fees http://www.wisebread.com/taxonomy/term/253/all en-US How a Credit Card Cash Advance Costs You More Than a Purchase http://www.wisebread.com/how-a-credit-card-cash-advance-costs-you-more-than-a-purchase <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/how-a-credit-card-cash-advance-costs-you-more-than-a-purchase" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-625782024.jpg" alt="Learning how a credit card cash advance costs more" title="" class="imagecache imagecache-250w" width="250" height="141" /></a> </div> </div> </div> <p>Credit cards are all about convenience. With one swipe, anything we want or need is right at our fingertips; and that includes cash. That convenience comes at a steep price, however &mdash; quite literally.</p> <p>Credit cards call it a &quot;cash advance&quot; when you use them to take cash out at an ATM, or use one of their convenience checks to pay for purchases (for example, when the vendor doesn't take credit cards, but will take a check).</p> <p>Here is what you need to know before even considering a cash advance, and some alternative solutions for when you need funds fast.</p> <h2>What is a credit card cash advance?</h2> <p>Taking a cash advance is done much the same way as making a withdrawal with your debit card. Instead of taking your own money out of your bank account, however, you borrow directly from your credit card. You may also receive checks in the mail from your card issuer that allow you to make credit card purchases via check payments. Again, this is not your money &mdash; the checks will pull funds from your credit card account.</p> <h2>What happens when you take a cash advance</h2> <p>Most credit card issuers impose entirely different terms on cash advance transactions. First, you will be charged a transaction fee, which will either be a flat rate or a percentage of the cash advance you're withdrawing (typically between 2 percent and 5 percent). Additional ATM fees and foreign transaction fees if you're out of the country may apply as well.</p> <p>In addition to fees, you'll likely be hit with a much higher interest rate. In some cases, the APR can be double the percentage for regular purchases. This catches many people off guard, since they're unaware different terms apply for cash advances. The longer it takes you to pay off this amount, the more that hefty interest will pile up.</p> <p>There is no grace period for cash advances, either. Typically, you have a month or so to pay off a credit card purchase in full before accruing any interest charges. This doesn't happen with a cash advance &mdash; you pay interest starting the day you make the transaction.</p> <p>Credit card companies also typically impose a separate limit on the amount of money you can take in a cash advance. This will often be much lower than your actual credit card limit.</p> <h2>How much will this actually cost you?</h2> <p>Let's say you are going out for dinner with friends, and you need to get a quick $40 from an ATM using your credit card. First, you will be hit with the cash advance fee. Next, you will start incurring interest on that withdrawal immediately (possibly around 30%). Furthermore, the operator of the ATM may also impose its own fees, which can be anywhere between $3&ndash;$5 per transaction. You could be looking at anywhere from $10&ndash;$15 in fees for taking out $40 (and that's assuming you pay it off by the next billing cycle). As you can see, that $40 dinner could wind up costing you $15 extra. Now imagine if you were borrowing $1,000 or more!</p> <h2>Alternatives to credit card cash advances</h2> <p>Simply put, you should always use a debit card to access cash instead of a credit card. Most major banks offer debit cards that can be used at in-network ATMs for no additional fees. In addition, many banks and credit unions are part of a larger ATM network that allows transactions for no additional fees.</p> <p>If the issue is that you're simply short on money, or stuck living paycheck-to-paycheck, a cash advance is not the solution. Instead, consider ways you can bring in extra income. Perhaps you can take up a part-time or side gig, sell a few items on eBay, or throw a big garage sale. (See also: <a href="http://www.wisebread.com/how-to-come-up-with-1000-in-the-next-30-days?ref=seealso" target="_blank">How to Come Up With $1,000 in the Next 30 Days</a>)</p> <h2>When is it Ok to take a cash advance?</h2> <p>A cash advance isn't the best option, but if it's your <em>only</em> option in an emergency, take it. Be sure to understand that there will be fees involved and that you need to repay the money you borrowed as soon as possible.</p> <p>Cash advances should never be used for everyday expenses, &quot;fun&quot; money (shopping or gambling, for example), or even to make ends meet until your next paycheck. It can be all too easy to fall into a cycle of cash advances, which will ultimately lead to credit card debt. (See also: <a href="http://www.wisebread.com/fastest-way-to-pay-off-10000-in-credit-card-debt?ref=seealso" target="_blank">Fastest Way to Pay Off $10K in Credit Card Debt</a>)</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/jason-steele">Jason Steele</a> of <a href="http://www.wisebread.com/how-a-credit-card-cash-advance-costs-you-more-than-a-purchase">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-dirty-secrets-of-credit-cards">The Dirty Secrets of Credit Cards</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/is-a-balance-transfer-offer-a-good-deal">Is a Balance Transfer Offer a Good Deal?</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/i-dont-love-capital-one-how-to-get-a-lower-apr-or-possibly-not">How to Get a Lower APR, or Possibly Not</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/your-interest-rates-are-about-to-go-up">Your Interest Rates Are About to Go Up</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-scary-facts-about-credit-card-debt">6 Scary Facts About Credit Card Debt</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Credit Cards APR borrowing money cash advance debt emergencies fees interest rates limits transactions Fri, 14 Apr 2017 08:30:14 +0000 Jason Steele 1925859 at http://www.wisebread.com What to Do When Your Tax Preparer Makes a Mistake http://www.wisebread.com/what-to-do-when-your-tax-preparer-makes-a-mistake <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/what-to-do-when-your-tax-preparer-makes-a-mistake" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-501391448.jpg" alt="Man learning what to do when a tax preparer makes a mistake" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>You might think that hiring a tax preparer to file your income taxes will guarantee a mistake-free return. Unfortunately, you'd be wrong.</p> <p>In 2015, the National Consumer Law Center used mystery shoppers to test the work of 29 tax preparers. The results were surprising: Only two of the returns compiled by these preparers came in error-free. That's bad news for a lot of people. USA Today reported in February that almost <a href="https://www.usatoday.com/story/money/personalfinance/2017/02/06/should-you-do-your-taxes-yourself-hire-tax-preparer/97198816/" target="_blank">79 million e-filed tax returns</a> were completed last year by professional tax preparers.</p> <p>And here's even more bad news: The IRS says that if your tax preparer makes a mistake resulting in you having to pay additional taxes, interest, or penalties, <em>you</em> are responsible for paying these fees &mdash; not your tax preparer.</p> <p>If your tax preparer does make a mistake on your return, what can you do? Here are five suggestions.</p> <h2>1. Contact your preparer</h2> <p>If the IRS sends you a letter claiming that there are mistakes on your taxes, call your tax preparer for an explanation. Tax preparers who do make mistakes might offer to pay any fees, penalties, or interest charges for you. This might not restore your confidence in their abilities, but it will help save your budget.</p> <h2>2. Pay the penalties</h2> <p>If the IRS is charging you a penalty for a tax mistake, even if that mistake was made by your preparer, pay it. You might be battling it out with your tax preparer in the hope of getting this professional to pay the penalty on your behalf, but the IRS doesn't care. If it doesn't receive its payment, you are the one who will face additional financial penalties.</p> <p>If your tax preparer refuses to pay for its mistake, send a check to the IRS. Then continue your fight against the preparer.</p> <h2>3. Know your rights</h2> <p>Check any contract you signed with your tax preparer. There might be language in the contract stating what your tax preparer will do in the event of a mistake. Some tax preparers will pay the interest and penalties that result from a mistake, but not any extra taxes you might owe.</p> <p>Some tax preparation firms, especially the big ones, might offer insurance that you can purchase for an extra fee. If you've bought this insurance, your tax preparer might be obligated to pay any interest, fees, or extra taxes you owe because of their mistakes.</p> <p>Be aware that tax preparers won't pay any penalties on your behalf, even if you've purchased extra insurance, if the mistakes they've made are because you provided them with inaccurate information.</p> <h2>4. Check the statute of limitations</h2> <p>If your tax preparer made a mistake that caused you to overpay on your taxes, you have three years to request a refund from the IRS. You must provide documentation to back up your claim that you overpaid.</p> <p>This statute of limitations works in reverse, too. If you underpaid your taxes because of a preparer mistake, the IRS has three years in which they can come after you for the money you owe. If your tax preparer made a substantial error, however (such as omitting 25 percent or more of your gross income), the IRS can go back up to six years. It's recommended to keep your records for at least this long. Be aware there is no statute of limitations for those who knowingly file fraudulent returns, evade taxes, or fail to file altogether.</p> <h2>5. File a complaint</h2> <p>If you discover that your preparer made an intentional mistake, perhaps to boost your return, make an official complaint with the Office of Responsibility at the IRS. If your preparer is a member of the American Institute of Certified Public Accountants, National Association of Enrolled Agents, or a state law association, you can also file a complaint with these organizations. Such complaints could cause tax preparers to face fines or lose their licenses.</p> <h2>Reduce the odds of a mistake by hiring the right professional</h2> <p>Sometimes you can prevent a future mistake by hiring the right tax professional upfront. The truth is, anyone can work as a tax preparer. Preparers must apply for a Preparer Tax Identification Number from the IRS. But getting this number is easy: It costs $50, and the IRS says that applying takes just 15 minutes.</p> <p>If you're searching for a tax professional, it's best to work with either a certified public accountant with experience completing tax returns, or what is known as an Enrolled Agent. To become an Enrolled Agent, tax preparers must first pass a three-part test given by the IRS that covers the ins and outs of individual and business tax returns. Some certified public accountants will also be Enrolled Agents.</p> <p>Ask any tax preparer for the phone numbers of past clients. Then call these clients to ask about the work the tax preparer turned in. The IRS also recommends that consumers only work with tax preparers who charge a flat fee. Preparers who charge a percentage of your tax refund might be tempted to fudge the numbers to boost your return.</p> <p>Finally, make sure that you provide all the proper documents and numbers. The tax preparer may or may not double check your numbers. Maybe you forgot about the antique you sold on eBay. Maybe you transposed a number when adding up your home office deductions. You can't depend on the tax preparer to notice that something is off or verify your numbers. The best professionals will ask you a lot of questions to ensure you've provided all the information. But others may just take your documents and enter the numbers.</p> <p>The bottom line is if the IRS audits you and discovers that the preparer made mistakes &mdash; intentional or accidental &mdash; you'll have to pay any penalties and fees.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/what-to-do-when-your-tax-preparer-makes-a-mistake">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/heres-what-happens-if-you-dont-pay-your-taxes">Here&#039;s What Happens If You Don&#039;t Pay Your Taxes</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-lessons-from-tax-day-to-remember-for-next-year">7 Lessons From Tax Day to Remember for Next Year</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-freelancers-and-side-giggers-need-to-know-about-income-taxes">What Freelancers and Side Giggers Need to Know About Income Taxes</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-important-tax-changes-for-2016">5 Important Tax Changes for 2016</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-reasons-you-should-file-your-taxes-as-soon-as-possible">8 Reasons You Should File Your Taxes as Soon as Possible</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Taxes accountants complaints cpa enrollment agents errors fees IRS Mistakes penalties statute of limitations tax filing tax returns Thu, 13 Apr 2017 08:00:10 +0000 Dan Rafter 1925856 at http://www.wisebread.com Why Warren Buffett Says You Should Invest in Index Funds http://www.wisebread.com/why-warren-buffett-says-you-should-invest-in-index-funds <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/why-warren-buffett-says-you-should-invest-in-index-funds" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-465649794.jpg" alt="Learning why Warren Buffett says you should invest in index funds" title="" class="imagecache imagecache-250w" width="250" height="142" /></a> </div> </div> </div> <p>About nine years ago, Warren Buffett <a href="http://www.usatoday.com/story/money/personalfinance/columnist/2017/03/08/buffetts-best-investment-tip-everyone-index-funds/98525306/" target="_blank">made a $500,000 bet</a>. He wagered that a simple index fund would outperform an actively managed hedge fund run by expert investors. Which would you pick?</p> <p>Before you decide, here is some additional information about the fund contenders:</p> <ul> <li>Index funds buy a mix of stocks in a proportion that represents the overall stock market or a particular market segment. Index funds are typically managed automatically by a computer algorithm, and management fees for this type of fund are usually very small &mdash; around 0.1 percent or sometimes even lower.