investments

How to Prepare Your Money for the Coming Economic Slowdown

Denise Hill — Tue, 23 Oct 2018 08:00:11 +0000

Predicting an economic downturn can seem as mystical and convoluted as reading tea leaves. However, the economic tea-leaf readers — financial experts — are warning that the economic winds are changing.

Even though unemployment is still low, there are other economic indicators causing financial analysts to predict lean financial seasons. First, economic growth has all but stalled. The rate of wage increase has stagnated. The Constant Maturity Treasury (CMT) rates, which are used to measure and predict future interest rates, economic growth, and output, are near flatlining — and threatening inversion. This means that as the economy continues to slow down, consumer interest rates will rise and investment earnings will lose momentum, possibly even losing money.

Preparing for a recession is similar to preparing for a tropical storm: There's no way to predict just how bad things will get, but burying your head in the sand and hoping for the best is a horrible idea. Here are a few things you can do to stormproof your finances against the coming economic slow down.

Beef up your emergency fund

The first thing you do when prepping for a storm is prepare your home for the onslaught. People in coastal areas board up windows and surround their homes with sandbags. An emergency fund does the same thing financially. It's the added installation and protection that can assist you when the economy dips. It can't stop the winds, or prevent the rain, and it may not stave off all damage, but it does provide an added layer of protection. And it provides you a fighting chance to preserve what you've worked so hard to build.

The traditional emergency fund is anywhere from three to six months' worth of daily living expenses — and even larger for people with high expenses, large salaries, or a job that would be difficult to replace. During lean economic times, you want to save more than the standard recommended amount.

Under normal circumstances, the average bout of unemployment lasts roughly three to six months. However, experts believe that number is slowly creeping up and could double in a sluggish economy. It has been suggested that you plan to be unemployed at least one month per every $10,000 you earn. So if you earn $70,000 a year, you should plan for an unemployment that lasts at least seven months. This formula is a great gauge in helping you determine how much you need in your emergency fund. (See also: 7 Easy Ways to Build an Emergency Fund From $0)

Adjust your budget and pay down debt

Another thing people do during an impending natural disaster is purchase supplies and nonperishable food items. This ensures that they will have something to eat during a major power outage and food shortage. Adjusting your budget by reducing expenses in preparation for a financial disaster follows the same principal. Even though during a disaster you can't eat steak and lobster, you do still eat. The same is true when money is tight.

Your vacation and home improvement plans may have to wait. You may have to forgo expensive advanced educational programs and even take your kids out of private school. The key is to prioritize your expenses, see what extras you can cut, and be prepared to lower the ax when the time comes. It's also imperative that you stop living on overtime, bonuses, and side-gig money. You should divert that money into your emergency fund or other liquid savings. (See also: 5 Budget Overhaul Tricks for the Recently Unemployed)

You should also focus on aggressively paying down debt. If you can get rid of some of your smaller debts quickly, do it. The less people you owe, the better. And paying off debt acts as a type of de facto savings account, too. Sure, the money isn't in an account and available for you to access — but if you eliminate debt, you owe less and have more money at your disposal. You'll also save on the amount of interest you'll pay over time. Paying down debt is always a fantastic idea; however, it can be your saving grace during a recession. (See also: 5-Day Debt Reduction Plan: Pay It Off)

Strengthen career skills

One nonfinancial thing you want to do when you feel the economic winds of change blowing is evaluate your career skill set. You have a primary job that you do. But you also have a bunch of little ancillary functions you perform. These things translate into job opportunities, or — at the very least — bullets on your resume.

Take time now while you are calm and things are going well to refresh your resume and sharpen or add to your skill set (just ensure you do it without adding debt). Most companies offer training of some sort, and many will also pay all or a portion of training you receive elsewhere. Some companies even have tuition assistance or reimbursement programs. Take advantage of those opportunities now, but be sure you read the fine print and understand the guidelines before you sign on the dotted line. (See also: These 17 Companies Will Help You Repay Your Student Loan)

Re-evaluate your investment portfolio

The stock market usually tanks — or at the very least, becomes extremely volatile — during an economic downturn. Financial experts always advise you not to pull your money out of an investment in a moment of panic. Fear should never drive your decisions.

Go ahead and look at your investment portfolio now and see if there are any changes you'd like to make. Risky funds will probably lose money during a slowdown, but they also rebound quickly during economic recovery. And safer investments may not lose much, but you won't make much, either. They cancel each other out.

One system or investment style isn't preferable over another. They all have pros and cons and respond to the highs and lows differently. The key is to assess yourself. Will one heavy loss give you a heart attack? If so, go with something less risky. But if you're confident you can ride the wave and stand the turbulence of a risky investment, stay put. Be sure you consult a financial fiduciary and get solid financial advice before you decide. Knee-jerk reactions are the quickest way to lose big when it comes to investing. (See also: 8 Ways to Prepare for a Stock Market Dive)

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This article is from Denise Hill of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

How Projection Bias Could Be Destroying Your Finances

Emily Guy Birken — Thu, 18 Oct 2018 08:00:11 +0000

Have you ever gone grocery shopping on an empty stomach? If you’re like most people, you come home with all kinds of random junk food and disparate ingredients you have no specific plans to use, all because they looked good at the time.

So when you decide to throw some “lightly expired” shrimp, Lonely Gal Margarita Mix for One, and an entire shelf’s worth of tortilla chips into your cart when you only needed a gallon of milk, you are falling victim to a cognitive bias known as the projection bias.

This bias causes you to believe that however you are feeling in the moment is how you will still feel in the future. So when you are feeling rumbly in your tummy while cruising the grocery store, you believe you’ll still want to eat shrimp-covered nachos once you get home — even though your enthusiasm for shrimp that’s gone to the bad place will definitely wane once you’ve had a snack.

Of course, the projection bias does more than just fill your grocery carts with food you’ll never eat. It can also cause you to make even bigger financial mistakes. Here’s how your inability to project your future preferences can ruin your finances. (See also: 5 Mental Biases That Are Keeping You Poor)

Irrational shopping

Car dealerships have long found that they sell more convertibles in the spring and summer than in the winter. Some of that is perfectly natural. A car buyer is likely to want to purchase a car whose amenities they can take advantage of right away. But convertible sales also spike during sunny days or warm spells during the winter. In those cases, the irrational convertible owner is projecting that she will want to ride with the top down and the wind in her hair every day, just because that’s what she wants on the unseasonably warm and beautiful day when she buys her new car.

Similarly, when you are in the midst of a new enthusiasm for exercise, it might seem like a great idea to buy a treadmill or elliptical machine. You want to exercise every day right now, so of course you’ll want to continue exercising in the future. There is no possible way that your new BowFlex will collect dust and/or become an impromptu clothes-drying rack within a few weeks of purchase.

One of the best ways of thwarting this expensive projection bias mistake is forcing yourself to take a cooling-off period before making any major purchases. Test driving the convertible BMW may be a blast on that random 70-degree day in late February, but will actually purchasing the car still feel as reasonable a week later when the snow is falling? Forcing yourself to wait a week (or a month) before making any large purchases can help you keep projection bias at bay. (See also: 9 Simple Ways to Stop Impulse Buying)

Not saving enough

The closest I have ever come to slapping someone was when a teaching colleague once told me that she didn’t bother saving money for retirement because she wanted to enjoy her money while she was young. This colleague seemed to believe that she would always enjoy good health and stable employment, and that she could just continue to work forever.

This kind of thinking is a common symptom of projection bias. We all tend to assume that the way our lives are now are how they will continue to be in the future. So we don’t bother to save money for a rainy day or for retirement, because we project today’s stability into the future.

This is one of the reasons why pessimists tend to be better savers than optimists. Pessimists expect things to go wrong, and they plan accordingly. So it’s a good idea to embrace your financial pessimism and think through all the potential ways Murphy’s law could throw a wrench in your life. You’ll be less likely to assume that your current life will remain unchanged forever — and you’ll be more likely to save money to protect yourself. (See also: 4 Ways Pessimism Can Actually Improve Your Finances)

Locking up money in illiquid investments

Whether you're investing in real estate or buying an annuity, the projection bias can potentially prompt you to make an expensive mistake. That’s because you might decide to put your nest egg into a real estate venture or annuity product when you're doing well financially. If your job feels secure and you can’t imagine needing to tap into your nest egg, it can feel foolish not to invest in something that will grow over time or provide you with guaranteed retirement income.

But job loss can strike anyone at any time, and if all of your investment money is tied up in a rental property that you cannot sell or an annuity that you cannot get out of, then you'll be stuck making some pretty difficult financial decisions until you are able to find another job.

While putting your money in illiquid investments can be a savvy financial move for the right investor, it’s important to think through what would happen if you were to lose your job or experience a financial downturn. When you consider making such investments, be sure you also have a Plan B for if life does not continue in the same way. (See also: How to Get Your Finances Back on Track After Losing Everything)

Buying a timeshare or retirement condo

One of the big problems with the projection bias is the fact that marketers and salespeople (not to mention con artists) are all perfectly aware of how this mental quirk works. So they make absolutely sure you have a great time with whatever they are selling to help you project future good times if you buy their product.

Two industries that often rely on this bias are timeshares and retirement condos. In many cases, both of these types of purchases require an upfront payment for future residence. While it’s possible that you will still want to visit Florida the first week of August every year in perpetuity, or that you will want to move into the 55+ condo community after you retire, you may also change your mind and feel stuck with an expensive choice that you may have trouble getting out of.

