either. Create an ongoing list of planned purchases. When you notice your shoes are wearing thin, add shoes to the list. When you decide you need a bigger slow cooker, add that to the list.

    Then when you are tempted to buy something on the spur of the moment, refer to your list. If it's not there, remind yourself that you don't need it and that money spent on impulse takes away cash that could be used to buy something you really want.

    4. Remember that generics equal more green in your wallet

    If you're buying a brand name, you're likely spending extra cash and may not be getting much in return.

    Consumer Reports compared name-brand and store-brand grocery products and found that consumers can save anywhere from 30 to 52 percent by buying store brands. In addition, the study revealed that in blind tests, most items tied in terms of their taste and, in some instances, the store brand was actually preferred over the name brand.

    Then there are generic drugs. The Food and Drug Administration says consumers can save 80 to 85 percent by buying generic prescriptions. No need to worry about their safety either because generic drugs must meet the same quality standards as brand names and must also include the same active ingredients in the same strength as their more expensive counterparts.

    From our Solutions Center: Click here to effortlessly track your expenses, free

    5. Negotiate for the lowest price

    You're missing out on great savings if the only time you negotiate is when you're buying a new car or are at a yard sale. Read Stacy Johnson's "Confessions of a Serial Haggler" for a rundown on the fine art of bargaining. Also check out this story offering tips for successful negotiation.

    6. Stop being the early adopter

    Always having the latest and greatest gadget might make you the cool kid in your circle of friends, but it's also going to empty your wallet in a hurry. You're paying top dollar for something you could probably get for significantly less a short year later.

    Why do you need to upgrade anyway? Why buy a 50-inch TV when your 37-inch one works perfectly fine? The Internet exploded during the 2013 football season when Dallas Cowboys owner Jerry Jones was photographed using a - gasp! - flip phone. Some people laughed, saying he was behind the times, but he's a billionaire so, really, who's getting the last laugh?

    7. Make a habit of sharing purchases

    Is there really a need for everyone on your block to own a weed whacker? If you are going to rent a carpet cleaner for an afternoon, could a friend or neighbor use it, too?

    Make a point to look for ways you can share purchases with others. Maybe that means something as formal as creating a neighborhood co-op where families come together to make shared purchases, or it could be as a simple as calling up your friend and asking if she wants to go in on a purchase or rental of a particular item.

    Find the best price on everything you buy on our deals page!

    8. Consider whether you can make it or do it yourself

    You can save a boatload of money if you do things yourself rather than paying someone else. From making your own laundry detergent to home repairs, many of the things you buy could be replaced by your own ingenuity or a little elbow grease. That said, we don't recommend do-it-yourself dentistry.

    9. Compare, compare, compare

    Knowledge is power, and your money will have more buying power if you take the time to do a little research. Never make a purchase without first checking prices at other retailers and online. Websites such as PriceGrabber, Shopzilla and Nextag make it easy to find the lowest price.

    Find help for common financial problems in our Solutions Center!

    10. Don't let can't-miss deals fool you

    Of course, slick salesmen and retailers won't want you to shop around. They may pressure you for an immediate sale, arguing that prices have never been so low or their manager is making a special deal for you that will only be available for the next 15 minutes.

    They are toying with you, my friends. Like a cat plays with a mouse, they are trying to back you into a corner where you feel you can't possibly say no. But competition is fierce, and the reality is there will always be another sale.

    Don't buy unless you've done enough research to know the deal is good. Plus, going back to strategy No. 5, walking away can be your most powerful negotiating tool.

    11. Try doing without

    You may be inclined to run out and buy something as soon as the old version has worn out or breaks. However, wait a couple of days or, even better, a couple of weeks before making a purchase. You may find you can do without the item, or you may discover you have another item that can work as a perfectly acceptable substitute.

    12. Look for a coupon

    We all know about coupons for grocery store items, but that's not all these little money-savers can be used for. Coupons are available for everything from auto repairs to online purchases.

