- RSS Channel Showcase 1500175
- RSS Channel Showcase 2916147
- RSS Channel Showcase 3129541
- RSS Channel Showcase 6093556
Articles on this Page
- 03/10/16--04:59: _10 Smart Ways I'm S...
- 03/11/16--07:13: _Waiting to File Tax...
- 03/11/16--07:47: _8 Surprising Things...
- 03/01/16--02:31: _Everything You Need...
- 03/01/16--11:36: _Saving and Investin...
- 03/14/16--05:28: _10 Surprising Ways ...
- 03/14/16--05:51: _25 Purchases You'll...
- 03/15/16--04:48: _Considering a Fixer...
- 03/15/16--05:57: _Retail Therapy Make...
- 03/15/16--06:20: _Get financially fit...
- 03/16/16--06:31: _10 Household Tools ...
- 03/16/16--07:02: _4 Ways Car Loans Ca...
- 03/17/16--05:15: _Boost Your Financia...
- 03/17/16--05:34: _11 Overlooked Credi...
- 03/18/16--05:32: _6 Painless Ways to ...
- 03/18/16--05:59: _10 Guaranteed Ways ...
- 03/22/16--04:02: _How Credit Inquirie...
- 03/22/16--04:14: _6 Money Hacks to Ma...
- 03/22/16--06:51: _Save at the salon b...
- 03/23/16--08:01: _8 Financial Decisio...
- 03/10/16--04:59: 10 Smart Ways I'm Spending My Tax Refund
- 03/11/16--07:13: Waiting to File Taxes? You Might End Up Paying More
- 03/11/16--07:47: 8 Surprising Things You Need to Know About Retirement
- 03/01/16--02:31: Everything You Need to Know About Taxes and Social Security
- Individual filers with a combined income of between $25,000 and $34,000 will pay income tax on up to 50% of benefits.
- Individual filers with a combined income of more than $34,000 will pay income tax on up to 85% of benefits.
- Married filers filing jointly with a combined income (including both spouses) of between $32,000 and $44,000 will pay tax on up to 50% of benefits.
- Married filers filing jointly with a combined income of more than $44,000 will pay taxes on up to 85% of benefits.
- Married filers filing separately will most likely pay taxes on their benefits.
- 03/01/16--11:36: Saving and Investing for Early Retirement: 3 Basic Strategies
- The Massive Investments Method. Many early retirees are heavily invested in stocks, real estate, and other markets. A common benchmark for a couple, both of whom make $35,000/year or so, is $2000 invested monthly. With average market gains, this investment regimen can yield a nest egg of $1,000,000. By using the 4% Rule (controversial; we'll go through this more in a future post), this couple will be able to take $40,000 out of their investment accounts each year, to live on, never fully depleting the portfolio. Ideally, the portfolio just keeps growing and compounding all the live long day, forever.
- The Cash Flow Method. Similar to the method above, the cash flow method is about investing your time and energy in something that will pay off for years to come. Maybe you buy up rental properties, which bring in thousands of dollars each money. Managed by an independent management company who takes a small portion of the products, these properties could bring in more income than you would get from a normal career, with none of the work. Maybe you start a company that continues to pay off with minimal oversight. Maybe you write the 21st century equivalent of the Happy Birthday song, and get royalties for the next 60 years. Whatever the case, you will have created something that pays the bills, which doesn't require you to work for 50 hours a week to sustain.
- The Currency Coasting Method. Finally, many people retire early by leaving their country of origin, to live in a place where their wealth goes much farther. This strategy can (and must) be used in tandem with either of the above, but may require less capital than either. If you move to Ecuador from the United States, you may not need the same amount of investments you'd need to live a comfortable unemployed life in the United States. Your living expenses may drop by ⅘ in Thailand, enabling you to live like a king spending half of what you'd pay to live in London. Lots of people who do this don't retire, per se. They keep working 10-40 hours a week: translating, teaching, blogging, working as entrepreneurs doing this and that. It's not true retirement, but just as many older adults never totally stop working, it's a method of living a more pleasurable life without having to slave away so hard to sustain it.
- 03/14/16--05:28: 10 Surprising Ways Spring Is Gonna Cost You
- 03/14/16--05:51: 25 Purchases You'll Never Regret
- 03/15/16--04:48: Considering a Fixer-Upper? 15 Ways to Avoid a Money Pit
- Home prices are high in many cities, and a fixer-upper may be the only affordable choice in decent neighborhoods.
- Home decorating and improvement TV shows inspire many buyers to turn to remodeling to get a home perfectly suited to them.
- Lovers of period homes always want to restore older structures.
- Galvanized steel pipes: Sediment can build up in the pipes, and they may leak and corrode.
- Aluminum wiring: It's a potential fire hazard.
- It's expensive. Depending on the material you choose, new siding starts at $10,000 to $13,000. Costs increase with the size and complexity of the job.
- It may indicate other problems. Siding may be rotting, blistering or disintegrating because of rot or mold hiding behind the home's exterior.
- Insect wings left on sills (termites)
- Teeny sawdust piles along baseboards (carpenter ants)
- Urine stains, odors or scrabbling sounds (rodents)
- 03/15/16--05:57: Retail Therapy Makes 85 Percent of Adults Feel Good
- Entertainment (i.e., books, movies, music)
- Furniture/home decor
- 03/15/16--06:20: Get financially fit with a home gym -- Savings Experiment
- 03/16/16--06:31: 10 Household Tools Every Frugal Homeowner Should Own
- 03/16/16--07:02: 4 Ways Car Loans Can Go Wrong and How to Avoid Them
- 03/17/16--05:15: Boost Your Financial Fitness With These 11 Small Money Moves
- Buy secondhand. Craigslist and garage sales are my best friends when I'm searching for big-ticket items because I simply refuse to pay full price. In fact, I've saved more than 50 percent in some instances on items that would have easily cost more than $1,000 in the store.
- Bargain shop. You can also reduce your spending drastically by avoiding full-priced items in the store. I can't remember the last time I paid retail for a piece of clothing; the clearance rack is my best friend. This may seem difficult initially, but the best way to avoid temptation is to embed in your brain the following: "If it's not on sale or clearance, I'm not buying it." Sounds corny, but it works!
- Never pay full price. As I said before, avoid the regular-priced racks altogether. Also, check online for promotional offers and check the store policies to see if they allow price matching.
- Allocate a percentage of your monthly income to your stash, either manually or electronically. The latter may work best to guarantee that you won't be tempted to skip a month.
- Make a plan for irregular income before you receive it. Expecting a hefty tax refund or a raise at work? Saving this cash is a great way to boost your emergency fund.
- A will: If you don't draft this important document and die without one, state laws will determine where your assets go. Is that what you really want?
- A durable power of attorney for finances and for health care: This document names a person to oversee your finances and your medical care if you become incapacitated.
- Life insurance documents: Don't leave your beneficiaries in the dark about the policies you have.
- Request a lower APR on your credit card. Pick up the phone and give the credit card company a ring to see if it can do anything for you. You never know until you ask, and the worst thing the representative can say is no.
- Look into refinancing your auto loan and/or mortgage. Depending on the loan, a reduction of a few points could save you thousands of dollars. Interest rates are at one of the lowest points in history.
- Explore your options. Don't have a 401(k) at work? Explore other options like an IRA or Roth IRA so you won't be left scrambling when retirement time rolls around.
- Maximize your Social Security benefits. How much you receive depends on the number of years you worked, how much you earned, when you decide to start collecting and other factors. Read here for "16 Ways to Get Bigger Checks from Social Security."
- 03/17/16--05:34: 11 Overlooked Credit-Card Perks
- 03/18/16--05:32: 6 Painless Ways to Pay Off Your Mortgage Years Earlier
- Find current mortgage rates. A good general source is the Freddie Mac weekly mortgage market survey, updated every Thursday. But you can also look at real-life rates available in your area by visiting our mortgage search page.
- Decide if you want a fixed-rate or adjustable-rate mortgage. ARMs are typically cheaper but riskier.Here's how to decide if an ARM is right for you.
- See what you could save. Use HSH's amortizing mortgage calculator - choose "show the full table" - to compare the costs and benefits of various options.
- $1,190 to pay it off in 20 years
- $1,459 to pay it off in 15 years
- $2,006 to pay it off in 10 years
- A lender's origination fee
- A title search fee and title insurance
- A settlement professional's fees
- The cost of pulling your credit report
- An appraisal fee
- State or county tax and/or transfer fees
- 03/18/16--05:59: 10 Guaranteed Ways to Retire Rich
- 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?
- 03/22/16--04:02: How Credit Inquiries Affect Your Credit Score
- 03/22/16--04:14: 6 Money Hacks to Make Life Easier
- 03/22/16--06:51: Save at the salon by making your haircut last -- Savings Experiment
- 03/23/16--08:01: 8 Financial Decisions You'll Regret Forever
Filed under: Taxes
By Mikey Rox
For the first time in what seems like ages - at least six years - I don't owe the IRS one red cent on my taxes. In fact, this year the government is going to pay me. I have grand plans for the extra influx of cash, mostly to tie up several financial loose ends. Take a look at this list of where my refund money is going, and make a plan to spend yours just as smartly.
1. Paying Off an Outstanding Medical Bill
Very annoyingly, I received a doctor's bill many weeks ago that was well above what I was expecting. I let it go for a while because I needed to call the doctor's office and cross-reference the fees with my insurance company to make sure everything was legitimate. Unfortunately, the charges were valid (not the outcome I was hoping for), so I have to pay up.
If you have outstanding medical bills, consider using all or part of your refund to tackle this debt. One bonus: Many hospitals and physicians will allow you to create interest-free payment plans to tackle your bills, making it unlikely you'll need to drop your entire tax refund on them.
2. Scheduling a Car Maintenance Appointment
The last time I had my oil changed, the mechanic told me that my car needed an alignment. It wasn't something I was prepared to pay for at the time, but I'll have it done now that I have the extra dough. While I'm there, I'll also have a few other issues taken care of, like a recently burnt-out headlight and the buffing of a dent that someone put in my car in the mall parking lot.
3. Pet Expenses
In the winter, I let my babe's fur grow a bit longer than I normally do throughout the rest of the year - cold weather and all. But spring is just around the corner, so it's time for a trim. And maybe a treat or two.
More importantly: Is your pet overdue for a trip to the vet? Spending some of your tax refund on your furry friend's health might be much appreciated - and save you from bigger vet bills in the long run.
4. Household Maintenance
It's not smart to let household maintenance go, and with your wallet is flush, now's the time to cross those to-dos off your list.
Stocking Up on Household Necessities
I host a lot of guests on a regular basis, so not only am I constantly cleaning the house - causing me to burn through cleaning supplies rather quickly - but I also go through a decent amount of kitchen and bathroom paper products. To cut costs and trips to the store, I buy these items in bulk and store them so I always have them on hand. And since they're not exactly cheap, now is the right time to stock up.