These types of purchases should also only be made after a great deal of thought, rather than right after a fun-filled weekend visit. (See also: Are Timeshares Ever Worth the Investment?)

The future will be different

The trick to keeping projection bias from destroying your finances is remembering that the future will not be exactly like the present. So it pays to be flexible in your plans for the future, and a little pessimistic about what you can expect.

Even if there are nothing but blue skies ahead and your tastes never change, you’ll still be glad you kept your finances flexible (and robust).

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This article is from Emily Guy Birken of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

5 Reasons Getting Rich Quick Is Unlikely and Always Will Be

Denise Hill — Wed, 20 Jun 2018 09:00:26 +0000

We've all dreamed about it: Winning the lottery without even playing. Inheriting millions from a wealthy, great-uncle you never knew existed. Pitching the perfect business idea to the perfect person at just the right time.

But chasing quick riches and instant wealth is an exercise in futility. It's like trying to capture a purple unicorn that lives outside of the castle just beyond the end of the rainbow; it's impossible. It doesn't exist. Movies, books, and social media have sold the idea that getting rich quick is possible. But that is a lie.

The allure of fast, easy money is a mirage that can lure you down a dark path. You risk emotional and financial devastation, as well as wasted energy and resources. And yet, people can't seem to let go of searching for ways to skip work and go straight to the wealth. It is impossible — always has been, and always will be. Here's why.

1. The law of equity (what you put in is what you get out)

The human mind, body, and soul is built for efficiency. Think about what happens when you decide to start exercising. At first, your movements are awkward. You lack coordination and you wear yourself out quickly. But a funny thing happens over time — you adapt. You not only get better at performing the exercises, but your body also adjusts and finds ways to perform the movements more efficiently in order to conserve energy.

The same thing is true when it comes to building wealth. It is natural to look for ways to get as far as you can with as little effort as possible, but there will always be a limit. Working out physically allows your body to adapt by building muscle memory, strength, and endurance. Similarly, as you build wealth, you develop patience, mental strength, and the stamina you need to sustain your money over time. And just like with exercise, getting rich is generally an equitable endeavor — at least initially. You only get out what you put in.

The bottom line is obtaining wealth — or anything of value — is usually attached to hard work, patience, and growth over time. Wealth without work is similar to using crash diets to lose weight. The results are not sustainable and you haven't learned how to properly maintain the changes. You need to consistently work hard and see your progress increase over time.

2. Easy come easy go

There are countless stories of people who come into a tremendous amount of money only to find themselves back where they started shortly thereafter. According to the National Endowment for Financial Education, 70 percent of people who win the lottery or get a big windfall all at once go broke within a few years.

Getting money and keeping it are two entirely different things. When you get something quick — without having to work and sweat for it — you don't value it as much. And what you don't value, you won't protect. One of the biggest problems financial advisers deal with when people get a sudden windfall is that they give too much away to family and friends. And they fail to properly keep track of what they get. When you get money quickly but haven't learned how to properly manage the little you had before, you simply repeat the same cycles but on a much larger scale.

When you aren't used to having, tracking, and managing large sums of money, it's really easy for you to lose it. There are people out there waiting for an opportunity to separate someone like you from your cash. Just like you want a quick buck, so does everyone else. And while your value system may only allow you to go so far to get it, others are far less scrupulous. (See also: Stop! Don't Make These 6 Dumb Mistakes With Your Financial Windfall)

3. A fool and their money are easily parted

Get rich quick schemes are never advertised as such. They are shrouded in mystery and secrecy. And who doesn't love a good secret? Especially one that can make you rich and elevate you above the rest of us mere mortals?

Most get rich quick schemes play on your desire for lopsided outcomes. Again, looking for a way to maximize impact and to gain ground quickly is completely natural and strategic. It doesn't make you a bad person. But it can make you a target.

The best approach to take when it comes to investment pitches and business propositions is to keep it simple. You are not a financial expert nor a business mogul. Don't pretend to be one. If you don't know, you don't know. Not knowing or understanding an investment or proposal is a key indicator that you need to back away from the table.

If it seems to good to be true, it is. If it sounds a little off, run. If it skirts the lines of legality, skip it. You have an internal gut feeling that causes you to pause; pay attention to that feeling. Don't let greed and/or arrogance push you into falling for fool's gold. Scam artists do what they do for a living. It's not a game for them. Humbly admitting that you don't understand the venture and gracefully bowing out can save not only money, but time and headaches as well. (See also: 3 Ways Millennials Can Avoid Financial Fraud)

4. It requires wisdom to build wealth (wisdom takes time)

Luck has very little to do with becoming wealthy. The ability to recognize and capitalize on a good opportunity is not happenstance. It takes wisdom to build and keep wealth. And building wealth slowly and experiencing the highs and lows of money management is what helps you gain wisdom.

You have to be diligent in order to truly be rich. You have to read, study, ask questions, and be willing to learn from others who are where you want to be. Being able to sniff out a con and spot a diamond among rocks takes keen senses, experience, and time. (See also: 5 Surprising Ways the Rich Get Richer)

5. Wealth is not a destination

One of the top reasons that getting rich quick isn't possible is because the concept itself is misguided. What is rich? When is enough, enough? And how do you know you are actually rich? Are you "oficially" rich when you reach millionaire status? Are you rich when you can buy whatever your heart desires? There are famous athletes, actors and actresses, singers, doctors, lawyers, scientist, etc. that make hundreds of thousands of dollars — millions even — but still are broke.

Wealth is a journey, not a destination. It is more than money in the bank and possessing expensive trinkets. You will gain money and you will spend it. You will earn it and lose it. Being rich is when you arrive at a place where you are able to be content with and manage what you have — no matter how much or how little. Being rich is a state of mind and a place of peace that is not greedy and constantly reaching for more. It's a journey of contentment. And that journey doesn't happen overnight. (See also: 5 Reasons Being a Millionaire Is Overrated)

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This article is from Denise Hill of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

How These 6 Assets Might Affect Student Financial Aid Eligibility

Emily Guy Birken — Thu, 14 Jun 2018 08:30:36 +0000

Once your child reaches high school, figuring out how to pay for college starts to loom large in your mind. An important step in getting ready for the costs of college is filling out the FAFSA (Free Application for Federal Student Aid). This paperwork helps determine how much need-based financial aid your student qualifies for. And before you assume that you make too much money to get any such assistance, remember that families earning as much as $180,000 per year can qualify for some form of financial aid.

Whether you have been diligently saving money in a 529 account since your (now 6-foot tall) baby was born, or you have only just now started thinking about college costs, you do need to understand exactly how your various assets might affect your student's financial aid eligibility. (See also: 5 Reasons Why Every Student Should Fill Out the FAFSA)

Here's what you need to know about the asset and income calculations for need-based financial aid.

Understanding the expected family contribution (EFC)

To determine your student's financial aid package, the college financial aid office starts by determining the cost of attendance and the expected family contribution, or EFC. The EFC amount is calculated based upon the information you provide on the FAFSA.

In general, assets and income held by the dependent college student count for more in the EFC formula, while parents' assets and income count for less — and some parental assets are not included in the calculation whatsoever.

The formula for calculating EFC specifically counts the following assets and resources:

20 percent of the student's assets, which includes savings, investments, business interests, and real estate.
2.6 to 5.64 percent of the parents' same types of assets (based on a sliding income scale).
50 percent of student income above $6,570.
22 to 47 percent of parent income above $25,040 (also based on the sliding scale).

The more money that is included in the EFC calculation, the lower the need-based financial aid offer will be. (See also: The 10 Most Common Financial Aid Mistakes — And How To Avoid Them)

How your assets are counted

Depending on what kind of assets you have, you may or may not have that money included in your student's EFC calculation. The following assets can affect financial aid offers:

1. Income

As of 2017, the FAFSA began requesting the prior-prior year's tax return from filers. This is called the "base year."

Before the change, families had to provide the prior year's tax return (that is, the immediate previous year) as their base year information. For instance, for the 2011–2012 school year, FAFSA filers had to provide their 2010 tax return, but filers filling out the FAFSA for the 2018–2019 school year will provide their 2016 tax return.

There are a couple of reasons why this is an important change. First, it means that families are less crunched to complete their previous year's taxes and a FAFSA form in the same year. Secondly, it also means that families who are actively trying to make income-related plans to lower their EFC need to do such things no later than their child's freshman spring/sophomore fall year.

What kinds of income-related plans? For instance, you might max out your retirement savings in the years leading up to the base year, because you are not asked to declare the value of tax-deferred retirement accounts (such as 401(k), 403(b), or IRA accounts) on the FAFSA. However, money that you contribute to your retirement account during the base year is still considered part of your income for the EFC calculation, even though it is pretax income that you have invested.

Another important thing to remember about income is how your child's income is counted on the FAFSA. Fifty percent of the dependent student's income over $6,570 is counted in the EFC calculation, and financial gifts are also considered income. For example, if Grandma and Grandpa give your child $10,000 toward college in 2018, 50 percent of the amount over the threshold ($3,430) would have to be counted as income on the FAFSA filed for the 2020–2021 school year, and it could increase the EFC amount (and reduce the aid) by about $1,715.

