savings http://www.wisebread.com/taxonomy/term/387/all en-US The Pros and Cons of Keeping All Your Accounts in One Bank http://www.wisebread.com/the-pros-and-cons-of-keeping-all-your-accounts-in-one-bank <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/the-pros-and-cons-of-keeping-all-your-accounts-in-one-bank" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/banking_business_account_finance_economy_concept.jpg" alt="Banking Business Account Finance Economy Concept" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Checking, savings, business, CD, money market, cash reserve, investment &mdash; with so many accounts available to U.S. consumers, should you keep them with a single financial institution? Let's review the pros and cons of keeping all your accounts in one place.</p> <h2>Pros of keeping all your accounts in one place</h2> <p>Here are some reasons why it makes sense to consolidate your accounts.</p> <h3>1. FDIC covers up to $250,000 for each eligible account</h3> <p>The Federal Deposit Insurance Corporation (FDIC) provides coverage of <a href="https://www.fdic.gov/deposit/deposits/faq.html" target="_blank">up to $250,000</a> per eligible account at the same insured financial institution. Covered accounts include checking and savings accounts, money market deposit accounts (MMDAs), and certificates of deposit (CDs).</p> <p>So, as long as each one of your qualifying accounts has a balance under $250,000, it's OK to keep those accounts together at the same financial institution. For example, if you were to have $100,000 each in a CD, checking account, and savings account at the same FDIC-covered bank, you would still be insured. Even though the accounts together equal $300,000, each account has less than $250,000, and the coverage would still apply.</p> <p>To find out if your deposits are insured by the FDIC, use the FDIC's <a href="http://www5.fdic.gov/edie/" target="_blank">Electronic Deposit Insurance Estimator</a> (EDIE).</p> <p>When you add accounts to your portfolio with the same bank, just remember that the FDIC warns consumers that non-deposit investment products, such as mutual funds, annuities, life insurance policies, and stocks and bonds are not insured by the FDIC.</p> <p>Are you a credit union member?</p> <ul> <li> <p>Federally chartered credit unions and those with headquarters in Arkansas, Delaware, South Dakota, Wyoming, or the District of Columbia are insured by up to $250,000 by the National Credit Union Administration (NCUA).</p> </li> <li> <p>State-chartered credit unions may be covered by a state-sponsored or private insurance, so contact your credit union representative for more details about potential insurance of deposits.</p> </li> </ul> <h3>2. Quicker coverage of bounced checks</h3> <p>Having more than one account at the same bank may help you to quickly cover a check or automatic debit or credit transaction with insufficient funds.</p> <p>Some banks may give you a quick heads up early in the morning that an incoming transaction won't clear due to a low balance, giving you time to make a quick deposit. In the event that you have a savings and checking account with the same financial institution, you could quickly cover the cash crunch by transferring funds from the savings to the checking account over the phone or online. (See also: <a href="http://www.wisebread.com/how-to-fix-your-finances-after-missing-a-payment?ref=seealso" target="_blank">How to Fix Your Finances After Missing a Payment</a>)</p> <p>Doing a quick transaction to cover that mistake could prevent the bank from applying overdraft or insufficient funds fees.</p> <h3>3. Access to higher savings interest rates and lower account fees</h3> <p>When you hold a large total of deposits within the same institution, very often you can qualify for better savings rates and reduced account fees. Find out from your financial institution whether or not they offer benefits for consolidating your accounts.</p> <p>Similarly, holding a larger total balance across several investment accounts, such as an IRA or individual investment account, may grant you some breaks on investment fees. Generally, with at least $100,000 in investable assets in the same institution, you should get lower charges on future applicable fees, such as front-end or back-end loads.</p> <p>If you don't meet the necessary thresholds to access better rates and lower fees, ask your financial institution if they'll accept a signed letter of intent to meet those thresholds by a specific date.</p> <h3>4. More personalized service</h3> <p>Maintaining a wide variety of products with the same bank allows the bank to have a better understanding of your financial history, overview of spending habits, and ability to pay back loans. When a financial institution has a more comprehensive view of your finances, then it can help you optimize your finances with more suitable products. For example, keeping several deposit accounts may help you qualify for a personal line of credit with an interest rate lower than that of a credit card.</p> <h2>Cons of keeping all your accounts in one place</h2> <p>Now let's take a look at the disadvantages of consolidating all your accounts under the same roof.</p> <h3>1. Missing out on potentially better deals</h3> <p>By turning your back on other financial institutions, you may develop a case of &quot;financial myopia&quot; in which you don't think about shopping around for better banking options. Sticking to your same brick-and-mortar branch may cause you to miss out on the better annual percentage yield (APY) that online savings accounts often offer.</p> <p>According to the FDIC, as of June 12, 2017, the <a href="https://www.fdic.gov/regulations/resources/rates/" target="_blank">average rate for a deposit account</a> with a balance under $100,000 was 0.06 percent. On the same day, you could find online savings accounts paying a savings rate of up to 1.25 percent for an account of similar size.</p> <h3>2. Potential of losing FDIC coverage</h3> <p>The FDIC coverage limit is $250,000 for each qualifying account. High-earners may run out of options in the same financial institution for opening eligible accounts and risk having a portion of their deposits without FDIC coverage.</p> <h3>3. Higher chance of loss in case of identity theft</h3> <p>Keeping all your eggs in one basket may work against you if a fraudster gets a hold of one of your accounts or cards. Getting access to just one account may grant them access to all of your money! This is particularly true when connecting two or more accounts so that one account covers another when a balance is running too low.</p> <p>If malicious hackers were to get a hold of the password for your bank's online portal, then they would have hit a major jackpot accessing all of your accounts. By spreading your funds across more financial institutions, you lower the chances of a cybercriminal accessing your funds. Of course, this is as long as you don't use the same password for all online portals. (See also: <a href="http://www.wisebread.com/3-sneaky-ways-identity-thieves-can-access-your-data?ref=seealso" target="_blank">3 Sneaky Ways Identity Thieves Can Access Your Data</a>)</p> <h2>The bottom line: Talk with your banker today</h2> <p>If you're thinking about opening more accounts with your current savings institution, it's a great time to sit with a representative and go over your available options. Armed with that information, you'll be in a better position to shop around for better banking options and make a more informed decision.</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/the-pros-and-cons-of-keeping-all-your-accounts-in-one-bank">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/are-you-paying-these-6-unfair-banking-fees">Are You Paying These 6 Unfair Banking Fees?</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/this-post-really-suk-kuks-examining-islamic-finance">This Post Really Suk-kuks: Examining Islamic Finance</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/banks-still-offering-free-checking-and-great-interest-rates">Banks Still Offering Free Checking and Savings with Great Interest Rates</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/12-places-to-keep-your-money-safe-and-growing">12 Places to Keep Your Money Safe — And Growing</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-times-you-shouldnt-rush-to-pay-off-your-mortgage">5 Times You Shouldn&#039;t Rush to Pay Off Your Mortgage</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Banking accounts CDs checking Comparison shopping FDIC financial institutions investments pros and cons rates savings Fri, 16 Jun 2017 08:30:10 +0000 Damian Davila 1963762 at http://www.wisebread.com 4 Retirement "Rules of Thumb" That Actually Work http://www.wisebread.com/4-retirement-rules-of-thumb-that-actually-work <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/4-retirement-rules-of-thumb-that-actually-work" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-451590917.jpg" alt="Learning retirement rules of thumb that actually work" title="" class="imagecache imagecache-250w" width="250" height="142" /></a> </div> </div> </div> <p>Planning for retirement can sometimes feel daunting, but there are ways to temper these worries. Over the years, financial experts have come up with several useful rules of thumb that can help you get your finances organized. To be sure, there is no one-size-fits-all approach to retirement savings, but these strategies are a great place to start.</p> <h2>1. The 50/30/20 rule</h2> <p>You may know Senator Elizabeth Warren for her fiery speeches on and off the floor of the U.S. Senate, but she is also a serial author with 12 books under her belt. Teaming up with her daughter, Amelia Warren Tyagi, Warren provides practical budgeting advice in <a href="http://amzn.to/2pq1gQQ" target="_blank">All Your Worth: The Ultimate Lifetime Money Plan</a>.</p> <p>The golden nugget from Warren's book is the 50/30/20 rule, which suggests that you split your budget into three buckets:</p> <ul> <li>50 percent to pay for must-haves, including rent or mortgage payments, groceries, and minimum debt payments;</li> <li>30 percent to cover non-essentials, such as going to the movies or on vacation; and</li> <li>20 percent to save for retirement, build an emergency fund, and make additional debt payments.</li> </ul> <p>The 50/30/20 rule has become very popular because it strikes a balance between wants and needs, and provides a simple approach to setting your monthly budget. Assuming a monthly paycheck of $2,800 after taxes, you would allocate $1,400 ($2,800 x 50 percent) to needs, $840 ($2,800 x 30 percent) to wants, and $560 ($2,800 x 20 percent) to debt and/or your retirement fund.</p> <h2>2. At least 10 percent of your income to retirement savings</h2> <p>There's another rule of thumb for how much of your income should go specifically toward retirement. According to many financial advisers, you should contribute <em>at least</em> 10 percent of your paycheck to your 401(k), IRA, or workplace savings plan.</p> <p>Why is 10 percent a rule of thumb? One possible explanation is the ease of calculation: Just take out a zero. With a gross monthly paycheck of $3,500, you know that you have to contribute $350 to your retirement account. Easy!</p> <p>A caveat here is that you should be doing this for as long as you are working, starting as soon as possible. Young retirement savers will benefit the most because of compounding interest. The more that you contribute to your retirement account in your early working years, the more time the funds will have to grow.</p> <h2>3. The 90/10 rule from Warren Buffett</h2> <p>In 2013, legendary investor Warren Buffett revealed that he ordered the trustee of his estate to allocate 90 percent of his cash to a very low-cost S&amp;P 500 index fund, and the remaining 10 percent to short-term government bonds. &quot;I believe the trust's long-term results from this policy will be superior to those attained by most investors &mdash; whether pension funds, institutions, or individuals &mdash; who employ high-fee managers,&quot; he concluded. (See also: <a href="http://www.wisebread.com/why-warren-buffett-says-you-should-invest-in-index-funds?ref=seealso" target="_blank">Why Warren Buffett Says You Should Invest in Index Funds</a>)</p> <p>This advice didn't go unnoticed by investors. Between 2011 and 2016, investors took $5.6 billion out of actively managed funds, which attempt to beat the market, and dumped $1.7 trillion into passively managed funds, such as index funds. As the name implies, index funds simply aim to generate a return equal to the index they're tracking, such as the S&amp;P 500, after fees.</p> <p>Putting 90 percent of your retirement savings in a low-cost index fund greatly minimizes your investment costs, since the expense ratios (the annual fees charged to shareholders) are much less than for actively managed funds. This means more money is left in your account to grow, and therefore you increase your chance of hitting your savings target. Some equity index funds have annual expense ratios as low as 0.05 percent, and those tracking the S&amp;P 500 had an average annual return of 8.65 percent over the 2007&ndash;2016 period.</p> <p>As you get closer to retirement age, you may want to consult with a financial professional on how to adjust your portfolio allocation according to your changing needs.