Keeping your financial house in order isn't a Herculean task, but it does require some time and effort. If your schedule is so jam-packed that you can't spare a few minutes a week to review your budget, check your credit health or track your progress on saving or paying down debt, you could be letting money slip through your fingers without even realizing it. When you're crunched for time, here are three things you can do to keep your finances on the right track.
1. Automate Your Finances
If paying bills is taking up a good chunk of your day, consider putting your payments on autopilot. When you set up automatic payments for credit cards or other debts, you won't have to worry about paying late and damaging your credit score.
Most banks offer bill payment services at no charge, so it might be a good idea for you to take advantage of these features. Remember, your bills aren't the only thing you can automate. If you're trying to build your emergency fund or pad your IRA and your 401(k), setting up recurring transfers to those accounts is a stress-free way to work towards meeting your savings goals.
Just make sure you're evaluating your accounts regularly to see how much progress you're making and how fees are detracting from your bottom line. If you're auto-saving in an IRA, for example, you'll want to check in periodically to see how your investments are performing and swap out ones that are costing you more than they're earning.
When you've got two checking accounts, a saving account, a retirement account, two or three credit cards and a mortgage, staying on top of them all can be overwhelming. Fortunately, there are a number of apps that make it easy to manage your finances.
With Personal Capital, for instance, you can link your checking account, savings account, IRA, 401(k) and investment accounts. The app analyzes your accounts to see what you're paying in fees and recommends ways to improve your investment performance.
Mint is a budgeting app that links your bank accounts, credit cards, student loans, mortgage and investment accounts. You can set up a budget, create goals for debt repayment or savings and get a quick snapshot of your net worth straight from your phone.
3. Consolidate and Increase Your Savings
Using apps like Mint or Personal Capital to manage your accounts can relieve some of your financial stress. But you can take it a step further by reducing the number of accounts you have. If you've got balances on five or six credit cards, for example, transferring them to a single card with a zero percent rate means you'll only have one payment to keep up with and you'll pay less in interest (at least temporarily).
The same goes for those of you with multiple student loans from different loan servicers. Consolidating all of your loans can make them easier to manage and it might shave a few bucks off the final interest total.
When you've got a hectic lifestyle, neglecting your finances is all too easy to do. But that can come back to bite you in the wallet. While you probably can't afford to go completely hands-off, looking for ways to minimize the time you spend managing your money could be a smart move.
Travel isn't cheap, but when the dollar is 15%-55% stronger against other currencies than it has been in over a decade, now is the time to travel! Not everywhere is a good value at this time. Some other currencies are flourishing just like the USD, so if you want to find strong-dollar discounts, you have to know where to look. Here are five amazing places to visit that are far less expensive than they have been in a recent five-year history thanks to a strong U.S. dollar.
Note: All currency conversions are based on XE.com's historical data. The current exchange rates may have changed since this article was published. Daily budgets and average hotel costs were calculated using numbeo.com's travel index tool.
1. South Africa ($1 USD = 15 ZAR)
Five years ago, you would have only gotten 6.73 Rand for your dollar, but now you'll feel more than twice as rich in South Africa. There has never been a better time to go on an African safari. In 2010, entrance to South Africa's biggest park (Kruger National Park) would have cost $23.77 (160 ZAR), but now, you can watch lions, zebras and elephants roam free for just $17.50 (264 ZAR)!
A four-day luxury lodge safari trip in Kruger National park is around 15,000 ZAR. In 2010, that would have been $2,225 USD, but today it's only around $965 USD!
A budget room in a guest house (known as a "backpacker" in South Africa) will cost you about 385 ZAR. In 2010, that equated to $57 a night, but today you'll pay just over $25 for the same room.
The Math
Midrange Daily Budget: 500 ZAR / Day
This daily budget based on 2010 conversion: $74 / Day
This daily budget thanks to today's dollar: $33 / Day
Savings of: 55%
Current Exchange: 1 USD = 15 ZAR
5 Year High: 16.00
5 Year Low: 6.56
2. Russia ($1 USD = 70 RUB)
The beautiful city of Moscow, the churches of St.Petersburg, and the world's greatest train journey have never been so affordable. The Russian ruble fell drastically at the end of 2014, and while this isn't great for Russians, it is excellent for those of us who have always wanted to visit this vast and beautiful country.
The average price of a midrange hotel in Moscow is around 3,500 RUB. In 2010, that would have been $116, but today that is less than $50.
One of the most legendary train journeys on the planet, the Trans-Siberian, is now a better value than it has been in the past few decades. The trip from Moscow to Ulan Bator will run you around 35,000 Rubles for a first class ticket. At Christmas time in 2010, that would have been $1,160, but with today's exchange it's just $498! You can buy two tickets today, for the same price as one ticket would have cost you at the end of 2014. Incredible.
The Math
Midrange Daily Budget: 4000 RUB / Day
This daily budget based on 2010 conversion: $133 / Day
This daily budget thanks to today's dollar: $57 / Day
Savings of: 57%
Current Exchange: 1 USD = 70 RUB
5 Year High: 71.91
5 Year Low: 27.29
3. Brazil ($1 USD = 3.95 BRL)
Although Brazil was once considered a "BRIC" economy, the collapse of oil prices, the FIFA World Cup, and preparation for the 2016 Olympics has proven pretty rough on Brazil's currency. Today the Brazilian real is suffering a real downturn and the U.S. dollar is getting about 57% more than it did around this time in 2010.
If the Brazilian real continues on this downward trend, the Olympics in 2016 might make for a great budget destination. According toolympics.org, tickets for events will go for around 70 real. That's only $17.70, and by the time the games begin, it might be even less.
A three-star hotel in Brazil averages at around R$230 per night. In 2010 that was $138, but today that same room will cost you less than $35.
The Math
Midrange Daily Budget: R$400 / Day
This daily budget based on 2010 conversion: $240 / Day
This daily budget thanks to today's dollar: $100 / Day
Savings of: 58%
Current Exchange: $1 USD = 3.95 RUB
5 Year High: 4.17
5 Year Low: 1.57
4. Japan ($1 USD = 122 JPY)
I have personally always wanted to visit Japan, but I thought it would be outrageously expensive. This was true back in 2010 when the exchange rate was around 82¥ to the dollar. At that time, Japan would have been a steep holiday, but today the dollar gets 33% more than it did back then.