Having the Carpets Professionally Cleaned
I totally dread having to replace my upstairs carpeting (I wish I didn't have it at all!), so I'm keen to keep it in good shape. That means having it professionally cleaned (which isn't as expensive as you might think) to combat the wear-and-tear of constant human and animal traffic.
Hiring a Landscaper to Clean Up the Yard
I love the outdoors, but I hate doing yard work. Thus, a portion of my refund will go to my friendly neighborhood landscaper who will clean up the fall and winter gunk so the my property can shine when the weather gets warm again.
Making Minor Fixes Around the House
We all have those tiny things that we need to fix around the house, but sometimes they're so insignificant that they don't warrant a trip to the store for supplies just for that one little problem. Refund time is a perfect time to make a list of what's dead or not working - like light bulbs, remote batteries, and other easy, inexpensive fixes.
Completing Forgotten or Overlooked Home Projects
I plan to hire a handy person - likely a student looking to make a quick few bucks - from Craigslist to help me finish a few put-to-the-side projects, like fixing a hole in my bathroom wall, hanging shelves, and cleaning up the basement. Much cheaper than hiring a professional company at professional prices.
5. Paying for My Spring/Summer Sports Leagues and Gym in Full
I enjoy staying active physically and socially, so I participate in several leagues, including shuffleboard (don't laugh!), bowling, and trivia. While I have some extra padding in my pockets, I'm paying for all those upcoming fees in full, mostly so I don't have to stop by the ATM several times a week. The same goes for gym or fitness class expenses. Pay for those suckers in full for a year, and save big on membership costs.
6. Buying Gifts for Upcoming Events
Wedding and baby shower season is coming, and if you're not careful, these events can really hit you where it hurts - your wallet! I know I have a few coming up, so I'm buying the gifts in advance. That way I'm not caught off guard in a few months when I've forgotten that I need to buy yet another toaster oven or playpen.
7. Taking Dry Cleaning and Alterations to the Cleaners
All winter long I keep separate clothes hampers in which I put my wool and other dry-clean-only garments along with any items that need alterations or repairs (like missing buttons). Since the cold season is coming to an end, I plan to have it all cleaned/repaired in one fell swoop so I can put everything away in perfect condition so it's ready to go for next year. This prevents me from making unnecessary new clothing purchases by keeping my existing wardrobe in good repair, year after year.
8. Paying Off Upcoming Trip Expenses
I have a spring birthday, and since I'm not a fan of public displays of birthday affection, I try to travel by myself when it rolls around. This year, I'm headed to three previously unvisited Major League Baseball stadiums (my goal is to see a ballgame in all of them by age 40), for which I'll need airfare, lodging, and a rental car. While it's not a super expensive trip, it's not exactly a drop in the bucket either, so my tax refund is a good way to fund this excursion now, so I can relax when it's actually time to depart.
9. Settling Long Overdue Debts
Interestingly, I have a smallish tax bill from 2013 that keeps popping up every now and again, and until recently I didn't know what it was for. I called the IRS and figured it out, so I plan to pay it off with my refund. If you have any bills like this - perhaps a credit card bill - you should think about doing the same. Get it out of the way and off your back. You'll instantly feel better.
10. Putting the Rest in Savings
Whatever remains of my refund will go straight to savings. I've wrapped up a lot of items on my to-do list, so if there's any excess cash, I plan to save it for surprise expenses in the future or to continue building my fund for a future investment. You can never go wrong with putting some money away for a rainy day.
And of course, it goes without saying that if you don't have a rainy day fund, likely the best thing you can do with your refund money is to put most or all of it toward an emergency fund.
Are you receiving a refund this year? How do you plan to spend it smartly? Let me know in the comments below.
Filed under: Taxes
By Karla Bowsher
Filing your tax return late in the season doesn't just add to your stress level. It can also add to your filing costs.
Some do-it-yourself tax-filing software companies charge procrastinators higher rates, a practice known as "price surging." Bloomberg Business reports that they include TurboTax, H&R Block and TaxAct.
The publication explains:
They offer cheap, sometimes even free services to early filers. Then, usually in late March, they slap customers with price hikes of 30 percent or more. Sometimes they continue ratcheting prices up in the days before the deadline.
Even free filing options aimed at taxpayers with the simplest of tax situations dry up toward the end of the tax season.
For example, TurboTax ended its "Absolute Zero" offer in mid-February last year, according to Bloomberg. This free service is for taxpayers who can file using the simple tax forms 1040EZ or 1040A and meet other criteria.
A spokesperson for TurboTax's parent company, Intuit, tells Bloomberg that charging lower prices earlier in the tax season encourages taxpayers to file as early as possible, which helps the company ensure it can provide good service during the busiest parts of the season.
This year, though, TurboTax was still advertising its Absolute Zero service on its website home page as of this morning.
TaxAct, which has matched its competitor's offer of a no-cost federal and state filing option, was also still advertising the service on its website homepage as of today. (Please note that our link to TaxAct is an affiliate link. That means that we may get a commission if you decide to purchase anything from TaxAct.)
Click here and learn to slash your taxes with our new tax course!
Additionally, TaxAct offers what it calls a "Price Lock Guarantee" that allows procrastinators to lock in early-season prices and still file later on. Here's how the company describes it:
We guarantee that if you complete your return using any of our online products, you will pay the product price listed for that product at the time you started your return.
If we charge you more than the price listed at the time you started your return, we will reimburse you for the difference.
H&R Block did not respond to Bloomberg's requests for comment on its online price strategy, according to the publication.
To learn more about how to keep as much money in your pocket as possible when filing with Uncle Sam this year, be sure to check out Money Talks News' new course taught by Stacy Johnson: "Mastering Taxes: Slash Your Taxes and Have Fun Doing It!" (Readers can save 28 percent via that link.)
How do you avoid added stress and costs when filing taxes? Let us know what works for you below or on Facebook.
Filed under: Retirement Plans
By Rachel L. Sheedy
As you advance toward retirement, it's a good idea to start sharpening the focus of your retirement vision. You need to figure out how you'll spend your time, what your retirement budget will look like and where your money will come from in retirement.
But as you build your retirement plan, you may discover a few unexpected twists along the way. The sooner you confront them, the better you can prepare. Here are eight surprising things you may not know about retirement.
Social Security Benefits and Retirement Savings Are Taxable
Once you start receiving Social Security checks, it may come as a surprise at tax time that Uncle Sam wants some of that money back. As much as 85% of Social Security benefits are taxable, depending on your income. In 13 states, you'll owe state income tax on your Social Security benefits, too.
Withdrawals of pretax money that you contributed to a 401(k) or a traditional IRA throughout your working years also will trigger a federal and possibly a state income tax bill. (The one bright spot: Withdrawals from a Roth 401(k) or Roth IRA will be tax-free in retirement. After-tax 401(k) contributions and nondeductible IRA contributions can be taken out tax-free, too.)
When devising your retirement income plan, take taxes into account. By having taxable accounts, tax-deferred accounts and tax-free accounts, you'll have some flexibility in managing and possibly reducing your annual tax bite in retirement.
Retirees Get a Lot of Tax Breaks
Although retirement-account withdrawals and Social Security benefits are subject to tax, there is some good news for retirees when it comes to taxes: A lot of tax breaks are available for retirees. Taxpayers 65 and older, for instance, qualify for a bigger standard deduction on their federal tax returns.
Many states offer tax breaks on all or part of your retirement income. Mississippi, for instance, doesn't tax any retirement income. Tennessee and New Hampshire, which only tax dividends and interest, both offer breaks on those taxes to seniors. Some states offer special breaks for retirees on sales taxes and property taxes. Check out the tax breaks your state offers by using Kiplinger's Retiree Tax Map.
Medicare Does Not Cover All of Your Health Costs
When you hit age 65, it's time to enroll in Medicare. But just as with the health insurance you've had throughout your working years, you'll have to pay premiums for Medicare coverage and co-pays on covered services. And some services -- such as long-term care -- aren't covered at all.
The average 65-year-old couple will pay $240,000 in out-of-pocket costs for health care during retirement, according to Fidelity Investments. And that does not include those potential long-term-care costs.
Buying a medigap supplemental insurance policy can help cover some of your out-of-pocket costs. Or instead of traditional Medicare and a medigap policy, you can enroll in Medicare Advantage, which provides health coverage through a private insurer.
Also consider buying a long-term-care insurance policy, which can help pay for home health aides or care in an assisted-living facility or nursing home.
Senior Discounts Aren't Always a Good Deal
You know you've made it into your golden years when you have earned the right to a senior discount. Usually these discounts are offered to folks 60 or older, though some (such as AARP member discounts) may be available starting at age 50.
But buyer beware: Sometimes other discounts can save older consumers more money. Comparison shop before accepting a discounted senior rate. For instance, if you're booking a stay at a hotel, find out if the hotel offers a senior rate. Then double-check with a discount travel Web site, such as Hotels.com, to see if you can score a better deal on the price. Also determine whether other discounts, such as an AARP or AAA member discount, might beat the hotel's own senior rate.
Turning Half a Year Older Matters
Many youngsters like to cite their age in half years, such as "five and a half" or "seven and a half." In retirement, you'll resurrect that thinking because two key milestones rely on half years. And if you aren't mindful of them, you could end up getting socked by Uncle Sam.
Once you hit age 59 1/2, you are no longer subject to the 10% early-withdrawal penalty if you take money out of your IRA or 401(k). Withdrawals of your earnings from a Roth IRA will no longer be subject to that penalty, either (assuming you've owned a Roth IRA for at least five years).
And starting in the year in which you turn 70 1/2, you must take required minimum distributions from traditional IRAs and 401(k)s. More on RMDs in a moment . . .
You Must Withdraw From Your Nest Egg
Once you turn age 70 1/2, Uncle Sam mandates that you take required minimum distributions from traditional IRAs and 401(k)s (except from the 401(k) of your current employer if you are still working and own less than 5% of the company). If you haven't taken your first RMD by April 1 of the year following the year you turn 70 1/2, Uncle Sam will sock you with a hefty penalty -- 50% of the shortfall. For instance, if your RMD was supposed to be $10,000, your penalty will be $5,000.
But just because you have to take money out of the tax shelter doesn't mean you have to spend it. If you don't need the money to live on, you can instead reinvest the money in a taxable account.
Your Nest Egg May Need to Stretch for Decades
Workers saving for retirement are often focused on their retirement date. But that's only the beginning of potentially decades that your nest egg is going to have to provide your income. If you retire at 65 and die at 95, that's 30 years of annual income you'll need -- which could be almost as long as your working career. Life expectancies are increasing, and the odds are good that at least one spouse, if not both, is going to live into his or her nineties. (You can check out your estimated life expectancy with online calculators.)