</p> <h2>4. The 4 percent rule</h2> <p>After testing a variety of retirement withdrawal rates using historical rates of return, financial planner William Bengen determined that four percent was the highest rate that held up over a period of at least 30 years.</p> <p>Here's how it works: Assuming a $600,000 nest egg, you would withdraw $24,000 in your first year of retirement. In the second year, you would withdraw the same amount plus extra to cover inflation. Assuming an annual rate of inflation of 2.5 percent, your second and third withdrawals would be $24,600 and $25,215, respectively.</p> <p>While the four percent rule is not without critics, nor is it the perfect calculation for everyone, it continues to help retirees plan ahead the size of their withdrawals during their retirement years. Just make sure that once you reach age 70 &frac12;, you meet your required minimum distributions (RMDs) set by the IRS. Some years you may have to withdraw a bit extra beyond your planned four percent to avoid the hefty 50 percent tax penalty for failing to take your scheduled RMD.</p> <h2>The bottom line</h2> <p>These four rules of thumb can give you a leg up on your retirement strategy. However, think of them more as guidelines and not so much as commandments. Every financial situation is different, so make the most of the available information and resources through your employer-sponsored retirement plan. Consult a financial adviser whenever necessary. (See also: <a href="http://www.wisebread.com/who-to-hire-a-financial-planner-or-a-financial-adviser?ref=seealso" target="_blank">Who to Hire: A Financial Planner or a Financial Adviser?</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/4-retirement-rules-of-thumb-that-actually-work">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/8-steps-to-starting-a-retirement-plan-in-your-30s">8 Steps to Starting a Retirement Plan in Your 30s</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/15-retirement-terms-every-new-investor-needs-to-know">15 Retirement Terms Every New Investor Needs to Know</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/stop-making-these-10-bogus-retirement-savings-excuses">Stop Making These 10 Bogus Retirement Savings Excuses</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/are-you-wasting-68000-on-gas">Are You Wasting $68,000 on Gas?</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-are-people-retiring-in-their-30s">How Are People Retiring in Their 30s?!</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement 4% rule 50/30/20 rule compound interest drawdown elizabeth warren index funds passively managed funds rules of thumb savings warren buffet Tue, 09 May 2017 09:00:10 +0000 Damian Davila 1941241 at http://www.wisebread.com 4 Times When Bundling Insurance Doesn't Make Sense http://www.wisebread.com/4-times-when-bundling-insurance-doesnt-make-sense <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/4-times-when-bundling-insurance-doesnt-make-sense" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-486437284.jpg" alt="Learning when bundled insurance doesn&#039;t make sense" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Insurance companies offer a host of ways to reduce the premiums you pay for auto, life, home, and health insurance. If you have a clean driving record, you might qualify for a discount on your auto insurance rates. If you install a security system to protect your single-family home, you might have to pay less for your homeowners insurance. And if you don't smoke, you'll certainly pay a lot less for life insurance.</p> <p>One of the most popular ways to qualify for a discount is to bundle different insurance policies together &mdash; say, your homeowners and auto policies &mdash; from the same insurer. Insurers will give you a discount as a reward for buying more than one policy from them.</p> <p>Bundling is popular. A 2016 story by InsuranceQuotes.com cited a U.S. National Auto Insurance study by J.D. Power and Associates saying that 58% of policyholders bundle their homeowners and auto insurance policies. InsuranceQuotes.com also reported that bundling insurance can save policyholders about 10% off their annual rates, if they land the best bundling deals available.</p> <p>But, there is a catch here, and sometimes taking out life, auto, and homeowners policies with different companies makes the most sense. Even though bundling might sound like the obvious choice for consumers hoping to save money on insurance coverage, there are a few times when bundling actually doesn't result in the biggest financial savings.</p> <h2>You Didn't Shop Around</h2> <p>The best way to nab the lowest rates on insurance is to take the time to shop around with different companies. This is far easier today, with insurers providing online quotes to potential customers.</p> <p>It can be tempting to skip the shopping phase if, for example, your auto insurer offers to provide a bundling discount for your homeowners insurance, too. But resist the temptation to take your insurer's offer until you've shopped around. You might find another insurer that will provide you a policy with a premium low enough to outweigh your first insurer's bundling discount. Armed with a lower quote from a competing insurer, you might even be able to convince your current insurance company to provide you an even bigger discount.</p> <h2>You Have a History of Health Problems</h2> <p>You'll pay far less for life insurance coverage if you have a history of good health. If your past is dotted with serious health issues, you can unfortunately expect your life insurance premiums to be higher. This spotty health history might also make it less financially sound to bundle your life insurance coverage with auto or homeowners insurance. Again, it's especially important to shop around with life insurance providers, especially when you have a complicated health history &mdash; including if you smoke or have a chronic condition.</p> <p>It's also worth noting that you may not want something as important as your life insurance coverage bundled through a company that specializes in say, auto insurance. In that case, it may be worth having it be its own separate policy.</p> <h2>Your Driving Record Isn't Exactly Flawless</h2> <p>Claim an accident on your auto insurance, and you can expect your premiums to soar. Again, it makes sense to shop around with different insurers to find the lowest rates when you are stuck with a spotty driving record.</p> <p>If you instead simply bundle your auto policy with the company that provides your homeowners insurance, you might miss out on lower premiums that will outweigh the bundling discount. Do your homework &mdash; even if it takes time &mdash; to discover if there are other insurers out there willing to give you a bigger break for your past driving mistakes.</p> <h2>You Need Specialized Homeowners Coverage</h2> <p>What if you need your homeowners insurance policy to cover an expensive jewelry collection? What if you need to insure solar panels on your home's roof? This coverage can be complicated, and cost more. Again, when you have such specific needs, if often makes more sense to talk to different insurers than blindly accept your provider's bundling offer.</p> <p>The main point here is that often, bundling will save you the most money. But there are exceptions, and you won't know the savings you might enjoy if you don't first shop around with other providers &mdash; even if your current insurer is promising a bundling discount.</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/4-times-when-bundling-insurance-doesnt-make-sense">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/beware-your-insurance-may-not-cover-these-8-losses">Beware: Your Insurance May Not Cover These 8 Losses</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-times-you-shouldnt-file-an-insurance-claim">7 Times You Shouldn&#039;t File an Insurance Claim</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/is-pay-as-you-drive-auto-insurance-worth-it">Is Pay-As-You-Drive Auto Insurance Worth It?</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/when-should-single-people-get-life-insurance">When Should Single People Get Life Insurance?</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/4-ways-being-a-safe-driver-will-save-you-big-money">4 Ways Being a Safe Driver Will Save You Big Money</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Insurance auto insurance bundling discounts homeowners insurance life insurance policies rates savings Tue, 14 Mar 2017 10:30:18 +0000 Dan Rafter 1905172 at http://www.wisebread.com 3 Reasons to Claim Social Security Before Your Retirement Age http://www.wisebread.com/3-reasons-to-claim-social-security-before-your-retirement-age <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/3-reasons-to-claim-social-security-before-your-retirement-age" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-538053186.jpg" alt="Man claiming social security before retirement age" title="" class="imagecache imagecache-250w" width="250" height="141" /></a> </div> </div> </div> <p>When it comes to Social Security, the usual advice is to hold off on taking benefits as long as possible. While most people could claim benefits as early as age 62, your monthly benefit amount will grow each year that you wait up to age 70. (See also: <a href="http://www.wisebread.com/6-smart-ways-to-boost-your-social-security-payout-before-retirement?ref=seealso" target="_blank">6 Smart Ways to Boost Your Social Security Payout Before Retirement</a>)</p> <p>However, there are some situations where taking benefits as soon as possible may be the better way to go. Here are three such scenarios.</p> <h2>1. You Need the Money</h2> <p>If you can't find a job, or simply don't have enough savings to live on, claiming Social Security benefits at age 62 may be your only option.</p> <p>Just keep in mind that if you do find a job, there are <a href="https://www.ssa.gov/planners/retire/whileworking.html" target="_blank">limits to how much you can earn</a> without impacting your Social Security benefits. In years when you are younger than your &quot;full retirement age&quot; (65&ndash;67, depending on when you were born), for every $2 you earn above $16,920, your Social Security benefits will be reduced by $1.</p> <h2>2. Longevity Doesn't Run in Your Family</h2> <p>One way to evaluate the impact of claiming Social Security benefits at various ages is to run what's known as a break-even analysis.</p> <p>When you claim as early as possible, your monthly benefit amount will be smaller than it would have been if you claimed later. However, the head start that early claiming provides means that if you claim benefits at a later age, even though the monthly amount is higher, it'll take a number of years before you've broken even with the total amount you would have received by claiming earlier.</p> <p>For example, here's a look at a friend's estimated monthly Social Security benefits and how they vary depending on when he claims benefits:</p> <ul> <li>$1,529 if claimed at age 62</li> <li>$2,273 if claimed at his full retirement age of 67</li> <li>$2,873 if claimed at age 70</li> </ul> <p>If he claims benefits beginning at age 62, by the end of the year that he turns 67, he will have received a total of over $100,000. If he waits until age 67 to begin taking benefits, it will take him until approximately age 78 before his accumulated benefits would overtake the total he would have received if he had started taking benefits at age 62.</p> <p>If he didn't expect to live to age 78, it would make sense to claim benefits earlier. Of course, that's a tough call. Even in families when one or both parents die early, some of their kids live far longer.</p> <p>To find out your own estimated Social Security benefits, create an account on the Social Security Administration's website.</p> <h3>Run Your Own Break-Even Analysis</h3> <p>Unfortunately, there isn't an easy way to run your own break-even analysis. The Social Security Administration used to have a calculator on its site designed for this purpose, but took it down because they felt it was encouraging too many people to claim early.</p> <p>One workaround is to run various scenarios with <a href="https://www.calcxml.com/do/ins07" target="_blank">this calculator</a>. As a starting point, enter your &quot;current age&quot; as 62, enter your estimated age of death in the &quot;retirement age&quot; field, enter the annual age-62 benefit amount in the &quot;your current annual income&quot; field (the SSA website lists benefits in monthly amounts, so be sure to multiply by 12), and then use the &quot;annual salary increase&quot; field to enter an estimated inflation rate (Social Security benefits are adjusted for inflation each year; use a relatively low amount &mdash; somewhere between 1% and 2%).</p> <p>Then run the same analysis, but change your &quot;current age&quot; to your full retirement age and change &quot;your current annual income&quot; to the annual amount of your full retirement age benefit.