The average cost of a midrange hotel room in Japan is 10,000¥. In 2010 that would have been $122 USD, today that room will run you just $82.
A guided hike to the top of Mt.Fuji costs about 47,000¥. In 2010 that was $573, but today you'd pay $385.
The Math
Midrange Daily Budget: 19,000¥ / Day
This daily budget based on 2010 conversion: $231 / Day
This daily budget thanks to today's dollar: $155 / Day
Savings of: 33%
Current Exchange: $1 USD = 121.83 JPY
5 Year High: 125.63
5 Year Low: 75.76
5. Any Country Using the Euro ($1 USD = 0.92 EUR)
Head to Europe for huge savings! Explore the whitewashed buildings of Oia, Greece, lay on the soft, sandy beaches of the Mediterranean, explore the beauty of Paris, and the history of Rome, all for a fraction of what it would have cost you just a few years ago.
At the end of 2010, the Euro was at 0.76 to the dollar, but today the dollar is 17% stronger and trades almost equally with the Euro. When I was in Greece, I found a lovely apartment just a few blocks from the sea on Santorini island. At the time (May, 2011), that apartment cost me 34 Euros, which was around $50 USD/night. Today I could get that same apartment for just over $37.
There hasn't been a cheaper time for Americans to visit Europe in over a decade. This is the perfect time to explore one of the most fascinating continents on Earth.
The Math
Midrange Daily Budget: €100 / Day
This daily budget based on 2010 conversion: $131 / Day
This daily budget thanks to today's dollar: $110 / Day
Savings of: 17%
Current Exchange: $1 USD = 0.915 EUR
5 Year High: 0.95
5 Year Low: 0.67
Enjoy it while it lasts...
Celebrate the strong American dollar by taking a trip to a place you couldn't afford previously. Enjoy the discounts while you can!
How we spend our hard-earned money can be quite revealing.
"To some extent, we are what we buy," explains Money.
Some products experience surging sales after a strong marketing campaign, a dramatic shift in price or the endorsement of a popular celebrity - have you heard of the "Oprah Effect"? But often the rush to buy is the result of shifting U.S. demographics.
The seven hot-selling items in a list compiled by Money reflect the latter. Check out where U.S. consumer dollars are flowing and what that reveals about Americans today:
Legal weed: With more states legalizing marijuana for recreational or medicinal purposes, the cannabis industry has experienced explosive growth. Legal pot sales reached $5.4 billion in the United States in 2015, a 17.4 percent spike over 2014. Pot sales are expected to hit $6.7 billion this year - in turn generating healthy tax revenues in states that allow it.
Canadian goods: When the value of the U.S. dollar rises compared with the Canadian currency as it has recently (the current rate is US$1 = C$1.32) many Americans flock across the northern border to shop. Money said the number of U.S. visitors to Canada shot up by 1.6 million during the first 11 months of 2015, and that number is expected to keep climbing this year.
Anything that can be bought on a phone (or tablet): Mobile shopping and spending soared 60 percent from 2014 to 2015. With retailers shifting more of their focus to mobile consumers, it's likely that number will only continue to increase in 2016.
Streaming service subscription: Regardless of whether they stream video or music, streaming service subscriptions are on the rise. Netflix, Hulu, Spotify and Amazon Prime, just to name a few, are continually increasing their customer base.
Bowls: That's right. "Bowls are the new plates," the The Wall Street Journal recently announced, noting that moving from plates to bowls signals a shift to a more casual lifestyle. Money noted that many health-conscious trendsetters are trading in their plates for bowls while restaurants are also moving towards bowl-friendly entrees. Money said bowl sales from dish companies like Fiesta increased by 17 percent last year.
Adult diapers: With Americans living longer these days and many seniors struggling with incontinence problems, it's really no surprise that adult diapers are flying off the shelves. Money said adult diaper sales are expected to grow by 48 percent globally by 2020. Compare that with baby diaper sales, which are expected to experience a much more modest growth of 2.6 percent in the next four years.
You don't have to sacrifice good pay to work from home.
FlexJobs, a subscription-based online service specializing in work-from-home and other flexible job postings, recently identified 10 positions that pay near or well over six figures.
"Sure, work-from-home jobs are available in lower pay grades, but it is clear that flexibility is not constrained by experience level or a high salary," said Jessica Howington, Flexjobs content team lead.
The list comes as the number of people in work-from-home jobs continues to grow. About 3.7 million employees (2.8 percent of the workforce) work from home at least half the time, according to Global Workplace Analytics.
More than 8 in 10 people surveyed about telecommuting say working from home contributes to work-life balance. Some who seek telecommuting positions say they are more productive working from home rather than an office; others say dropping commute time adds to time spent exercising and other healthful habits.
The top-paying jobs and their job descriptions that FlexJobs found:
Supervisory attorney, $117,000 - $152,000: Oversees less-experienced attorneys, provides legal guidance and support, supervises other attorneys and their assigned cases and staff.
Senior software engineer, $100,000 - $200,000: Responsible for developing and running software programs, overseeing related projects, managing a team of software engineers, troubleshooting technical issues, and debugging software.
Senior medical writer, $110,000 - $115,000: Reviews medical information, writes documents, edits other medical writers' submissions and works with senior management to keep projects on track at a variety of health care-related companies including medical publishers and pharmaceutical companies; usually needs a degree in a science or medical discipline.
Director of quality improvement, $100,000 - $175,000: As part of a company's operations and technical teams,+ is responsible for working to design and develop best practices related to systems administration and data architecture.
Clinical regulatory affairs director, $150,000 - $151,000: Plans, prepares and submits products for market nationally and internationally, writes regulatory documents for clinical trial applications, and assists with marketing documents.
Research biologist, $93,000 - $157,000: Explores and studies biology in a lab or out in the field while researching interaction of organisms and environments; specialized fields include zoology, taxonomy, physiology, population biology and ecology.