<br /> &nbsp;</li> <li>Hedge funds put money into alternative investments that can go up if the stock market goes down. Of course, hedge funds also try to provide maximum returns and beat the stock market if possible. Hedge funds may invest in real estate, commodities, business ventures, and other opportunities that fund managers think will hedge against potential stock market losses and produce good returns. These funds are actively managed and have high management fees of around 2 percent or more.</li> </ul> <p>Buffett picked a simple S&amp;P 500 index fund for the wager. He bet against an investment manager who picked a set of five hedge fund portfolios. After letting these investments play out for nine years, Buffett announced the results of this wager in the chairman's letter in this year's annual report for the holding company he controls and runs, Berkshire Hathaway: The index fund outperformed the actively managed funds. (See also: <a href="http://www.wisebread.com/the-5-best-pieces-of-financial-wisdom-from-warren-buffett?ref=seealso" target="_blank">The 5 Best Pieces of Financial Wisdom From Warren Buffett</a>)</p> <p>Buffet's experience mimics numerous studies that have shown that index funds consistently beat the results of actively managed funds. Why does a simple and essentially automatic investment strategy (the index fund) outperform sophisticated investment funds managed by active expert investors?</p> <h2>Low fees</h2> <p>Fund fees, also known as expense ratios, are much lower for index funds than for actively managed hedge funds or mutual funds. You can find index funds with fees under 0.1 percent, while actively managed hedge funds can have fees of 2 percent or more.</p> <p>Although the wager Buffett made concerned hedge funds with high expense ratios, the same principle applies when comparing index funds to actively managed mutual funds, which can have fees as high as 1 percent. Higher fees mean that actively managed funds have to outperform the market significantly to offset them. Over the long run, actively managed funds may not consistently outperform the market by enough to make up for the higher fees.</p> <h2>Investment errors</h2> <p>Another reason actively managed funds can fall behind index funds is investment errors. In active funds, someone is making investment decisions and moving money around trying to get higher returns. Sometimes an investment manager can outperform the market and get higher returns, but this doesn't always work out. It only takes one mistake to wipe out a lot of investment gains. In an index fund, the only investment decision is to adjust the ratio of holdings to match the market segment of interest.</p> <p>Index funds accurately reflect the performance of the market they are mirroring. The investment strategy is simple, and there is no opportunity for investment error. If you invest in an index fund, you will reliably receive similar returns to the market that your index fund represents.</p> <h2>How to buy an index fund for your portfolio</h2> <p>During my research for this article, I moved around $10,000 of my own investment funds from actively managed funds into index funds with much lower fees. I figured if index funds are good enough for Warren Buffett, they are good enough for me!</p> <p>You can log in to your investment account website and view the expense ratios for your current investments and for other available funds. I found that my investment choices had expense ratios ranging from 0.02 percent to 0.83 percent &mdash; a difference of more than 40-fold. This is definitely a big enough difference to worry about.</p> <p>A good first step is to check your own investment funds and find out how high the fees are. You may be happy with what you find, or you may decide you want to move to index funds with much lower fees.</p> <p>Of course, when choosing your investment funds, you shouldn't look only at the expense ratio. You should balance your portfolio to include a strategic mix of large cap, medium cap, and small cap investments and an intentional balance of foreign and domestic stocks to meet your investment goals.</p> <p>When I moved my investment money into index funds with very low fees, I picked funds that made sense to balance my portfolio. For example, I moved some funds from a mid-cap growth fund with a 0.3 percent expense ratio into a mid-cap index fund with a 0.07 percent expense ratio &mdash; over four times lower fees. In the long run, I think this is a bet that will pay off.</p> <p>Even if you don't have $500,000 to wager, you might as well minimize what you are paying in fees by moving from actively managed funds to index funds. You'll keep more of your money working for you instead of having it go to work for someone else.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dr-penny-pincher">Dr Penny Pincher</a> of <a href="http://www.wisebread.com/why-warren-buffett-says-you-should-invest-in-index-funds">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-4"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-3-rules-every-mediocre-investor-must-know">The 3 Rules Every Mediocre Investor Must Know</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-are-income-stocks">What Are Income Stocks?</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/11-investing-tips-you-wish-you-could-tell-your-younger-self">11 Investing Tips You Wish You Could Tell Your Younger Self</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-too-much-investment-diversity-can-cost-you">How Too Much Investment Diversity Can Cost You</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/3-steps-to-getting-started-in-the-stock-market-with-index-funds">3 Steps to Getting Started in the Stock Market With Index Funds</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment actively managed funds expense ratios fees hedge funds index funds mutual funds portfolio returns stock markets Warren Buffett Mon, 10 Apr 2017 09:00:08 +0000 Dr Penny Pincher 1922477 at http://www.wisebread.com How to Face 4 Ugly Truths About Retirement Planning http://www.wisebread.com/how-to-face-4-ugly-truths-about-retirement-planning <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/how-to-face-4-ugly-truths-about-retirement-planning" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-155373418.jpg" alt="Learning ugly truths about retirement planning" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Most working Americans still have a long way to go to ensure a comfortable, financially secure retirement. But, with consistency and dedication, retirement planning can be a feasible project. Let's review some of the ugly truths of retirement planning, and the strategies you can use to conquer them. (See also: <a href="http://www.wisebread.com/7-things-financial-advisers-wish-you-knew-about-retirement?ref=seealso" target="_blank">7 Things Financial Advisers Wish You Knew About Retirement</a>)</p> <h2>1. Employer matches require work</h2> <p>While people often like to think of employer matches as free money, the truth is that you do need to do some &quot;work&quot; to earn those matches.</p> <p>First, your employer may require a minimum period of employment or contribution to your retirement account before you become eligible for employer contributions. According to a Vanguard analysis of 1,900 401(k) plans with 3.6 million participants, 27 percent of employers <a href="http://money.usnews.com/money/retirement/articles/2015/06/29/how-does-your-401-k-stack-up" target="_blank">require a year of service</a> before providing any matching contributions. And that waiting period may be on top of the waiting period to be eligible for an employer-sponsored 401(k) in the first place.</p> <p>Second, once you're eligible for the employer match, you may have to contribute a minimum percentage from each paycheck yourself to get it. According to Vanguard, 44 percent of employers required a 6 percent employee contribution to get the entire 401(k) match on offer.</p> <p>Third, only 47 percent of surveyed employers provide immediate vesting of employer contributions. Since only moneys in your retirement account that are fully vested truly belong to you, you may have to wait up to six years to get to keep it all. If you part ways with your employer earlier than that, you may have to say goodbye to some or all of those employer contributions. (See also: <a href="http://www.wisebread.com/15-retirement-terms-every-new-investor-needs-to-know?ref=seealso" target="_blank">15 Retirement Terms Every New Investor Needs to Know</a>)</p> <h3>How to handle it</h3> <p>Find out the applicable rules for employer contributions under your employer-sponsored retirement account. Ask about the waiting period for eligibility, how much you should contribute to get the full employer match, and what is the applicable vesting schedule for employer contributions. This way you'll know how to make the most (and keep the most!) of any employer contributions.</p> <h2>2. Full retirement age is higher than many of us think</h2> <p>According to the 2016 Retirement Confidence Survey from the Employee Benefit Research Institute (EBRI), one in every two American workers expected to retire <a href="https://www.ebri.org/pdf/briefspdf/ebri_ib_422.mar16.rcs.pdf" target="_blank">no later than age 65</a>.</p> <p>The problem with that plan is that only those with born in 1937 or earlier have a full retirement age of 65. Your full retirement age is the age at which you first become entitled to full or unreduced retirement benefits from the Social Security Administration (SSA). Retiring earlier than your full retirement age decreases your retirement benefit from the SSA.</p> <p>For those born 1960 or later, full retirement age is 67. If this were your case, retiring at age 62 or age 65 would <a href="https://www.ssa.gov/planners/retire/retirechart.html#chart" target="_blank">decrease your monthly benefit</a> by about 30 percent or 13.3 percent, respectively. (See also: <a href="http://www.wisebread.com/13-crucial-social-security-terms-everyone-needs-to-know?ref=seealso" target="_blank">13 Crucial Social Security Terms Everyone Needs to Know</a>)</p> <h3>How to handle it</h3> <p>If you're one of the 84 percent of American workers expecting Social Security to be a source of income in retirement, then you need to keep track of your retirement benefits. There are two ways do this.</p> <p>First, since September 2014, the SSA mails Social Security statements to workers at ages 25, 30, 35, 40, 45, 50, 55, and 60 and over, who aren't yet receiving Social Security benefits and don't have an online &quot;my Social Security&quot; account. Here is a <a href="https://www.ssa.gov/myaccount/materials/pdfs/SSA-7005-SM-SI%20Wanda%20Worker%20Near%20retirement.pdf" target="_blank">sample of what those letters look like</a>. Second, you could sign up for a my Social Security account at <a href="http://www.ssa.gov/myaccount" target="_blank">www.ssa.gov/myaccount</a> and have access to your Social Security statement on an ongoing basis.</p> <p>Through either one of these two ways, you'll get an estimate of your retirement benefit if you were to stop working at age 62 (earliest age you're eligible to receive retirement benefits), full retirement age, and age 70 (latest age that you can continue delaying retirement to receive delayed retirement credits). That way you can plan ahead for when it would make the most sense to start taking your retirement credits.</p> <h2>3. Retirement accounts have fees</h2> <p>One of the most common myths about 401(k) plans is that they don't have any fees. The reality is that both you and your employer pay fees to plan providers offering and managing 401(k) plans. One study estimates that 71 percent of 401(k) plan holders <a href="http://www.aarp.org/work/retirement-planning/info-02-2011/401k-fees-awareness-11.html" target="_blank">aren't aware that they pay fees</a>.</p> <p>While an annual fee of 1 to 2 percent of your account balance may not sound like much, it can greatly reduce your nest egg. If you were to contribute $10,000 per year for 30 years in a plan with a 7 percent annual rate of return and an 0.5 percent annual expense ratio, you would end up with a balance of $920,000 at the end of the 30-year period. If the annual expense ratio were to increase to 1 percent or 2 percent, your final balance would be $840,000 or just under $700,000, respectively.</p> <h3>How to handle it</h3> <p>One way to start minimizing investment fees is to pay attention to the annual expense ratio of the funds that you select.</p> <ul> <li>When deciding between two comparable funds, choose the one with the lower annual expense ratio. Research has shown that funds with a lower expense ratio tend to better performers, so you would be minimizing fees <em>and </em>increasing your chances of higher returns.<br /> &nbsp;</li> <li>Explore index funds. For example, the Vanguard 500 Index Investor Shares fund [<a href="https://finance.yahoo.com/q?s=vfinx" target="_blank">Nasdaq: VFINX</a>] has an annual expense ratio of 0.14 percent, which is around 84 percent lower than the average expense ratio of funds with similar holdings. The Admiral version of this equity index fund has an even lower annual expense ratio of 0.05 percent.<br /> &nbsp;</li> <li>Check the prospectus of your funds for a schedule of fees. From redemption fees to 12b-1 fees, there are plenty of potential charges. Review the fine print of any fund that you're considering investing in and understand the rules to avoid triggering fees. For example, you may need to hold a fund for at least 65 days to prevent triggering a redemption fee. (See also: <a href="http://www.wisebread.com/watch-out-for-these-5-sneaky-401k-fees?ref=seealso" target="_blank">Watch Out for These 5 Sneaky 401(k) Fees</a>)</li> </ul> <h2>4. 401(k) loans are eating away nest eggs</h2> <p>According to the latest data from the EBRI, 23 percent of American workers <a href="https://www.ebri.org/pdf/briefspdf/ebri_ib_422.mar16.rcs.pdf" target="_blank">took a loan</a> from their retirement savings plans in 2016. On top of the applicable interest rate on your loan, you'll also be liable for an origination fee and an ongoing maintenance fee. Given that origination fees range from <a href="http://www.nber.org/papers/w17118.pdf" target="_blank">$25 to $100</a> and maintenance fees can go up to $75, 401(k) loans are one expensive form of financing. (See also: <a href="http://www.wisebread.com/5-questions-to-ask-before-you-borrow-from-your-retirement-account?ref=seealso" target="_blank">5 Questions to Ask Before You Borrow From Your Retirement Account</a>)</p> <p>Additionally, when you separate from your employer, the full unpaid balance is due within 60 days from your departure. If you don't pay back in time, that balance becomes taxable income, triggering potential penalties at the federal, state, and local level. One penalty that always applies is the 10 percent early distribution tax for retirement savers under age 59-1/2.