</p> <h2>3. You Have Plenty of Money Already Saved for Retirement</h2> <p>If you have enough money to live on regardless of your Social Security benefits, that may be another reason to take Social Security benefits as early as possible. You could use the money to invest, buy a <a href="http://www.wisebread.com/is-long-term-care-insurance-worth-it?ref=internal" target="_blank">long-term care insurance policy</a>, or buy a <a href="http://www.wisebread.com/term-vs-whole-life-insurance-heres-how-to-choose?ref=internal" target="_blank">life insurance policy</a>.</p> <p>It's true that you should think very carefully before claiming Social Security benefits at age 62. There's a hefty increase in the monthly benefit amount for each year that you wait. And if you're married, keep this in mind: When you die, your spouse will be able to choose to take the higher of their benefit or your benefit. If you had been the higher earner, by waiting as long as possible before claiming your benefit, that will be very helpful to your spouse once you're gone.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/matt-bell">Matt Bell</a> of <a href="http://www.wisebread.com/3-reasons-to-claim-social-security-before-your-retirement-age">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/5-questions-to-ask-before-you-start-claiming-your-social-security-benefits">5 Questions to Ask Before You Start Claiming Your Social Security Benefits</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-american-cities-where-you-can-retire-on-just-social-security">5 American Cities Where You Can Retire On Just Social Security</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-sobering-facts-about-social-security-you-shouldnt-panic-over">5 Sobering Facts About Social Security You Shouldn&#039;t Panic Over</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/6-smart-ways-to-boost-your-social-security-payout-before-retirement">6 Smart Ways to Boost Your Social Security Payout Before Retirement</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/13-crucial-social-security-terms-everyone-needs-to-know">13 Crucial Social Security Terms Everyone Needs to Know</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement benefits full retirement age income longevity savings social security Wed, 01 Mar 2017 10:30:37 +0000 Matt Bell 1898659 at http://www.wisebread.com The Inventor of the 401K Has Second Thoughts About Your Retirement Plan — Now What? http://www.wisebread.com/the-inventor-of-the-401k-has-second-thoughts-about-your-retirement-plan-now-what <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/the-inventor-of-the-401k-has-second-thoughts-about-your-retirement-plan-now-what" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-171328267.jpg" alt="" title="" class="imagecache imagecache-250w" width="250" height="141" /></a> </div> </div> </div> <p>In the early 1980s, the 401K plan was introduced as a potential supplement to the pension plans offered by employers. Now, they are a staple of retirement planning, while pensions are available to fewer workers than ever before.</p> <p>A 401K allows workers to set aside a certain amount of their salary and invest into a variety of mutual funds. Often, companies will match contributions up to a certain amount. These plans can be powerful vehicles for amassing great wealth in retirement, but the founders of these plans recently voiced concerns that the plans are inadequate for many people, and that they were never meant to <em>replace </em>pensions altogether.</p> <p>For sure, 401K plans place more of the savings burden and risk onto the individual than pensions do. And many plans are lousy, with high fees and poor investment choices. So, what to do? Here's how to build that big retirement fund even when you're at the mercy of the 401K.</p> <h2>1. Save Up to the Match, Regardless</h2> <p>You may be annoyed that a 401K is all your employer has to offer, but if the company is offering to match contributions, you'd be a fool not to participate. Even if the plan has lousy mutual funds with high fees, free money is still free money. Most good companies offer at least 50 cents for every dollar you contribute up to a certain amount, and that can add up to a lot of dough over time.</p> <h2>2. Get an IRA</h2> <p>A 401K is not the only vehicle for saving for retirement. Individual retirement accounts, or IRAs, offer some good tax advantages and better flexibility than a 401K. There's no company match for an IRA, but you have the ability to invest in just about anything. That's why many investors will put money in a 401K up to the company match, then put any additional savings in IRAs. Most people can contribute $5,500 annually into an IRA. With a traditional IRA, any money you contribute is deducted from your taxable income. With a Roth IRA, your money is taxed right away but you don't have to pay tax on any gains when you withdraw the money at retirement.</p> <h2>3. Start Early and Have a Long Time Horizon</h2> <p>Despite the flaws of a 401K, it's still very possible to amass a large sum for retirement if you begin investing when you are young and keep it up for a long time. If you enter the workforce when you're 18 and keep saving and investing until retirement age, that means you'll have 45 years to allow your nest egg to grow. In fact, under this scenario, it's possible to retire a millionaire by putting aside less than a few hundred dollars per month.</p> <h2>4. Find the Low-Cost Funds</h2> <p>Even if your 401K plan isn't perfect, you owe it to yourself not to make matters worse by investing in bad funds. Many 401K plans offer mutual funds with high management fees and other expenses, but most also offer low-cost options, including basic S&amp;P 500 Index funds. Find those funds with the lowest fees, so you get to keep more of your money. Look for funds with expense ratios below 0.5%, if possible.</p> <h2>5. Embrace the Power</h2> <p>When an employer offers a pension, it almost always contributes to a pension fund and then hopes that investment returns are enough to meet the obligations they have to employees. So in reality, the only significant difference between a pension and a 401K plan is who is in control. With a 401K plan, you have more control over how you invest. For some people, this is scary. But for others, it's just as scary to leave their financial future in the hands of others.</p> <h2>6. Make a Good 401K Part of Your Job Search</h2> <p>Think about the last time you searched for a job. When you applied and interviewed for positions, did you take the quality of the company's 401K plan into account? Chances are, this was far down the list of concerns, below salary, health benefits, and even vacation time. But imagine if more people turned down job offers because of a lousy 401K plan or a low company match. If more prospective employees voiced concerns about the quality of retirement plans during the hiring process, companies might be more likely to improve their plans.</p> <h2>7. Talk to Your Lawmakers</h2> <p>It's unlikely that the President or Congress can force companies to bring back pensions, but they are the ones who could change 401K plans to make them more attractive. Lawmakers could pass legislation that improves the tax benefits of plans or increases the amount investors are allowed to contribute. They could pressure companies to boost their matching contributions, and require more companies to offer plans to more employees. Lawmakers could also propose new kinds of savings plans managed by the government. At the very least, voicing your concerns about the quality of the 401K as a retirement option could start a conversation on Capitol Hill.</p> <h2>8. Join a Union, If You Can</h2> <p>Much of the erosion of defined benefit plans has coincided with the drop in influence of labor unions in America. According to the AFL-CIO, about 75% of union workers participate in defined benefit plans, compared to about 20% for nonunion workers. But far fewer people are part of unions these days.</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/the-inventor-of-the-401k-has-second-thoughts-about-your-retirement-plan-now-what">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/15-retirement-terms-every-new-investor-needs-to-know">15 Retirement Terms Every New Investor Needs to 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/stop-making-these-10-bogus-retirement-savings-excuses">Stop Making These 10 Bogus Retirement Savings Excuses</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-important-things-to-know-about-your-401k-and-ira-in-2016">5 Important Things to Know About Your 401K and IRA in 2016</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/10-signs-you-arent-saving-enough-for-retirement">10 Signs You Aren&#039;t Saving Enough for Retirement</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-face-4-ugly-truths-about-retirement-planning">How to Face 4 Ugly Truths About Retirement Planning</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement 401k contributions employer match IRA nest egg pensions Roth savings Mon, 13 Feb 2017 10:30:33 +0000 Tim Lemke 1889313 at http://www.wisebread.com Is Pay-As-You-Drive Auto Insurance Worth It? http://www.wisebread.com/is-pay-as-you-drive-auto-insurance-worth-it <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/is-pay-as-you-drive-auto-insurance-worth-it" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_driving_car_540836094.jpg" alt="Woman learning if pay-as-you-drive auto insurance is worth it" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Don't drive much throughout the year? Your wallet may be in luck, in more ways than one. Pay-as-you-drive car insurance plans (also known as usage-based car insurance plans) can provide a money-saving solution for drivers who don't drive often. Each month, your rate will vary based on how much you drive. The less you drive, the more you'll save.</p> <h2>How Does the Plan Work?</h2> <p>These unique auto insurance options work a bit like pay-per-minute cellphone plans, where you're only charged for what you use. In order to accurately determine how much you're driving, you will receive a small wireless device that plugs into your vehicle's OBD-II port. This will alert your insurance company to how many miles you drove, so they can determine your monthly bill.</p> <h2>Who Qualifies?</h2> <p>Pay-as-you-go insurer <a href="http://www.tkqlhce.com/click-2822544-12479902-1459881208000" target="_blank">Metromile</a> estimates that if you drive less than 200 miles per week, you can save money with their pay-per-mile insurance plans. They also found that if you drive less than 5,000 miles a year, you could pay 40%&ndash;50% less than you would with a traditional insurance plan. In fact, they estimate that 65% of drivers are overpaying for their insurance. These types of plans are especially beneficial to drivers who don't drive very often and people who are paying high insurance rates due to their age or credit history.</p> <h2>How the Pricing Works</h2> <p>Once you enroll, you will pay a low monthly base rate, plus a charge per mile of driving. Through Metromile, if you drive more than 150 miles per day (or 250 per day in Washington), you won't be charged for the extra miles above the cap, which means you won't overpay on a long trip. Other factors can also affect your rate, including age, vehicle, and driver history.</p> <h2>How Much Can You Save?</h2> <p>Many drivers will limit their coverage in order to save money when they don't drive often. However, this can end up costing you more in the end if you <em>do</em> get in an accident. Instead, a pay-as-you-drive plan can provide the coverage you need and save you money every month.</p> <p>Some insurers claim that you will save anywhere from 20%&ndash;50% on your premium, and certain providers will even offer an immediate discount just for installing the tracking device to your vehicle's onboard diagnostics port. You can get an accurate idea of how much you can save by comparing your current auto insurance costs to what you would spend using a simple plan, like those that Metromile offers.</p> <p>As an example, we will use Metromile's estimate of $46 per month, which includes a $30 flat monthly rate and 500 miles driven x $0.032 per mile. According to the National Association of Insurance Commissioners, the national <a href="http://www.dmv.org/insurance/average-car-insurance-rates.php" target="_blank">car insurance average</a> rate is just over $900 per year for a single driver. Compared to the $552 per year that you would spend on pay-as-you-drive plans, you'll save about $350 per year if you drive 500 miles per month, on average.</p> <h2>Who Offers It?</h2> <p>Progressive, Allstate, State Farm, Travelers, Esurance, Nationwide, The Hartford, Safeco, American Family, and GMAC are some of the bigger insurance companies that offer these types of plans, but many have additional stipulations. For instance, Progressive also monitors what type of driver you are by also collecting information about how hard you brake, how much you accelerate, and your driving patterns. Insurance companies like Metromile only monitor how many miles you are driving.</p> <h2>Is It Right for You?</h2> <p>Along with deciding whether to sign up for this type of plan, you will also need to find the right insurance provider. Sites like <a href="http://www.carinsurance.com/Articles/pay-as-you-drive-discounts.aspx" target="_blank">carinsurance.com</a> can help you determine what type of discount you can expect, what's measured, and what's available in your state.