Director of business development, $100,000 - $151,000: Helps drive sales and revenue, responsible for established clients and new business, oversees sales teams for larger companies.
Environmental engineer, up to $110,000: Performs as expert to reduce environmental waste and damage, including managing ways to protect the Earth and human populations from harmful chemicals and pollution, ensuring compliance with regulations and, in some cases, assisting in development of regulations.
Major gifts officer, up to $90,000: Cultivates and solicits current and prospective donors for large-sum donations by using sales skills, organizational skills and working independently; extensive travel may be required.
Audit manager, $90,000 - $110,000: Leads, plans and executes financial and operational audits for companies or clients, works with stakeholders to understand the outcomes and impacts of the audit, ensures future compliance, and evaluates internal systems, policies and procedures.
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:
$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
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:
A lender's origination fee
A title search fee and title insurance
Taxes
A settlement professional's fees
The cost of pulling your credit report
An appraisal fee
State or county tax and/or transfer fees
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.
With a new pair of shoes or a shipment of groceries just a few clicks away, American consumers have embraced the ease of online shopping. In fact, on average, Americans were expected to spend an estimated $1,804 on online shopping last year (the most of any country in the world), according to Statista's Digital Market Outlook for 2015.
But just because online shopping is easy with 24/7 access to e-commerce sites and no lines at the checkout doesn't mean that it's your best or least expensive option. Here's a look at the potential downsides of shopping online, as well as strategies for offsetting these challenges.
Shipping costs. Many retailers offer free shipping, but often with a minimum dollar amount designed to tempt you into buying more. In fact, Amazon.com recently raised its free shipping minimum for most orders to $49. "If you end up buying a bunch more and adding some filler to your order, [it] may not turn out to be the best deal," says Karl Quist, president of online shopping tool PriceBlink.com. If you decide to shop online anyway, search for a promo code and see if you can nix the shipping costs without buying more than you need. Programs like ShopRunner or Amazon Prime also offer free shipping with no minimums, but be sure to weigh the cost of membership against the total savings.
Potential for overpaying. Online retailers' use of dynamic pricing means that prices for online purchases can fluctuate over the course of the day. "If you buy it at the wrong time, you could be overpaying," says consumer and money-saving expert Andrea Woroch. "It's a lot harder to change prices at a brick-and-mortar store than it is online," Woroch adds. Fortunately, tools like Paribus.co will monitor price drops and automatically request a refund on your behalf. However, a study conducted by Northeastern University also found that some e-commerce sites use "price steering," a technique to manipulate search results or customize pricing options based on data collected about the user. For example, if an e-commerce site detects that a consumer is more affluent, it might steer the consumer to personalized and pricier options.
Impulse buys. Maybe you don't need new shoes, but you get an email from your favorite retailer offering half off a second pair. Or just as you're about to close your Web browser, the chat box pops up offering you 10 percent off your next purchase. Now, instead of thinking you don't really need another pair of shoes, you're thinking about what a deal it is. Online retailers are savvy about getting you to spend more. To curb impulse buys, Woroch recommends disabling a one-click checkout option and not saving your credit card information, both of which make it easy to buy items without a second thought. And instead of shopping on your phone when you're intoxicated or bored, find other ways to keep yourself occupied. "With shopping so readily available all the time, you have that much more time to shop and spend money," she adds. Another strategy is to unsubscribe from retailer's emails or to create a separate email account. That way, you won't be tempted to buy things you don't need.
Lack of real-world touch and sight. Some online retailers such as Warby Parker and Trunk Club use home try-ons or advanced fit technology (like Fits.me) to help you buy exactly what you want. Another startup, Try.com, integrates with the e-commerce sites of retailers, including Nike, Ralph Lauren and Zara, and allows consumers seven days to try on clothes for free and ship them back using a prepaid envelope if they decide not to keep the items. Conversely, in the absence of a try-on feature, not being able to feel or see it in real life means those shoes may not fit well or those throw pillows might not match your couch as you had hoped. "For clothing and home goods [such as] curtains and bedding, you want to make sure that the material is of good quality," Woroch says.
Hassle-prone returns. Free shipping and free returns allow online retailers to compete with brick-and-mortar stores. But when a dress doesn't fit or a necklace looks chintzy, do you keep it or send it back? It turns out many consumers choose the latter to avoid packing up an item and printing out a return shipping label. "We're lazy in nature, so we just don't do that," says Alex Matjanec, co-founder and CEO of MyBankTracker.com. Ironically, the more time we have to return something, the less likely we are to actually do it, finds research out of the University of Texas-Dallas, perhaps because we procrastinate and eventually decide to keep the item. Woroch recommends checking a store's return policy before you buy material goods. For bulkier items such as furniture pieces or TVs, the retailer may not offer free return shipping at all. However, in some cases you can avoid extra costs by returning the item in-store rather than shipping it back.
Retargeting. Retargeting is a tool designed by companies to lure shoppers back to a retailer's site after you've left. "You search for The North Face Agave Women's Jacket online, and the jacket begins to follow you wherever you go," Matjanec says. "Every time you get online, it's there waiting for you," he says. This can feel a little creepy, so you may want to clear your Internet browser's cookies to avoid reminders of your past product searches. On the other hand, some retailers include savings messages in their retargeting ads, so you could benefit from retargeting ads by getting a better deal on that jacket.
No, your pants aren't on fire. But judging by the results of a new poll, you might be comfortable lying about certain money issues to get ahead in life - even if the consequences could be grave.
The survey from NerdWallet, conducted by Harris Poll and released this week, sheds some light on how consumers feel about lying when money is at stake.
The online survey tracked the opinions of 2,115 Americans age 18 and older, asking about a variety of scenarios and whether it's OK to lie about them.
Here are the key takeaways. What do you feel crosses the line?
1. Some Lies Are More Forgivable Than Others. As you might suspect, not all lies are created equal in the eyes of most Americans. Take a look at what participants were - and weren't - OK with.
Entertainment subscription accounts. Do you have Netflix or Amazon Prime, Pandora, Hulu Plus or something along those lines? Or rather, do you have family members or friends who have such a service, and they let you use it? That's OK. Well, not really, but 33 percent of Americans say using someone else's account information for online movies, music or articles to avoid paying subscription costs is acceptable.