</p> <h3>How to handle it</h3> <p>Don't borrow from your retirement account. Studies have shown that 401(k) borrowers tend to come back for additional loans, increasing their chances of default. One study found that 25 percent of 401(k) borrowers came back for a <a href="http://www.nytimes.com/2013/08/17/your-money/one-dip-into-401-k-savings-often-leads-to-another.html" target="_blank">third or fourth loan</a>, and 20 percent of 401(k) borrowers came back for <em>five </em>or more loans. Borrowing from your retirement account should be a very last-resort option because there are few instances when it's worth it. (See also: <a href="http://www.wisebread.com/this-is-when-you-should-borrow-from-your-retirement-account?ref=seealso" target="_blank">This Is When You Should Borrow From Your Retirement Account</a>)</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/damian-davila">Damian Davila</a> of <a href="http://www.wisebread.com/how-to-face-4-ugly-truths-about-retirement-planning">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-traps-to-avoid-with-your-401k">7 Traps to Avoid With Your 401(k)</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/why-tax-day-is-april-15-and-other-weird-financial-deadlines">Why Tax Day Is April 15 and Other Weird Financial Deadlines</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-inventor-of-the-401k-has-second-thoughts-about-your-retirement-plan-now-what">The Inventor of the 401K Has Second Thoughts About Your Retirement Plan — Now What?</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-reasons-early-retirement-might-be-financially-risky">4 Reasons Early Retirement Might Be Financially Risky</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-things-financial-advisers-wish-you-knew-about-retirement">7 Things Financial Advisers Wish You Knew About Retirement</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement 401(k) contributions employer match fees full retirement age loans nest egg social security ugly truths Fri, 07 Apr 2017 08:00:13 +0000 Damian Davila 1922316 at http://www.wisebread.com 7 Traps to Avoid With Your 401(k) http://www.wisebread.com/7-traps-to-avoid-with-your-401k <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/7-traps-to-avoid-with-your-401k" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-163904271.jpg" alt="Finding traps to avoid with your 401(k)" title="" class="imagecache imagecache-250w" width="250" height="142" /></a> </div> </div> </div> <p>More and more Americans are choosing an employer-sponsored 401(k) as their preferred way to build up their nest eggs. As of 2014, an estimated 52 million Americans were participating in a 401(k)-type plan.</p> <p>When used properly, a 401(k) can be a powerful tool to save for your retirement years, but there are a couple of crucial pitfalls that you have to watch out for. From high fees to limited investing choices, here is a list of potential downsides to 401(k) plans &mdash; and how to work around them.</p> <h2>1. Waiting to set up your 401(k)</h2> <p>Depending on the applicable rules from your employer-sponsored 401(k), you may be eligible to enroll in the plan within one to 12 months from your start date. If your eligibility kicks in around December, you may think that it's fine to wait until the next year to set up your retirement account.</p> <p>This is a big mistake for two main reasons.</p> <p>First, contributing to your 401(k) with pretax dollars allows you to effectively reduce your taxable income for the current year. In 2017, you can contribute up to $18,000 ($24,000 if age 50 or over) to your 401(k), so you can considerably reduce your tax liability. For example, if you were to contribute $3,000 between your last two paychecks in December, you would reduce your taxable income by $3,000. Waiting until next year to start your 401(k) contribution would mean missing out on a lower taxable income!</p> <p>Second, your employer can still contribute to your 401(k) next year and make that contribution count for the current year, as long as your plan was set up by December 31 of the current year. Your employer contributions have to be in before Tax Day or the date that you file your federal taxes, whichever is earlier.</p> <h3>How to work around it</h3> <p>If you meet the requirements to participate in your employer-sponsored 401(k) toward the end of the year, make sure to set up your account by December 31st. That way, you'll be ready to reduce your taxable income for the current year through your own contributions and those from your employer before their applicable deadline (December 31 and Tax Day or date of tax filing (whichever is earlier), respectively).</p> <h2>2. Forgetting to update contributions</h2> <p>When you set up your 401(k), you have to choose a percentage that will be deducted from every paycheck and put into your plan. It's not uncommon that plan holders set that contribution percentage and forget it. As your life situation changes, such as when you get a major salary boost, marry, or have your first child, you'll find that your contributions may be too big or too small. (See also: <a href="http://www.wisebread.com/5-times-its-okay-to-delay-retirement-savings?ref=seealso" target="_blank">5 Times It's Okay to Delay Retirement Savings</a>)</p> <h3>How to work around it</h3> <p>To keep a contribution level that is appropriate to your unique financial situation, revisit your percentage contribution every year and whenever you have a major life change. Don't forget to also check whether or not you elected an annual increase option &mdash; a percentage by which your contribution is increased automatically each year &mdash; and adjust it as necessary.</p> <h2>3. Missing out on maximum employer match</h2> <p>Talking about contributions, don't forget that your employer may contribute to your plan as well. In a survey of 360 employers, <a href="https://www.shrm.org/resourcesandtools/hr-topics/benefits/pages/bigger-401k-matches.aspx" target="_blank">42 percent of respondents</a> matched employee contributions dollar-for-dollar, and 56 percent of them only required employees to contribute at least 6 percent from paychecks to receive a maximum employer match.</p> <h3>How to work around it</h3> <p>Employers require you to work a minimum period of time before starting to match your contribution. Once you're eligible, meet the necessary contribution to maximize your employer match. One estimate puts the average missed employer contribution at $1,336 per year. This is free money that you can use to make up for lower contribution levels from previous months or years.</p> <h2>4. Sticking only with actively managed funds</h2> <p>When choosing from available funds in their 401(k) plan, account holders tend to focus on returns. There was a time in which actively managed funds were able to deliver on their promise of beating the market and delivering higher-than-average returns. That's why 401(k) savers often choose them.</p> <p>However, passively managed index funds &mdash; funds tracing an investment index, such as the S&amp;P 500 or the Russell 2000 &mdash; have consistently proven that they can beat actively managed funds. Over the five past years, only 39 percent of active fund managers were able to beat their benchmarks, which is often an index. That's why over the same period, investors have taken $5.6 billion out of active funds and dumped $1.7 trillion into passive funds.</p> <h3>How to work around it</h3> <p>Find out whether or not your 401(k) offers you access to index funds. Over a long investment period, empirical evidence has shown that index funds outperform actively managed funds. Review available index funds and choose the ones that meet your retirement strategy. (See also: <a href="http://www.wisebread.com/3-steps-to-getting-started-in-the-stock-market-with-index-funds?ref=seealso" target="_blank">3 Steps to Getting Started in the Stock Market With Index Funds</a>)</p> <h2>5. Chasing high returns instead of lower costs</h2> <p>When reading the prospectus of any fund, you'll always find a disclaimer warning you that past returns aren't a guarantee of future returns. So, why are you holding onto those numbers so dearly? As early as 2010, investment think tank Morningstar concluded that a fund's annual expense ratio is the only reliable indicator of future investment performance, even better than the research firm's well-known star rating.</p> <p>And guess what kind of funds have the lowest annual expense ratios? Index funds! For example, the Vanguard 500 Index Investor Shares fund [Nasdaq: <a href="https://finance.yahoo.com/quote/VFINX?p=VFINX" target="_blank">VFINX</a>] has an annual expense ratio of 0.16 percent, <a href="https://personal.vanguard.com/us/funds/snapshot?FundId=0040&amp;FundIntExt=INT" target="_blank">which is 84 percent lower</a> than the average expense ratio of funds with similar holdings. If your 401(k) gives you access to lowest cost <a href="https://personal.vanguard.com/us/funds/snapshot?FundIntExt=INT&amp;FundId=0540" target="_blank">Vanguard Admiral shares</a>, you would shed down that annual expense ratio even further to 0.05 percent.</p> <h3>How to work around It</h3> <p>When evaluating a fund in your 401(k), look for comparable alternatives, including index funds. To maximize the growth of your nest egg, chase funds with lower annual expense ratios and investment fees. Regardless of their performance (which tends to be better anyway!), you'll minimize your investment cost. (See also: <a href="http://www.wisebread.com/watch-out-for-these-5-sneaky-401k-fees?ref=seealso" target="_blank">Watch Out for These 5 Sneaky 401(k) Fees</a>)</p> <h2>6. Not periodically rebalancing your portfolio</h2> <p>Even when choosing index funds, you still need to periodically adjust your portfolio. Let's assume that you follow this investment recommendation from Warren Buffett for your 401(k): <a href="http://www.berkshirehathaway.com/letters/2013ltr.pdf" target="_blank">90 percent in a low-cost index fund</a>, and 10 percent in government bonds. (See also: <a href="http://www.wisebread.com/the-5-best-pieces-of-financial-wisdom-from-warren-buffett?ref=seealso" target="_blank">The 5 Best Pieces of Financial Wisdom From Warren Buffett</a>)</p> <p>Depending on the market, your portfolio allocation may be way off as early as one quarter. If the S&amp;P 500 were to have a huge rally, you may now be holding 95 percent of your 401(k) in the index fund. That would be much more risk that you may be comfortable with, so you would need to take that 5 percent and put it back into government bonds. On the other hand, holding 85 percent in government bonds would make you miss your target return for that year. Forgetting to <a href="http://www.wisebread.com/the-most-important-thing-youre-probably-not-doing-with-your-portfolio?ref=internal" target="_blank">rebalance your portfolio</a> once a year when necessary is one easy way to derail your saving strategy.</p> <h3>How to work around it</h3> <p>Many 401(k) plans offer an automatic annual rebalancing feature. Review the fine print of this feature with your plan and decide whether or not it's suitable for you. If your plan doesn't offer an automatic rebalancing feature, choose a date that makes the most sense to you and set it as your day to rebalance your portfolio every year.</p> <h2>7. Taking out 401(k) loans</h2> <p>Treating your 401(k) as a credit card is a bad idea for several reasons. Doing this:</p> <ul> <li>Creates additional costs, such as origination and maintenance fees;<br /> &nbsp;</li> <li>Becomes due in full within 60 days of separating from your employer;<br /> &nbsp;</li> <li>Turns into taxable income when not paid back, triggering potential penalties from the IRS and state and local governments; and<br /> &nbsp;</li> <li>May quickly turn into a bad habit: <a href="http://www.nytimes.com/2013/08/17/your-money/one-dip-into-401-k-savings-often-leads-to-another.html" target="_blank">25 percent of 401(k) borrowers</a> go back for a third or fourth loan, and 20 percent of them take out at least five loans.</li> </ul> <h3>How to work around it</h3> <p>Treat your 401(k) as a last-resort source of financing. There are very few instances when you should <a href="http://www.wisebread.com/this-is-when-you-should-borrow-from-your-retirement-account?ref=internal" target="_blank">borrow from your retirement account</a>. Make sure that you go through all of your credit options and include the opportunity cost of foregoing retirement savings, including potential taxes and penalties, when comparing a 401(k) loan against another type of loan.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/damian-davila">Damian Davila</a> of <a href="http://www.wisebread.com/7-traps-to-avoid-with-your-401k">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-face-4-ugly-truths-about-retirement-planning">How to Face 4 Ugly Truths About Retirement Planning</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/why-warren-buffett-says-you-should-invest-in-index-funds">Why Warren Buffett Says You Should Invest in Index Funds</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-inventor-of-the-401k-has-second-thoughts-about-your-retirement-plan-now-what">The Inventor of the 401K Has Second Thoughts About Your Retirement Plan — Now What?</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-signs-your-retirement-is-on-track">8 Signs Your Retirement Is on Track</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/15-retirement-terms-every-new-investor-needs-to-know">15 Retirement Terms Every New Investor Needs to Know</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement 401(k) actively managed funds contributions employer match employment fees index funds loans rebalancing Thu, 23 Mar 2017 09:00:15 +0000 Damian Davila 1909973 at http://www.wisebread.com Here's What Happens If You Don't Pay Your Taxes http://www.wisebread.com/heres-what-happens-if-you-dont-pay-your-taxes <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/heres-what-happens-if-you-dont-pay-your-taxes" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-153832691.jpg" alt="Woman learning what happens if she doesn&#039;t pay taxes" title="" class="imagecache imagecache-250w" width="250" height="142" /></a> </div> </div> </div> <p>As Tax Day looms, you may wonder how high the tax man should rank on your list of creditors. Is it better to postpone paying taxes in order to <a href="http://www.wisebread.com/fastest-way-to-pay-off-10000-in-credit-card-debt?ref=internal" target="_blank">pay off credit card debt</a>, or to keep the electricity running?</p> <p>Here's what happens if you're not able to pay everything you owe to the IRS, as soon as you owe it.</p> <h2>1. You'll Pay a Penalty</h2> <p>Assuming that you filed your tax return on time but didn't pay your full tax bill, the IRS will charge you <a href="https://www.irs.gov/taxtopics/tc653.html" target="_blank">0.5% of what you owe</a>, every month until you pay, up to 25% of the debt. So if you still owed $1,000 when you filed your return on April 18, you'll owe an additional $5 a month.