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/andrea-cannon">Andrea Cannon</a> of <a href="http://www.wisebread.com/is-pay-as-you-drive-auto-insurance-worth-it">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/repair-the-car-or-spend-the-cash">Repair the Car or Spend the Cash?</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/heres-how-a-claim-will-impact-your-car-insurance">Here&#039;s How a Claim Will Impact Your Car Insurance</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-times-when-bundling-insurance-doesnt-make-sense">4 Times When Bundling Insurance Doesn&#039;t Make Sense</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/is-mechanical-breakdown-insurance-worth-it">Is Mechanical Breakdown Insurance Worth It?</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/the-top-10-cheapest-cars-to-insure">The Top 10 Cheapest Cars to Insure</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Cars and Transportation Insurance car insurance mileage pay as you drive premiums rates savings usage based car insurance Mon, 09 Jan 2017 10:30:23 +0000 Andrea Cannon 1869650 at http://www.wisebread.com 15 Retirement Terms Every New Investor Needs to Know http://www.wisebread.com/15-retirement-terms-every-new-investor-needs-to-know <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/15-retirement-terms-every-new-investor-needs-to-know" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/retirement_blocks_73115095.jpg" alt="New investor learning retirement terms" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Congratulations! By starting your retirement fund, you've taken one of the most important steps toward a comfortable retirement. But as a novice investor, you may feel a bit overwhelmed with all the available information, including contribution limits, early penalty fees, and Roth 401Ks. To help you make sense of it all, let's review 15 key terms you should know:</p> <h2>1. 401K</h2> <p>The 401K is the most popular qualified employer-sponsored retirement plan in the U.S. The two most common types of 401K plans are the traditional 401K, to which you contribute with pretax dollars, and the Roth 401K, which accepts contributions with after-tax dollars. Earnings in a traditional 401K grow on a tax-deferred basis (you'll pay taxes on the funds when you withdraw them during retirement) and those in a Roth 401K grow tax-free forever, since you've paid taxes upfront.</p> <h2>2. After-Tax Contributions</h2> <p>Only certain types of retirement accounts, such as Roth 401Ks and Roth IRAs, accept contributions with after-tax dollars. When you contribute to a retirement account with after-tax dollars, your retirement funds grow tax-free forever, since you've already paid Uncle Sam.</p> <h2>3. Catch-Up Contribution</h2> <p>Retirement investors who are 50 and older at the end of the calendar year can make extra annual &quot;catch-up&quot; contributions to qualifying retirement accounts. Catch-up contributions allow older savers to make up for lower contributions to their retirement accounts in earlier years. In 2016 and 2017, catch-up contributions of <a href="https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-catch-up-contributions">up to $6,000</a> (on top of traditional annual contribution limits) are allowed for 401Ks and up to $1,000 for IRAs.</p> <h2>4. Contribution Limits</h2> <p>Every year, the IRS sets a limit as to how much you can contribute to your retirement accounts. In 2016, you can <a href="https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-ira-contribution-limits">contribute up to $5,500</a> ($6,500 if age 50 or over) to traditional and Roth IRAs and <a href="https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-contributions">up to $18,000</a> ($24,000 if age 50 or over) to a traditional or Roth 401K. These annual contribution limits to retirement accounts remain unchanged for 2017. If you exceed your contribution limit, you'll receive a penalty fee from the IRS, unless you take out excess moneys by a certain date.</p> <h2>5. Early Distribution Penalty</h2> <p>To discourage retirement savers from withdrawing funds before retirement age, the IRS imposes an additional 10% penalty on distributions before age 59 &frac12; on certain retirement plans. Keep in mind that you're always liable for applicable income taxes whether you take a distribution from your retirement plan before or after age 59 &frac12;. Under certain circumstances, you're allowed to <a href="http://www.wisebread.com/7-penalty-free-ways-to-withdraw-money-from-your-retirement-account">withdraw money early</a> from a retirement account without the penalty.</p> <h2>6. Fee</h2> <p>You've heard that there is no such thing as a free lunch and no retirement plan is exempt from this rule. There's always a cost for the employer or employee, or both. Always check the prospectus from any fund for its annual expense ratio and any other applicable fee. An annual expense ratio of 0.75% means that for every $1,000 in your retirement account, you're charged $7.50 in fees. And that's assuming that you don't trigger any other fees! (See also: <a href="http://www.wisebread.com/watch-out-for-these-5-sneaky-401k-fees?ref=seealso">Watch Out for These 5 Sneaky 401K Fees</a>)</p> <h2>7. Index Fund</h2> <p>An index fund is a type of mutual fund that tracks of a basket of securities (generally a market index, such as the Standard &amp; Poor's 500 or the Russell 2000). An index fund is a passively managed mutual fund that provides broad market exposure, low investment cost, and low portfolio turnover. Due to its low annual expense ratios, such as 0.16% for the Vanguard 500 Index Investor Shares [Nasdaq: <a href="https://finance.yahoo.com/quote/vfinx">VFINX</a>], index funds have become a popular way to save for retirement. (See also: <a href="http://www.wisebread.com/3-steps-to-getting-started-in-the-stock-market-with-index-funds?Ref=seealso">3 Steps to Getting Started in the Stock Market With Index Funds</a>)</p> <h2>8. IRA</h2> <p>Unlike a 401K, an individual retirement account (IRA) is held by custodians, including commercial banks and retail brokers. The financial institutions place the IRA funds in a variety of investments following the instructions of the plan holders. A traditional IRA accepts contributions with pretax dollars, and a Roth IRA accepts contributions with after-tax dollars. An advantage of using a Roth IRA is that it provides several exemptions to the early distribution penalty.</p> <h2>9. 401K Loan</h2> <p>Some retirement plans allow you to take a loan on a portion of your available balance &mdash; generally, 50% of your vested account balance, or <a href="https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-loans">up to $50,000</a>, whichever is less. While the loan balance is generally due within five years, it becomes fully due within 60 days from separating from your employer. (See also: <a href="http://www.wisebread.com/5-questions-to-ask-before-you-borrow-from-your-retirement-account?ref=seealso">5 Questions to Ask Before You Borrow From Your Retirement Account</a>)</p> <h2>10. Mutual Fund</h2> <p>By pooling funds from several investors, money managers are able to invest in a wide variety of securities, ranging from money market instruments to equities. Investing in a mutual fund enables an individual retirement investor to gain access to a wide variety of investments that she wouldn't necessarily have access to on her own. Depending on its investment strategy, mutual funds can have a wide variety of fees. So, make sure to read the fine print. (See also: <a href="http://www.wisebread.com/4-sneaky-investment-fees-to-watch-for?ref=seealso">4 Sneaky Investment Fees to Watch For</a>)</p> <h2>11. Pretax Contribution</h2> <p>When you contribute to your employer-sponsored retirement account with pretax dollars, you're allowed to reduce your taxable income. For example, if you were to make $50,000 per year and contribute $5,000 to your 401K with pretax dollars, then you would only have to pay applicable income taxes on $45,000! You delay taxation until retirement age when you're more likely to be in a lower tax bracket.</p> <h2>12. Required Minimum Distribution (RMD)</h2> <p>You can't keep moneys in your retirement account forever. At age 70 &frac12;, you generally have to start taking withdrawals from an IRA, SIMPLE IRA, SEP IRA, or 401K. An RMD is the minimum amount required by law that you have take out from your retirement account each year to avoid a penalty from the IRS. You can use of one of these <a href="https://www.irs.gov/retirement-plans/plan-participant-employee/required-minimum-distribution-worksheets">requirement minimum distribution work sheets</a> to calculate your RMD.</p> <h2>13. Rollover</h2> <p>When you separate from your employer, you generally have up to 60 days to transfer moneys in your previous retirement account to a new retirement account accepting those moneys. This process is known as a rollover. In a direct rollover, the process is automatic; in an indirect rollover, you receive a cash-out check from your previous employer to rollover the moneys to a new qualifying retirement account. (See also: <a href="http://www.wisebread.com/a-simple-guide-to-rolling-over-all-of-your-401ks-and-iras?ref=seealso">A Simple Guide to Rolling Over All of Your 401Ks and IRAs</a>)</p> <h2>14. Target-Date Fund</h2> <p>A target-date fund is a retirement investment fund that seeks to provide higher returns to young investors and gradually reduce risk exposure as they get closer to retirement age. Since the Pension Protection Act granted target-date funds the status of qualified default investment alternative in 2006, these type of funds have gained popularity. About half of 401K participants <a href="https://www.ebri.org/publications/ib/index.cfm?fa=ibDisp&amp;content_id=3347">hold a target-date fund</a>.</p> <h2>15. Vesting</h2> <p>In any retirement account, only money that is fully vested truly belongs to you. While all of your contributions and the matching contributions from your employer to your retirement account are always fully vested, some employer contributions, such as company stock, may follow a vesting schedule. In <em>cliff vesting</em>, you only become fully vested after a certain period of time. In <em>graded vesting</em>, you gradually gain ownership of those employer contributions.</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/15-retirement-terms-every-new-investor-needs-to-know">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/5-important-things-to-know-about-your-401k-and-ira-in-2016">5 Important Things to Know About Your 401K and IRA in 2016</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/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-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/optimize-your-ira-and-401k">Optimize Your IRA and 401(k)</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-penalty-free-way-to-withdraw-retirement-money-early">The Penalty-Free Way to Withdraw Retirement Money Early</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/stop-making-these-10-bogus-retirement-savings-excuses">Stop Making These 10 Bogus Retirement Savings Excuses</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement 401k contributions employer-sponsored retirement index funds IRA new investors Roth savings target date funds taxes terms Thu, 17 Nov 2016 11:00:14 +0000 Damian Davila 1834559 at http://www.wisebread.com 7 Money Moves You Will Always Be Thankful For http://www.wisebread.com/7-money-moves-you-will-always-be-thankful-for <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/7-money-moves-you-will-always-be-thankful-for" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/family_piggy_bank_72948583.jpg" alt="Family making money moves they&#039;ll always be thankful for" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>The air is crisp and the time for family, friends, and fun is upon us! But are you ready for the tons of holiday spending and planning ahead for 2017? Read up on these seven money moves you will always be thankful for/</p> <h2>1. Monitoring Your Credit</h2> <p>Whether you've already got a mortgage, cars, and all the trimmings, or you're a young adult with the hopes of buying an asset like a house someday, you'll need to maintain good credit. Everyone gets one <a href="http://www.wisebread.com/how-to-get-a-truly-free-credit-report">free credit report</a> each year, and some credit card companies even give you regular updates on your credit score. I know, we love to remind you of this! But when you're meeting with the realtor and they don't laugh at your borrowing limit, you'll be saying thanks.</p> <h2>2. Negotiating Your Insurance</h2> <p>When shopping around for insurance, it's easy to settle for the first average quote you receive and end it. It's boring! But it really is best to gather several quotes to gain some leverage. If there's a company you prefer, show them the cheaper quote and get them to lower theirs. Also, try to ask yourself which types of insurance you actually need. When you've saved hundreds of dollars per year in insurance costs, it'll be easier to agree to host Thanksgiving at your place next time.