How Much Does a Cosigner Help with Getting Auto Loans or Better Loan Terms?

A woman in a bright yellow dress drives a silver car.

Imagine you’re shopping for a new car and finally find a reasonably priced set of wheels that you like. But when the dealer pulls your credit, that seemingly affordable monthly payment is no longer available to you. Instead, you’re offered a subprime car loan at 10% or even 20% interest because your credit isn’t strong enough to get a better rate.

How much does a cosigner help on auto loans when you’re facing this type of situation? Get more information below to help you decide whether seeking a cosigner is the right option for you.

How Does a Cosigner on a Loan Work?

A cosigner is basically someone who backs the loan. They sign agreeing that if you don’t make the payments as promised, they will step in to pay them.

If you don’t have much of a credit history or your credit is bad or poor, lenders are typically hesitant to give you an auto loan. They perceive you as risky. Will you pay as agreed? There’s not enough data or credit history for them to make that call.

However, a cosigner with a long history of good credit is different. The lender is more likely to believe that this person willpay as agreed. So, if you can get a cosigner to back you, you might have a better chance of getting a loan or getting better terms.

How Much Does a Cosigner Help With an Auto Loan?

How much can you save? Imagine you finance $37,851, the average price for a new light vehicle in the United States as of February 2020.

The average interest rate as of the end of 2019 for new car loans was 5.76%. If you’re able to get that interest rate and a loan term of 72 months—that’s 6 years—you would pay a total of $44,742. That’s $6,891 in interest and a monthly payment of around $621.

If you financed at 10% without a cosigner for the same terms, you’d pay a total of $50,488 for the vehicle. That’s $12,637 in interest and around $701 in monthly payments.

This is obviously just an example, but you can see that a cosigner can save you a lot. In this case, it’s $80 a month and more than $5,700 total.

Cosigner Versus Co-Applicant

It’s important to note that having a cosigner for a car loan is not the same thing as having a co-applicant. A co-applicant buys the vehicle with you. Their credit history and income are used alongside yours to determine if you, together, can afford the vehicle. The co-applicant also has an equal share of ownership in the vehicle purchased with the loan.

A cosigner, on the other hand, doesn’t have an ownership share in the vehicle. Their income may also not be a factor in the approval. Typically, they’re along only to provide a boost in the overall credit outlook.

What Are Some Downsides of Having a Cosigner?

Most of the risks or disadvantages are held by the cosigner. If you don’t pay the loan, they could become responsible for it. They could also suffer from a lower credit score if you’re late with car payments because it might get reported to their credit too.

As a borrower, you might experience a few disadvantages in using a cosigner. First, you have to get someone to agree to this, and you typically want it to be someone with good credit. Trusted family members are the most common cosigners, but that could mean that they might want to have a say in what type of vehicle you get.

And if something happens and you can’t pay the vehicle loan for any reason, you run a personal risk. You could damage your relationship with the cosigner if they do end up having to pay off the loan or face damage to their credit.

So, Should You Get a Cosigner for an Auto Loan?

The decision is personal. Before you do anything, check your credit and understand where you are financially. That helps you know what your chances for getting approved for a loan are on your own and how much loan you might be able to afford.

Then, check out some potential auto loans and consider whether you should apply for them on your own. If you know your credit is too poor or you try to apply for a loan and don’t get favorable terms, talk to a potential cosigner. Be honest about your situation and have a plan to pay the loan on time each month so they feel more confident supporting you as you make this purchase.

Apply for an auto loan today!

The post How Much Does a Cosigner Help with Getting Auto Loans or Better Loan Terms? appeared first on Credit.com.

Source: credit.com

How to Decide If Pet Insurance Is Worth the Cost

Woman deciding if pet insurance is worth the cost

Last fall, our greyhound Tivo refused his breakfast on a Friday morning. He didn’t eat or drink water all day, and we were worried. That night, we took him to the 24-hour emergency veterinarian and Tivo was diagnosed with a bacterial stomach bug and dehydration. We went home with antibiotics, a saline IV, and a $200 vet bill.

Thankfully, we could afford this bill for unexpected emergency care for Tivo. But if he were diagnosed with a chronic condition or needed a very costly intervention, we might find ourselves facing some heartbreaking financial decisions.

Pet insurance is often touted as a solution to these worries. With pet insurance covering some costs of veterinary care, you’re never forced to choose between your beloved pet and your finances. However, does this kind of coverage make sense for most pet-owners?

Here’s what you need to know about pet insurance so you can keep your fur babies bright-eyed and bushy-tailed for years to come.

Premium costs

As with human health insurance, pet insurance charges you a monthly premium for your pet’s coverage. According to Value Penguin, the average monthly cost for canine pet insurance is $47.20, and the average for feline insurance is $29.54 for accident and illness coverage.

Of course, this doesn’t tell the whole story of what to expect from premium costs. Many pet insurers increase premiums with the age of your pet. Which means the $47 per month you pay to keep your 4-year-old pup healthy could rise with his/her age, making the premiums harder to keep up with just as they’re more likely to need age-related medical intervention. In addition, different breeds can have different premium prices, since there are some hereditary conditions that various breeds may be more prone to.

However, even with these potential issues, there are some methods to keep premiums manageable. For instance, some tried and true insurance reduction strategies work just as well for your pet’s health insurance as they do for your own. These include increasing your deductible, reducing the percentage that the insurance reimburses, or limiting the annual payout rather than choosing unlimited coverage.

These strategies can keep your premiums affordable while still helping with big veterinary bills. But you need to be prepared to pay anything above and beyond the coverage limits you set up. (See also: 8 Ways to Lower Your Vet Bills) 

Coverage

It’s also important to note that pet insurance does not necessarily cover every kind of health cost for your pets. To start, unlike (some) human health insurance, most pet insurance will not cover preventive care and annual exams. So you will need to plan for these costs on top of your premiums.

Pet insurance policies generally come in two varieties: accident and illness policies, and accident-only policies. In general, accident-only policies do not raise their premiums as your pet ages, making this kind of insurance more affordable long-term. However, accident-only policies tend to be cheaper because your pet is less likely to get injured than fall ill. If you decide to invest in pet insurance, getting both accident and illness protection will likely offer you more protection.

That said, each insurer gets to decide which illnesses, conditions, and services it covers, and not all ailments are covered. Many insurers also do not cover the diagnostic exam for a particular illness, even if the treatments are covered. Make sure you pay attention to the details of what your potential insurer will cover before signing up for coverage.

As with many types of human health insurance, most pet insurance policies exclude preexisting conditions. Unfortunately, some insurers consider health problems to be "preexisting" if they crop up within a year of the purchase of your policy. Insuring your pet when they’re young is the best way to avert the preexisting condition coverage gap.

Finally, pet insurance coverage is usually handled via reimbursement. That means you’ll be on the hook to pay the vet bill at the time of service, and you’ll submit your receipts to your insurer to receive reimbursement. (See also: 7 Things You Need to Know About Pet Insurance)

Should you buy pet insurance?

With all the caveats, coverage gaps, and reimbursement requirements, pet insurance is not necessarily a slam dunk for everyone. In fact, many consumer advocates recommend that pet owners put aside an amount equal to the annual premium into a savings account each year. This will give you the same peace of mind that you can cover any potential health care needs for your pet while also allowing you to keep the money if you never need to use it.

However, if you struggle with financial discipline, this strategy will leave you in a difficult situation if your furry friend needs an expensive procedure. Pet insurance can provide you with the protection your pet needs even if you struggle with money. 