</p> <p>It's a very good idea to file your return on time, or file an extension, even if you won't be able to pay right away &mdash; fees increase if you haven't filed a return by Tax Day. Also, filing on time might get you a break: The IRS says that if you file for an extension or file your return, you may <a href="https://www.irs.gov/uac/things-you-should-know-about-filing-late-and-paying-penalties" target="_blank">not have to pay the penalty</a> if you've paid 90% of what you owe by Tax Day.</p> <h2>2. You'll Pay Interest</h2> <p>The IRS isn't going to lend you that money interest-free. The rate on money you owe to the IRS is <a href="https://www.irs.gov/pub/irs-news/ir-16-159.pdf" target="_blank">currently 4%</a>.</p> <h2>3. You'll Get a Bill</h2> <p>If you haven't filed your tax return at all, the government will kindly figure out how much you owe for you and send a bill. Actually, not so kindly, because the way they'll calculate your taxes, you'll end up owing more than you would have if you'd done them yourself. The government doesn't have access to all your financial records, so they may not give you <a href="https://www.irs.gov/businesses/small-businesses-self-employed/filing-past-due-tax-returns" target="_blank">credit for your deductions</a>.</p> <p>Even if you file your return, if you owe money, eventually you'll start getting mail about it from the IRS.</p> <h2>4. You Could Get a Lien on Your Home</h2> <p>If you don't pay those bills (or show the IRS they're wrong and you don't owe), the next step is putting a lien on your property &mdash; usually your house, if you own one. This tends to happen if you owe $10,000 or more and haven't worked out a plan with the IRS to pay it off.</p> <p>A <a href="https://www.irs.gov/businesses/small-businesses-self-employed/understanding-a-federal-tax-lien" target="_blank">federal tax lien</a> is a legal document that says if you sell your property, the proceeds will go toward your debt before you see a dime. This could make it tough or impossible to take out a mortgage on your home, and <a href="http://info.courthousedirect.com/blog/bid/309664/How-Do-Liens-Affect-Real-Estate-Sales" target="_blank">complicate the deal</a> if you try to sell your home.</p> <p>The tax lien will be reported on your credit report and will <a href="http://www.experian.com/blogs/ask-experian/tax-liens-in-your-credit-report/" target="_blank">stay there for seven years</a>, even after you pay the debt. This can make it impossible to get approval for new credit cards or other loans.</p> <h2>5. You Could Lose Your Passport</h2> <p>Thanks to a new law, the State Department can now revoke your passport (or refuse to issue you one) if you owe the IRS <a href="http://transportation.house.gov/uploadedfiles/joint_explanatory_statement.pdf" target="_blank">$50,000 or more in delinquent debt</a>. So if your plan was to skip out on your debt, you won't get far.</p> <h2>6. The Government Could Seize Your Property</h2> <p>It's called a levy, and it means the <a href="https://www.irs.gov/businesses/small-businesses-self-employed/levy" target="_blank">IRS can take your Chevy</a>. Or your Ford, or your RV, or boat, or house. They can even garnish your wages or take what you owe right out of your checking account. If you think owing the mob is bad, try owing the federal government.</p> <p>In the IRS' defense, it doesn't start seizing citizens' property out of the blue. You'll get lots of mail warning that you're in default, telling you that you have the right to a hearing, and explaining that next, they're coming for your stuff. Don't ignore that mail.</p> <h2>7. You Could Pay Larger Penalties</h2> <p>If the IRS determines that your failure to pay in full was due to negligence or fraud, the penalties could <a href="https://www.law.cornell.edu/uscode/text/26/6662" target="_blank">climb to 20%</a> or <a href="https://www.irs.gov/irm/part25/irm_25-001-006.html" target="_blank">even 75%</a>.</p> <h2>8. You Could End Up in Court</h2> <p>The IRS would rather work with you to get the money. But if you're recalcitrant or showed intent to defraud them, they can charge you with one or more felonies. In 2008, they <a href="http://www.nytimes.com/2008/01/14/business/14tax.html?ref=business" target="_blank">charged actor Wesley Snipes</a> with conspiracy to defraud the government for refusing to pay taxes on $38 million in earnings. Snipes had joined a movement of tax deniers who interpret various laws to mean that paying taxes is not required.</p> <h2>9. You Could Go to Prison</h2> <p>Most people who owe the IRS don't do time. But Snipes did. He was convicted of three misdemeanors related to his failure to file tax returns and <a href="http://www.forbes.com/sites/robertwood/2015/04/10/10-notorious-tax-cheats-wesley-snipes-hired-tax-professionals-but-still-was-jailed/#4edc682341e2" target="_blank">served three years</a>. It could have been worse: Snipes was acquitted for the felonies he had been charged with.</p> <h2>10. Maybe Nothing Will Happen</h2> <p>If the government doesn't have record of your earnings &mdash; for instance, if you work for cash and don't get dividends on investments &mdash; the IRS may never notice if you don't file a tax return and don't pay a dime. But flaking on filing is definitely a bad idea: Not only will you live in fear of all the consequences mentioned above, but if your earnings are modest, you could be missing out on the <a href="https://www.irs.gov/credits-deductions/individuals/earned-income-tax-credit" target="_blank">earned income tax credit</a> and other benefits of being on record as a wage earner, like the ability to get a mortgage loan.</p> <p>It's a good idea to keep in touch with the IRS if you owe them money. In fact, if you file your tax return, pay what you can, and then call them up, they may <a href="https://www.irs.gov/individuals/online-payment-agreement-application" target="_blank">work out a payment plan</a> with you, or even settle for <a href="https://www.irs.gov/individuals/offer-in-compromise-1" target="_blank">less than the full amount</a> you owe.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/carrie-kirby">Carrie Kirby</a> of <a href="http://www.wisebread.com/heres-what-happens-if-you-dont-pay-your-taxes">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-5"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-to-do-when-your-tax-preparer-makes-a-mistake">What to Do When Your Tax Preparer Makes a Mistake</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-lessons-from-tax-day-to-remember-for-next-year">7 Lessons From Tax Day to Remember for Next Year</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-to-do-if-you-have-a-tax-lien-on-your-house">What to Do If You Have a Tax Lien On Your House</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-important-tax-changes-for-2016">5 Important Tax Changes for 2016</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/why-tax-day-is-april-15-and-other-weird-financial-deadlines">Why Tax Day Is April 15 and Other Weird Financial Deadlines</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Taxes court debt fees IRS jail late payments liens owing money passports payment plans penalties seize property tax day tax returns Fri, 03 Mar 2017 11:00:14 +0000 Carrie Kirby 1898661 at http://www.wisebread.com 7 Things You Should Never Do With Your Travel Rewards Credit Cards http://www.wisebread.com/7-things-you-should-never-do-with-your-travel-rewards-credit-cards <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/7-things-you-should-never-do-with-your-travel-rewards-credit-cards" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-637964304.jpg" alt="" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Getting the most out of a travel rewards credit card isn't as easy as it might seem. Sure, the basic premise is simple: Rewards credit cards dole out points when you make a purchase with your card. Then you redeem them for free or discounted travel. But there are plenty of pitfalls to watch out for. (See also: <a href="http://www.wisebread.com/get-started-with-travel-rewards-in-4-simple-steps?ref=seealso" target="_blank">Get Started With Travel Rewards With These Simple Steps</a>)</p> <p>Before you put too much effort into earning travel rewards, it's crucial to know what you're getting into. If you don't, you could end up with expired or useless points, or worse, debt.</p> <p>If you're angling to use credit card rewards to your advantage &mdash; not the card issuer's &mdash; here are some mistakes to avoid along the way.</p> <h2>1. Missing the Minimum Spending Requirement for a Bonus</h2> <p>Most top travel rewards credit cards offer a <a href="http://www.wisebread.com/5-best-sign-up-bonuses-for-airline-miles-credit-cards?ref=internal" target="_blank">sign-up bonus</a> for hitting a minimum spending requirement within a specific length of time when you first get the card. For example, you might earn 50,000 points if you spend $4,000 within the first three months of card ownership. (See also: <a href="http://www.wisebread.com/top-5-travel-reward-credit-cards?ref=seealso" target="_blank">Best Travel Rewards Credit Cards</a>)</p> <p>If you should happen to fall short, however, you'll never see that bonus hit your account. That's true whether you're $20 short or $200 short. Unless you meet the minimum spending requirement in its entirety, you're out of luck.</p> <p>If you get a new card for the bonus, make sure you're prepared to spend enough to hit the minimum with ease. You should also remember that the clock generally starts ticking on the day you're approved for the card &mdash; not the day you received it or activated it. So, if your card takes 10 days to show up in the mail, that's 10 days less you have to meet the spending requirement. If you're unsure of the exact date you were approved, call the number on the back of your card and ask. (See also: <a href="http://www.wisebread.com/5-smart-ways-to-meet-a-rewards-card-minimum-spending-requirement?ref=seealso" target="_blank">5 Smart Ways to Meet a Rewards Card Minimum Spending Requirement</a>)</p> <h2>2. Earning Loyalty Points You Can't Use</h2> <p>Racking up Hyatt Gold Passport points for a trip to Denmark sounds like a genius plan until you realize there are no Hyatt properties in the entire country. And earning Southwest Rapid Rewards points sounds smart &mdash; that is, until you realize Southwest doesn't even fly out of your home airport.</p> <p>This might sound crazy, but it happens all the time. Believe it or not, some people get so excited about earning points or miles that they don't even check whether they can use them. (See also: <a href="http://www.wisebread.com/choose-the-best-travel-rewards-credit-card-with-this-guide?ref=seealso" target="_blank">Choose the Best Travel Rewards Credit Card With This Guide</a>)</p> <p>Before you sign up for a <a href="http://www.wisebread.com/5-best-co-branded-airline-credit-cards?ref=internal" target="_blank">co-branded card</a> that only works with a specific loyalty program, it's crucial to figure out if those points will leave you better off. If you're unsure or want more flexibility, steer clear of co-branded cards and instead choose a <a href="http://www.wisebread.com/top-5-travel-reward-credit-cards?ref=internal" target="_blank">flexible travel rewards card</a> that lets you use points for multiple airlines and hotel chains.</p> <h2>3. Carrying a Balance</h2> <p>Paying interest on your credit card charges is never a good idea, but that's especially true if you're using the card to earn rewards. Since rewards credit cards typically charge higher interest rates than non-rewards cards, your misguided pursuit of points and frequent flyer miles can leave you worse off than if you had a <a href="http://www.wisebread.com/the-best-low-interest-rate-credit-cards?ref=internal" target="_blank">low-interest credit card</a>.</p> <p>Before you chase credit card rewards, you should be <a href="http://www.wisebread.com/fastest-way-to-pay-off-10000-in-credit-card-debt?ref=internal" target="_blank">debt-free</a>. Even better, you should track your spending to make sure you're on track with your goals.</p> <h2>4. Forgetting About Annual Fees</h2> <p>While many <a href="http://www.wisebread.com/5-best-cash-back-credit-cards?ref=internal" target="_blank">cash back credit cards</a> don't come with annual fees, the same cannot be said about travel rewards cards. Some <a href="http://www.wisebread.com/the-5-best-premium-credit-cards?ref=internal" target="_blank">excellent premium cards</a> come with annual fees as steep as $450, while more basic cards cost anywhere from $59 to $95.</p> <p>Before you sign up for a rewards card, make sure you know about fees and when they come due. You should also make sure you're going to extract enough value from the card to make the experience worth it. (See also: <a href="http://www.wisebread.com/simple-guide-to-evaluating-a-credit-card-with-an-annual-fee?ref=seealso" target="_blank">Simple Guide to Evaluating Whether a Credit Card With an Annual Fee Is Worth It</a>)</p> <h2>5. Letting Your Points Expire</h2> <p>Some points expire if you let them sit idle for too long, while others never expire. Of course, the burden falls squarely on you to keep up with expiration policies and deadlines. If you fail to plan and don't ensure your points stay active, you could see thousands of points disappear overnight.</p> <p>Before you get too wrapped up in any rewards program, make sure you know what it takes to keep your points active. Some airline programs will wipe out your point haul after 12&ndash;24 months of inactivity, but you can keep your account active by using your co-branded credit card for a purchase or transferring points.</p> <p>Either way, make sure you know the rules and stay organized enough to follow them. (See also: <a href="http://www.wisebread.com/4-best-tools-for-tracking-your-rewards-miles?ref=seealso" target="_blank">4 Best Tools for Keeping Track of Your Rewards</a>)</p> <h2>6. Not Using the Right Card for Your Goals</h2> <p>A friend of mine had been using her only rewards card &mdash; a cash back card &mdash; to save up points for an international flight that normally costs around $1,500. At the rate she was going (earning around 30,000 points per year), it would easily take her five years to earn that round-trip ticket &mdash; and that's only if the price didn't surge in the meantime.</p> <p>Once I realized this, I guided her toward the <a href="http://www.wisebread.com/chase-sapphire-preferred-review?ref=internal" target="_blank">Chase Sapphire Preferred&reg; card</a> for its generous sign up bonus. Once she earned the bonus, she would have more than enough points to transfer to the United MileagePlus program to pay for the same international ticket right away. Overnight, her strategy morphed from one that would take up to five years to a plan that would culminate in just a few short months. (Keep in mind the card has an annual fee.)