2. 529 accounts and Coverdell ESAs

The good news about these accounts is that whether they are in your name or your child's, they are considered parental assets. That means no more than 5.64 percent of the assets in a 529 account or Coverdell ESA will be included in the EFC calculation. So if you have saved $25,000 in your daughter's 529 account, her aid would only be reduced by roughly $1,400.

If other relatives — such as grandparents — have been saving money for your child in a 529 or Coverdell account under their own names, their gift can come with some expensive (and unanticipated) strings attached. That's because such assets are not counted at all on the FAFSA form, but when the money is withdrawn to pay for educational expenses, you must claim the amount withdrawn as untaxed income to the student. Since 50 percent of student income is counted in the EFC calculations, this situation can reduce aid by half the amount of the withdrawal. (See also: 5 Smart Places to Stash Your Kid's College Savings)

3. Retirement accounts

As mentioned above, the value of parental retirement accounts are not included in EFC calculations. However, the money that you contribute to your retirement account during years you fill out the FAFSA is included as parental income, even though you don't actually get to bring that money home with you. Some parents front load their retirement contributions in the years leading up to their child's base year just in case they need to reduce their retirement savings during the college years.

In addition, parents need to know that withdrawals from Roth IRA accounts are penalty-free if they are used for qualified college expenses. However, this distribution will count as parental income on the FAFSA for the year of the distribution and potentially reduce financial aid by as much as 47 percent of the amount withdrawn.

One way to circumvent this problem is to wait to take a Roth IRA distribution until your child has reached at least the spring semester of his or her sophomore year, since it will be after the final year of income you will need to report on a FAFSA. (Remember, since the FAFSA is based upon the prior-prior year's tax returns, you will not need to provide income information for the last two years of your child's four years in college.)

4. Home equity

The FAFSA does not consider the amount of equity in your home when calculating the EFC — although the CSS PROFILE, which is the form required by many private colleges and universities for determining financial aid eligibility, does request this information. This means that federal financial aid does not need to know how much equity you have in your home, but many private institutions will consider it when evaluating your financial aid needs.

Since home equity is not part of the EFC calculation, some families with large non-retirement savings may consider paying down (or paying off) their mortgage in the years before the base year. This will reduce your expected family contribution, but it could hurt you if Junior or Sis decide to go to a private college or university instead of InState U.

5. UGMA or UTMA accounts

These sorts of custodial accounts are in your child's name, which means that 20 percent of any assets in these accounts are counted toward the EFC. In addition, any interest, dividends, or capital gains earned from these types of accounts (or any accounts in your child's name) are counted as income for your child — which means that 50 percent of that money is counted toward the EFC.

Parents who opened a UGMA (Uniform Gift to Minors Act) or UTMA (Uniform Transfer to Minors Act) account for their child's education would probably be better served by rolling the assets over into a 529 account so that less of the money will be considered part of the EFC.

6. Taxable investment accounts

If you have additional investments on top of your tax-advantaged retirement accounts, these will also need to be claimed on the FAFSA form. These accounts are counted as assets, meaning up to 5.64 percent of their value will be counted in the EFC calculation. However, any dividends and capital gains earned are counted as income, and any distributions you take from these sorts of accounts are also counted as income.

If you need to take distributions from taxable investment accounts to help pay for your child's education, you will also want to wait to do this until at least the spring semester of his or her sophomore year, to keep the distribution from dinging you on the FAFSA.

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This article is from Emily Guy Birken of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

What You Should Ask Your Financial Adviser at Your Annual Meeting

Matt Bell — Tue, 17 Apr 2018 08:30:09 +0000

The decision to work with a financial adviser is not a one-and-done type of deal. You need to stay engaged and informed. While you probably covered most of your key financial questions in your first meeting or two, you should continue to meet at least on an annual basis. Here are some important questions to explore when you do.

Is my investment mix still appropriate?

When your adviser first put your financial plan together, he or she probably had you fill out a risk tolerance questionnaire or asked you questions directly. That information, coupled with your investment time frame, helped determine your portfolio's optimal asset allocation — the mix of stocks and bonds that's generally best for someone in your situation.

But your situation is ever changing. You're getting older, which could spell the need to make your portfolio a bit more conservative. Or changing market conditions might reveal something about your risk tolerance that the questionnaire couldn't catch. There's nothing like a real market downturn to find out just how risk-tolerant you really are.

So, one key question to keep on the table is whether your portfolio is allocated appropriately. (See also: The Basics of Asset Allocation)

How will you help me navigate the next bear market?

This question could just as easily be, "How will you help me navigate the next bull market?" It depends on where we are in the market cycle. At the moment, we're still in the midst of a very long-running bull. But just as surely as night follows day, bear markets follow bull markets. President Kennedy once said, "The time to repair the roof is when the sun is shining." Right now is a good time to talk about your adviser's plan for the bear market to come.

When the market changes direction, are you expected to grit your teeth and ride out the storm? Or does your adviser plan to make changes to your investment holdings? If so, what changes will be made and what will trigger the need to make them? If your adviser plans to make adjustments, hopefully he or she will base them on clear, objective criteria. Make sure you understand them.

This is all about expectations management. The better you prepare yourself for challenging market conditions and the actions your adviser may take to steer your investments through those conditions, the better you'll be able to sleep at night when they appear. (See also: 6 Investment Truths to Remember When the Stock Market Is Down)

What if a bear market hits at the start of my retirement?

If you're within 10 years of retirement, it's not too early to ask this question. For the unprepared, a bear market that hits right at the start of retirement can be devastating. This is why some advisers recommend taking a "bucket approach." One bucket contains cash, or very conservatively invested money. It should contain enough to cover three to five years' worth of the living expenses that your adviser predicts you'll have once you've spent your monthly payouts from Social Security or other guaranteed income sources. The other bucket is more traditionally invested.

When the market is in decline, you use the first bucket to draw money for living expenses. That way, you can avoid selling more volatile investments while they're falling or recovering. When the market is growing again, you draw from that bucket and also use it to replenish your cash bucket.

What's your adviser's perspective on this approach? What else does he or she recommend if the start of your retirement coincides with a market downturn?

What's my Social Security contingency plan?

Your financial plan surely includes an assumption about the age when you plan to take Social Security. If you intend to wait at least until your full retirement age (67 for anyone born in 1960 or later), what contingency plan does your adviser recommend in case you're not able to wait that long?

Many of today's retirees left the workforce earlier than they expected due to medical problems, the need to care for a loved one, or a corporate downsizing. Your plan should include a contingency in case something similar happens to you. (See also: How to Plan for a Forced Early Retirement)

Should I consider an annuity at some point?

An immediate annuity purchased upon retirement or shortly thereafter could provide some invaluable peace of mind, especially if it covers much or all of your essential living expenses. Generally, what does your adviser think of immediate annuities? And how does he or she recommended sorting through the myriad decisions related to annuities, such as: whether to base benefits on your life only or your spouse's as well, whether to include an inflation rider, whether to include a "period certain" provision whereby benefits would continue being paid to your spouse or heirs even after your death.

What annuity companies does your adviser recommend and will he or she earn a commission from the sale of an annuity provided by one of those companies? Are there other annuities available to you that may offer better terms but no commission to your adviser?

Also, what does your adviser think of longevity annuities? This type of annuity helps protect against the financial risk of a long life. You might purchase it for a lump sum when you are 65 or 70, with benefits not kicking in until you are 80 or 85. Should you plan to purchase one?

Just because you're working with a financial adviser doesn't mean you can think of yourself as having outsourced your financial life. Stay involved, see it as a partnership, and keep asking informed questions.

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This article is from Matt Bell of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

7 Worst Reasons NOT to Buy a House

Kentin Waits — Wed, 28 Feb 2018 10:00:06 +0000

For most of us, our home is the biggest ticket item we'll ever buy. The amount of time, labor, and money this single transaction represents demands a clear head and clear motivations. Since we already know there are a lot of terrible reasons to buy a house, let's take a look at things from the other side. Here are the worst reasons not to buy a house.

1. The market may go bust

After the Great Recession of 2008, everyone's worried about buying at the top of a bubble. But if you dream of owning a home, you've amassed a healthy down payment, can easily afford the mortgage payment and property taxes, and plan to stay in your new home for a while, stop obsessing about what the market may or may not do. Get on with the business of living in a new home.

2. You don't like the cosmetics

The triple threat of bad landscaping, garish paint, and shag carpet has made many a real estate agent go prematurely gray. But cosmetics are just that — cosmetic. They can often quite inexpensively be changed. Instead of writing off a house because it's got a case of the uglies, channel your creativity. Make small modifications as your time and budget allow. (See also: Don't Let These 6 Home Décor Flaws Ruin Your House Hunt)

3. Your furniture won't fit

I admit it; I used to watch lot of house hunting shows on cable TV. And the one conclusion I drew from this voyeuristic exercise? Too many homebuyers are terrified that the things they already own simply won't fit, no matter how generous the proportions of the rooms.

I'm not sure it makes sense to reject a home — or homeownership in general — simply because you've amassed a collection of barge-like beds, sofas, and dining room tables. Here's a good rule of thumb: Don't let things that depreciate in value dictate your purchase of something that appreciates in value.

4. You're afraid it will be a bad investment

First and foremost, houses are meant to be lived in (and hey, we all gotta live somewhere). Those who approach homeownership purely as an investment often fail to realize one important fact: Houses are often a worse investment than letting your money grow in the stock market. (See also: Stop Thinking of Your House as an Investment)

If you want to own your home rather than rent, buy a home. Live in it. Sell or rent it when you're ready to move on. You may come out ahead financially, or you may not. But in the meantime, you'll have lived in the home you wanted and that has value in and of itself.