Show your love with an emergency fund

Whether or not you decide to purchase pet insurance, remember that you’ll have to pay upfront for any veterinary procedures. With insurance, you will get reimbursed for covered care, but you will still need to have access to funds to pay for Mittens’ kidney stone removal or Rex’s arthritis care at the time of care.

This means that one of the best ways you can protect your furry friends and avoid heartbreaking financial choices is to have an emergency fund. With or without pet insurance, set some money aside for the unexpected so you can enjoy your four-legged family members for years to come. (See also: 7 Easy Ways to Build an Emergency Fund From $0)

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With pet insurance covering some costs of veterinary care, you're never forced to choose between your beloved pet and your finances. Here's what you need to know about pet insurance. | #pets #petcare #insurance


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5 Best Hedges in the Face of Inflation

Inflation measures how much an economy rises over time, comparing the average price of a basket of goods from one point in time to another. Understanding inflation is an important element of investing.

The Bureau of Labor Statistics CPI Inflation Calculator shows that $5.00 in September 2000 has the purchasing power equal to $7.49 in September 2020. To continue to afford necessities, your income must pace or rise above the rate of inflation. If your income didn’t rise along with inflation, you couldn’t afford that same pizza in September 2020 — even if your income never changed.

Inflation represents a real risk for investors as it could erode the principal value of your investment.

For investors, inflation represents a real problem. If your investment isn’t growing faster than inflation you could technically end up losing money instead of growing your wealth. That’s why many investors look for stable and secure places to invest their wealth. Ideally, in investment vehicles that guarantee a return that’ll outpace inflation. 

These investments are commonly known as “inflation hedges”. 

5 Top Inflations Hedges to Know

Depending on your risk tolerance, you probably wouldn’t want to keep all of your wealth in inflation hedges. Although they might be secure, they also tend to earn minimal returns. You’ll unlikely get rich from these assets, but it’s also unlikely you’ll lose money. 

Many investors turn to these secure investments when they notice an inflationary environment is gaining momentum. Here’s what you should know about the most common inflation hedges.

1. Gold

Some say gold is over-hyped, because not only does it not pay interest or dividends, but it also does poorly when the economy is doing well. Central banks, who own most of the world’s gold, can also deflate its price by selling some of its stockpile. Gold’s popularity might be partially linked to the “gold standard”, which is the way countries used to value its currency. The U.S. hasn’t used the gold standard since 1933.

Still, gold’s stability in a crisis could be good for investors who need to diversify their assets or for someone who’s very risk-averse. 

If you want to buy physical gold, you can get gold bars or coins — but these can be risky to store and cumbersome to sell. It can also be hard to determine their value if they have a commemorative or artistic design or are gold-plated. Another option is to buy gold stocks or mutual funds. 

Is gold right for you? You’ll need to determine how much risk you’re willing to tolerate with your investments since gold offers a low risk but also a low reward. 

Pros

  • Physical asset: Gold is a physical asset in limited supply so it tends to hold its value. 
  • Low correlation: Creating a diversified portfolio means investing in asset classes that don’t move together. Gold has a relatively low correlation to many popular asset classes, helping you potentially hedge your risk.
  • Performs well in recessions: Since many investors see gold as a hedge against uncertainty, it is often in high demand during a recession.

Cons

  • No dividends: Gold doesn’t pay any dividends; the only way to make money on gold is to sell it. 
  • Speculative: Gold creates no value on its own. It’s not a business that builds products or employs workers, thereby growing the economy. Its price is merely driven by supply and demand.
  • Not good during low inflation: Since gold doesn’t have a huge upside, during periods of low inflation investors generally prefer taking larger risks and will thereby sell gold, driving down its price.

2. Real Estate Investment Trusts (REITs)

Buying real estate can be messy — it takes a long time, there are many extra fees, and at the end of the process, you have a property you need to manage. Buying REITs, however, is simple.

REITs provide a hedge for investors who need to diversify their portfolio and want to do so by getting into real estate. They’re listed on major stock exchanges and you can buy shares in them like you would any other stock.

If you’re considering a REIT as an inflation hedge you’ll want to start your investment process by researching which REITs you’re interested in. There are REITs in many industries such as health care, mortgage or retail. 

Choose an industry that you feel most comfortable with, then assess the specific REITs in that industry. Look at their balance sheets and review how much debt they have. Since REITs must give 90% of their income to shareholders they often use debt to finance their growth. A REIT that carries a lot of debt is a red flag.

Pros

  • No corporate tax: No matter how profitable they become, REITs pay zero corporate tax.
  • High dividends: REITs must disperse at least 90% of their taxable income to shareholders, most pay out 100%.
  • Diversified class: REITs give you a way to invest in real estate and diversify your assets if you’re primarily invested in equities.

Cons

  • Sensitive to interest rate: REITs can react strongly to interest rate increases.
  • Large tax consequences: The government treats REITs as ordinary income, so you won’t receive the reduced tax rate that the government uses to assess other dividends.
  • Based on property values: The value of your shares in a REIT will fall if property values decline.

3. Aggregate Bond Index

A bond is an investment security — basically an agreement that an investor will lend money for a specified time period. You earn a return when the entity to whom you loaned money pays you back, with interest. A bond index fund invests in a portfolio of bonds that hope to perform similarly to an identified index. Bonds are typically considered to be safe investments, but the bond market can be complicated.

If you’re just getting started with investing, or if you don’t have time to research the bond market, an aggregate bond index can be helpful because it has diversification built into its premise. 

Of course, with an aggregate bond index you run the risk that the value of your investment will decrease as interest rates increase. This is a common risk if you’re investing in bonds — as the interest rate rises, older issued bonds can’t compete with new bonds that earn a higher return for their investors. 

Be sure to weigh the credit risk to see how likely it is that the bond index will be downgraded. You can determine this by reviewing its credit rating. 

Pros

  • Diversification: You can invest in several bond types with varying durations, all within the same fund.
  • Good for passive investment: Bond index funds require less active management to maintain, simplifying the process of investing in bonds.
  • Consistency: Bond indexes pay a return that’s consistent with the market. You’re not going to win big, but you probably won’t lose big either.

Cons

  • Sensitive to interest rate fluctuations: Bond index funds invested in government securities (a common investment) are particularly sensitive to changes to the federal interest rate.
  • Low reward: Bond index funds are typically stable investments, but will likely generate smaller returns over time than a riskier investment.

4. 60/40 Portfolio

Financial advisors used to highly recommend a 60/40 stock-bond mix to create a diversified investment portfolio that hedged against inflation. However, in recent years that advice has come under scrutiny and many leading financial experts no longer recommend this approach. 

Instead, investors recommend even more diversification and what’s called an “environmentally balanced” portfolio which offers more consistency and does better in down markets. If you’re considering a 60/40 mix, do your research to compare how this performs against an environmentally balanced approach over time before making your final decision.

Pros

  • Simple rule of thumb: Learning how to diversify your portfolio can be hard, the 60/40 method simplifies the process.
  • Low risk: The bond portion of the diversified portfolio serves to mitigate the risk and hedge against inflation.
  • Low cost: You likely don’t have to pay an advisor to help you build a 60/40 portfolio, which can eliminate some of the cost associated with investing.

