investing

5 Financial Accomplishments Millennials Can Be Proud Of

Tim Lemke — Thu, 15 Nov 2018 08:01:11 +0000

Millennials get blamed for a lot of things. Often, they're accused of being spendthrift and irresponsible. Critics assume that Millennials are unable or unwilling to save money or invest smartly.

Much of this criticism is unfair. In fact, if you look at what Millennials have accomplished with their finances, they have a lot to be proud of.

1. More than one in three Millennials own a home

Pew Research Center reports that about 35 percent of Millennials now own homes. That's still lower than the national average overall, but many experts say that an increase in Millennial homeownership in recent years has helped boost the overall rate of ownership to its first increase since before the Great Recession. Given the headwinds facing Millennials (high housing costs, student loan debt, stagnant wages), a homeownership rate of more than one-third is nothing to sneeze at. (See also: 10 Reasons to Cut Millennials Some Slack About Their Money)

2. Millennial homeowners have good credit

Research from Ellie Mae, a platform provider for the mortgage finance industry, showed that mortgages to Millennials weren't going to people with terrible credit. In fact, the average FICO score among Millennial borrowers in 2017 was 723, which falls in the "good" range. (See also: 7 Ways Millennials Are Better With Money Than You Are)

3. Millennials are hitting their savings goals

A 2018 Bank of America survey revealed that about two-thirds of Millennials who have a savings goal are able to stick to it each month. In fact, 16 percent of Millennials have $100,000 or more socked away in savings. And 59 percent of this demo feels financially secure. These stats directly contradict the assumption that Millennials don't know how to save and waste every dollar they earn.

4. Millennials ask for raises, and often get them

If you're a Millennial, there's a good chance you've summoned the courage to ask for a pay increase, and have gotten one. Bank of America reported that 46 percent of Millennials have asked for a raise in the last two years, and 80 percent of those people have received higher pay. Baby Boomers, Gen Xers, and other generations have lagged behind in asking for more money. (See also: 6 Ways Millennials Are Working Less and Earning More)

5. Millennials have made investing cheaper and easier

It used to be that investing was exclusively for the elite, and you could only trade stocks through a human stockbroker who charged high commissions. But in the last 20 years since Millennials began investing, costs have come down. Index funds with super-low expense ratios have revolutionized investing. Discount brokerages are engaged in a race to the bottom on the commissions charged per trade.

And there are also tons of smartphone apps that make it easier to buy even fractional shares of stock. Millennials are also responsible for the surge in new services such as robo advisors, account aggregators, and more. (See also: Here's How Boomers and Millennials Are Creating Winners on the Stock Market)

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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:

This Is How Free Money Management Apps Make Money

Tim Lemke — Tue, 09 Oct 2018 08:00:13 +0000

There are many smartphone apps designed to help make our financial lives easier. It’s now possible to manage nearly all aspects of our money — from budgeting, to investing, to sending money and making payments — through an app. And since many of these apps are free to use, it prompts the question as to how the operators make any money.

The business model for apps varies, but there are a variety of revenue streams ranging from advertising and referrals to subscription premium services. Let’s take a quick look at a half dozen of the most common financial app categories and their business models.

1. Money transfer apps

Do you need to pay someone, but don’t have cash and don’t want to bother with a check or money order? You can use money transfer apps to make payments and transfer cash instantly. In most cases, the app links to a bank account or credit card.

Some of the more popular money transfer apps include PayPal, Venmo, Cash App, and Dwolla, though there are many others. They are usually free to use, and they make money by charging a percentage of every transaction involving a credit card. Some apps, such as Venmo, also have a social feed component that could eventually lead to advertising revenue. (See also: The 5 Millennial Money Apps Everyone Should Use)

2. Account aggregators

These apps, which often also have desktop versions, allow users to link all of their financial accounts in order to see their full monetary situation in one view. This allows for easier tracking of spending and income, and there are some handy budgeting tools. Mint and Personal Capital are two of the more popular account aggregators.

Mint makes its money from a number of different sources, including advertising, product referrals (including credit cards), and from selling users’ aggregated financial data. Personal Capital, meanwhile, gets its revenue from the management fees tied to its separate robo-advising service. It collects 0.89 percent of the size of each portfolio under $1,000,000, and less as accounts grow larger. (See also: These 5 Apps Will Help You Finally Organize Your Money)

3. Investment apps

There are a number of new apps designed to make it easier for people to invest, including some that allow users to invest with small quantities of money. Acorns, for example, will round the cost of your purchases up to the nearest dollar and invest the difference. Acorns and its competitor Stash charge $1 per month until you have $5,000 in a portfolio (and in Stash's case, $2 a month for IRA balances under $5,000). After that, both services charge 0.25 percent of your account balance. (See also: How to Start Investing With Just $100)

4. Credit score checkers

There are a number of apps that allow users to learn their credit score and get alerts for any unusual activity on their credit report. Credit Karma, Credit Sesame, and WalletHub are popular apps that are free to use, but make money from targeted advertising, loan management, and referral partnerships with credit card providers. (See also: I Checked My Credit Score in 11 Places — Here's What I Learned)

5. Billing, invoicing, and time tracking

This group includes apps such as Harvest, which allows for time-sheet tracking, billing, online invoicing, and other services. Harvest is free for one person and two projects, but $12 per month, per person for unlimited projects. Similar apps have similar charges, but also make money if you use their payment processing features or pay for other upgrades. (See also: 5 Free Accounting Tools for Freelancers)

6. Bill paying

These apps can be similar to account aggregators, but allow users to make payments. Doxo is one app that allows for bill paying and offers a “digital filing cabinet.” Bill paying is often free, but users may be charged a fee if the provider is not part of the app’s network, or you pay using a credit card. (In the case of Doxo, this could be as much as 3.5 percent.)

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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:

9 Money Questions You Should Be Able to Answer by Age 30

Tim Lemke — Wed, 03 Oct 2018 08:00:12 +0000

If you are exiting your 20s, you may be gallantly resisting the urge to "adult" and actually pay attention to your finances. But it's time to get serious, people.

You don't need to obsess over every detail of your money just because you are entering your fourth decade of life, but there are some key things you should have a handle on if you want to achieve financial freedom and retire on time.

Let's examine these questions you should be able to answer by the time you turn 30.

1. What is your net worth?

Your net worth is the total sum of your assets minus your debts. By age 30, you should be focused on building that net worth to a healthy sum. This means boosting your income, investing well, and keeping debt to a low level.

It means knowing how much you're putting into your 401(k) and other retirement accounts. It means knowing how much you owe. There's no magic number for what your net worth should be at this stage, but it should definitely be in positive territory. If you have a negative net worth, work to reduce your debt load and start saving money more aggressively. (See also: 6 Money Moves to Make If Your Net Worth Is Negative)

2. What are you invested in?

By age 30, you should be investing as much money you can in stocks, with the intention of watching that money grow for the next three decades or more until you retire. Starting at age 30 will give you plenty of time to build a sizable nest egg, if you invest well.

At this stage, you may be throwing your money into whatever investments are offered by your employer's retirement plan. But you should take time to know precisely how your money is being invested. Are your holdings comprised of low-cost investments with a track record of growth? Are you paying high fees or commissions? And when was the last time you rebalanced your portfolio? These are the questions you should be asking yourself now, and you ought to have good answers. (See also: 8 Steps to Starting a Retirement Plan in Your 30s)

3. How big is your emergency fund?

If you're around 30 years old, you may feel like nothing seriously bad could happen to you. But life can come at anyone, and fast. At this point in your life, you should be putting some money aside for a rainy day. An emergency fund can help you absorb an unexpected expense, such as a medical emergency, big car repair, or a busted appliance. Opinions vary on how big an emergency fund should be, but you should ideally have at least three to six months' worth of daily living expenses saved in cash to endure a big life event. (See also: 5-Minute Finance: Start an Emergency Fund)

4. Are you on track to retire comfortably?

Retirement may be decades off, but it's still crucial to get a sense of whether you're saving enough now to ultimately retire when you want to. It's been said that by age 30, you should have half your income saved. This may seem like a steep total in an era of high housing costs and student loans, but it's achievable if you maintain good savings discipline. Calculate how much you'll have saved by age 50, then 55, then 60. If you're behind your target, it may be important to bump up your current rate of saving. (See also: 8 Things Millennials Can Do Right Now for an Early Retirement)

5. Are you properly insured?

Building your net worth isn't just about making money, but also protecting it. Insurance is perhaps the one thing you will pay for that you hope to never use. You may have health insurance, but have you taken time to review your policy and understand how much you'll end up paying out of pocket if you get sick? What about homeowners or renters insurance to protect your belongings? And what about life insurance? It's hard at age 30 to think about illness or accidents happening, but there's a fine line between living a carefree life and facing a financial disaster by being horribly unprepared. (See also: 15 Surprising Insurance Policies You Might Need)