5. Renters are happier than owners

Renters may be more carefree than homeowners, but that doesn't always translate into happiness. Renting puts you at the mercy of shifting economies, forces you to deal with a rotating parade of new neighbors (with whom you may share a wall or two), and provides little opportunity to customize or improve your space. Depending on your priorities, renting may be more of a drag than a delight.

6. You're scared of commitment

So, you say you're scared of commitment. Who isn't? But by avoiding homeownership, you're actually committing to something — spending more money on rent, not building equity, sacrificing a certain level of privacy, and potentially retiring with less security. There's proactive commitment and passive commitment. Which do you prefer?

7. You're worried about hidden issues

Remediating hidden issues can be expensive, but don't let unfounded fears get the best of you. Few homes are able to keep their secrets completely. Do your homework and don't skimp on the home inspection. Hire an experienced and certified professional, attend the inspection in person, and read the final report carefully. If a home has fatal flaws, move on. (See also: Thinking of Skipping the Home Inspection? Here's What It Will Cost You)

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This article is from Kentin Waits of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

4 Worst Reasons to Buy a House

Dan Rafter — Wed, 31 Jan 2018 09:30:09 +0000

Each month you send a rent check to your landlord. Meanwhile, every homeowner you know insists that you're wasting that money. They say that you should buy a home and that owning is a smarter financial move.

But are they right? Not necessarily.

There are good reasons to buy a home: You get a place to call your own and raise your family. You get more space. You'll gain more — but not complete — control over your monthly housing payments.

This doesn't mean, though, that owning is always the better financial choice. In fact, there are many myths about homeownership that could persuade you to buy for the wrong reasons. Here are four of them.

1. Owning a home is a great investment

It might seem that purchasing a home, holding onto it for years, and then selling it for a profit is a great reason to buy. But the truth is, homes aren't good investments for most owners.

Robert Shiller, a Yale economist, has long studied the housing industry, and ranks as a true expert when it comes to real estate and economics. Speaking to The Motley Fool in 2014, Shiller unveiled the numbers proving that housing historically has not been a good investment.

Shiller found that from 1890 through 2012, home prices when adjusted for inflation did not grow one cent. Homeowners would have made significantly more money by investing in the stock market during this same time. Shiller reported that the value of the S&P 500 increased more than 2,000 times from 1890 through 2012. Shiller also found that from 1890 through 1980, the real value of home prices actually fell by about 10 percent.

Don't buy a home thinking that it's a smart financial investment. It's not. A home is a place to raise your family and retreat to at the end of a long day. It's not supposed to be a moneymaker. (See also: Stop Thinking of Your House as an Investment)

2. You're tired of throwing away your money on rent

Advocates of homeownership often tell you that you're throwing away your money every time you pay a rent check. What they don't say is that this doesn't change much after you buy a house — at least not initially.

Most of us take out a mortgage loan to finance the purchase of a house. The bank behind your mortgage will technically own most of your house after you close on it. And in the earlier years of owning a home, the vast majority of the money you send toward the bank goes toward paying off interest. Only a small amount of each monthly payment goes toward paying down the principal of your balance.

So, you're still throwing your money at someone with nothing concrete to show for it. You're just throwing it at your bank instead of your landlord. And if you don't hold onto your house long enough — say, more than seven years — you'll have paid far more in interest than in reducing your principal balance by the time you sell. (See also: Why I Choose to Rent Instead of Buy)

3. You can build equity

Earning equity is one of the most popular reasons for people to buy a home. Say you owe $150,000 on your mortgage and your home is worth $220,000. You now have $70,000 worth of equity. You can borrow against that in the form of a home-equity loan or home equity line of credit to pay for everything from a child's college education, to major home improvements, to reducing credit card debt. (See also: 4 Smartest Ways to Use a Home Equity Loan)

You earn equity in two ways: First, every time you make a payment, you are reducing your mortgage amount. Second, if your home increases in value, your equity will grow automatically.

The problem is that home values can fall, and building equity when that happens is a true challenge. Say after three years of owning your home, you've reduced your mortgage amount to $200,000. If home values have fallen since you purchased your residence and your home is now worth just $190,000, you don't have any equity. Instead, you are underwater — meaning that you owe more on your mortgage than what your home is worth. (See also: 6 Times It's Actually OK to Be Underwater on Your Home)

You can't control whether the value of your home falls or rises. Millions of homeowners discovered this in 2007 and 2008, when home values across the country plummeted. Many of the owners who bought in 2005 and 2006 still owe more on their mortgages than what their homes are worth. Building equity isn't a guarantee.

4. Owning a house comes with big rewards at tax time

Advocates of buying a home point to the deductions that owners can take come tax time: Owners can deduct the interest they pay on their mortgages, as well as their property taxes.

But these deductions are becoming less valuable to some people. First, the new tax reform law says that owners will only be able to deduct the interest on their mortgage loans up to $750,000, rather than the $1 million that it was previously. Federal tax reform will also limit the amount that taxpayers can deduct in state and local property and income taxes on their federal returns to a maximum of $10,000.

The biggest change, though, might be the new standard deduction. Taxpayers filing their federal returns can either itemize their deductions or take the standard deduction. Tax reform will boost the standard deduction from $6,350 to $12,000 for individuals. It will increase the standard deduction for couples filing jointly from $12,700 to $24,000.

There is no financial reason for taxpayers to itemize their deductions if they aren't greater than the standard deduction. As the standard deduction increases, a greater number of taxpayers will take it instead of itemizing. This means we'll see fewer homeowners taking advantage of the property tax and mortgage interest deductions.

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This article is from Dan Rafter of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

6 Ways to Make Your Home Into an Investment

Aja McClanahan — Mon, 29 Jan 2018 09:30:09 +0000

Owning a home can be a great investment — if you do it right. Yes, having a nice, safe place to live for 30 years has its benefits, but there are drawbacks, too. Depending on the price you pay for your home, the appreciation rate, and other factors, you could end up with a negative return on your investment.

If you're smart, you can actually use your primary residence as an investment and bump up your potential returns. The even better news is that banks will finance a home purchase more favorably than any other business investment. Unlike a small business or purchasing securities, you can get a home loan with little to no money down.

If you’d like to use your home as a wise investment, there are a few moves you can make to help your returns go further.

1. House hacking

House hacking is a term that means getting tenants to pay for not only their own living space, but also yours. One form of house hacking involves living in a home and renting out rooms. With this method, you can choose how many rooms you rent out and how often. The idea is to cover more than the cost of the rooms you’re renting out. In the best of all possible worlds, you’ll bring in enough to pay the whole mortgage.

Alternatively, you can purchase a multiunit property, live in one unit, and rent the other unit(s) out, again, at a rate that’s ideally high enough to cover the whole mortgage. As long as you get a property that has no more than four units, you can get a residential loan with options for a lower down payment. Beyond four units, you’d be subject to commercial financing, which requires much more money down.

2. Get a HELOC

If you’ve got equity in your home (the difference between your home’s market value and the remaining loan balance), you might be eligible for a home equity line of credit, otherwise known as a HELOC. Banks will give you anywhere from 70 to 80 percent of your home’s equity in the form of a line of credit.

You can use this money for various purposes, but a common use of a HELOC is investing in more real estate. This additional money can be used to purchase and renovate additional properties that you can either sell for a profit or keep for rental purposes. (See also: Home Equity Loan or HELOC: Which Is Right for You?)

3. Make a low down payment

Though this is not always a good strategy for the long term, you can use this method to capture a good return on capital in some cases. This works best in a scenario where you will be able to get revenue from your property rather quickly — say, profits from an immediate sale or by renting out the property.

A simple example would be purchasing a home that requires $5,000 for the down payment and closing costs, but earns you $3,600 a year after you’ve paid all expenses. By year two, you’ll already have netted $7,200, which is a 144 percent return on your initial capital investment of $5,000.

4. Buy low, sell high

Looking for a deal in real estate requires patience, luck, and diligence. By the time properties are advertised, they may already be priced at or above market value. However, if you’re lucky enough to find off-market deals that are priced well below market value through your network of friends and acquaintances, you may be able to actually walk into a deal with equity.

A very simplified example would be purchasing a home worth $150,000 for $100,000. If you were to pay $10,000 to cover the down payment and closing costs, and sell the property right away for $150,000, you’d quickly receive a 500 percent return on your $10,000 investment. (See also: Sell Your House Faster With These 6 House Flipping Tricks)

5. Improve your home

Although most home remodeling projects won’t pay for themselves through a higher sales price for the house, some renovations in some markets will.

To find out what renovations will offer the biggest bang for your buck in your real estate market, check out Remodeling Magazine's 2017 Cost vs. Value Report. Typically, bathroom, kitchen, and basement remodels are all things that can boost the value of your home. If you choose wisely, you may be able to increase your home’s value at a faster rate. (See also: 5 Home Renovations That Could Hurt Your Home's Value)

6. Add solar panels

There are multiple ways you can come out ahead with the installation of a solar panel. Depending on whether you buy or lease your solar panel system, you can receive tax credits, save on utility bills, and capture potential appreciation on the resale of your home.