</p> <p>(See also: <a href="http://www.wisebread.com/how-i-redeemed-a-12000-family-vacation-with-credit-card-rewards-in-2-months?ref=seealso2" target="_blank">How I Redeemed a $12,000 Family Vacation With Credit Card Rewards in Two Months</a>)</p> <p>The bottom line: If you have a specific goal in mind, you can save time and heartache by optimizing your rewards from the start. (See also: <a href="http://www.wisebread.com/5-steps-to-getting-a-free-or-close-to-free-vacation-in-9-months-or-less-with-credit-cards?ref=seealso" target="_blank">5 Steps to Getting a Free (or Close to Free) Vacation Quickly With Credit Cards</a>)</p> <h2>7. Overspending to Earn More Rewards</h2> <p>Because rewards credit cards dole out points based on your spending, it can be tempting to spend more to earn more rewards. This is especially true when certain bonus categories come into play. If you can earn five times the points on a brand-new flat screen television, for example, you might feel inclined to buy one, even if you didn't need it.</p> <p>But if your rewards goal is truly getting ahead, you should think long and hard before buying anything out of the ordinary. After all, spending money you wouldn't spend otherwise won't help you save money in the long run.</p> <p>Remember, the best credit card rewards strategy is a simple one: When you use your cards for bills you were going to pay anyway, you'll truly be rewarded. But if you use credit card rewards to justify a spending spree, you're not really helping yourself. (See also: <a href="http://www.wisebread.com/7-credit-card-reward-tips-many-people-dont-follow?Ref=seealso" target="_blank">7 Credit Card Reward Tips Many People Don't Follow</a>)</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/holly-johnson">Holly Johnson</a> of <a href="http://www.wisebread.com/7-things-you-should-never-do-with-your-travel-rewards-credit-cards">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-5"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/9-ways-to-use-travel-rewards-cards-to-get-free-trips">How to Use Travel Rewards Cards to Get Free Trips</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/dont-make-these-6-credit-card-sign-up-bonus-mistakes">Don&#039;t Make These 6 Credit Card Sign-Up Bonus Mistakes</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/12-expert-tips-for-redeeming-miles-for-free-travel">12 Expert Tips for Redeeming Miles for Free Travel</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/once-in-a-lifetime-experiences-ive-earned-with-credit-card-rewards">Once-In-A-Lifetime Experiences I&#039;ve Earned With Credit Card Rewards</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-myths-about-credit-cards-that-wont-go-away">5 Myths About Credit Cards That Won&#039;t Go Away</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Credit Cards bonuses cash back fees miles Mistakes points rewards spending requirements travel Wed, 01 Mar 2017 10:30:34 +0000 Holly Johnson 1898658 at http://www.wisebread.com Yes, You Need Home Title Insurance — Here's Why http://www.wisebread.com/yes-you-need-home-title-insurance-heres-why <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/yes-you-need-home-title-insurance-heres-why" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-470522924.jpg" alt="Man learning why he needs home title insurance" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>The closing costs on a typical mortgage loan can seem overwhelming. According to Zillow, the <a href="http://www.zillow.com/mortgage-learning/closing-costs/" target="_blank">closing costs</a> for a $150,000 home can range from $3,000 to $7,500, with an average falling around $3,700.</p> <p>So when you discover that you'll also have to pay for something called title insurance when closing your loan, you might wonder if this fee is necessary, or if title insurance is something you can skip.</p> <p>Here's the short answer to those questions: Yes, title insurance matters. And no, mortgage lenders won't let you skip it.</p> <h2>What Title Insurance Does</h2> <p>To sum up, title insurance protects you from clerical errors, mistakes in property records, or unpaid taxes involving the home you are purchasing.</p> <p>Maybe the past owner of the home hasn't paid property taxes in years. If you buy the home, the government agencies levying those taxes will come after <em>you</em> to pay them &mdash; unless you have title insurance.</p> <p>Or, maybe a past seller bought the home with a sister. Maybe these two siblings had a falling out, and the brother sold the home without telling his sister. That spurned relative could come after you for the profits she says she is owed from the sale &mdash; again, unless you have title insurance protecting you.</p> <p>Title insurance is like most other forms of insurance: You pay for it in the hopes that you'll never need to use it.</p> <h2>What Title Insurance Doesn't Do</h2> <p>Title insurance covers the window of time before your ownership of the home, protecting you from certain claims and legal fees that were beyond your control. Even though it extends backward through time indefinitely, coverage ceases on the date you take ownership. If you decide not to pay property taxes once you're the official homeowner? That's on you.</p> <h2>A Two-Part Transaction</h2> <p>Title insurance will be included as part of your third-party closing fees, charges levied by companies that work with your mortgage lender to originate your home loan.</p> <p>There are actually two parts to title insurance. First, the title company providing your insurance will search all the property records associated with the home you are buying to make sure there aren't any unpaid taxes, long-lost heirs, or charges of fraud associated with the property. This is known as the title search.</p> <p>Once the search is complete, and the title insurer is confident that the seller has legal ownership and the right to sell the home, it will create two title policies. The lender's title policy protects your lender from anyone claiming rights against your property. It also reimburses your lender if you lose your house to a title claim and are no longer making your mortgage payment. All lenders will require that you pay for a lender's title insurance policy.</p> <p>The second part of title insurance is the part that actually protects you: the owner's policy. This policy protects you from the above mentioned unreleased liens, people who might claim ownership of your home, or public record errors that were missed during the title search. Most lenders will also require that you purchase an owner's policy, too.</p> <h2>How Much Will It Cost?</h2> <p>Title insurance is not cheap. In fact, it ranks as one of the biggest fees buyers will pay when closing a mortgage loan.</p> <p>The cost of this insurance does vary quite a bit, usually depending on where you live. But you can generally expect to pay a one-time premium between $1,000 to $3,000 for title insurance.</p> <p>Most lenders will select a title insurance company for you. But you aren't required to work with that company. You can shop around for lower rates. This is usually a smart move: You can often shave hundreds off the cost of title insurance by shopping around.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/yes-you-need-home-title-insurance-heres-why">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-3"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-smart-ways-to-lower-your-monthly-mortgage-payment">4 Smart Ways to Lower Your Monthly Mortgage Payment</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/should-you-pay-your-mortgage-off-early">Should You Pay Your Mortgage Off Early?</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/3-ways-to-finance-a-tiny-house">3 Ways to Finance a Tiny House</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-surprising-things-lenders-check-besides-your-credit-score">4 Surprising Things Lenders Check Besides Your Credit Score</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/2-things-you-must-know-about-the-new-mortgage-rules">2 Things You Must Know About the New Mortgage Rules</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Insurance Real Estate and Housing closing costs fees homeownership mortgages property liens property taxes protection public records title insurance Fri, 03 Feb 2017 10:30:32 +0000 Dan Rafter 1885598 at http://www.wisebread.com 8 Smart Money Moves to Make in the New Year http://www.wisebread.com/8-smart-money-moves-to-make-in-the-new-year <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/8-smart-money-moves-to-make-in-the-new-year" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/piggy_bank_savings_545348368.jpg" alt="Piggy bank for making smart money moves in the new year" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Maybe your New Year's resolution is to budget more consistently, save more, or spend less. Maybe it's investing a portion of your disposable income wisely. Whatever your financial objectives are, setting money-minded goals is important to ensure a more prosperous 2017 and beyond. Here are a few ways to build and improve upon the foundation you've already laid.</p> <h2>1. Enlist Professional Help</h2> <p>Guess what? Everybody gets themselves into a financial pickle every now and then &mdash; myself included &mdash; and it's not the end of the world. Don't beat yourself up about it. You can fix this.</p> <p>If you overdid it during the holidays (or even all of last year), identify your missteps so you don't repeat them in the future, and you can formulate a plan of resolve. If finances aren't your forte (though you should make them your forte ASAP), consider consulting an expert.</p> <h2>2. Learn to Cook</h2> <p>I know a staggering number of people who can't cook. Like, if they tried to sauté a few shrimp, you'd probably walk away from the dinner table with hepatitis. I don't understand it &mdash; which is why I harp on those who avoid the kitchen to get in there and learn. Refusing to prepare yourself fresh, delicious meals is just plain lazy.</p> <p>The other problem with not being able to cook is that the alternative is expensive and very unhealthy. For starters, you're at the mercy of the microwave or what's already prepared at takeouts and restaurants &mdash; and more times than not, that food is loaded with fats and sodium. Second, you're paying about three-to-one for ready-to-eat dishes (unless you're buying the worst of the worst from the freezer section) versus what you could make in your own home using store-bought ingredients.</p> <p>Cooking shows on the Food Network and recipes off the Internet taught me a lot of kitchen basics (like how to make sure a chicken breast is thoroughly cooked so I don't poison myself). A friend of mine recently hired a cook from Craigslist to come into his home once a week to help him learn how to prepare standard meals, like pork chops, veggies, and rice. There are plenty of resources available to help you learn how to cook, too. Find them, graduate to adulthood by making your own dinner, and then count all the cash you're saving. Your mama will be so proud.</p> <h2>3. Cut the Fat From Your Expenses</h2> <p>Along with cutting the fat from your diet, you also should look for ways to trim it from your budget. End memberships and subscriptions you don't use, and call your service providers to renegotiate your deals. I shaved $15 per month off my mobile phone bill last year by calling to update my 12-year-old plan. Also, investigate your bank accounts for erroneous fees; you may be paying for something on a recurring basis that you totally forgot about. Commit to shopping less, and saving more when you do need or want to spend. I don't buy anything without a coupon or discount code. Positive personal finance is a way of life.</p> <h2>4. Increase Your Retirement Savings</h2> <p>If there's extra money in your budget at the end of the month, spend it on your future by increasing your retirement savings. If your employer matches 401K contributions, you should at least be maxing them out. If you don't have an employer-sponsored plan, look into a Roth IRA as an alternative.</p> <h2>5. Consider a Balance Transfer</h2> <p>If you're underwater on your credit cards, consolidating that debt onto a <a href="http://www.wisebread.com/the-best-0-balance-transfer-credit-cards?ref=internal" target="_blank">card that allows balance transfers</a> could save you a decent chunk of change. Just make sure you check the fees and pay it off during the promotional period, otherwise interest can revert much higher, making repayment even more expensive. (See also: <a href="http://www.wisebread.com/which-balance-transfer-credit-card-is-the-best-for-you?ref=seealso" target="_blank">Which Balance Transfer Credit Card Is Best for You?</a>)</p> <h2>6. Lower Your Investment Fees</h2> <p>If your finances are already fairly on track, there are still ways you can put more money back into your bank account &mdash; like lowering your investment fees if you play the stock market.</p> <p>Take a closer look at your portfolio, and re-evaluate to see how you can restructure so fees aren't costing you significant amounts in the long run. Now might also be a good time to <a href="http://www.wisebread.com/3-steps-to-getting-started-in-the-stock-market-with-index-funds?ref=internal">consider investing in index funds</a>, the benefits of which include broader market exposure, low operating expenses, and low portfolio turnover.</p> <h2>7. Research How the Trump Administration Will Affect Your Finances</h2> <p>Things are going to change, perhaps significantly, once Trump takes office. The new tax code overhaul alone could affect your finances one way or another. But there are other effects to consider, like rising interest rates, which may reduce the pool of potential buyers of a home sale if you're planning to sell in the near future. The repeal of Obamacare may also alter your budget, depending on what health care alternatives you have. Nonetheless, I recommend researching how the new administration's fiscal plans will trickle down to your own pocket. Hopefully you'll come out ahead, but you should prepare yourself, either way.</p> <h2>8. Just Say No</h2> <p>Make 2017 the year that less is more. Buy fewer retail items, dine out less frequently, limit your alcohol consumption, and learn how to say no to recreational activities that aren't in your budget. You don't have to do or have it all to feel satisfied. Rather, you'll start to experience satisfaction in other ways, like not living paycheck to paycheck because of frivolous spending. You deserve better; give it to yourself.