When creating your retirement income plan, there are a number of ways to protect against "longevity risk" -- that is, the risk of living longer than your money lasts. Consider keeping stocks in your nest egg, which can provide growth over the long term and help protect you from the risk that inflation will eat up your money.
A smart move to maximize lifetime Social Security income is having the higher earner delay his or her benefit until age 70, which will boost that benefit by 32% a month for those whose full retirement age is 66. That boosted benefit will last the lifetime of the surviving spouse; it can't be outlived, and it comes with an annual inflation adjustment, too.
Another option to make sure you have money to live on in your old age: Consider a longevity annuity. This annuity requires a smaller investment up front in exchange for bigger guaranteed annual payouts that typically start around age 85. New government rules allow you to invest in one through retirement accounts.
You Can Keep Saving for Retirement
If you are still working later in life, even part-time, you can still save in tax-advantaged retirement accounts. If your employer offers a 401(k), you can contribute to that plan; consider socking away at least enough to get any company match.
After you hit age 70 1/2, you can no longer contribute to a traditional IRA, but if you have earned income you can still contribute after-tax money to a Roth IRA. If you are self-employed, you have a few other options, such as setting up a solo 401(k).
Since Social Security checks are a federal government benefit, it seems odd that you'd have to pay taxes on this income. But the fact of the matter is that some people do owe taxes on Social Security.
The good news is that if you're living off of Social Security retirement benefits and not much else, you won't likely have to pay taxes on this income. However, if you have income from wages, self-employment, interest, dividends, or other taxable income in a given year, you may need to pay taxes on both that income and your Social Security income.
There's a ceiling here, though. You can't be required to pay taxes on more than 85% of your total Social Security income for the year. So no matter how much money you make otherwise, at least 15% of your Social Security income is tax-free.
How much of that 85% of your income you'll pay taxes on depends on how much your combined income is for a year. The current rules operate off the concept of "combined income," which is actually not as straightforward as it sounds.
For IRS purposes, your "combined income" when using Social Security benefits is equal to your adjusted gross income plus any nontaxable interest plus ½ of your Social Security benefits. So if your AGI from a part-time side job is $10,000 in a year, you earn no nontaxable interest, and your Social Security benefits total to $16,020, your combined income is actually $18,010.
So what are the rules for taxing Social Security income? They're as follows:
How to Pay Your Taxes
If there's a good chance you'll earn enough money in 2016 to pay taxes on some of your Social Security benefits, how do you ensure those taxes get paid? You've got two options. One is to have taxes withheld from your benefits as they come in each month.
You can have the Social Security Administration withhold taxes when you apply for benefits originally. If you're already receiving benefits and want to change your withholding situation, fill out IRS form W-4V to have the SSA start withholding taxes from your monthly checks.
The other option is to pay quarterly estimated taxes. This is similar to paying quarterly estimated taxes on your self-employment income. If your income during the year is variable, or you're just not sure how much you'll make, quarterly estimates might be a better bet for you. Each quarter, you can look at how much you made in combined income, and figure out if you'll likely need to pay taxes on your Social Security benefits. When you file your taxes for the year, you can get a credit for any over-payment, or catch up if you underestimated.
Understanding how your overall income affects taxes owed on your Social Security benefits is an important piece of the puzzle when deciding whether to continue working while you draw on these benefits.
You should take time to understand how much you'll pay in taxes before deciding to continue running your business or working part-time. This calculator is one good option for figuring it out. In addition, tax preparation software will walk you through how much tax you'll owe, if any, on your social security retirement benefits.
Everybody wants to retire early. Sure, you might like what you do. But if you're 98% of people, you'd like to have more time to yourself, with your family and friends. In the years following the global recession, early retirement (or even regular retirement) seemed like an impossible dream for many. But there has been a growing contingent of young people online who are making it happen. In the upcoming weeks, we're going to look closely at some of these different strategies, and try to help you identify the best way to leave the working world behind, for a reasonable lifestyle of your choosing.
What Does Retiring Early Even Mean?
First of all, Early Retirement isn't the same thing as "Financial Independence". The latter refers to creating wealth so large that the sky is the limit to how one can spend time and money. Financially independent people buy sports teams, travel the world by hot air balloon, and run for President. Unless you have a lot of family wealth, a kickass job, or some outlying factor, you're not going to be able to achieve true Financial Independence. Early Retirement is about living a Frugal, Sustainable life, with enough savings and investments at play to pay for it until you're dead.
Can Someone With a Normal Job Retire Early?
Yes. You don't have to have a "Wolf of Wall Street" job to retire early. But you do have to be willing to live in a way that most other people don't. This means being neurotically careful with your money, living beneath your means, and making certain sacrifices others won't. The thing is, when you look at the numbers, this stuff is doable! Like I said, I'm going to do deep write-ups of each of these methods as we go into the weeks ahead. For now, just know that you can probably achieve one of the following goals, or at least improve your financial standing in big ways.
JUST TELL ME HOW TO RETIRE EARLY!!!!!
All right, all right. Here are the basic three ways that people retire early. Understand that there are endless variations and combinations of these methods. For our purposes, let's look at these as totally different strategies.
IT'S NOT THAT SIMPLE!!!!!
Lest you think that retiring early is that easy, let me stop you right there. It takes a lot of effort and consistent determination to pull this off. You'll also need luck to maximize your efforts. Over the next couple of months I will break down each of the above methods, showing how a combination of saving, investment, entrepreneurship, and strategic living can make early retirement possible, if not for everybody, for many more people than presently achieve it. Good luck, and keep reading!
Filed under: Budgeting
By Tim Lemke
If you live in a colder part of the country, you probably can't wait for this winter to end. The New York City area, for example, has experienced its second-coldest February in history. But before the warmer months hit, it's important to understand how the change in seasons will impact your finances. While winter brings its own financial burdens, spring and summer can empty your pocketbook, as well.
Here's how to stay within your budget as the temperatures warm up.
1. Go Green With Transportation
You'll probably drive more when it gets warmer, and may even take long road trips. You can expect gas prices to rise as demand increases and fuel companies switch from winter to summer fuel blends. Gas prices will remain low by recent standards, but it might help to consider walking or biking to work, or using public transit.
2. Register Early for Summer Camp
Summer can be a challenge for working parents, as the kids are out of school and need someone to look after them during the day.This means that many families explore summer camps and other activities. A week of summer camp will set you back an average of $304, according to the American Camp Association, with some for-profit camps costing more than $500 weekly. It helps to register in the winter to take advantage of early bird registration deals, and you may get a discount by signing up for multiple weeks at the same location. There may also be discounts for families with multiple children at the same camp.
3. Start Saving for New Family Additions
If you or your partner are not pregnant already, you can probably disregard this one. But statistics show that more children are born during the spring and summer months than other times of the year. The Centers for Disease Control and Prevention report that August is the top month for new babies. New arrivals aren't cheap, and you can definitely expect to spend some money in the months leading up to the delivery. Now is the time to start banking as much cash as you can.
4. Travel Within Your Means
With an improving economy, the American Automobile Association expects more people to take trips this summer. According to American Express, an average vacation will set you back $1,145 per person, or $4,580 for a family of four. The good news is that gas prices are lower than in years past, and a strong dollar means that it's cheaper to travel overseas.
5. Budget Home Expenses
When it's cold and snowy outside, there's no lawn to mow (and you're probably postponing the construction of that backyard patio until the thaw). Warmer weather is when you whip out the lawnmower and make the call to that contractor. It's also when you might make any repairs necessitated by the snow, ice, and wind of winter. Various sources suggest that a homeowner will spend about 1% of their home's value on maintenance each year. Much of this expense will happen during the spring and summer, so be sure to budget accordingly. Consider saving a few bucks here and there by watering your lawn less and attempting landscaping projects yourself.
6. Be Patient With Investments
There's an old saying that investors should "sell in May and stay away" until October. This is not perfect advice, but there is evidence to suggest that the stock market's slowest months are in the spring and summer. Since 1950, the Dow Jones Industrial Average has averaged negative returns during the months of May, June, August, and September. It has seen positive returns during all other months.
7. It's the Thought That Counts for Mom and Dad
Undoubtedly, people spend more money on gifts around Christmas than any other time of year. But the holidays of spring and summer can also add to your expenses. Americans were expected to spend $162.94 on Mother's Day in 2014 and $113.80 on Father's Day, according to the National Retail Federation. If you want to save money on these holidays, consider some thoughtful, but less expensive gift options, such as a great home-cooked meal.
8. Skip the Theater
The summer months are when Hollywood's biggest blockbusters hit the theaters, and many of us go, even if it's just to sit in an air conditioned environment for a while. Six of last year's top grossing movies at the box office were released during the spring and summer. Going to the movies is not cheap; the average cost of a movie ticket is $8.17, and many recent top films have extra charges for 3D or IMAX screenings. Want to save a few bucks? Get a Netflix account or go to RedBox and watch movies at home.
9. Don't Buy a Car
Generally speaking, the best time to buy a car is the end of the year when sellers are looking to meet their sales quotas. And you might get some good prices on older models in the fall when new models come in. Though you won't see as many deep discounts in the summer, you can still do okay at the end of months or quarters.
10. Take Advantage of the Real Estate Market
No one wants to move in the winter time, so there's more competition for homes during warmer months. This places upward pressure on home prices. In 2014, the median price for homes sold in the U.S. between May and August was about $220,000, according to the National Association of Realtors. That's about $20,000 more than the median price of other months. On the positive side, this is good news if you are selling your home, and buyers are more likely to see a larger selection of homes for sale.
Filed under: Spending
By Marla Walters
Over the years, I have made many a purchase. Some were big-ticket; some were under $15. Of course, there were occasions when buyer's remorse soon followed my shopping trips, but there were several purchases that I still stand by.
Here are 25 purchases that I think you would never regret.
Home ownership is still a sound financial idea. You can build up equity, claim mortgage tax deductions, and build a good credit history. I was a renter before I was a homeowner, and would never go back, but that's me. I like being able to put holes in walls where I want them, own pets, or dig up part of the yard for a garden. When you own a home, you are able to create the living environment you want - not your landlord's.
2. Four-Wheel Drive Pickup Truck
Not too long after my husband and I became homeowners, we bought a truck. It is now 18 years old and still runs well. Need green waste hauled? Buying large stuff? Going somewhere adventurous, where you need four-wheel drive? A truck enables you to do a lot of things that are especially handy if you are a homeowner. Ours isn't going to break any land-speed records, but we don't care. It's as handy as heck.