The only caveat to adding solar energy is that the installation itself can be quite costly. Plus, the amount of energy your system produces will depend on many things — from geography (sun exposure), to the architecture of your roof, to even the state you live in.

However, for many homeowners, it can be worth the investment, especially if you are planning to stay in your home for a number of years. Use a solar calculator to find out if owning solar panels will earn your home a worthwhile return on investment. (See also: How Long Does It Take to Break Even With Solar Panels?)

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This article is from Aja McClanahan of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

12 Things You Should Know About the New Tax Law

Tim Lemke — Thu, 11 Jan 2018 09:30:06 +0000

The long-debated changes to America's tax code are now law. President Trump closed out 2017 by signing the Tax Cuts and Jobs Act, bringing sweeping changes to how much individuals and companies will pay in tax beginning this year.

What does the new tax law mean for you? Here are some key take-aways.

1. You'll probably pay less in taxes

There's been a lot of debate about who benefits the most from the new tax law, but what's clear is that just about everyone will see at least some decrease in how much they pay. At the very least, your personal tax bracket is likely lower. The new tax brackets are: 10 percent, 12 percent, 22 percent, 24 percent, 32 percent, 35 percent, and 37 percent. (They were previously 10 percent, 15 percent, 25 percent, 28 percent, 33 percent, 35 percent, and 39.6 percent). A tax reform calculator can help you grasp how much tax you'll pay under the new law.

2. Corporations will pay less tax, too

The new tax law greatly simplifies and lowers taxes for companies. Corporations will now pay a flat rate of 21 percent on all profits, down from as much as 35 percent under the previous law. This brings the United States' corporate tax rate below the global average. The new law also eliminates the alternative minimum tax (AMT) for corporations.

3. You'll get more money back if you have kids

One of the final provisions added to the new tax bill was an increase in the child tax credit. This is a credit you receive if you have a dependent aged 17 or under. The credit was doubled, from $1,000 to $2,000 per child. The refundable portion of the credit was also increased to $1,400.

4. You can (probably) still deduct mortgage interest

Under the new tax law, the deduction for mortgage interest was capped at $750,000, but if you bought your house before December 15, 2017, it's still $1 million. So for most people, mortgage interest will still be deductible. It's important to note that this only applies to your primary residence; interest on vacation homes is not deductible. (The previous law allowed for a tax break on second homes.)

5. You can deduct property and local taxes, up to a point

There was some debate in Congress about whether property taxes, state taxes, and local taxes would be deductible, and they ultimately will be. However, these deductions will be capped at $10,000. This could mean higher taxes for those people living in certain places, such as California and New York. Some state and local lawmakers are exploring ways to offset that burden.

6. Many deductions are now gone

Under past tax law, you could deduct moving expenses from your taxes. You could deduct many work-related expenses that were not reimbursed from your employer. You could even deduct any costs you incurred when you did your taxes. These deductions and many others are gone. However, it is unclear whether taxpayers will feel the need to itemize deductions in the future anyway.

7. Itemizing may no longer make sense

As we indicated above, the new tax bill does allow for some itemized deductions, but it may not matter. That's because the standard deduction has been doubled, to $12,000 for single filers, $18,000 for heads of household, and $24,000 for married couples filing jointly. For many people — especially those who don't own homes — it may be hard to collect the amount of deductions to make itemizing worthwhile. The Joint Committee on Taxation said that 94 percent of taxpayers may now choose to take the standard deduction, up from 70 percent under the previous law.

8. There are no more personal exemptions

Under the previous tax law, the IRS allowed you to reduce your tax liability by claiming a personal exemption. This exemption was $4,050 during the last two years. The new tax law eliminates personal exemptions and instead significantly boosts the standard deduction ($12,000 for singles and $24,000 for married couples). For most people, this still will result in lower taxes.

9. Investment income will be treated roughly the same

There were some adjustments to how investment income is treated, but dividends and capital gains will generally be taxed as they were under the previous law. Long-term capital gains — investments held for more than a year — will still be taxed at 15 percent for most people and 20 percent for the highest earners. Short-term capital gains will still be taxed as normal income, though that means the taxation will be less, since income tax brackets are lower under the new law.

10. The "marriage penalty" is almost gone

Under the previous tax law, it was possible for people to be stung by higher taxes if they got married. That's because in some instances, a couple with similar incomes filing jointly would jump to a higher tax bracket. Under the new law, the thresholds for filing jointly are exactly double those for single filers, except for married couples earning more than $300,000.

11. The health care individual mandate may be eliminated

Under the Affordable Care Act, anyone who did not purchase health insurance was subject to a penalty of 2.5 percent of your income or $695, whichever was higher. That penalty will go away in 2019 under the new tax law.

12. None of the changes apply to 2017

It's important to know that when you file your tax return over the next few months, you won't be working with the new tax law. Any money you earned in 2017 is taxed under the previous tax structure. This is important to remember when claiming deductions and trying to figure out proper tax rates for your income. You won't have to worry about the 2018 tax law until you file your tax return in 2019.

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This article is from Tim Lemke of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

6 Things You Need to Do if You're Retiring in 2018

Dan Rafter — Wed, 20 Dec 2017 09:30:10 +0000

You’re ready to retire in 2018. A long career is behind you, and you're finally ready to enjoy your golden years after decades of hard work and saving.

But just because retirement is at your doorstep doesn’t mean you don’t still have a few important steps to take. Here are six things you need to do right now to start your 2018 retirement off on the right foot.

1. Calculate your retirement budget

Creating any sort of budget rarely sounds like fun, but when you’re ready to retire, it’s a necessity. Remember, that paycheck you’ve counted on for so long is disappearing. You need to make sure you have enough money coming in each month to support yourself.

First, calculate how much money you’ll have available each month. Include all sources of income, including Social Security benefits, money from the savings you’ve built up, royalties, rents, disability payments, and annuity payments. Then, calculate your fixed expenses that remain the same each month. These would include rent or mortgage payments, car payments, and insurance costs — everything from life and health, to homeowners and auto.

Create reasonable estimates for expenses that might fluctuate each month. This includes costs such as utility bills, the money you spend on groceries, transportation costs, and, always important, the estimated amount of dollars you’ll spend on entertainment, traveling, and eating out.

Once you have these figures, you’ll know if you have enough money to support the retirement lifestyle you want.

2. Make some tweaks

Maybe, after creating this budget, you discover that you don’t have enough incoming dollars to cover all your expenses. This means it’s time to make some changes. If money is tight, you might have to cut back on discretionary expenses like going out to dinner or the movies. You might not be able to take a road trip every month. You might have to put off that cruise.

If you need more dramatic savings, it might be time to consider putting your home on the market. If you sell it and downsize into a smaller residence — maybe a condo or apartment — you might be able to generate enough money, and save enough in monthly mortgage expenses, to afford a more luxurious retirement lifestyle.

You might also consider selling your car, if you’re still making payments on it, and purchasing a more affordable vehicle that might cost hundreds of dollars less each month. (See also: 6 Ways You Can Cut Costs Right Before You Retire)

3. Talk to your partner about your retirement hopes

You don’t want to hit retirement only to discover that you’re happy puttering around the house and reading while your partner is looking forward to traveling the country in an RV.

Partners need to talk about their retirement goals long before they leave the working world. If you haven’t done this yet, and you’re ready to retire in 2018, it’s time to have this conversation.

Retirement brings with it plenty of free time — maybe more than you expected. You might get tired of reading or fishing pretty quickly. It’s best to discuss how you’ll fill these extra hours with your partner or spouse before retirement hits. Doing so will increase the odds that both of you will enjoy a happy retirement together. (See also: 5 Money Conversations Couples Should Have Before Retirement)

4. Consider whether you still want to work

Many retirees take on part-time work after they leave their full-time jobs. Some do this for financial reasons, while others simply enjoy the act of going to work and staying productive.

Take a long look at yourself. If you enjoy the routine of going to work, and find working satisfying, taking a part-time job might be the right decision for you. Or maybe you’ll want to use your retirement years to set up a consulting business or pursue a dream job in the arts.

Just make sure to plan for this move. Share your goals with your partner, so that he or she isn’t blindsided when you announce that you’re going back to work. And if you’re retiring next year, take the time now to make the connections and prep your resume so that you can transition as smoothly as possible to your new job. (See also: 4 Creative Remote Jobs That Can Supplement Your Retirement Income)

5. Explore your community

Again, retirement comes with plenty of free time. If you don’t want to work, maybe you’ll want to volunteer to fill in those hours. Now is the time to explore volunteer opportunities in your community. That way, when you do retire, you’ll already have a plan for how you’ll occupy those long post-work days. (See also: How to Find Your New Identity After Retirement)

6. Get conservative with your investments

If you haven’t already, move your retirement savings out of stocks and into less volatile savings vehicles such as bonds. It’s true that bonds don’t have the same ceiling when it comes to big gains, but you don’t want a dip in the stock market six months before you retire to eat up a big chunk of your retirement savings. Instead, play it safe by moving your savings to retirement vehicles that aren’t as likely to hit a big dip.

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5 Retirement Struggles Nobody Talks About — And How to Beat Them

Carrie Kirby — Mon, 04 Dec 2017 09:00:07 +0000

If you have ever sat down with a financial planner, you know that one of the main questions that comes up is, "How much income do you think you'll need when you retire?"