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/mikey-rox">Mikey Rox</a> of <a href="http://www.wisebread.com/8-smart-money-moves-to-make-in-the-new-year">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-6"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/12-personal-finance-skills-everyone-should-master">12 Personal Finance Skills Everyone Should Master</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/looking-on-the-bright-side-how-to-find-a-silver-lining-in-the-current-financial-crisis">Looking On The Bright Side: How to Find A Silver Lining In The Current Financial Crisis</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-financial-decisions-youll-never-regret">8 Financial Decisions You&#039;ll Never Regret</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-money-mistakes-to-stop-making-by-50">5 Money Mistakes to Stop Making by 50</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-manage-your-money-during-a-spousal-separation">How to Manage Your Money During a Spousal Separation</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance Frugal Living advice balance transfers budgeting fees financial help investments learning to cook New Year resolutions retirement Mon, 16 Jan 2017 10:00:10 +0000 Mikey Rox 1873728 at http://www.wisebread.com 5 Things Your Financial Planner Isn't Telling You About Retirement http://www.wisebread.com/5-things-your-financial-planner-isnt-telling-you-about-retirement <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-things-your-financial-planner-isnt-telling-you-about-retirement" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/couple_financial_planner_485026010.jpg" alt="Couple learning what their financial planner isn&#039;t telling them about retirement" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Personal finances can get complicated fast, which is why many people seek the assistance of a financial adviser. Especially when considering your retirement, it can give you extra confidence to know that a professional is helping ensure you make the best decisions for your future.</p> <p>It may therefore come as a surprise to know that historically, financial advisers haven't been required to put your best interests first. But in April 2016, the Labor Department finalized a new rule that requires financial advisers who deal with retirement accounts to respect what's known as the fiduciary standard, meaning they <em>have</em> to put the client's interests first.</p> <p>Before, financial advisers just had to follow the suitability standard, which meant they were only required by law to provide clients a &quot;suitable&quot; plan, which might satisfy your basic requirements but isn't necessarily the best plan for you.</p> <p>When they're doing their job well, a financial adviser can help you invest your money wisely and plan for retirement. But it's always important to do your own research and stay informed. When it comes to retirement, here are some things your financial planner may not have brought to the table.</p> <h2>1. Fees May Grow With Your Assets</h2> <p>Financial advisers often charge based on a percentage of the assets they are managing for you. Unfortunately, the fees compound over time, just as your returns do. By the time you're ready to retire, that could mean you're paying thousands of dollars a year in fees.</p> <p>As your nest egg grows, keep an eye on your fees and renegotiate your rates, so you don't end up paying too much for their services.</p> <h2>2. Retiring Abroad Can Halve Living Costs</h2> <p>If you're feeling tight on funds for retirement and you're not sure how to make your money go further, there's an important alternative that you should be considering. Retiring abroad can <a href="http://www.wisebread.com/retire-for-half-the-cost-in-these-5-countries?ref=internal">cut your retirement costs in half</a>. (See also: <a href="http://www.wisebread.com/x-exciting-world-cities-you-can-afford-to-retire-in?ref=seealso" target="_blank">4 Exciting World Cities You Can Afford to Retire In</a>)</p> <p>However, many U.S.-based financial advisers are entirely focused on domestic retirement and that's what they'll help you plan for. Plus, it may be in their interest to keep you close so you don't decide to move your funds elsewhere.</p> <p>If retiring abroad is something you want to truly consider, seek an expert who brings that specialty expertise to the table. You should also do your own research, including finding online forums for expatriates to answer your questions about retiring abroad. (See also: <a href="http://www.wisebread.com/5-incredible-places-to-retire-abroad-that-anyone-can-afford?ref=seealso" target="_blank">5 Incredible Places to Retire</a>)</p> <h2>3. Travel and Retirement Go Hand in Hand</h2> <p>If you've written off the idea of traveling as being too expensive, and these views are being reaffirmed by a conservative financial planner, it's time to re-evaluate. Retirement affords you great flexibility and the price of travel may be within closer reach than you realize.</p> <p>See also: <a href="http://www.wisebread.com/how-one-woman-retired-at-60-and-traveled-the-world?ref=seealso2" target="_blank">How One Woman Retired at 60 and Traveled the World</a></p> <p>Costs in many countries are often much lower than at home, and if you plan carefully &mdash; especially if you're able to start socking away money early in your career &mdash; your monthly budget may be able to absorb the extra expense of plane tickets, accommodations abroad, food, and entertainment. <a href="http://www.wisebread.com/top-5-travel-reward-credit-cards?ref=internal" target="_blank">Rewards credit cards</a> can help you <a href="http://www.wisebread.com/9-ways-to-use-travel-rewards-cards-to-get-free-trips" target="_blank">earn free travel</a>, too.</p> <p>See also: <a href="http://www.wisebread.com/how-to-travel-full-time-for-17000-a-year-or-less?ref=seealso2" target="_blank">How to Travel Full-Time for $17,000 a Year (or Less!)</a></p> <h2>4. An HSA Could Lower Your Health Care Costs</h2> <p>If you have a high-deductible health insurance plan, you may be eligible for a Health Savings Account. As with an IRA, HSA contributions are tax-free and they grow tax-free. You can leave money in the account for years and if you withdraw the funds to pay for qualified health care costs, you will still not pay taxes on the money. If you have a balance at age 65 and want to use it for nonmedical expenses, you can, but the withdrawals will be taxable. (See also: <a href="http://www.wisebread.com/how-an-hsa-saves-you-money?ref=seealso" target="_blank">How an HSA Saves You Money</a>.)</p> <p>Keep in mind that only people enrolled in qualifying high-deductible health care plans are eligible. But if you're one of them, an HSA could be an important part in reducing your health expenses during retirement.</p> <h2>5. You May Be Able to Ditch Your Life Insurance</h2> <p>Having a life insurance policy is useful if someone else will be financially hurt when you die. However, depending on your particular situation, you may no longer have dependents after you retire. Or you may have investments and pensions that pay 100% to the surviving spouse. In that case, your spouse won't suffer financially from your death and you probably don't need life insurance.</p> <p>There are a lot of variables to consider when planning for retirement, and a financial planner can clarify your options. But while a financial planner can be a helpful resource, they aren't the ultimate authority on what's best for you. Stay informed and choose what's best for you and your family.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/nick-wharton">Nick Wharton</a> of <a href="http://www.wisebread.com/5-things-your-financial-planner-isnt-telling-you-about-retirement">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-ways-travel-in-retirement-keeps-you-young">6 Ways Travel in Retirement Keeps You Young</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/retire-for-half-the-cost-in-these-5-countries">Retire for Half the Cost in These 5 Countries</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-keys-to-an-early-retirement">4 Keys to an Early Retirement</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-almost-anyone-can-afford-to-retire-in-mexico">How Almost Anyone Can Afford to Retire in Mexico</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/if-youre-lucky-enough-to-receive-a-pension-here-are-6-things-you-need-to-do">If You&#039;re Lucky Enough to Receive a Pension, Here Are 6 Things You Need to Do</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement expats fees fiduciary financial advisers financial planners health care life insurance living abroad retiring overseas travel Tue, 10 Jan 2017 11:00:09 +0000 Nick Wharton 1870053 at http://www.wisebread.com Are Your Assets Costing You Too Much? http://www.wisebread.com/are-your-assets-costing-you-too-much <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/are-your-assets-costing-you-too-much" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_daydreaming_money_481974106.jpg" alt="Woman learning if her assets are costing her too much" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>The more assets, the merrier is generally a good philosophy. But there are times when assets can actually be a drain on your financial wellbeing. Some assets cost a lot to possess and don't bring you much in return.</p> <p>Consider whether these common assets are worth their weight.</p> <h2>Your Home</h2> <p>A home can be one of your biggest assets. It can also be one of your biggest financial enemies. Ideally, you are making payments on your home, building equity, and increasing your net worth as you go. But often, homeowners find that their monthly mortgage payments are hindering their ability to make ends meet. To make matters worse, home upkeep and repairs, electricity, and other utilities may be costing you more than you bargained for. Homeownership is a great goal, but don't buy a home if it will make your life more challenging financially.</p> <h2>Your Cash</h2> <p>It may seem crazy to say that good old cash can work against you. But if you have a lot of it and there's inflation, over time it will lose value. It's great to have a healthy dose of cash on hand, but at a certain point it becomes smarter to invest your money in something with a higher rate of return. If you have large quantities of cash in bank accounts that provide a low interest rate, chances are you are making a financial mistake.</p> <h2>Your Car</h2> <p>You can count an automobile toward your net worth, but you can virtually guarantee it's going to decline in value over time. Add in the cost of maintenance, gas, and insurance, and it's likely that a car is a true drain on your finances. But you need a car to get around, so it's best to look at the true cost of ownership before buying. This means taking into account fuel mileage, reliability history, and the cost of parts and labor.</p> <h2>Your Collectible Items</h2> <p>You've got a Van Gogh hanging in your living room. There's a Mickey Mantle rookie card in your man cave. Your jewelry collection would make Elizabeth Taylor envious. All of these valuable items are nice to possess, until you take into account the expense of owning them. From storage to insurance to the cost of restoration, high-end collectibles can be a financial headache. For example, according to a Wall Street Journal report, managing an art collection could cost you between 1% and 5% of the value of the pieces annually. You may cash in big time if you ever sell these items, but the cost of ownership is high and may not be worth it.</p> <h2>Your Investments</h2> <p>It might seem backward to think of your investments as a drain on your finances, but it can happen if you're not investing in the right way. Are you investing in things that will grow in value over time, or in low-risk things that may be outpaced by inflation? Do you own a property that's costing money to maintain but not bringing in revenue? Are you paying a hefty amount in fees and commissions? Are you paying a high-priced broker or accountant to manage things even though you can probably do it on your own?</p> <h2>Your Life Insurance Policies</h2> <p>Many people don't think of life insurance as an asset, but it can be under certain circumstances. Of course, it's only a good asset for you if you believe the eventual benefit will outweigh the cost. Many life insurance policies are simply not very good &mdash; costly premiums, and low payouts.</p> <h2>Your Intangible Assets</h2> <p>Sometimes you have assets that don't really bring you any monetary gain, but may cost you money to obtain or possess. One example of this is a copyright or patent. These are things that may require upfront costs in the form of research and legal assistance, but the financial gain is uncertain. A patent has no real value until you sell it or develop a product based on it. When you acquire these types of assets, it's important to come up with some plan for monetization. Otherwise, they are simply a vehicle for sunk costs.</p> <h2>Your Inventory</h2> <p>If you run a business, any product you've manufactured but have yet to sell is considered an asset. But if you have too much inventory, that could be problematic. Inventory costs money to store. Some items might become obsolete or spoil, and result in no revenue. On the flip side, too little inventory can result in a lost sale. Smart business owners become skilled in inventory management, in which they can properly forecast sales to ensure the proper amount of product on hand.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/tim-lemke">Tim Lemke</a> of <a href="http://www.wisebread.com/are-your-assets-costing-you-too-much">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/big-purchases-you-should-make-by-30-40-and-50">Big Purchases You Should Make by 30, 40, and 50</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-credit-repair-mistakes-that-will-cost-you">8 Credit Repair Mistakes That Will Cost You</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-quiet-millionaire-parts-4-5-building-your-net-worth">The Quiet Millionaire: Parts 4 &amp; 5 - Building Your Net Worth</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-is-your-net-worth">What Is Your Net Worth?</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-high-is-your-score-on-the-most-important-measure-of-wealth">How High Is Your Score on the Most Important Measure of Wealth?</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance assets Cars cash collections costs expense fees housing life insurance net worth Fri, 06 Jan 2017 11:00:12 +0000 Tim Lemke 1864688 at http://www.wisebread.com 6 Ways to Invest When You're In Debt http://www.wisebread.com/6-ways-to-invest-when-youre-in-debt <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/6-ways-to-invest-when-youre-in-debt" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/plant_tree_stump_462868653_0.jpg" alt="Learning ways to invest when you&#039;re in debt" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>You know you need to begin investing to save for the future, but you still have some debt to pay off. It is possible to take care of both at the same time?