3. A Safe
There are paper records, and then there are really important records like birth certificates, marriage certificates, title to cars, valuables, etc. If it is important, it needs to be put somewhere secure. Sure, you could get a safe-deposit box, but it's handier to have things around - where you can get them when needed - and not subject to a bank's hours.
4. Fruit Trees
There is no instant gratification in planting fruit trees, but they are well worth the effort. Every time we pick avocados, oranges, bananas, or lemons, we are grateful we took the time to plant those trees. We cannot begin to eat all of what they produce, but part of the fun is to share the bounty.
5. Leather Furniture
When we began buying furniture, I thought leather would be bad to have, with kids and pets, but I was so wrong. It is extremely durable, and with leather cleaner and a little elbow grease, it cleans right up. Ours has survived beautifully, and we'll never go back to upholstered furniture. It is also easy to re-decorate with different throws or pillows.
6. Gas Stove
If you are interested in energy efficiency, gas is the way to go. It takes nearly three times as much energy to deliver electricity to your stove, according to the California Energy Commission. Savings aside, if you like to cook, it is so much easier to regulate stove temperatures with gas instead of electric. Plus, if the power goes out, you can still cook.
7. Outdoor Fire Pit
An outdoor fire pit was a bit of an impulse buy, but we have gotten so much use out of it. If you like to entertain, break out the marshmallows. Even if it is just my husband and I, it makes for an extremely relaxing evening - sitting in the yard with a glass of wine in hand.
Have you ever regretted spending money on a vacation? Even when things don't turn out the way you expect, there were fun memories and good stories. Plus, they're good for you. People need breaks from work and time for fun and relaxation. And vacations do not have to break the bank - try camping, a road trip, or renting an RV.
9. Plug-In Artificial Christmas Tree
We bought the plug-in artificial tree during a year when I just couldn't, for sad reasons, handle Christmas. For 16 years since, we have plugged it in, and it's bright, cheery, and works perfectly. We live in a climate where fresh trees are ridiculously expensive, so this tree paid for itself long ago. Amusingly, it has become a collector's item on eBay and is worth much more than we paid for it years ago. Now, I wouldn't trade it for a 10-foot Silvertip.
After a particularly bad storm, we lost power for a week and a half. We also couldn't get enough ice, and eventually lost the contents of our freezer and refrigerator. That was motivation to purchase a generator. They are noisy and give off exhaust when being used, but having weathered even more storms, we're glad we bought it.
11. Knife Sharpener
If you have a scout merit badge in the fine art of knife sharpening, and the proper whetstones, you don't need one of these. If, on the other hand, you have a drawer or cutting block full of mostly dull knives, like we did, get a good knife sharpener. It will make life so much better. Scout's honor.
12. Label Maker
People who know that we own a label maker actually ask us to make labels for them. Talk about a handy little contraption! You can go a little nuts with them. If you are into organizing, they are a must-have.
13. Meat Smoker
If you like tender meat, poultry, and fish with a smoky flavor, look into buying a smoker. We have a traditional charcoal-burning one (quite inexpensive) as well as a new electric one. We will never eat Thanksgiving turkey another way, and we're about to try salmon and bacon. I worried that cleanup would be a pain, but it's really quite easy.
14. LED Flashlights
Not only are LED flashlights longer-lasting than regular flashlights, but they are more energy-efficient, and they cast a very bright light. We have a more traditional, battery flashlight that is very heavy, and the tiny LED outshines it every time. It is now our favorite.
15. Good-Quality Multi-Tool
Do some research and invest in a quality multi-tool that will last. Mine contains 10 tools: Needle nose spring-loaded pliers, a wire cutter, a fine edge blade, a package opener, scissors, two screwdrivers, a bottle opener, tweezers, and a file. Although I would like to carry mine in my purse, I am afraid I will lose it to the TSA when I fly, so it lives in my car. And I have another in my desk at work.
16. French Press
We paid under $20 for our French Press coffee pot about five years ago. Not only is the coffee from a French Press really delicious, but if there is a power outage, you can still make coffee! That's basically the same as having superpowers. This is a very important thing, when you really need coffee. It even goes camping with us.
17. Ice Chests
I just went outside and counted, and we have three, in varying sizes. Since we live a distance from Costco, we take the big one along when we do bulk shopping. Another has wheels, making it perfect to drag to picnics. The smallest one is perfect for beverages. During power outages, they have also been used to store food.
18. Alternative Education
Not all kids fit into the same mold, and sometimes they do better in a setting that suits their interests and pace of learning better. My mother, a longtime public school teacher, recommended we try the Montessori method for our daughter. She was right, and that was a great fit. Eventually there were others, including charter and public. In retrospect, I think it was good to mix it up.
19. Camping Equipment
If you like the great outdoors, odds are, you enjoy camping. It's an inexpensive vacation, if you own your own equipment (or can borrow some). A site with no frills should be around $10; state parks with water and bathrooms can be around $15. Even if you go to a private campground, you should be able to get a site for less than $50 a night. Most of our equipment was purchased at yard sales. Our big splurge was to buy new, good-quality sleeping bags - which are worth every penny on cold nights.
20. Ceiling Fans
We are not fans of air conditioning, but needing to move air around, we invested in ceiling fans. They don't actually lower the temperature of a room, but air movement makes a room feel cooler. In the winter, you can run the fan in a clockwise direction, and bring that warm air down.
21. KitchenAid Mixer
The KitchenAid mixer is a beast. Mine will not only mix, but also knead bread dough, and whip cream. It is about 15 years old and works perfectly. One of these days, I'll invest in some of the attachments and make ravioli, pressed juice, or core apples.
22. Revere Ware
My mother-in-law, who burned, um, everything in the kitchen, taught me the value of buying Revere Ware. I have owned many sets of "celebrity chef" pans, and I'll tell you - nothing, absolutely nothing, has held up as well as this brand. I still have one of her stock-pots, and it's a treasured item.
If you burn something in one of these pans, no problem. Let it soak overnight, scrape it, and out it comes. If it's really major, there is a cleaning product called Bar Keepers Friend that will remove any residual gunk. If I were getting married and had a registry, I'd choose Revere Ware.
23. Wine Refrigerator
It's a shame when a good bottle of wine is ruined due to being overheated. The wine fridge also ensures that you drink wine at the proper suggested temperature. I had initial concerns about energy usage, but that has not been an issue on our bill.
24. Sewing Machine
If you want to save money, and think you might enjoy getting in touch with your creative side, a sewing machine is a great thing to have around. You can make repairs, cover pillows, make curtains or blankets, or even sew some of your own clothes. To be honest, I'm not very good at sewing, but I really like it. My daughter recently bought herself a machine on Craigslist and taught herself to sew. We get a kick out of copying trendy catalog stuff and making it ourselves.
25. Good Books
Despite having the ability to download books and use e-readers, I have never really enjoyed that kind of reading experience as much as a paper page-turner. I also like to re-read favorites as well as classics. Reading can be an inexpensive pleasure, and you will never regret the books you buy.
Filed under: Home Buying
By Marilyn Lewis
Fixer-uppers are back in style. During the housing boom, few homebuyers wanted to bother with renovation projects. New homes and those in move-in condition were the ideal.
That's still true for many buyers. But others are finding that, done correctly, remodeling a fixer-upper can save a lot of money. Fixers are getting attention because:
However, the wrong remodeling project can become a money pit that strips your bank account right down to the studs. Here are 15 ways to identify the fixer uppers worth your time and money:
1. Make cool calculations
Bring a cold analytical eye when shopping for a home to renovate. Put your emotions in the back seat while you assess each home's possibilities.
2. Love the floor plan
Look for a floor plan you can live with. Moving load-bearing walls is an expensive proposition and generally to be avoided. SFGate tells how to identify load-bearing walls.
3. Start with the basement
Inspect a home thoroughly, inside and out. Check inside and outside the basement or foundation for exposed wires and pipes, cracks in the foundation, or water pooling around the home.
"The biggest problems in a house typically arise as a result of poor stability in the structure or foundation," contractor Tyson Kunz told Bankrate.
Wise Bread says:
HouseLogic and About.com offer more details on inspecting basements.
[A basement] can provide valuable clues on the quality of construction; condition of the HVAC, plumbing and electrical systems; and how well previous owners have maintained the building. Avoid sagging floor joists or unstable supports, ancient heating and AC systems, leaking water heaters, and electrical panels with loose wires.
4. Inspect the roof
Get a home inspector or trusted roofing specialist to tell you if the home needs a new roof, which costs $20,000 to $40,000 and up.
In an article on assessing fixer-uppers, Consumer Reports says:
5. Scrutinize bathrooms
Runaway water can wreak havoc on any home, and a leaky roof is its quickest way in. If the home has an asphalt roof, look for cracked, curled and missing shingles. Gutters, downspouts and leader pipes should also be in place to collect rainwater and channel it away from the house.
Bathrooms deserve special attention because leaks cause rot and structural damage.
"Sloppy showers lead to repeated occurrences of water on the floor that seep through into the floor of the bathroom and adjacent rooms," says HowToManGuide.com.
6. Avoid ancient plumbing and wiring
The presence of these elderly building materials is a sign of trouble:
Replacing a home's plumbing and wiring are budget-killers involving thousands - if not tens of thousands - of dollars.
7. Back away from funky smells
If your nose wrinkles when you enter a home, that's a sign of problems. A home that emits bad smells may have a dangerous gas leak, sewer or septic problems, or mold - all of which require expensive remedies. Save your money for improvements you can enjoy.
Musty and dank smells come from mildew or mold and disqualify a home from consideration. Mold is not always visible; it may be inside walls. Don't assume you won't find mold in a dry, arid climate. It can be caused by condensation inside walls.
8. Watch for rot
Rotting wood is another red light. Use a pencil to push on trim and the wood around windows, and look for soft or crumbling wood.
9. Inspect drywall and floors
Keep an eye out for stained, uneven or warped, discolored or peeling flooring or drywall. These can indicate rot or mold.
10. Run from bad siding
Deteriorating siding raises a red flag for two reasons:
If you want to replace old windows with new, energy-efficient ones, and it's a priority in your budget, that's cool.
But be careful of committing to a home with leaking windows. Water seeping into a home through window leaks can cause untold - and unseen - problems from rot and mold. You can't tell how bad the problems are without removing the windows.
12. Spot a bad location
Become an expert on the neighborhood. Bargain homes are often in less desirable areas. Knock on doors on the street and chat with neighbors about crime. Your job is to assess how bad a neighborhood is and whether it's really going to turn around.
Even if you don't have children in school, your home's next buyer might. So learn about the quality of local schools. Get neighborhood crime statistics from the city police. Assess the home's proximity to jobs, stores, banks, cafes, restaurants and playgrounds.