6. Is your savings account the right one for you?

You've probably been putting money in a savings account since you were a teenager. But have you ever given any thought to how much interest your money is earning? Are you aware of what fees you're paying? By age 30, you should be mindful of where you're putting your money and should take time to shop around for the bank that treats you best. There are many banks out there, and you don't have to settle for the one right around the corner. (See also: 6 Important Things to Look for in a Savings Account)

7. What is your credit score?

Your credit score is like your financial report card. A high number means you've been responsible with your money, and you can be rewarded with lower interest rates from lenders. By this stage of your life, you should know what your credit score is. In fact, many credit cards now tell you your score each month. Ideally, you should shoot to get your score over 800, but 700 usually means you're in decent shape. Anything lower means you may want to take time to pay down debt, take care of any outstanding late charges, and start borrowing more responsibly. (See also: 5 Things to Do Right Now to Boost Your 600 Credit Score)

8. Are there errors on your credit report?

In addition to knowing your credit score, by age 30 you should be in the habit of checking your credit report every year. You're legally allowed to review the credit reports from each of the major credit bureaus (Experian, TransUnion, and Equifax) once yearly, and this periodic review can be helpful in keeping your finances on track. Your credit reports may contain errors, like incorrect names and addresses, and even references to debts that aren't yours. If you find mistakes, contact the credit bureaus to get the reports fixed ASAP. (See also: How to Read a Credit Report)

9. What is your debt-to-income ratio?

At this point in your life, you may be considering buying a home. When you seek to get a mortgage loan, lenders will want to know the ratio of your debts versus your income. A ratio that is above 43 percent is considered too high by some lenders, and you may find it difficult or even impossible to get a reasonable loan. If your debt-to-income ratio is nearing this level, it's time to start paying off whatever loans and credit card bills you have. (See also: 5-Day Debt Reduction Plan: Pay It Off)

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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:

9 Essential Personal Finance Skills to Teach Your Kid Before They Move Out

Tim Lemke — Fri, 06 Jul 2018 09:00:10 +0000

Your child is on the verge of moving out and living on their own. Are they prepared?

Arming them with the right personal finance knowledge will give them a strong foundation to go and achieve many of their life goals. If their understanding of personal finance is lacking, they could begin their independent life on the wrong foot (and they may even come back home).

Consider these ways that you can help your child build a base of financial knowledge before they move out.

1. Show them how to budget

Perhaps the most important personal finance skill is consistently spending less than you earn. There are a million different ways to budget, and whatever works for you may not work for your child. But encourage them to develop a system to track and categorize spending and then compare those expenses to their income. Of course they'll need to account for housing, food, and utilities but also let them know it's OK to include "fun money" in their budget. It will help them stay motivated to stick to their budget. (See also: How to Help Your Kid Build Their First Budget)

2. Teach them how retirement plans work

If your child is moving out, they likely have some earned income. That means they can start contributing to a Roth individual retirement account. They may scoff at the notion of saving for retirement so early, but if you help them open a Roth IRA and demonstrate how much money they can accrue over time, they'll get on board. Urge them to save as much as they can each month, invest in simple things like index funds, and simply watch their account balance grow over time through compounding.

If they have a 401(k) plan through an employer, take time to review the plan document with them and encourage them to contribute as much as they can. Be sure to explain the advantages of getting a company match on contributions, if one is offered. (See also: 11 Basic Questions About Retirement Saving Everyone Should Ask)

3. Explain bank interest rates

Chances are, your child already has a savings account. But it's still helpful to explain that they don't necessarily need to put their money in the first bank they see. Show them how interest rates can vary, and that it's OK to shop around for the best rates so they can earn a little extra money. Explain terms like APR and APY, and the factors that impact whether rates go up or down.

Also outline the pros and cons of placing money in certificates of deposit. These days, it's also helpful to explain that while interest rates are rising, they're still quite low, and that it might make sense to invest some funds in ways that generate a higher return than savings account interest. (See also: 12 Places to Keep Your Money Safe — And Growing)

4. Tell them about bank fees

Once your child understands how bank interest rates work, they'll need to know about the tendency banks have to charge fees to account holders. These fees could be for anything from low balances to the use of paper checks. Tell your child how they can avoid these fees by researching the best bank accounts and reading the fine print. Let your kids know that if a bank is charging too many fees, it's OK to switch to another bank that doesn't. (See also: Are You Paying These 6 Unfair Banking Fees?)

5. Teach them the pros and cons of credit cards

Credit cards can help a person establish credit, and that's important when you are starting out. And some credit cards offer nice benefits, such as cash back on purchases or travel rewards miles.

You can help your kid apply for a card, but it should come with a series of warnings. Young people must know that credit card balances should be paid off in full each month whenever possible. Show your child that credit card interest rates can be exorbitant, and that high balances can lead to a debt spiral from which they may never escape. (See also: How to Get Your First Credit Card and Build Credit)

6. Outline the pain of debt

Arguably the most important lesson you can teach your children before they leave the nest is that debt is not a good thing. Take time to explain the basics of borrowing so they understand how expenses can continue to increase if debt is not paid off. Show them calculations with interest rates for credit cards, auto loans, student loans, personal loans, and mortgages. Give them an understanding of debt-to-income ratios, and what that means in the context of their financial well-being. (See also: 8 Common Causes of Debt — And How to Avoid Them)

7. Explain the concept of net worth

When your child leaves home, they may be focused on finding a job that pays a high income. That's fine, but it's important for them to understand that income alone is not what generates financial security. It's more crucial to acquire assets that increase in value, while eschewing things that will decrease in value or be a drain on your finances.

This means saving money and investing it. It means avoiding debt. It means purchasing a home instead of renting, if possible. Your net worth — that is, the total value of your assets minus your debts — is the true indicator of your financial well-being. (See also: 6 Money Moves to Make If Your Net Worth Is Negative)

8. Urge them to shop for value

Saving money isn't always about spending as little as possible. It's also about spending your money wisely and getting the most bang for your buck. For example, if your child needs to purchase a refrigerator for their apartment, convey to them that they should seek out the best quality model at a price that fits their budget.

Shopping for value involves understanding quality and longevity of products, and knowing what features matter and which don't. It also involves doing extensive research of products and prices before you buy. Shopping for value is a skill that can be learned, and one that could save your child a considerable amount of money over time. (See also: How to Shop With Purpose — And Save More Money)

9. Teach them basic car maintenance

You don't need to teach your child how to replace a catalytic converter, but it helps if they have a decent foundation of car knowledge. Teach them how to put air in a tire and change the tire. Demonstrate how to swap out a headlight bulb and replace a hubcap. Urge them to read the car's manual and learn what all of those warning lights mean. Get them in the habit of changing the oil every few thousand miles.

Finally, teach them how to research the cost of car repairs, so they don't get ripped off at the mechanic. Your child won't be able to avoid car repair expenses, but they'll know enough to avoid getting stranded on the side of the road. Moreover, these basic maintenance efforts could help prevent the need for a major repair later. (See also: Bookmark This: Save Money With an Easy to Follow Car Maintenance Checklist)

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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:

5 Smart Money Moves Your Kids Can Make Over Summer Vacation

Emily Guy Birken — Thu, 05 Jul 2018 09:00:11 +0000

Summer vacation when you're a kid means endless days of bike riding, swimming, playing video games, and fighting over who gets the last purple Popsicle in the freezer.

It's not nearly as idyllic for Mom and Dad. Not only do parents need to line up (and pay for) alternate child care for the kids during the summer months, but they also have to worry about Junior and Sis spending their allowances on Dilly bars and Star Wars sunglasses that break immediately, only to ask for more money to go to the movies every weekend.

That's why summer is a perfect opportunity to teach your kids about money management. Not only will these money moves help to improve your kids' money skills, but it will also help them to retain the math and reading skills they might not otherwise be practicing while school is out.

Here are five great money activities your kids can enjoy this summer vacation.

1. Lemonade stand

There's a reason why this classic introduction to entrepreneurship is a perennial favorite. Encouraging your kids to set up a lemonade stand gives them an opportunity to think about all the aspects of making a business successful, including venue, startup costs, pricing, advertisement, and signage.

Your kids will learn all sorts of important lessons about economics through this summer project. For instance, they can charge a higher price for homemade lemonade made from real lemons as compared to lemonade mixed from a powder — but they have to do more work to make the more expensive product. Is the increased price worth the increased work for these budding business owners?

In addition, your kids can learn that choosing a popular spot on a hot day will increase their sales, as opposed to setting up shop on a quiet street on a cooler day.

The one caveat about lemonade stands is the potential legal aspect of this kind of business. There are laws in many parts of the country that prohibit these kinds of sidewalk businesses without a permit, even when such businesses are run by adorable 10-year-olds. Help your child research the local laws before she sets up shop.