</p> <h2>3. Stowing Cash Into a Mutual Fund or ETF</h2> <p>How many ways should you save money? Even if you already have some mutual funds in your 401K, even if you have a vacation savings jar in the kitchen &mdash; you might want to consider stowing some cash from your savings account separately in a mutual fund or ETF. They're steady, the rate is far superior to a savings account, and it keeps you from feeling like your savings can be tapped at any time. It takes some thought and some calculus of weighing the fees and taxes to decide whether to take the funds out. Sometimes we need that bit of a barrier so that we can benefit in the long run. Check out <a href="http://www.wisebread.com/9-top-mutual-funds-for-low-risk-investors">these tips for investors</a>. Your future self will be thanking you down the line.</p> <h2>4. Paying Off High-Interest Debt</h2> <p>Carrying balances on one (or a few) high-interest cards? If you have debt at anything above 10% interest, paying those off should be your priority. The longer you carry those balances, the more precarious the situation gets. And of course, if you were to follow the first point in this list, it would be pretty hard without paying off that <a href="http://www.wisebread.com/5-ways-to-pay-off-high-interest-credit-card-debt?ref=internal">high-interest debt</a>. Once that's done, you can pass the savings around the table.</p> <h2>5. Building an Emergency Fund</h2> <p>Why wouldn't you want to be covered if a small emergency happened? Consider the emergency fund as your war chest, defending you from calamities such as car accidents, sudden house repairs, a child getting sick, or getting stuck with unpaid jury duty. <a href="http://www.wisebread.com/change-jars-and-8-other-clever-ways-to-build-an-emergency-fund">Even broke folks</a> can start one. Keep it somewhere easy to access, and by all means, never pilfer it for Black Friday. That's what #7 is for!</p> <h2>6. Getting Your Taxes Done Early</h2> <p>Who doesn't want to get their money early? Or get tax stress off their chests? Starting around November, you really should be gathering your receipts and <a href="http://www.wisebread.com/avoid-the-tax-season-rush-with-these-early-prep-steps">setting a tax plan</a> &mdash; whether you need to book an appointment with your accountant, or book some personal time in front of QuickBooks. What easier way to be thankful all the way into the dark of January than knowing a refund check is on its way?</p> <h2>7. Setting a Christmas Budget</h2> <p>Going into Thanksgiving with a shopping list and wondering, &quot;How am I gonna do this <em>and </em>Christmas?&quot; Fix that in the future with a <a href="http://www.wisebread.com/avoid-these-5-common-holiday-budget-pitfalls">Christmas budget set in advance</a>. Even if you're a family who slowly buys gifts for each other year-round, that can creep up. By having a set budget every year, you can check against immediately clicking &quot;add to cart.&quot; Imagine how nice it would be to not feel completely tapped out after the holidays. Just get through Thanksgiving and everything else is gravy.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/amanda-meadows">Amanda Meadows</a> of <a href="http://www.wisebread.com/7-money-moves-you-will-always-be-thankful-for">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/10-money-moves-to-make-before-the-leaves-change">10 Money Moves to Make Before the Leaves Change</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/where-to-turn-for-help-when-you-dont-have-an-emergency-fund">Where to Turn for Help When You Don&#039;t Have an Emergency Fund</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/when-to-use-savings-to-pay-off-debt">When to Use Savings to Pay Off 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/10-golden-rules-of-personal-finance-everyone-should-know">10 Golden Rules of Personal Finance Everyone Should Know</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-money-mistakes-to-stop-making-by-50">5 Money Mistakes to Stop Making by 50</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance being thankful credit report debt emergency funds money moves savings taxes Thanksgiving Mon, 14 Nov 2016 09:00:06 +0000 Amanda Meadows 1830894 at http://www.wisebread.com Easy Budgeting for First Time Singles http://www.wisebread.com/easy-budgeting-for-first-time-singles <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/easy-budgeting-for-first-time-singles" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_kitchen_dancing_76246703.jpg" alt="Woman learning easy budgeting for first time singles" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>As many as 28% of Americans live by themselves. Whether you are venturing out on your own after college, or life circumstances have forced you to live alone (i.e. divorce, kids leaving the nest, etc.), it can be hard to switch your saving and spending mentality to &quot;party of one.&quot;</p> <p>Keep these budgeting tips in mind as you navigate the financial waters by yourself:</p> <p>(See also: <a href="http://www.wisebread.com/how-to-live-alone-without-going-broke?ref=seealso">How to Live Alone Without Going Broke</a>)</p> <h2>1. Start With an Emergency Fund</h2> <p>Dave Ramsey likes to start with the emergency fund, and I wholeheartedly agree. In my own experience, it seemed as if costly instances were always popping up when I had zero emergency fund and was living paycheck to paycheck.</p> <p>I remember trying to reach that $1,000 saving mark for my emergency fund, thinking it was the most impossible thing ever (hey, I was only 21 making very little money). I remember when I finally reached that mark, the emergency fund stayed at $1,000 and life's little inconveniences seemed to be easier to handle.</p> <p>If you have no emergency fund, then your first financial goal should be a $1,000 fund. After that is established, you want to add a little bit of money to your account each month to save up one month of living expenses, then three months, then six months. This money will keep you protected against a job loss or unexpected medical emergency.</p> <h2>2. Budget for the Fun Stuff</h2> <p>When all of the financial responsibilities sit on your shoulders, it can become so easy to forget to treat yourself and to budget in the fun stuff. No matter how tight your budget is, you need to leave a little wiggle room for mental health. Living frugally and on a strict budget can be amazing, but it can also grow tiresome month after month. What is the point of cutting your grocery budget to less than $30 a week if you are just miserable?</p> <p>Dream big for a second. What would you do or where would you go this minute if you had the money? Perhaps you would buy yourself a fancy pair of shoes or take a weekend trip to Italy. Whatever it is, don't ignore this desire. Instead, research how much it will cost and create a financial road map to get there. Your dream vacation could only be a year or two away with a smart budgeting plan.</p> <h2>3. Evaluate What You Really Need to Buy</h2> <p>Before you get excited about being on your own and buy everything in Bed, Bath, and Beyond, think a moment. Most basic items, such as can openers, dishes, and other must-haves for the home can be found inexpensively. Many of your family members and friends have extra dishes or kitchen gear that they never use. Ask them to borrow it. You might be surprised how generous people are when it comes to getting rid of extra stuff.</p> <p>If you can't score any freebies, then check local thrift stores and yard sales. There is no reason to spend $50 on a plate set when you can score one at a thrift store or yard sale for $5 or less.</p> <p>Another tip is to buy as you realize the need. When I moved into my first place, I didn't realize how many items were needed to just make and eat a basic meal. However, I also realized that a lot of kitchen gadgets aren't necessities. For example, a pie server or salt and pepper shakers are nice to have, but you can easily make it work without them.</p> <h2>4. Budget Before You Move and After</h2> <p>Before you sign the lease on your apartment or rental, crunch the numbers. Is your budget going to be tight? You might have to rethink where you live to better fit your budget. After you move in, evaluate how you are doing with your budget. Are you struggling to stick with it a month or three after moving on your own? These are little red flags that signify a change is needed, either a decrease in expenses or an increase in income.</p> <h2>5. Control Groceries and Eating Out</h2> <p>One of the trickiest things to budget for when you are alone is food. This is especially true if you are used to shopping or cooking for more people. Start with a loose meal plan. This doesn't have to be anything fancy or time-consuming, just plan out what you are going to eat for the week. For example, on Monday, you will eat oatmeal and coffee for breakfast, a sandwich and chips for lunch, and pasta and meatballs for dinner.</p> <p>As you plan out each meal, coordinate your shopping list. As you cook for dinners, you can either cook enough to have lunch the next day, or you can freeze a portion of your meal for later use. This will save you time and prevent you from wasting food. (See also: <a href="http://www.wisebread.com/save-money-and-eat-better-with-these-6-online-meal-planners?Ref=seealso">Save Money and Eat Better With These 6 Online Meal Planners</a>)</p> <h2>6. Automate Your Finances</h2> <p>Another way to make sure that you stay on top of your finances is to look for apps that will help you automate your finances. For example, <a href="https://www.acorns.com/">Acorns</a> helps you to invest automatically, and <a href="http://mint.com">Mint</a> and <a href="https://www.personalcapital.com/landing/registration/affiliate?utm_source=FlexOffers.com+LLC&amp;utm_medium=affiliate&amp;utm_campaign=Personal+Capital+%24100k+Aggregators&amp;utm_content=">Personal Capital</a> will help you budget with very little time and thinking. Schedule your bills to be paid after your payday to ensure your account does not go into overdraft.</p> <p>Some sites will even let you schedule monthly payments to landlords. Just be sure to still look over statements if you switch to automatic payments. You want to ensure that you are not overcharged for anything. (See also: <a href="http://www.wisebread.com/5-ways-to-automate-your-finances?ref=seealso">5 Ways to Automate Your Finances</a>)</p> <p>Like many things, living alone has a learning curve. Don't let a bad month have you running to credit cards or family for help.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/ashley-eneriz">Ashley Eneriz</a> of <a href="http://www.wisebread.com/easy-budgeting-for-first-time-singles">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/11-good-money-habits-that-will-keep-you-out-of-debt">11 Good Money Habits That Will Keep You Out of 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/will-a-dental-discount-plan-save-you-money">Will A Dental Discount Plan Save You Money?</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-get-your-toiletries-for-cheap-or-even-free">6 Ways to Get your Toiletries for Cheap or Even Free!</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-sleek-marketing-ploys-aimed-at-getting-more-of-your-grocery-money">5 Sleek Marketing Ploys Aimed at Getting More of Your Grocery Money</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/10-frugal-hacks-for-single-living">10 Frugal Hacks for Single Living</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Frugal Living Budgeting automated payments bills emergency fund food costs groceries living alone moving savings single Fri, 14 Oct 2016 10:31:03 +0000 Ashley Eneriz 1812612 at http://www.wisebread.com 4 Ways to Make the Most of Your Student Loan Grace Period http://www.wisebread.com/4-ways-to-make-the-most-of-your-student-loan-grace-period <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/4-ways-to-make-the-most-of-your-student-loan-grace-period" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_happy_diploma_94435335.jpg" alt="Woman making the most of her student loan grace period" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Graduating from college with your degree in hand is exciting. But the thought of paying back your students loans? Not so much. But, depending on the type of student loans you took, you're probably eligible for a grace period, or a set number of months after graduation in which you don't have to start repaying your loans.</p> <p>During this time, you can take financial steps to prepare yourself not only for your looming monthly loan payments, but also for your entire financial future. Take advantage of this grace period to begin building your savings, building a solid credit score, and building a budget.</p> <p>Don't skimp on these steps. After all, that grace period doesn't last forever.</p> <h2>How Grace Periods Work</h2> <p>The federal government doesn't always expect you to begin repaying your student loans as soon as you leave college. Instead, most federal student loans come with a grace period. The goal is to give recent graduates a chance to start earning money and settle their finances before they have to start making monthly student loan payments.