insurance

How Paying Attention to Detail Saves Your Finances

Tim Lemke — Wed, 17 Oct 2018 08:00:12 +0000

They say the devil is in the details. When it comes to your finances, this can certainly be true.

Each day, we have the potential to lose money simply because we aren't paying attention. We pay too much for items because we don't notice how much they cost. We lose money in fees or other charges because we don't read the fine print on documents.

We may think this lack of attention to detail costs us just a dollar here or there. But this carelessness can ultimately represent a great deal of money lost over time. Let's examine these ways that being detail-oriented can improve your financial situation.

You'll know a good deal when you see it

If you pay close attention to what items cost, you'll know when you see a good deal. Even if you are not shopping for a specific item, take time to look at its price. That way, when the time comes to make a purchase, you'll have a sense of whether you may be overpaying. If you are keenly aware of pricing, you may learn which retailers consistently have the best deals and which stores to avoid. Depending on who you buy from, you may be able to automate this process by setting up price alerts via email or text. (See also: 10 Shopping Mistakes Even Smart People Make)

You'll notice when a cashier makes a mistake

I used to work as a cashier at an office supply store, and I was not particularly great at it. At the end of the day, I often learned that I had made mistakes when giving change to customers. Few customers ever noticed the errors, so it was their loss. When you pay cash at a store, be sure to count your change before you leave. Take care to remember which bills you used to pay. If the math doesn't make sense to you, don't be afraid to let the cashier know. In addition, be sure to review your receipt to ensure you weren't accidentally charged more than once for an item.

You'll know whether you're paying too much to invest

When we invest, we often pay attention to prices and the basic return on investment. But do we know how much money fund managers takes out as expenses? Are we cognizant of what commissions we pay each time we trade? These costs can take away several percentage points from our overall returns, potentially costing us thousands of dollars over time. To get the maximum return on your investments, it's wise to examine their overall rate of return with fees and expenses included. (See also: 4 Sneaky Investment Fees to Watch For)

You'll see the "catch" when there is one

Congratulations! Your cable company just gave you free HBO. But did you notice that it's only for three months, and then you'll be charged the full monthly fee? Is that "free" cellphone really free, or did they roll the cost into your monthly bill? Whenever a deal appears to be too good to be true, it usually is. Read the fine print on anything you sign and be aware that rarely is anything truly free. (See also: Watch Out for These 4 Sneaky Charges on Your Monthly Bills)

You'll know what's covered by insurance

Several years ago, the basement of my home flooded after our sump pump failed during a heavy rainstorm. I assumed that the damage would not be covered by insurance because I had not purchased extra flood insurance. But, in reading the fine print of my policy, I learned that there was a special provision that covered me in the event of a failed sump pump. If I had not taken the time to read the policy carefully, I may have been on the hook for thousands of dollars in renovations.

Insurance policies are complicated. You may think you're covered for certain things when you aren't. You may be covered for things you aren't aware of. Always be sure to read your policy so that when bad things happen, you feel confident that you're properly insured. And be sure to update your insurance plans if your life circumstances change. (See also: 11 Unexpected Things Covered by Homeowners Insurance)

You'll notice errors in your credit report

By law, you are permitted to get one free copy of each of your three credit reports — from TransUnion, Equifax, and Experian — every year. Even if you have no intention of borrowing something, it's good to review your credit reports when you can, because they may have incorrect information about your finances. Your credit reports may also show you've been the victim of identity theft. By conducting a detailed review of your credit reports, you can ensure that lenders have the most accurate picture of your financial situation. (See also: How to Read a Credit Report)

You'll be billed correctly

Have you ever been to the car mechanic and received a multi-page, itemized list of the work performed? Have you ever been billed by a doctor's office and seen a list of unfamiliar charges? Sometimes, bills can show a lot of charges that you weren't expecting. It's best to review these bills and identify each charge. If you don't understand something or an item seems unfamiliar, don't pay the bill until you get an explanation. You should never pay a bill without reviewing the charges first.

You know you'll be paid correctly

If you have your paycheck direct deposited in your bank account, you may not look at your pay stub regularly. But your paycheck is worth reviewing each time, just to be sure that you're being paid the correct amount. It's also important to check if taxes, 401(k) contributions, or health savings account funds are being deducted correctly. Checking paychecks is especially important for hourly or freelance workers who may have inconsistent income. (See also: Are You Withholding the Right Amount of Taxes From Your Paycheck?)

You will pay the right amount of tax

Taxes are annoying, but they are a necessary part of living in a society. And it's crucial to be organized and detail oriented when filing them. Mistakes on your taxes could end up in you paying too little tax, resulting in penalties. Or, you could end up paying too much tax if you're careless. When claiming deductions, be sure to have proper documentation to justify them so you avoid getting in trouble with the IRS.

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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:

How One More Year of Work Can Transform Your Retirement

Matt Bell — Mon, 02 Jul 2018 08:30:17 +0000

As you glance into the future, do you see a life of endless work stretching out in front of you? If so, you're not alone. An increasing number of people are wondering how they'll ever be able to retire.

But maybe things aren't as bad as they seem. In fact, a recent study found that delaying retirement by just a few months could have a major impact on your ability to retire and your standard of living in retirement.

A National Bureau of Economic Research (NBER) study concluded that "working three to six months longer boosts retirement income by as much as increasing retirement contributions by one percentage point over 30 years of employment."

More specifically, the study found that instead of retiring at age 66, working until age 67 can boost retirement income by 7.75 percent. By contrast, increasing the amount of earnings saved in a retirement account by one percentage point starting at age 36 and keeping it at that level for the next 30 years would raise retirement income by just over 2 percent.

The NBER findings held true for singles as well the primary earner of married couple households across a wide range of incomes.

That isn't to say that increasing your savings rate is a bad idea. It's just that of the two main options available to workers who are behind on their retirement planning — saving more or working longer — working even a little longer will likely pay higher dividends than saving more.

The value of waiting

The researchers noted four benefits from delaying retirement. First, each additional month of work provides an opportunity to save more in a retirement account. Second, it gives that account balance more time to grow. Third, if you plan to buy an annuity, each month that you hold off will increase the benefit amount for the same cost or lower the cost of the same benefit amount.

Fourth, and by far most importantly, each month you delay retirement will boost your Social Security benefits. The earliest you can claim benefits is age 62; the latest is age 70. Between those two points, each month that you wait will increase your monthly benefit.

You can review your estimated Social Security benefits by creating an account on the SSA website. You'll see how dramatically different your estimated monthly benefits will be at age 62, at your "full retirement age" (67 for those born in 1960 or later), and at age 70. For example, my benefit will increase more than 50 percent if I claim at age 67 instead of 62. And if I wait until age 70, my benefit will be nearly twice as high as my age 62 benefit.

Once you know your full retirement age benefit, you can also estimate the month-by-month or year-by-year differences in your benefits by using the SSA's calculator. For example, if I were to claim benefits beginning at age 67 instead of age 66, waiting that extra year would give me a 6.5 percent raise — $2,750 per month vs. $2,582, a difference of $168 per month or $2,016 per year.

To understand how that compares to saving more, let's start with "the 4 percent rule," a common recommendation to withdraw no more than 4 percent of your nest egg each year in order to make sure your retirement savings last throughout retirement. Following that guideline, it would take $50,400 of additional retirement savings in order to provide a $2,016 boost of yearly retirement "income."

To accumulate that much more money in her retirement account, a 56-year-old making $80,000 per year would have to contribute an additional 4.3 percent of salary each month ($289.50) to her workplace retirement plan, generate an average annual return of 7 percent, and do that for 10 years. (See also: 6 Smart Ways to Boost Your Social Security Payout Before Retirement)

There may be other benefits to delaying retirement as well.