2. Investment club

Have your older kids form an investment club together. This club will invest a hypothetical $1,000 in whatever stocks the kids decide on together. Encourage them to choose stocks from companies that they already have a relationship with, like McDonald's, Facebook, Disney, Coca-Cola, Nike, Apple, or Microsoft. Remind them of what Warren Buffett says: Invest in what you understand. Their understanding of these brands will make them better investors than if they try to just pick something they are unfamiliar with.

Once they have "invested" their money, ask them to provide a weekly report on how their investments are doing. They will need to track the prices of their stocks and record those prices, which means they will learn how to look up stock information online. They can even make charts plotting the movement of their stock choices, so that they can have a good visualization of what their money is doing.

This project will help to encourage them to think of investing as something that anyone can do, even a kid, and can get them excited about potentially investing some of their real allowance money rather than spending it on Legos. (See also: 10 Investing Lessons You Must Teach Your Kids)

3. Grocery store math

When you take your child with you to the grocery store, put him in charge of keeping track of how much you have spent. For each item that you place in the cart, ask your child to write down the cost, which he will add to a running tally. Not only will this help him practice his math skills, but it will also give him an opportunity to do price comparisons, learn how pricing works for loose items like produce, and offer you a chance to talk about sales tax and how that affects your total at the cash register. (See also: 6 Fun Games That Teach Your Kids About Money)

4. Create a practice budget

One way of doing a practice budget is with a toy catalog. If you can't find one in print, check online, as many retailers upload versions of their toy catalog digitally. Tell your kids they have $50 to "spend" in the catalog, and let them go through the pages circling or noting what they are interested in. Then, ask them to add up the costs of all the items they circled to see if they stayed within their budget. Depending on the age of your kids, this can be a tough exercise, since they may be overwhelmed with how much they want.

For younger kids, another practice budget exercise is to take them to a dollar store and give them $5 each to spend. While they will be able to pick out at least a few items each, they will need to do some important thinking about which things they want most. This will help them understand opportunity cost — buying one item means you have less money available to buy a different item.

Similarly, if you have an older kid who loves video games that offer in-app purchase upgrades, ask them to list the cost of all the upgrades they want. These types of purchases tend to be low dollar amounts, but they add up quickly — and asking your kid to do the math on how much all of the character upgrades will cost can be very eye-opening. (See also: How to Help Your Kid Build Their First Budget)

5. Save up for a trip to a theme park

Going to an amusement park is a great family outing, but such day trips can be expensive. Between the price of tickets, the cost for things like ride photos and other souvenirs, extras like face painting, and the high markup on food, a family can drop quite a lot of money in a single day at a theme park.

Have your kids plan the budget for your trip to their favorite amusement park. Ask them to research how much entrance tickets cost and if there are ways to lower those costs. For instance, there are often reduced rates for purchasing tickets online as compared to at the gate, and amusement parks will often pair up with major retailers or brands to offer promo codes to reduce rates even further.

Let the kids know how much of the trip you will pay for, and ask them to cover any extras. For instance, you might offer to pay for half the cost of the admission, and will help them pack food for the trip. The kids will have to cover the rest of the admission price, as well as any extras or food purchased on site. This will help them figure out the best ways to budget, and determine whether having Dippin' Dots or a souvenir from the park is more important to them. (See also: 8 Affordable Amusement Parks That Are Just as Fun As Disney)

It's summertime, and the money lessons are easy

This summer, help your kids learn how to make responsible choices with money. These fun activities will ensure they go back to school in the fall with a clearer understanding of economics, budgeting, wants versus needs, and money management.

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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:

8 Signs Your House Is Holding You Back

Tim Lemke — Tue, 03 Jul 2018 08:00:09 +0000

Owning a home can be a powerful thing. It can bring happiness and security to you and your family, and it's often a wise financial decision. But sometimes, your house can be a problem.

Many of us fall for the temptation to purchase a home that is ultimately too costly for us to sustain. We pursue our "dream home" only to find that the costs of ownership and maintenance are actually preventing us from achieving other goals. Let's examine the signs that your house may be holding you back.

1. It is costing you more than 30 percent of your income

It's fine to budget a certain amount of your income to housing costs, but at a certain point, that share becomes too much. The federal government advises spending no more than 30 percent of your income on housing. This is not a requirement — very wealthy people may be able to afford more — but it's a good rule of thumb. For most people, once you pass that 30 percent threshold, you may find it hard to make your housing payments and cover other expenses in your life. (See also: How to Make Ends Meet When You're House Poor)

2. You're barely making a dent in the loan principal

One of the major advantages of owning a home versus renting is that you have the opportunity to build equity over time. This can be a major part of building net worth. But, a large mortgage loan with unfavorable terms could mean that you are paying mostly interest and very little principal.

With most home loans, homeowners can build equity over time — if they're patient, they can pay off the interest and begin chipping away at the principal. But some mortgage loans (such as interest-only or negative amortization loans) can leave a homeowner with little to no equity and may even leave them owing more than the home is worth. This is a hard situation to get out of, but if you can find a way to refinance your mortgage into a fixed-rate loan, the house will be less of a financial burden over time. (See also: 8 Signs You're Paying Too Much for Your Mortgage)

3. You are taking on other debt

It's OK to have some mortgage debt, but when you find yourself borrowing to pay for other things, that's problematic. Have you been forced to finance your cars instead of pay for them outright? Are you taking on credit card debt? Your house may be responsible for an ever-increasing debt load that could eventually destroy your financial dreams. (See also: 5 Surefire Signs You Have Too Much Debt)

4. You're struggling to hold onto it

When that mortgage bill is due each month, are you scrambling to get the funds together? Have you been late on payments or skipped them altogether? Is the bank threatening to take your home away? This is a horrendous way to live. Chances are, you've taken on too much house. That home, which is supposed to provide your family with shelter, security, and comfort, is now something you can barely afford to keep. It may be time to devise an exit strategy.

5. You've come to resent the house

A home should be a source of pride. It's the place where you watch your kids grow up, grow vegetables in the backyard, and host Thanksgiving. Your home should be your refuge and a place of happiness.

Have you instead found yourself simply hating the place? Have you ever said, "Gosh, I can't stand this house?" Maybe it's because the house is haunted or backs up to the city dump. Or it could be that the costs of owning and maintaining the house stresses you out. If your house is a source of strain rather than joy, it could be that it's too much of a financial burden.

6. Your life has shrunk

OK, so you have your house. You go to work every morning. What else are you doing with your time? What dreams are you pursuing?

Sometimes, our housing costs impose such a burden that we find ourselves unable to really "live" life in a meaningful way. Taking time to travel? Forget it. Going back to school? No way. Starting a business? Not a chance. Even going out to eat with friends and family may be out of the question.

You may feel "rich" living in a large, expensive house. But how rich is your life, in the final analysis?

7. Investing seems impossible

Your employer offers a 401(k) plan, but you haven't even thought about contributing. You've heard about things like IRAs and mutual funds, but can't bother to research what it all means. The notion of putting money aside for retirement seems almost ridiculous, because you're barely treading financial water.

There's no question that investing can be difficult when you have other living costs to consider, but you need to budget for the future in the same way that you budget for groceries and other costs. If you find it hard to set aside even a small amount, it could be that your house is eating up too much of your income.

Reducing your housing costs and freeing up even $50 to $100 per month could represent tens of thousands of dollars in savings over time. If you can further reduce your housing costs by thousands and invest toward retirement instead, you'll be sitting pretty. (See also: You Can Start Investing With a Lot Less Money Than You Think)

8. You feel stuck in your job

Maybe you're not satisfied with your career path, or aren't getting along with your boss. Perhaps you can't stand your commute. Ideally, you can simply leave your job and find a new one. But sometimes, we stay at jobs because the pay and other benefits are simply too good to pass up. How many of us have said, "I can't leave this job because I've got a mortgage to pay?"

If this sounds like you, think about how your house is actually forcing you to stick with a job you hate. While we all must earn income to live, we also all deserve the right to pursue careers based on reasons other than money. Moreover, we should ideally be able to take time off work — or endure a job loss — without it resulting in immediate financial disaster. If you feel trapped in a job you don't like, are your housing costs to blame?

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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:

5 Ways to Embrace Having to Work in Retirement

Emily Guy Birken — Thu, 28 Jun 2018 08:00:15 +0000

We all know what retirement is supposed to look like: You get a nice farewell luncheon and a gold watch from your employer — and then you get busy golfing, traveling, spoiling the grandkids, and generally living it up in your golden years.

So if you find yourself with an underfunded nest egg and the realization that you have to continue working in retirement, you can be forgiven for wanting to throw an epic temper tantrum. Working in retirement is not what we were promised, and if that doesn’t warrant some flailing and crying, I don’t know what does.