</p> <p>The grace period varies depending on the type of federal loans you are repaying. Direct subsidized loans, direct unsubsidized loans, subsidized federal Stafford loans, and unsubsidized federal Stafford loans come with a grace period of six months during which you won't have to make payments. Federal Perkins loans come with a grace period of nine months. Depending on when you took them out, the interest on some loans might continue to grow even during the grace period.</p> <h2>1. Select a Repayment Plan</h2> <p>It's during your grace period that you'll need to select a repayment plan for your student loans. For federal student loans, you'll automatically be entered into the Standard Repayment Plan. This plan gives you at least 10 years to repay your student loan debt, and is usually the most affordable choice. Under this plan, you'll pay the least amount of interest.</p> <p>There are exceptions, though. If you haven't been able to find a job or if your job pays you little, an income-driven plan might make more sense. These plans come with lower monthly payments that are designed to be affordable to you. However, you will end up paying more interest over the long run.</p> <p>As your grace period ticks away, make sure to stay in contact with the servicer that is handling your loan repayments. Your servicer can answer any questions you have and help you find the best repayment option. You can find the servicer of your loan at <a href="https://studentaid.ed.gov/sa/?login=true">My Federal Student Aid</a>.</p> <h2>2. Create a Budget</h2> <p>Once you enter the workforce, it's essential to create a budget. Simply list all of the money that you earn during the month. Then list all of your expenses, including estimated costs for items such as groceries, dinners out, and entertainment. Now you'll know how much extra money you should have every month. (See also: <a href="http://www.wisebread.com/build-your-first-budget-in-5-easy-steps?ref=seealso">Build a Budget in 5 Easy Steps</a>)</p> <p>Make sure to factor in your estimated monthly student loan payments in this budget. This will help you determine whether you can repay your loans under the Standard Repayment Plan or if you'll need to consider an income-based option for tackling your monthly loan payments.</p> <h2>3. Start Building Your Savings</h2> <p>It's tempting when you get your first paychecks to spend everything you've earned. Resist. Instead, start building your savings. It's important to have an emergency fund that you can tap into whenever a financial emergency pops up. And these emergencies will happen. Your car might suddenly need expensive repairs. If you've built up an emergency fund, you won't have to rely on your high interest rate credit cards to cover these unexpected financial hits. (See also: <a href="http://www.wisebread.com/the-best-low-interest-rate-credit-cards?ref=seealso">Transfer Balances to These Low Interest Rate Cards</a>)</p> <p>It might sound good, but your grace period is a great time to start saving for retirement. The sooner you start putting money away for your eventual retirement, the better off you'll be once you leave the workforce. Retirement might seem like it's ages away. But if your employer offers a 401K plan, enroll in it and start saving at least some of each paycheck for retirement. If your employer doesn't offer a 401K plan, consider opening an IRA on your own.</p> <p>Of course, this assumes that you'll have enough money to save and meet your monthly financial obligations, including your upcoming student loan payment. If you can't, put retirement savings on hold.</p> <h2>4. Build Your Credit</h2> <p>You need a strong credit score today. Lenders rely on this score when determining who qualifies for auto and mortgage loans and at what interest rates. Fortunately, you can start building a good credit score as soon as you graduate (or before, really). Pay all your bills on time. When you use credit cards, only charge what you can afford to pay off in full when your payment is due. If you take out a car loan, make your payments on time every month.</p> <p>Taking these simple steps will help you build a solid credit score. And when it's time to start making your student-loan payments? Every time you make one of these payments on time, you'll be taking a small step to building your score, too.</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/4-ways-to-make-the-most-of-your-student-loan-grace-period">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/6-questions-to-ask-before-taking-out-student-loans">6 Questions to Ask Before Taking Out Student Loans</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/how-to-stop-student-loans-from-ruining-your-life">How to Stop Student Loans From Ruining Your Life</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-valuable-rights-you-might-lose-when-you-refinance-student-loans">8 Valuable Rights You Might Lose When You Refinance Student Loans</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-every-parent-should-know-about-the-new-college-financial-aid-rules">What Every Parent Should Know About the New College Financial Aid Rules</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-money-moves-to-make-the-moment-you-graduate">5 Money Moves to Make the Moment You Graduate</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance Education & Training budgeting college federal loans grace periods loans planning repayment plans savings stafford loans student loans Wed, 05 Oct 2016 10:00:05 +0000 Dan Rafter 1805246 at http://www.wisebread.com 5 Times You Shouldn't Refinance Your Mortgage http://www.wisebread.com/5-times-you-shouldnt-refinance-your-mortgage <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-times-you-shouldnt-refinance-your-mortgage" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/couple_stressed_bills_85513247.jpg" alt="Couple learning times they shouldn&#039;t refinance their mortgage" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Refinancing your mortgage can drastically lower your monthly payments, especially since rates are still very low. The decision to refinance should be an easy one, right? Not so quick.</p> <p>Refinancing isn't for everyone or every financial situation. Here are five times you should hold off on refinancing your mortgage. (See also: <a href="http://www.wisebread.com/refi-shy-how-to-determine-if-now-is-the-time-to-refinance?ref=seealso">ReFi Shy? How to Determine if Now Is the Time to Refinance</a>)</p> <h2>1. You Don't Plan on Staying in the House</h2> <p>If you plan on selling your home in the next five years, then hold off on refinancing it. The move will likely only waste your time and money. Selling too soon after refinancing means you won't live in your home long enough to capture the savings benefits of lower rates. Plus, you'll still owe any fees associated with the new loan.</p> <p>We made the mistake of refinancing our other home from a 30-year mortgage to a 15-year mortgage. Our broker had talked us into it, saying it was a smart option. It wasn't. At the time of the refinance, I was pregnant with my second child, and truly planned to live in our first home for many more years. However, two kids under three plus one room equals a lot of sleepless nights.</p> <p>The decision to refinance ended up costing us more initially and monthly, especially since we sold our home just nine months later.</p> <h2>2. The Savings Don't Add Up</h2> <p>The reason why many individuals choose to refinance their mortgage is because they want to get a lower interest rate. Before you jump on the refinance wagon, do a little bit of calculating. Find out how much the refinance will cost you compared to how much it will save.</p> <p>Also realize that a refinance can add years to your loan. Don't automatically believe that you are benefiting from lower monthly payments if your loan has been extended an additional five years.</p> <h2>3. You Are Trying to Pay Off Your Loan Sooner</h2> <p>As I mentioned before, we refinanced our home to a 15-year loan because we wanted to pay off our mortgage faster. On paper, the numbers made sense, and the change was only going to cost us an extra $300 a month, which seemed doable. However, it would have been better for us to keep the 30-year loan and make the extra payments on our own terms. This would have given us more wiggle room in our budget for unexpected costs.</p> <h2>4. You Are Switching to an adjustable-rate mortgage</h2> <p>Adjustable rate mortgage (ARM) rates are tempting to jump on, especially since they guarantee a low rate for a certain amount of time. However, interest rates eventually will go up. It's just the ebb and flow of the economy.</p> <p>With an ARM, you will pay more of the principal faster, which is nice, but you better be prepared to pay higher payments when the rates go up.</p> <h2>5. You Aren't in the Right Position to Finance</h2> <p>If for some reason your home has dropped in value, refinancing your home can tack on extra costs, such as private mortgage insurance. Borrowers with small down payments &mdash; or refinances with little equity &mdash; have to pay PMI until their equity reaches 20% of the home's value. For example, if you bought your house for $250,000, paid off $30,000 of it, but the value of your house dropped to $225,000, you would have very little equity in the home and in most cases have to pay for PMI.</p> <p>Another thing to consider before you refinance is your credit score and job history. If your score has dropped even just a little, you could miss out on qualifying for the lowest rates, which would make the whole refinance process not worth it. Also, if you recently switched career fields, i.e. going from a teacher to a computer system administrator, your pay might be higher, but your duration of employment might make you ineligible for a refinance. (See also: <a href="http://www.wisebread.com/is-it-safe-to-re-finance-your-home-close-to-retirement?ref=seealso">Is it Safe to Re-Finance Your Home Close to Retirement?</a>)</p> <p>Refinancing is a good choice if it means you can ditch annoying PMI fees and score a lower interest rate. However, a refinance is not for everyone, so be sure to crunch the numbers first.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/ashley-eneriz">Ashley Eneriz</a> of <a href="http://www.wisebread.com/5-times-you-shouldnt-refinance-your-mortgage">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/refi-shy-how-to-determine-if-now-is-the-time-to-refinance">ReFi Shy? How to Determine If Now Is the Time to Refinance</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-it-safe-to-re-finance-your-home-close-to-retirement">Is it Safe to Re-Finance Your Home Close to Retirement?</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/5-times-you-shouldnt-rush-to-pay-off-your-mortgage">5 Times You Shouldn&#039;t Rush to Pay Off Your Mortgage</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-valuable-rights-you-might-lose-when-you-refinance-student-loans">8 Valuable Rights You Might Lose When You Refinance Student Loans</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing adjustable rate mortgages ARMS mortgages moving refinancing savings Tue, 27 Sep 2016 10:00:08 +0000 Ashley Eneriz 1799077 at http://www.wisebread.com Why Your Personal Savings Rate Matters http://www.wisebread.com/why-your-personal-savings-rate-matters <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/why-your-personal-savings-rate-matters" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_piggy_bank_89732325.jpg" alt="Woman learning why her personal savings rate matters " title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Your personal savings rate is one of the most important indicators of your financial health. The personal savings rate is simple: It's the amount you have left over every month after you've spent the money coming in.</p> <p>To find out your personal savings rate, add together all the funds that come in over the month. Include wages and salaries, dividends, and any income from other sources, such as side-jobs or Social Security. Be sure to include any income you have automatically saved, such as IRAs or health care savings accounts (HSAs).</p> <p>Then, add the total left in your accounts. How much didn't you spend? Include any money in IRAs, HSAs, or savings accounts here, as well as cash in your billfold. Divide that figure into the total income. In other words, if your total coming in was $4,000 and you saved $200, the rate is 0.5, or 5%.</p> <h2>Personal Savings: You Need It</h2> <p>Why should you pay attention to your personal savings rate? Because you need savings for many things in life! If buying a house is in your future, you should have a down payment saved. You'll get a better deal on mortgage rates and points the more you have saved. You'll also need savings for any repairs or remodeling. If your car conks out on the way to work, savings means you can afford a down payment on new wheels or even a good used car.</p> <p>Mortgages and cars aren't the only reasons you need to save, though. Potential job loss is another. Companies often downsize without much warning &mdash; or much severance. Many financial advisers recommend keeping a three to six-month emergency cushion for just such emergencies.</p> <p>And how about health care? What if you suddenly needed emergency surgery? Deductibles, copays, tests, and prescriptions can add up rapidly. Health care costs may be a reason you'd need savings.