The IRS. How about deliberately concealing under-the-table income? Twenty-four percent of Americans said not reporting that dough to the IRS was acceptable.
Eating out. You go to a restaurant, and your kid is 13 or 14 but looks younger. Should you lie about his age to get a discount at a restaurant, theme park or, say, a museum? Twenty-one percent of Americans think that kind of thing is fine, but apparently it's a little worse to lie about your own age (only 17 percent said that was permissible).
Auto insurance. What about fudging the number of miles you drive every year so you can get a lower auto insurance rate? Twenty percent of Americans say that's acceptable.
Credit cards. Lying about your income on a credit card or loan application so a financial institution will lend you more? Only 12 percent feel that's acceptable.
Life insurance. Sixteen percent of people condone lying about smoking marijuana to get lower life insurance rates, whereas only 11 percent of respondents believe it's OK to lie about smoking habits to get lower life insurance rates.
2. Men Lie More; Older People Lie Less. True to the stereotype, when it comes to dishonesty and dollars, men can be cads. Meanwhile, graying hair may signal honesty.
At least, when it came to this survey, male participants were likelier to condone lying than women, and older participants were more honest.
When it came to lying on a credit card or loan application, 16 percent of men were willing to lie about the information they provided, compared with only 8 percent of women. Almost twice as many men were also perfectly fine with not reporting under-the-table income to the IRS (30 percent of men versus 18 percent of women). But there was only a 3 percent difference between men and women (35 percent versus 32 percent) when it came to using someone else's account to avoid paying for online, subscription-based movies, music or articles.
As you get older, apparently you get more ethical. Only 11 percent of seniors said it was acceptable to use somebody else's paid account to watch movies or listen to music, whereas 39 percent of Americans ages 18 to 64 voted it acceptable. When it comes to fibbing about your income on a credit card or loan application, only 4 percent of retired Americans said it's OK versus 13 percent of adults who identified themselves as students.
And almost one-third of parents with kids under 18 think it's permissible to lie about their children's ages to get a discount, whereas 18 percent of childless people think that's fine.
3. Fear of Consequences Helps People Decide Whether to Lie. Of course, there's no way to know what's going through someone's mind when they answer questions like these. One could argue that it's easier to be ethical about restaurant discounts when you're not the one paying for your kid's meal, and perhaps fewer seniors think it's OK to use somebody else's paid account because they're frequently the ones paying for it.
The respondents weren't asked why they felt that being honest or dishonest was acceptable in certain scenarios, but Amy Danise, an insurance editor at NerdWallet who helped put the survey together, has an educated guess.
"The people don't seem to be factoring in the consequences of the lies, since lying to the IRS is deemed more acceptable than lying about your child's age, and if you were caught in either situation, the consequences would be far worse with the IRS than lying to a restaurant," Danise says. "With a restaurant, if you're caught, 'Who cares?'"
"The lie seems to depend on the perceived likelihood of getting caught," Danise adds.
That may be why men lie about money more. "I think men have less fear of getting caught and may be, in this case, more risk-takers in general than women," Danise adds.
She also suspects that so few people find it acceptable to lie on a life insurance policy because there's a medical exam, and people know they'll probably be caught.
David Hagenbuch, a marketing professor who specializes in ethics, agrees. "My hunch is that most of the survey respondents based their ethical choices on consequences rather than on moral principles," says Hagenbuch, who teaches at Messiah College in Mechanicsburg, Pennsylvania.
"More specifically," Hagebuch says, "I'd speculate from the wide-ranging results that people's estimation of consequences was further broken down into factors such as the likelihood of getting caught, financial cost, social stigma and impact on others."
Still, one could argue that Americans aren't a lying bunch. After all, there was only one scenario in which more than 50 percent or more of respondents argued that it's OK to lie when it comes to money: using someone else's subscription entertainment account was fine with 62 percent of students and 59 percent of people ages 18 to 34. Overall, the majority of respondents said it was best to not lie.
But for those who take the jaded viewpoint, the reason we aren't lying more may be because technology has made it harder for us to lie, says Wendy Patrick, a business ethics lecturer at San Diego State University.
"We live in a technologically savvy world where it is increasingly easy to detect dishonesty," she says. "In an age of instant fact-checking, most of my students view the truth in black and white and would not dare to even fudge a date on their resumes."
But she adds, "There are some consumers, however, who continue to view honesty in multiple shades of gray. They might pass one of their children off as under 12 or themselves as a senior in order to get a discount, hoping they do not get carded."
So there's our future. As technology continues to evolve, society will become more honest - whether we like it or not.
If you've made the decision to eat healthy, congratulations! Changing your diet isn't easy. That's why we've rounded up these tips about choosing healthy, low-cost options to get you started.
First, let's talk protein. We all need it, and you can find it in many foods, from ground beef to lentils. Clearly between these two, lentils are the cheaper and healthier choice. But it might surprise you to learn that lentils also contain more protein per pound than beef, and they're only a fraction of the price.
Now, on to the produce section. Fresh veggies are great, but if you're trying to save a few dollars, head to the freezer aisle. Not only are frozen fruit and vegetables cheaper, but companies tend to freeze the produce at peak ripeness - so nutritionally, they can be just as good, if not better than fresh. Just be sure to avoid products with added sugars or salt.
Next, check out grains. In this department, brown rice is the front-runner. At 18 cents per serving, it's a better bargain than other healthy grains like quinoa and farro. It's also high in fiber, so it won't pack on the pounds like white rice.
There's much more to cover, but if you make these healthy choices you'll be well on your way.
Related: 5 cheap things that will help you stay healthy
Congrats! You've diligently saved up a down payment, run the numbers on what you can realistically afford and probably attended enough weekend open houses to know you're ready to call a home your own.
Now comes the actual buying part.
While it's an exciting milestone, purchasing a first home can also seem terrifying. After all, it's one of the biggest money decisions you'll ever make. And getting hit with a whole new language of unfamiliar finance terms can only add to the stress.
The good news is that home buying doesn't have to be daunting. While we can't help you decide between a ranch or a townhouse, we can give you the tools to help make sure your decision is financially sound.