Cons

  • Not enough diversification: Financial managers are now suggesting even greater diversification with additional asset classes, beyond stocks and bonds.
  • Not a high enough return: New monetary policies and the growth of digital technology are just a few of the reasons why the 60/40 mix doesn’t perform in current times the same way it did during the peak of its popularity in the 1980s and 1990s.

5. Treasury inflation-protected securities (TIPS)

Since TIPS are indexed for inflation they’re one of the most reliable ways to guard yourself against high inflation. Also, every six months they pay interest, which could provide you with a small return. 

You can buy TIPS from the Treasury Direct system in maturities of five, 10 or 30 years. Keep in mind that there’s always the risk of deflation when it comes to TIPS. You’re always guaranteed a minimum of your original principal at maturity, but inflation could impact your interest earnings.

Pros

  • Low risk: Treasury bonds are backed by the federal government. 
  • Indexed for inflation: TIPS will automatically increase its principle to compensate for inflation. You’ll never receive less than your principal at maturity.
  • Interest payments keep pace with inflation: The interest rate is determined based on the inflation-adjusted principal. 

Cons

  • Low rate of return: The interest rate is typically very low, other secure investments that don’t adjust for inflation could be higher. 
  • Most desirable in times of high inflation: Since the rate of return for TIPS is so low, the only way to get a lot of value from this investment is to hold it during a time when inflation increases and you need protection. If inflation doesn’t increase, there could be a significant opportunity cost.

The Bottom Line 

Inflation represents a real risk for investors as it could erode the principal value of your investment. Make sure your investments are keeping pace with inflation, at a minimum. 

Inflation hedges can protect some of your assets from inflation. Although you don’t always have to put your money in inflation hedges, they can be helpful if you notice the market is heading into an inflationary period. 

The post 5 Best Hedges in the Face of Inflation appeared first on Good Financial Cents®.

Source: goodfinancialcents.com

401k Early Withdrawal: What to Know Before You Cash Out

When it comes to making a 401k early withdrawal, there are a number of reasons why it might be tempting. With millions still unemployed due to the pandemic, unexpected expenses are taking a particularly hard toll. One reason why early withdrawal isn’t uncommon in the U.S. might be because it’s easy to assume you’ll have time to rebuild your 401k nest egg.

However, is the benefit of withdrawing your retirement savings early truly worth the cost? For many people, their 401k is their primary method of investing in their financial future. Before making a decision about early withdrawal, it’s important to consider the penalties and fees that could impact you. Read on to learn exactly what happens when you decide to dip into your 401k so you won’t be surprised by the repercussions.

How Much Are You Penalized for a 401k Early Withdrawal?

On the surface, withdrawing funds from your 401k might not seem like a bad option under extenuating circumstances, but you could face penalties. Young adults are especially prone to early withdrawals because they figure they have plenty of time to replace lost funds.

 

401k early withdrawal penalties

 

If you’re not experiencing a significant hardship, 401k early withdrawal probably isn’t the right choice for you. Ultimately, you could lose a substantial portion of your retirement savings if you choose to withdraw your 401k early to use the money to make other risky financial moves. Below, let’s delve further into the penalties that usually apply when you withdraw early.

1) Your Taxes Are Withheld

When you prematurely withdraw from your retirement account, your first consideration should be that you’ll have to pay normal income taxes on that money first. This means you’re losing at least roughly 30 percent of your savings to federal and state taxes before additional penalties.

Even if you only have $10,000 you want to withdraw, consider that you’re automatically giving $3,000 of your cash to the government. In the best case scenario, you might receive some money back in the form of a tax refund if your withholding exceeds your actual tax liability.

2) You Are Penalized by the IRS

If you withdraw money from your 401k before you’re 59 ½ , the IRS penalizes you with an extra 10 percent on those funds when you file your tax return. If we use the example above, an additional $1,000 would be taken by the government from your $10,000 — leaving you with just $6,000. If you’re 55 or older, you could try to get this penalty lifted by the IRS through the Rule of 55, which is designed for people retiring early.

Also, there are exceptions under the CARES Act, which is designed to help people affected by the pandemic. There are provisions under the act that state individuals under the age of 59 ½ can take up to $100,000 in Coronavirus-related early distributions from their retirement plans without facing the 10 percent early withdrawal penalty under certain conditions.

3) You Lose Thousands in Potential Growth

Even if you’re not deterred by tax penalties, think twice before you sabotage your long-term retirement savings goals. When you withdraw money early, you’ll miss out on potential future savings growth because you won’t gain the perks of compound interest. Compounding is the snowball effect resulting from your savings generating more earnings — not only on your principal investment but also on your accrued interest.

Also, if you make a 401k early withdrawal while the market is down, you’re doing yourself a disservice because you’ll be leaving thousands on the table. It’s unlikely you’ll fully recover the lost years of compound interest you would have benefited from. You might need to get creative with a passive income stream to help support you later in life.

 

tips to minimize 401k withdrawal penalties

 

When Does a 401k Early Withdrawal Make Sense?

In certain cases, it actually might be strategic to move forward with 401k early withdrawal. For example, it could be smart to cash out some of your 401k to pay off a loan with a high-interest rate, like 18–20 percent. You might be better off using alternative methods to pay off debt such as acquiring a 401k loan rather than actually withdrawing the money.

Always weigh the cost of interest against tax penalties before making your decision. Some 401k plans do allow for penalty-free early withdrawals due to a layoff, major medical expenses, home-related costs, college tuition, and more. Regardless of your strategy to withdraw with the least penalties, your retirement savings are still taking a significant hit.

401k Early Withdrawal, Hardship, or Loan: What’s the Difference?

Knowing the differences between a 401k early withdrawal, a hardship withdrawal, and a 401k loan is crucial. Due to the many obstacles to make a 401k early withdrawal, you may find you want to keep it untouched. If you’re convinced you still need to use your 401k for financial assistance, consult with a trusted financial advisor to figure out the best option.

When Does This Apply?

Taxes and
Penalties

Early Withdrawal

Your funds are withdrawn to pay off large debts or finance large projects. Your 401k fund is typically subject to taxes and penalties.

Hardship Withdrawal

You’re only eligible for this type of withdrawal under circumstances such as a pandemic or natural disasters. Withdrawals can’t exceed the amount of the need and the funds are still subject to taxes and penalties.

401k Loan

The loan must be paid back to the borrower’s retirement account under the plan. The money isn’t taxed if the loan meets the rules and the repayment schedule is followed.

Additional Considerations

If you’ve left a job and don’t know what to do with your Roth IRA, a 401k transfer is a good option. Most likely, you will save money and have a wider range of investment options when you transfer your funds. 401k fees can be high, and rolling over your funds to a Roth IRA account could be wise in the long run. Also, be aware that the process is more complicated for indirect rollovers. 

In Summary:

  • If you’re one of the millions of Americans who rely on workplace retirement savings, early 401k withdrawal may jeopardize your future financial stability.
  • There are very few instances when cashing out a portion of your 401k is a smart move.
  • In most cases, any kind of early 401k withdrawal is detrimental to your retirement plans.
  • Stick to your budget and bulk up your emergency fund to stay one step ahead.

In short, 401k early withdrawals are usually counterproductive. Prevent compromising your hard-earned savings by using a free budgeting tool that will set you up for success. After all, being prepared and informed are two of the most important parts of maintaining financial health.

Source: SEC

The post 401k Early Withdrawal: What to Know Before You Cash Out appeared first on MintLife Blog.

Source: mint.intuit.com

What Are the Consequences of Not Having Life Insurance?