13. Look for pests
You'll need an expert to tell for sure if a pest infestation is present. But you can spot some telltale signs, including:
14. Hire a home inspector
Once you've found a home that passes muster, hire a well-regarded home inspector to professionally look at the structure from top to bottom. (Cost: $300 to $500, on average, according to FoxBusiness.) Don't buy a home without a professional inspection.
You can locate inspectors in your area on the websites of these national home inspector organizations:
Note: Don't try to search for lead paint and asbestos. These are dangerous substances, so let the inspector do it.
15. Inspect after a rain
See if you can schedule your home inspection right after it rains. Visiting at that time lets you and the inspector see if water accumulates around the foundation - a bad sign, as it can cause leaks and foundation problems.
Have you bought a fixer-upper? Tell us about it in the comments below or on our Facebook page.
Filed under: Spending
By Karla Bowsher
Nearly all Americans admit to using shopping as a pick-me-up, a new survey shows.
The survey results recently released by Ebates.com, a cash-back portal, indicate that 96 percent of American adults admit to participating in retail therapy - and 85 percent of adults admit that it does make them feel better.
Ebates.com CEO Kevin H. Johnson states in a news release:
"Our survey confirms that Americans enjoy shopping and that buying things makes them happy."
Nearly 1,100 adults were polled this month for the survey.
More than one-third of the adults surveyed said that shopping makes them feel better than indulging in pizza, eating sweets like ice cream or working out. Fourteen percent even prefer shopping to sex.
Certain types of purchases make consumers feel better than others, though, the results show.
The top five purchase types that make American adults happiest are:
For 87 percent of adults surveyed, a trigger motives them to shop. Their triggers most commonly include the changing of the seasons and advertising.
When it comes to online shopping in particular, most adults said they do it when they need something specific or when they find a great deal they can't pass up.
For more ways to save online, check out "5 Super Easy Ways to Save Money Shopping Online."
Do you participate in retail therapy? Does it make you feel better? Share your thoughts on the topic with us in a comment below or on our Facebook page.
Filed under: Savings ExperimentWe all need exercise, but that doesn't mean you need a pricey gym membership to stay in shape. We've rounded up 3 essential items you can use to get fit without ever leaving the house.
Let's start with a little strength training.
If you're aiming to gain functional strength rather than big muscles, try using resistance bands. The bands may look simple, but they're actually very versatile. Just hook them on a door, table or any immovable object and you can do a whole range of full body exercises.
Sets can cost anywhere from $10 to $150, so shop around to see which type works for you.
But all the muscles in the world won't help you without a little endurance, which is why a good jump rope should also be on your list.
They've been used by athletes and boxers for years to build conditioning, speed and core strength. And best of all, they only cost about $10 and travel easily.
Last but certainly not least, there's the stability ball. It's one of the most important things to have in your home gym and you can find it for as low as $10. Ab crunches, squats, hamstring curls - this simple ball can do it all, while improving your core strength and balance.
So depending on what your goals are, you can still get fit and save big by incorporating these fitness essentials into your home gym.
Just don't let your favorite TV show distract you!
Related: 6 low-cost aids for your fitness program
Filed under: Spending
By Paul Michael
If you have a home, you need a tool kit. It's an essential for any household. But what to put in it?
Well, the good news is you can get by with just essential 10 items. You will of course need more tools as time goes by, but this list is a great starting point. (Oh, and you will need a sturdy toolbox to store them all. You can find used ones for cheap, or even free, on Craigslist. Or try your local thrift store.)
1. Multi-Bit Screwdriver
There are many variations of the multi-bit screwdriver. On the cheaper end, the bits come in a separate holder or case. You can also find ones called "auto-loaders" that contain at least six different varieties of bit. You want one that fits both Phillips head and slot head screws. With this one tool, you have a starter set of screwdrivers that will work for most jobs around the home. (See also: 10 Easy Plumbing Repairs That Don't Require a Plumber)
2. Power Drill (Go Cordless)
There are so many different jobs around the home that require a power drill, so your frugal tool kit should include one. If you want to save the most money and have something much more handy, go with a cordless drill. They don't have as much power as an equivalently-priced corded drill, but for everyday needs, they're just fine. Ideally, get a good, refurbished brand rather than a cheap new one. DeWalt or Makita are reliable, and will last you many years. This will definitely be the most expensive tool you buy in this kit, but it's worth it. You will also need a variety of drill bits. Luckily, many drills come with a starter selection.
3. Claw Hammer
There are several types of hammer available to the DIY enthusiast. A ball peen hammer, a tack hammer, a club hammer, and even a sledgehammer. But for the basic, frugal tool kit, your best bet is a claw hammer. Its two uses, driving in and removing nails, are ideal. When you get into more specific tasks, other hammers for specific jobs are much better, but for a starter kit, the basic claw hammer is just fine.
4. Adjustable Wrench
The key word here is adjustable. As you're building a frugal tool kit, you want your tools to have as many uses as possible, whenever possible. The adjustable wrench can fit a wide variety of nuts and bolts, and is therefore perfect for your kit. Buy a wrench that is big enough to cover a large array of sizes, without being so big that it will be cumbersome on smaller nuts and bolts. Anywhere from eight to 12 inches is good.
5. Retractable Tape Measure
You probably know this as the Stanley Measuring Tape, but they are available from many different manufacturers. However, Stanley has been making these for decades, and they're very good at it. In particular, the PowerLock model is a great tape measure for having around the house. They're available in many different sizes, but for the minimal price difference, go for the 25'x1" model. It's sturdy, long enough to cover most jobs, and very reliable.
6. Needlenose Pliers (AKA Long Nose Pliers)
Again, there are so many different types of pliers available on the market, all doing slightly different jobs. For the frugal starter kit, you are better off going with a pair of sturdy needle-nose pliers. We're looking for tools with more than one function, and these include a wire-stripping tool whilst also having a long reach and the ability to twist small wires and objects. When you start building up your kit, you can add locking and adjustable pliers. But for the basic kit, these will serve you well. Stanley's eight-inch long nose pliers are solid, and usually sell for under $10.
7. Retractable Utility Knife
Just like the tape measure, Stanley has also become synonymous with the utility knife. In fact, many professionals and amateurs still refer to it as the Stanley Knife. You will need a sharp knife for a countless array of DIY jobs, whether it's cutting carpet or vinyl tile, to wallpaper, wood veneer, or even sharpening a pencil. With a good retractable knife, you have safety as well as versatility, with a variety of different blades on the market available.
There will be more than a few DIY experts screaming "No!" at this next statement, and I would usually concur - but this is a frugal toolkit, after all. Instead of buying a wood saw and a hacksaw, simply buy the hacksaw and use it for both purposes. There. I said it. If you only have the money for one saw, a hacksaw is at least multi-functional. It cuts through metal and plastic beautifully. It can also cut wood, although it's inefficient, slow, and clogs the small teeth - but, it will do it. Try cutting metal with a wood saw and see how far you get. There are several different blades available, so if you do need to cut wood, opt for blades with the fewer teeth per inch. For instance, 14 will perform way better than 32.
9. Level (AKA Spirit Level, Bubble Level)
For so many jobs around the house, you will need to make sure something is straight, or level. This is why a level is an essential part of your toolkit. They come in various sizes, from as small as three inches, all the way up to several feet. For your purposes, anything from nine inches to three feet is a good bet. Make sure your level has three different bubbles inside, for vertical, horizontal, and 45 degrees. If you really don't want to spring for a level, and have a smartphone, you can find an assortment of free level apps. The phone is not as good, but it's better than nothing at all.
10. Rechargeable Flashlight
Finally, the flashlight. When the lights go out, or the fuses blow, you'll need a flashlight. When there's a leak in the corner of the basement, you'll need a flashlight. When there's a wiring issue under the counter, you'll need a flashlight. Basically, without a flashlight, you'll be groping around in the dark, and that's not safe at all. Now, regular flashlights are fine, but most people will tell you - the batteries die at the worst possible time. So, go with a rechargeable one. They stay plugged in, and are ready to go whenever. Plus, they're affordable, starting at around $10.
Filed under: Auto Loans
By Nancy Dunham
Your new car loan can drive your credit ahead, cementing your reputation as a responsible borrower who can be trusted with major responsibility including the much-coveted mortgage.
But take a wrong turn - even one late payment - and your credit score will sink, making future credit more difficult to obtain - and in some cases nearly impossible.
And now is the time to guard against making such mistakes. The rebound in the stock market has brought about a "manifestation of the wealth effect," Robert Johnson, president of The American College of Financial Services in Bryn Mawr, Pennsylvania, told Main Street.
Basically the stock market's bullish cycle makes consumers feel wealthier and more confident making large discretionary purchases, he said.
Before you sign on the dotted line for that new or new-to-you car, consider these auto loan pitfalls to protect your credit.
Need a car loan? Check out our car loan shopping page here.
1. Getting in over your head
Sure, the price of the car is plain to see - it's posted on the windshield, right? - but it's easy to end up paying more than you intended. Some dealers offer very low car prices because they make their money on high finance rates, notes Bankrate. Savvy borrowers shop for auto financing from credit unions, banks and other respected online lenders before they begin serious negotiations on the exact car. Knowing the total of your purchase - including all extras and finance charges - is key to ensuring you don't fall behind in payments or carry so much debt that lenders consider you a high risk.
2. Forgetting to factor in loan costs
While some advocate paying cash for vehicles, an auto loan is a great way to build credit if it's done right.
But many auto loans just don't make good financial sense. Many auto buyers spend too much on loans because they look at the monthly payments, not the total cost of the car - including interest on a loan. A better bet: Follow the 20/4/10 rule suggested by Interest.com and others. Make a down payment of at least 20 percent, finance a car for no more than four years and don't let your monthly vehicle expense (including principle, interest and insurance) exceed 10 percent of your gross income. That way you'll build credit without carrying an unwieldy amount of debt and have options if your financial situation changes.
3. Getting upside down on a loan
Long-term loans may make sense for those who can reasonably expect financial stability. But what if you buy a car based just on what you can pay on your current salary and then you're laid off? You may need to sell your car even though it is worth less than you owe on the loan. That's called being upside down on your loan. "There is no silver bullet that will magically get rid of the negative equity," wrote auto expert Phil Reed, former consumer advice editor for Edmunds.com. "Your options are to deal with the situation either now or later." What that means: Keep your car at least until you reach a break-even point in the loan. Sell the car and find a way to make up the difference on the loan. Or face repossession and watch your credit take a major hit that might be irreparable for years to come.
4. Rolling over a loan without first doing the math
Another way to eliminate negative equity is to buy another car in which the dealership rolls the amount currently owned into the new loan. Doing so will mean paying interest for both cars, Reed cautioned. However, incentives could reduce the balance or even erase the negative equity, Reed wrote. His example: "If a person was $1,500 upside down on the trade-in car and wanted to buy a new car that had a $2,500 rebate, he or she could erase the negative equity and still have $1,000 for a down payment on the new car. Note, however, that cars with heavy incentives tend to have lower resale value for at least three years, according to Edmunds pricing analysts. This means you will be upside down for a longer period of time. In other words, it will take more time for this car to be available as a free-and-clear trade-in."