</p> <p>Finally, Social Security is not going to pay for anyone's retirement &mdash; at least, not all the way. The system is already beginning to be viewed as a partial supplement to what one needs to live on past 65. You need to be saving for retirement.</p> <p>For all these life events, it's important to save as much as you can, as early as you can. Savings accounts, bonds, and stock market investments all do their best work over time. The earlier you start to save, the more your savings can appreciate.</p> <h2>U.S. Savings Rates Need to Be Higher</h2> <p>For Americans generally, the <a href="http://time.com/money/3763261/savings-rate-two-year-high/">rate is around 5.8%</a>. That's low &mdash; investment advisers believe personal savings rates should be closer to 10% or 15%.</p> <p>But, depending on your age and income, you may be significantly below the national average: <a href="http://www.thefiscaltimes.com/2015/04/26/Americans-Low-Savings-Rate-Bad-Sign-Good-Economy">18% of people</a> across the U.S. save nothing. Their personal savings rate is zero. And roughly 50% save roughly a measly 5%.</p> <h2>6 Ways to Raise Your Rate</h2> <p>So, how can you effectively increase your personal savings rate? Here are six easy ways.</p> <h3>1. Grab Employer Matches</h3> <p>Take advantage of employer matches, if available. If your company matches 401Ks or HSAs, take advantage of them as much as you can. It's literally free money in your savings.</p> <h3>2. Maximize Pretax Savings</h3> <p>Take advantage of pretax savings, if available. If your company offers pretax savings through an 401K, HSA, or any other savings/investment vehicle, use it! Pretax savings of even 2% are greater than after-tax savings of 2%. It adds up over time.</p> <h3>3. Think Utilitarian</h3> <p>Avoid being overly flashy with major purchases like cars. It may be nice to think of a red convertible &mdash; but if that adds up so you have no disposable income left, you may want to rethink the purchase. Would a serviceable car allow you to reduce monthly payments? Or, could you buy a used car and put money you'd earmarked for payments toward your personal savings rate?</p> <h3>4. Pare Back Your Budget</h3> <p>If you don't currently keep a budget, it's time to start one. Review your budget by category. What could you pare back without drastic impact? Could that Starbucks venti macchiato coffee every day be substituted with coffee brought from home? Could Netflix substitute for movies and dinner out?</p> <h3>5. Curb Impulse Purchases</h3> <p>It's great to be able to buy new fall shoes and DVDs that call your name. But it's also great to be able to look at your savings every month with pride. Cut down on impulse purchases. If you love shoes or the newest DVDs, look at catalogs to whet your thirst. But don't buy shoes until you need them. As for DVDs? Check the library.</p> <h3>6. Consider the Gig Economy</h3> <p>Would it be possible to have occasional work driving for a ride-sharing company, running errands, or taking care of pets or plants? Earmark any earnings for your personal savings rate.</p> <p>Your personal savings rate has a major impact on your financial life. Take advantage of every way to maximize it. If you do, you'll be in much better financial shape than most of America is right now.</p> <p><em>What are you doing to maximize your PSR?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/anum-yoon">Anum Yoon</a> of <a href="http://www.wisebread.com/why-your-personal-savings-rate-matters">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/4-money-moves-to-make-the-moment-you-win-the-lotto">4 Money Moves to Make the Moment You Win the Lotto</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/when-to-use-savings-to-pay-off-debt">When to Use Savings to Pay Off 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-places-to-stash-your-money-besides-a-savings-account">10 Places to Stash Your Money Besides a Savings Account</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/will-a-dental-discount-plan-save-you-money">Will A Dental Discount Plan Save You Money?</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/americans-savings-rate-up-to-almost-7-who-benefits">Americans&#039; savings rate up to almost 7% - who benefits?</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance Personal Savings Rate savings Tue, 13 Sep 2016 09:00:14 +0000 Anum Yoon 1791531 at http://www.wisebread.com 4 Foolproof Ways to Protect Your Money From Inflation http://www.wisebread.com/4-foolproof-ways-to-protect-your-money-from-inflation <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/4-foolproof-ways-to-protect-your-money-from-inflation" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_clock_money_94923537.jpg" alt="Woman finding ways to protect her money from inflation" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Back in January 1980, when Jimmy Carter was President and Michael Jackson led the music charts with &quot;Rock with You,&quot; Americans were experiencing one of the periods of highest inflation in modern history. In January 1980, inflation was over 13.9% per year and peaked in April 1980 at 14.76%.</p> <p>With the consumer price index (CPI) at <a href="http://www.bls.gov/news.release/cpi.nr0.htm">0.8% in July 2016</a>, many Americans have never experienced the dramatic increase in prices that other generations have. But even though inflation is low these days, it still eats away at your savings and investments. Let's review four (nearly) foolproof strategies and investments that will reduce the hit.</p> <h2>1. Invest in an S&amp;P 500 Index Fund</h2> <p>The average annual inflation rate since the U.S. government began tracking it in 1913 is <a href="http://inflationdata.com/Inflation/Inflation_Rate/Long_Term_Inflation.asp">about 3%</a>. To combat inflation's effect on your money, you need investments that provide greater average returns than the inflation rate.</p> <p>Since its inception in 1928, the S&amp;P 500 has provided an <a href="http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/histretSP.html">average annual return of 11.25%</a> until 2015, making this stock market index a leading choice to protect yourself from inflation. For the greatest ease and cost-efficiency, invest in a mutual fund or exchange-traded fund that mirrors the S&amp;P 500's performance.</p> <p>Not only are the average returns of passively-managed S&amp;P 500 index funds higher than those of actively managed funds, but also the expense ratios of S&amp;P 500 index funds are lower than those of actively managed funds. For example, the Vanguard 500 Index Investor Shares fund [Nasdaq: <a href="https://finance.yahoo.com/quote/VFINX?p=VFINX">VFINX</a>] has an annual expense ratio of 0.16%, which is 84% lower than the average expense ratio of funds with similar holdings.</p> <p>Of course, this approach isn't actually foolproof, since both the rate of inflation and market returns vary from year to year. But when considering long-term averages, it's a fairly safe bet.</p> <h2>2. Increase Annual Contributions to Saving Accounts</h2> <p>Even when you leverage <a href="http://www.wisebread.com/5-best-online-savings-accounts?ref=internal">high-yield online savings accounts</a>, you'll only make between 0.75% and 1.05% per year, according to data from August 2016. With a July 2016 CPI of 0.8%, you're actually losing 0.05% and gaining only 0.25% per year. (See also: <a href="http://www.wisebread.com/capital-one-360-review?ref=seealso">Capital One 360: A Competitive Banking Option</a>)</p> <p>Setting up automatic transfers from your paycheck or main checking account to your investment and saving accounts is a smart idea, but adjusting those contributions for inflation is an even better one. A good practice is to make an adjustment for inflation once a year. Check with your financial institution to find out if it offers the option of automatic adjustments for inflation to your contributions.</p> <h2>3. Seek Real Estate Income</h2> <p>While gold has a great reputation as an investment hedge against inflation, real estate income has proved to be a better hedge tool. A study from financial company Fidelity back-tested the performance of several assets against inflation on an annual basis during a 40-year period and found that gold and real estate income beat inflation 54% and 71% of the time, respectively. &quot;Real estate is regarded consistently as a <a href="https://www.reit.com/news/videos/wharton-professor-discusses-reits-inflation-hedging-benefits">good inflation hedge</a>, and it is&quot;, asserts Susan Wachter, professor at the University of Pennsylvania Wharton School of Business. (See also: <a href="http://www.wisebread.com/4-reasons-millenials-should-invest-in-a-home?ref=seealso">4 Reasons Millennials Should Invest in a Home</a>)</p> <p>While most individual investors can only afford to buy their own home, all individual investors can gain exposure to real estate income from a wide variety of properties through real estate investment trusts (REITS). Some advantages of REITs are their requirement to maintain a dividend payout ratio of at least 90% and their liquidity because they trade on major stock exchanges.</p> <p>For example, the 10-year annual average return of the Vanguard REIT Index Fund Investor Shares [Nasdaq: <a href="http://finance.yahoo.com/quote/VGSIX?ltr=1">VGSIX</a>] is 7.46%, as of June 30, 2016. In comparison, the 10-year annual average return of the S&amp;P 500 was 7.42% for the same period.</p> <p>Adding REITs provides you access to assets with inflation resistance and helps you protect against the negative of higher inflation. Still, REITs should only be a part of a well-diversified portfolio. Depending on your tolerance to risk, financial advisers suggest allocating from 5% up to 20% of your investment in portfolio in REITs. And of course, past performance is no guarantee of future success.</p> <h2>4. Negotiate Your Salary</h2> <p>If your salary were to consistently go up every year, you would not to worry about inflation to begin with! However, <a href="http://time.com/money/3657524/odds-of-getting-raise/">less than half of working Americans</a> ever even ask for a raise, and about 30% of them are uncomfortable negotiating salary.</p> <p>Start your career on the right foot by successfully negotiating the salary offer of your very first job. Three out of four U.S. employers typically have room to increase their first salary offers by 5% to 10% during negotiations, but only 38% of applicants negotiate those first salary offers. Let's imagine that your first salary offer was $38,000, that would mean that you have the potential of increasing that offer from $39,900 to $41,800. Given the historical inflation average of 3% per year, you have the potential of covering inflation for 40 months just by negotiating your first salary offer.</p> <p>And things only get better after that.</p> <p>By bumping up your salary from the start, you're increasing your chances of future raises. As your salary grows over time, so does your probability of getting a raise. For example, people making $40,000 to $50,000 have about a 40% chance of receiving that raise they requested and people making $60,000 to $70,000 have about a 50% chance.</p> <p>While there are other factors that may influence pay raises, the main one is the decision to request better compensation. From U.S. workers asking for a raise, 75% of them get something: 44% of them get what they asked for and 31% of them receive a smaller amount. Getting at least a small raise is a very smart strategy to protect yourself from inflation because inflation erodes the value of your dollars year after year.</p> <p><em>What are other ways to protect yourself from inflation?</em></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/4-foolproof-ways-to-protect-your-money-from-inflation">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-11"> <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/a-simple-guide-to-series-i-savings-bonds-i-bonds">A Simple Guide to Series I Savings Bonds (I-Bonds)</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/this-post-really-suk-kuks-examining-islamic-finance">This Post Really Suk-kuks: Examining Islamic Finance</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/cash-might-make-you-happier-but-investments-will-make-you-richer">Cash Might Make You Happier, But Investments Will Make You Richer</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/why-does-the-stock-market-keep-going-up">Why Does the Stock Market Keep Going 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/the-3-rules-every-mediocre-investor-must-know">The 3 Rules Every Mediocre Investor Must Know</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance Banking Investment consumer price index Economy hedging inflation negotiating real estate REITs returns s&p 500 salary savings stocks Fri, 02 Sep 2016 09:00:14 +0000 Damian Davila 1784422 at http://www.wisebread.com 4 Surprising Things Lenders Check Besides Your Credit Score http://www.wisebread.com/4-surprising-things-lenders-check-besides-your-credit-score <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/4-surprising-things-lenders-check-besides-your-credit-score" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/man_paperwork_house_83751927.jpg" alt="Man learning things lenders check besides credit score" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>You know how important your FICO credit score is to mortgage lenders. They rely on this number to gauge how well you've handled credit and paid your bills in the past. A high credit score means that you'll qualify for a low mortgage interest rate. A low score? You might not qualify for a loan at all.