Before I started writing in the personal finance space, I spent nearly 8 years working alongside my husband in a funeral home. My husband Greg worked as a mortician, and I was the Director of Family Services. I learned so much about living and dying during my years in the mortuary business, but there’s one that stuck with me — the real-life consequences of not having life insurance. 

I clearly remember speaking with dumbfounded families who couldn’t believe their husband or father (or wife or mother) never had life insurance in place. Some didn’t have enough money to cover final expenses like the funeral bill, and others confided in me they had no idea how they would pay their bills.

This saddened me greatly since I know first-hand how inexpensive life insurance can be — especially if you’re young and healthy. After all, I’m a 40-year-old woman and I currently have two term policies worth $1 million dollars that set me back a grand total of $53 per month. 

Why People Don’t Buy Life Insurance

The main reason consumers don’t buy this important coverage is simple — they get busy and forget. Most of us know we need life insurance in place during our working years, and that’s especially true for those of us with kids. But it’s easy to let life get in the way, and for the purchase of life insurance to wind up on a list of other to-dos that we never get to. 

Not only that, but people don’t want to think about dying. I specifically remember a family I met in the funeral home who just lost a husband and father who wasn’t even 40-years-old. In tears, his wife explained that he had told her he was going to buy life insurance dozens of times, but that he hated even dealing with death. He had a $20,000 life insurance policy through work, and he knew he needed more, but he didn’t want to face his mortality in his free time. Unfortunately, his family paid dearly for that decision.

A final reason people don’t buy life insurance is cost. The thing is, term coverage is so cheap that almost anyone can afford it. People just think it’s expensive, so they shy away from taking the next steps. Life insurance is also just another bill to pay, and many can barely keep up with the bills they have.

That’s probably why so few people have enough coverage. Here are some statistics that should scare you:

  • Only around 60 percent of Americans had life insurance in 2018, according to LIMRA’s 2018 Insurance Barometer Study
  • Among those with life insurance, 1 in 5 people know they do not have enough
  • Consumers surveyed tend to overprice life insurance; millennials in particular believe that life insurance costs 5x the actual amount for a policy

Consequences of Not Having Life Insurance

Based on those statistics, not enough people have life insurance and those who do may not have enough coverage to last. But, what can this mean for your family? Here are the main downsides you’ll face when you don’t buy life insurance now, before it’s too late:

Your Income Disappears

Income replacement is one of the most compelling reasons to buy life insurance, and that’s especially true if you have kids. You don’t want your income to suddenly disappear, leaving your family in the lurch. However, this is exactly what happens when you die without life insurance. All of a sudden, your family is left trying to cover regular bills and living expenses without your income.

That’s why many experts suggest buying at least 10x your income in term life insurance coverage. This way, your family will have some cash they can use to replace your income while they mourn and get back on their feet.

Your Debts Don’t 

Your income may disappear when you die, but your debts certainly don’t. With that in mind, you should buy life insurance coverage that will cover major debts you have like your home mortgage, your family car loans, and any credit card debt you have.

If you don’t buy life insurance and you die before your time, your family will be left trying to cover all your debts without your help. It’s shameful to leave them in this position — especially when term life insurance coverage can easily be purchased for the price of a dinner out per month. 

Your Family Could Need a GoFundMe to Pay for Your Funeral

During my final years in the funeral industry, GoFundMe came about. I cannot tell you how many families came in to plan their services without any money only to find that, no, the funeral home wouldn’t let them make payments. After that, they’d set up a GoFundMe and solicit donations from family and friends to pay for a service. 

This always made me sad, mostly because families shouldn’t have to struggle or fundraise to pay for final expenses. I always thought that, if only their loved one had a small term life insurance policy, they would have been able to grieve without the added stress.

You Will Not Leave a Legacy

Finally, life insurance offers you the chance to leave a legacy behind. This could mean leaving enough money to pay for college tuition for your children, or having a broad enough policy so your spouse or partner never needs to work again, paving the way for them to stay home and nurture your kids. When you have enough life insurance so your family is taken care of, they will never forget it.

The opposite is also true. Many whose loved ones die without life insurance wind up angry and resentful at their partner for leaving them in such a position. I know because I saw it with my own eyes, and I felt their exasperation as they tried to figure out what to do.

Purchase Life Insurance the Painless Way

Here’s the thing: Buying life insurance doesn’t have to be complicated or stressful. I know because I have purchased $1 million in life insurance coverage, and because the second policy I bought online didn’t even require a medical exam. 

The purchase of life insurance can be painless and fast if you plan to buy basic term coverage, and it can also be significantly cheaper than you think it would be. These tips can help you get the coverage you need without any added hassle or stress.

1. Shop Around and Compare Quotes Online

First, you should absolutely shop around and compare life insurance quotes online, mostly because this is such an easy task. A range of online life insurance providers including Haven Life and Bestow make it easy to price out a policy in a matter of minutes online. 

To get a quote from Bestow or Haven Life, for example, all you need to supply is your birth date, your height, your weight, and your zip code. You don’t even need to enter your contact information or your email to get a free quote with either company.

You can also check out our guide to the Best Life Insurance Companies of 2021, which lets you read reviews of all the top providers and compare rates from multiple providers in one place. 

Whatever you do, don’t go with the first life insurance company you come across. Make sure you compare policies in terms of their monthly cost, the amount of coverage, and how long it lasts. Then, and only then, can you know you’re getting the best deal.

2. Play Around with Coverage Amounts

You also need to have a general idea of how much coverage you want and need. We mentioned that most experts suggest buying at least 10x your income in life insurance coverage, but it may be prudent to buy more term coverage than you need. After all, there’s no such thing as having too much life insurance in place, but you can definitely not have enough.

You’ll also want to decide how long you want your policy to last. Most term life insurance policies last for 10, 15, 20, or 30 years, letting you tailor your policy to your needs.

If you’re young and you have young kids, you may want a 30-year policy that will provide income replacement for your entire working life. If you’re in your 40’s and you plan to retire at 55, on the other hand, you may feel comfortable with a policy that lasts for 15 or 20 years. There is no “right” or “wrong” answer, but these are factors you should consider.

3. Look for Providers that Don’t Require a Medical Exam

According to LIMRA’s 2018 Insurance Barometer Study, half of all consumers say they are “more likely to purchase life insurance if priced without a physical examination.” And, can you blame them? Medical exams require a blood draw, and you have to set aside time in your schedule for them to boot. It’s easy to procrastinate and never buy a policy when a medical exam is required.

Fortunately, many life insurance providers don’t require a medical exam. Instead, they rely on algorithms to determine who is the greatest risk, and who can purchase coverage that begins right away. The second policy I purchased for myself came from Haven Life, and it did not require a medical exam. 

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I was in my late 30’s when I purchased this policy for $750,000, and I only pay around $27 per month. I applied for this policy online and had coverage the next day, and all without seeing a nurse or facing the dreaded needle prick.

The Bottom Line

Since you took the time to read this piece, you are probably on the verge of buying life insurance. You already know you need it, so don’t let another day go buy without coverage. You may not think something could happen to you in the next week or the next few months, but life doesn’t always go as planned. If you’re unlucky, your untimely death may be no exception.

Take the time to get a quote for life insurance, and you’ll never have to wonder what your family would do if you died. Life insurance lets you continue providing for them even after you’ve left this Earth, and there’s nothing more thoughtful and loving than that. 

The post What Are the Consequences of Not Having Life Insurance? appeared first on Good Financial Cents®.