Continued employer matches on retirement savings

If your employer matches a portion of the money you contribute to your workplace retirement plan, that's an incredible benefit. The longer you keep taking advantage of it, the larger your nest egg will grow. (See also: 7 Things You Should Know About Your 401(k) Match)

Extended group health insurance

Medicare eligibility begins at age 65, so if you retire before then, you'll need to find coverage elsewhere, which can be expensive. By the same token, if you continue to work past age 65, you may be able to hang onto your group health insurance, which may be more comprehensive than Medicare.

If that's your situation, be sure to contact your benefits department to see how your current health insurance works with Medicare. It may be that you'll have to sign up for Medicare even if you keep your current insurance. The number of people employed at your company will dictate how payment of claims will be coordinated between the two insurance plans. (See also: 4 Common Mistakes to Avoid When You Enroll in Medicare)

More employer-provided education opportunities

Employer-sponsored training is another valuable benefit, whether it comes in the form of tuition reimbursement for college classes or in-house workshops. If you're among the growing number of people who plan to do some type of work for pay after leaving the full-time workforce, new skills you pick up on your current employer's dime could be well worthwhile.

If you're behind on your retirement planning, hopefully this has shown you that you probably won't have to work forever in order to cover your later life expenses. Even relatively small delays in your retirement can make a meaningful difference. And when you factor in the other benefits of working a bit longer, you may be in far better shape than you thought. (See also: 6 Great Retirement Jobs)

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

Why Health Care Should be Part of Your Retirement Savings Plan, Too

Emily Guy Birken — Wed, 27 Jun 2018 08:30:15 +0000

You might think that retirement planning should be all about the fun and rewarding stuff you are saving up for: remodeling your home, traveling, spoiling your grandkids, and enjoying life. But only thinking about the good parts of your retirement leaves a major piece of your future unfunded: health care.

The fact of the matter is that health care could be your largest retirement expense — by a lot. Each year, Fidelity calculates the average cost of medical expenses for a 65-year-old couple retiring during that calendar year. In 2018, Fidelity has calculated that the average couple will need $280,000 in today's dollars to cover medical expenses in retirement — and that figure does not include long-term care.

As heartburn-inducing as that number is, it's not time to panic. Even people earning average incomes can prepare for health care costs in retirement without robbing a bank, moving in with their children, or learning to practice medicine on oneself. Here's what you need to know about medical care in retirement, and how to prepare yourself and your budget for it. (See also: 4 Affordable Retirement Spots With World-Class Health Care)

Your health in retirement

Let's start with the bad news: It's likely that your health will deteriorate in retirement.

In some ways, it's harder to think about declining health than it is to think about mortality, since we know the latter is inevitable. The statistics on preparing for death vs. preparing for poor health in retirement bear this out, since 42 percent of Americans have a will or estate plan in place, according to a Care.com survey, while the Economic Policy Institute found that only 30 percent of Americans have more than $1,000 saved for retirement.

But declining health as you age is a fact of life. According to the CDC, three out of every four Americans over the age of 65 have multiple chronic conditions. These are defined as illnesses or medical conditions that last a year or longer and require ongoing medical attention or limit daily activities.

In addition, the Alzheimer's Association reports that one out of every three seniors dies with Alzheimer's or another form of dementia. What is so pernicious about these medical issues is the fact that dealing with chronic health conditions or dementia can be devastating to a retirement budget. (See also: Don't Let Poor Health Kill Your Retirement Fund)

What about Medicare?

What is most concerning about the Fidelity calculation of $280,000 for medical care costs in retirement is the fact that the numbers are based on a 65-year-old retiring couple, which means they are eligible for Medicare. In fact, Medicare premiums make up 35 percent of Fidelity's calculation, or $98,000. (The remaining breakdown is 45 percent to co-payments, coinsurance, and deductibles, and 20 percent to prescription drugs.)

Medicare costs more than you realize, and covers less than you'd expect. It's important to understand what Medicare does and does not cover. (See also: 5 Common Medicare Myths, Debunked)

Medicare Part A

Medicare Part A, which is also known as hospital insurance, charges no monthly premium for the majority of enrollees. However, Part A coverage is quite sparse. It is called hospital insurance for a reason — because it only (partially) covers inpatient hospital care, inpatient care in a skilled nursing facility, home health care, and hospice care. In short, Medicare Part A will only pay for a serious medical problem that either lands you in the hospital or is expected to be fatal. It does not cover doctor's visits or prescriptions.

In addition, Part A only partially covers this care. You will still have to meet a deductible of $1,340 (for 2018) for each benefit period, and you will be responsible for a coinsurance amount of $335 per day if you stay more than 60 days in a hospital and $167.50 per day if you stay more than 20 days in a skilled nursing facility. (See also: 4 Common Mistakes to Avoid When You Enroll in Medicare)

Medicare Part B

This is the part of Medicare that works like regular health insurance. The majority of beneficiaries will pay a monthly premium (which can be deducted from their monthly Social Security check) for this program. As of 2018, the monthly premium for most Medicare Part B beneficiaries is $134, although higher income beneficiaries may have to pay more.

On Part B, you will pay all costs for covered services up to the yearly $183 deductible. Once that has been met, you will generally pay 20 percent of the Medicare-approved amount for most doctor services, outpatient therapy, and durable medical equipment. However, Medicare Part B does not cover long-term care (nonmedical help that the elderly may need for daily living), prescription drugs, routine dental or eye care, dentures, hearing aids or exams for fitting them, or routine foot care.

These coverage gaps can help explain the astronomical amount of money Fidelity calculates for health care needs in retirement. (See also: How to Make Sense of the Different Parts of Medicare)

Why you shouldn't panic

While none of this is good news, it's still no reason to go on a bank-robbing spree or start playing the lottery. There are a number of savvy strategies you can adopt right now to help make sure health care does not overwhelm your retirement budget.

1. Take care of your health

Adequate sleep, exercise, and healthy eating may not seem like part of your financial plan, but they can potentially have a greater return than any traditional investment. Taking better care of yourself can help to improve your health and potentially reduce the need for medical care as you age.

However, it's important to remember that even the most fit ultramarathoner who consumes only kale smoothies is not immune to the vagaries of poor health. But you will never regret taking care of yourself, because at the very least, it helps you to feel better in the present. (See also: 7 Smart Ways to Invest in Your Health)

2. Investigate long-term care insurance

One of the biggest coverage gaps in Medicare is long-term care, which is help that a senior might need with daily living activities such as bathing, dressing, eating, and mobility. Private health insurance also does not cover this kind of care, which means any retiree who needs it will be on the hook to pay for it herself. And according to the Department of Health and Human Services, the average 65-year-old today has a 70 percent chance of needing long-term care at some point in the future.

Long-term care insurance can potentially fill the coverage gap. This kind of insurance will help pay for your nonmedical long-term care after you have reached the end of the "elimination period," which can last anywhere from 20 days to 120 days. Until that point, you will pay for your care out of pocket.

Long-term care insurance isn't cheap, though. Prices vary, but a 60-year-old couple could expect to pay between $2,700 and $5,600 per year for a policy that pays for $150 per day in care, for a benefit period of three years. (See also: The Best Age to Buy Long-Term Care Insurance)

This kind of insurance is the best option for about 20 to 30 percent of retirees, according to the Center for Retirement Research at Boston College — those who have a moderate nest egg. For many others, it will make more sense to exhaust their assets to become eligible for Medicaid, which will cover long-term care. (See also: 5 Ways to Make Long-Term Care More Affordable)

3. Consider a health savings account

If you are in good health as you approach retirement, you may want to sign up for a health savings account (HSA). This account, which works a little like an IRA, allows families to contribute up to $6,900 (as of 2018) and individuals to contribute up to $3,450 in pretax income. If you are over the age of 55, you can contribute an additional $1,000 above these limits. The money grows tax-deferred, and as long as you use any withdrawals for qualified medical expenses, they are also untaxed.