When I was asked this question, the first answer that popped into my head was, "Hardly any!" In the retirement scenario in my mind, my kids were independent and my home was paid off, leaving few financial obligations. When pressed, I acknowledged that I might need some money for taking fun vacations with all that free time I'll have, and for buying gifts for my grandchildren.

While it's true that a lot of the big expenses of our working lives have ideally been paid off by retirement, retirees still face a lot of financial obligations. Retirement is not all learning to paint or strolling on the beach — despite what prescription drug ads may lead you to believe. A 2016 study by the U.S. General Accounting Office found that retirees on average spend 77 percent of what they spent while they were working, with spending declining decade by decade as retirees age. (See also: 9 Unexpected Expenses for Retirees — And How to Manage Them)

Let's go through some of the retirement expenses you may not have accounted for, and how to deal with them.

1. Health care

While other expenses shrink after retirement, medical care spending increases. In the present day, the increase is modest. The same U.S. General Accounting Office report found that retirees ages 65 to 79 spend an average $5,000 a year on health care, compared to $3,900 for workers aged 50 to 64. But predictions for future health care expenses in retirement are dire.

HealthView Services' 2017 Retirement Health Care Costs Data Report predicts that medical costs will rise 5.47 percent per year for the foreseeable future — meaning that today's 65-year-old may be spending $10,000 or more per year on health care by age 75, on top of Medicare coverage.

"Health care will be one of the most significant retirement expenditures; however, the savings required to cover this expense may be modest — especially if one has been utilizing an income replacement ratio (IRR) of 75% to 85%," warns the report.

HealthView recommends talking to your planner not just about income replacement, but also about what you expect medical expenses to be based on your current health. Look at optimizing your retirement portfolio to address those needs. For example, some advisers recommend saving for retirement medical expenses using a health savings account — although these are only available to workers who have high-deductible health plans. (See also: How an HSA Could Help Your Retirement)

Managing health conditions proactively can also make a big difference in expenses over a lifetime.

"A 50-year-old male with type II diabetes can save (an average of) $5,000 per year in pre-retirement health expenses by shifting from Poorly Managed to Well Managed care," the report says.

2. Taxes

You might expect your income tax to disappear or decline steeply when you retire, but remember that withdrawals from 401(k) plans and traditional individual retirement accounts are taxable, as are most pensions and some Social Security benefits. If your retirement plan involves collecting rent on properties you own, well, that's taxable too. And if you have paid off your mortgage before retiring, remember that you just lost a big tax deduction in the form of mortgage interest payments.

The problem of taxes during retirement is the reason many workers also invest in a Roth IRA or Roth 401(k) plan. Unlike a regular retirement account, which you fill with untaxed income, only paying taxes on withdrawals, a Roth takes income you already paid taxes on, and withdrawals are tax free. Since no one knows how tax rates when you retire will compare to tax rates today, many advisers recommend spreading investments across both kinds of accounts to hedge your bets. (See also: Here's How Your Taxes Will Change When You Retire)

Another thing to consider when retired is whether you plan to make charitable donations part of your estate plan. If you were going to give away thousands of dollars to charities in your will, for example, discuss with an accountant setting up a schedule of giving while you're alive, instead, so that you could take annual tax deductions that could reduce or eliminate taxes you owe.

3. Inflation

In recent years, inflation has been low, but the long term average annual rate of price increases is 3.22 percent. That means that if you retire with benefits and savings designed to cover 80 percent of your current income, those same benefits will cover a smaller portion of your current spending each year, if not invested to grow at a rate faster than inflation. This is why financial planners never advise keeping your life savings in cash, stuffed in a mattress.

Of course in retirement you don't want to take on big risks with investments, since you can't earn more money to replace what you lose. But you also can't be too conservative or you risk having inflation shrink your savings each year. With interest rates as low as they are, you can't count on earnings from certificates of deposit to surpass inflation. For most retirees, that means you must have some money in stocks, bonds, or other investments. And you must stick to your investment plan, even if the market gets rocky. (See also: 7 Reasons to Invest in Stocks Past Age 50)

4. End of life

When you plan your retirement, you're likely thinking more about all the golf you want to play or the traveling you want to do, not so much about spending your final years in a nursing home or planning your funeral. Unfortunately, those less fun expenses must also be planned for.

Take a realistic look at how much assisted living and nursing homes cost. If you are still young enough to get it, look into long-term care insurance. Discuss with your family whether they expect you to move in with them if you need more care later in life, or if they would prefer you plan for nursing home care or assisted living. If long-term care needs seem imminent, meet with an attorney who specializes in making Title XIX plans; they can help you learn what assets can be shielded from being liquidated to pay for care. (See also: Is Long Term Care Insurance Worth It?)

Medical expenses tend to jump in the final years, costing about $7,000 to $8,000 more per year in the last two years of life, according to HealthView Services.

Consider prepaying funeral expenses so that it's not a cost hanging over your head as you enjoy retirement. And certainly meet with an estate planner as part of your retirement planning to make provisions for the distribution of wealth after you are gone. (See also: 9 End-of-Life Cost Savings Your Survivors Will Thank You For)

5. Mandatory withdrawals

The moment you turn age 70 and a half, you are required to take minimum distributions from your IRA, 401(k), and other retirement accounts on a schedule set by the IRS. This doesn't sound like a problem — after all, this is what you saved all that money for. But what if you don't need to spend the required distribution this year? Unfortunately, you still have to withdraw it, and pay taxes on it, or the IRS will confiscate 50 percent of the money you were supposed to withdraw in the form of a tax penalty.

While you can't change the IRS's schedule for required withdrawals, and you can't roll the distribution into a different tax-deferred account, you can plan for this requirement and schedule income and spending around it. For instance, you can avoid selling real estate or other investments, or scale back work hours if you are still working, and allow the income you are getting from your retirement account to replace other income. And of course, you can always invest your distribution outside of retirement accounts, if you don't need to spend it.

Another way to conquer the mandatory distribution is to plan for it while saving for retirement, for example by putting some income into a Roth IRA, which doesn't have required distributions. As you approach retirement, if your IRA distributions look like they will be too large for you to use, you may also talk to a planner about converting a traditional account into a Roth.

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5 Details Your Financial Adviser May Be Ignoring

Denise Hill — Fri, 17 Nov 2017 09:30:10 +0000

All financial advisers are not created equal. And all financial advice — including advice recommended by top economists and financial experts — may not be the best advice for you.

Your financial plan should encompass your complete financial picture, including your goals and priorities. It should include planning for your children, your spouse, aging parents, long-term care, death, loss of income, and so much more. But just because these things should be included in your plan doesn't mean your adviser is automatically doing so.

Here are five key things your financial adviser may ignore or omit telling you.

1. He or she is not a financial fiduciary

The term financial adviser is becoming increasingly ambiguous. Due to the complex rules that determine who can call themselves a "financial adviser," many professionals who are unqualified to give financial advice are unfairly operating under this label.

Benjamin Brandt, a North Dakota financial adviser and host of the podcast Retirement Starts Today Radio, recommends that you only take advice from and follow a financial plan created by a qualified fee-only financial fiduciary. Fee-only fiduciaries are paid a flat fee that ensures they don't earn commissions on investment sales. Since they don't depend on commissions from sales, you won't have to question whether a fiduciary adviser is operating with your best interest at heart.

To ensure you are working with a true financial fiduciary, Brandt recommends checking the adviser's credentials using the Paladin Registry, which offers a database of financial adviser designations that can help determine if the adviser holds a professional designation (CFP, CPA, ChFC, and CFA) versus one they may have purchased online. (See also: Investment Advice You Should Never Hear From Your Financial Adviser)

2. Your complete financial picture

Understanding your complete financial picture — including where you are currently and your future aspirations — is key in developing a true financial plan that is beneficial.

According to Brandt, if a financial adviser shows you a glossy sales brochure and offers you investment products before ever looking at your budget, net worth statement, or written financial goals, you are not working with a fiduciary and should ignore his or her financial advice.

Before sitting down with an adviser, it helps to take a good look at your finances. Things like calculating your net worth, setting your financial goals, and creating an informal budget before your first visit with an adviser can help you start off on the right foot.

And while your calculations and budget may not be entirely accurate (hence the need for a financial adviser), you will have a better idea of where you are and what you have. It will provide your adviser with a more comprehensive financial picture. It will also allow you to discuss your liabilities and other investments that may not be profitable, as well as help to avoid duplicate investments. (See also: 11 Secrets You Need to Tell Your Financial Adviser)

3. Your personal and financial goals

A financial adviser who fails to ask about your financial goals as it relates to your children, your spouse, and your lifestyle is doing you an injustice. An adviser who merely wants to sell and manage your investments can actually set you up to lose more money long-term than if they include your financial priorities in the plan up front.

Take, for example, a parent who wants to send their children to school without student loans. That parent would need to explore options that help in saving specifically for college. This could be done through traditional methods or less conventional saving vehicles such as a 529 plan. There are many factors that can shape that decision and a good financial adviser should work with that parent to determine the best savings vehicle to suit the needs of that family.

Your financial adviser should understand and respect your financial goals and find the best avenues to help you achieve those goals. Things they should know and consider are:

If you are working to reduce or eliminate debt.
Your plans for one-time expenses such as paying for a wedding or taking a large vacation.
Education planning for you or your children (private school, college, continuing education programs, or advanced degrees).
A possible career change by you or your spouse.
If you are planning to start a business.