So to cut out some confusion, we've rounded up eight of the most important home-buying terms and translated each into plain English. Consider this your cheat sheet to common real estate and mortgage lingo.
1. ARM
ARM stands for adjustable rate mortgage. Simply put, it's a type of home loan where your interest rate will change over time.
Most ARMs start off with a short period of a set low interest rate. But after that time is up-typically between three and 10 years-your rate becomes adjustable. That means it'll reset periodically, based on what's going on in the market. So if interest rates start sliding, you could be saving money. But the opposite can also happen: If rates rise, your monthly payment could suddenly skyrocket.
If you're the type of person who likes a little more certainty in your life, you probably wouldn't love an ARM. On the other hand, if you're not shopping for your forever home and plan to move before the fixed-rate period expires, an ARM could be a good option.
This type of home loan is a little more old-school than an ARM, and it's a lot more straightforward.
Whereas ARM interest rates go where the market goes, think of a fixed-rate mortgage as a more dependable choice, for better or for worse: You'll be committed to a single interest rate for the life of the loan.
That comes with its pros and cons. For example, if interest rates in the market drop, you're stuck with your higher rate. (That is, unless you refinance, which can mean some hassle and fees.) Still, if interest rates rise, you won't have to stress about suddenly having a bigger home payment.
This is a less common type of mortgage (typically for ones administered by the Federal Housing Administration or U.S. Department of Veterans Affairs) where, instead of taking out a new loan, you simply take over the seller's old mortgage.
That may sound like a great deal-doesn't "pre-owned" always mean savings?-but it's a little more involved than, say, buying a used car.
It typically only makes sense if interest rates are rising. For example, if the owner's mortgage was fixed at 3%, and rates right now are 5%, you'd stand to save on interest. Bonus: You'll also likely pay less in fees, since you aren't getting a brand-new mortgage. (Though you will still have to be approved by the seller's lender.)
Plus, say you're buying the home for $250,000 and the mortgage balance is just $150,000. You'll still have to find a way to cover that difference, whether that's coming up with a bigger down payment or taking out a second mortgage.
This is a type of mortgage where after just five or seven years of low monthly payments, you're expected to pay off the rest of the home in one, big lump sum at the end-hence, the "balloon."
Yes, it's a lot of cash to suddenly come up with. But in reality, most people never actually plan to pay that big balance at once. Rather, they'll sell their home before then or simply take out a new loan when the balloon payment comes due.
The big advantage? The interest rate for those five or seven years tends to be really low.
Here's the risk, though: There's no guarantee you'll be approved for another loan once that big payment is due. For example, say your home's value has fallen over time, or you've weathered a big pay cut at work. That'll make getting a new mortgage on the fly much harder.
Equity tells you how much of your home you really own. In short, it's the current market value of your house minus the amount you still owe on the mortgage. For example, let's say your ranch house is worth $300,000 right now, but you're still on the hook for $150,000 in mortgage payments. You really only "own" $150,000 of the home. In other words, you have 50% equity.
As you keep making those monthly payments, your equity will grow. It can also change as the value of your home goes up (or down).
"Escrow" can get confusing, because it actually has two different meanings in the real-estate world.
First, after your offer has been accepted on the home, some money will be kept in a separate escrow account until all the conditions of the contract are met. It's a way to protect both the buyer and seller.
For example, as the buyer, you don't want to hand over any money until you're sure the home passes inspection. But the seller also wants some kind of assurance that you'll actually pay before they take the home off the market.
So an escrow agent comes in as the referee. They hold a certain amount of cash from the buyer in this escrow account, along with documents from the seller, like the deed to the house. Once the contract is signed, all the assets are handed out.
But escrow account takes on a second meaning when you become a homeowner. Because your mortgage lender wants to make sure you actually pay your property tax and homeowner's insurance, they collect extra money from you every month and hold it in an "escrow account." They'll then use that money to pay those annual expenses for you-and you can both worry less knowing there is money set aside to pay those important bills.
Earnest money is a way to show a seller that you're serious about wanting to buy their property. After all, before starting a contract, sellers want to be sure that you're ready to put a ring on it-and that you're not just throwing out offers at every open house you attend.
So to show them how "earnest" you really are, you deposit a set amount of money into an escrow account (yep, that term again) with your offer. It's typically 1% to 3% of the purchase price. If all goes well and the home is yours, that cash can go toward your down payment. On the other hand, if you get cold feet and back out, the seller has an opportunity to pocket that money.
Private mortgage insurance, aka PMI, is a type of insurance policy you'll have to take out if your down payment is less than 20%.
If you can't come up with 20%, the mortgage lender views you as a financial risk. So to protect themselves, they make you pay for PMI until you've built up a little more than 20% equity in your house. That way, if you end up defaulting, the lender will still get paid via the insurance.
Not only is PMI an extra bill you'll have to cover every month, but unlike most insurance policies you pay for, your PMI doesn't protect you-only the lender will be covered if you default. So at LearnVest, we recommend you always try to save up at least 20% for a home down payment-so you can avoid having to pay that PMI.
After all, caring for a little one costs about $13,000 a year, and finding that extra room in your budget isn't necessarily easy.
Still, three out of five moms admit they could raise kids for less than they spend. It's just that they want to create the "perfect" childhood.
That desire translates to a budget-busting lineup of activities, setting moms back an average of $1,391 annually. The majority (91%) say they pay as much as they do because it's what's best for their kids-not to keep up with their social circle or who's posting what to Facebook.
But it's hard to resist lifestyle inflation, and the more money earned by surveyed moms, the more they report spending ($2,600 more per child for those making at least $100,000).
And expenses further down the road are already looming: 60% worry about having enough money to fully support a child until adulthood.
Such pressure has its own costs. One in five say their relationship with their partner suffers from financial stress and the need to work more to give junior the very best.
While that impulse is understandable, these findings are a reminder that becoming a parent is a major money commitment. If you're thinking of having a baby, our handy checklist is a good place to start your financial prep.
Americans now have more than $1.2 trillion of student loan debt.