</p> <p>The short answer is that yes, you can pay down debt and invest at the same time. In many ways, this is a personal choice. If you despise debt and sleep better at night knowing that you're paying it off as quickly as possible, that's fine. But if you can tolerate paying off debt at a slower rate and investing some money, you may end up ahead of the game financially over the long-term.</p> <p>Here are some things to consider when deciding how much to invest and how much debt to pay off.</p> <h2>1. Minimum Payments First, Then Invest</h2> <p>While it's certainly possible to pay down debt and invest at the same time, it's never a good idea to invest if you can't make your minimum payments first. If you don't make minimum payments, you'll be on the hook for higher interest, late fees, and penalties. Not to mention that your credit score will take a big hit. Consider investing your money only if you know you can set money aside and still make at least the minimum payments on debt.</p> <h2>2. Tackle the High Interest Debt</h2> <p>If your debt is tied up in credit cards and other things that come with high interest rates, you may want to hold off on investing until that's under control. Credit cards have interest rates in the double digits, and you're unlikely to generate an investment return that outpaces that. Once that high-interest debt is down to zero, then investing becomes much more possible. (See also: <a href="http://www.wisebread.com/fastest-way-to-pay-off-10000-in-credit-card-debt?ref=seealso">Fastest Way to Pay Off 10K in Credit Card Debt</a>)</p> <h2>3. Use Your 401K Plan</h2> <p>If you work for an employer that offers a 401K plan or something similar, it's worth taking part even if you have some debt. That's because most employers will match contributions up to a certain amount. So it's like getting free money. Any contributions you make to a 401K are deducted from your taxable income, so there are great tax advantages for taking part. Invest what you can while still paying down your debt. Then, when your debt is paid off, increase your contributions.</p> <h2>4. Look at Low-Cost Mutual Funds and ETFs</h2> <p>If most of your debt is tied up in low-interest things like student loans or mortgages, it's okay to set aside some money to invest in things that will generate a good return. In fact, there are many financial planners that argue against paying off low-interest loans early if market returns are higher than interest rates. Over time, stocks have averaged returns of about 7%, which is much higher than interest rates these days. To get this type of return, consider looking at mutual funds and exchange-traded funds that have low fees and are designed to track the performance of the overall stock market.</p> <h2>5. Find Investments That Trade Without a Commission</h2> <p>If you're trying to invest and pay down debt at the same time, there's a good chance you may only be able to invest a little at a time. That's okay, but it's important to be aware of the fees and commissions you pay every time you buy and sell. If you're only buying a few shares of a stock but paying $8 in a commission, for example, that fee is cutting into a sizable percentage of your investment. Fortunately, many discount brokerages allow you to trade certain types of investments without paying a commission. Fidelity offers fee-free investing on all iShares ETFs, ETrade offers many commission-free ETFs from WisdomTree and Global X, and TD Ameritrade offers more than 100 ETFs with no transaction fees.</p> <h2>6. Automate as Much as Possible</h2> <p>Finding the balance between investing and paying off debt requires some discipline. If you have some debt but are considering investing, determine in advance what your ideal balance is. Then, set up automatic monthly transfers of money into an investment account, and automate your bills as well. If you get extra money or a raise, consider tweaking the balance accordingly. When you automate, it takes the guesswork out, allows you to stay consistent, and makes it easier to do other financial planning.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/tim-lemke">Tim Lemke</a> of <a href="http://www.wisebread.com/6-ways-to-invest-when-youre-in-debt">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-4"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-money-moves-to-make-as-soon-as-you-conquer-debt">7 Money Moves to Make as Soon as You Conquer Debt</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/why-warren-buffett-says-you-should-invest-in-index-funds">Why Warren Buffett Says You Should Invest in Index Funds</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-3-rules-every-mediocre-investor-must-know">The 3 Rules Every Mediocre Investor Must Know</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-ways-to-prevent-a-debt-spiral">5 Ways to Prevent a Debt Spiral</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/funding-your-401k-when-youre-in-debt">Funding your 401(k) when you&#039;re in debt</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Debt Management Investment 401k ETFs fees interest rates market returns mutual funds saving money Wed, 23 Nov 2016 11:30:07 +0000 Tim Lemke 1838645 at http://www.wisebread.com 8 Credit Repair Mistakes That Will Cost You http://www.wisebread.com/8-credit-repair-mistakes-that-will-cost-you <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/8-credit-repair-mistakes-that-will-cost-you" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_shocked_credit_card_183185522.jpg" alt="Woman making credit repair mistakes that will cost her" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Rebuilding a poor credit score can seem like an overwhelming task, especially as bad credit puts you in a rotten financial situation. With bad credit you get much higher interest rates, and can often get completely denied when you apply for a new account. But if you don't go about repairing your credit in the right way, you may actually be doing more harm than good. Here are the top eight credit repair mistakes too many people make every day.</p> <h2>1. Closing Accounts With a Zero Balance</h2> <p>We all hear horror stories of accounts being used by identity thieves long after we stopped using them. But with today's identity theft protections, and credit card companies footing the bill for fraud, that's no longer a concern. However, these cards on your file, although not being used, do count toward your credit score.</p> <p>Let's say you have three credit cards, each with a $12,000 limit. One card is at a zero balance, one has $1,500 on it, and the other has $5,500. You decide to transfer the balance of $1,500 to the card with $5,500 and close the two empty accounts. Huge mistake. Before, you had $36,000 in available credit, and were using on $7,000 of it. That's just over 19% of your <a href="http://www.wisebread.com/this-one-ratio-is-the-key-to-a-good-credit-score?ref=internal">credit utilization</a>. Now, you have only $12,000 in available credit, and are utilizing 58% off your available credit. You have the same amount of debt, but your credit score just took a hit because of your huge debt to credit availability ratio.</p> <p>Instead of closing old accounts, use them for smaller purchases each month, and pay off the balances in full. It will keep your credit score in check.</p> <h2>2. Hiring a Credit Repair Company</h2> <p>You've seen the ads. You've heard the testimonials. They offer to clean up your credit (for a monthly fee, of course), and say they will raise your score by hundreds of points. Well, if you believe that, someone has a bridge to sell you, too.</p> <p>Most of these credit repair businesses are in the business of making as much money from you as possible, and will stretch out the process for months, or even years. One such technique they use to do this is called &quot;jamming,&quot; and it can seriously damage your reputation. The problem is, &quot;jamming&quot; actually does work&hellip;for a short while.</p> <p>Here's how it works: When you (or your credit repair agency) sends a dispute to a credit bureau, it will be forwarded to a vendor for verification. And under the rules of the Fair Credit Reporting Act, the agency has to review and respond to every dispute within 30 days. The &quot;jamming&quot; scam perverts this system by inundating the bureaus with challenges of every item on your credit report. It's an overflow of paperwork, and the items don't get addressed in time, so they disappear from your credit report. But, they come back. The vendor who reported it will keep doing so, and until it is properly addressed, it will never disappear. But the credit repair agency looks like it is doing the job, and you keep on paying them to scrub items that keep coming back.</p> <h2>3. Lying About Your Credit Issues</h2> <p>This is not the time to start getting creative with your explanations, or just plain lying about what is in your credit report. If you have a legitimate issue with something that is in your report, such as a late payment you know you made on time, then by all means fight tooth-and-nail to dispute it. But if you did make the payment late &mdash; sorry, you did that. It's on you, regardless of the situation. You can ask, or even plead, for the vendor who reported it to scrub it from their records, but lying won't get you very far. You could even get into some legal trouble, which is not going to do you any favors at all.</p> <h2>4. Paying Collection Fees</h2> <p>Collection agencies are built on a model of intimidation, scare tactics, bullying, and fear. If you do get a call from a collection agency, it will not be pleasant. You may be told you owe $50, the remaining balance on a &quot;charged-off&quot; (also known as delinquent) account. Hey, it's only $50, you have it available now, so you pay it off. Wrong. Dead wrong.</p> <p>Although it will get the collection agency off your back, it won't do anything to fix your credit score. In fact, it's an admission of guilt, and can impact your account by more negative points than simply not paying it off at all. As far as a credit report is concerned, paying a $50 fee on a charged-off account has the same impact as paying off a $50,000 fee. Your credit will suffer, because you have a permanent record that you are unreliable. Do whatever you can to work this debt out without paying the collection fee.</p> <h2>5. Consolidating Too Much Debt</h2> <p>When it comes to financial issues and credit scores, variety is definitely the spice of life. Lenders in general like to see a selection of different credit cards, loans, and other accounts, with small, manageable balances that are paid each month. You may very well have a hard time keeping track of all these smaller payments, and decide to put them all onto one card to save time and money. That is a mistake.</p> <p>If you close those accounts, your credit score is affected, as outlined earlier. If you leave them all open, but have eight cards at zero and one that is almost maxed out, that is also going to hurt your credit score. Lenders love revolving balances, but other lenders may look at you as a risk if you have eaten up 90% of your available credit on just one card. You need to spread it around. Plus, without strict discipline, you could find yourself using the other cards again, and bury yourself under more monthly debts.</p> <h2>6. Eliminating Every Single Debt</h2> <p>After getting burned with credit cards and loans, the first thing you want to do is swear them off completely. But wait.&nbsp;A credit score is affected by many things, but one major contributing factor is how you pay your debts each month. If you have small debts and pay on time, you are low risk, and highly attractive. You'll have a credit history. If you have nothing in your credit report, lenders will give you a very wide berth. They don't have a resume of your spending habits to go from, and that is like letting someone rent your house without doing a background check. So once you've done the smart thing and paid off all your debt, pick one or two <a href="http://www.wisebread.com/top-5-travel-reward-credit-cards?ref=internal">credit cards with solid rewards</a>, use it to pay for stuff you meant to buy, and pay it off entirely when the bill is due. That will keep your credit active, healthy, and you'll get a few bucks back from your <a href="http://www.wisebread.com/5-best-cash-back-credit-cards?ref=internal">cash rewards credit cards</a>, too. (See also: <a href="http://www.wisebread.com/the-best-5-credit-cards-for-groceries?ref=seealso">Use These Credit Cards When You Grocery Shop</a>)</p> <h2>7. Not Keeping Accurate Documentation</h2> <p>In this day and age, there is no excuse for not maintaining records of your correspondence with collection agencies, credit card companies, and other lenders. If you don't already have one, buy yourself a basic scanner and keep a copy of every letter you send (in this case, physical letters are much better than emails), or even take photographs. Send any letters, such as credit disputes, via certified mail, and indicate that you want a return receipt. Keep a file on your computer as a back up, and a physical folder that you can access at any time. You want to be completely buttoned up, and ready to bring out evidence of your payments and conversations at a moment's notice.</p> <h2>8. Finally&hellip; Doing Nothing</h2> <p>Yes, having bad credit sucks. But choosing to ignore it, hoping it will sort itself out over time, is even worse. You do not have to accept a bad credit score. You do not have to spend a lifetime paying for small mistakes you made. You can fix it, and you can do it by yourself, or find a legitimate professional to help you out.</p> <p>First and foremost, you should be checking your credit report often. <a href="http://www.anrdoezrs.net/click-2822544-10809829-1462225929000">Credit Karma</a> is a great place to start, and it's totally free. Also check out <a href="https://www.annualcreditreport.com/index.action">AnnualCreditRepot.com</a>, which is also free, and covers the three big reporting bureaus &mdash; TransUnion, Equifax, and Experian. When you see a mistake, no matter how small, get in contact with the lender and fix it. You have the power, but you have to act upon it.