4. Preparations for long-term care

According to LongTermCare.gov, 70 percent of people turning 65 will require long-term care services sometime in their lives. And of that number, the U.S. Department of Health and Human Services found that 18 percent will have to live in a long-term care facility.

According to insurance firm Genworth, the average annual cost of a stay in an assisted living facility is $45,000, while a stay in a nursing home with a private room costs an average $97,455 per year. And avoiding a stay in a facility isn't necessarily the answer to saving money on long-term care; an individual receiving 44 hours of in-home health care weekly can expect to pay close to $50,000 per year.

Long-term care services come with significant costs that often impact retirement plans, savings and assets, and the level of care one receives. If your adviser doesn't account for these expenses in your financial plan, they are putting you at risk of financial turmoil later in life.

This means that for some, considering their age, family history, and potential health risks, a health savings account (HSA) may make more sense than a traditional IRA. With a traditional IRA, you contribute pretax dollars to the plan and the money grows tax-deferred. You pay taxes when you withdraw the money when you retire.

To enroll in an HSA, you must have a high-deductible health insurance plan (HDHP). With an HSA, you get the same pretax contribution benefit, but the difference is that when you withdraw money to pay for qualified health insurance premiums or medical expenses (including nursing home stays and in-home care), it comes out tax-free. And the funds rollover from year to year, so you don't lose what you don't spend.

But again, the decision on whether or not to invest in an HSA can only be determined on a case-by-case basis. What may make sense for one situation could be detrimental in another. (See also: 10 Reasons an HSA Is Actually Worth Having)

5. Tax efficiency

Unfortunately, a lot of financial advisers fail to take the time to comb through your tax returns to check for tax efficiency. And tax efficiency is one area where a good financial adviser can be the most helpful.

An adviser who only focuses on managing your portfolio may not have the expertise to accurately analyze your tax situation and understand how to maximize your income assets. A financial adviser who holds a CPA or CFP designation, on the other hand, would most likely be qualified to provide sound tax advice.

Financial planner Charles Scott recently told USA Today that if the only tax advice your adviser gives is to put your money in tax-deferred investments such as an IRA or 401(k), you may want to get a second opinion. Because even though you'll be in a lower tax bracket when you retire than you are currently, there are so many other factors that must be considered. He advises that you diversify your tax load now and in the future.

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This article is from Denise Hill of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

How Complacency Keeps You From Financial Security

Annie Mueller — Fri, 06 Oct 2017 08:30:06 +0000

Complacency is not taking action even when you know you should. It tends to be an issue when you're not sure why a decision matters, or when you're overwhelmed by the details and options involved in making a decision. Complacency may seem like no big deal, but it can have a very negative effect on your finances. Here's how it can hurt you.

You're getting a poor return on your investments

When you're complacent about how you manage your long-term savings, you can miss out on a lot of returns. If you put off moving your money into an investment or fund, and leave your accumulated savings in a low-interest savings account instead, you're losing money every month. You could be adding to your savings effortlessly with passive income, and by not doing so, you're drastically diminishing your future earnings potential.

Take an hour or two to learn the basics of investing. Then set up an account and get started earning a better return. You can always make adjustments later. In the meantime, your returns will be compounding.

Your lack of emergency savings means more financial emergencies

Complacency might make you feel like you don't need to have an emergency fund. Maybe you haven't rebuilt your fund after a crisis, or maybe you haven't been able to accumulate one at all. When things are going well and your day-to-day life is predictable, an emergency fund might seem unimportant.

However, having an emergency fund keeps a small crisis from becoming a big deal. You can't always predict a big expense or income loss; without a plan and some savings, you may end up using a high-interest loan or credit card to handle a financial crisis. That kicks off a fix-it-quick debt cycle, which can leave you backed into an unpleasant financial corner.

It can seem difficult to build up an emergency fund, especially if you're already on a tight budget. But even a very small, regular contribution to your savings will add up quickly. Doing what you can is better than doing nothing at all.

You're not adding as much as you could to your retirement savings

Maybe you're not taking full advantage of your 401(k) or haven't yet set up the IRA you've been thinking about. There can be some details to work through, but in the meantime, you're missing out on savings and, possibly, matching funds from your employer. If you're failing to contribute regularly, or putting off setting up a 401(k) and IRA altogether, you're jeopardizing your retirement. You're also missing out on tax breaks that come with these retirement accounts.

Not sure where to start? Our step-by-step guide to choosing 401(k) investments can help. If your employer doesn't offer a 401(k), here are five Roth IRA accounts you can set up on your own that don't require a lot of money to open.

Your big, unnecessary expenses are increasing your debt

At some point, you made a decision to buy the house or the car or whatever it is. Now, you realize it's not really worth it. The expense is more than you can comfortably handle, and you could live without it. But getting away from this payment — whether it's a lease, a mortgage, or a car loan — seems impossible, so you just … don't.

Meanwhile, you're paying interest every month and, if your budget is stretched to the limit, you're not saving like you could be. You may be stuck making minimum payments on debt, or failing to proactively maintain your big purchases because you can't afford to do more. The resulting depreciation can diminish the value of your house or car in a hurry, leaving you with less and less value to recover as time goes on. (See also: 4 Purchases With Financing Options That Depreciate Fast)

Take the first step by finding out how to get out from under this big expense. There may be an option to end the lease early. Maybe you can sell the car and pay off the loan. Or it might be time to get that house on the market and find something more affordable. The sooner you take action, the sooner you stop losing money.

Your ho-hum career is costing you opportunities

Career capital isn't only about what you make in terms of salary; it's also about the skills and experiences you build, which can add to your marketability. If you're bored, disinterested, or otherwise feeling stuck in your job, but you're staying put, you're limiting your future in terms of finances and fulfillment.

The more disengaged and unhappy you are in your job, the poorer your performance will be. You're more likely to do subpar work, miss out on opportunities, and be passed over for promotions. Even if you don't love your job, do your best to gain skills and be engaged while you're there; doing so will open up more opportunities for advancement or a complete career change.

Meanwhile, start looking for your next move. It might be time to start a side hustle, network for a new job option, or get serious about starting a business. Don't let time go by and kill your enthusiasm (and your bank account). The sooner you take action, the sooner you can increase your salary and your enjoyment in the work you do.

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This article is from Annie Mueller of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

What to Expect After These 5 Personal Financial Disasters

Annie Mueller — Mon, 11 Sep 2017 08:00:05 +0000

Financial hardships can happen despite the most careful planning and saving. If you're facing a crisis, read on to learn what you can expect to happen and how you can handle these challenges. There are always options, and you can recover from even the most feared financial situations.

1. You've lost your primary source of income

There are many reasons why you might be facing a sudden, devastating loss of income. Sometimes family, personal, or medical situations make it impossible for you to continue working; in other cases, the job itself ends, and you have to start over again. Losing your primary income source, of course, hits you hard financially. Other income — a partner's salary, perhaps, or side job — can help alleviate the financial impact. But that help is usually limited, either in amount or in duration. Here are a few things you can expect to happen.

Loss of savings

Losing your income means you quickly start relying on your emergency fund and any other savings you've accumulated. If you're able to quickly reduce your expenses, you can make your savings last longer.

Increased debt

If your savings aren't adequate, or if you face unexpected financial needs, you may find yourself debt-dependent in order to handle incoming bills. The worst case scenario is when you have to rely on high-interest debt (such as credit cards) to keep up.

Financial stress

Dealing with income loss, financial insecurity, and all the changes you have to make as a result quickly leads to stress. Stress, unfortunately, is no friend to you and decreases your ability to make smart, long-term decisions.

Change in lifestyle

You'll need to cut your expenses as much as possible to handle income loss; though these changes aren't necessarily bad, they can cause emotional pain, personal discomfort, and induce more stress. Change is difficult even in positive circumstances, and change induced by financial crisis exacerbates stress and insecurity.

What you can do

There are many ways you can positively handle a loss of income:

Do your best to reduce your immediate expenses, even if only temporarily.
Call and negotiate for delayed payment plans with creditors or other major billers. (See also: Pay These 6 Bills First When Money Is Tight)
Get some money coming in; even a small amount of what you used to make will help you deal with bills and expenses. (See also: How to Come Up With $1,000 in the Next 30 Days)
Reach out to your personal and professional network for work opportunities.

2. You've defaulted on a loan

Defaulting on a loan feels like one of the worst possible financial situations. However, getting in over your head financially can happen to anyone. It doesn't have to end your financial future, but it will have some impact on your financial present. Here's what can happen after defaulting on a loan.

Lowered credit score

Late payments, missed payments, and account closures on debts can all bring your credit score down. A low credit score isn't the end of the world, but it will limit your ability to establish credit, get loans, or even rent a house or buy a car.

Calls from collection agencies

Different lenders have different rules, but after some period of nonpayment, your loan will most likely be passed on to a collection agency. While some agencies maintain a professional tone and approach, some do not and might become intrusive or aggressive. Even with courteous collectors, it's stressful and unpleasant to get letters and calls demanding debt repayment you know you can't afford. (See also: Account in Collections? Here's How to Fix It)

Repossession of collateral

If the loan you've defaulted on has collateral — such as a mortgage or car loan — you may find yourself facing repossession. Home foreclosure is usually a last resort, as it's messy and costly for mortgage companies to handle.