To help people deal with their debt burden, credit unions, banks and Silicon Valley startups have introduced loans that can be used to refinance existing student loan debt. Companies life SoFi advertise that borrowers save an average $18,936 when they refinance their debt. And SoFi isn't the only company to offer low interest rates. Interest rates start as low as 2.13% (variable) and 3.25% (fixed).
But before you sign on the dotted line, make sure you ask yourself these four questions.
1. Do you have federal or private student loans?
If you have federal student loans, you are probably eligible for income-driven repayment options from the federal government. With an income-driven plan, the federal government will review your tax return and will cap the monthly payment to a fixed percentage of your discretionary income. Depending upon the plan, your monthly payment could be capped to between ten and twenty percent of your discretionary income. You would continue to make payments for up to 25 years, depending upon which plan you use. At the end of the repayment period, any remaining loan balance is forgiven.
Just remember that you have to renew your enrollment every year. If your income increases, so does your payment. And if debt is forgiven, you will owe taxes on the amount that is forgiven. If your income is low enough, your payment could be as low as $0 per month.
Your interest rate on your federal loans will likely be much higher than the interest rate being made available by companies that refinance the debt. You should think of the higher interest rate as an insurance premium. If you have a high level of confidence in your ability to repay your student loans quickly, and you have an emergency fund in case of job loss, you might not need to worry about income-driven plans. Just think long and hard before making a decision.
2. Do you have a good credit history and verifiable income?
If you want to refinance your student loan debt, you need to have an excellent credit history. Only people with an excellent credit history and good income can qualify. Lenders will look at your credit report and will want to see a history of on-time payments, especially with your existing student loans. In addition, most lenders will perform an analysis of your cash flow and will want to verify your income. Most lenders are targeting "HENRYs," which are "high earners, not rich yet." If that describes you, refinancing your debt could make a lot of sense. But if you are struggling to make your payments or have a bad credit history, you would likely be rejected.
3. Do you want a fixed or variable rate?
Variable interest rates are much lower than fixed interest rates. For example, earnest, a Silicon Valley startup, charges variable rates between 2.13% - 5.41% and fixed rates between 3.50% - 7.05%. If you can pay off your debt quickly, you might want to take advantage of the low variable rates. However, if you think it will take 15 or more years to eliminate your debt, you will probably want to lock in a fixed rate. This is ultimately a risk-reward calculation that only you can make.
4. Have you shopped around for the lowest interest rate?
There are a lot of companies offering to refinance your student loans, and you should apply to as many as possible. Use a website like MagnifyMoney to compare the many companies that offer the product. And make sure you complete all of your applications in a month. FICO treats all student loan inquiries within a 45 day period as a single inquiry. So you should feel comfortable shopping for the best rate without worrying about the impact on your score. Just remember that if you are planning to apply for a mortgage in the next six months, you might want to hold off on shopping around for a refinance option, because even a single inquiry can have a big impact on your mortgage rate.
For many people, student loan debt is a big burden. Like any other form of debt, the interest rate will have a big impact on how long it will take to pay off the debt. The lower the interest rate, the quicker you can get out of debt. Just make sure you take advantage of the lower rate by reducing the term of your loan. Your goal should be to eliminate the debt as quickly as possible.
A high credit score is your ticket to discounts in borrowing and insurance. It can also be a key to landing a job or a rental home.
Why FICO?
FICO (for Fair Isaac Corporation, the company that invented credit scoring) scores are used in an estimated 90 percent of credit decisions in the United States.
FICO is the score that lenders, bankers, landlords, merchants and other businesses check to gauge your creditworthiness.
Not long ago consumers had to pay for a peek at their official FICO scores. But that's history. Now you can get your score for free if you know where to look.
How to use your score
For free FICO scores you can thank the federal Consumer Financial Protection Bureau. The CFPB pushed the heads of major credit card companies to allow consumers no-cost, regular access to the official FICO score that lenders use, not educational scores likes the ones banks, credit card companies and others often offer consumers instead. The CFPB argued that consumers who can monitor their credit scores are able to improve their credit and avoid delinquency.
Monitoring your score adds to the control you have over your financial life. FICO scores range between 300 and 850; the higher the score, the better your creditworthiness.
Your credit score is meant to predict the risk of lending to you. It is generated when a company like FICO runs data from your creditors through a mathematical formula.
You can see that data, too, in the form of a credit report. It's smart to keep an eye on those reports, too, since they reveal what merchants and lenders are telling each other about you.
The government requires the three major credit reporting companies - TransUnion, Equifax and Experian, which collect data and produce these reports - to give consumers one free every 12 months. You can get these free credit reports from AnnualCreditReport.com. Monitoring your credit reports lets you keep an eye out for identity theft and reporting errors from creditors.
Still, credit reports don't include your credit score. You have to get that separately.
It is instructive and kind of fun to watch your FICO score go up or down as you borrow, repay and apply for credit. Also, an unexpected change might alert you to fraud or an error reported by a credit bureau.
How good is the score you see?
Some fluctuation in a score is to be expected. It may move around in response to how you manage your credit, pay your bills and take on new debt.
Even the scores under the FICO brand can vary. FICO has updated its scoring model several times. But this does not mean that lenders use the latest versions. So even within the FICO scoring system, the score you get free could be different from the one a lender eventually pulls when you apply for credit. Still, FICO - new or old - is the go-to scoring system for most lenders.
Getting a free FICO score still takes a little finesse as it's available from a limited (but growing) number of sources. If you ask FICO for your score, be prepared for a $19.95 charge.
Here are six ways to access your official FICO score free of charge (Looking at your credit score does not affect your credit, by the way):
1. Credit cards
Banks can offer their credit-card holders a look at their FICO scores through FICO's Score Open Access.