The downside of HSAs is that you must have a high-deductible health insurance policy to qualify for one. To be considered a high-deductible policy, your insurance must have a deductible of least $1,350 per individual or $2,700 for a family, and an out-of-pocket maximum that is at most $6,650 per individual plan or $13,300 per family plan.

This makes HSA plans a bit of a difficult choice. If you enjoy good health as you approach retirement, they can be an excellent option, since you can also make penalty-free nonmedical withdrawals after age 65 (although you will pay taxes). That means your HSA can be one part of your retirement nest egg that can be used for something other than medical care if you continue to have good health.

But the high-deductible health plan puts you in a bad position if you get sick before reaching Medicare eligibility. You might end up having to raid your HSA before your official retirement. (See also: How an HSA Could Help Your Retirement)

4. Open a Roth IRA for health care savings

Roth IRAs are tax-advantaged investment vehicles that allow you to put aside already taxed money into the account, where it grows tax-deferred. As long as you keep the Roth IRA for at least five years and are over age 59½, you can withdraw funds from the account tax-free. As of 2018, you can set aside $5,500 per year, and savers over the age of 50 can contribute an additional $1,000.

This makes the Roth IRA a good place to earmark funds for health care in retirement. Since there is no penalty or tax on withdrawn funds, you do not have to worry about how a big withdrawal for medical care could affect your taxes in retirement.

You can determine the asset allocation of your Roth IRA based on your health expectations. If you are in good health as you approach retirement, plan on investing mostly in growth-oriented stocks, since you don't anticipate needing expensive health care until 10 or 20 years after retirement. If you already have a chronic health issue or know that certain medical problems run in your family, you may want to put most of your money in more stable investments, and only allocate a portion for growth. (See also: The Right Way to Withdraw Money From Your Retirement Accounts During Retirement)

The good, the bad, and the healthy

Health care in retirement does not need to overwhelm your budget. If you make sure you recognize the potential costs and understand Medicare's coverage gaps, you can prepare for your medical needs as you age. (See also: Follow These 5 Steps to Full Health Care Coverage in Retirement)

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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:

9 Financial Mistakes You're Making at the Doctor's Office

Kat Tretina — Mon, 04 Jun 2018 08:30:18 +0000

If you have an ongoing medical condition, you know how expensive health care can be. Medical costs have skyrocketed the past several years, leaving people facing the very real possibility that doctor's visits, prescriptions, and procedures could deplete their bank account or even land them in debt.

There are ways to make medical care more affordable. However, a lot of people miss out on some important discounts. Below, find out what costly mistakes you might be making at the doctor's office.

1. You don't comparison shop for prescriptions

When it comes to medication, the price you pay can vary from location to location. If you go to the same pharmacy every time and never shop around, you could be overpaying for your prescriptions.

GoodRX is a site that allows you to compare prices at several different local pharmacies at once, ensuring you get the best price. According to the site, if you had a prescription for the antidepressant Lexapro and filled it at Walmart, you'd pay $46.29. But, if you filled it at Costco, you'd pay just $10.50.

2. You don't ask for generic medication

If your doctor prescribes you a new medication, going with a name brand can cost you hundreds or even thousands of dollars. For example, if you were to fill a prescription for Crestor, a medication for high cholesterol, it would cost you about $825 for a 90-day supply, according to Drugs.com. By contrast, if you got the generic version — rosuvastatin — you'd pay just $96 for the same supply.

When you're at the doctor's office, be sure to ask your doctor if there is a cheaper generic version available.

3. You don't use a discount prescription card

If you don't have insurance and need to fill a prescription, you can expect a hefty bill. However, you might not have to pay the sticker price on your own.

There are free discount programs you can sign up for to get your prescriptions at a much cheaper price. For example, if you sign up for a program like FamilyWize, you can get up to 90 percent off your prescriptions' prices. (See also: 7 Ways You Can Save Money On Prescription Medications)

4. You don't show up to appointments

Many doctor's offices are cracking down on people who miss appointments by charging them no-show fees. These fees can run anywhere from $20 to the price of a full visit, which can easily cost you hundreds.

If you can't make an appointment, contact the office as soon as possible to cancel or reschedule. If you do so early enough, you can prevent no-show fees from being added to your account.

5. You don't always pay your bills on time

If you owe your doctor money but don't pay your bill on time, you can quickly rack up late fees and interest charges. Over time, your bill can balloon thanks to those penalties. What's worse, if your doctor decides to send your delinquent account to a collections agency, your credit will also take a hit.

It's important that you make all of your payments on time. If you're in danger of falling behind, contact your doctor's office right away to see if you can get on a more affordable payment plan. It's better to be upfront about your situation than to ignore it.

6. You use the emergency room for illnesses and minor injuries

If you go to the emergency room for minor injuries or illnesses like strep throat or the flu, you could end up spending thousands. According to a 2016 report by the Health Care Cost Institute, an emergency room visit cost an average $1,917. That's an awful lot to pay for the flu.

In many cases, going to an urgent care facility rather than the emergency room can be a more cost-effective option. An urgent care visit typically costs between $100 and $200 out of pocket. These facilities can handle most minor illnesses or injuries, including broken bones. (See also: Urgent Care or ER? How to Decide Where to Go)

7. You don't negotiate costs

Although you can't negotiate costs like copays or coinsurance — your insurance provider determines those — you can negotiate services and treatments that aren't covered by insurance.

If your insurance provider refuses to cover a necessary service, explain to the office administrator that you'll be paying out of pocket and ask if they offer any discounts for cash-paying patients. In some cases, you may pay significantly less than if you used insurance. (See also: 7 Ways to Negotiate Medical Bills)

8. You see out-of-network providers

If you've always gone to the same doctor, finding a new one might be a real pain, and you might put off finding someone else. However, if your current doctor is out of your insurance provider's network, this can be a costly mistake.

Depending on the type of insurance plan you have, your insurance company might only cover a portion of a visit with an out-of-network doctor. If you have an HMO, they might not cover any of it, and you'll be solely responsible for the charges. Taking the time to find a doctor within your network can save you money (and headaches) over time. (See also: How to Choose the Best Primary Care Physician)

9. You don't keep copies of your test results

If you need to have an MRI, CT scan, or blood work done, ask the doctor or lab technician for a copy of your results. Keeping a copy for yourself can help you in the future if another doctor wants to run the same tests. If you have a recent version, you can skip getting another round of expensive tests, saving you a lot of money.

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This article is from Kat Tretina 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:

6 Parts Every Successful Budget Needs

Rachel Slifka — Wed, 16 May 2018 09:00:26 +0000

Budgets aren't perfect. No matter how much you plan, it's impossible to predict every single expense, which can make it challenging to stick to your plan. Fortunately, you can weather any financial storm by making sure your budget has these at least these components.

1. Emergency fund

A car repair, medical expense, or sudden job loss can all wreak havoc on your normal monthly budget. Instead of panicking and going into debt after an emergency, you can give yourself peace of mind by starting an emergency fund.

How much money should you keep in an emergency fund? Well, the answer depends on many things, including the cost of your daily expenses, how hard your job would be to replace, and any other unique circumstances. One savings guideline is to save at least three to six months' worth of daily living expenses, though some people may need more. That way, if you ever suffer a job loss, you would be covered for a few months until you found another job.

To prevent yourself from using the money you are saving for a rainy day, it's a good idea to stash your cash in a separate savings account. You can start building your emergency fund by having money automatically deposited from every paycheck. (See also: 5-Minute Finance: Start an Emergency Fund)

2. Debt repayment

Debt can add up quickly and become overwhelming if you do not have a repayment plan in place. Whether you have a mortgage, car loan, student debt, or a credit card balance, it's your responsibility to manage your debt.

You can take away the burden of debt repayment by tallying up the payments you owe and putting them into your monthly budget. This will keep you on track, accountable, and working to hit your repayment goals. To make more progress, aim to free up extra dollars every month and put that toward your debt. (See also: 7 Easy First Steps to Paying Off Debt)

3. Retirement fund

Do you have a plan to take care of your future? If not, it's time to start a retirement savings plan.

Retirement might seem like a long ways away, but failing to save now can have dire consequences later. The more you save while you're still young, the longer you'll have to earn compound interest on your investments. The longer you wait to save, the harder it will be to catch up. Retirement savings needs to be a line item in your budget every single month.

If you work for a traditional employer, you likely have a company 401(k) or IRA plan you are eligible to participate in. Most employers can set up paycheck deductions, making it incredibly easy to start contributing to the account ASAP. In addition, check with your employer to see if they offer any company match. As part of your benefits package, many employers will match a percentage of what you contribute to your retirement account. Failing to at least meet the requirements for a match is leaving free money on the table, so make sure you take advantage of it. (See also: 7 Retirement Planning Steps Late Starters Must Make)

4. Fun money

You can't have all work and no play. Allow yourself a break and start putting money into a vacation or fun fund. Whether you prefer to take a trip, play a round of golf, or spend the day at the spa, you can treat yourself guilt-free by budgeting for it in advance. (See also: Yes, You Need "Fun Money" in Your Budget)

5. Funds for irregular expenses

Not every expense is billed monthly. Most people find they have at least a few quarterly or even annual expenses, such as HOA fees, insurance premiums, club membership dues, and more.

Since they aren't regular bills, it can be easy to forget that they are coming due. Don't panic — you can still budget for them and ensure you always have the cash for odd expenses.

An easy way to handle these types of bills is to create an irregular expense savings account. Calculate what you owe in total irregular expenses for the year and divide it by 12. That's how much you should save every month to cover irregular expenses. Just remember to start saving before your first bill is due so you can ensure you have enough to cover what you owe.

It may also be helpful to keep a financial calendar. You can mark when each bill is due throughout the year, so no quarterly or annual bill will come as a surprise.

6. Regular review

Circumstances change, and your budget should change accordingly. By regularly reviewing your budget, you can see what's working and what isn't. Are there areas where you are constantly going over the amount you budgeted for? Areas where you are spending less? Has your income changed? Do you need to set aside more for savings?

Review your budget at least once a month. If you have a significant other, sit down together and discuss your financial goals. By making small tweaks as you go, you will discover how to use your money most effectively.

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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:

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 Common Mistakes to Avoid When You Enroll in Medicare

Dan Rafter — Tue, 01 May 2018 08:30:19 +0000

If you're close to retirement age, you might soon be eligible for Medicare. The federal health insurance program is an important resource, helping you cover the costs of hospital stays, doctor's visits, and prescription medication. The challenge? Signing up for Medicare can be complicated. It's not unusual for new enrollees to make mistakes, and these mistakes can prove costly.

Your goal is to sign up for Medicare services on time and correctly to avoid financial hits. Here are some common mistakes to watch out for when enrolling in Medicare coverage.

Thinking you haven't worked enough to qualify

You might think that just because you haven't worked much, or at all, that you can't sign up for Medicare. That isn't true.

To be enrolled in Medicare Part A, you might hear that you need to rack up 40 eligibility credits by paying Social Security and Medicare payroll taxes. That comes out to about 10 years of work for most people. But this only means that you won't have to pay for Medicare Part A coverage, which covers medical services provided by hospitals. You can still sign up for Medicare Part A if you haven't worked long enough to earn those 40 credits. You'll just have to pay a premium.

Some people are automatically enrolled in Medicare Part B — the insurance that helps cover doctor visits, trips to the outpatient clinic, and any expenses for medical equipment — when they sign up for Part A (together, the two comprise Original Medicare), while others enroll separately. You don't need any work credits to sign up for Medicare Part B. You can qualify for this part of Medicare even if you've worked fewer than 10 years. You just need to be 65 or older and a U.S. citizen or legal resident who's lived in the country for at least five years. The same holds true for Medicare Part D, which covers prescription medications. As long as you already have Parts A and/or B, you can enroll in Part D. (See also: How to Make Sense of the Different Parts of Medicare)

Signing up too late

Medicare.gov is clear about the risks of signing up too late for Medicare. In many cases, you'll need to sign up for Medicare coverage during your seven-month initial enrollment period. That period includes the three months before you turn 65, the month you turn 65, and the three months after.

There is an exception: You can delay signing up for Medicare coverage if you have health insurance coverage past the age of 65 from an employer for which either you or your spouse still actively work. If this employer has 20 or more employees, you can delay Medicare enrollment until the job ends and not face a penalty. If your employer has fewer than 20 employees, you should sign up for Medicare when you are first eligible.

If you do sign up late — especially for Part B coverage — you will face a stiff penalty. According to Medicare.gov, your monthly premium for Medicare Part B will be 10 percent higher for each full 12-month period that you could have had this coverage but didn't sign up for it. And that penalty will last as long as you are enrolled in Part B coverage.

Here's an example from Medicare.gov: Say your initial enrollment period ended Sept. 30 of 2009. You didn't sign up for Part B coverage until the general enrollment period in March of 2012. Your Part B penalty will be 20 percent. That's because you waited two full 12-month periods before signing up.

There is a penalty for signing up late for Medicare Part A, too, if you don't qualify for premium-free coverage and instead have to pay. Again, your monthly premium might increase by 10 percent. You'll have to pay this penalty for two times the number of years you could have had Part A coverage but didn't sign up for it.

Again, here's an example from Medicare.gov: Say you were eligible for Part A coverage for two years before finally signing up. You will have to pay the higher premium for four years — twice the number of years in which you waited to enroll. (See also: 5 Common Medicare Myths, Debunked)

Skipping Medicare Part D

Medicare Part D helps cover the costs of prescription medicine. It's not free — you'll have to pay a monthly premium. Because of this, you might be tempted to skip this coverage, especially if you're healthy today and you don't take any medications.

Don't. You can't predict how healthy you'll be in the future. You can't predict whether one day you will need costly prescription medications.

Sign up for Part D coverage as soon as you are eligible. Like with Medicare Part A or B, if you wait too long — any continuous period of 63 days or more after your initial enrollment period ends, unless you have approved medication coverage from a different source — you will face a penalty added to your monthly fee.

Not understanding what open enrollment means

Medicare does offer its own open enrollment period, which runs every year from Oct. 15 to Dec. 7. If you are new to Medicare, though, this isn't when you must sign up. New enrollees get their own enrollment periods.

The open enrollment period starting Oct. 15 is reserved for those already receiving Medicare and who want to change their coverage choices for the next year.

If you are enrolling for the first time, you still need to sign up for Medicare sometime during your seventh-month initial enrollment period.

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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:

Could You Make Ends Meet If You Were Suddenly Disabled?

Mikey Rox — Wed, 07 Mar 2018 09:30:09 +0000

Becoming disabled is not a worst-case scenario, but it's one that can wreak irreparable havoc on your finances. You may have little to no control over whether or not a disabling illness or injury will impact your life, but you can prepare for the what-if. If you don't, you could find yourself — and your loved ones — facing financial ruin should the what-if become reality.

We all need to ask ourselves: Could we make ends meet if we were suddenly disabled?

Build your emergency fund ASAP

Ideally, you should have at least six months' worth of salary in an emergency account, but even three months' worth can be a big help when you're facing a disability. Even if you can go back to work eventually, you'll probably be out for some time — first in the hospital, and then recovery time at home, which may be an extended period depending on the severity of your condition. If your emergency fund is currently running on empty, now is the time to focus on beefing it up. Illness or injury could happen at any time, to anyone. (See also: 7 Easy Ways to Build an Emergency Fund From $0)

Identify other sources of income or savings

If you don't have a lot of money in your emergency fund, maybe there are other sources of income or savings that you can rely on. Do you have valuables that you can sell? Can you downsize to put cash in the bank? Will your disability allow you to get a new job based on your skills and limited mobility? Do you have stocks or bonds you can cash in? None of this is ideal, of course, but it may prevent or at least hold off mounting debt while you recover or figure out how to best move forward based on your disability.

Disability insurance is a must

If you're gainfully employed, I highly recommend that you get disability insurance — while you are still healthy and able-bodied — even if it's short-term. Short-term disability insurance will pay roughly half your salary while you're out of work. Short-term disability duration can range, but the maximum amount of time is generally a year.

If you can get long-term disability through your employer, even better; that will protect you after the short-term expires, paying around 50 to 70 percent of your normal salary until you can return to work or for the amount of time stated in your policy.

If you're not sure what kind of disability benefits you may need, talk it over with a financial adviser or planner. You may also be able to get coverage for the eventuality that your spouse has to quit their job to become your caregiver.

Disability insurance may not seem necessary when you're young (I was invincible in my 20s, too), but you could wind up in major financial trouble later in life, especially if you're starting your career with very little money in the bank. (See also: 4 Things You Need to Know About Disability Insurance)

Social Security Disability may be able to help

If you didn't invest in a disability insurance policy before the injury, you can file a claim for Social Security Disability benefits and see if you qualify. Just don't count on it right away. This can be a very long, tedious process, and many claims are denied the first time they are filed. If you are denied, you can file an appeal. A lawyer may be able to help you expedite the process, though it will come with the added expense of legal fees.

Consider your loved ones, too

You don't want to burden your family with taking care of you if you can help it. Preventing them from having to make financial sacrifices on your behalf is another case for investing in disability insurance.

Your loved ones' lives can change drastically along with yours in the event of a disabling illness or injury. They may have to quit a job to become your caretaker, sell or modify their home, or make various other types of serious financial sacrifices. You can lessen that risk with proper planning. Quality of life is even more important when faced with a disability — for all those impacted, not just the injured individual — and it's your responsibility to take care of yourself while you're still healthy and ensure you have a plan.

The reality is, you can't assume that your loved ones will be able to drop everything and make financial sacrifices for you. Illness or injury can be a very stressful situation in anyone's life, and if you can lessen that stress ahead of time, you owe it to those who would be tasked with your care.

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

7 Times Travel Insurance Is Worth It

Tim Lemke — Tue, 06 Mar 2018 10:00:08 +0000

Traveling is one of the best things you can do for yourself, but it can also be quite costly. This cost can be exacerbated if you end up being forced to cancel or cut your trip short and are unable to get your money back.

Travel insurance can help you avoid losing money if your plans change unexpectedly, or if you encounter an emergency while on your trip. It's not always worth the added expense to purchase travel insurance, but there are a number of instances when it's wise to get it. Consider these when planning your next trip.

1. The trip is expensive

Perhaps you managed to book a pricey, customized, VIP tour of the Antarctic ice shelves, complete with a penguin encounter. Maybe you got an exclusive after-hours tour of the Vatican Museums. You saved up enough money to book these bucket list vacations. It took you a long time, and a lot of hard work. These are trips that you may never be able to book again if you are forced to cancel. Travel insurance is not necessarily going to allow you book that expensive, once-in-a-lifetime experience again, but at least you'll avoid the pain of also losing all the money you spent to book it.

2. You've had recent health issues

One of the most common reasons you may be forced to cancel a trip is an illness or injury that prevents you from traveling. If you are battling cancer, for example, you may feel good one day and not so great the next. It may also be impossible to predict when treatments or surgery may be needed. In this case, travel insurance can give you some peace of mind and allow you to go ahead and book that trip.

Older travelers who may have certain health conditions that have the tendency to flare up may also find travel insurance useful. It is important to note, however, that many travel insurance policies do not cover trip expenses if you cancel due to a pre-existing health condition, so be sure to check the specific provisions of the policy before buying. (See also: What Exactly Does Trip Cancellation Insurance Cover?)

3. There's a chance you may be pregnant

If you and your partner have been trying to have children, you may be wary of vacationing because you don't want to cancel a trip if you do get pregnant. At the same time, it seems silly to avoid traveling if you're not expecting. Travel insurance can come in handy here, because it will allow you to book travel without worrying about losing money if you get some good news. (See also: Everything You Need to Know About Buying Travel Insurance)

4. If you're cutting things close

Let's say you've booked a cruise departing from Barcelona leaving on Saturday, but your schedule only allows you to fly to Barcelona that day. To make things dicier, you have to take two connecting flights to get there. If you experience any delays or miss a flight, you may miss the cruise departure entirely. Travel insurance could reimburse you for costs you incur to catch up with your cruise.

Keep in mind, however, that travel insurance may only cover you if you're delayed due to weather or mechanical problems with the airline. Missing a flight because you overslept, for example, may not be a valid reason to seek reimbursement.

5. If you're going somewhere with unknown medical care

Getting sick or hurt on a trip can be a harrowing experience, and that's especially true if you find yourself in a place where medical care is below American standards. Even today, there are many countries that lack a robust health infrastructure, and medical staff there may not be equipped to perform surgeries or other emergency procedures. A good travel insurance plan can cover travel to better health facilities or hospitals, to ensure you have the best possible medical care even if you are far from home.

6. If you're traveling to a "high-risk" country

Adventurous travelers may find themselves in places that carry some risk to personal safety. Some nations are torn apart by civil war or unrest. Others are prone to incidents of terrorism. Even countries that have general political instability can be risky places to visit.

It's possible to buy travel insurance that covers you for a variety of things if you go to these countries. You can be covered for injuries, for example, or if you have to be evacuated. There are even policies with provisions relating to kidnapping and extortion. (See also: 5 of the Safest Countries to Visit in 2018)

7. If you're in the military

Those serving in our armed forces must be ready to travel anywhere at a moment's notice. If you are on active duty or a reservist, you know that any vacation could be interrupted if duty calls. Travel insurance can reimburse you for costs if you have to cancel or interrupt a trip due to military service.

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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:

8 Questions to Ask Contractors Before Hiring One

Dan Rafter — Wed, 28 Feb 2018 09:00:06 +0000

Hiring a contractor to waterproof your home's leaky basement, add that dream master bedroom, or renovate your kitchen is a big decision. These projects can cost thousands of dollars. You might have even tapped your home's equity in the form of a home-equity loan or line of credit to fund the renovations.

You want to be certain that you're hiring the right people for the job. And you can do that by interviewing several contractors and asking the right questions.

1. Do you have a contracting license?

Contractors require different licenses depending on the state or county in which they do business. You want to make sure that whatever contractor you hire has the proper licenses to work on your project. Otherwise, if local government officials discover that you are working with an unlicensed contractor, they could shut down your project, leaving you with a half-finished bathroom remodel or kitchen renovation.

Licensing requirements vary widely by state, so make sure you do your research before hiring. For instance, in Florida, contractors can hold one of two license types: certified and registered. A certified contractor can work anywhere in the state, while a registered one can only work in a specific community.

In Iowa, contractors who earn more than $2,000 for the year must be licensed with the Iowa Division of Labor, while in Indiana, the state only licenses plumbers. All other contractors are licensed at the local level, having to earn licenses from the individual municipalities in which they work.

Because states and individual counties and municipalities vary so widely in licensing requirements, it's best to call your local government before hiring anyone.

2. What kind of insurance do you have?

Any contractor you hire should have three types of insurance: personal liability, workers' compensation, and property damage. And don't just ask contractors if they have these policies. Ask to see the actual certificates of insurance.

If your contractor doesn't have these forms of insurance, you could end up paying big for any injuries or property damage that occurs during your home-improvement project.

3. How long have you been in business?

It's not always true that the most experienced contractors are the best. It's equally untrue that contractors newer to the business will cause you grief. But in general, more experienced contractors know how to stick to schedules and budgets. They've also experienced the common problems that can come up on a construction site and are more likely to know how to resolve them. (See also: 9 Home Improvements You Should Always Negotiate)

4. Can I contact past customers?

Before hiring any contractor, it's important to speak with their previous customers. These past clients can tell you how well the contractors stuck to schedules, if the budget on their project steadily swelled, or how well they cleaned up after themselves on a job site. They can also tell you whether the work the contractors did was high quality and worth the cost.

If a contractor can't or won't provide you with references? Hire someone else.

5. Will you use subcontractors on this job?

Many contractors rely on subcontractors to complete a renovation project. Your general contractor, for instance, might hire an electrician or plumber to help finish your job.

There's nothing wrong with this. But you want to make sure the subcontractors are reliable and that they also carry the right amount of insurance. If they aren't reliable, they could slow down your project. And if they don't have enough insurance coverage, you could again be responsible for paying for damages or injuries on your job site.

6. Will I need a permit?

It varies by local municipality, but your construction job, even if it seems like a small one, might require a government permit. Even something as small as installing a backyard fence might require one. Ask your contractor about this. Contractors who work in your area should know whether a permit is necessary for your job and what steps you must take to qualify for one.

7. How long will my job last?

Anyone who has worked with contractors knows that construction schedules can, and usually do, change during a job. But you will want at least a rough estimate of how long your home-improvement project will take. (See also: 10 Home Renovations That Almost Pay for Themselves)

8. How will payments be handled?

Ideally, you'll want to pay for your construction project throughout the process, making payments after your contractor reaches certain milestones. This will give you more financial protection than if you pay upfront. And if contractors are falling behind schedule, they might be more inspired to catch up if they won't receive their money until after they hit a goal.

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Why a Deferred Annuity May Be a Smarter Buy Than Long-Term Care Insurance

Aja McClanahan — Mon, 19 Feb 2018 09:30:14 +0000

Many people look forward to the latter years of their life. Most expect to retire and live at a relaxed pace that allows them to savor moments they may have missed while living as a worker-bee.

For this reason alone, many people take time to plan every aspect of their retirement — from savings, to housing, and even long-term care. The only problem is that some of this planning is made on assumptions. And many of these assumptions change over time. For instance, premiums for long-term care insurance have been increasing steadily. So much so, that many insureds are wondering if they should keep their policies in place or bail and look for other options.

Dawn-Marie Joseph, founder of Estate Planning & Preservation in Williamston, Michigan, explains the problem many people face. "Back in 2000, the cost of long-term care policies doubled, if not tripled, for many policyholders," she says. "This forced many people to cancel their policies and lose the money that they had paid premiums with."

Fast forward almost 20 years later, and many retirees are still in a bind without long-term care options. The worst part is that it seems like there aren't that many alternatives to paying rising premiums for long-term care. Aside from dropping the insurance altogether, or accepting reduced benefits at the same premium, many policyholders feel stuck.

There may be one other alternative to these policies if the circumstances are right: a deferred annuity. (See also: How to Make Sure You Don't Run Out of Money in Retirement)

What is a deferred annuity?

A deferred annuity is an insurance product that acts as a savings vehicle. It is simply a way to receive consistent payments from an investment over a period of time, rather than all at once. Annuities help many people cover expenses in retirement, such as long-term care costs.

A deferred annuity differs from an immediate annuity in that you contribute to the account over time or put in one lump sum and wait for it to grow through investment gains. Gains are not taxed until your monthly payouts begin.

Before we get into how the deferred annuity works, it's helpful to know about the different types of deferred annuities: fixed and variable.

Fixed annuities

These are more like bank CDs. You deposit a certain amount of money, and the insurer will pay you a guaranteed amount of interest over a specific period of time. With a fixed annuity, taxes are deferred until the contract moves into the payout phase in which the accumulated funds are annuitized for monthly payments. At that point, earnings are taxed as ordinary income.

With a fixed annuity, you are locked into a certain interest rate. The investment yields returns like a bond or other lower-interest investment. This option would be better for you if you don't mind a lower rate of return in exchange for the security of knowing your return is guaranteed.

Variable annuities

Variable annuities are more like mutual funds. You typically get to choose from a variety of investments like stocks, ETFs, or money markets. There's more potential to earn higher yields as the stock market does well, but you'll also be exposed to market volatility.

The insurance component makes it so that annuity investors will get at least a return of their principal, in case their chosen investments don't perform well. Contributions grow tax-deferred and, like fixed annuities, are taxed at withdrawal.

If you have an appetite for risk, there's more of an upside potential with a variable annuity. Your monthly payouts could be higher if the investments in your annuity do well. However, if you are more interested in getting a guaranteed minimum monthly payment, as opposed to higher returns on your investment, a fixed annuity would be a better fit.

With both products, withdrawals taken before age 59½ will be subjected to a 10 percent tax penalty.

What are the advantages of a deferred annuity?

In general, many people use this savings strategy when all other retirement accounts have been maxed out. A big advantage to saving money in a deferred annuity is the ability to defer taxes. As money grows in this account, the compound interest effect is not slowed down by tax payments that cut into the principal deposit.

Another advantage of an annuity is that income is guaranteed. At minimum, there is a promise to return your principal investment. And if you die before using your annuity, most include a death benefit component that allows your beneficiaries to receive at least your principal investment plus any gains (this would be taxed as ordinary income).

Deferred annuity versus long-term care insurance

A deferred annuity is not for everyone, but it can be an option for some people. For example, if you plan to self-insure for potential long-term care needs, this product could help.

As mentioned earlier, many people are finding the cost of rising long-term care insurance premiums unbearable, so it might make more sense to divert that premium money into a product with better prospects of delivering benefits without breaking the bank.

Another reason for choosing a deferred annuity may be out of necessity. Emily Stroud, a financial adviser, recommends "purchasing a deferred annuity instead of long-term care insurance, if the applicant is not likely to be approved for insurance after going through medical underwriting."

She goes on to explain, "I have had clients in the past who had pre-existing health conditions who were denied coverage because the insurer thought they were too risky to insure." (See also: Is Long-Term Care Insurance Worth It?)

Unlike long-term health care insurance, deferred annuities may be used for long-term health care needs or for anything else money can buy. For example, if the owner of the annuity doesn't ultimately need long-term care, they could either drawn down their money or leave the annuity proceeds to a beneficiary.

Additionally, there are hybrid policies that let you choose various riders that allow you to customize the benefits that make sense for your particular situation.

What are the downsides of a tax deferred annuity?

The biggest downside is that this product typically requires a large sum of money to make the initial deposit. Furthermore, it has to be an amount of money that you won't actually need for the length of time the deferred annuity requires. Sometimes, this can be five, 10, or even 20 years. Withdrawing funds early often comes with steep penalties.

Another issue is that the guaranteed interest rate may not keep pace with higher market returns. Though you'll get regular payments from an annuity to cover living costs, you could miss out on better returns if you had invested in stocks instead.

Annuities, in general, have a bad reputation for being costly due to commissions and fees passed on to the annuitant. But not only is it possible to find low-cost annuity products, but one could also argue that the high premiums for long-term care insurance are just as costly or even more so.

Who would benefit most from a deferred annuity?

Still not sure if a deferred annuity is for you? Here's a list of situations in which you might benefit from a deferred annuity:

You've got a lump sum of money you can invest or deposit for five, 10, or 20 years.
You are not eligible for long-term care insurance or life insurance in general.
Long-term care insurance is too expensive for the benefits it would offer to you.
You don't need payments from your annuity right away.
You don't mind the additional fees that you could incur with an annuity policy.
You'd like a predictable stream of income.

If you answered yes to one or more of these questions, it might be a good idea to sit down with your financial adviser to find out if a deferred annuity would be better for you than long-term care insurance.

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

8 Things Millennials Can Do Right Now for an Early Retirement

Tim Lemke — Wed, 24 Jan 2018 10:00:05 +0000

When you're young, it's hard to think of retirement planning as a priority. You have barely entered the workforce; now you have to think about what to do when you've stopped working?

But if you are of the millennial generation, the road to a comfortable retirement should begin now. And with the right moves, you may even be able to retire early. Consider these financial moves to supercharge your retirement plan.

1. Develop a net worth mindset

One of the keys to saving for a comfortable retirement is to focus on accumulating things that grow in value while reducing your liabilities.

This means earning and saving as much money as possible while eliminating debt. It means investing and watching your money grow, through things like stocks and real estate. It means avoiding spending money on things that will lose financial value or have no value to begin with.

This mindset will help you develop a high "net worth," calculated by how much your assets exceed your liabilities. You can't retire unless you have a high net worth, and you can't get there unless you make the right financial choices — especially at an early age. (See also: 6 Money Moves to Make If Your Net Worth Is Negative)

2. Open an IRA

If you have any earned income at all, you can open an individual retirement account (IRA), which allows you to invest in almost anything and enjoy tax savings along the way. With a traditional IRA, any money you invest is deducted from your taxable income. With a Roth IRA, contributions are taxed upfront, but any investment gains can be withdrawn tax-free when you retire. You will pay a penalty and taxes if you withdraw money before you turn 59½.

These retirement accounts can be powerful saving vehicles if you have the discipline to set aside as much money as you can. The earlier you invest, the more time your money has to grow. (See also: 5 Retirement Accounts You Don't Need a Ton of Money to Open)

3. Put money in a 401(k)

If you are employed by a company, there's a good chance that you have access to a 401(k) or similar plan. Don't ignore your human resources representative when they hand you a stack of plan documents urging you to sign up.

A 401(k) plan allows you to invest in a variety of mutual funds and other investments, and your company will often match your contributions up to a certain amount. Money you contribute is deducted from your taxable income. You should invest as much as you can into your 401(k), but it's imperative that you at least contribute enough to get the maximum in matching funds. Your contributions, coupled with the matching funds, can add up to millions of dollars by the time you decide to retire. (See also: 401K or IRA? You Need Both)

4. Open a taxable brokerage account

There's no rule that says all your investments need to be in retirement accounts. Regular taxable brokerage accounts don't have the same tax advantages as IRAs or 401(k) plans, but they do offer other perks, chiefly the flexibility to withdraw money whenever you want it. This is especially key for someone looking to retire before age 59.

Taxable brokerage accounts can be used to accumulate dividend stocks, bonds, or other investments that provide income that will allow you to retire early. (See also: 7 Investment Accounts All 30-Somethings Should Have)

5. Get a side hustle

To accumulate enough money for an early retirement, you'll need a healthy and steady income. If your day job doesn't quite pay enough, look for other ways to generate cash. This may mean freelance writing or playing guitar at local coffee shops. Maybe it's tutoring math, working as a DJ, or doing ASMR videos on YouTube.

If you're young, you have energy and freedom, and the ability to make some cash on the side. Earn it, invest it, and watch it help you retire for good from work at an early age. (See also: 14 Best Side Jobs For Fast Cash)

6. Learn to budget

It's simple: The only way to invest money is to save it, and the only way to save it is to spend less than you earn. This may be easier said than done, especially if you aren't making a lot of money early in your career. But it needs to happen.

Start by tracking your spending so you know precisely where your money is going. Then create buckets for various categories of spending (rent, food, entertainment, etc.). Budgeting requires focus and discipline, but can be fun — and ultimately rewarding — when you see your savings grow. (See also: 9 Ways Staying on Budget Can Be Fun (Really!))

7. Tackle that debt

You may have student loans. As a result, you may also have credit card debt. If this is weighing you down, it's time to do something about it or an early retirement will be impossible.

Begin by going after some of the most onerous debt first — usually, this is the credit card debt with the highest interest rate. Once the debt is eliminated, you can begin to focus on actually saving and investing, rather than simply making ends meet. (See also: The Fastest Method to Eliminate Credit Card Debt)

8. Get insured

The ability to retire early is as much a product of avoiding disaster as accumulating wealth. It's hard to save and invest aggressively if you find yourself saddled with tens of thousands of dollars in medical bills, or expenses to replace items lost when your apartment flooded.

You may think that health insurance is a waste of money because you are young and in good shape. You may think that you're a good driver and don't need comprehensive auto insurance. But if you truly want to gain financial independence and work toward an early retirement, you must be properly insured. Even if you have insurance now, review your policies to make sure you're covered at the right levels. Fail to do this, and you may find a single disaster will send your financial future off track. (See also: 15 Surprising Insurance Policies You Might Need)

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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 Longevity Is Changing Retirement Planning (And What to Do About It)

Aja McClanahan — Mon, 22 Jan 2018 09:30:09 +0000

There's no doubt about it: People are living longer and need more money to support their extended life spans. In the U.S. alone, the average life expectancy has reached the mid-80s for people turning 65 today, though it's not unusual for someone to live well into their 100s.

Longer life spans should be a reason to rejoice — after all, it means additional memories and experiences that come with having more time on earth. However, living longer also brings legitimate concerns about saving enough money to support such a long stay.

If you're uncertain that you'll have enough money to enjoy a retirement of 30 or 40 years, you should start planning now. Take a look at how living longer could affect your retirement income and what you can do to prepare for it.

1. You need to save more money

Much of the financial advice for retirement hasn't considered a retirement period that could last 30 or 40 years. If people aren't advised to save enough during their career, they'll likely have a smaller nest egg that will be depleted much faster. In the case of a long life span, saving the typical 10 to 15 percent of income traditionally recommended for retirement probably won't be enough.

You should consider working with a financial planner to discuss the prospects of a longer retirement. Get solid numbers on your potential cost of living to cover various scenarios. Calculate what you could need 20, 30, and even 40 years after you leave the working world, and figure out the amount of money you should be saving to cover those scenarios. (See also: How to Face These 7 Scary Facts About Retirement Saving)

2. Your investments may need longer exposure to risk

There are a couple of ways your investing strategy may change with a longer life span. For one, you may find yourself using catch-up contributions and may opt to max out every retirement vehicle you can as early as your 40s and 50s.

Then, there's the idea of allocation and risk. Morgan Ranstrom, CFA of Trailhead Planners, says that moving away from equities into bonds may no longer be a good strategy. "It may be necessary to maintain more stock and/or risk exposure in a retiree's investment portfolio to reduce the risk of outliving their money," he says.

An investment adviser can help you create a reasonable asset allocation plan that considers a longer retirement period. Make sure you have a rebalancing plan for each stage of your life, from pre-retirement through 20 or 30 years post-retirement. Seeing these scenarios, with possible outcomes, will give you an idea of how to adjust your investment strategy both now and later on in life. (See also: 7 Reasons to Invest in Stocks Past Age 50)

3. You'll need more insurance

Michael Dinich, professional estate and tax planner, points out that, "Many universal life policies were funded at a level that would only guarantee coverage until mid-80s." Extending policies for older retirees can be extremely costly, leaving people without coverage when they need it most.

In addition to life insurance, longer life spans could increase the need for long term care insurance. This type of insurance can help cover nursing home costs. Getting this insurance in your 50s or 60s can be expensive, but it will be significantly cheaper than if you wait until you're older. (See also: The Best Age to Buy Long-Term Care Insurance)

Check your existing insurance policies to find additional products that may cover your needs. For example, some policies can be converted partially or completely once the term expires so they last longer. There may also be hybrid products that cover a combination of life, burial, and long term care. The key is to check into these options early to prevent being ineligible at an older age.

4. You may need to work longer

Living longer means you may need to keep working longer to continue growing your retirement savings. Kevin Langman, financial planner at Finovo, says he sees clients with a more fluid concept of their working careers. "Instead of working to a set date and stopping," he explains, "we see careers going through stages, with a few decades of full-time work followed by a shift to more part-time and passion-fueled work."

Just because you may need to work later in life doesn't mean it has to be stressful or you have to languish in a job you dislike. Investigate ways to extend your career in a way you don't dread — maybe turn a passion or hobby into a side gig. Langman encourages his entrepreneurial clients to explore residual income options like, "products and services that can continue to generate income even once they are not working on them full-time anymore." (See also: 6 Great Retirement Jobs)

5. You'll need to account for inflation

Brian Saranovitz, of Your Retirement Advisor, says that planning for inflation can be tricky such a long way out. He says, "In some cases, retirees will need to create an inflation-adjusted retirement income for 25, 35, or possibly more years." With such a far-out horizon, it can be hard to pinpoint exactly how much inflation will affect an asset base.

Work closely with your retirement planner or investment adviser to control the effects of not only inflation, but other forces that can erode assets quickly like taxes and market volatility. Some options include exploring alternative investments and insurance products to increase the effectiveness of your portfolio. (See also: 4 Ways to Protect Your Retirement From Inflation)

Roger Whitney has been a financial adviser for 27 years. He sums up the idea of a longer retirement in this way: "Traditional retirement planning worked for our parents. They lived retirement on the park bench of life. The modern retiree will likely live longer, be more active, and spend more in retirement. They'll still be on the playground."

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

7 Signs It's Time to Quit Freelancing

Paul Michael — Mon, 15 Jan 2018 09:00:07 +0000

Tell someone you're a freelancer, and you'll usually be treated with a mix of envy and admiration. Freelancing brings with it a perception of freedom and flexibility that is a definite plus, but much harder to sustain than many people might realize.

As a freelancer, chances are you put in more hours and are on the go more than regular full-time employees. You don't get subsidized health care, a 401(k) match, or paid vacation. It can be tough — sometimes, too tough. And when the following red flags appear, it may be time to throw in the towel. (See also: Day Job or Freelance: Which Is Right for You?)

1. You don't enjoy it anymore

Let's start with the most obvious reason. If it's just not something you like doing anymore, maybe it's time to start thinking about a different career path. Remember when you first decided to jump into the freelancing pool? The buzz you felt going it alone. Hustling for clients. Being your own boss. It all felt like the world was your oyster. If you now get up every day wishing you'd made a different choice, that's life telling you you're wasting time.

Our job takes up the majority of our waking hours, so to be doing something that makes every one of them painful is just not worth it. What do you daydream about doing instead? What would reinvigorate those passions you once felt for freelancing? Listen to your gut and make a move in that direction. (See also: 8 Signs the 9-to-5 IS Right for You)

2. It's getting harder and harder to find work

When you first dipped your toe into the freelance pool, you had to hustle to get those initial clients. But, after some hard work, you built up a nice client roster and had enough regular work to make freelancing a financial success. However, things change. Markets change. Freelance industries can become flooded with new and cheaper talent. And, of course, there are those sites like Fiverr and Guru that are crammed with people all over the world charging rates that you cannot even begin to compete with.

That mix of more competition, lower freelance rates, and even corporate downsizing can have a serious impact on the time you spend trying to find work. And if you spend more time looking for it than working on it, you could be in real trouble. (See also: How to Land More Freelance Clients)

3. You can no longer afford to pay for your own health care

This is a big reason freelancers are returning to the workforce, and it's a sad sign of the times. Corporations and small businesses have the clout to negotiate excellent rates for their employees. Not only that, but the company pays the majority of the monthly premium, with some companies even offering completely free HMO coverage for an employee and family.

As a freelancer, you don't have that kind of power. According to data gathered by eHealth, the average individual health insurance premium for 2017 was $393 a month. It skyrockets to $1,021 a month for families. That's not taking into account deductibles, which you have to meet before the insurance kicks in. It's a huge burden for a freelancer to take on, and coming back into the fold can be a relief. (See also: 10 Work Perks You Can't Get as a Freelancer)

4. You miss the interaction with other employees

Freelancing can be a lonely business. Many people take daily human interaction for granted. In fact, some people tire of it all, and it becomes a major reason for freelancing and going solo. But over time, you can go days without talking to anyone except the checkout cashier and the dog.

Humans, for the most part, are social creatures; it's only natural to start longing to be around other people again — for those water cooler talks about last night's killer season finale, or the latest and greatest music you've discovered. And while texting and calling people can help with the loneliness, it can become depressing. If it's starting to weigh on you every day, and you are making excuses to leave the house, it's time to think about returning to the workforce. (See also: 11 Ways Freelancers and Telecommuters Can Make Friends and Network)

5. You're bored and you're coasting

Has the freelance life lost its spark because you are simply not being challenged anymore? It's possible that your daily work routine is filled with the same projects, for the same clients, over and over again.

Some freelance writers get stuck penning annual reports and company brochures week in, week out, and it becomes monotonous work. Some freelance photographers get stuck doing weddings and graduations, and although it's special for the people being photographed, it can be tedious taking the same shots every time. Whatever your freelance gig, if you are dreading getting out of bed in the morning because you have "those projects," you have lost your passion. Dive back into something more challenging, for your own mental wellbeing.

6. You can't make ends meet

Freelancing is a constant hustle. It can be exhausting to find work for yourself. What's worse is when the jobs start paying less, or you lose a few clients. Some clients will be tempted by younger freelancers offering lower rates. Others may just be retiring, or going in another direction. And while it's important not to panic if you do lose some regular monthly income, you have to be prudent about how long you ride it out.

Can you find something that will make up for that income loss before it really starts to eat away at your emergency fund? Do you even have an emergency fund? What can you cut out to keep going? Examine the budget carefully, and if things are looking bleak, you may need to cut and run to a regular, full-time salary. (See also: The Smart Way to Budget on a Freelance Income)

7. The work-life balance is no longer acceptable

When you first started freelancing, you knew you'd have to put in extra hours to get the business off the ground. After that, it should have been more like a day job, with regular hours that you work, regular time to relax, and hopefully, a week or two of vacation. However, some freelancers swear by the saying, "Never turn down work — they may never ask again."

That can be a huge problem. You don't want to turn work away and risk an income stream drying up. But you're tired. You've been putting in 60-hour weeks and you need a break. If you have reached that stage where you are living to work, and not working to live, you should consider quitting and finding a full-time job with an employer. (See also: 9 Signs Your Work-Life Balance Is Off)

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