Filed under: Saving
By Allison Martin
How much time do you spend on your finances each week? A couple of hours? Or do you rarely spend any time at all?
It's understandable that people shy away from what appears to be a daunting task, which is why we have broken it down here. It turns out that it's really just a lot of smaller tasks - none of them particularly difficult.
Tackle these 11 small money moves, and the payoff will be big - for your wallet and your peace of mind.
1. Modify your spending habits
Many people complain about not having enough money to make ends meet, yet refuse to cut back on discretionary spending. Can't think of anything to cut back on? Try those quick runs to the nearest fast-food joint, daily trips to Starbucks or cable upgrades, just to name a few.
You can also improve your spending habits by shopping smarter. Here are a few suggestions to get you started:
2. Use cash-back sites
When you shop online, use cash-back websites - our favorite is Ebates, but there are many - to cut costs on things you need. Not sure how they work? In this article, Money Talks News founder Stacy Johnson demonstrates the process, showing how he got printer cartridges priced at $25 for just $4.74. He found it to be far easier and generate more savings than anticipated.
"I thought (cash-back sites) were too complicated: wrong," he writes. "I thought they were too much hassle: wrong. I thought the amount of money at stake wasn't worth worrying about: wrong again. If you're not using a cash-back site, you're wasting money."
3. Create a spending plan
Having a hard time keeping your spending under control? A budget establishes a clear plan that dictates where your money goes each month. It lets you make provisions for savings and figure out where you need to trim your discretionary spending.
Track what you spend for at least two weeks to gauge your actual spending patterns. A free online service like our partner Powerwallet can track expenses for you.
Determine if your expenses exceed your income, and make cuts if necessary. Over time, you can adjust and fine tune your budget to meet your financial goals.
For additional tips to get you started, check out "8 Secrets for Building a Budget You Can Live With."
4. Open a savings account
If you haven't already done so, contact your financial institution to open a savings account. If you are choosing a bank or credit union, be sure to look for the best interest rate you can get. Our Solutions Center savings page is a great place to start shopping.
If you already have a savings account, but still struggle with increasing the balance:
5. Be vigilant about your account activity
Haven't paid much attention to your statements in the past? Now's the time to start. Identity theft is at an all-time high, and your account activity may serve as the first indicator that you have been victimized.
Start by reviewing the activity on both your bank and credit accounts at least once a week, and review the comprehensive statement when you receive it at the end of the month. If you fear that you have been a victim of identity theft or a data breach, check out the newly launched FTC website, IdentityTheft.gov, designed to make it easier for victims to report and recover from these incidents.
6. Check your credit
Reviewing your credit report takes only a few minutes, yet so many people choose not to do so. Would you want to end up with a higher interest rate on a loan because of a mistake on a credit report that lowered your credit score - a mistake that could have been corrected with a quick call or letter to the creditor?
A Federal Trade Commission study of the U.S. credit reporting industry found that 5 percent of consumers had errors on one of their three major credit reports that could lead to them paying more for products such as auto loans and insurance.
Haven't checked your credit in a while? Head on over to AnnualCreditReport.com.
7. Gather pertinent documents
Have you prepared for someone else to handle your affairs if you were suddenly unable to do it? If not, now's the time to gather important documents that pertain to both your finances and health care. These include:
Of course, each of these documents should be stored in a safe place in your home or in the cloud. Make sure those who will handle your affairs know where to find them.
8. Renegotiate interest rates
Have you tried reaching out to lenders to secure lower interest rates on your debt? Here are two things to try:
9. Adjust your tax allowances
Does your tax liability or refund always seem to catch you by surprise? It is definitely jarring to get a big bill at tax time - and it can throw a wrench in budgeting, or force you to borrow. Getting a big refund seems better, but in reality it means you paid too much to the government during the year, and could have been using that money to invest or pay down debt.
Try using the IRS Withholding Calculator to determine if you need to adjust your allowances on Form W-4.
10. Maximize 401(k) contributions
If at all possible, contribute the maximum amount allowable under law to your 401(k), but certainly no less than the amount needed to capture your employer's entire match. You definitely don't want to leave free money on the table.
There are other ways to build retirement funds:
11. Make your money work for you
Are your investments in your 401(k) and other retirement funds getting a decent return? Are the fees taking too much of a bite out of your earnings? Are your investments allocated in a way that's appropriate for your age and risk tolerance? See: "How to Evaluate Your Retirement Funds in 15 Minutes or Less."
Also, remember that the earlier you invest, the more compounding interest will work in your favor.
Does this list sound arduous? Just tackle one small task at a time, and systematically check them off the list as you go. The payoff will be big - financial fitness for the long run.
Filed under: Credit Cards
By Sandra Block and Lisa Gerstner
Rewards points and cash back are only some of the benefits of paying with plastic. Here are 11 little-known benefits that cardholders can take advantage of -- from extended warranties on items you purchase with your cards to free admission to museums. See what your card can do for you.
Before you pay extra to extend the warranty of a product you buy, check to see whether your credit card offers additional coverage free. The four major credit card networks -- Visa, MasterCard, Discover and American Express -- provide up to a year of extended warranty protection for some cardholders. To be covered, an item must be purchased with your credit card and must have an existing manufacturer's warranty. Coverage typically is limited to $10,000 per item.
If you use a credit card to buy an item that later goes on sale, your credit card might pay you back the difference. For example, Citi cardholders who register purchases they make with their cards will receive the difference in price if Citi finds the same item for less within 60 days of purchase. Discover will refund the difference up to $500 if you find a lower price within 90 days; MasterCard will reimburse cardholders who find a lower price on an item within 60 days of purchase.
Coverage for Damaged or Stolen Products
Several card issuers will repair or replace items you charge to your card that are damaged or stolen within 90 days of purchase, says Bill Hardekopf, CEO of credit card comparison site LowCards.com. And if a retailer will not accept a return within 90 days of purchase, some cards, such as Chase Sapphire and all Discover cards, will reimburse you for the cost of the item purchased with your card.
Most major credit cards offer secondary rental car insurance, picking up costs that aren't covered by your personal auto insurance policy if your rental is wrecked or stolen. Declining the damage waivers offered at the rental car counter could save you $15 to $25 a day.
Because coverage varies, even among cards within the same network, call your credit card issuer before you rent the car. In general, you must use the credit card to book the rental, and you must decline the collision damage waiver when you rent the car. Ask the issuer whether it will cover "loss of use" -- the cost the rental car company incurs while the vehicle you rented is being repaired (or, in the case of theft, relocated). Be aware, too, that your credit card may not provide coverage in some overseas countries. For example, American Express excludes cars rented in Australia, Ireland, Israel, Italy, Jamaica and New Zealand.
Cell Phone Replacement
Replacing a damaged or stolen cell phone could cost you hundreds of dollars. Some credit card issuers will cover the cost of purchasing a new phone, as long as you use the card to pay your cell phone bills. First Citizens Visa will cover up to $500, minus a $50 deductible. If you pay your bills with a Wells Fargo credit card, you're eligible for up to $600 in coverage, minus a $25 deductible. Lost phones usually aren't covered.
Several card issuers, including Citi, MasterCard and American Express, will reimburse cardholders for luggage that is lost, stolen or damaged during flights purchased with eligible cards. If your personal property is stolen from your hotel room, MasterCard will reimburse you if you used an eligible card to pay for the room.
Some card issuers, such as MasterCard (for World cards) and American Express, also assist with emergency medical care while you're traveling. They provide referrals to local health care providers and arrange transportation to a medical facility if one is not available near you.
No Baggage Fees
Airline-branded credit cards typically offer a free checked bag for flights purchased with the card. For example, if you use a Citi/AAdvantage Platinum Select MasterCard (a branded card for American Airlines) to purchase tickets, the baggage fee is waived on the first checked bag for you and up to four traveling companions.
Bank of America and Merrill Lynch cardholders receive free admission to more than 150 museums, science centers, botanical gardens and other venues in 98 cities on the first weekend of the month. Participating institutions include New York's Metropolitan Museum of Art, Chicago's Shedd Aquarium, Boston's Museum of Fine Arts, the Houston Zoo and the Portland Children's Museum. And American Express Membership Rewards points can be redeemed for concert, theater and sporting event tickets, as well as Universal Studios Hollywood tickets.
Free Currency Conversion
When traveling overseas, buying local currency from exchange bureaus can be particularly costly because of high fees and unfavorable exchange rates. Get a better deal by paying for goods and services on your trip with your credit card instead of cash. You'll get a better exchange rate, and you can avoid fees entirely by using a card that doesn't ding you with foreign transaction fees. Capital One, Discover, HSBC and Pentagon Federal Credit Union charge no foreign transaction fees on their credit cards. American Express waives foreign transaction fees for American Express Consumer and Business Delta SkyMiles cards.
Identity Theft Services
As data breaches become more common, some card issuers are adding identity theft assistance to their benefits. For ID theft victims, MasterCard helps obtain free credit reports, replace stolen credit and debit cards, and alert the credit bureaus and other entities that sensitive information has been compromised. Plus, cardholders can sign up for monitoring of their personal information, including credit and debit card numbers, Social Security numbers and driver's license numbers, for sale to crooks on the Internet.
If you lose your Discover card, you can immediately freeze your account online or through a mobile app-then unfreeze the account if you find it.
Free Credit Scores
Several issuers, including American Express, Barclaycard, Citibank, Discover and Pentagon Federal Credit Union, provide free FICO credit scores (the most commonly used measure of creditworthiness among lenders) to some cardholders. Depending on the lender, you may be able to see your score on your monthly statement, by logging in to your account online, or by viewing it on a mobile app.
Some issuers provide alternative credit scores to the FICO score. USAA offers free VantageScore credit score updates to its members, and Capital One provides a free score from TransUnion to most credit card customers.
Filed under: Mortgages
By Marilyn Lewis
Chances are your home mortgage is the largest debt you'll ever have. How would you like to pay it off and run your mortgage contract through the shredder a lot faster than the 30 years for which most homeowners sign up?
Let's consider some ways to painlessly pay off your home loan sooner. You can choose to do it a little faster or a lot. In some cases, you'll scarcely notice the added expense.
1. Make biweekly mortgage payments
Since there are 12 months in a year, homeowners make 12 monthly mortgage payments. But if you make half-sized payments every two weeks (biweekly), you'll make 26 half-payments, the equivalent of 13 full payments.
Essentially, it is like making 13 monthly payments every year rather than the usual 12.