</p> <p>But mortgage lenders don't look only at <a href="http://www.wisebread.com/7-reasons-you-are-more-than-your-credit-score" target="_blank">your credit score</a>&nbsp;when you apply for a home loan. They also consider several other key factors &mdash; everything from your job history to the size of your down payment.</p> <p>Here is a look at four noncredit factors that lenders will be studying when you apply for a mortgage loan.</p> <h2>Debt</h2> <p>Outside of your credit score, your debt-to-income ratio is the most important number for mortgage lenders. This ratio measures the relationship between your monthly debt obligations and your gross monthly income.</p> <p>As a general rule, lenders strongly prefer your total monthly debts &mdash; including your estimated new mortgage payment &mdash; equal no more than 43% of your gross monthly income (your income before taxes).</p> <p>If your debt-to-income rises past this level, lenders won't be as willing to lend you mortgage money. They'll worry that you're already overburdened with debt, and the addition of a monthly mortgage payment will only make your financial situation worse.</p> <h2>Job History</h2> <p>Lenders prefer borrowers who have worked for the same employer, in the same position, for at least two years. Lenders believe that such workers are less likely to lose their jobs and, therefore, less likely to lose the income stream they need to pay their mortgage loan on time each month.</p> <p>But there's a lot of flexibility with this rule. For instance, if you took on a new job with your same employer in the last two years, this probably won't hurt you. Even if you moved onto a new job with a different employer in your same industry, lenders probably won't worry.</p> <p>But what if you've taken a new job in a new industry in the last two years? That might cause some concern. Lenders might worry that you'll be more likely to lose that new position. However, you can usually still qualify for a loan.</p> <p>If you've been unemployed for a significant amount of time in the last two years, that can cause more problems. Be prepared to explain to lenders why you have a gap in your work history. As long as you have a solid income now, the odds are still good that you'll be able to qualify for a home loan.</p> <h2>Savings</h2> <p>To qualify for the lowest interest rates, make sure you have enough money in savings. You'll need money to pay for your down payment, closing costs, and a certain number of months' worth of property taxes, of course.</p> <p>But lenders often require that you also have enough in savings to pay at least two months of your new mortgage payment, including whatever you're paying each month for property taxes and insurance. If your total monthly mortgage payment will be $2,000, you'll need at least $4,000 in savings in addition to whatever you'll be paying for closing costs and down payment.</p> <p>Lenders want to see that you have savings in case you suffer a temporary reduction in your monthly income. This way, you'll be able to use your savings to pay for at least a couple months of mortgage payments.</p> <h2>Down Payment</h2> <p>The size of your down payment plays a big role in the size of your mortgage interest rate. In general, the bigger your down payment, the smaller your interest rate.</p> <p>That's because lenders consider you less of a risk to default on your loan if you come up with a larger down payment. You've already invested more in your home, the theory goes, so you'll be less likely to walk away from it.</p> <p>You can qualify for mortgage loans today with a down payment of as little as 3% of your home's final purchase price, in many cases. But if you want to qualify for the lowest interest rates? Putting down 20% of your home's final purchase price &mdash; admittedly not an easy task &mdash; will increase your chances of nabbing that ultralow rate.</p> <p><em>If you're getting ready to buy a house, have you taken steps to improve these parts of your finances?</em></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/4-surprising-things-lenders-check-besides-your-credit-score">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-12"> <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/5-things-lenders-look-for-in-a-loan-application">5 Things Lenders Look For in a Loan Application</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-reasons-why-youre-too-old-or-too-young-for-a-mortgage-loan">4 Reasons Why You&#039;re Too Old — Or Too Young — For a Mortgage Loan</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/why-you-shouldnt-panic-if-your-credit-score-drops">Why You Shouldn&#039;t Panic If Your Credit Score Drops</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/15-personal-finance-calculators-everyone-should-use">15 Personal Finance Calculators Everyone Should Use</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/4-mortgage-secrets-only-your-broker-knows">4 Mortgage Secrets Only Your Broker Knows</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Banking Real Estate and Housing closing costs credit history credit score debt down payment FICO score interest rates job history lenders loans mortgages savings Mon, 29 Aug 2016 10:00:09 +0000 Dan Rafter 1779806 at http://www.wisebread.com 10 Money Moves to Make Before the Leaves Change http://www.wisebread.com/10-money-moves-to-make-before-the-leaves-change <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/10-money-moves-to-make-before-the-leaves-change" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_fall_leaves_81399473.jpg" alt="Woman making money moves before the leaves change" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>As yet another fun summer season winds down, there's no better time than the start of autumn to take a look at our finances to see where we can make adjustments. Consider these 10 money moves to make before the leaves change.</p> <h2>1. Get Back to Budget Reality</h2> <p>Summer activities can put budgeting on the back burner as we spend more and save less over vacation. A little splurging or a savings vacation isn't the end of the world, as long as it isn't a permanent getaway that drains your accounts. With autumn right around the corner, however, now's the time to get back to basics and rein in spending. Summer can be expensive, but you can regain control of your money by coming up with a spending plan that helps you curb impulse buys and save more of your income for a rainy day.</p> <h2>2. Start a Holiday Fund</h2> <p>The beginning of fall means the holiday season is only three months away. As you revamp your budget, start putting money aside for the end of the year. Whether your plans include taking an end-of-the-year vacation or buying gifts for loved ones, early planning can ensure enough cash so that you don't have to rely on credit cards.</p> <h2>3. Ask About Flat-Rate Billing</h2> <p>If your gas or electric bills trigger heart palpitations, talk to your utility company about flat-rate billing. The company looks at your past electricity or gas usage and uses this information to estimate your expected usage over the next year. Based on this estimation, you're charged a flat rate for the next 12 months. Flat-rate billing protects against higher utility bills during the winter and summer months, and as a result, budgeting is easier because you know exactly what you'll owe each month and there are no surprises.</p> <h2>4. Review Your TV Habits</h2> <p>Fall signifies that start of the new prime time television schedule &mdash; one of my favorite parts of the change of seasons. This is an excellent time to evaluate your TV viewing habits to see if you can do without cable, downgrade your package, or otherwise modify your home-entertainment budget to better suit your needs. With so many options these days, you can likely stream many of your favorite shows at a price that's far less than cable.</p> <h2>5. Pay Off Summer Debt</h2> <p>Carrying credit card debt from month-to-month is expensive. If your credit cards took a beating over the summer, come up with a plan to <a href="http://www.wisebread.com/fastest-way-to-pay-off-10000-in-credit-card-debt?utm_source=wisebread&amp;utm_medium=internal&amp;utm_campaign=article">eliminate this debt</a>. Give your credit cards a break and pay for everything with cash, and then cut back on unnecessary spending to free up cash in your budget. Use the savings to double or triple your minimum payments and pay off balances sooner. (See also: <a href="http://www.wisebread.com/5-day-debt-reduction-plan-pay-it-off?utm_source=wisebread&amp;utm_medium=seealso&amp;utm_campaign=article">5 Day Debt Reduction Plan</a>)</p> <h2>6. Prepare for Colder Days</h2> <p>Temperatures cool down around September and October, so to trim your heating bill, take steps early in the season to keep the heat in and the cold out. This includes replacing missing insulation in the attic, weatherstripping your doors and windows, sealing any cracks around windows and electrical outlets, installing a storm door, hanging heavy drapes, getting a programmable thermostat, and closing your fireplace flue.</p> <h2>7. Check Your Savings Contributions</h2> <p>If summer fun threw off your savings goals, you can play catch-up by taking advantage of your company's retirement plan, or increasing your contributions if you already have a 401K.</p> <p>&quot;An employer may offer to match a percentage or all of your contributions to a retirement account,&quot; says Jim Poolman, retirement expert and executive director of the lndexed Annuity Leadership Council. &quot;Some employers may even contribute to your retirement account each year whether you save or not.&quot; Any employer retirement contribution is considered &quot;free money&quot; and can maximize your savings at any age.</p> <h2>8. Balance Your Portfolio</h2> <p>In addition to contributing or increasing contributions to your company's retirement plan, you should get serious about balancing your portfolio to protect against market shifts. It isn't enough to have a 401K. Poolman suggests adding more conservative, low-risk products, such as fixed indexed annuities (FIAs) to balance your retirement portfolio.</p> <p>This is important as you become older, because a savings strategy that worked in your 20s might not be the right fit in your 30s or 40s.</p> <p>&quot;Assessing your investment mix at different stages in your life is key,&quot; Poolman warns. &quot;When you're young, a higher-risk investment strategy may be more effective, whereas the closer you are to retirement, the more important a low-risk portfolio may be.&quot;</p> <h2>9. Have a Money Talk With Your Partner</h2> <p>It's also important to sit down with your partner and/or a financial planner to review your overall financial picture and determine where you can improve. For example, when was the last time you reviewed your life insurance policy? If you've recently tied the knot, had a baby, or purchased a home, can you increase your coverage? Or if you're self-employed, could you increase contributions and max out your IRA, which can grow your money and help you save on taxes? A yearly review can ensure a firm financial foundation and help you hit your goals.</p> <h2>10. Make Doctor's Appointments</h2> <p>A flexible spending account (FSA) lets you set aside a percentage of your pretax pay for eligible out-of-pocket medical expenses. These accounts effectively reduce health care costs for doctor appointments, prescription medications, vision care, and dental care. You can withdraw funds to pay for covered expenses. The catch, however, is that funds in a flexible spending account must be used in the plan year. Some employers don't allow funds to carry over into the next year, or they only allow employees to carry over $500. If you don't use the money, you lose it. So with three months left in the year, schedule your doctor, dental, and vision appointments to avoid forfeiting your unused balance.</p> <p><em>What steps are you taking to prep your finances for fall?</em></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/10-money-moves-to-make-before-the-leaves-change">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/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-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-5-best-pieces-of-financial-wisdom-from-warren-buffett">The 5 Best Pieces of Financial Wisdom From Warren Buffett</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/7-money-moves-you-will-always-be-thankful-for">7 Money Moves You Will Always Be Thankful 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/the-financial-basics-every-new-grad-should-know">The Financial Basics Every New Grad Should Know</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/when-to-use-savings-to-pay-off-debt">When to Use Savings to Pay Off Debt</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance advice autumn budgeting debt fall health care money moves organizing paying bills savings seasons Mon, 22 Aug 2016 09:00:07 +0000 Mikey Rox 1775890 at http://www.wisebread.com