But not being able to fully retire doesn’t have to put you in a permanent bad mood. Once you’ve stopped shaking your fist at the heavens, consider these ways to not only accept, but also embrace the reality of working in retirement.

1. You may be happier than retirees

Though it might seem like retirement is the key to happiness, psychological researchers have found that working is actually better for your subjective well-being. According to a 2014 study by Dr. Elizabeth Mokyr Horner in the Journal of Happiness Studies, retirees do experience a rush of well-being and life satisfaction in the first few months after they retire — but they feel a sharp decline of their levels of contentment within the first few years of retirement.

There are a couple of reasons for this decline in happiness. First, anything you spend years planning for is unlikely to live up to your expectations. It’s only natural for retirees to feel let down when they realize their new chapter in life isn’t exactly what they expected. In addition, when you end a career that has helped define who you are, it’s common to feel adrift once that career has ended. Finally, retirement can often lead to a shrinking social circle, since you no longer see co-workers on a daily basis. Lack of social contact can increase feelings of loneliness and depression, which can be a major problem among retirees.

Even if you are not happy about the fact that you have to work past retirement age, remember that working may actually be improving your happiness by helping to define you, giving you a broader social circle, and providing you with a reason to get up every morning. (See also: How to Find Your New Identity After Retirement)

2. You can make your workplace better

One of the benefits of working past traditional retirement age is the amount of knowledge and experience you bring to your job. Not only does that make you a valuable member of your workplace, but it provides you with an opportunity to help encourage and shape the culture there. By taking younger co-workers under your wing and making suggestions based on your depth of knowledge, you can potentially improve the company you work for. It’s tough to do this without the kind of clout your experience lends you.

3. You can put off taking Social Security

According to the Center for Retirement Research at Boston College, approximately 42 percent of men and 48 percent of women begin taking their Social Security benefits at age 62, the earliest you are eligible to receive them. But Social Security benefits are permanently reduced by up to 30 percent by taking them so far in advance of full retirement age.

If you are still working in retirement, you can put off taking your Social Security benefits, and thereby increase your monthly benefit by as much as 8 percent per year that you put off Social Security. In addition, you may also be increasing your Social Security monthly payment by continuing to work, since the Social Security Administration calculates your benefit based on your 35 highest earning years. If you are at the top of your lifetime salary while working past retirement age, these high earning years will replace lower earning years from your youth — and potentially increase your monthly payment. (See also: 6 Smart Ways to Boost Your Social Security Payout Before Retirement)

4. You are in a retirement investment sweet spot

Though working past retirement age may not be your idea of fun, it does give you an unparalleled opportunity to invest. First, since you are over the age of 50, you can take advantage of the catch-up provisions that allow you to contribute up to $24,500 to your 401(k) and up to $6,500 to your IRA, allowing you to reduce your tax burden while funding your retirement accounts.

In addition, since you are working longer, that means you have a longer investment timeline to play with. This can allow you to invest for growth in ways that a typical retiree could not, since she would be trying to protect principal. Since you anticipate working for a few more years, you get a few more years of the magic of compound interest working to build your wealth. (See also: 7 Reasons to Invest in Stocks Past Age 50)

5. You can keep using your employer’s health insurance

All Americans are eligible for Medicare as of age 65, but the program costs more than you might expect and covers less than you might think. Not only do you have to pay a premium of at least $134 per month for Medicare Part B, but you will be on the hook for 20 percent of the Medicare approved amount for health care after you have met the annual deductible of $183. In addition, Medicare does not cover prescription drugs, dental or vision care, foot care, hearing aids, or dentures.

Being able to stay on your employer’s health insurance could be a major benefit to working, since you are likely to have more comprehensive coverage under that insurance and it may be less expensive for you, as well. (See also: 4 Common Mistakes to Avoid When You Enroll in Medicare)

No need to curse the heavens

Working in retirement may not be what you planned, but it doesn’t have to feel like the end of the world. If you take the time to recognize how working in retirement can actually help your emotional, mental, financial, and physical well-being, you can embrace the reality of working when you’d expected to be golfing.

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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:

8 Ways to Preserve Your Net Worth in Retirement

Tim Lemke — Thu, 21 Jun 2018 08:01:16 +0000

We all know the key to a comfortable retirement is amassing enough wealth to last your entire post-work life. But if you truly want to ensure financial security, you should work to maintain or even build upon your net worth as you age. This requires an aggressive level of saving when you are young, and a lot of discipline along the way — but it can be done.

Let's examine some ways you cannot only make your retirement savings last, but also protect all of your net worth throughout your lifetime.

1. Budget and plan wisely

Retirees generally see their expenses decline as they age. The kids are out of the house, college is paid off, homes are owned free and clear. Don't get too cocky, though; you still need to ensure your expenses don't outpace your income. Continue working hard to live within your means. Keep budgets for most expenses, and develop savings plans for any big-ticket purchases. If you want to maintain your net worth, you can't allow your day-to-day cost of living to get out of hand.

2. Downsize

Do you need to live in such a large house? Do you really need two cars? You can reduce your day-to-day expenses and make your retirement funds last longer by simply scaling down your possessions. Considering selling some of your material items and converting them to cash for living expenses or for investing. Or, just donate them to charity and potentially get a tax break on donations.

Even though the footprint of your life may be getting smaller, your net worth can actually increase under these circumstances because you may be converting physical assets (house, car, etc.) to investments that can rise in value and generate new income. (See also: 7 Reasons You Need to Downsize)

3. Never spend your principal

In an ideal world, you are spending your retirement living off the gains and interest from your savings, not the savings itself. If you amass enough savings, that sum can by itself generate its own income in the form of interest, dividends, and capital gains, and it may be possible to live on that income alone. You need a lot of money saved to make this happen, but it's a wonderful feeling to know you are living comfortably without ever tapping into the bulk of your savings.

4. Avoid taking on new debt

You may be tempted in retirement to finally buy that beach house, that luxury car, or that set of his-and-hers personal watercraft. This is fine if these are things you saved for, but you can't let yourself go overboard. The last thing you want is to take on new debt that will add to your expenses at a time when your income is drastically reduced.

Borrowing can lead to interest payments, which can lead to more debt, and then you're seeing your nest egg and net worth drop faster than you ever intended. Avoid debt — especially new debt — and you will be in much better shape financially as you age. (See also: What to Do If You're Retiring With Debt)

5. File for Social Security as late as possible

Anyone can begin accepting Social Security benefits starting at age 62, but if you can wait until you're 67 (what the Social Security Administration considers full retirement age), you'll get 100 percent of your benefits. Accepting benefits before your full retirement age means you'll receive lower monthly payments, costing yourself thousands of dollars annually. (See also: 6 Smart Ways to Boost Your Social Security Payout Before Retirement)

6. Continue to invest

It may seem counterintuitive to consider investing when you're looking to protect the income you have. But there is a growing body of evidence to suggest that it's OK to invest in stocks even as you get older. Why? Because people are living longer and are more likely to outlast their savings.

Continuing to invest smartly in stocks can help you increase your savings and make it last longer. It's certainly wise to move most of your money into safer things like bonds and cash, but setting aside a certain portion for stocks could mean the difference between seeing your net worth shrink and watching it grow.

7. Pay as little tax as you can

Hopefully, you've used tax-advantaged accounts such as a 401(k) and Roth IRA to build your retirement savings. When you retire, you no longer have those vehicles at your disposal. But there are some things you can do to keep the government from taking too much. First, you can work to ensure that any income you have is taxed at as low a rate as possible. This means taking advantage of stock dividends and long-term capital gains, which are taxed at lower rates than normal income. It means purchasing tax-free municipal bonds. It means claiming as many deductions as you can on your taxes. Taxes are necessary to keep our society upright, but there's no reason to pay more than required.

8. Avoid bailing out relatives

This is not an argument against helping out your children or other loved ones with financial expenses. But it's important to be thoughtful about how you help and the impact it may have on your finances. Is the money you are giving to your adult child simply throwing good money after bad?

If you are helping to take care of the grandkids, are you being reimbursed for the child care expenses (food, clothes, etc.) you are taking on? Remember that in order to make your retirement funds last, you can't be giving away your savings carelessly. (See also: Are You Ruining Your Retirement by Spoiling Your Kids?)

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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:

10 Pointless Fees That Are Sabotaging Your Budget

Carrie Kirby — Tue, 12 Jun 2018 09:00:30 +0000

When I read the word "fee," what I see is, "something you should have avoided paying." No one likes to pay fees, fines, service charges, or anything that sounds remotely like a penalty. While some fees are unavoidable — try taking a flight without paying the Passenger Civil Aviation Security Service Fee — there are plenty that you can sidestep by calling to complain, avoiding certain behaviors, or switching providers.

Of course, to get out of a fee, first you have to know it was charged. Here are the especially pointless ones you need to watch out for.