    If you dine out regularly, see if a coupon book or key card would be a good investment. These are often sold as fundraisers through schools and clubs, but you can also buy Entertainment Books online. Be sure to check which coupons are included to ensure they match your tastes. Often, these programs provide more discounts to local, independent establishments than to chains.

    You can also get coupons by signing up for the mailing lists of your favorite stores or agreeing to receive mobile alerts.

    Finally, don't forget to search for coupons and promos when shopping online. For more information, read our "Definitive Guide to Promo Codes, Coupons and Deals."

    13. Drop the bottom line with online rewards

    In addition to coupons, you can save money by taking advantage of online rebates. Our favorite is Ebates, but a simple Web search will turn up many others. You can also use rewards programs. You may not get savings upfront, but you can receive a nice check or other rewards later.

    14. Use a rewards credit card

    Like rebate websites, rewards credit cards don't drop your initial cost, but they do provide overall savings on your purchase in the form of cash back or rewards points that can be redeemed for merchandise, gift cards or travel.

    The one caveat of rewards credit cards is their interest. If you don't pay off your balance in full each month, the amount of interest you pay could negate any rewards you receive.

    If you don't already have a card, you can find a comprehensive list of rewards credit cards here.

    From our Solutions Center: Find a better credit card in seconds

    15. Only pay cash

    Finally, if you really want to save money on everything you'll ever buy, only pay with cash. Research shows that using cash discourages spending, while credit cards and gift certificates may encourage it. In addition, spending cash keeps you accountable by ensuring you only use the money you have on hand rather than basing your purchases on some vague notion of what might be available in your bank account or on your credit card.


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    Woman using smart phone

    By Trent Hamm

    When you carry a balance on a typical credit card, the credit card company is simply extracting money from your wallet. If you carry a $2,500 balance for a year on a typical 20 percent APR card, that means you're giving the credit card company $500 of your hard-earned cash just to keep that $2,500 balance. That's $500 that just blows away in the wind. The higher the balance, the worse it is - and the higher the APR, the worse it is, too.

    One of the best money-saving strategies is to simply reduce that interest rate. If you knock an interest rate down from 20 percent to 10 percent, you save $250 a year in the example above. That's a lot of money.

    The first step is easy: Just call the number on the back of your card. But you might need some help once you're actually on the phone. Here are some tips for negotiating a better rate on your credit card.

    Make sure you have a position to negotiate from. Have you been a customer of this company for years? Do you pay your bills? Do you also maintain a balance on this card? Could you financially survive if this credit card were to be closed out? Do you have better interest rate offers on the table?

    If you're answering "yes" to those questions, then you're in good shape to negotiate a better interest rate. If not, you don't have much leverage to negotiate.

    Credit card companies want to keep customers who consistently pay their bills (a few days late on occasion is fine, but skipping months isn't), but also maintain a balance on their card. Those are the ideal customers. Is that you? If not, then the credit card companies won't do much to keep you around, as you're not worth much to them as a customer.

    Similarly, you need to be in a position where you could survive without this card. Do you need this card to make ends meet each month? One potential outcome of this type of negotiation is that you end up closing your account - or the credit card company ends up closing it.

    Be polite, always. No matter what happens during the phone call, refrain from getting angry. Don't raise your voice. Don't ever skip over polite phrases in your speech. Don't start calling the person on the phone names.

    The second you resort to these tactics, your chances of getting a better interest rate drop to zero. The person on the other end will stop cooperating with you and you'll be left with your current rate.
    If you're frustrated, simply say, "Thank you for your time!" and end the call, then vent your anger once you're off the phone.

    Make sure the representative actually has the power to lower your interest rate. When you start speaking with a customer service representative, you should first make sure that the person you're talking to actually has the ability to lower your interest rate.

    As always, be polite. Try saying something like this: "I have been a good customer, and I'd like to keep doing business with you. However, my interest rate seems high, and I'd like to talk with someone about that. Do you have the authority to change my interest rate?"