Who's eligible: Holders of these cards can access their FICO scores, typically by checking the account online:
Discover: TransUnion FICO scores are on monthly bills
USAA: Enroll in free CreditCheck1
Merrick Bank: GoScore, a free benefit, includes emailed FICO scores
CapitalOne: CreditWise, a free benefit, lets users track FICO scores
First Bankcard
Bank of America
Barclaycard US
Citi
Chase Slate card
American Express
2. Auto loans
Who's eligible: Car buyers financing through these companies can see their scores:
Ally Financial
Hyundai Capital America (including Hyundai Motor Finance and Kia Motors Finance)
3. Credit unions
Who's eligible: Some credit unions give cardholders free access to FICO scores. Among them are:
Pentagon Federal Credit Union
North Carolina State Employees' Credit Union
Digital Federal Credit Union (DUC)
Pennsylvania State Employees Credit Union
5. Checking accounts
See if your bank offers free FICO scores with checking accounts. Some 100 million U.S. accounts come with free FICO scores, MarketWatch reports.
6. Credit counselors
Who's eligible: You can see and talk over your FICO score by making an appointment with a credit counselor at one of the nonprofit credit-counseling agencies that purchase credit scores from Experian, a credit-reporting agency. These agencies buy credit reports and FICO scores to help in offering credit and financial counseling.
Through FICO's Score Open Access for Credit & Financial Counseling program, participating agencies can share FICO scores with members. The aim is to "aid consumers who have credit management problems by providing FICO scores along with credit education material that helps consumers understand credit scoring and learn about responsible financial health management," FICO says.
When calling one of these credit counseling agencies for an appointment, be sure to ask if you will be able to see your FICO score. If the answer is no, keep shopping. Participating national organizations include:
National Foundation for Credit Counseling: Call 800-388-2227 or use the online agency locator to make an appointment or learn more.
Your visit is not reported to a credit bureau.
Visiting a credit counselor does not affect your credit score.
Nonprofit credit-counseling agencies offer help for free or at very low cost.
Alternative credit scores
Plenty of other sites offer free credit scores, just not FICO scores. If you can't get access through any of the cards or accounts above, consider an alternative score. You'll at least get a reading on your credit that you can monitor and compare over time.
Be aware that numerous websites advertise free FICO scores, but there's a potentially expensive catch: These are gateways to fee-based services. You must sign up with a credit card to get a free peek at your FICO score.
Frugal people who pay off their debt and achieve financial independence don't succeed by accident. They establish habits that allow them to consistently reach their goals over the long haul.
During the past few years as a personal finance blogger and author, I have noticed that the most successful frugal people tend to follow a common set of habits. These same habits remind me of the traits that Stephen Covey detailed in his popular 1989 book, The 7 Habits of Highly Effective People. For this article, I kept the original seven habits, but updated them for achieving financial independence today.
What are the seven habits that allow some people to excel at being frugal?
1. Be Proactive
Frugal people are proactive about their money, taking action to monitor and control spending and maximize income. They find ways to spend less and reduce expenses - even if it requires effort and creative thinking. They direct most of the money they save from reduced expenses into savings and investments for long term goals.
Although the first thing that comes to mind with frugality is saving money, many frugal people maximize income through side hustles or by generating passive income in addition to controlling their spending. An extra dollar saved or an extra dollar earned both contribute favorably to the bottom line.
Frugal people know how much money they have coming in and how much is going out, often with great precision. This is accomplished by creating and following a budget and proactively monitoring spending. They focus on what they can control within their budget to achieve financial success.
2. Begin With the End in Mind
Why do frugal people work so hard to control spending and keep track of their money? Are they simply not interested in buying things? On the contrary, most frugal people are striving to reach financial independence so that they can travel or launch a second career or to have plenty of money to buy the things that matter to them. Frugal people are willing to worry about money now so they don't need to worry about it later.
Surprisingly, many frugal people care more about their time than their money. Saving money buys financial independence, which buys time to do whatever you want. Frugal people want freedom to use their time as they wish and not be locked into working at a job until they reach old age.
Frugal people begin with the end in mind. The end they want to achieve is financial independence. With that end in mind, they make a plan to reach the goal and follow it every day. The sacrifices along the way are worth reaching the goal.
3. Put First Things First
What is the first thing you pay every month? Do you pay your mortgage first? Perhaps you pay your utility bill or car payment first. Frugal people pay something else first - themselves.
Paying yourself first means that you invest in your retirement fund or other savings accounts first, then you pay other bills using the money that is left. Most people pay their bills first, and then save or invest if there is any money left.
Frugal people realize that having money to invest is the most important priority, and they take care of that priority first. If there is not enough money left to pay the bills, then frugal people find ways to make their bills smaller so they can fully fund their investment goals.
4. Think Win-Win
Stephen Covey talked about win-win situations in terms of structuring deals where both parties involved get something beneficial. His point was that someone doesn't have to lose in order to make a great deal - in fact, the best deals happen in win-win situations.
Looking at this habit in the context of frugal success, just because you spend less money doesn't mean you have to benefit less or receive less value. In fact, frugal people find ways to spend less money and achieve greater benefit at the same time.
Frugal people find plenty of win-win situations for their money. For example, why do many of them prepare most of their meals at home instead of dining out? Of course, making food at home is cheaper than paying the bill at a restaurant, but eating at home is healthier as well. The benefit of making your own food goes beyond just saving money.
Buying a smaller house is less expensive than a larger house and it costs less for maintenance, insurance, heating/cooling, and lighting. In addition to the lower initial price and reduced ongoing costs, a smaller house also takes less time to clean and maintain, freeing up time for other activities.
Most win-win scenarios involve not just price, but value. Frugal people consider the overall value that a purchase would provide throughout its life, including hidden expenses and potential benefits. Frugal people are willing to spend money to get a good value, and they shop around and use coupons to get the best deal they can on the right item.
5. Seek First to Understand, Then to Be Understood
Most frugal people don't start out being frugal. They start out as "normal" spenders and rack up credit card bills and student loans like most people. Over time, they come to understand that spending and debt are not the path to contentment. They realize that sometimes less really is more, at least when it comes to debt and spending.
Frugal people reach an understanding of how much stuff they need to be happy, which is often far less stuff than most people think they need to be happy. Frugal people make spending decisions in terms of needs and wants, while most people think primarily in terms of having more and better stuff than their friends and neighbors.
As far as being understood, most frugal people don't seem to care much what "normal" people think of them. Frugal people understand that spending money to keep up with the Joneses, or anyone else, doesn't make much sense and is certainly not the path to long term contentment.