Source: goodfinancialcents.com

8 Essential Rules for Surviving Financial Hardship

At some point, most people experience an unexpected crisis that shakes their financial world. It could be losing a job, receiving a huge medical bill, or having a car break down at the worst possible time. But surviving a pandemic is a situation you probably never thought you would face.

No matter what challenge you’re facing, you’re not the first.

Along with the public health toll, the COVID crisis has put millions of people out of work. For those struggling financially, here are eight critical rules to help you manage money wisely, stretch your resources, and bounce back from this unprecedented health and economic disaster.

8 rules for managing a financial hardship

Here are the details about each rule to manage a financial setback during the coronavirus crisis.

Rule #1: Accept your situation and use your resources to seek help

The key to successfully navigating a financial setback is to be realistic. If you’re in denial and don’t face money troubles head-on, you can quickly compound the damage.

Instead of focusing on the problem, getting angry, or letting stress overwhelm you, channel your emotions into finding solutions. Start talking about your challenges with people and professionals you trust, such as a money-savvy family member, financial advisor, legitimate credit counselor, or an attorney.

Instead of focusing on the problem, getting angry, or letting stress overwhelm you, channel your emotions into finding solutions.

The following financial associations have certified volunteers who can offer free help and advice:

  • National Association of Personal Financial Advisors
  • The Financial Planning Association
  • Association for Financial Counseling & Planning Education

Rule #2: Get a bird’s eye view of your finances

To fully understand your situation, create a list of what you own and owe; this is called a net worth statement. Compiling your data in one place helps you evaluate your financial resources, make decisions more efficiently, and have essential information at your fingertips if creditors or advisors ask for it.

First, list your assets: 

  • Cash
  • Investments
  • Retirement accounts
  • Real estate
  • Vehicles 

Then list your liabilities:

  • Mortgage
  • Car loans
  • Student loans
  • Credit card debt

Include the estimated values of your assets, the balances on your debts, and the interest rates you pay for each liability. You could jot down this information on paper, enter it in a computer spreadsheet, or create a report using money management software.

When you subtract your total liabilities from your total assets, you’ve calculated your net worth, which is an indicator of your financial health. It’s not uncommon to have a low or negative net worth when you’re in financial trouble.

RELATED: 10 Things Student Loan Borrowers Should Know About Coronavirus Relief  

Rule #3: Understand your cash flow

An essential part of bouncing back from a financial crisis is keeping an eye on your monthly income and expenses. Create a cash flow statement that lists your expected income and typical expenses, such as rent, utilities, food, prescriptions, transportation, and insurance. Again, you can create this report manually or by using budgeting features in a financial program.

Understanding where your money goes is the only way to prioritize expenses and cut all non-essential spending.

Understanding where your money goes is the only way to prioritize expenses and cut all non-essential spending. Making temporary sacrifices will help you recover as quickly as possible with less long-term damage to your finances.

Rule #4: Shop your essential expenses

As you review your spending, it’s an excellent time to comparison-shop your essential expenses. Evaluate your highest costs first, such as housing, vehicles, and insurance, since they offer the most significant potential savings.

For instance, you may be able to move into a less expensive home, purchase or lease a cheaper vehicle, and shop your auto insurance to find better deals. Ask your utility provider about assistance programs that offer energy-saving improvements at no charge.

Rule #5: Communicate with your creditors

If you haven’t been in contact with your creditors, start a dialog with each one immediately. You’ll come out ahead and get favorable treatment from creditors if you are proactive and honest about your financial troubles. Ask them for solutions, such as deferring payments for several months, setting up a reduced payment plan, or refinancing a loan to reduce your financial burden.

You’ll come out ahead and get favorable treatment from creditors if you are proactive and honest about your financial troubles.

Creditors are likely to ask about details regarding your financial situation, so have your net worth and cash flow statements on hand when you speak to them. Be ready to complete any required assistance applications quickly.

Rule #6: Prioritize your debts carefully

Based on guidance from creditors and finance professionals, prioritize your bills and debts carefully. Your goal should be to conserve as much cash as possible without skipping essential payments. Always pay for necessities first: food, prescription drugs, and auto insurance.

Debts related to child support and legal judgments have severe consequences and should be prioritized

Use your net worth statement to rank your liabilities from highest to lowest priority. For instance, debts related to child support and legal judgments have severe consequences and should be prioritized. Keeping up with an auto loan is a high priority if you rely on your vehicle for transportation. Federal student loans are in automatic forbearance through September 30, and the relief may get extended through 2020.

Your unsecured debts—medical bills, credit cards, and private student loans—are lower priorities. Never pay these debts ahead of rent, a mortgage, or utilities when you have a cash shortage.

Rule #7: Don’t let collectors force you to make bad decisions

Prioritizing your debts means some may be paid late or not at all. If a debt collector contacts you about a low-priority debt, such as a medical bill or credit card, don’t allow them to persuade you to pay it before your highest priority bills.

Collectors may try various aggressive tactics, such as threatening to sue you or ruin your credit. A lawsuit could take years, and a creditor is more likely to negotiate a settlement with you. Remember that a creditor or collector can’t send you to jail for civil debts.

If you are behind on bills, that fact is likely already reflected on your credit reports. By the time a collector contacts you, the damage is already done, and paying the bill won’t improve your credit in the short-term.

Rule #8: Take advantage of local and federal benefits

If your income and savings have entirely dried up, use these resources to learn more about local and federal benefits.

  • FeedingAmerica.org has a map showing local food banks
  • Supplemental Nutrition Assistance Program (SNAP) is the federal food program you may qualify for based on where you live, your income, and family size
  • MakingHomeAffordable.gov can help you find a housing counselor or see if your mortgage is backed by the federal government and qualifies for forbearance
  • Benefits.gov has a questionnaire that helps you discover the benefits you’re eligible for
  • Medicaid.gov is the federal health insurance program you may qualify for based on where you live, your income, and family size
  • Healthcare.gov is the federal health insurance marketplace where you may find plans with substantial subsidies if you earn too much to qualify for Medicaid

Financial challenges can cause you and your family to experience a flood of emotions, including anger, fear, and embarrassment. As difficult as it might be to put a financial crisis into perspective, it’s critical. No matter what challenge you’re facing, you’re not the first. There are millions of people who are dealing with COVID-related financial hardships.

Face the fact that your recovery could take a while. Do everything in your power to manage your budget wisely by getting organized, seeking ways to earn more, and spending less. Don’t be afraid to ask for help from creditors, seek free advice from professionals, and take advantage of every local and federal benefit possible.

Source: quickanddirtytips.com

Skipping Renters Insurance? Why That’s a Bigger Risk Than You’d Think

As a finance writer, I am surrounded by people who know a lot about managing money. But even those with the most money know-how can still miss financial must-haves.

For instance, in a recent conversation, a few of my coworkers stated they didn’t have renters insurance. This puts them among the 59% of renters who don’t have renters insurance, according to a poll from the Insurance Information Institute. On the other hand, 95% of homeowners carry homeowners insurance.

Granted, renting comes with fewer property responsibilities than owning. But don’t assume you can skip insurance for your home simply because you’re leasing it. Go without it and you’ll expose yourself to some major risks.

See why opting for a policy is protection you can’t live without, and learn how renters insurance can help smooth over the following five major renting crises.

1. Damaged Belongings

If you’re asking yourself whether you need insurance as a renter, a better question might be, Can you afford not to have it?