1. Digital equipment rental fees

A friend recently replaced her internet provider's outdated modem with one she bought herself. When she called to let the company know, they removed a $20 monthly equipment rental fee she hadn't even known she was paying. She just saved $240 a year!

2. Bank fees

Banks love to tack on fees. One of the most insidious is the overdraft fee, which kicks in when a bank allows you to take more money out of your account than you actually have, then charges you for the "privilege." The really devilish thing here is that if the bank doesn't cover the transaction — for instance, if you haven't opted in to the overdraft program — they will deny payment to the merchant and charge you a non-sufficient funds fee. Either way, you pay.

Other sneaky bank fees are account maintenance fees, which might kick in if your account falls below a certain balance threshold, or check writing fees, which can crop up if you signed up for an account that typically allows only a small number of transactions per month.

A few tips for avoiding bank fees: Use a credit card rather than a debit card to avoid accidental overdrafts. Keep an eye on your balance and know what checks are coming in. Keep a buffer of several hundred dollars in your account and set a text alert to let you know if your balance dips below it. Link your checking account to a savings account. Know the terms of your bank account.

If you do see a fee on your bank account statement, call the bank. They may agree to fully or completely reverse the charge, and at the very least, they can let you know how to avoid the fee in the future — for example, by changing account types. If you find yourself getting hit with a lot of fees, consider changing banks or switching to a credit union. (See also: Are You Paying These 6 Unfair Banking Fees?)

3. ATM fees

The average fee for using a cash machine not run by your bank has hit an all-time high of $4.69, according to Bankrate. This may not seem like a big deal until you consider the percentages here. If you withdraw $40 from an out-of-network ATM and pay $4 for it, that's like giving away 10 percent of your hard-earned money just for the privilege of using the machine.

To avoid this fee, always keep a little cash in your wallet in case of an emergency. If I find myself in a crunch, I stop at a grocery or drugstore and make a small purchase to get cash back. I'd rather pay $1 for a pack of gum with my cash than $4 for nothing. (See also: 8 Ways to Make Sure You Never Pay an ATM Fee)

4. Investment account fees

When you invest for retirement, you can expect to pay some fees, but plans and accounts with higher-than-average fees can sap your retirement income big time. There are the fees you can easily see: The average investment manager charges around 1 percent of your assets each year. But you may also be paying fees you don't know about, like load fees on the mutual funds your adviser is buying or excessive trading fees if your manager is moving your money around a lot.

To avoid excessive investment fees, consider a low-cost platform such as Vanguard target date funds or a robo adviser. If you're stuck with your company's 401(k) plan, study the fees carefully and complain to human resources if they're too high. (See also: Watch Out for These 5 Sneaky 401K Fees)

5. Foreign transaction fees

If you go overseas, you may find yourself hit with foreign transaction fees both while using your credit card and while withdrawing cash. The only way to avoid this is to do your homework before you go. There are a lot of credit cards that advertise no foreign transaction fees now, so if your card doesn't offer that perk, simply apply for one that does before your trip. Getting approved should only take a few days, and you can even pay extra for express shipping if you're leaving soon.

If your bank account charges foreign transaction fees, that can be harder to change, because opening a new account takes paperwork and time. If you have more than one account, check with all of them. Last time I went overseas, I learned that my credit union account doesn't charge the fee, while my regular checking account did. So I simply used the credit union account to withdraw cash on my trip. You can also ask your bank if there is a different account type you can switch to that doesn't charge the fee. (See also: 11 Ways to Avoid Bank Fees While Traveling)

6. Library fines

When my kids were little and liked to check out 10 picture books at a time from our local library, the books would end up mixed in with their personal libraries and I would forget we ever checked them out. We ended up running up so much money in fines that my library card was frozen.

A better way to operate is to set a calendar reminder on your phone for the day before books are due. Keep the receipt handy, or consult your online library account, so that you have a list of all the books you checked out. If none of that works, you may have to do what I did: Institute a "read them at the library only" policy for library books.

If you do let those fees add up, find out if your library has an amnesty or fee forgiveness day scheduled. Our local library sometimes forgives fines in exchange for donations to the food pantry. You can also let the library know if you have a financial hardship; as long as they get the books back, they may be willing to waive the fines. Finally, find out if your library offers fine-free cards for children.

7. Credit card fees

If you fail to make the minimum payment on your credit card, you will be charged not only interest, but also a late fee. While traveling last month, I missedpayments on two credit card accounts, each which only had a tiny amount of charges on them. For both, the fee was larger than the balance I'd failed to pay.

To avoid this, always make at least the minimum payment each month. Not only will this avoid this month's fee, but it will demonstrate a good payment record which will help if you ever do slip up. Because I'd had a perfect on-time payment record before this, both credit cards forgave my late payments and reversed the fees. (See also: 5 Simple Ways to Never Make a Late Credit Card Payment)

8. Credit report fees

It's a good idea to check your credit report regularly for accounts you don't recognize, accounts sent to collections without your knowledge, or other problems that could prevent you from getting a loan in the future. But you generally don't need to pay for this. Under the Fair and Accurate Credit Transaction Act (FACTA) all Americans are entitled to one free credit report a year from each bureau. (See also: How to Read a Credit Report)

9. Money transfer fees

Sending money to family or even paying bills if you don't have a checking account can run up large fees, but it doesn't have to be that way. There are now tons of ways to send money with no fee or only a small fee, using PayPal, Venmo, Apple Pay, or Square Cash. For PayPal, if you're not making a business transaction, make sure to choose the friends and family option so you're not charged a fee. (See also: 7 Modern Ways to Send Money to Your Kid)

10. Airline fees

We are in the era of a thousand airline fees, and it is annoying. Many of the so-called fees that airlines tack onto your bill are just price increases in disguise, while others are mandated by the government. But there are some that are often avoidable, such as phone booking fees, baggage fees, and ticket change fees.

To avoid a phone fee, book online whenever possible. If you are booking an itinerary that can't be booked online, such as using miles on partners for some airlines, remind the phone agent that your transaction can't be done online and they probably won't charge you the fee.

To avoid baggage fees, look into getting the airline's credit card; many offer a free checked bag and other privileges to cardholders. Another strategy is to bring a roll-aboard bag that fits within the airline's carry-on allowance. In my experience, passengers with these bags are often offered free checked baggage at the gate anyway. Finally, you can stick to airlines that don't charge a fee for the first bag or two, such as Southwest. (See also: 6 Ways to Save On Baggage Fees)

Avoiding ticket change fees can be both the easiest and hardest. When your plans don't change, or if you book with Southwest, it's easy to avoid. If you made a mistake on your booking or if plans change, these can be impossible to avoid. The best you can do is to check and double check your reservation within the first 24 hours, before the airlines are allowed to charge a fee.

Some airlines offer the chance to purchase a ticket with free changes for a higher cost. Naturally, on the flights when I paid extra for that privilege, my plans did not change. If your plans change unavoidably, you can try calling the airline or booking company to plead your case. If the change is due to a death, you'll be expected to produce the death certificate.

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

5 Money Moves to Make When It's Too Hot to Go Outside

Ashley Eneriz — Mon, 21 May 2018 09:00:30 +0000

The heat wave is coming — are you ready? For many, summer marks the start of vacation season, especially for kids or those who have several weeks off work. While it is good to take a much-needed break, don't get too lackadaisical when it comes to your bank account this season.

Here are a few money moves you should make when it is too hot to do much else. You will be thankful later that you didn't take a vacation from managing your money wisely.

1. Comparison shop insurance plans

When you've had the same auto insurance and home insurance for over a year, you might be stuck in the mindset that you are paying the best price, especially if you shopped quotes the year previously. Recently, my husband and I thought we were getting the best price for our car insurance because it had been the cheapest option for us for the past six years, and we had racked up several discounts for being on the plan so long.

However, replacing our paid-off SUV with a new van and having a minor accident the year before slowly made our rates creep up. I honestly didn't think another company could offer cheaper insurance, but a few quick searches online helped us find the same coverage for $500 less a year.

Bottom line: Don't assume you are paying the best price for insurance just because your plan was the cheapest when you shopped for rates earlier. (See also: Here's How a Claim Will Impact Your Car Insurance)

2. Put investing on autopilot

Don't want to think about investing on your summer break? Me neither. Investing is similar to exercising. Only a select few really love to partake and the rest of us know we must do it to remain (financially) healthy. Thankfully, you don't have to become an expert in the stock market to start investing your money. Instead, try these simple ways to put your investments on autopilot:

Start with setting up automatic deposits from your paycheck into your 401(k) through your employer. If you can set your account to increase your investment by 1 percent each year, you can grow your retirement fund without feeling the monetary sacrifice.
Use an app like Acorns, which rounds up your purchases to the nearest dollar and automatically invests your spare change.
Set up automatic payments to investment accounts. Both Fidelity and Ally offer different online investment accounts where you can set up automatic transfers. While they might require a minimum amount to start the account (i.e. Ally's professionally-managed portfolio account requires $2,500 to open), you can set up small amounts of money to be transferred each week. Think about it. You really won't miss $10 to $20 a week, but setting up the transfer will equate to $520 to $1,040 invested each year.

3. Declutter, sell, and donate

It may be too hot for a garage sale, but that doesn't mean you can't sell some unused items and free up space around the house. Make a game out of decluttering and tackle one small area of your air-conditioned home each day of the week. You can worry about your garage, basement, or attic in the cooler months. Make your decision quickly about what to keep, sell, and donate. Remember, anything you don't use regularly is taking up prime real estate in your home. Don't try to justify a need for it in the future.

If the item is larger, such as a baby swing or chair, list it on Craigslist, OfferUp, or local Facebook selling groups. If the item is easy to ship and can make you more than $10, like designer jeans or an old iPad, list it on eBay. For eBay sales, I schedule postal pickups so that I don't have to deal with the heat and post office lines.

If the item does not sell well locally or through eBay, schedule a donation pickup. Fill up a box of unwanted goods, schedule a pickup with a local second hand store, leave it on your porch, and save the donation slip for tax season. Finally, enjoy a large glass of lemonade in your decluttered home. (See also: 11 Easy Ways to Earn More on eBay)

4. Review your credit reports and credit score

Plan to get your credit in tiptop shape this summer, especially if you hope to purchase a car, home, or open a new credit card in the near future. An excellent credit score will save you money on lower interest rates.

First things first, order a free copy of your credit report through AnnualCreditReport.com. You are entitled to three free copies — one each from Experian, Equifax, and TransUnion — every year. Check the report for inaccuracies and make sure everything looks as expected. (See also: How to Read a Credit Report)

Next, order your credit score. You can purchase your FICO score from myFICO — it will run you about $19.95 a piece from each of the three credit bureaus. You can also get a good idea of what your score is through free sites like Credit Karma and Credit Sesame, or through credit cards that offer free credit scores.

Note that these free scores often have their own metric for credit scoring, and that number may differ slightly from your official FICO score, which is what most lenders use when determining whether or not to approve you for credit. Still, a free score will give you a good ballpark estimate of where your score stands. (See also: I Checked My Credit Score in 11 Places — Here's What I Learned)

What I like about both Credit Karma and Credit Sesame is that they will show you which areas you need to improve to boost your score. For example, if your credit usage is too high, the site may recommend that you boost your score by paying off debt and/or increasing your credit limit, either by opening up a new card or asking for a limit increase. Of course, be aware that asking for a credit increase and opening up a new card can be reported as hard inquiries on your credit report, and too many hard inquiries can negatively affect your credit score. (See also: 5 Ways to Improve Your Credit Score Fast)

5. Start your holiday savings fund

Even though Thanksgiving and Christmas are months away, they are coming, and they will be costly. Avoid the holiday debt trap or credit card hangover by saving way ahead of time. If you start in June, you have six months to build up a savings fund without the stress. Calculate how much you spent on Thanksgiving and Christmas/Hannukah/Kwanzaa the year before, and use it as a guideline for how much you should save.

For example, if the winter celebrations cost your family $1,000 between food shopping, decorations, presents, and outfits, divide that number by six and aim to save that much each month. It is much easier to save $167 each month for six months than to try and find an extra $1,000 in your budget between November and December. (See also: Avoid These 5 Common Holiday Budget Pitfalls)

Don't waste your summer months wishing you were on a beach somewhere or enviously looking at friends' and co-workers' vacation pictures. Instead, work on your finances with these easy steps so that you can be the one enjoying a debt-free vacation next year.

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

9 Money Moves You're Never Too Old to Make

Tim Lemke — Wed, 09 May 2018 09:00:13 +0000

We often assume as we get older that money matters become more simple, and in many cases, this is true. You may be done worrying about saving for the future, and may be free of many of the expenses you had when you were younger. But this doesn't mean you're too old to make financial decisions that will still benefit you.

There are many money moves that you made when you were younger that still apply. Not all of these actions below will make sense for everyone. But age, by itself, shouldn't rule them out.

1. Buying a home

You may think that by a certain age, it makes no sense to purchase a home because you may not live long enough to pay it off in full. But there are some great financial advantages to homeownership, even for older people.

For one thing, if you want your retirement nest egg to last, you are better off putting money into something that builds equity and may increase in value. That's money that can be used in the future for your long-term care, or passed on to your heirs. Some older citizens even fund their retirement using a reverse mortgage, which allows you to draw equity from your home to pay expenses.

Additionally, when you own a home, you can make adjustments to the design and features to accommodate any health needs. For example, you could install a chairlift or add a bedroom on a lower floor so you won't have to go up steps. These are things you may not be able to do if you live in a rental property. (See also: 5 Benefits of Carrying a Mortgage Into Retirement)

2. Getting life insurance

Many older people don't bother with life insurance past a certain age, because the premiums do get more costly. But there are many cases where it makes sense.

If you are still working and your spouse relies on that income, term life insurance can come in handy. You may also have some debt — mortgage debt, for example — and want to ensure there is enough money to pay it off if you pass away. Guaranteed Universal Life policies can be good for seniors who want to ensure there's money to pay for final expenses or estate taxes.

There are many different insurance products; be sure to closely examine the costs and benefits of each to see if they make sense for your situation. (See also: 5 Kinds of Insurance Every Retiree Should Consider)

3. Shopping for health insurance

We assume that older Americans are simply covered by Medicare and that there's nothing more they need to know. But the reality is that Medicare doesn't cover everything, and it's often important to get supplemental insurance to protect yourself.

You are never too old to shop around to find the lowest premiums and out-of-pocket expenses. No matter your age, it's smart to re-evaluate your insurance periodically to ensure you have the right coverage at the right cost. This is especially true if your health situation changes. (See also: How to Make Sense of the Different Parts of Medicare)

4. Investing

If you are retired, you may be of the mindset that you already have all the money you need to live comfortably. But are you sure this is true? People are living longer these days, and you can spend as much time in retirement as you did working. Thus, it may be necessary to continue to accumulate money as you get older.

Even if you think stocks are not right for you at this stage of your life, continuing to buy bonds, real estate, and other investments can help bolster your nest egg and ensure that you can cover all of your life expenses as you age. (See also: 7 Reasons to Invest in Stocks Past Age 50)

5. Rebalancing your portfolio

At a certain age, you may feel like your investments don't need much baby-sitting. If you've shifted to a lot of fixed-income investments, it may be true that your portfolio doesn't need much maintenance. But that doesn't mean you should ignore it.

Even the oldest investors need to check in to see if they are on track to hit their savings goals. All investment portfolios can get out of whack if they are not monitored properly. An older investor may find, for example, that stocks make up too much of a percentage of their portfolio and represent a risk if the market goes down. (See also: Think Outside the Index When You Rebalance Your Investment Portfolio)

6. Building an emergency fund

You may have accumulated enough money to retire on, but did you take into account the cost of a new roof for your home? Did you count on thousands of dollars in unreimbursed medical expenses? It helps to have a separate account to cover these types of expenses, separate from the money you use to cover everyday costs.

If you are no longer working, you may still be able to fund your emergency account through income from stock dividends, interest, or capital gains. Just be sure you're not tapping into money you may need in the future for living expenses. (See also: Yes, You Still Need an Emergency Fund in Retirement)

7. Crafting a will

You are certainly never too old to outline your final wishes. If you haven't done this yet, don't delay. A will offers family members guidance on how you want to spend your last days, freeing them from making difficult choices. You can assign an executor to help carry out your wishes, and a clearly written will can help avoid fights over how to divide your assets. Many families have been broken apart due to spats regarding their inheritance.

It helps to have a will in place while you are still relatively young, but it's never too late to change a will as long as you are of sound mind. If you have a will already, it may be worth reviewing it periodically to make sure the information is accurate and up to date. (See also: 6 Times You Need to Update Your Will)

8. Saving for college

You can go back to school at any age. But you can also save money for your children, grandchildren, or anyone else who you'd like to see get a degree.

Most states offer college investment plans, known as 529 plans, that allow you to invest money for the purposes of education. You can designate a beneficiary of the funds and that money can be withdrawn tax-free as long as the money is used for qualifying education expenses. Depending on where you live, your contributions may also be tax deductible. The new tax law allows these funds to be used for K-12 schooling as well. (See also: The 9 Best State 529 College Savings Plans)

9. Starting a business

If you have skills and knowledge built up over a long life, why not make it work for you? Who says retirement has to involve sitting at home and doing crossword puzzles? Maybe you can start a quilting business. Perhaps you can launch a new career investing in real estate. Heck, you can build your own tech startup. At this point in your life you probably have the money, time, and experience to give it a go.

If you have your wits about you, you're never too old to start a new venture. Obviously, you need to be realistic about how much time and energy you want to devote to a new company, and you should avoid putting your retirement savings at risk. It's also important to have a clear succession plan in place to ensure the organization will keep running after you are gone. (See also: 5 Questions Retirees Should Ask Before Starting a Small Business)

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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:

4 Signs Your Emergency Fund Is Too Big

Dan Rafter — Fri, 13 Apr 2018 09:00:06 +0000

Financial experts have long advocated for the emergency fund: savings set aside to pay for life's unexpected emergencies. This financial cushion can also help cover your daily living expenses should you lose your job. But is it possible to save too much money in an emergency fund?

Yes, if you could be using that extra money to invest, pay off high-interest debt, or boost your retirement savings.

Here are a few signs that your emergency fund is too big, and that the money in it — at least some of it — would be better used elsewhere.

1. You have more than enough emergency savings to live off

Financial experts have long recommended having three to six months' worth of daily living expenses covered in an emergency fund. However, this is a general guideline, and you should tailor the specific amount to your unique life circumstances.

If you're a high earner with a specialized job, for example, you may need a larger emergency savings. If you suddenly lost your job, it may take you longer to find a new position in your field, and your loss of income may be significant. Single people should also consider saving more. With only one source of income coming in, there is much less wiggle room in the budget to withstand a job loss or other financial emergency.

Regardless of how much is in it, your emergency fund should have enough money so that you can pay your mortgage, car payment, phone bill, utilities, and any other daily expenses during a crisis without resorting to credit cards.

To calculate if your emergency fund is too big, you'll first need a monthly budget that lists all of your expenses. Multiply that figure by six, or 12 if your situation calls for a larger emergency savings. If you have more than enough saved to live off for six months to a year, you can stop building the fund. Your additional dollars would better serve you elsewhere. (See also: Is Your Emergency Fund Costing You Money?)

2. You're behind on your retirement savings

You might think having too much money in your emergency fund is far from a problem. But it could be if you are stowing money in an emergency fund at the expense of depositing it in a 401(k), IRA, or other retirement savings vehicle.

You're supposed to save emergency fund dollars in a safe place. That usually means a savings account. The problem is, even the most generous savings accounts pay interest at just 1 percent, if not lower. The money you have in a savings account will grow much slower than it would invested in an IRA or mutual fund.

Those extra thousands of dollars sitting in your emergency fund could instead be helping to build your nest egg. If you're behind on retirement savings, it might be time to take a closer look at your emergency fund. If you have more than the recommended amount of savings in it, start moving some of that money into retirement savings. (See also: 7 Retirement Planning Steps Late Starters Must Make)

3. You're struggling with credit card debt

High-interest credit card debt is the worst kind of debt to have. It's not unusual for cards to come with interest rates of 17 percent or higher.

If you carry a balance on your cards each month, and if you're only able to make minimum monthly payments, check in with your emergency fund. Any extra dollars in that fund beyond the recommended amount could instead be used to pay down your credit card debt faster. (See also: The Fastest Method to Eliminate Credit Card Debt)

4. You're a two-income household

Do both you and your spouse or live-in partner work full-time? You might not need as large of an emergency fund. If you lose your job, your household will still receive an injection of cash from your partner's salary.

If you do have that extra salary, you might consider an emergency fund that has fewer months' worth of daily living expenses. Your partner's salary can act as a cushion while you use the dollars that you would have placed in your emergency fund to instead pay down credit card debt, boost your retirement savings, or invest. (See also: 5-Minute Finance: Start an Emergency Fund)

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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:

8 Ways to Build Your Financial Self Esteem

Tim Lemke — Mon, 09 Apr 2018 08:00:07 +0000

If you're struggling to make ends meet, or are crushed by debt, it's not a great feeling. It's easy to feel despondent when you can't seem to get ahead financially. But don't get discouraged! If you make the right choices, things will come together for you and your money. There are many small things you can do to make yourself feel better about your financial situation.

Try a few of these ways to give your financial self esteem a boost. Positive things will snowball from there.

1. Pay off one credit card

You may be battling a giant monster of debt from credit cards, student loans, auto loans, and more. And you probably feel pretty cruddy about it all. But you can give yourself a little psychological boost by targeting one credit card and working to get that balance down to zero.

Even if you pay off a credit card with a relatively low balance, it will make that debt pile seem a little less overwhelming. From a money-saving standpoint, it makes more sense to pay off the credit cards with the highest interest rates first. But those cards may have higher balances and take longer to pay down. Prioritizing paying off small-balance cards in full, otherwise known as the snowball method, gives you valuable momentum that encourages you to keep chipping away at other debts.

Once you pay off that first credit card, stick it in a drawer and say, "I'm done with you!" You'll feel great and will be eager to tackle the next one. (See also: 6 Secrets to Mastering the Debt Snowball)

2. Buy some shares of stock and wait a few months

This one won't give you an immediate self esteem boost, but it will make you feel awesome if you are patient. Select a popular stock or common index fund and buy a few shares. The size of the investment does not matter here. A few hundred dollars invested will suffice. Leave the investments alone for about three months and check the price. In most cases, you will find that the investments have risen in value since you bought them. Congratulations! You just made money as an investor and you hardly had to do anything.

Of course, this strategy can backfire if the market takes a dive, but if that happens, just hang in there and wait a few more months. You will be rewarded for your patience and will feel a lot better about your finances. And who knows? You may fall in love with investing and start on the path to making a ton of money in the markets. (See also: 9 Ways to Tell If a Stock is Worth Buying)

3. Recognize that everyone has money troubles

I am not a big fan of schadenfreude — that is, the act of getting joy from the suffering of others — but you can feel a little bit better about your own financial problems when you realize that few people are free of money stress. Household debt is practically ubiquitous. Student loan debt is common. And no one feels like they have enough saved for retirement.

I'm not suggesting you should feel comfortable with your bad finances, but there's no reason to beat yourself up too hard. If you have a plan to reduce debt, build your credit score, and boost your net worth over time, keep plugging away. You'll get there, and are probably doing better than you think. (See also: 4 Money Lessons You Can Learn From the Joneses)

4. Score some extra income

You may be stuck in a job that doesn't pay great and you feel like you are struggling to make ends meet. You've cut expenses, but things still don't add up. This is where you need to find creative ways to make extra money.

There are a variety of ways to make a few extra bucks on the side that can help add to your bottom line while also potentially opening up new opportunities. It may be a freelance writing project, some homemade jewelry to sell on Etsy, or even just an occasional pet sitting gig. Even a small extra paycheck — especially if it's from work you enjoy doing — can lift your spirits and make you feel a little more in control of your financial situation. (See also: 14 Best Side Jobs For Fast Cash)

5. Walk right past your temptations

When I used to work in the city, I would pass a coffee shop on the way to my office. And I would frequently stop in for an overpriced Americano. I knew it was a waste of money — we had free coffee at my office! — but it was a habit. One day, I decided to challenge myself to keep on walking. I looked straight into the window of the coffee shop, but did not go in. I missed the caffeine pick-me-up, but also knew that I just saved myself $3.50. Over time, that $3.50 a day turned into hundreds of dollars saved. And I got an ego boost from staring temptation in the face and walking on.

Successfully resisting temptation is hard, but it can feel so good over time, especially when you know you're giving yourself a financial boost. (See also: 7 Effortless Ways to Prevent Budget-Busting Impulse Buys)

6. Give some money away

This may seem counterintuitive. How can you give away money if you are struggling financially yourself? But donating money to a cause will make you feel better about yourself in general. It's also likely that the amount you give will make a big difference to the recipient and won't ultimately impact your own finances too much in the long run.

This is not to say you should give away money carelessly, or constantly bail out friends or relatives. You still need to take care of you. But an occasional small donation can be great for the world and give you a little charge of self esteem. (See also: 5 Ways Giving to Charity Is Good for You)

7. Get a better deal

Searching for bargains can be exhausting, but it can feel rewarding when you score a big one. It's a nice feeling to get $200 knocked off the price of a new refrigerator. You feel awesome when you find a gallon of milk for $1.19. And buy one, get two free on boxes of cereal? Score!

If you can find a way to make searching for sales fun, you'll feel great when you succeed, and will feel even better knowing that your finances benefit as a result. There is one word of caution though, which is to remember that you're not really saving money if you're spending it on items you wouldn't otherwise be buying. So focus your bargain hunting on things you need. (See also: These Apps and Extensions Find Online Deals for You — Automatically)

8. Improve your credit score, even a little

Your credit score has an enormous impact on your finances, as it dictates how much you can borrow and at what interest rate. If you have a bad credit rating, you may feel like you're in a terrible spiral. Your credit rating is bad because of your finances, but you're having trouble improving your finances because of your credit rating.