6. Synergize
Synergy is the concept that sometimes, one plus one adds up to more than just two. How is this possible?
If you decide that you can live without cable TV, you can save about $100 per month. Not only do you save $100 this month and every month thereafter, but you have significantly reduced the amount of money you need to retire by forgoing a recurring expense during your retirement years. You could retire years earlier due to the synergy of eliminating a recurring expense.
Another example of synergy is reducing clutter. If you minimize the amount of clutter you collect over time, you will require less space to store your stuff. You will be able to live in a smaller, less expensive house. With less clutter, you will be better able to find and use the items that you do have. Savings of time and money will accumulate over the years greatly exceeding the small amount of effort it takes to nip clutter in the bud. This is another example where a seemingly insignificant action can allow you to achieve your goals years earlier due to synergy. (See also: 8 Ways Clutter Keeps You Poor)
7. Sharpen Your Saw
As you are reading this, you are sharpening your saw! If you have ever tried to cut something with a dull saw, you know that it takes a lot of work and a long time to get the job done. Keeping your saw sharp is time well spent.
Sharpening your saw means to continue learning and finding new inspiration to get the most from your money. Frugal people tend to seek out ideas on saving money from blogs, podcasts, books, and by talking with other frugal friends. Reading about the financial success and failures of others can provide inspiration to keep your goals firmly in mind and on track.
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:
$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
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:
A lender's origination fee
A title search fee and title insurance
Taxes
A settlement professional's fees
The cost of pulling your credit report
An appraisal fee
State or county tax and/or transfer fees
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.
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.
When the stock market crashed a few years ago, too many people freaked out and sold their investments.
You know what? Those people took a bad situation and made it even worse. Many sold their investments right when the market was bottoming out, and then they missed the rebound.
The people who are going to retire rich are those who snatched up stocks at bargain-basement prices in 2009 and then saw their value climb by double digits in the following years. Same thing goes with the housing market. When the bubble burst, the smart people were the ones who were buying houses, not selling.
It's easy to follow the herd, but if you want to be rich, you need to keep a cool head and make rational money decisions even in the midst of a crisis.
Rule 9: Work longer
Or at least wait to file for Social Security. While you can file for Social Security benefits as early as age 62, you'll get a lot more money if you wait until you're 70.
Once you hit your full retirement age, you can get an 8 percent bump in your benefits for every year you wait to start receiving payments. However, you'll want to file by age 70 because there is no benefit to waiting longer than that.
You may be worried you'll have one foot in the grave at age 70, but don't fret. According to Social Security actuarial data, at age 70, you should still have an average of 14 to 16 years left to suck all the marrow out of life.
Rule 10: Maximize your income potential
Finally, if you want to retire rich, you need to maximize your earnings. That means no more settling for a dead-end job that pays pennies.
Look for ways to increase your income, which can, in turn, increase the amount of money you are saving for retirement. Consider these options:
Does your current field offer some form of credentialing that could increase your opportunities for a raise or a transfer to a higher-paying position?
Is there someone in your workplace who could serve as a mentor and help advance your career?
Did you start a college program and never finish it? Will those credits transfer?
Could you use an online degree program or vocational classes through a community college to earn a degree or upgrade your skills?
Regardless of which option you choose, don't fall into the student loan trap. If you do decide to go back to school, look for ways to make college affordable and try to pay as you go rather than going into debt.
Retiring rich may sound like something reserved for the one-percenters, but by making these smart money moves, you too can have plenty of cash to carry you through your golden years.
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!
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.
Did you know that there are ways to make your haircut last longer and trim your salon costs too?
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!
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.
Keeping your financial house in order isn't a Herculean task, but it does require some time and effort. If your schedule is so jam-packed that you can't spare a few minutes a week to review your budget, check your credit health or track your progress on saving or paying down debt, you could be letting money slip through your fingers without even realizing it. When you're crunched for time, here are three things you can do to keep your finances on the right track.
1. Automate Your Finances
If paying bills is taking up a good chunk of your day, consider putting your payments on autopilot. When you set up automatic payments for credit cards or other debts, you won't have to worry about paying late and damaging your credit score.
Most banks offer bill payment services at no charge, so it might be a good idea for you to take advantage of these features. Remember, your bills aren't the only thing you can automate. If you're trying to build your emergency fund or pad your IRA and your 401(k), setting up recurring transfers to those accounts is a stress-free way to work towards meeting your savings goals.
Just make sure you're evaluating your accounts regularly to see how much progress you're making and how fees are detracting from your bottom line. If you're auto-saving in an IRA, for example, you'll want to check in periodically to see how your investments are performing and swap out ones that are costing you more than they're earning.
When you've got two checking accounts, a saving account, a retirement account, two or three credit cards and a mortgage, staying on top of them all can be overwhelming. Fortunately, there are a number of apps that make it easy to manage your finances.
With Personal Capital, for instance, you can link your checking account, savings account, IRA, 401(k) and investment accounts. The app analyzes your accounts to see what you're paying in fees and recommends ways to improve your investment performance.
Mint is a budgeting app that links your bank accounts, credit cards, student loans, mortgage and investment accounts. You can set up a budget, create goals for debt repayment or savings and get a quick snapshot of your net worth straight from your phone.
3. Consolidate and Increase Your Savings
Using apps like Mint or Personal Capital to manage your accounts can relieve some of your financial stress. But you can take it a step further by reducing the number of accounts you have. If you've got balances on five or six credit cards, for example, transferring them to a single card with a zero percent rate means you'll only have one payment to keep up with and you'll pay less in interest (at least temporarily).
The same goes for those of you with multiple student loans from different loan servicers. Consolidating all of your loans can make them easier to manage and it might shave a few bucks off the final interest total.
When you've got a hectic lifestyle, neglecting your finances is all too easy to do. But that can come back to bite you in the wallet. While you probably can't afford to go completely hands-off, looking for ways to minimize the time you spend managing your money could be a smart move.
If you've made the decision to eat healthy, congratulations! Changing your diet isn't easy. That's why we've rounded up these tips about choosing healthy, low-cost options to get you started.
Did you know that there are ways to make your haircut last longer and trim your salon costs too?