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/paul-michael">Paul Michael</a> of <a href="http://www.wisebread.com/8-credit-repair-mistakes-that-will-cost-you">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-10"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/heres-why-you-shouldnt-freak-out-if-you-miss-a-payment-due-date">Here&#039;s Why You Shouldn&#039;t Freak Out If You Miss a Payment Due Date</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-financial-mistakes-that-wont-hurt-your-credit-score">5 Financial Mistakes That Won&#039;t Hurt Your Credit Score</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-after-the-holidays-moves-your-credit-score-will-thank-you-for">5 After the Holidays Moves Your Credit Score Will Thank You For</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/pay-these-6-bills-first-when-money-is-tight">Pay These 6 Bills First When Money Is Tight</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-steps-to-getting-excellent-credit">5 Steps to Getting Excellent Credit</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance collections consolidating credit history credit repair credit repair companies credit score fees late payments Mistakes zero balances Tue, 22 Nov 2016 11:30:08 +0000 Paul Michael 1837740 at http://www.wisebread.com 8 Signs an ETF Isn't Right for You http://www.wisebread.com/8-signs-an-etf-isnt-right-for-you <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/8-signs-an-etf-isnt-right-for-you" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/little_boy_money_71664445.jpg" alt="Finding signs that an ETF isn&#039;t right for you" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>In recent years, exchange traded funds, or ETFs, have become a common part of many retirement portfolios. They work much like mutual funds, but can be traded throughout the day and often have lower costs. But how do you know if an ETF makes sense for you? After all, there are <em>literally thousands </em>of ETFs available, all with unique characteristics and goals.</p> <p>Most financial advisers suggest that investors keep things simple by finding ETFs that track major benchmark indexes, such as the S&amp;P 500. They should generally have low fees and fit in with other investments in your portfolio, too.</p> <p>Here are some key ways to determine if an ETF isn't right for you.</p> <h2>1. It Has High Fees</h2> <p>Anytime you purchase a mutual fund or ETF, it's important to note how much of your money is going to fund managers and other expenses. High fees can take a big cut out of your overall earnings, and there's little evidence that ETFs with higher fees perform better than cheaper ones. It's possible to own very solid ETFs with expense ratios at 0.1% or lower. If your ETF's expense ratio is significantly higher, it may be time to invest in something else.</p> <p>&quot;Anything above 0.3%, and it gets a little excessive,&quot; says Justin Halverson of Great Waters Financial in Minneapolis.</p> <h2>2. You Don't Understand It</h2> <p>As ETFs have grown in popularity, they've also grown in number &mdash; and complexity. That means there are many &quot;boutique&quot; ETFs with very unique philosophies and goals. There are ETFs that zero in on very specific industries or market sectors. There are ETFs that do elaborate things involving leverage, or track obscure indexes. For most investors, these ETFs are complicated and unnecessary.</p> <p>&quot;You can get as fancy as you want with it,&quot; said Charlie Harriman, a financial adviser at Cloud Investments LLC in Huntsville, Alabama. &quot;We usually advise that investors stick with the staples and things they know.&quot;</p> <h2>3. It's Too Risky</h2> <p>Some of the unique ETFs mentioned above are designed to generate big returns in some cases, but there's a huge downside if markets go south. Some ETFs use leverage to potentially amplify returns by two or three times an underlying index &mdash; thus, they can amplify losses during downturns. The average investor who is saving for the long term does not need to take on additional risk with ETFs that are designed for short-term trading.</p> <h2>4. It's Too Conservative</h2> <p>It's important that your investments match up with your financial goals. This means that if you're a young investor, you probably don't need a bonds ETF, or an ETF with low-growth dividend stocks. These types of ETFs may help you avoid a big loss during a market downturn, but you'll never be able to amass the kind of wealth you need in retirement unless you get a bit more aggressive.</p> <h2>5. Its Holdings Overlap With Other Things You Own</h2> <p>Diversification is great, but sometimes you can go overboard. When you invest in an ETF, you are getting exposure to a wide range of stocks, and there may be other ETFs with similar holdings. For instance, an ETF that tracks the overall stock market may own a good chunk of Apple stock, and a tech-focused ETF may own a lot of Apple stock as well. So it may not necessarily make sense to own both. Be sure to check the list of holdings for each ETF you own in order to avoid redundancy in your portfolio.</p> <h2>6. You Can't Trade It for Free</h2> <p>Many discount brokerage firms allow account holders to trade certain ETFs without paying a commission. For example, Fidelity allows fee-free trades for all ETFs offered by iShares. By eliminating this commission, you could save upward of $7 on every stock purchase, which is a lot of money if you make frequent purchases. This is particularly advantageous for younger investors who prefer to invest a little at a time rather than one large sum.</p> <p>If you're looking at an ETF to buy but it's not available without paying a commission, consider switching to a similar ETF that is. If your broker does not offer commission-free trades on ETFs, maybe that's a good excuse to switch brokers.</p> <h2>7. It Doesn't Track an Index Very Well</h2> <p>Many ETFs are designed to track a specific benchmark index, such as the S&amp;P 500 or Russell 2000. If they do what they are supposed to, your returns will be closely aligned with the performance of these indexes. But some ETFs do it better than others. It's easy to find an ETF's &quot;tracking error,&quot; which measures the difference between an ETF's performance and the benchmark it's supposed to be tracking. Most ETFs will have a tracking error of less than a tenth of a percent.</p> <p>&quot;If you see a high tracking error, this could work out to an investor's benefit, but it may also be to their detriment,&quot; Halverson says.</p> <h2>8. It's Not Traded Very Heavily</h2> <p>The only way an ETF is sold is if there is a buyer. Likewise, you can't buy a stock if no one is selling. With most ETFs, it's easy to buy and sell because there is a large trading volume &mdash; meaning that there are plenty of buyers and plenty of sellers. And when there is a high volume, there is rarely a big spread between the &quot;bid&quot; and the &quot;ask&quot; prices. But what happens if an ETF has a low trading volume?</p> <p>Halverson said this could mean that the ask and bid prices are far apart, and it may be hard to complete a sale at the price you want. Most investors, he said, will find it easier and better financially to trade ETFs that are more commonly traded.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/tim-lemke">Tim Lemke</a> of <a href="http://www.wisebread.com/8-signs-an-etf-isnt-right-for-you">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-reasons-you-shouldnt-invest-like-warren-buffett">7 Reasons You Shouldn&#039;t Invest Like Warren Buffett</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-ways-to-invest-when-youre-in-debt">6 Ways to Invest When You&#039;re In Debt</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/10-questions-to-ask-before-you-sell-a-stock-or-a-fund">10 Questions to Ask Before You Sell a Stock or a Fund</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-10-weirdest-etfs-you-can-buy">The 10 Weirdest ETFs You Can Buy</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-money-moves-to-make-as-soon-as-you-conquer-debt">7 Money Moves to Make as Soon as You Conquer Debt</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment ETFs exchange traded funds fees funds retirement risk trading Thu, 03 Nov 2016 09:30:25 +0000 Tim Lemke 1825852 at http://www.wisebread.com The Problem With Car Title Loans http://www.wisebread.com/the-problem-with-car-title-loans <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/the-problem-with-car-title-loans" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/car_coins_money_49234302.jpg" alt="Learning the problem with car title loans" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Your electric bill is due in three days and you don't have enough cash in your checking account to cover it. Or maybe a big credit card bill just arrived in your mailbox and you don't have enough dollars to even afford the minimum required payment.</p> <p>Should you take out a car title loan, a way to turn the title of your vehicle into quick cash?</p> <p>Most consumer advocates say &quot;no.&quot; Car title loans, they say, come with exorbitant interest rates. And the companies making them target consumers whom they hope won't pay them back on time. This way, the lenders who originate these loans make extra money on penalties and fees.</p> <p>Read on to learn more about car title loans &mdash; and why you should avoid them.</p> <h2>How Title Loans Work</h2> <p>Car title loans are fairly simple. You provide a lender with the title of your car as collateral. You can then usually borrow up to 50% of the assessed value of your car. To not incur any extra fees, you usually must pay the loan back in 30 days.</p> <p>If you don't pay the loan back, your lender will have your car repossessed. It's why most title lenders require that you drop off a copy of your car keys when you take out the loan.</p> <h2>Exorbitant Interest Rates</h2> <p>The biggest negative with car title loans are the sky-high interest these lenders charge. According to the Federal Trade Commission, title loans typically carry an <a href="https://www.consumer.ftc.gov/articles/0514-car-title-loans">annual percentage rate of 300%</a>. A report by the Center for Responsible Lending in 2013 summed it up this way: If you borrowed $1,000 for a month from a title lender, you'd typically pay $250 in interest. That is exorbitant.</p> <h2>Predatory Lending</h2> <p>Critics lump title lenders in with the originators of payday loans, saying both types of lenders are <em>predatory</em>. The Center for Responsible Lending, for instance, says that title lenders target consumers who are less likely to pay their loans back on time. Lenders like this because they can then force these consumers to refinance or &quot;roll over&quot; their loans several times, paying more fees and interest each time. When these consumers finally do pay back their loans, the title lenders have earned plenty of profit. (See also: <a href="http://www.wisebread.com/10-terrible-loans-you-should-avoid?ref=seealso">10 Terrible Loans You Should Avoid</a>)</p> <p>The center said in its 2013 report that title loan borrowers renew their loans eight times on average, paying an average of $3,391, or nearly three times what they initially borrowed.</p> <p>And if consumers don't renew their loans and simply stop paying? Then title lenders simply take their borrowers' cars and sell them. Either way, the title lenders make a solid profit on their loans.</p> <h2>Car Title Loans Are Big Business</h2> <p>Car title loans generate plenty of money each year. The Center for Responsible Lending reports that each year, car title lenders earn $4.3 billion in fees on loans that total $1.9 billion. Title Max is one of the bigger of these lenders. The company says that since opening in 1998, it has expanded to more than 1,100 locations in the United States.</p> <h2>Fast Cash Alternatives</h2> <p>You know that title loans are a bad deal. But what alternatives do you have if you need fast cash?</p> <p>There are some. Of course, they all come with drawbacks, too. It's not easy to find a great deal when you need money quickly.</p> <p>Your best bet might be to borrow money from family members or friends. Make sure, though, that you pay back these loans quickly. Otherwise, you can easily ruin your relationships.</p> <p>If you can't borrow money from friends or family, there are always credit unions and banks. You can apply for a personal installment loan from these sources. In an installment loan, you'll pay back a portion of your debt every month, with interest, until it is paid off. Banks and credit unions will charge you interest on their loans, but their interest rates will be far lower than the interest you'd pay on a car title loan. The challenge? You might not qualify for one of these loans if your credit is weak. The application process might take time, too, meaning that you might not gain access to the money you need before your other bills come due.</p> <p>You can also turn to your employer for help. Maybe you can secure an advance on your next paycheck that you can use to pay off your upcoming bills. The problem here, of course, is that your next paycheck when it does arrive will be smaller. At the same time, your boss might reject your request, and this can make for an awkward office environment.</p> <p>The truth is, there is no perfect option when you need cash and you need it in a hurry. The best approach is to build up an emergency savings fund that you can tap whenever a financial emergency arises. Financial experts say that you should have at least six months' worth of living expenses saved in one of these funds at all times. (See also: <a href="http://www.wisebread.com/change-jars-and-8-other-clever-ways-to-build-an-emergency-fund?ref=seealso">Change Jars and Other Clever Ways to Build Up an Emergency Fund</a>)</p> <p>That sounds overwhelming, but there's nothing wrong with building up that fund slowly. Deposit what you can each month, even if it's as little as $50. Before long, you'll have grown a solid emergency fund. Then you won't have to worry about title loans or other sources of fast cash.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/the-problem-with-car-title-loans">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-8"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-a-credit-card-cash-advance-costs-you-more-than-a-purchase">How a Credit Card Cash Advance Costs You More Than a Purchase</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-mortgage-secrets-only-your-broker-knows">4 Mortgage Secrets Only Your Broker Knows</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-ways-to-invest-when-youre-in-debt">6 Ways to Invest When You&#039;re In Debt</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-surprising-things-lenders-check-besides-your-credit-score">4 Surprising Things Lenders Check Besides Your Credit Score</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-surprising-ways-revolving-debt-helps-you">5 Surprising Ways Revolving Debt Helps You</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Cars and Transportation borrowing money car title loan fees interest rates lenders predatory loans Fri, 21 Oct 2016 10:00:21 +0000 Dan Rafter 1816945 at http://www.wisebread.com