To go this route, call your lender and ask the best way to do it. Some lenders will set you up with biweekly payments. Or you might simply prefer to send in the extra payments by mail or electronically. Whenever you make any extra payment, however, be sure to designate it "apply to principal." Otherwise, the lender may treat the extra as a prepayment of your next regular monthly payment.
Use a calculator like this one from the Mortgage Professor to see your savings. For example, according to this calculator, if you have a 30-year fixed-rate mortgage at 3.8 percent, making biweekly payments would save $20,573 in interest over the life of the loan and pay off your mortgage four years earlier. That's a big bang for not many extra bucks.
One thing to avoid: "mortgage acceleration" products and plans. Paying down your mortgage is an easy thing to do, and you shouldn't have to pay anything to do it. No expertise or pipeline to a higher authority is required. When you see ads and pitches for mortgage "acceleration" plans, programs and products, run the other direction. (Learn more about these gimmicks here.)
2. Pour every bit of extra cash into your mortgage
Dedicate every windfall - a bonus, raise, or holiday or graduation gift - you receive toward paying down debt. Obviously, the highest-interest debt takes priority. But if you have an adequate emergency savings fund and your mortgage is your only debt, don't even ask yourself what you'll do with extra money when it falls into your hands: Add it to your mortgage payment, designating it as additional principal.
It's possible you'll find better uses for extra cash than paying down your mortgage. For example, if your mortgage rate is 3.8 percent, but you can earn 5 percent on your money elsewhere, you're obviously going to be better off earning the 5 percent. Read Stacy's discussion about the pros and cons of using extra cash to pay down your mortgage.
3. Round up your payments
The monthly payment on a $200,000 mortgage at 3.8 percent fixed over 30 years is about $932 a month. Get into the habit of rounding up that amount to $1,000. Or even $1,030, or $1,050. Do it on a regular basis, and you'll shave years off your mortgage while feeling little pain.
4. Make one extra payment a year
Give yourself a holiday gift by making an extra payment at the end of the year - or at any time. Or, if you'd rather, add an amount equal to one-twelfth of your mortgage payment to each month's payment.
For instance, with the $932 monthly payments in the example above, one-twelfth is $78. Add that to your normal payment, for a total payment of $1,010, and you'll shave 30 payments off a 30-year mortgage, paying it off in 26 years instead of 30.
5. Refinance into a shorter loan
Monthly payments are lower on longer-term loans than on shorter-term loans. But borrowers who choose shorter-term loans - such as a 15-year fixed-rate loan instead of a 30-year fixed-rate loan - stand to save a lot of money over the long haul. You can, too.
Follow these three steps to find out what you would save:
Here's an example: If you pay 3.8 percent on a 30-year fixed-rate home loan of $200,000, your payment (principal and interest) will be $932 a month. After 30 years, you'll have repaid the $200,000, plus $135,489 in interest, money that could have gone to a college education for your kids or helped you retire earlier.
Reducing the term, or duration, of the loan usually saves money in two ways: You pay less total interest, and you often get a lower rate.
When I researched this story, the average 30-year fixed-rate mortgage was 3.8 percent. The average 15-year, fixed-rate mortgage had an average interest rate of just 3.07 percent. The monthly payments on a $200,000 loan would be $1,388, which is $457 higher than the 30-year version.
But you'd be done in half the time, paying only $49,823 in interest, instead of $135,489. That means you'd keep nearly $86,000 in your pocket rather than putting it in a lender's.
If you want to shorten your mortgage's term but 10 or 15 years feels too tight, the payments on a 20-year loan might be more comfortable.
6. Refinance and just pretend it's a shorter loan
If locking into a shorter mortgage with higher monthly payments feels scary, you can get much the same effect by refinancing - if rates are low enough to justify it - into a cheaper 30-year mortgage but paying it off on a 15-year (or 10-year or 20-year) schedule.
You won't enjoy the lower rates offered for shorter-term loans, but you'll save heaps of money on interest. To stick with our sample mortgage, the new payment on your $200,000 (3.8 percent, 30-year fixed-rate) mortgage is $932. Go ahead and pretend you're on a shorter schedule. Your monthly payment would be:
Do the math yourself using the HSH calculator, or any number of other free calculators.
This option requires willpower, because you must choose a higher payment than you are required to make each month. But it gives you the flexibility of falling back to your smaller required payment if you need extra cash.
Is refinancing cost-effective?
Options 5 and 6 involve refinancing your home. Before considering those options, decide if refinancing is a good move for you.
Whether refinancing is worth it depends on the associated costs and how long you'll stay in the home. To be a good deal, you'll need to stay long enough to more than recoup your costs.
Refinancing is loaded with costs, including, but not limited to:
You can pay for these costs out of pocket at the time you refinance. Many lenders encourage borrowers to have the fees added ("rolled in") to their loan balance. But if you do, your monthly payment will grow and you'll pay additional interest.
Here's rule of thumb: Expect to pay 2 percent to 5 percent of the loan amount to refinance, says Zillow.
Estimate your own costs using MyFICO's refinance calculator. Also, you can shop around by telling several mortgage lenders how much you want to borrow and asking for their estimates of fees. Again, our mortgage search tool is a good place to start.
Tip: Don't give lenders consent to pull your credit until you're ready to actually apply for a loan.
What's your approach to paying your mortgage? Are you trying to pay it off faster? Let us know in our Forums. It's the place where you can speak your mind, explore topics in-depth, and post questions and get answers.
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:
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.
Filed under: Credit Score
By Andrea Cannon
Have you noticed inquiries on your credit report? Not sure what they mean? Soft and hard inquiries are the result of potential creditors assessing your credit report after you've applied for things such as a credit card, mortgage, or car loan. Hard and soft inquiries each affect your credit differently. Read on to learn more:
What Are Soft Inquiries?
Soft inquiries typically occur when your credit report is pulled for a background check. This can occur when you are applying for a new job, getting pre-approved for lending offers, and even when you check your own credit score.
While they will usually show up on your credit report, this isn't always the case. Plus, they won't affect your credit score, so you don't need to be concerned about them.
What Are Hard Inquiries?
Hard inquiries occur when a lender pulls your credit report to make a lending decision. This takes place most commonly when you apply for a loan, credit card, or mortgage. However, there are other reasons that your credit may reflect a hard inquiry, such as when you request a credit limit increase. They can, in some cases, lower your FICO score by one to five points and can remain on your credit report for up to two years. Typically, the more hard inquiries on your credit report, the likelier it is to affect your score.
Multiple hard inquiries in a short period of time can cause significant damage to your credit. When multiple hard inquiries come through at once, the credit bureaus assume you are desperate for credit or can't qualify for the credit you need. Any future creditors may also take this information and assume that you are a high risk borrower, which will reduce your chances of getting the credit you need. In fact, according to myFICO, people with six hard inquiries or more on their credit are up to eight times as likely to file for bankruptcy, compared to people with no inquiries - meaning that more inquiries usually means greater risk.
Exceptions to the Rule
There are certain instances that are gray areas, which may result in a soft or hard inquiry depending on the situation (such as when you rent a car or sign up for new cable or Internet service). If you aren't sure about whether your actions will result in a soft or hard inquiry, you can simply ask the financial institution you are requesting financing from.
Another exception is when you are rate shopping. Generally, your FICO score will only record one single inquiry within a 14-45 day period if you are shopping for the best mortgage, auto loan, or student loan rates. By doing all of your shopping for the same type of loan within a two-week span, you can reduce the effect on your credit.
Disputing an Unauthorized Inquiry
If a hard inquiry occurred without your permission, you may be able to dispute it. This can be done by calling or writing the creditor and asking them to remove the unauthorized hard inquiry from your credit report. You can also dispute them directly with the credit bureau. Otherwise, if you've authorized the hard inquiry, it can take up to two years to disappear from your credit report.
How Inquiries Will Affect Your Future
As is the case with anything that negatively affects your credit score, inquiries can affect your ability to get good loan rates. More hard inquiries means a lower credit score, which means fewer credit options or a higher interest rate. This will ultimately mean you will pay more over the life of the loan.
How Will Your Credit Recover?
The good news about a hard inquiry is that if you aren't doing them often, they aren't going to have a big effect on your credit. For instance, factors like your payment history, credit history, and credit utilization rate are weighted much more heavily. Continue monitoring your credit every month to ensure that there are no unauthorized hard inquiries or other issues so that you can continue to maintain the highest score possible. (See also: 10 Surprising Ways to Negatively Affect Your Credit Score)
On the other hand, if you already have bad credit, then an additional hard inquiry can have an even greater impact on your score. Try keeping your hard inquiries to only one or two a year, if possible.
Do you have unusual experiences with inquiries on your account? Please share your thoughts in the comments!
Filed under: Saving
By Karen Cordaway
Every now and then we might discover a great tip that makes life so much easier. Whether you're perusing Pinterest, Reddit, Instagram or magazines, there are shortcuts you can take when it comes to spending and saving. Here are 6 shortcuts to make dealing with money a little easier.
1. Buy in bulk.
Sasha Mitchell-Fuller, a current producer at "The Dr. Oz Show," formerly of "The Tyra Banks Show," loves to stay current on fashion while putting together segments for TV, and believes you can have an up-to-date wardrobe with designer brands without depleting your bank account. She thinks getting a much-needed wardrobe reboot can happen all in one shot during the times of year where stores are known to have big sales.
This approach encourages shopping efficiency for those who have busy schedules and might find it hard to shop every season. Instead of having to stay up on every random sale throughout the year, Mitchell-Fuller uses this bulk shopping method for clothing and can insure that she can look polished for every season. She snags deals at stores like Zara and Nine West only during their 70 percent off sales. She adds, "These are also items that you can wear forever."
2. Be a super saver.
If you want to save money on a regular basis, think about how much you want to put away per month. Set savings goals to keep track of how much actually hits your bank account. You can automate this process on bank accounts like Capital One 360. There is a goal-setting feature that is easy to set up and keeps you aware of how close you are to reaching your goal whenever you login to your account, displayed as a bar graph next to the dollar amount inside the account. You can check in on multiple goals this way without ever having to touch a spreadsheet or calculator.
3. Create an out of sight, out of mind savings account.
If you're a spender and you tend to dip into your emergency fund any time you come up a little short, setting up a different savings account might be how you approach putting away money and keeping it there. If you make it a little less convenient to get the money, you may be less likely to touch it. Consider this to put money away for long-term goals or even an emergency fund for saving 3 to 6 months' worth of living expenses. This way, you won't see it on a regular basis and won't be tempted to think of it.
4. Take stock of the food you buy.
You might already get some savings at the grocery store by picking up sale items listed in the circular or by clipping a coupon or two, but another way to save money is to actually eat the food that you buy. Write a list of needed items. When you purchase the items at the store from that list, keep the list after shopping. You can keep it on the fridge or close by to remind you of what's inside the fridge. It's easy for something like broccoli or carrots to get thrown in a drawer and forgotten about, only to have them spoil. With a reminder of what you have, you can cook meat before it goes bad. You can also make sure you consume produce and other items that may perish quickly.
5. Make multiple accounts to put yourself first.
You may have heard of the phrase "pay yourself first" when it comes to investing. Think about applying this concept to other categories in your budget. You can make multiple bank accounts in many online banks. As long as you leave enough money to pay your bills and other expenses, ship the rest of the money to different accounts that you need to save for.
For example: if you own a car you'll need oil changes and other types of vehicle maintenance throughout the year. Figure out how much you spend annually for this. Then divide that number by 12 to figure out what that would cost you per month. You can sock away that amount of money so when the time comes to repair you vehicle, the money will be waiting there to pay for it.
Also, make accounts for things you want to do like taking a vacation, working on your house, having a party or any other activity that may require you to put money away little by little to be able to afford it. This way saving can also be rewarding instead of just putting out a fire when an emergency strikes. It can change your mindset and make the process more enjoyable.
6. Don't just coupon for food.
Take the same approach when couponing or getting discounts on more self-indulgent purchases. Many people use coupons for food and other necessities. While useful, it might not be as rewarding. Think about using the same money-saving method when it comes to splurging. Many spas have promotions, for instance. You can get a cheaper price for a massage or facial at certain times of year. You can also "bulk shop" or bundle services and spend less than you normally would. You can indulge a bit without going without clobbering your wallet.
First, brush your hair before bedtime. It helps redistribute natural oils from your scalp, which prevent dried and split ends.
And to preserve your locks as you sleep, use a satin pillowcase to rest your head on. Unlike cotton, which is rougher on hair and skin, satin's smooth, soft texture helps prevent hair from frizzing and reduces the friction on your follicles. This can minimize breakage and help prevent hair loss.
So brush up your bedtime routine, and you'll keep hair healthier - no matter what the style!
Filed under: Spending
By Bob Niedt
Financial regrets. We've all had a few. But there's a big difference between making an impulse purchase that you second-guess the morning after and making a major decision about your money that could haunt you for a lifetime.
We reached out to dozens of financial planners and personal-finance experts for their views on some of the most consequential mistakes people can make with their money. We also offer advice on fixing these mistakes - or avoiding them altogether - so you're not left ruing the day when you blew your budget, wiped out your savings or otherwise sabotaged your financial future. Take a look.
1. Borrowing from your 401(k)
Taking a loan from your 401(k) can be tempting. After all, it's your money. As long as your plan sponsor permits borrowing, you'll usually have five years to pay it back with interest.
But short of an emergency, tapping your 401(k) is a bad idea for many reasons. According to John Sweeney, executive vice president for retirement and investment strategies at Fidelity Investments, you're likely to reduce or suspend new contributions during the period you're repaying the loan. That means you're short-changing your retirement account for months or even years and sacrificing employer matches. You're also missing out on the investment growth from the missed contributions and the cash that was borrowed.
Keep in mind, too, that you'll be paying the interest on that 401(k) loan with after-tax dollars - then paying taxes on those funds again when retirement rolls around. And if you leave your job, the loan usually must be paid back within 60 days. Otherwise, it's considered a distribution and taxed as income.
Before borrowing from a 401(k), explore other loan options. College tuition, for instance, can be covered with student loans and PLUS loans for parents. Major home repairs can be financed with a home-equity line of credit.
2. Claiming Social Security early
You're entitled to start taking benefits at 62, but you probably shouldn't. Most financial planners recommend waiting at least until your full retirement age - currently 66 and gradually rising to 67 for those born after 1959 - before tapping Social Security. Waiting until 70 can be even better.
Let's say your full retirement age, the point at which you would receive 100% of your benefit amount, is 66. If you claim at 62, your monthly check will be reduced by 25% for the rest of your life. But hold off until age 70 and you'll get a 32% boost in benefits - 8% a year for four years - thanks to delayed retirement credits. (Claiming strategies can differ for couples, widows and divorced spouses.)
"If you can live off your portfolio for a few years to delay claiming, do so," says Natalie Colley, a financial analyst at Francis Financial in New York City. "Where else will you get guaranteed returns of 8% from the market?" Alternatively, stay on the job longer, if feasible, or start a side gig to help bridge the financial gap. There are plenty of interesting ways to earn extra cash these days.
3. Paying the minimum on credit cards
Americans' plastic addiction is taking a toll on their bottom lines. The average household with debt owes $15,762 on credit cards, according to personal finance website NerdWallet.com.
"It can take years and years and years to potentially pay off that credit card debt with the amount of mounting interest costs," says H. Kent Baker, professor of finance at the Kogod School of Business at American University, "especially if one continues to charge more and more and more."
Consider this example: You have a $5,000 balance on a card with a fixed rate of 12.5%, typical of what banks are charging these days. If you only make minimum payments, it'll take nearly 10 years and $1,700 in interest to eliminate that $5,000 debt, a Bankrate calculator shows.
What to do? First, stop making new charges. Second, if possible transfer the balance to a lower-rate card. Third, pay more than the minimum. Even a small boost to your monthly payment can result in significant savings on interest. Above all, advises Baker: Live within your means. (Kiplinger's Household Budget Worksheet can help you get back on track.)
4. Putting off saving for retirement
Financial professionals have heard the refrain before: "I'll start saving for retirement when I make more money." But that fiddling while Rome burns won't cut it as retirement nears.
"Many people do not start to aggressively save for retirement until they reach their 40 or 50s,'' says Ajay Kaisth, a certified financial planner with KAI Advisors in Princeton Junction, N.J. "The good news for these investors is that they may still have enough time to change their savings behavior and achieve their goals, but they will need to take action quickly and be extremely disciplined about their savings."
Morningstar calculated how much you need to sock away monthly to reach the magic number of $1 million saved by age 65. Assuming a 7% annual rate of return, you'd need to save $381 a month if you start at age 25; $820 monthly, starting at 35; $1,920, starting at 45; and $5,778, starting at 55.
Uncle Sam offers incentives to procrastinators. Once you turn 50, you can start making catch-up contributions to your retirement accounts. In 2016, that means older savers can contribute an extra $6,000 to a 401(k) on top of the standard $18,000. The catch-up amount for IRAs is $1,000 on top of the standard $5,500.
5. Bankrolling your kids
Sure, you want your children to have the best - best education, best wedding, best everything. And if you can afford it, by all means open your wallet. But footing the bill for private tuition and lavish nuptials at the expense of your own retirement savings could come back to haunt all of you.
"You cannot borrow for your retirement living,'' says Joe Ready, executive vice president of Wells Fargo Institutional Retirement and Trust. "[But] you may have other avenues beyond [borrowing from] your 401(k) plan to help fund a child's education." Instead, Ready says parents and their kids should explore scholarships, grants, student loans and less expensive in-state schools in lieu of raiding the retirement nest egg. Another money-saving recommendation: community college for two years followed by a transfer to a four-year college. (There are many smart ways to save on weddings, too.)
No one plans to go broke in retirement, but it can happen for many reasons. One of the biggest reasons, of course, is not saving enough to begin with. If you're not prudent now, you might end up being the one moving into your kid's basement later.
6. Passing up professional advice when you need it
We all can use a hand once in a while, especially when it comes to tricky aspects of our financial lives. For example, some of the financial professionals we talked to pointed to the panic brought about by the sharp economic downturn in 2008 and 2009. Many individuals poorly timed when to get out of the stock market and when to get back in.
"Investors who aren't very experienced tend to buy high and sell low, when you're supposed to buy low and sell high in the stock market," says Catherine Shenoy, director of applied portfolio management and senior lecturer at the University of Kansas Business School. "That's one way a professional financial adviser can help you."
Advice isn't limited to investments. The right financial pros can assist with everything from taxes and insurance to retirement savings and estate planning. And good advice can pay off for you and your loved ones. Common but avoidable mistakes such as dying without a valid will or failing to designate the correct beneficiaries for your retirement accounts could leave your heirs in limbo and even see your wealth go to the wrong people.
"Not carefully choosing your financial adviser can be a huge mistake," says Andy Tilp, an investment adviser representative with Trillium Valley Financial Planning in Sherwood, Ore. "It is very important to have an adviser who is a fiduciary for the clients and is working solely in the client's best interest. An adviser who sells high-fee, commission-loaded products is helping his own net worth but can be a disaster for the client." (Learn more about what to ask a financial adviser when hiring one.)
7. Avoiding the stock market
Shying away from stocks because they seem too risky is one of the biggest mistakes investors make. True, the market has plenty of ups and downs, but since 1926 stocks have returned an average of about 10% a year. Bonds, CDs, bank accounts and mattresses don't come close.
"Conventional wisdom may indicate the stock market is 'risky' and therefore should be avoided if your goal is to keep your money safe," says Elizabeth Muldowney Samuelson, a financial adviser with Savant Capital Management in Rockford, Ill. "However, this comes at the expense of low returns and, in fact, you have not eliminated your risk by avoiding the stock market, but rather shifted your risk to the possibility of your money not keeping up with inflation."
While there are no guarantees when it comes to stocks, you can lessen the likelihood of taking a big hit. Diversification is the key. Keep your money in a mix of large, small, domestic and foreign stocks. We favor low-cost mutual funds and exchange-traded funds because they offer an affordable way to own a piece of hundreds or even thousands of companies without having to buy individual stocks. If you aren't comfortable picking your own funds, hire a financial adviser to help.
And don't even think about retiring your stock portfolio once you reach retirement age, says Sweeney, of Fidelity Investments. Nest eggs need to keep growing to finance a retirement that might last 30 years. You do, however, need to ratchet down risk as you age by gradually reducing your exposure to stocks.
8. Quitting school
Rarely is the student who skips school going to soar in life, financial planners and experts warn. Sure, you'll dodge the albatross of student loans by not going to college, but the short-term savings could eventually be offset by smaller paychecks and missed promotions.
"All the income studies have shown that college graduates earn two to three times more [on average] than high school graduates," says Shenoy, of the University of Kansas Business School. "Quitting school without your degree really puts you behind the eight ball in terms of your career."
Based on U.S. Bureau of Labor Statistics data, a high school graduate working full time will have median lifetime earnings of $1.4 million, while a worker with a bachelor's degree will earn nearly $2.4 million. A doctoral degree leads to median earnings of about $3.4 million over a lifetime.
Remember that what you study can have a big influence on your prospects. Some of the best college majors for your career in terms of future pay and employment opportunities are in the areas of health care, technology and finance. Conversely, majoring in, say, fine arts or design tends to have the poorest financial payoff.