What you can do

The best way to handle defaulting on a loan is with proactive negotiation. Try these steps:

Negotiate a payment plan for delayed and/or split payments in order to avoid collection agencies.
Negotiate a debt settlement with the bank or credit holder. You'll usually need to make a cash payment, but only for a percentage of the total amount owed in order to clear the debt entirely.
Contact your mortgage company if the loan defaulted on is your house mortgage; explain your situation and ask them to help you work out an affordable, alternate payment plan. They don't want your house; they want your cash, and they may be willing to negotiate terms and minimum payments.
Examine options to consolidate all your debt into a single, smaller payment you can afford.

3. You've lost money in an investment

So you took some of your hard-won savings and decided to invest. Maybe it was in a friend's startup, a real estate project, or a stock that seemed like a sure thing. It didn't work out, and now you've got to handle the fallout. Assess the impact and start taking positive steps forward. Here are a few things you might initially face:

Loss of money

The most obvious consequence, of course, is the loss of your money; that hurts. Remember, however, that just as you lost money, you can also invest and save money. One painful investment loss does not poison the rest of your savings or investments.

Loss of confidence

The psychological impact of a bad money move can make you doubt your own financial prowess and decisions. It's okay to question yourself, but you want to learn, not stay stuck. (See also: Your Loss Aversion Is Costing You More Than Your FOMO)

Smaller retirement savings

If you were counting on the return from this investment as a key part of your retirement savings, you're now facing a major blow to your retirement plan.

Less ability to invest

A loss of money means, of course, lowered liquidity. You may not be financially able to build up savings quickly, which reduces your ability to invest and start rebuilding your portfolio.

What you can do

You don't have to run away from investing (nor should you!) because you made one choice that didn't work out. Start proactively using these options to recover:

Meet with a financial planner to assess your options and go over any lingering financial questions or doubts.
Rebuild emergency savings, if you've used them up as part of your investment.
Lower expenses or increase income to replace what you've lost, by cutting back on expenses and adding in some side work for a while.
Keep your savings steady; build up to a minimum investment amount and examine the safest high-yield options for your next investment.

4. You've racked up high-interest debt

It's never the plan to get stuck with high-interest debt. But with the right (or wrong) combination of life events and decisions, you can find yourself there. High-interest debt is a particularly bad kind of debt: If you can't make more than the minimum payments, your debt will continue to grow at a very fast rate. It's likely you'll be facing some unpleasant consequences such as:

Poor credit score

If you've made a late payment or missed one altogether, your credit score can be affected negatively. And if you've accumulated more debt than you can manage, and you're frequently missing payments while you try to keep up, your credit score can take a big hit.

Loss of opportunities

When you're struggling to keep up with debt payments, you're limited. Whether it's an investment opportunity or the chance to enjoy some time off with friends, the burden of high-interest debt can keep you from affording the opportunities that come your way.

Financial embarrassment

Many people still struggle with feeling ashamed or embarrassed about having debt, even though having debt — a lot of it — is quite common. In fact, according to a 2017 poll conducted by Northwestern Mutual, 40 percent of Americans spend about half their monthly income on debt payments.

What you can do

Being burdened with high-interest debt may feel like a problem you can't solve, but there are steps you can take to reduce its impact on your life. Start with these actions:

Communicate with the debt holder if you've fallen behind on payments. You can often negotiate a split or delayed payment, as long as you can guarantee a payment of some kind.
Learn about debt repayment strategies and which one might work best for you.
Whatever you do, don't add any more to your debt! Put away any active credit cards and reduce normal expenses so you can live on your income without adding more debt to your life.

5. You're recovering from a divorce

Divorce not only has a huge impact on your emotional and psychological state, but also on your financial well-being. First, divorce itself is expensive; the average cost is between $15,000 and $20,000. In addition to footing your part of that bill, you might also face some of these huge costs:

Disproportional expenses

You might find that your expenses, carried over from your pre-divorce life, exceed your current, post-divorce income. You can reduce or eliminate expenses, but sometimes you're locked into agreements (such as a lease or a cellphone service contract) that keep you at a higher expense level than you can reasonably afford.

Lowered investment returns

If you and your former spouse were contributing to a joint account, you'll have to divide that up somehow in the divorce proceedings. If it's an even split, your half in an account by itself will produce reduced returns.

Big tax bills

If part of your divorce was to liquidate and divide all assets, you might be in for an unpleasant surprise when tax time rolls around. You may have to pay a hefty capital gains tax on certain investments or other assets that have been liquidated.

What you can do

By taking some smart steps forward, you can reduce the negative financial impact that a divorce has on you. Make these moves to take control of your financial life, post-divorce:

Meet with a financial consultant as soon as possible to develop a plan for maximizing your investments and keeping your retirement savings on track. (See also: 5 Money Moves to Make the Moment You Decide to Get Divorced)
Call and negotiate with contract holders to eliminate any lingering, too-high expenses. There may be a buyout option you can take.
If possible, delay liquidation of shared assets or investments until you fully understand the taxes or fees that you'll face when they are liquidated. (See also: How to Protect Yourself Financially During a Divorce or Separation

It's not easy to recover from a financial disaster, but recovery is always an option. The most important things you can do are, first, face the situation squarely in order to figure out what your best options truly are. You may have more than you think.

Secondly, don't be afraid to ask for help, which doesn't necessarily mean asking for money. Rather, you may be able to get help from your creditors (lowered payments), from your network (job opportunities), from your local community (selling your car, building a side hustle), and more.

Moving forward and rebuilding takes time, but it's within your power.

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This article is from Annie Mueller of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

How an HSA Could Help Your Retirement

Damian Davila — Wed, 21 Jun 2017 09:01:05 +0000

If you're worried about medical expenses during your retirement, you're not alone. According to the latest Retirement Confidence Survey from the Employee Benefit Research Institute, 45 percent of American workers don't feel confident that they will have enough money to take care of their medical expenses when they retire.

The good news is that you may be able to do something on top of socking away money into your 401(k) or IRA to plan ahead for your medical bills during retirement. Let's review what a health savings account (HSA) is and how it can help your retirement planning. (See also: How an HSA Saves You Money)

What is an HSA?

An HSA is a tax-advantaged medical savings account available only to people who are enrolled in high-deductible health plans (HDHPs). An HDHP is health insurance that has a lower monthly premium, but a high deductible. A deductible is the amount you must pay out of pocket for medical expenses before your health insurance kicks in.

An HSA helps you pay for qualified medical expenses such as doctors' visits and prescriptions that are not reimbursed by your HDHP. The beauty of an HSA is that you can contribute to it with pretax dollars by setting aside a portion of every paycheck, allowing you to reduce your taxable income. Depending on where you set up your HSA, you may be able to invest the money in mutual funds or other investments to help the funds grow faster. Whatever money you don't use during the year rolls over into the following year, meaning you could have a nice amount built up by the time you retire.

For your insurance plan to qualify as an HDHP — one that allows you to use an HSA — the HDHP must have a deductible of at least $1,300 for self-coverage or $2,600 for family coverage (as of May 2017). You can only use the money in the account for qualified medical expenses, and if you withdraw money from your HSA to use for other purposes before you reach age 65, you'll have to pay a 20 percent tax penalty.

To qualify for an employer-sponsored HSA, you can't be listed as a dependent on somebody else's tax return or enrolled in Medicare.

How an HSA can help your retirement

Here's how an HSA can give your nest egg a boost during your retirement years.

1. Avoid taxes on approved medical expenses

Without an HSA, if you took out $1,000 from your 401(k) to cover a medical bill during retirement, you'd pay applicable income taxes on the money you withdrew. And if you were to retire before age 59 ½, you would pay an additional 10 percent penalty tax for that 401(k) withdrawal. With an HSA, however, you never pay taxes when using funds for approved medical expenses.

2. Avoid the early withdrawal penalty on nonmedical distributions after age 65

The longer you hold an HSA, the more flexibility you'll gain to use your funds. Once you reach age 65, you can withdraw money from the account for nonmedical expenses without triggering that 20 percent tax penalty. Note that you'll still pay income tax on the distribution.

3. Gain access to more investment options

If your employer-sponsored retirement account gives you access to only a few investment options, an HSA may be a way to broaden your options for retirement investments. While some HSA providers limit investment options to an FDIC-insured savings account, many others offer the option to put money in a separate HSA investment account with several fund options, including mutual funds and low-cost index funds. (See also: Why Warren Buffett Says You Should Invest in Index Funds)

4. Increase annual contribution limits for your retirement savings

In 2017, a single tax filer can save up to $18,000 in a 401(k) and up to $5,500 in a Roth IRA (with catch-up contributions for those 50 and older of $6,000 and $1,000, respectively). With an HSA, that same tax filer can save up to an additional $3,400 to cover medical expenses during retirement, with a $1,000 per year catch-up contribution allowed for those aged 55 and over.

Take a look at HSAs

If you don't have a good employer-sponsored health plan, you could give your retirement plan a much-needed boost with an HSA, assuming you're eligible for one. The premiums on an HDHP can be higher than those of other health plans, so it's important to take a look at all of your alternatives. Since there are many considerations to keep track of, including taxes, medical expenses, and investment decisions, consider seeking the advice of a professional. (See also: Who to Hire: A Financial Planner or a Financial Adviser?)

The health insurance decisions you make now could help you have a more comfortable retirement.

[Editor's Note: An earlier version of this article noted that withdrawals after age 65 for nonmedical expenses are tax free. This is incorrect, and the article has been corrected to reflect that.]

This article is from Damian Davila of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread: