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DailyFinance.com

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    By Gregory Go

    For new cardholders and those just beginning their journeys into the complicated world of credit ratings and credit cards, managing and understanding the many types of credit cards and their terms can become confusing.

    While several areas of life allow wiggle room for trial and error, credit scores are less forgiving.
    It's very easy to make a simple mistake that can cost not just a significant drop in your credit score, but also thousands of dollars in the future. That's why it's important to beware of these five common mistakes millennials often make with credit cards.

    1. Carrying Balances and Paying Just the Minimum

    A common belief is that to build a positive credit rating, you have to get a credit card and also carry a balance from month to month. The problem, however, is that credit cards designed for new cardholders generally carry high APRs - as high as 25 percent. If you carry a balance from month to month and only pay your minimum monthly payment due, you are paying considerable cash in interest on purchases, which can potentially create a mountain of debt you can't pay down. Build your credit rating and save on interest by paying your balance in full each month, instead.

    2. Maxing Out Credit Lines

    A new line of credit can be exciting and provide an opportunity to make a large purchase you've had your eye on for a while. At first, it can seem like a simple plan - make the purchase and slowly pay it off. Maxing out credit lines, however, can signal to creditors that you're at risk of defaulting on your balances. Spending too much or maxing out your credit lines also affects your utilization ratio, an important factor in your credit score. Utilization ratio is the percentage of the total available credit the cardholder has used, and a high ratio indicates a higher credit risk. It is often recommended that you keep your total debt-to-credit ratio below 30 percent, which means you may have to put off that large purchase you've been dreaming of for a bit longer.

    3. Focusing on Fancy Rewards and Promotional Offers

    Many credit cards tout a range of special perks and rewards designed to attract new cardholders. While many of these opportunities can be worth hundreds of dollars in cash, airline miles or points, it's important to be aware of what those rewards might cost you. The interest rate plus any associated fees can be more than the rewards and perks are worth. New cardholders are often better off building a positive credit rating by making timely payments on cards with low interest rates, rather than seeking cards with extra rewards or special promotional offers. Those offers will always be around, and you may be in a better position later to take advantage of them without it costing you as much or damaging your credit history.

    4. Using a Credit Card for Everyday Purchases

    The only time it's recommended you use your credit card for everyday purchases like groceries and fast food is if you are earning specific rewards for those types of purchases, and if you pay them off every month in full. If you carry a balance and use your card for everyday purchases, $20 in toothpaste and toiletries can end up costing several times that. If you are unable to pay for living expenses with cash, you may need to readjust or create a budget before taking on the additional weight of a credit card.

    5. Not Taking Due Dates Seriously

    Although it's common for most companies, such as your cellphone provider, to impose late fees when a payment is late, ignoring due dates on credit cards can become far costlier. Late payments not only significantly affect your credit rating but usually come with late fees as well as penalty APRs. One late payment can end up in an APR that's well over 20 percent. That penalty APR combined with a late fee of approximately $30 (and the effect on your credit rating) can cost you hundreds - even thousands - in the end.

     

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    By Nancy Dunham

    It's no secret that rents are high in many areas of the country due in part to millennials' affinity for renting combined with the impact of Great Recession foreclosures that sent some homeowners looking for leases.Boomers, for a variety of reasons, have also become more likely to rent.




    The bottom line is that high demand for rentals has driven up the costs. Even so, it doesn't mean that you can't get a good deal, or at least avoid paying more than you should.

    Consider these tips for tracking down an affordable rental:

    1. Avoid the giant, corporate complexes

    Instead, look for apartments where you will deal directly with the owner or a manager. Those landlords generally place more value on long-term, reliable renters than those who work at corporate complexes, reports The Fiscal Times. They are also less likely to raise rent quickly.

    2. Know the neighborhood

    Even in a seller's market, landlords are anxious to rent their properties to qualified tenants as quickly as possible. Use that to your advantage by scouring the neighborhood and targeting the properties for rent. Consider looking for housing that's a bit older, and you may have a solid shot at negotiating rent, reported Daily Finance.com.

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

    3. Show them your 'perfect tenant' persona

    It's easy to forget that in many ways landlords are entrusting their valuable property to your care. That's why they look for those with good credit scores, stable employment and solid past rental histories. Sure, it's tempting to wear sweats and sneakers when apartment hunting, but remember - leasing is a business transaction. You needn't dress as if you stepped out of a corporate boardroom, but having a clean, professional appearance is a good idea. Landlords also want you to look good on paper - meaning a good credit score, a stable job history and stable rental history. If one of these things is going to set off alarms, be prepared to address it. For instance, a landlord I know was willing to rent to a couple even though the husband had a marginal credit score, because they were recently married and the wife was now in charge of finances for herself and her (admittedly) disorganized spouse. They were prepared for questions and got the rental.

    4. Prepare to negotiate for savings

    Renters are often surprised at how easily they can reap significant savings by negotiating. Be prepared to ask for one month free, or for a lower monthly rate in exchange for a longer lease. Ask for a two-bedroom apartment for a one-bedroom price. Ask for free fitness membership or a break on utilities or parking. You might even ask if there's some service you could perform - lawn mowing, snow shoveling or even general maintenance on your own unit - for a reduction in rent. The time to speak up is, of course, before you sign or renew a lease.

    5. Weigh everything that is covered by your rent

    Is it vital that you live in an apartment with the "right" address? Consider that at a slightly less prestigious location your rent might also cover the costs of parking, a doorman, on-site fitness facilities, utilities and more.

    Find help for common financial problems in our Solutions Center!

    6. Shop at off-peak times

    Landlords are especially anxious to rent between October and February. You'll find more specials and choices when you shop for a rental at a nonpeak time, reports The Washington Post.

    7. Read the lease first, then sign

    Sure, that sounds like a no-brainer, but in the frenetic, time-consuming rush to rent an apartment many of us sign first and ask questions later. Check the lease, and read all fine print. Do you pay extra for utilities? Is water included? Are there parking restrictions? Can you sublet? And even if everything looks OK but you have misgivings, don't sign, recommends The Fiscal Times.

    8. Ask about referral bonuses

    It's sometimes difficult to find qualified renters for properties, which is why apartment managers often value referrals. Ask if the apartment complex has a referral program or if they would consider paying a "finder's fee" if you refer a prospective tenant who becomes an actual resident. I've heard of referrals ranging from $50 to $250, depending on time of year, location and other variables.

    9. Don't forget about pro-rated rents

    If you rent an apartment but don't plan to move in on the first of the month, find out if the landlord will pro-rate your rent - just allow you to pay for the weeks you are there. Although some property managers of highly desirable units might insist on the full first month's rent, many will likely be more than willing to discount.

    10. Consider your gut reaction to the property

    Rental notices can be misleading, and rental layouts can make a big difference. A 750-square-foot apartment that includes a long hallway might feel smaller than a 600-square-foot apartment with a more open layout. A cheaper apartment in a neighborhood where parking is scarce and tickets are commonplace might end up costing you more than a more expensive place where parking is plentiful, or included in the cost of renting. An awesome deal in a crime-infested area might not feel so awesome when you're trying to catch a taxi late at night. Be realistic about your budget and your lifestyle.

     

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    By Krystal Steinmetz

    Meet "Sally" and "Suzy": These 30-year-old twin sisters are identical in nearly every way. Both women live in Louisville, Kentucky. They're both employed full time, have stellar driving records, decent credit ratings and no lapses in car insurance coverage. They even drive twin 2005 Honda Civics - same color, make, model and mileage.

    Sally pays $2,408 a year for car insurance - to get a policy providing theminimum coverage required by Kentucky - through Farmers Insurance. Meanwhile, Suzy pays Farmers $1,640 for the exact same coverage. So why is Sally paying 47 percent more than Suzy for the same insurance?

    According to the Consumer Federation of America, Sally is forced to pony up more cash for insurance because she's arenter and Suzy is a homeowner.

    From our Solutions Center: How to quickly shop insurance

    That's right. The CFA - which recently conducted an analysis of premium quotes from the major auto insurers for a 30-year-old safe driver in 10 cities across the United States - found that consumers pay an average of 7 percent more (about $112 a year) for auto insurance if they write a rent check rather than a mortgage check for their home.

    Depending on the insurer and where drivers live, they could be like Sally - paying upwards of 47 percent more for insurance. For example, Allstate's auto insurance quote for a renter in Tampa, Florida, was 19 percent more than a homeowner. In Baltimore, Liberty Mutual charged renters 23 percent more.

    The CFA maintains that auto insurance companies' use of homeownership status in pricing leaves low- and moderate-income Americans at an unfair disadvantage. According to Federal Reserve Board data, the median income of renters in the United States was $27,800 in 2013, compared with $63,400 for homeowners.

    "To raise people's auto insurance premium because they can't afford to buy their homes unfairly discriminates against lower-income drivers," said CFA Insurance Director J. Robert Hunter in a prepared statement. "A good driver is a good driver whether she rents or owns her home. Insurance companies should not be allowed to target people based on homeownership status."

    The CFA obtained quotes from State Farm, Geico, Allstate, Progressive, Farmers, Liberty Mutual and Nationwide. Geico was the only insurer whose quotes were the same, regardless of the driver's homeownership status.

    "Virtually every state requires drivers to buy insurance, but we shouldn't force them to buy a home in order to get the best price," Hunter said. "State insurance commissioners and elected representatives should step in and stop this practice," he added.

    Check out "Crazy Auto Insurance Rates: Your DUI May Matter Less Than Credit Score."

    Do you think renters should have to pony up more for car insurance than homeowners? Sound off below or on our Facebook page.

     

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    By Maryalene LaPonsie

    Retiring comfortably - never mind wealthy - may seem out of reach to many people, given current savings rates. Consider that median savings accumulated by workers ages 51 through 60 years is $49,000, while the number for people ages 30 through 40 is $30,000, according to professional services firm Towers Watson.




    Don't let the statistics scare you. With a little advance planning and self-discipline, you can have a golden nest egg at retirement. Here's how:


    Rule 1: Spend less than you earn


    The formula for retiring rich starts with you actually putting money in the bank. Social Security alone isn't enough to have you living the good life during your golden years.

    Money Talks News founder Stacy Johnson recommends you spend only 90 percent of the money you make and sock away the remaining 10 percent.

    If you have zero savings right now, concentrate on building up an emergency fund in a savings account first. Once your rainy-day fund is full, put that 10 percent you're not spending into a dedicated retirement fund.

    If you're currently spending more than 90 percent of your income each month, you may want to read about how to save $1,000 by summer.


    Rule 2: Start saving early


    Thanks to the power of compounding interest, a little money saved now can go a long way at retirement time. But to get the most benefit, you'll want to start saving as early as possible.

    Let's say you're 20 years old and can manage to put away only $100 a month into your retirement fund. Assuming you average 8 percent returns, you'll be closing in on having half a million dollars - $463,806 to be exact - by age 65. Even better, over that 45-year period, you'll only have invested $54,000 of your money to get all that cash in return.

    If you wait until you're 40 to start saving $100 a month, and get that same rate of return, you'll put in $30,000 of your money and get $87,727 in return by age 65. Not bad, but wouldn't you rather have half a million?


    Rule 3: If you start late, make up for lost time


    Maybe you're 55 and think you've missed your window of opportunity to retire rich. Don't wave the white flag just yet!

    The government allows those 50 or older at the end of the year to make catch-up contributions to their retirement funds. You can contribute an extra $6,000 to your workplace retirement program, such as a 401(k), for a total annual contribution of $24,000. IRA catch-up contributions are $1,000 for a total allowable contribution of $6,500 each year.

    You might think there's no way you'd ever have $6,500, let alone $23,000, to invest in a single year, but you could be surprised at when and how you come into extra cash. You may benefit from a loved one's estate, downsize your home or sell a boat or other large toy that no longer fits your lifestyle. When you find yourself on the receiving end of a windfall, don't blow it on a vacation; put it in a retirement account if you want to retire rich.


    Rule 4: Don't leave free money on the table


    If someone tried to hand you $100, would you say no?

    That's exactly what you're doing when you fail to take advantage of a 401(k) employer match. Your company is basically giving you free money with the only string being you need to pony up some of your own cash for the retirement fund too.

    You won't get rich by passing up golden opportunities like this for extra cash. If your employer offers a 401(k) match, make sure you are taking full advantage of it.


    Rule 5: Minimize your taxes


    The rich stay rich, in part, because they're savvy enough not to let Uncle Sam take too much of their money.

    When you're investing your retirement money, be sure to use tax-sheltered accounts such as IRAs and 401(k)'s whenever possible. In addition, be smart about which type of account you use.

    Traditional retirement accounts let you invest money tax-free now and pay the piper once you make withdrawals in retirement. Meanwhile, Roth IRAs and Roth 401(k)'s tax you now and make the withdrawals tax-free.

    You'll probably want to discuss with a financial adviser the best option for your particular situation, but generally, Roth accounts are preferable for younger investors. In theory, you should be making more when you're 65 than when you're 25. As a result, your tax rate now may be lower than the rate you'd pay at retirement. However, if you're within a few years of retirement, you may want to consider a traditional account to get the tax benefits now.


    Rule 6: Take a little risk


    You could put all your money in bonds and sleep well at night knowing you'll probably never lose any of your money. But with that approach, you're not going to retire a millionaire either.

    Stocks and real estate are where the money is to be made, but then there is always the risk of a housing bubble bursting or the market crashing. Take heart, though, in knowing that stocks and real estate have historically appreciated in the long run.


    Rule 7: Stay informed about your investments


    Don't mistake taking a risk with being dumb.

    A smart risk may be investing in an emerging market fund. A dumb move may be pouring your life savings into a speculative currency.

    How do you know the difference? By researching available investments, weighing your options and selecting the amount of risk that works for your unique situation. For example, those nearing retirement age may want to minimize their level of risk, while recent college grads can be more daring because time is on their side.

    For more help on investing, read Stacy's advice on how to open a mutual fund and how to select a good investment adviser.


    Rule 8: Break free from the herd


    When the stock market crashed a few years ago, too many people freaked out and sold their investments.

    You know what? Those people took a bad situation and made it even worse. Many sold their investments right when the market was bottoming out, and then they missed the rebound.

    The people who are going to retire rich are those who snatched up stocks at bargain-basement prices in 2009 and then saw their value climb by double digits in the following years. Same thing goes with the housing market. When the bubble burst, the smart people were the ones who were buying houses, not selling.

    It's easy to follow the herd, but if you want to be rich, you need to keep a cool head and make rational money decisions even in the midst of a crisis.


    Rule 9: Work longer


    Or at least wait to file for Social Security. While you can file for Social Security benefits as early as age 62, you'll get a lot more money if you wait until you're 70.

    Once you hit your full retirement age, you can get an 8 percent bump in your benefits for every year you wait to start receiving payments. However, you'll want to file by age 70 because there is no benefit to waiting longer than that.

    You may be worried you'll have one foot in the grave at age 70, but don't fret. According to Social Security actuarial data, at age 70, you should still have an average of 14 to 16 years left to suck all the marrow out of life.


    Rule 10: Maximize your income potential


    Finally, if you want to retire rich, you need to maximize your earnings. That means no more settling for a dead-end job that pays pennies.

    Look for ways to increase your income, which can, in turn, increase the amount of money you are saving for retirement. Consider these options:
    • Does your current field offer some form of credentialing that could increase your opportunities for a raise or a transfer to a higher-paying position?
    • Is there someone in your workplace who could serve as a mentor and help advance your career?
    • Are you eligible for one of the government-funded workforce development training programs?
    • Did you start a college program and never finish it? Will those credits transfer?
    • Could you use an online degree program or vocational classes through a community college to earn a degree or upgrade your skills?

    Regardless of which option you choose, don't fall into the student loan trap. If you do decide to go back to school, look for ways to make college affordable and try to pay as you go rather than going into debt.

    Retiring rich may sound like something reserved for the one-percenters, but by making these smart money moves, you too can have plenty of cash to carry you through your golden years.

     

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    By Kira Brecht

    It's the age-old question: Can money buy happiness?

    Much of the time, our energy and focus is on work and career, which primarily is about the chase for the almighty dollar. Generally, people want more for basic needs, including a roof over their heads, food, clothing and maybe a car.

    And we all want more of the fun things money can buy, including vacations, entertainment and the latest
    high-tech toys
    .

    It can be a valuable exercise to take a step back from the daily grind to examine what money means to you and how you spend it. "I think deep down, the brain equates money not so much with happiness as with security and survival. These are nonnegotiable values, primal motivators," says Kenneth Reid, founder of DayTradingPsychology.com.

    "Research shows that the greatest psychological stress occurs when one is unable to act in one's own best interest," Reid says. "But when we are able act in accordance with those primal imperatives, we feel a sense of deep satisfaction. Such acts can be as simple as clipping a coupon and saving 25 cents."

    Ultimately, the goal of money management is to provide discipline and a process for doing the things we must do that may not feel good at the time but are crucial to our future success, says Joshua Wilson, chief investment officer at WorthePoint Financial in Fort Worth, Texas. "Money shouldn't be viewed as a score card, but as a ticket to different degrees of freedom. Some people require more to get to the degree of freedom that they need."

    Money can have paradoxical effects, Reid says. "We've all heard stories about how sudden wealth, such as lottery winnings, can be disruptive, even devastating, to a person or a family. A phrase comes to mind from complexity theory: 'more is different.' It means that scale brings unique challenges. Too much, too soon can be as bad as too little, too late."

    Behavioral economists have identified some ways money could increase levels of happiness.

    Neil Krishnaswamy, a certified financial planner for Exencial Wealth Advisors in Plano, Texas, recommends the book "Happy Money: The Science of Happier Spending" by Elizabeth Dunn and Michael Norton. "This book provided me with great insights, particularly in how we think about our discretionary spending," he says. "Once our essential, or nondiscretionary, expenses are met, how should we think about spending our discretionary dollars in ways that lead to real, lasting fulfillment? If we're more conscious of how our spending is connected to our values and learn from some of the recent scientific research, we might just be able to use money in a way that really does buy happiness."

    Science shows that there are several ways we can spend money more effectively to increase life satisfaction.

    Buy experiences. Dunn and Norton's research reveals that satisfaction with experiential purchases increases over time, while satisfaction with material goods decreases over time. "I met an older woman the other day in a dentist's waiting room. She had an intense vitality about her that was impossible to ignore," Reid says. "We struck up a brief conversation, which led to my discovery that she also spent two months a year leading walking tours in faraway lands. Money may not buy happiness directly, but it might buy you the challenges you need to achieve something even deeper and more lasting - something we don't have a simple name for."

    Buy time. Spend your money to free up time for family, friends or meaningful hobbies and activities. For instance, hire a housecleaning service or use a dry cleaning service that picks up and drops off to reduce your time spent on errands.

    Pay now, consume later. Technological innovations have made it possible to fulfill almost all desires immediately, Krishnaswamy says. "We are enabled more than ever to consume sooner and pay later. With the Internet, we can shop faster, pay with a credit card and have things delivered to us the next day. When you shop at Amazon.com (ticker: AMZN), you may be tempted to join their Prime program, giving you two-day shipping on all purchases. While efficient and often very practical, shopping this way may deprive you of the experience of delayed gratification."

    Invest in others. Research shows there are good strategies to invest in others that can boost happiness, Krishnaswamy says. Make it a choice to invest in someone, make a connection with them and make an impact in their lives, he says.

    In the end, money may mean different things, including power, freedom or security. If your goal is happiness, research shows that how you spend your money could actually help boost life satisfaction. Maybe money can actually help you buy happiness after all.

     

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    By Maryalene LaPonsie

    A recent study from the Stanford Center on Longevity unearthed an interesting anomaly. While the financial security of Millennials and Gen Xers had dropped significantly from 2000 to 2014, it has risen slightly for baby boomers ages 65 to 74, according to The Sightlines Project.

    "No change is probably more accurate," says Steve Vernon, a consulting research scholar for the center's financial security division. The increase registered only 1 percent, but it was in contrast to the 8 percent drop in financial security measured for 25- to 34-year-olds, the greatest decline among all age groups.

    What's more, seniors have the greatest financial security of any group surveyed. In 2000, 45- to 54-year-olds topped the index, with 75 percent being financially secure. By 2014, that group dropped to 68 percent, while the score for 65- to 74-year-olds increased to 69 percent. The group with the lowest financial security is 25- to 34-year-olds, with only about half (56 percent) being financially secure in 2014. Stanford researchers calculated the financial security index by averaging nine financial metrics including cash flow, emergency savings, assets and insurance coverage.

    Social Security, pensions and jobs stabilize finances. The financial security of seniors is likely holding steady for several reasons. "Social Security does a good job of keeping you out of abject poverty," Vernon says. "People over 65 are also working longer."

    Access to traditional pensions is another factor that helps retirees. "When you look at that older population, a number of them have a traditional pension," says Kevin Crain, managing director and retirement services executive for Bank of America Merrill Lynch. "There is some predictable income post-retirement."

    Beyond a steady source of income, older Americans may have greater financial security because they typically carry less debt and are more likely to own a home. Many people in their 60s may also find themselves on the receiving end of an inheritance, which could further buoy their finances.

    Senior fortunes could change later in life. While 65- to 74-year-olds are experiencing relatively stable financial security now, it may not last. Kathleen Hastings, a certified financial planner with FBB Capital Partners in Bethesda, Maryland, cautions that as seniors age, they may strain their resources.

    "If you're looking at the group that's 80 and older, their economic security is deteriorating," Hastings says. She attributes declining financial security among the elderly to increased medical and long-term care costs coupled with Social Security increases that haven't kept pace with health care inflation.

    Financial security tends to decline slightly as people age. The Sightlines Project found that 62 percent of people age 75 and older were financially secure in 2014, compared to 69 percent of people age 65 to 74. While younger seniors may be relatively healthy and able to continue working if needed, the elderly may need expensive care and have dwindling resources to pay for it. "Once you get past age 75, you'll probably see a shift [in security] to the other direction," Crain says.

    Younger generations may not follow in their parents' footsteps. Although the financial security of 65- to 74-year-olds seems stable today, future generations shouldn't necessarily expect the same. "I do think this age group right now is in a unique situation," Crain says. That's because many of today's retirees have Social Security, a traditional pension and their own savings from 401(k) plans and IRAs.

    Millennials and Gen Xers likely won't have traditional pensions to fall back on. They may also have delayed home ownership and taken out significant student loans, increasing their chances of carrying debt into retirement. And with boomer parents living longer, there may be little chance of anything being left over to pass along as an inheritance.

    Vernon and the other collaborators on the Stanford study agree younger generations may be headed for trouble, but they are quick to say they aren't passing judgement. "We're very careful that we're not shaking our fingers at individuals," Vernon says. Instead, he hopes The Sightlines Project report will raise awareness of the need to take action, both individually and collectively through policy changes, to improve financial security for all generations.

    Steve Martin, a senior managing advisor with BKD Wealth Advisors in Oakbrook Terrace, Illinois, says the best takeaway may be this: "The sooner people start planning for retirement, the better off they'll be."

     

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    By Andrea Cannon

    Leasing is now more popular than ever. In fact, Millennial car buyers are leasing 46% more over the past five years because they are able to afford their dream car at a much lower cost. If you've thought about leasing a vehicle, then we've provided what you need to know before visiting the dealer.

    Benefits of Leasing

    You will pay for the car while you need it, and at the end of your lease, you'll simply return it.

    There are a number of other benefits associated with leasing a vehicle, such as:
    Lower repair costs, because the warranty will cover most of them.
    • Lower sales tax, since you'll only be responsible for paying sales tax on the portion of the car you finance.
    • Lower monthly payments compared to buying.
    • Typically, there is no down payment, or a very low down payment, required.
    • Fewer obligations - at the end of your contract, you simply turn in the keys and walk away.
    • New vehicles every few years. Once your lease term is up, you can choose a new lease and enjoy all the benefits and features of a new car. This also means that you can drive a better car for less money every month. On the other hand, you won't be able to customize your vehicle.
    Length of Lease and Key Contract Terms

    Lease terms usually last between two to four years. However, every leasing contract is different, so you want to find out specifics, like the length of the term and the mileage cap (which is typically between 12,000-15,000 miles/year).

    Most drivers agree that leasing contracts can be very confusing, even more so than when buying a vehicle. If you'd like to go in as prepared as possible, consider reviewing some common contract terms. There's a long list of costs, terms, and fees on a lease contract, but the key items to look for are pretty clear.

    Gross Capitalized Cost

    This is the sticker price of the car. Like everything else in life, it's negotiable. Don't pay full price!

    Adjusted Capitalized Cost

    This is the price of the car less negotiation, rebates, trade-in, and down payment.

    Residual Value

    When you turn in the car at the end of the lease, the carmaker estimates it will still be worth something; the car's residual value. The higher this number, the lower the depreciation (and the lower your payments).

    Depreciation

    This is the value of the car over the months and miles you will be driving it. You can think of this as the rental fee for the car. Or you can think of it as Adjusted Capitalized Cost - Residual Value.

    Money Factor

    This is the interest rate you'll pay, but it's not a straight forward interest rate.To compare it with an actual interest rate, multiply it by 2400, so you have a better idea of the value of the loan. This is also negotiable.

    This interest rate will be charged to the sum of Adjusted Capitalized Costand Residual Value. It seems like double counting, but you're paying for both the use of the car and money the finance company "loaned" you to lease the car. It may appear on your bill as Finance Charge or Rent Charge.

    Monthly Lease Payment

    Finally, this is what you'll pay each month. It's simply the Depreciation + Finance Charges + Sales Tax.

    A good lease deal is one with the lowest Adjusted Capitalized Cost, the highest possible Residual Value, and the lowest possible Finance or Money Factor. Be sure to negotiate for all three!

    Financing and Payment Options

    As is the case when purchasing a car, you will have a number of financing options available to you when leasing. Make sure to research lease specials and financing options in your area before visiting a dealership. Use Edmunds' Price Promise tool to find special offers near you.

    Leasing can be difficult if you don't have good credit. If you aren't getting the financing terms you're after, then the DMV recommends first working on raising your credit score, offering a higher down payment, or lowering the annual mileage of your lease. If you have a vehicle trade-in, this can be a great start for your down payment.

    Remember, the higher your down payment is, the lower your monthly payments will be. On the other hand, some experts recommend putting as little down as possible because if your vehicle is wrecked shortly after leasing, you will be out of any money you invested upfront.

     

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    By Qiana Chavaia

    In a decade-long Prudential survey that studied the financial experiences of women, research data showed that since the 2008 financial crisis, women have made significant improvements in their financial behavior. Still, many continue to admit a lack of knowledge and understanding of sophisticated financial products.

    That lack of knowledge causes more than 50% of women to rely on someone else to make financial decisions regarding their future. On the other hand, the study dispels several myths about female financial behavior, casting a more positive light on women's money habits.

    Here are four common money misconceptions about women.

    1. Women Are Impulse Shoppers

    One of the most common misconceptions is that women are impulse shoppers. Data from the survey showed that often, the last-minute purchases referred to as impulse buys are made using funds already set aside within a budget. And the majority of respondents (70%) claimed to spend based on need, not wants.

    2. Women Don't Know How to Manage Money

    Most people don't fully understand money management - but that's a problem for both sexes, and not unique to women. However, a majority of women distrust the process of turning planning over to a financial professional - six in 10 prefer the help of family and friends. This differs from men, who often prefer outside sources of help.

    3. Women Don't Understand Retirement Planning

    Women's understanding of workplace retirement plans and IRAs showed considerable improvement since the 2008 crisis, up from 47% to 72% of respondents. While many women have more to learn about other retirement products such as annuities, a majority of female respondents have seen progress in their understanding of retirement planning.

    As women increasingly become primary earners or amass significant net worth of their own, their financial behaviors and understanding of money management will undoubtedly continue evolving.

    4. Women Don't Make Financial Decisions in Their Households

    The belief that women don't make household financial decisions is an entirely outdated and erroneous one, according to the data. The survey showed that 95% of women consider themselves financial decision makers, and 85% of married women say they manage the household's financial decisions themselves, or jointly with their spouse. That means today's women are developing (or in many cases already have) a much more thorough understanding of personal finances and investing than earlier generations.

    Do you cling to any of these money myths about women?

     

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    Can Meal Subscription Boxes Save You on Groceries?
    Meal subscription services have been around for a few years now. For between $9 to $15 a meal, companies like Hello Fresh, Plated and Blue Apron will deliver easy, ready-to-cook dishes complete with portioned ingredients right to your door.

    But the real question is: Can they save you money?

    That all depends on your dining habits. If you're someone who does a lot of cooking at home, you're not likely to save any money with a subscription service. In fact, you might end up spending more.

    However, what you will save is time.

    You're not going to be bogged down by things like last-minute grocery shopping and hunting for recipes - so for some of you, that might be worth the extra cost!

    So who will save money with a subscription service? It's the people and families who dine out often and spend much more than they have to.

    Sound familiar? If you love to cook new things but just can't find the time to shop for groceries, these services can be a great way to cut costs by up to 50 percent a meal, depending on where you eat. So while a meal subscription service might not be for everyone, they could be a great option for adventurous foodies looking to expand their tastes and save a few dollars.

    Each company has its own menus and pricing, so shop around!

     

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    By Krystal Steinmetz

    Americans sure have a lot to gripe about these days - from problems with banks or their wireless provider to being victimized by scams run by impostors. The Federal Trade Commission received more than 3.08 million consumer complaints in 2015.

    For the first time in 15 years, the FTC received more debt-collection complaints (897,655) from consumers than it did identity theft complaints (490,220), which had previously held the top spot among consumer complaints since 2000.

    From our Solutions Center: Free help with debt collectors

    Debt collection gripes made up 29 percent of the complaint calls to the FTC last year, while 16 percent of the complaints were related to identity theft. The Consumer Sentinel Network data book is an annual report documenting consumer complaints received by the FTC, as well as state and federal law enforcement agencies, national consumer protection organizations and non-governmental organizations.

    "While debt collection complaints rose to the top spot among complaint categories, the report notes that this was due in large part to a surge in complaints contributed by a data contributor who collects complaints via a mobile app," the FTC explains. "This change caused a spike in complaints related to unwanted debt collection mobile phone calls."

    Still, identity theft complaints rose by more than 47 percent from 2014, on the heels of growing complaints about tax identity theft fraud.



    "We recognize that identity theft and unlawful debt collection practices continue to cause significant harm to many consumers," Jessica Rich, director of the FTC's Bureau of Consumer Protection, said in a statement. "Steps like the recent upgrade to IdentityTheft.gov and our leadership of a nationwide initiative to combat unlawful debt collection practices are critical to our ongoing work to protect consumers from these harms."

    The FTC says these were the top five consumer complaints in 2015:
    • Debt collection: 897,655 complaints. (For ways to deal with this problem, check out "4 Steps to Stop Debt Collectors in Their Tracks.")
    • Identity theft: 490,220. There are ways to protect yourself from becoming a victim of identity theft. Click here for 10 great tips.
    • Impostor scams: 353,770
    • Telephone and mobile services: 275,754
    • Prizes, sweepstakes and lotteries: 140,136

    You can file a consumer complaint with the FTC online or by calling 1-877-FTC-HELP (382-4357).

     

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    By Karla Bowsher

    Retail drug prices, on average, more than doubled over a seven-year period, according to data from AARP.

    The nonprofit's latest Rx Price Watch report, which tracks prescription drugs widely used by older Americans, found that the retail cost of prescription drug therapy reached an average of $11,341 per drug, per year in 2013.

    That's up from an average of $5,571 in 2006, when Medicare implemented its prescription drug benefit, Medicare Part D.

    Leigh Purvis, director of health services research in AARP's Public Policy Institute, tells the Associated Press:

    "Our concern with the prices we're seeing is that the overall trend is really accelerating."

    The 2013 average cost of $11,341 is also unaffordable for retirees with low incomes and limited savings, Purvis says.

    According to AARP, which advocates for senior citizens, the 2013 average cost is equivalent to:
    • Almost three-quarters of the average Social Security retirement benefit ($15,526).
    • Almost half of the median income for Medicare beneficiaries ($23,500).
    • More than one-fifth of the median U.S. household income ($52,250).




    The latest Rx Price Watch report also shows that drug price increases are outpacing inflation.

    In 2013, for example, the average annual increase in retail prices for a combined set of 622 widely used prescription drugs was 9.4 percent. The general inflation rate, however, was 1.5 percent over the same period.

    AARP attributes its findings on the much higher average cost "entirely" to price increases for brand-name and specialty drugs, which the nonprofit reports "more than offset often substantial price decreases among generic drugs."

    From our Solutions Center: How to quickly shop insurance

    Of course, as is the case for most types of purchases, consumers are not obligated to buy brand-name drugs and can save a lot of money by buying generics.

    To learn more about how to lower your drug costs - whether you use brand-name or generic drugs - start with:
    What's your take on AARP's findings? Let us know what you think by commenting below or on our Facebook page.

     

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    By Damian Davila

    Congratulations on your promotion! You've just made another step toward a successful future.

    Still, this isn't the time to become complacent. A promotion comes along with new challenges and tasks. To help you make the very best out of your new job, here are the 10 money moves to make after a promotion.

    1. Revisit Your Tax Withholding

    Most promotions don't come with just a title upgrade, they come with a well-deserved raise. If that's your case, calculate whether or not you need to adjust your W-4 form and submit it to your HR department.

    Let's assume that you file a joint return with your spouse and your combined taxable income was $90,000. Your tax due would be $18,293.75 ($5,156.25 + 25% of the amount over $37,450). After your promotion, your new combined taxable income is now $100,000. Your new tax bill is $21,071.25 ($18,481.25 + 28% of the amount over $90,750). Assuming no offsets to your salary bump and no changes to your W-4, you would be $2,777.50 short of your tax bill! (See also: Top Three Tax Facts to Know for 2016)

    Use the IRS Withholding Calculator and determine if you need to update your W-4.

    2. Calculate Vesting of Company Shares

    Vested company shares are another way that your employer could reward you. Very often, these restricted stock units vest over time, meaning that you gain ownership of those shares the longer you stay. The idea is that your employer wants you to perform well and remain with the company. Contact your HR department to find out the vesting schedule of your company shares so that you know how much you would actually take with you if you were to part ways with your employer.

    3. Time Profit Sharing and Bonus Checks

    When your promotion includes a large bonus or profit sharing check, pay attention to the date that the
    payment will be issued on. An elective deferral contribution to your retirement accounts must be deposited by the tax filing due date (April 19, 2016 for Maine and Massachusetts residents and April 18, 2016 for everybody else). For 2015 and 2016, the contribution limit to 401K, 403B, and most 457 plans is $18,000, and to regular and Roth IRA plans it's $5,500. If you're age 50 or over, you can make an additional $6,000 in catch-up contributions. When you haven't met the applicable contribution limit, take advantage of that windfall to fatten up your retirement accounts.

    4. Identify Additional Costs

    With great power comes great responsibility, Peter Parker! Take stock of the responsibilities of your new position and determine how much additional time you may need to perform those tasks successfully. Having to stay a bit longer at work may increase several costs, including paying higher fees for babysitters or preschools, and dining out more often than before the promotion. Your first weeks in your new position will provide you an idea of how much your budget will need to adjust.

    5. Determine New Tax Deductions

    The good news is that some of those new-job-related costs may also be tax deductible.
    • Keep track of mileage that you have to drive to off-site locations for job-related activities. You can deduct 54 cents per mile for business miles driven in 2016, down from 57.5 cents in 2015. Also, you may use that mileage to allocate a portion of your car expenses, such as insurance and maintenance.
    • Being able to telecommute from home allows you to designate a portion of your home as a business office. Use the percentage from your total home space used used for business purposes to allocate allowable deductions using Form 8829.
    • Having to dine and wine prospective clients may also be tax deductible.

    Consult your accountant for more details on allowable deductions.

    6. Prevent Burnout

    Several human resources experts claim that the first 100 days on the jobare critical, particularly after a promotion. To thrive in your new role - and to maximize your number of fully vested shares if applicable - take steps to mitigate additional stress related to your new job. Whether it's hitting the gym more often, signing up for a new class, or having "pizza day" with the kids once a week, you may have new costs to cope with stress. Make sure to include them in your new monthly budget.

    7. Request a Credit Limit Increase

    Now that you have a higher annual income, you may be eligible for a higher limit on your credit cards. If you've have been current in all of your payments for the last year, have an account in good standing, and haven't requested a limit increase in several months, contact the issuers of your credit cards to submit your request. Most financial institutions allow you to do this over an online portal, but some may request to contact them via phone.

    With a higher credit limit, you can effectively improve your credit utilization ratio, which accounts for 30% of your FICO credit score.

    8. Ask for Education and Licensing Subsidies

    Most promotions are the result of hard work, and some of them are the result of an important investment that requires a recurrent annual expense.

    For example, an architect needs to complete a series of hour requirements and exams to become licensed. Upon becoming licensed, an architect can choose to become a member of the American Institute of Architects (AIA), which has an initial cost of $442 per year and costs $600 each year thereafter to renew. Having the AIA in the title of a lead architect in a project bid makes a company more desirable to clients, so an architect could successfully argue that it's in the company's best interest to subsidize the annual cost of $600.

    Similar scenarios take place in other industries, including accounting, engineering, and finance.

    9. Inquire About Additional Company Benefits

    Your promotion could unlock new or improved perks, including:
    • Health plans;
    • Flexible spending accounts (FSA);
    • Telecommuting devices (laptops, smartphones);
    • Fund options in retirement accounts;
    • Industry conferences; and
    • Parking options.

    Find out what discretionary items are covered by your updated employment package.

    10. Hire an Assistant

    One time saving hack from the world's busiest people is to outsource non-critical tasks, such as researching travel options, transcribing audio, and scheduling meetings, to an assistant. If your new job doesn't include a personal assistant, then hire a virtual one for about $10 per hour through Upwork, Fancy Hands, or Zirtual.

    You'll free up time to be able to focus on higher level priorities.

    What are some other things that people should do after a promotion? Share with us in the comments!

     

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    By Tim Lemke

    You're in your 30s now. If you're finally looking to get settled in your financial life, you may want to consider ways to build wealth over the long term. But that checking account alone isn't gonna cut it. It's time to examine the options out there for someone in their 30s who finally has a little bit of money to invest.

    Here are seven essential investment accounts all 30-somethings should have.

    1. 401K, If Available to You

    If you're employed full-time, your company may offer a retirement plan that gives you access to a number of mutual funds and other investments, plus the great tax advantages that come with it. Under a 401K, 403B, or similar plan, contributions are deducted from your pre-tax income, and most employers will match a certain percentage of what you put in. Now that fewer employers are offering pensions, the 401K has become the primary vehicle for saving for retirement. Pumping cash into this account while you're still relatively young gives your investments plenty of time to rise in value and give you a sizable nest egg. Even better, your investment is tax-deferred until you begin making withdrawals.

    2. Traditional IRA

    You don't necessarily need a traditional Individual Retirement Account if you have a 401K with an employer match. But if you have 401K from an old employer, it might make sense to roll it into an IRA, because you have a much broader choice of investments to choose from - many with lower fees. With an IRA, you can invest in practically anything, including individual stocks, mutual funds, bonds, and even commodities. Traditional IRAs are also great for people who are self-employed or otherwise don't have access to a 401K. Like a 401K, your contributions are deducted from your taxable income. You can open an IRA at most discount brokers such as Fidelity, TD Ameritrade, and E*TRADE.

    3. Roth IRA

    This account is a little bit like a 401K in reverse. The tax advantage is on the back end, when you can withdraw money upon retirement without paying tax on the earnings. That's because contributions to a Roth IRA come from earnings after tax, unlike 401Ks, which draw on pre-tax income. Under a Roth IRA, you can contribute up to $5,500 annually, and you can withdraw contributions (but not your gains) before retirement age without paying a penalty.

    4. Taxable Brokerage Account

    While your main focus should be investing in tax-advantaged accounts that are designed for retirement, it's good to have some investments available in this type of account due to the flexibility. You don't need to wait until retirement age to access funds in this account, for one thing. That means you can use it to boost your income now, through the sale of stock or the gain of dividends. If you hold on to investments in a taxable account for a long time (generally over a year), you'll pay only the long-term capital gains tax (mostly likely 15%) when you sell.

    5. 529 College Savings Plan (If You Have Kids)

    College is pricey, so nearly every state enables people to save for college by investing money for education in a tax-advantaged way. A 529 plan is similar to a Roth IRA, in that investments will grow tax-free until they're withdrawn, as long as they are spent on higher education. In many states, you also get a tax break from the contributions. It's possible to open a 529 for your child as soon as they have a social security number. Even if you don't have kids yet, you can designate a beneficiary now - such as a niece or nephew - and change it to your own child later. (See also: The 9 Best State 529 College Savings Plans)

    6. High-Interest Savings Account

    Everyone knows you need a basic bank account, but if you want to boost your savings, it's helpful to have a savings account with a higher-than-average interest rate. These days, interest rates are extremely low, but you can still find returns of above 1% in money market accounts and online banks such as Capital One 360. (See also: Best Online Checking Accounts)

    7. Peer-to-Peer Lending Account

    In addition to making it easier to invest in stocks, the Internet age has also made it possible for individuals to invest in other people's debt. There are thousands of people who have hopped onto sites such as LendingClub and Prosper and report consistently solid returns. These sites generally work in the same way as banks, except that those in need of money are borrowing from individuals, who are seeking to make money on the interest. In most cases, people can invest based on the risk level of each borrower; those who aren't as creditworthy promise a potentially higher return - but more risk - to the investor. Popular personal finance blogger Mr. Money Moustache has reported more than an 11% annualized return since 2012, and many others report similar gains. (See also: How to Make Money with Prosper)

    How many of these accounts do you have?

     

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    Sports Authority Files For Bankruptcy
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    By Karla Bowsher

    Sports Authority won court approval Thursday to begin final sales at stores that are slated to close.
    The store closings will happen over the next three months, the retailer said in a website announcement Wednesday.

    Court approval of Sports Authority's proposal to close 143 stores came one day after the company filed the proposal as part of a petition for bankruptcy protection under Chapter 11 of the U.S. bankruptcy code.

    By filing under Chapter 11, Sports Authority has the option to restructure its business to be able to pay down debts, rather than to liquidate the entire business.

    The privately held company explained in its online statement, which is signed by Michael Foss, Sports Authority's chief executive officer:

    We have decided to utilize the Chapter 11 process to implement a financial and operational restructuring that we believe is necessary to help us become an even better place for our customers to shop for sporting goods.

    Due to the changing retail environment, we have a long-term plan to streamline and strengthen our business so we can continue to make necessary investments in our operations, including upgrading our in store experience and enhancing our website. As part of that plan, we have identified approximately 140 stores that we intend to close or sell in the coming months.



    The 143 stores slated to close are located in the following 26 states and Puerto Rico.
    1. Arizona
    2. California
    3. Colorado
    4. Connecticut
    5. Delaware
    6. Florida
    7. Georgia
    8. Illinois
    9. Kansas
    10. Maine
    11. Maryland
    12. Massachusetts
    13. Michigan
    14. Minnesota
    15. Missouri
    16. Nebraska
    17. New Hampshire
    18. New Jersey
    19. New York
    20. Ohio
    21. Oregon
    22. Pennsylvania
    23. Puerto Rico
    24. Tennessee
    25. Texas
    26. Utah
    27. Virginia
    Each closing store's complete address is available in the court document filed Wednesday. In total, Sports Authority had more than 450 stores across 41 states, according to its website.

    The retailer also notes on its website that "customers should not be affected" by the restructuring:
    • We do not expect there to be any impact on gift card balances or your ability to use gift cards at our stores or online at this time.
    • There should be no changes to our return/exchange policies at our go-forward stores or our customer loyalty program, The League.
    • If you have a warranty on a product you bought at Sports Authority, it is still in effect for the same period of time.
    • This should have no impact on the way you use your Sports Authority credit card or pay your bill.

    Were you surprised by the news of Sports Authority's filing for bankruptcy, or by the number of stores slated to close? Share your thoughts below or on Facebook.

     

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  • 03/07/16--06:26: Seven Unusual Tax Deductions
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    We have all heard cases of strange failed tax deductions, such as writing off a personal racehorse as a business entertainment expense, a toothless actor being unable to write off his dentures, and our personal favorite - a business owner who had his store burned by an arsonist, claimed the insurance as income, and tried to deduct the arsonist's $10,000 fee as a business expense. Some people just don't know when to stop.

    However, there are more than a few odd tax write-offs that do manage to pass IRS scrutiny, or are later approved by the Tax Court. They probably will not apply in your case, but who knows....

    1. Addiction Treatment - Certain types of addiction treatments may be written off under Medical and Dental expenses. Examples include smoking cessation programs (but not nicotine gum or patches), weight loss expenses that are related to specifically diagnosed diseases such as obesity and high blood pressure, and inpatient treatment for alcohol and drug addiction.

    For the majority of taxpayers, addiction treatment expenses (along with other medical and dental expenses) may be deducted beyond the threshold value of 10% of your adjusted gross income (AGI).

    2. Breast Implants - While cosmetic procedures are not normally deductible, an exotic dancer successfully argued that her breast implants were a necessary part of her business, and that without the implants, she would lose income to other exotic dancers. Insert your own joke here.

    3. Breast Pumps - Is anyone sensing a theme? Breast pumps as well as other devices to increase lactation for new mothers are deductible as necessary medical devices.

    4. Clarinet Lessons - Clarinet lessons in general are not deductible, but if they are part of an orthodontist's regimen to help deal with an overbite, they may be deductible as a medical expense. The way a clarinet is positioned in the mouth decreases the pain of an overbite. Both the cost of the clarinet and the lessons may be deducted.

    5. Guard Animals - If you use a guard dog or other animal to protect your property, you may be able to deduct some of the costs of caring for that guard animal. The Tax Court even allowed cat food to be deducted for a cat that was deemed necessary to a junkyard to keep it free of rats and snakes. Presumably, you would have a difficult time deducting a guard opossum or halibut.

    6. Pet Moving Expenses - Moving expenses associated with job relocation include the expenses of relocating your pet, and all of those expenses are deductible above-the-line - meaning they reduce your adjusted gross income (AGI) and can be taken whether or not you itemize.

    These expenses may not be much if your move is a relatively short drive but shipping your dog or cat across the country is relatively expensive - not to mention transporting your horse.

    7. Lawn Care and Landscaping - You may be able to deduct lawn care and landscaping expenses if they are an integral part of your home business. You must be a sole proprietor who regularly meets with clients in the home office, and you must show why the landscaping is relevant - perhaps your business caters to upper-income clients that would be reluctant to do business with you, or your home business involves gardening or landscaping.

    These cases all illustrate one fact - if you can make a reasonable argument, the IRS will at least consider unusual tax deductions. Prepare your argument carefully and use common sense to the extent possible. We strongly discourage anything that involves arson!

     

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    By Brittany Lyte

    Even more than a house or a top-notch college education, income taxes are probably the single largest expense you'll ever encounter in life. And you already know there are all sorts of little tax tricks that can be used every year to shave off a little of your overall debt to the IRS. What you probably didn't know is that there are a few more advanced strategies, mainly utilized by the millionaire's club, that can greatly reduce - and sometimes completely eliminate - your taxes. And they work just as well for the everyman (that means you!) as they do for members of the upper crust. (See also: 16 Great Tax Deductions You May Have Missed)

    Intrigued? Read on for our guide to making the tax-reduction strategies of the wealthy work for you.

    1. For People Who Own Stock

    Warren Buffett's tax rate is effectively lower than the rate paid by the people who clean his office, and the strategy he uses to pull it off can also work for you. Most of Buffett's income is from dividends, which are taxed at a lower rate than ordinary income. But if he were to simply sell his shares for cash, he'd still get hit with a pretty hefty amount of capital-gains taxes.

    For example's sake, let's say he has $200 million worth of stock that he wants to redeem for cash. If he sells, he'll be required to turn over a hefty $30 million, or so, in taxes. But if he borrows $200 million from an investment bank and uses the shares as collateral, he'll get the cash while avoiding having to fork over a small fortune to the IRS. Buffett's strategy of cashing in on stock without losing any gains is a smart one that you can use, too. In fact, Robert Willens, who runs an independent firm that advises investors on tax issues, told Bloomberg Business it's a tax-reduction ploy that's "alive and well."
    Sound too complicated for you? Here's an easier trick: When you sell stock for profit, consider also selling any losers in your portfolio. This technique, known as "tax loss harvesting," can help you potentially shave thousands off your tax bill, since the IRS will subtract your losses from our gains for tax purposes.

    2. For Commercial Property Owners

    Here's a tip from the tax-avoidance pros, as explained by Bloomberg Business. The idea is to relinquish your property ownership in exchange for cash without getting hit by big capital-gains taxes. First, establish a 50-50 partnership with a partner for any properties you own. Then, allow one partner to cash out. If we're talking about a $100 million office building, a 50% cash-out would trigger about $7.5 million in capital-gains taxes.

    Now, the partner who's cashing out needs to turn his ownership of the property into a loan. So the partnership borrows $50 million and puts it into a new subsidiary partnership, which contributes the cash to yet another new partnership. This newest partnership lends the $50 million to a finance company for three years in exchange for a three-year note. The partner cashing out now owns a loan note valued at $50 million, effectively liquidating his 50% interest. Three years later, the note is repaid and the partner gains ownership of 100% of a partnership sitting on a $50 million pile of cash - without triggering any capital-gains tax.

    3. For Residential Real Estate Owners

    Bill and Hillary Clinton use trusts to eliminate estate tax, and so can you. Here's the secret: create residence trusts and shift ownership of your home(s) into them. That's it! The advantage here is that any appreciation in the value of your property will fall outside the umbrella of your taxable estate. While your tax savings might not be huge at first, they could become quite significant a few years down the road. "The goal is really be thoughtful and try to build up the nontaxable estate, and that's really what this is," David Scott Sloan, a partner at Holland & Knight LLP in Boston, told a reporter for Bloomberg Business. "You're creating things that are going to be on the nontaxable side of the balance sheet when they die."

     

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    By Emily Brandon

    1. Affordable housing

    Housing is often your biggest retirement expense. But there are a variety of ways to cut your housing costs in retirement. Here are some ways to pay less for housing after you retire.

    2. Pay off your mortgage.

    When you pay off your mortgage, you eliminate one of your most significant monthly bills. While you will still have to pay for insurance, maintenance and taxes, those costs are likely to be a fraction of your mortgage costs. Your retirement savings will stretch much further if you no longer need to make a large housing payment every month.

    3. Downsize.

    There's no need for a large house with several stories and a spacious yard once your children grow up. Downsizing to a smaller home that costs significantly less can give a quick boost to your nest egg and eliminate many of the responsibilities of maintaining a large or aging home.

    4. Relocate.

    Once you retire, you don't have to live in a high-cost city because it's close to your job. You can choose to live anywhere in the world that has the amenities, weather and entertainment options you desire. Start dreaming about the beach, a golf community or a college town. Once you exit a large city, you might even be able to buy a newer or bigger home for less money.

    5. Reduce property taxes.

    Senior citizen homeowners who are older than a certain age and sometimes below a certain income cutoff qualify for property tax discounts in some jurisdictions. Find out when you might become eligible for property tax breaks in your area, and factor in property taxes and any exemptions provided to retirees before making any moves.

    6. Become a renter.

    Maintaining an aging home can be expensive and a lot of work. Selling your home and becoming a renter frees up the cash that was tied up in your home, makes someone else responsible for the upkeep of the property and might allow you to relocate to a city center that is walkable and close to shopping and entertainment options. However, renters could be subjected to significant rent increases or asked to move, which can be difficult to cope with in retirement.

    7. Reverse mortgage

    Retirees ages 62 and older who are committed to staying in their current home can use a reverse mortgage to tap their home equity to pay for living expenses. However, reverse mortgages charge a variety of fees, and if you move or sell the home, the loan becomes due. Plus, your children won't be able to inherit the home unless they pay off the loan.

    8. Move in with your children.

    Multigenerational households can provide benefits to both adult children and retirees. Grandparents might be able to help with childcare and meal preparation, while also being provided with eldercare when it's needed. While there is certainly the potential for conflict, a thoughtful arrangement could reduce the expenses of all the involved family members.

    9. Share your living space.

    Many retirees end up living alone after a spouse passes away. But roommates aren't just for young people. Retirees can split the rent or mortgage payment and gain some pleasant company if they live with other retirees. While you'll need to decide who does which chores, it's often nice to have someone to share meals or watch TV with.

    10. Rent out a room.

    If you have more bedrooms than you need, you might be able to make some money renting out a room. Some retirees take on long-term tenants, while others might make some extra cash on an occasional basis when there is an event in town. There are now several web services that can connect you to short-term renters online.

    Bonus. Sell your stuff.

    A family home accumulates a lifetime of equipment for discarded hobbies and electronics you seldom use. Gather up the things collecting dust in your basement and garage and try your hand at selling them. Your house doesn't have to be a storage container for children who have moved away, and you might be able to make some cash from people who can use the things you no longer need.

     

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    Simple Plumbing Tricks You Can (Really!) Do Yourself
    Whether it's a problem with your sink, toilet or pipes, a typical plumbing service call can set you back about $150.

    But there's hope: Some of these issues are actually easy and inexpensive to fix on your own. And if we can do it, so can you.

    Leaky toilets are a common issue and can raise your water bill. But how do you know you if even have a leak?

    Here's a simple test: Put a few drops of food coloring in the tank and wait 15 minutes. If you see any color appear in the water below, chances are you have a leak. The culprit may be a worn-out flapper in the tank. Luckily, they're easily replaceable for less than $3.

    The water level is another thing than can cause some problems. If you're toilet's running, the level is too high. Weak flush? It's probably too low.

    But that's an easy fix too. If you open the lid of your tank, in most models, you'll see a fill valve on the left side. Turn the screw on top of the fill valve to adjust how high or low you need your water to be.

    Finally, don't be so quick to throw out that leaky showerhead. It could just mean you need a little plumber's tape. Remove the showerhead, and clean off any old tape from the ring. Then simply wrap new tape in its place in a clockwise direction so it doesn't come off when you screw it back on.

    And there you have it! Now that you know these simple tricks, try them out -- and save the plumber for the bigger stuff.

    Related: 10 cheap home fixes

     

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    By Damian Davila

    Dear students, I'm sure that you have heard the news: Every single year the average student loan debt per borrower is increasing. For example, the average class of 2015 graduate with student loan debt will owe a little more than $35,000.

    Still, there is a silver lining: College students and grads often qualify for significant tax breaks and deductions. To minimize your tax bill and increase your chances of a refund, here are eight tax deductions and breaks worth knowing about.

    1. 529 Plans

    If your parents or other donor started a 529 plan for you, you're in luck. Also known as qualified tuition programs, 529 plans allow individuals to save for education expenses on a tax-deferred basis and allow a designated beneficiary (ideally, that's you) to use those funds, including interest gains, for qualified expenses free of taxes or penalties.

    But few people know that you can also start a 529 plan for yourself. Yes, if you anticipate returning to school for any reason, you can save for related expenses in your own 529 plan - at any age. The list of qualified education expenses goes beyond tuition and academic fees, including expenses for room and board, transportation, equipment, and accommodations for individuals with special needs, so adults can benefit, too. (See also: The 9 Best State 529 College Savings Plans)

    2. Qualified IRA Distributions

    Qualified distributions taken from a traditional IRA for use in qualified higher education expenses create no tax burden or penalty for you, assuming you only withdraw contributions, and not any earnings on the contributions. (Note: If your spouse, parent, or grandparent takes distributions from their own plans to fund your educational expenses, they would have to pay applicable income taxes on those funds, but don't have to pay the early distribution penalty which applies if under age 59 1/2.)

    3. American Opportunity Credit

    Replacing the Hope Scholarship credit, the American Opportunity Credit allows you to cover up to $2,500 of undergraduate college costs, including:
    • 100% of your first $2,000 qualified education expenses; and
    • 25% of next $2,000 qualified education expenses.

    Keep in mind that you can claim the American Opportunity tax credit on your own academic expenses or on those of your spouse and kids. This means that you can claim up to $2,500 per student living in your household. However, to be eligible for the full credit, your modified adjusted gross income must be $80,000 or less (those making more receive a reduced amount of the credit).

    Another advantage of this tax credit is that 40% of it is refundable, meaning that the IRS will issue a refund for that amount even if you don't owe any federal income tax.

    4. Lifetime Learning Credit

    The Lifetime Learning Credit allows you to deduct up to 20% of your first $10,000 in qualified education expenses, up to $2,000 per taxpayer.

    Unlike the American Opportunity Credit, the Lifetime Learning Credit isn't refundable. You can use it to reduce any tax that you owe, but won't receive a refund for the unused portion when your tax bill is already zero.

    However, the Lifetime Learning Credit doesn't require you to be working towards a degree like the American Opportunity Credits does. A single class makes you eligible for this tax credit.

    To claim the American Opportunity and Lifetime Learning Credits, file Form 8863 with your federal return.

    5. Business Deduction for Work-Related Education

    The IRS allows you to deduct the costs of qualifying work-related education as business expenses as long as the education is:
    • Required by employer of by law;
    • Necessary to maintain or improve skills; or
    • Indispensable to meet minimum requirements.

    You can also deduct qualifying transportation and travel expenses necessary for completing the education. For example, you can deduct 57.5 cents per mile driven and 50% of meals when traveling overnight for education purposes throughout 2015.

    Make sure to keep all records, such as transcripts and catalogs of coursework, and receipts from all of your education expenses to provide sufficient support, especially in case of an IRS audit. A best practice is to obtain a statement from your employer providing details about your required education and reimbursements.

    For more details, consult Chapter 12 from IRS Publication 970.

    6. Coverdell Education Savings Account

    Students under age 18, or of any age with special needs, don't pay any tax on distributions from Coverdell Education Saving Accounts for qualified education expenses at eligible institutions.
    While there is no limit on the number of Coverdell Education Savings Accounts that can be opened for the same beneficiary, the total cash contribution to all accounts on behalf of the beneficiary cannot exceed a total of $2,000 per year. Contributions can only be made in cash.

    7. Education Savings Bond Program

    Series EE bonds issued after 1989 and Series I bonds qualify for the Education Savings Bond Program, allowing you to not pay tax on the interest earned on those U.S. savings bonds. While you can take the tax deduction for your own education, you must be at least 24 years old before the bond's issue date.
    For additional eligibility criteria, such as modified adjusted gross income tiers, consult Chapter 10 from IRS Publication 970.

    8. Scholarship and Fellowship Grants

    Last but not least, the IRS exempts students from any taxes on funds from scholarship or fellowship grants that don't exceed qualified education expenses or represent payment for teaching, research, or other services.

    To increase the combined value of educational credits and other types of educational assistance, the IRS recommends to coordinate Pell grants and other scholarships by including some or all of the additional assistance in income in the years it's received.

    What are other tax deductions and breaks available for students?

     

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    By Geoff Williams

    It's a question everyone asks when they end up paying an unexpected and expensive bill. What went wrong?

    Too often, what went wrong is that a problem was ignored until suddenly there was no ignoring it. Almost of all of us, unless we're highly organized, are susceptible to financial time bombs. In the spirit of keeping these from decimating your bank account, here are seven big ones to consider.

    The dryer vent. Forgetting to empty a dryer vent, something that costs nothing but time, can, over time, lead to a home fire, which, of course, can do hundreds or thousands of dollars in damage, says Jonathan Heuer, co-owner of Home Square, a professional home maintenance company in Stamford, Connecticut.
    Heuer isn't being an alarmist. According to the U.S. Consumer Product Safety Commission, more than 15,000 fires are started every year by clothes dryers.

    The sump pump. The average cost to purchase a sump pump is $442.53, according to Angie's List, and if you have someone install it, expect to tack on a few hundred or more dollars.

    Still, that's far cheaper than dealing with the results of a neglected sump pump. Heuer says a colleague of his had a broken sump pump and a blocked drainage line. The colleague didn't fix either and ended up with $15,000 in damage.

    The air filter in your furnace. A filter costs about $7, says Mike Catania, co-founder of the coupon and promotion code website PromotionCode.org. But neglecting to change your filter - generally recommended every other month or so - "can cause debris to build up that can shorten the life of your furnace by five years, cause a myriad of respiratory problems and make you lose out on up to 15 percent savings on your electric bill," Catania says.

    Water spots on your wall. "You may see the smallest leak on your drywall and think that it is isn't a big deal at all," says Ron Schmedly, who lives in Cincinnati and became an unwitting expert on financial time bombs at home.

    He and his spouse didn't think a minuscule leak in the family room by the chimney was a big deal, and they ignored it for a couple of years.

    But the leak and the resulting damage got worse. What probably would have been several hundred dollars for a handyman to fix became something much more expensive.

    "We had to replace 25 percent of the chimney this year at a cool $12,000 because we waited too long to repair the initial damage," Schmedly says.

    Gutters. Cheryl Reed, a spokeswoman for Angie's List, says you really should clean your gutters.
    "Ever see little trees growing in the gutter? ... Ignoring the gunk collecting up there will lead to serious water damage, not to mention the gutters," she says.

    According to Angie's List, homeowners spend, on average, $125 to $175 to get gutters cleaned. Judging from various home improvement sources on the Internet, gutter replacement would likely cost about 10 times what it would to get gutters cleaned - and, of course, water damage to your home can easily set you back thousands of dollars.

    Insurance. Not buying any or enough insurance is a big mistake, says Holly Wolf, chief marketing officer at Conestoga Bank in Chester Springs, Pennsylvania. (Her bank doesn't sell insurance, nor does anyone in her family.)

    "It's just something I believe in," Wolf says of insurance, and she makes the observation that frequently people will get, for instance, cheap car insurance, but then if they're unlucky enough to have a claim, "they get no support and battle [the insurer] every step of the way."

    Your car. As a general rule, regular car maintenance is smart, and if you hear a suspicious sound or your vehicle acts weird, you'd do well to check it out.

    Thomas Wooldridge, a marketing consultant in Atlanta, says that last summer, his car engine was making odd noises. And while he thought the sound was strange, he ignored it.

    "I knew I had to get it checked out but kept on delaying. Then one day last summer, I was 50 miles away from home and heard a loud bang in the engine," Wooldridge says. "I immediately lost all engine power and was only on batteries. The car was slowing down by itself, and the gas pedal was not responsive. The power steering wasn't working either and [the] only thing I could do was pull over on the side of the road."

    It turned out to be a faulty water pump.

    "A simple $200 water pump repair that I should have done weeks earlier cost me over $2,400 worth of engine damage," Wooldridge says.

    Of course, your life may have many realms: home, car, health, kids, pets. If you have a lot going on, and especially if you're on a tight budget, it can be hard and seem impossible to anticipate all the potential problems that could drain your finances.

    Still, it's worth trying. As Heuer says, "Take care of the small stuff early, and it won't kill you down the road."

     

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