If the relatively small cost of a renters insurance premium—typically between $15 and $25 per month—seems too expensive, consider the alternative, suggests John Espenschied, agency principal of Insurance Brokers Group.

“Imagine replacing all your clothes, furniture, electronics, food, personal items, and priceless personal memorabilia,” he says. With renters insurance, the insurer will cover most or part of the value of damaged items. Without this coverage, you’re completely on the hook for all those costs.

Espenschied tells a story of one of his clients, a young woman to whom he recommended rental insurance multiple times. She declined the coverage.

Months later, there was an electrical surge in the building. “It took out everything she owned that was plugged in, including the TV, computer, and several other items,” Espenschied explains. These items were permanently damaged and unusable.

Had she opted for renters insurance, Espenschied could have helped her submit a claim and get the money to replace those belongings. Unfortunately, without the policy there was nothing he could do.

Don’t put yourself in the same position—get a renters insurance policy. On top of that, take steps to document all belongings and valuables so you can prove ownership in a renters insurance claim.

2. The Temporary Loss of a Habitable Home

Some disasters—such as fires, flooding, and electrical issues—can require extensive repairs and render your rental uninhabitable. Your landlord will usually handle these repairs, but if you lose the use of your home, your landlord might only be required to refund a prorated rent for the days you can’t live in your rental.

But if you’re out of a place to live, your daily rent rate might not cover any decent hotels or other temporary housing options.

But there’s good news: “Most renters insurance policies can help you in the event something happens to your apartment or house and you have to live elsewhere while it’s repaired,” says Jennifer Fitzgerald, CEO and cofounder of insurance comparison site PolicyGenius.

Typically, you can find a hotel nearby and your renters insurance will cover the costs of your stay until you can resume habitation of your home.

3. Stolen Belongings

Renters insurance typically includes coverage for theft and burglary too. If your home is broken into or burglarized, you can file a claim with your renters insurance provider to replace any stolen or damaged items.

“It even covers your belongings when they’re not physically in your home,” Fitzgerald says. “So if you take your laptop with you to the local coffee shop or on vacation and it’s stolen, your policy could help cover the costs of getting it repaired or replaced.” Renters insurance will usually be the policy that covers theft of personal items from your car too.

If your home is broken into or your purse is stolen from your car, promptly notifying authorities is an important step—filing a renters insurance loss claim will usually require a police report of the theft.

4. Personal Liability for Legal Damages

The most important protection your renters insurance provides, however, might be personal liability protection.

“If your dog bites someone or a food delivery person slips and falls, you’re covered,” says Stacey A. Giulianti, chief legal officer for Florida Peninsula Insurance. Instead of being held personally responsible for those damages, your insurer will step in and help. “The carrier will even hire and pay for an attorney to defend any resulting lawsuit.”

This can be especially important if you are found responsible for damage to adjacent properties as well, Espenschied says. For example, renters insurance will cover you if your toilet or tub “overflows and leaks into the neighbor’s unit below, causing damage to their personal property and cost to repair the building.” You may also be covered if a kitchen fire in your apartment causes damage to the unit above you.

The damage and loss can easily add up to tens of thousands of dollars. In cases like these, renters insurance can be the difference between smooth recovery and huge financial loss or even bankruptcy.

Make sure you understand your coverage. “Every policy is different, so talk to an agent and read your policy terms,” Giulianti warns.

5. An Eviction for Violating Your Lease Agreement

Many lease agreements include a clause in which the tenant agrees to purchase a renters insurance policy. These common clauses usually clarify that the landlord’s property insurance coverage does not extend to your personal belongings.

If you sign a lease with such a clause, you are agreeing to maintain this insurance coverage throughout your residency there. If you fail to get a policy or allow it to lapse, your landlord is within their rights to serve you with a “comply or quit” notice and possibly begin eviction proceedings.

If you don’t currently have a policy, reconsider getting renters insurance. Alongside a healthy emergency fund, having the right insurance can bring vital financial security to your life. For the cost, renters insurance provides protection and peace of mind.

“Most renters can get a policy for around $20 per month,” Fitzgerald says. “That’s a small price to pay when you think about the fact that if you don’t have renters insurance, you’ll be forced to cover the cost of replacing any and all items damaged.”

Procuring a renters insurance policy is a smart step toward financial security. With the right policy, you can avoid debt in an emergency and protect your possessions and your home. If you’re ready to buy a home, learn more about the ins and outs of home mortgages in Credit.com’s Mortgage Loan Learning Center. And to be financially prepared for anything, it’s also a good idea to build your credit score so you can qualify for loans and other credit when necessary. See where you stand with a free credit score from Credit.com.

Image: istock 

The post Skipping Renters Insurance? Why That’s a Bigger Risk Than You’d Think appeared first on Credit.com.

Source: credit.com

How to Maximize Rewards on Everyday Spending

Woman using credit card on everyday spending

While many rewards enthusiasts focus on signing up for new credit cards to earn signup bonuses, not everyone has the time or desire to play the signup game. There is effort involved in tracking multiple cards, annual fees, and rewards programs, after all, and some people don’t want to spend their time or mental energy this way.

If you’re someone who falls into this category, you may be better off maximizing one or two cards instead of chasing rewards. Fortunately, you can earn plenty of rewards over time if you’re savvy about your card’s benefits and bonus categories.

The key to getting the most out of your rewards cards is understanding how they work and looking for opportunities to earn more points on your everyday spending. Here are some tips that can help.

Brainstorm every bill you could pay with a credit card

Because rewards cards offer points based on each dollar you spend, maximizing the amount you can spend on credit is the best way to boost your rewards haul. The smartest strategy to use here is figuring out how many of your monthly bills you can pay with a credit card.

While you may not be notified or aware, it’s possible that bills you’ve been paying with a check or debit card for years can be paid with a credit card without any fees. While your bills may vary, some expenses you should try to pay with a credit card include:

  • Rent
  • Utility bills like electric or gas
  • Health insurance
  • Cable television and internet
  • Cell phone
  • Taxes
  • Daycare
  • Auto and home insurance
  • Subscription services
  • College tuition or student loans
  • Medical bills
  • Lawn care

Keep in mind that these are just some of the bills you could be paying with credit. Depending on your situation, you could have additional, uncommon expenses to cover that could be paid with credit with ease.

Also, remember that these additional bills should be paid with credit on top of your everyday expenses like groceries, dining out, gas or bus fare, and miscellaneous spending. Every time you buy something in person or online, you should strive to pay with your rewards card if you can.

Leverage your rewards card bonus categories

It’s also important to leverage your favorite card bonus categories, whatever they may be. This is especially important if you have a few cards with different bonus categories since you’ll want to make sure you’re using the right card for bills that let you earn bonus points.

Let’s say you have a travel credit card that earns 3x points on dining and travel and another card that earns 6x points at the grocery store. In that case, you would be smart to use the travel card for dining and travel purchases and your other card when you stock up on food. While the amount of rewards you earn with individual purchases may seem nominal, using the right card for the right purchase can help you earn a lot more rewards over time.

Set up auto-pay bills to be paid with credit

Most of us have bills set up to be paid automatically, whether it’s our Netflix and Hulu subscriptions, gym membership, or utility bills. Make sure each bill you have set up to be paid automatically is set up to be paid with your rewards card and not a debit card. This way, you can earn rewards points on those expenses every month.

Use shopping portals and dining clubs

Many flexible rewards programs, frequent flyer programs, and hotel loyalty programs have shopping portals you can access to earn extra points. Major airlines like American, Delta, and United also have shopping portals that work similarly. (See also: How to Maximize Rewards Through Credit Card Shopping Portals)

Some programs like Southwest and Delta also offer dining clubs. These programs let you earn additional points or miles just for dining at participating restaurants in your area. It’s easy and it’s free to join, so you may as well earn extra miles on your spending if you’re going to dine out anyway. (See also: Everything You Need to Know About Airline Dining Rewards Programs)

How much the average family can earn

If you are skeptical the average family can rack up meaningful rewards without signing up for new cards over and over again, look at how this might work in real life. For example, imagine a family of four with two rewards card-toting adults. Across the two of them, they have:

  • A cash back card that earns 2% back
     
  • A travel credit card that earns 3% on dining and travel
     
  • A rewards card that earns 6% cash back at the grocery store on up to $6,000 in spending each year

To figure out how much this family might earn, we used Bureau of Labor Statistics spending averages from 2017. Here’s a rundown of that data for the year plus how much a family could earn in rewards over 12 months based on average expenses:

  • Food at home ($4,363): $261.78 in rewards at 6%
     
  • Food away from home ($3,365): $100.95 at 3%
     
  • Utilities, fuels, and public services ($3,836): $76.72 at 2%
     
  • Household operations ($1,412): $28.24 at 2%
     
  • Household supplies ($755): $45.30 at 6%
     
  • Household furnishings and equipment ($1,987): $39.74 at 2%
     
  • Apparel and services ($1,833): $36.66 at 2%
     
  • Gasoline and motor oil ($1,968): $39.36 at 2%
     
  • Other vehicle expenses ($2,842): $56.84 at 2%
     
  • Healthcare ($4,928): $98.56 at 2%
     
  • Entertainment ($3,203): $64.06 at 2%
     
  • Personal care products ($762): $45.72 at 6%
     
  • Education ($1,491): $29.82 at 2%

Total rewards: $923.75

While $900+ is a lot to earn in rewards within a year, you have the potential to earn a lot more. After all, these are just some of the expenses the average family faces and not all of them. If you could pay some additional big bills with credit each month like daycare or your rent, you could significantly add to your bottom line.

What to watch out for

While maximizing rewards cards is a smart idea if you’re using them already anyway, there are always pitfalls to be aware of when you’re using a credit card. Here’s what to watch out for during your quest for more cash back and travel rewards.

Fees for using credit

While there are many bills you can pay with credit without a fee, some vendors, merchants, and service providers charge a fee to use a credit card as payment. Fees are especially prevalent on bills such as utilities, cable or internet, rent, and insurance. Make sure to verify you aren’t being charged a fee to use credit before you proceed.

Annual fees

Don’t forget that some rewards cards charge annual fees. These fees may be worth it depending on your spending and rewards haul, but you should always factor them into the equation to make sure each fee is worth paying. If you’re against paying annual fees, look for rewards cards that don’t charge one.

Budgeting mishaps

Using a credit card for all your expenses may simplify your financial life, but it could also cause your budget to fall out of whack. Make sure you’re only spending on purchases you planned to make anyway, and that you’re tracking your spending and paying off your credit cards regularly.

Debt

Never use credit cards for purchases you can’t afford to repay if you’re pursuing rewards. The interest you’ll pay will always be much more than the rewards you earn. If you’re worried using credit will cause you to rack up debt you can’t afford to repay, you’re better off sticking to cash or debit instead.

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Want to maximise your credit card rewards? The key to getting the most out of your rewards cards is understanding how they work and looking for opportunities to earn more points on your everyday spending. We’ve got the ultimate tips and tricks to help you save money and earn more rewards! | #creditcards #rewardsprogram #creditcardrewards


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Money Audit: Should We Hold on to Our Rental Properties?

This week’s Mint audit helps out a couple, Pasquale, 46, and Jillian, 39, who are starting a new life together after each experiencing divorce. Both work in software sales earning roughly the same income. When combined, their earnings average $450,000 a year.

The New Jersey couple shares a new mortgage and a savings account. They recently purchased a home together and pool a fraction of their incomes together into a joint account to pay for shared expenses such as the home loan, property taxes and utilities.

Pasquale and Jillian also arrived at the relationship owning their own properties. Pasquale has held onto his townhome in a nearby town that he bought after his divorce. He rents it out, earning a nice $500 monthly profit. Jillian also has a home in Florida, which she rents out. She more or less breaks even every month.

They would like advice related to managing their rental properties (should they sell them?), possibly buying a vacation home in the $250,000 to $350,000 range and, for Pasquale, saving up to help send his two daughters (ages 13 and 17) to college. They’re also wondering if they’re saving “enough” for retirement.

They had lots of good questions, and after an hour on the phone and a review of their finances, I was able to fit together some of their puzzle pieces.

First, here’s a break down of some their finances:

Retirement Savings

  • Pasquale: Contributes 5% to 401(k) and has about $500,000 in it. He also invests 15% in company’s ESPP (Employee Stock Purchase Plan)
  • Jillian: Contributes 5% to a 401(k) plus employer’s match, totaling 10%. She has about $200,000 saved. She also invests 11% in her company’s ESPP.
  • If they were to both cash out their ESPPs today, they’d have about $250,000 in gains, which are subject to income tax.

Child Support Payments

  • Pasquale: $4,000 per month

Debt (Credit Cards and Student Loans)

  • Pasquale: $18,000 in student loans
  • Jillian: $40,000 in student loans

Real Estate Holdings

  • Each of their individual properties has about $80,000 in equity.

 

Here are my top 3 recommendations:

Max Out the 401(k)s

The couple is doing fairly well with their retirement savings, but I think they are too exposed to their ESPPs. They contribute more to their ESPPs than their 401(k)s, which is very risky, considering an ESPP puts all your money in a single stock. A 401(k) is far more diversified.

They may benefit from reallocating some of those dollars back into their company 401(k). In doing so, I recommend they both aim to max out their 401(k)s, which also means a bigger tax deduction. This year’s maximum contribution is $18,500.

Transfer Some ESPP Earnings to College Savings

Every six months, each receives the chance to cash out some or all of the money in their ESPP. I recommend striking at the next opportunity to reduce their exposure to a market downfall and help pay for future college expenses. Taking 20 or 30 percent off the table and placing the dollars into a safer haven like a CD creates less risk.

For Pasquale, specifically, I’d look into selling some of his shares at the next opportunity and placing it into a plain vanilla savings account to cover at least the first two years of his daughter’s education. His daughter will choose a school soon and expects to receive some grants and scholarships to reduce the cost. At that point Pasquale can better estimate how much to withdraw from the stock plan.

For his youngest daughter, it’s not too late for Pasquale to open a 529-college savings account. That money can later be used for higher education costs without being subject to taxes. Investing $500 a month in a 529 starting today could help to afford at least the first year or two of school, depending on where she lands. Pasquale may even consider using some of the ESPP gains to fund the new 529 for daughter #2, if his eldest doesn’t need it.

Sell Rentals to Purchase a New Second Home

How emotionally tied are they to their individual properties? Pasquale said he could take it or leave it. The $500 cash flow is nice, but he’s open to selling it. Jillian, however, would be sad to part ways with the Florida home. While its rental income is just enough to cover the carrying costs, she likes the idea of keeping it. She’s always wanted to have a house by the water.

But I propose a scenario: What if they sold both rental properties and pooled the equity ($160,000) to afford a new second home that they’d both own? They’re eyeing a cabin near the Poconos in Pennsylvania. The estimated cost for a home that suits them is between $250,000 and $300,000. A 50% down payment on a $300,000 home would mean that their monthly mortgage would be roughly $700 per month, given today’s average interest rate of about 4.50% (or possibly higher for second homes.)

From selling the two properties they achieve their goal of affording a second home. Located in a popular resort area, they can also rent it out from time to time for more than $700 a week. Renting the place for just 8 or 10 weeks out of the year would probably cover the annual mortgage.

From there, any extra cash flow could be used to save more for retirement, travel, college, or whatever they wish.

 

Farnoosh Torabi is America’s leading personal finance authority hooked on helping Americans live their richest, happiest lives. From her early days reporting for Money Magazine to now hosting a primetime series on CNBC and writing monthly for O, The Oprah Magazine, she’s become our favorite go-to money expert and friend.

The post Money Audit: Should We Hold on to Our Rental Properties? appeared first on MintLife Blog.

Source: mint.intuit.com

8 Ways to Save Money on Date Night

Whether you’re cozying up on the couch together with a bottle of wine or headed out to the trendy restaurant everyone’s talking about, date night is an essential part of most relationships.

“Date nights are important because they give new couples a chance to get to know each other and established couples a chance to have fun or blow off some steam after a rough week,” says Holly Shaftel, a relationship expert and certified dating coach. “Penciling in a regular date can ensure that you make time for each other when your jobs and other aspects of your life might keep you busy.”

Finding ways to spend less on date night can be easy if you're willing to be creative.

There’s just one small snag. Or, maybe it’s a big one. Date nights can get expensive. According to financial news website 24/7 Wall St., the cost of an average date consisting of two dinners, a bottle of wine and two movie tickets is about $102.

When you’re focused on improving your finances as a couple, finding ways to spend less on date night is a no-brainer. But you may be wondering: How can we save money on date night and still get that much-needed break from the daily grind?

There are plenty of ways to save money on date night by bringing just a little creativity into the mix. Here are eight suggestions to try:

1. Share common interests on the cheap

When Shaftel and her boyfriend were in the early stages of their relationship, they learned they were both active in sports. They were able to plan their date nights around low-cost (and sometimes free) sports activities, like hitting the driving range or playing tennis at their local park.

One way to save money on date night is to explore outdoor activities.

If you’re trying to find ways to spend less on date night, you can plan your own free or low-cost date nights around your and your partner’s shared interests. If you’re both avid readers, for example, even a simple afternoon browsing your local library’s shelves or a cool independent bookstore can make for a memorable time. If you’re both adventurous, check into your local sporting goods stores for organized hikes, stargazing outings or mountaineering workshops. They often post a schedule of events that are free, low-cost or discounted for members.

2. Create a low-budget date night bucket list

Dustyn Ferguson, a personal finance blogger at Dime Will Tell, suggests using the “bucket list” approach to find the best ways to save money on date night. To gather ideas, make it a game. At your next group gathering, ask guests to write down a fun, low-budget date night idea. The host then gets to read and keep all of the suggestions. When Ferguson and his girlfriend did this at a friend’s party, they submitted camping on the beach, which didn’t cost a dime.

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The cost of an average date consisting of two dinners, a bottle of wine and two movie tickets is about $102.

– Financial news website 24/7 Wall St.

To make your own date night bucket list with the best ways to save money on date night, sit down with your partner and come up with free or cheap activities that you normally wouldn’t think to do. Spur ideas by making it a challenge—for instance, who can come up with the most ideas of dates you can do from the couch? According to the blog Marriage Laboratory, these “couch dates” are no-cost, low-energy things you can do together after a busy week (besides watching TV). A few good ones to get your list started: utilize fun apps (apps for lip sync battles are a real thing), grab a pencil or watercolors for an artistic endeavor or work on a puzzle. If you’re looking for even more ways to spend less on date night, take the question to social media and see what turns up.

3. Alternate paid date nights with free ones

If you’re looking for ways to spend less on date night, don’t focus on cutting costs on every single date. Instead, make half of your dates spending-free. “Go out for a nice dinner one week, and the next, go for a drive and bring a picnic,” says Bethany Palmer, a financial advisor who authors the finance blog The Money Couple, along with her husband Scott.

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4. Have a date—and get stuff done

Getting stuff done around the house or yard may not sound all that romantic, but it can be one of the best ways to save money on date night when you’re trying to be budget-conscious. And, tackling your to-do list—like cleaning out the garage or raking leaves—can be much more enjoyable when you and your partner take it on together.

5. Search for off-the-wall spots

If dinner and a movie is your status quo, mix it up with some new ideas for low-cost ways to save money on date night. That might include fun things to do without spending money, like heading to your local farmer’s market, checking out free festivals or concerts in your area, geocaching—outdoor treasure hunting—around your hometown, heading to a free wine tasting or taking a free DIY class at your neighborhood arts and crafts store.

“Staying creative allows you to remain flexible and not bound to simply doing the same thing over and over,” Ferguson says.

6. Leverage coupons and deals

When researching the best ways to save money on date night, don’t overlook coupon and discount sites, where you can get deals on everything from food, retail and travel. These can be a great resource for finding deep discounts on activities you may not try otherwise. That’s how Palmer and her husband ended up on a date night where they played a game that combined lacrosse and bumper cars.

Turn to coupons and money-saving apps for fun ways to save money on date night.

There are also a ton of apps on the market that can help you find ways to save money on date night. For instance, you can find apps that offer discounts at restaurants, apps that let you purchase movie theater gift cards at a reduced price and apps that help you earn cash rewards when shopping for wine or groceries if you’re planning a date night at home.

7. Join restaurant loyalty programs

If you’re a frugal foodie and have a favorite bar or restaurant where you like to spend date nights, sign up for its rewards program and newsletter as a way to spend less on date night. You could earn points toward free drinks and food through the rewards program and get access to coupons or other discounts through your inbox. Have new restaurants on your bucket list? Sign up for their rewards programs and newsletters, too. If you’re able to score a deal, it might be time to move that date up. Pronto.

8. Make a date night out of budgeting for date night

When the well runs dry, one of the best ways to save money on date night may not be the most exciting—but it is the easiest: Devote one of your dates to a budgeting session and brainstorm ideas. Make sure to set an overall budget for what you want to spend on your dates, either weekly or monthly. Having a number and concrete plan will help you stick to your date night budget.

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“Staying creative allows you to remain flexible and not bound to simply doing the same thing over and over.”

– Dustyn Ferguson, personal finance blogger at Dime Will Tell

Ferguson says he and his girlfriend use two different numbers to create their date night budget: how much disposable income they have left after paying their monthly expenses and the number of date nights they want to have each month.

“You can decide how much money you can spend per date by dividing the total amount you can allocate to dates by the amount of dates you plan to go on,” Ferguson says. You may also decide you want to allot more to special occasions and less to regular get-togethers.

Put your date night savings toward shared goals

Once you’ve put these creative ways to save money on date night into practice, think about what you want to do with the cash you’re saving. Consider putting the money in a special savings account for a joint purpose you both agree on, such as planning a dream vacation, paying down debt or buying a home. Working as a team toward a common objective can get you excited about the future and make these budget-friendly date nights feel even more rewarding.

The post 8 Ways to Save Money on Date Night appeared first on Discover Bank – Banking Topics Blog.

Source: discover.com