    If they answer yes, then keep talking. If not, politely ask if you can be transferred to someone who does have that power. Say something like: "In that case, could I please speak to a supervisor who does have that authority?"

    Use other offers for leverage. If you've done your homework, you should have a credit card offer with a lower interest rate than the card you're negotiating. Even better, you may already have another card with a lower interest rate. Use that as leverage when negotiating on this card.

    Say something to the effect of this: "This card currently has a 19.9 percent APR. However, my other card, a Visa issued by Citigroup, has a 13.9 percent APR. I would prefer to use your card rather than the Citigroup card if they had the same interest rate."

    Offer to transfer a balance. Another tool you have in your arsenal is the suggestion of transferring a balance to the card you're negotiating. If you're successful in getting a lower rate than the card you would be transferring from, this will save you money and entice the company to lower your rate.

    Say something to the effect of this: "I currently carry a balance on my Citigroup Visa. If you were willing to lower the interest rate below the rate on that card, I would transfer my balance to your card."

    Be willing to play hardball. If they won't help you at all, don't hesitate to close the card. There's no reason continuing to do business with a company that does not appreciate you.

    If your attempts are denied, try saying something to the effect of this: "In that case, I would like to close my account with you and pay off my balance." If they don't respond with a good offer, make sure that they send you written notification of the account closure.

    Carrying a credit card balance puts a real strain on your finances. While paying the balances off is the best solution, negotiating a better interest rate is a powerful interim step that can keep money in your pocket - where it belongs.


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    College fund stored in glass jar in kitchen

    By Krystal Steinmetz

    An entire kindergarten class at Rio Vista Elementary School in Anaheim, California, has a free golden ticket to college, thanks to the generosity of a complete stranger.

    Marty Burbank, an attorney and Navy veteran from Fullerton, California, went from stranger to hero after he pledged $1 million to pay the college tuition of all 26 kindergartners, The Orange County Register reports.

    Find help for common financial problems in our Solutions Center!

    The 51-year-old Burbank and his wife, Seon Chun-Burbank, a professor at Vanguard University, had plans to buy a new 40-foot sailboat just a few short months ago. But that plan changed after Burbank heard a December church sermon on giving.

    "Sailing has been a big part of my life," Burbank, who began sailing at age 3, told the OC Register. "(But) the boat seemed like a real selfish thing to me at that point. This is something significant that I think is going to impact a lot more people than just me."

    Burbank's offer includes funding two years of community college and two years at a California state university (or the equivalent if they plan on attending a different college), plus money for books for teacher Tessa Ashton's entire class of kindergartners - the Class of 2032.

    Burbank set up a private foundation for the kids' college funds, which he plans to contribute to each year until $1 million is reached. He said he will delay his retirement and he's scrapped his dream of purchasing a new boat.

    "I'd rather not have a boat and get these kids through school," he told the OC Register. "Maybe one day they'll buy me a boat."

    Burbank said all the kids have to do is draw a picture or write an essay each year about what getting a college education will mean for them and their families, CNN Money explains.

    "I'm a strong believer in visualizing your goals, and this way they'll be thinking about this each year for the next 12 years," Burbank told CNN Money.

    Burbank knew Ashton from church. He had previously donated his time as well as several gifts to Ashton's school, including a power washer, more than 1,000 notebooks and a pallet of granola bars, according to the OC Register.

    Ashton's entire kindergarten class speaks Spanish at home. CNN Money said they started kindergarten knowing very little English. Ashton said she talks to them about college every day.

    "I tell them that they need to sit and listen, because that's a skill they'll need when they go to a place called college," she said.

    The families of the kindergartners told the OC Register that they are grateful - and overwhelmed - by Burbank's generosity.

    "May God bless him always for helping people who truly need his help," Silvia Escobar, whose son Roniel Garzo is in Ashton's class, said in Spanish. "There are no words," she said of Burbank's kindness.


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