If you can stay focused on improving that credit rating, it will pay off. Focus hard on paying bills on time, every time. Reduce your overall debt load and don't use too much of your available credit. It will take time, but eventually you will see your credit rating creep up. Start by celebrating a 10-point increase. Throw a party when you get up above 600, and again when you're at 700. Every increase in credit rating should lift your spirits and motivate you to keep going. (See also: 7 Ways to Increase Your Credit Score Quickly)

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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:

4 Things Teens Can Do Now to Prepare for Financial Independence

Emily Guy Birken — Tue, 03 Apr 2018 08:00:06 +0000

In the past couple months, it's become abundantly clear that today's teens are tenacious and enterprising. Add in the fact that they are "digital natives" and have a firm grasp on social media and technology, and it seems as if there is very little teens cannot do if they put their minds to it.

Unfortunately, there is one area where teens feel a little less optimistic: Money.

According a 2013 survey by Junior Achievement, an organization dedicated to teaching kids about money, 25 percent of teens believe they will not be able to support themselves without the help of parents until they are between the ages of 25 and 27. In addition, only 59 percent of teens feel confident that they will be able to support themselves between the ages of 18 and 24.

Some of this pessimism about future financial independence is a natural reaction to the relatively high unemployment rate among teens. But teens, with a little judicious help from Mom and Dad, can set themselves up for financial independence down the road. Here are a few things that every teen can do to prepare for financial independence in adulthood.

1. Set financial goals

One of the best ways to learn how to handle finances is through financial goal setting. Parents can help teens set realistic financial goals, such as saving up for a coveted iPhone, making a contribution to a college fund, or paying for the class trip. Teens can learn how empowering it is to create a written plan for achieving their financial goals and find ways to earn or save money toward those goals.

Parents can help foster this ability by asking teens to pay for wanted purchases on their own, while showing them how to create and follow through on a plan. (See also: How to Help Your Kid Build Their First Budget)

2. Track spending

One of the biggest stumbling blocks in achieving financial independence is ignorance of where the money goes. Without financial awareness, it's very easy to spend your way through a great deal of money without ever realizing how much is slipping through your fingers. This is why it's important for teens to learn the habit of tracking their finances now.

There are several ways that parents can help to encourage their teens to track their spending.

Make your teen's allowance conditional on tracking. According to former Vice President Nelson Rockefeller, this was how the famously wealthy family handled allowances: "All of us had to keep a record of where our money went. We were required to give 10 percent to charity, save 10 percent, and then account for how we spent or saved the other 80 percent."

Make tracking a family affair. It's much easier to encourage your kids to join in on something they already see you do than ask them to start doing something that seems foreign to them. Include them in money tracking and find a way to make a game of it among the family. For instance, you could have a contest to see who can get their weekly or monthly tracking done first — which will have the added benefit of encouraging all of you to track your spending as it happens.

Let them embrace financial technology. There are a number of apps and computer programs out there that will help your teen track money on the very device they are generally glued to. The best options for teens are systems like Mvelopes and YNAB, which both allow for manual tracking of cash transactions. Not only will manual tracking help get teens in the habit of always tracking their spending, but even young teens who depend solely on cash can use them.

3. Open a Roth IRA

Any teen who has earned income — that is, who has earned money from a job — can contribute to a Roth IRA. The contribution limit is $5,500 per year, or the maximum amount the contributor earned from a job — whichever amount is lower. For instance, a teen who earns $2,500 per year flipping hamburgers on weekends can only contribute up to $2,500 into their IRA or Roth IRA.

Getting started on a retirement account in your teens can make an enormous difference in your ability to retire. The magic of compound interest has more time to work if you start in your teens. In addition, getting in the habit of paying yourself (and your retirement account) first is an important aspect of achieving financial independence as an adult.

Since few teens will be interested in setting aside every single paycheck for a Roth IRA, parents can encourage their teens to put money in the IRA by offering to match anything they set aside.

4. Start investing

While getting teens into the habit of putting money into retirement accounts is incredibly important, it's also vital for them to feel comfortable with investing in general. This will not only help them make smart decisions with the investments in their retirement accounts, but it is also an important way to build wealth.

There are several ways to help your teens get involved in investing.

Encourage them to buy individual stocks that they find interesting. The stock market offers teens a chance to own a piece of the companies whose products they use every day. This makes investing feel more personal, and gives teens the opportunity to learn how their favorite brands are faring.

Ask them to defend their purchases before they make them. Financial professional Lawrence Sprung told U.S. News & World Report that he asked his 11-year-old son to defend his request to buy a particular stock. The article explains: "When his 11-year-old son declared that he wanted to invest in Walt Disney Co, Sprung asked him to prove his case. His son noted how Disney was unrolling a new Star Wars enterprise, enlarging and redeveloping some of its parks, and that people from all over the world would head to Disney's parks whether the economy was good or bad."

Create a teen-run family investment account to help your kids understand the importance of diversifying. Hold regular meetings to discuss how the holdings are doing and go over investment strategies. This will help teens feel perfectly at home with the ins and outs of investing.

Make financial upkeep a habit

Teens can do a great deal to prepare for financial independence while still under their parents' roof. By getting into the habit of good money management — including setting goals, tracking spending, saving for the future, and investing — teens can be sure that they will reach financial independence and avoid the possibility of living in Mom's basement.

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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 Financial Risks Worth Taking

Rachel Slifka — Wed, 28 Mar 2018 10:00:07 +0000

They say no big reward comes without risk. That can be a hard pill to swallow, especially when it comes to our money.

Most of us would rather not put our hard earned cash at risk. With the tough economic times of 2008 in recent memory, people are still on edge when it comes to taking financial risks.

On the other hand, leaving your cash in a savings account isn't going to get you ahead of the game. In order to be successful financially, you will eventually have to face some risk. In fact, being too complacent with your cash can be one of the biggest financial risks of all.

Here are the financial risks that can be hugely beneficial.

1. Moving to a new city

Do you feel like your current location is lacking in career opportunities? Or perhaps rent is atrocious and you're finding it hard to get by? A move may be a solution.

There's no doubt about it — moving is expensive. You may have to break a lease and sign a new one, complete with security deposit. You'll probably have to pay for a moving truck, movers, new furniture, and more. Not to mention, your new city could come with a much higher cost of living. But, for some people, moving could be well worth it.

When I moved cities, even though I tried to make it as cheap as possible, I still incurred quite a few expenses. But financially and personally, it was worth it to me. My hometown is small with very few opportunities, so I knew I would have a better shot at earning a bigger income in a larger city. Fortunately, that turned out to be true. (See also: Here's How Much Life in the Big City Will Cost You)

2. Investing in graduate school

Graduate school is a big investment, so it's important to weigh whether or not the expense is worth it in the long run. Tuition costs are ever increasing, books are expensive, and if you choose a full-time program, you are losing out on income you could have earned while working instead.

While it is a big investment, a graduate degree can help you find a higher paying job with more opportunity for growth. And some high paying careers cannot be achieved without some sort of degree in higher education.

Before you sign up for graduate school, take time to truly consider what you want to do and whether it will benefit you financially. Be sure to consider how you can market yourself, even without an advanced degree. While a graduate degree can certainly help in the job process, there are many other factors that determine whether or not you receive a job offer. (See also: 7 Things to Consider Before Paying for an MBA)

3. Starting a business

Starting a business is outside many people's comfort zone. It can cost significant cash to start and to grow a business from scratch. There is also uncertainty in working for yourself if you've only ever worked with for a traditional 9-to-5 employer.

But starting a business can come with many personal and financial benefits. For one, you keep all of your own profit. If the business is successful, you are the one who gets the big payout. For many people, owning and operating their own business is a personal and career preference as well. If you've been dreaming about starting your own business, develop a financial plan before you dive in head first. (See also: Starting Your Dream Business Is Easier Than You Think — Here's How)

4. Investing

The stock markets are full of ups and downs and uncertainty, but the payoff can be huge. Most, if not all, experts would agree that failing to invest is riskier than not investing. While leaving your money in a savings account might ensure it doesn't lose much value in the short term, it won't gain much value, either. In fact, due to inflation, you are likely to lose value over time.

Investing thoughtfully, however, can give you the opportunity to grow your money at a much faster rate. Investing certainly isn't a get-rich-quick scheme, but overall, it can pay off big time with smart decisions. (See also: How the Risk Averse Can Get Into the Stock Market)

5. Buying a home

The housing market isn't necessarily as stable as it used to be, and a home is a major cost. But can it be worth the risk?

There are many factors to consider when deciding if purchasing a home is worth the risk. You'll want to consider resale value, in the event that you need to move. Location, school district, quality of home, and neighborhood are all other important factors to consider. If you are planning to stay in a location long-term, a house may be a smart investment. (See also: 7 Worst Reasons NOT to Buy a House)

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