retirement savings

How to Manage Money When You Hate Thinking About It

Mikey Rox — Tue, 27 Mar 2018 09:00:11 +0000

Love it or hate it, money matters. I've found that many people with consistent financial issues actually fear money and hate thinking about how to manage it. They don't know what to do with it, how to spend smartly, how to save wisely, or how to set financial goals that help hold them accountable to themselves.

If you fall into that category, help is here. Start picking up the pieces of your broken-down budget with these tips on how to get your dollars and cents in order — even when you dread it.

1. Automate everything

The more bills you put on autopilot, the less you'll have to think about what needs to go out and when. The key to this system working properly is keeping the required amount of money in your account so it's there on the due date. If you don't have the funds, you'll overdraft, which not only defeats the purpose of this simplification, but also puts you in an avoidable debt situation.

Almost all your bills can be automated these days. Christy Rakoczy, personal finance expert with Student Loan Hero, details how.

"Set up automatic bill pay to pay off your credit cards each month, and to pay utility bills, mortgage, rent, and other fixed expenditures. Other than checking your account balances once in a while, once you've automated everything, you should never need to think about money again. All your money will go exactly where it needs to and you'll know the cash left over in your checking account is for spending."

And bills aren't the only things you can automate. If you dread facing your retirement accounts dead-on, automate those, too.

"If you have a workplace 401(k) plan, talk to HR about setting up automatic contributions if you aren't already contributing," Rakoczy says. "You should contribute at least enough to get your employer match, but ideally as much as 10 to 15 percent of your income. If you don't have access to a 401(k), you can set up an IRA and make automatic contributions to that account as soon as your paycheck hits your bank account."

Once you've got your retirement accounts and bills automated, set up automatic transfers to other savings, such as an emergency fund, a vacation account, or an account to save for a house down payment. Whatever your goals are, have a dedicated account to save for them and move money automatically into that account each month. (See also: How to Use "Bucket Budgeting" to Overhaul Your Finances)

2. Enlist the help of apps

There's no shortage of personal finance and money management apps available to you — some more user-friendly than others. If you're having trouble tracking your cash flow, maybe it's time to give one a shot.

Mint, Personal Capital, and Intuit Turbo are just a few of many available tools that can help you track and manage things like upcoming bills, low balances, or unusual spending so you never miss a payment or spend more than you have. If you aren't someone who checks their bank account regularly, these reminders can help you stay on budget and know exactly where your money is going and where you need to cut back. (See also: These 5 Apps Will Help You Finally Organize Your Money)

3. Establish a "same place, same time" schedule

I'm a creature of habit, and if something isn't on my daily schedule or logged in my calendar, it probably won't be accomplished. Same goes for you, I bet. Rather than trying to manage your money and expenses as they come in, consider setting up a time when you know you'll be free and clear to "meet with your money" on a weekly, biweekly, or monthly basis.

Student Loan Hero personal finance expert Miranda Marquit sticks to this strategy to stay on top of her finances.

"Once a week, on Sunday evening, I take 15 minutes to scan my accounts and make sure everything is in line," she says. "Also, on the last Sunday of the month, I take an hour to reconcile my accounts. Because I have my bills and savings goals automated, all I have to do is check in. In total, I spend less than two hours a month managing my money. As long as my priorities are covered with automatic means, and I verify everything's where it should be, there's no real need to think about it a whole lot."

4. Stick to an all-cash system

I racked up a decent amount of credit card debt as soon as I turned 18 because I had no idea what I was doing. Happens to the best of us. But what I took away from that experience is that if I didn't have the money in my bank account for something nonessential, I had to live without it. That was the only way I was able to dig myself out of debt — sticking to an all-cash system and just saying no.

This could work for you, too. Once all your bills are paid, take out a budgeted amount of cash for what you might want and guide your spending based on those limitations. This tactic will also allow you to see money physically leave your hands, which is a proven deterrent to spending versus debit and credit cards where swipes mean nothing and can get out of hand before you know it. (See also: Is an All-Cash Diet Right for You?)

5. Adopt the 50/20/30 rule

Even if you despise managing money, it's important to implement spending parameters to keep yourself on track and avoid overspending. If you don't like the all-cash method, try a different approach, like the 50/20/30 rule.

"Spend only up to 50 percent of your after-tax income on essentials, such as housing; 20 percent on financial priorities, such as debt repayments and savings; and 30 percent on wants or lifestyle choices, such as dining or entertainment," advises Natasha Rachel Smith, personal finance expert at TopCashback.com. "By adopting a simple yet powerful rule, you can manage your money more effectively." (See also: How to Manage Your Money — No Budgeting Required)

6. Set a 10 percent total-income savings goal

If you regularly save 10 percent of your income, no matter how much you earn, you will always have the confidence of knowing you are living within your means. It will also pave the way for other financial milestones, such as saving for the down payment on a house or starting a college fund for your kids.

This may sound like an intimidating process, but it doesn't have to be. Carla Dearing, CEO of online financial wellness service Sum180, breaks it down further.

"Think of saving 10 percent as the way you empower yourself to make ongoing investments in your financial health, year after year," she says. "This is more easily achieved than you might think. Simply set up automatic bank transfers for the beginning of every month. By doing this, money you have earmarked to save is transferred from your checking to your savings account without you having to lift a finger and before you have a chance to spend it on something else."

7. Hire a financial planner

If you're someone who balks at the mention of money management, but also has enough disposable income to farm out the task, consider hiring a financial planner. They'll take the dirty work off your hands — for a fee — and provide advice on how you can make the most with what you have. Certainly you shouldn't spread yourself too thin by bringing a planner on board, but if you have extra money to invest in yourself, this is a good start. (See also: 3 Reasons to Be Picky When Hiring a Financial Planner)

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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:

6 Personal Finance Rules to Live By in Your 40s

Dan Rafter — Thu, 22 Mar 2018 10:00:06 +0000

Your 40s can be a stressful time. Your children might be moving on to college, changing the dynamics of your household. Your own parents are aging and might need to move into a nursing home or assisted living facility. And you might be feeling extra pressure at work to move up to higher-paying positions as a way to maximize your earning potential.

But your 40s can also be a time to secure your financial health and pave the way toward a brighter retirement. You can increase your odds of achieving this goal by following the personal finance rules below.

1. Focus on building your retirement savings

The main goal in your 40s should be to boost your retirement savings as much as possible. Retirement might still seem a long way away, but it's closer than you think.

If you are saving money in your company's 401(k) plan, be sure to maximize your regular contributions and take advantage of any company match. Do the same with any investments you make in a traditional IRA or Roth IRA. The more you save today, the brighter your retirement years will be. (See also: 7 Retirement Planning Steps Late Starters Must Make)

2. Don't let college costs derail your retirement savings

You want to help your kids pay for their college educations. That's understandable, but don't let your desire to help your children derail your retirement savings.

If you spend too much money helping your kids pay for college, you'll struggle to build your retirement savings. In your 40s, saving for retirement should be your top priority, outweighing even your goals of chipping in to pay for your children's college education.

Remember, your children have options for paying for college. They can borrow money. They can choose less expensive schools. They can seek out scholarships or attend a community college for two years. You don't have nearly as many options when it comes to your retirement savings. (See also: How to Keep Student Loans From Wrecking Your Retirement)

3. Reduce your debts

Nothing ruins your plans to save money quicker than debt. And no other is as costly as credit card debt. Do everything you can in your 40s to eliminate it.

Some debt is better than others. Auto loans and mortgages, for instance, generally come with lower interest rates. And you are receiving a benefit — a house to live in, a car to drive — while making those monthly payments. But credit card debt is another story. This debt comes with sky-high interest rates that can snowball by hundreds of dollars every month. That's why it's so important to pay it off as quickly as possible. (See also: The Fastest Method to Eliminate Credit Card Debt)

Remember that your primary goal in your 40s is to build your retirement savings. Think of how many additional dollars you could save if you weren't sending so much money each month to your credit card providers.

4. Grow your emergency fund

Another thing that can quickly derail your efforts to save for retirement is an unexpected emergency. Say your roof springs a leak or your furnace conks out in the middle of January. You must fix these problems, and that won't be cheap.

That's where an emergency fund comes in. As the name suggests, this type of fund is filled with dollars that you only tap when an unexpected financial emergency pops up. By having a well-stocked emergency fund, you won't have to resort to credit cards to pay for unexpected home or auto repairs, or even a surprise medical bill.

Financial experts recommend that you have enough in your emergency fund to cover at least six months' to a year's worth of daily living expenses. That might seem daunting, but even starting an emergency fund with small payments every month can build up. Say you deposit $200 every month in an emergency fund. After a year, it will grow to $2,400. (See also: 7 Easy Ways to Build an Emergency Fund From $0)

5. Avoid the co-signing temptation

When you're in your 40s, your children might be ready to apply for auto loans or credit cards of their own. It can be challenging for young adults with limited credit histories to earn approval for these loans. It's not unusual for them to ask their parents to co-sign on an application.

While it might be tempting to want to help your kid, be careful: If your son or daughter makes their payments late, your credit score will take a fall, too. That's because when you co-sign, you become equally responsible for a debt. If your children default on a loan, you're on the hook for making those missed payments — putting you in a dangerous financial predicament that could completely derail your retirement savings.

Don't co-sign unless you're positive your children won't miss any payments. Even then, it's probably not in your best interest to be a co-signer. (See also: Should You Co-sign Your Teenager's Credit Card Application?)

6. Make sure you have enough life insurance

What would happen to your children or spouse if you suddenly died? Would your spouse be able to pay the monthly mortgage? Would your family have to move to a new, less expensive home?

Life insurance can prevent financial stress for your family if you should die unexpectedly. Make sure that you have enough life insurance coverage to protect your loved ones. Your 40s is a good time to review your life insurance coverage and make changes if necessary. (See also: Why Your Group Life Insurance Is Not Enough)

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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:

How to Keep Student Loans From Wrecking Your Retirement

Toni Husbands — Fri, 23 Feb 2018 10:00:06 +0000

Student loans are not just a burden to young college grads, but to those nearing retirement age as well. Many Americans who have to choose between saving for retirement and paying for a child's college education opt for the latter.

That can be a problem. The Consumer Financial Protection Bureau reports that in 2015, $66.7 billion of student loan debt belonged to borrowers age 60 and older. Among them, 40 percent of borrowers over the age of 65 were in default. The vast majority of older Americans with student loan debt — 73 percent — borrowed to help fund a child's or grandchild's education.

The statistics don't lie; the latest obstacle threatening a comfortable retirement for Americans may very well be student loan debt. (See also: Are You Ruining Your Retirement by Spoiling Your Kids?)

Understanding what's on the line

Understanding just how much a student loan can disrupt your retirement will help you evaluate the decision before signing on the dotted line. The average college student graduates with over $37,000 in student loan debt. Given that tuition costs continue to rise at twice the rate of inflation, loan balances are likely to grow for future classes.

Before taking out a student loan for a child or grandchild, consider whether you can realistically repay the loan before entering retirement. Even if you can, understand that you may be sending hundreds of dollars every month toward that debt instead of toward your retirement account. How much will that hurt you in the long run?

Whether you co-sign for a student loan or borrow directly for your child, you will be responsible for the entire balance of the loan. If you can't afford to make those payments, and you know you will still be repaying the loan well into retirement, the best decision is not to take out a loan at all. You'd be putting yourself in a position of great financial risk by doing so.

If you default on a student loan, things can get even worse. Student loan creditors can garnish your wages, including Social Security benefits. Tax refunds can also be seized to satisfy unpaid balances. Even bankruptcy won't be a good option, as student loans can generally not be discharged. If you find yourself in a position where you're over your head and unable to pay, your outstanding student loan debt can be devastating to your financial wellbeing.

Alternatives to student loan debt

If savings, scholarships, and grant opportunities have all been exhausted, there are still ways to bring down the cost of college for your child and avoid having student loans impact your retirement savings plan. (See also: The Encouraging Truth About How Americans Are Covering the Cost of College)

1. Your child can choose cheaper schools

While your child may have their heart set on particular school, they also need to be realistic about how much it will cost to attend. Price should be as much of a deciding factor as the school itself. If your child attends an in-state school or community college, you can greatly minimize or even eliminate the need for student loans altogether.

2. Your child can earn college credit in high school

Advanced Placement (AP) is a program that allows high school students to earn college credits through specialized courses. There may be certain prerequisites to signing up for these advanced classes, and you'll have to pay a $94 fee for the exam. Additional costs may also apply for certain study materials.

If your child scores well on their AP exams, it could save them from having to take certain introductory courses in college — which in turn could slash thousands from their tuition bill. AP exams are scored on a scale of 1–5. Different colleges have their own criteria for assessing how many credits your child's test score is worth (or if they'll accept the AP credits at all).

3. Have your child commute from home

Room and board is a large portion of the overall college experience and expense. And while your kid may be eager to set out on their own, again, they need to be realistic about what's affordable, and so do you. Sabotaging your retirement savings to pay for your child's room and board is simply not a smart financial move.

Attending a college close to home, or even finding a school that offers some of its courses online, will allow your child to continue living at home and to commute to class. This way, they (and you) can better focus on paying tuition.

If they have their heart set on living on campus, taking a Resident Assistant position can allow your child to live in the dorms for free. They will have added responsibility as an RA, but the benefits can be worth it.

4. Your child can find a job

Just because your child is attending school doesn't mean they can't find a part-job to help cover education costs. While it may be a burden to hold down a job while pursuing a degree, make sure your child understands how much more of a burden it will be for either of you to carry student loan debt decades into the future. Companies like UPS and Starbucks offer tuition assistance benefits that can help defer college costs. (See also: These 17 Companies Will Help You Repay Your Student Loan)

Even a full-time position is not out of the question. Students working full-time may take longer to complete a degree, but a few more years of study can be a worthwhile trade-off for your child to graduate debt-free.

Dealing with student loans in retirement

For those still repaying student loans into or nearing retirement, the burden can be tremendous. But you do have options.

Federal student loans offer income-based repayment programs. A deferment or forbearance can be requested to conserve cash if you're experiencing a temporary financial hurdle. Consolidating loans can also help you adjust interest rates or convert your loan into one that offers more repayment assistance options. Visit the Federal Student Aid website to find more information about the repayment programs that are available to you. (See also: 4 Things You Need to Know About Deferring Student Loans)

Private student loans are a different matter. Very few private student lenders offer any form of repayment plan. If you are struggling to make payments, your best bet is to contact your lender directly and discuss what options may be available to you. If you have co-signed a private student loan, you may be able to request to be removed if the primary borrower has a good payment history and solid credit. By passing the baton to your adult child, you can return your focus to your retirement.

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

5 Tax Mistakes Freelancers Need to Stop Making

Aja McClanahan — Wed, 07 Feb 2018 09:00:06 +0000

No doubt about it, being a freelancer is hard. From serving clients to staying on top of your money game, there's no shortage of work to do. Sometimes, things may be overlooked or set on the back burner while you tackle pressing business matters. However, there is one major thing that just can't be ignored — taxes.

As your own chief financial officer you'll need to be aware of major tax missteps that could ultimately ruin your business. Ideally, you'll engage the help of an experienced small business accountant who knows the ins and outs of tax strategies for freelance business owners. However, you've got to have your ducks in a row to double and triple check their suggestions and advice, too. (See also: What Freelancers and Side Giggers Need to Know About Income Taxes)

These are the top tax mistakes freelancers really need to stop making.

1. Not paying self-employment tax

As a freelancer, you probably have a number of clients that pay you without deducting any taxes. Because you are a contractor, you are responsible for any and all taxes on your income.

Self-employment tax is a term that covers two main taxes: Social Security and Medicare. As an employee of a company, your employer would cover part of this tax. However, lucky you, since you are your own employer, you get to pick up the tab on the entire tax bill.

On the other side of paying all these taxes, you do get some reprieve by deducting a portion of these payments from your gross income, which can reduce the amount of taxes you owe overall.

Just know that it's very important to pay self-employment taxes on your freelance income. If your client issues you a 1099 form, it's also transmitted to the IRS. The IRS becomes aware of this income and can demand you to make an accounting for that money if they suspect you owe taxes on it.

2. Not having an accounting system

Making a lot of money as a freelancer can also increase your tax liability. If you don't have a good system in place to track all of your income and expenses, you could end up paying more (or less) taxes than you're supposed to.

Charleen Fariselli is a CPA who has worked with small businesses for over 10 years. She says that freelancers who don't accurately track income and expenses are at a disadvantage. "This affects their taxes because they don't have a good accounting system and are often losing deductions so they pay more in tax," she says.

Charleen also adds that a lack of a good accounting system can have an impact on making timely, accurate tax payments: "These freelancers can't calculate what their taxable income is each quarter for making tax payments, so they over or underpay, if they pay at all."

The good news is that there are many accounting software options out there to help you organize your books, including QuickBooks, Xero, Wave, and Freshbooks. You can also use a simple Google Sheets document. (See also: 5 Free Accounting Tools for Freelancers)

3. Mixing business with pleasure

One of the worst things a freelancer can do is allow their business expenses and income to spill over into their personal finances. For example, a business owner may use a business credit or debit card to cover a personal expense like purchasing groceries for their family.

The biggest problem with this behavior is how it affects record keeping for tax filing purposes. Joshua Zimmelman of Westwood Tax & Consulting says that bad record keeping can cause confusion for freelancers at tax time. "Too many freelancers miss out on deductions because their finances are not organized," he says. "Separating your expenses from the start makes filing your tax return so much easier."

If you need help keeping your personal and business finances separate, you can opt for a business checking account or credit card. You could also use both.

If you do have to use money from your business dealings to cover personal expenses or vice versa, make sure you keep a record of such transfers. A small business CPA can help you categorize (loan, owner draw, paycheck, etc.) the transactions so that you don't run into problems with record keeping or tax liabilities. (See also: The 5 Biggest Mistakes Freelancers Make)

4. Neglecting retirement savings

The freelance life can be a roller-coaster ride of feast or famine, but it's still important to keep savings in the equation — especially retirement savings. Saving for retirement is not only critical for your golden years, but can also help you save on taxes.

When you put money away for retirement, it reduces the amount of your income tax withholding. Joanna Zarach is a consultant who helps freelancers plan for retirement. She says, "Solo retirement plans are the most effective way to lower your tax bill now and to build tax-free growth in your investment accounts."

There are different options to save for retirement. Some smart options include:

Individual 401(k): This type of account is ideal for solopreneurs who want higher contribution limits. You can save with pretax dollars while receiving tax deductions for employer contributions (you are the employer) as well.
SEP IRA: Tax-deductible contributions are made by the employer (in this case, you). Growth is tax-deferred until withdrawal.
ROTH IRA: With this type of retirement account, you save after-tax income that grows tax-free forever.

5. Neglecting health care contributions

Paul Jacobs is a CPA, EA, and officer at Palisades Hudson Financial Group. He says he often sees freelancers, "Forgetting to deduct health insurance premiums. A great tax break that is available to the self-employed is the ability to deduct this expense."

As a small-business owner, there are tax benefits when you pay insurance premiums for yourself and family members. Premiums for medical, dental and, in some cases, long-term health insurance qualify.

Reporting these premiums on your taxes can reduce your adjusted gross income (AGI) which can make you eligible for certain tax breaks. The only caveat here is that you may now have to itemize deductions in order to take advantage of this deduction come tax time due to the recent Tax Cuts and Jobs Acts of 2017.

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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:

6 Questions All Rookie Investors Should Ask

Matt Bell — Tue, 06 Feb 2018 09:30:08 +0000

The first time you got behind the wheel of a car, you were probably a little intimidated. The same can be true if you're just getting started with investing. Here are some questions that may be on your mind, along with answers designed to help you begin your investing journey with the knowledge you need to succeed.

1. Why should I invest?

Especially if you're young, investing might not seem very urgent. Investment goals, such as retirement, may seem distant and vague.

The financial services industry has tried everything to get people to recognize the importance of investing for retirement, even using photo-enhancing software to show young people what they may look like when they're 65 or 70. A 2012 Merrill Edge study actually found the tactic somewhat effective in motivating people to save more for their later years.

Assuming you don't have access to such technology, maybe the best way to find the motivation to invest is to consider the cost of waiting. Crunching the numbers just may be the wake-up call you need.

2. What's the harm in holding off a little while?

The sooner you start investing, the less you'll have to invest each month in order to meet your goals.

Let's say you're 25 years old, plan to retire at age 70, and want to accumulate $1 million by then. Assuming a 7 percent average annual return, you would need to invest about $275 per month. Even waiting just five years will significantly increase that amount. Starting at age 30, you would need to invest about $361 per month in order to accumulate $1 million by age 70.

Here's another way to think about it. If you invested $200 per month from age 25 until age 70 and generated an average annual return of 7 percent, you'd end up with about $733,804. Wait until age 30 to start investing $200 per month, and you'll end up with $512,663.

That's amazing, isn't it? By investing for just five fewer years, you will invest just $12,000 less than if you had started at age 25. And yet, because of the power of compounding — more accurately, because of missing out on five years' worth of the power of compounding — you'll end up with about $221,000 less. That's a huge penalty for waiting. (See also: 11 Investing Tips You Wish You Could Tell Your Younger Self)

3. How much should I invest?

To get a general sense about how much to invest each month, use the Fidelity Retirement Score calculator. Once you run some initial numbers, you'll be able to see how changing some of your variables, such as how much to invest and when to retire, will impact your how much money you end up with.

4. Should I use my company's 401(k) plan or an IRA?

The key to answering this question is whether your employer offers a match on some of the money you would contribute to its 401(k) plan. If so, start there.

In a typical arrangement, an employer will match your contributions up to 6 percent of your salary. If yours will contribute a dollar for every dollar you put in, that's a guaranteed 100 percent return on your money. If it will match 50 cents for every dollar you contribute, that's a guaranteed 50 percent return on your money. Don't miss out.

If your employer doesn't offer a match, the decision depends on the investment options it offers. There are still some employers whose plans contain a strange mix of mutual funds with high fees (you should not be limited to funds with "expense ratios" higher than 1 percent). If that's the case with your employer's plan, you may be better off using an IRA. However, even with a solid 401(k) plan at your disposal, don't think an IRA isn't for you. Contributing to both plans can give you a further leg up in your retirement savings strategy. (See also: 401(k) or IRA? You Need Both)

5. What should I invest in?

It used to be a lot more complicated and intimidating to figure out what investments to make. Today, target-date funds have simplified the process. By choosing a single mutual fund that has the year of your intended retirement date as part of its name, such as the Fidelity Freedom 2040 Fund, you'll gain a portfolio that's diversified across stocks, bonds, and other asset classes in a way that's appropriate for someone your age. As you get older, the fund will automatically adjust its investment mix, becoming more conservative as you near your target retirement date. (See also: What You Need to Know About the Easiest Way to Save for Retirement)

6. What can I expect from my investments?

In short, you can expect that the ride will not always be smooth. Last year, the S&P 500 generated a nearly 22 percent return, but in 2008 it fell 37 percent.

Investing always comes with risk, and there's no way to predict how each year will turn out. A solid approach is to build a diversified portfolio, perhaps through a target-date fund, and commit to staying with it in good years and bad.

The longer you stay invested, the better your odds of success. As Morningstar documented in its 2017 Fundamentals for Investors report, from 1926 through 2016, 74 percent of one-year returns from the U.S. stock market were positive, 86 percent of five-year returns were positive, and 100 percent of 15-year returns were positive.

As with so many things, the best way to learn about investing is to get started. Taking the steps described above should get you moving in the right direction.

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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:

4 Things You Should Make Your Adult Child Pay For

Toni Husbands — Thu, 25 Jan 2018 09:30:10 +0000

The USDA estimates that a child born in 2015 will cost their parents $233,610 by their 18th birthday. This staggering number is based on two-income, middle-class households and accounts for shelter, food, and other child-related expenses. It does not include college.

Parents expecting a clean break at age 18 might be in for another costly surprise. NerdWallet recently commissioned a study which found that 80 percent of parents with adult children are chipping in with financial support. This support could be costing them up to $227,000 in retirement savings.

Parents are paying for big-ticket items like tuition and student loans, as well as routine bills like cellphone payments and car insurance. To pay or not to pay? That is an ongoing question. Before deciding whether or not to take on an expense for your adult child, you should consider two questions.

Can you afford it?

First, can you afford the cost? Think not only of the monthly payment, but the entire financial obligation. If you have to take on debt to support your adult child's lifestyle, chances are you can't afford to help. Let your cash guide your decision.

Are you really helping?

Next, will paying their bills actually help your child? Covering an adult child's living expenses can teach a destructive lesson. Parents should consider whether the financial support is helping or hindering their child's growth. There may be other, long-lasting ways to support your kid that don't stunt their independence or zero out your savings.

What they should pay for

As a parent, I know there is an undeniable drive to take care of our children and smooth the rough patches. I imagine that never goes away. But, we must balance our desire to help our kids with the necessity of teaching them financial independence and maintaining our own financial security. We can help strike that match by making our adult kids pay for the following things. (See also: Are You Ruining Your Retirement by Spoiling Your Kids?)

Cellphones and service

Paying for an adult child's cellphone bill will cost you $1,200 in lost retirement savings in just one year, according to the NerdWallet study. Bump that up to five years, and you're missing out on over $5,300 in savings.

A cellphone business model is a perfect tool to help your young adults learn responsibility and understand the consequences of missing a payment. Not only will the service become unavailable, but their friends will know they didn't pay their bill. Avoiding public shame can be a huge motivator.

Rent and housing expenses

If adult children cannot afford to pay their living expenses, parents should step back. Suggest they find a roommate, move to a less expensive location, or move in with family. Sometimes life throws a curveball, and a move back home with parents is necessary.

Paying for ongoing living expenses only allows adult children to avoid facing their financial realities, and it will seriously dent your retirement savings. One year of support alone will cost you over $16,000. If this trend continues, you could miss out on more than $75,000 over five years. Help your child stand on their own two feet and keep your retirement plan on track.

Direct PLUS loans (and other student loans)

A Direct PLUS loan is an unsubsidized loan for the parents of dependent students. Taking out one of these loans to help fund your child's expensive college tuition and expenses is a bad idea.

If you've exhausted all funding sources and still need to rely on a PLUS loan, it's time for your child to consider a more affordable education alternative. Direct PLUS loans are not awarded based on the borrower's ability to repay. Parents can easily find themselves overwhelmed with large bills exactly when they need to be more focused on saving for retirement.

A 2015 study by the University of Southern California and the University of South Carolina found that parents borrow an average $21,000 for their children's college education, and more than 200,000 people are still paying these loans past retirement age. According to NerdWallet, helping adult children repay student loans costs parents $80,000 in savings. It's time to pass that bill on to your child.

Credit card payments

If young adults are racking up excessive credit card debt, their parents may be tempted to swoop in, pay off some of those high-interest balances, and give their kids a fresh start.

Not so fast.

Paying this bill robs your child of the valuable lessons learned in digging themselves out of a financial hole. Whether they are forced to file bankruptcy and rebuild their credit, or make the sacrifices necessary to pay back the borrowed funds, that experience forces them to confront their irresponsible choices and contend with the related discomfort. Pain leaves lasting reminders.

Adults with parents who rescue them from the pain of poor decisions have no incentive to think through the consequences of their actions.

Adult children need our love, support, and encouragement. They don't need us to prop up their lifestyle or mute the consequences when they make unwise decisions. By not providing financial support indefinitely into adulthood, you're doing what's best for you both — now and in the future. (See also: 7 Money Conversations Parents Should Have With Their Adult Kids)

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

5 Ways to Make Long-Term Care More Affordable

Matt Bell — Wed, 13 Dec 2017 09:30:09 +0000

A long life can be both a blessing and a financial burden. As our health inevitably declines over time, medical expenses can skyrocket. What follows are several ideas for keeping later-life health care costs under control.

1. Save for health care like you save for retirement

It's common for people to save for their retirement. Far less common is the habit of saving for future health care costs. And yet, a growing number of people have access to a triple tax-advantaged way to do just that — a health savings account. If you have a high-deductible health insurance policy, that's you. (See also: How an HSA Could Help Your Retirement)

Money you contribute to such an account is tax-deductible, and assuming it's ultimately used for health care expenses, earnings and withdrawals are tax-free. If you don't spend all the money you contribute each year, the balance can be carried over from year to year. With some account providers enabling you to invest the money, you could build up quite a balance.

That money could be used to help pay health care costs in your later years, including some expenses for long-term care, whether provided in your home or a nursing home. The money also could be used to pay the premiums for Medicare Parts A, B, C, and D, and at least a portion of long-term care insurance (LTCI) premiums.

2. Don't over-save

Headlines about later life health care costs can strike fear into your heart and wallet. According to a recent Fidelity Benefits Consulting study, a 65-year-old couple retiring in 2017 will need $275,000 to cover their health care costs throughout retirement — up from $260,000 for couples retiring in 2016. And that's just for normal older age health care; it doesn't include the cost of long-term care.

But let's take a look past the headlines. Assuming a 20-year retirement, $275,000 works out to $1,146 per month. While people's health care costs vary widely, $1,146 is less than some families pay right now for high-deductible health insurance premiums plus monthly contributions to a health savings account.

Instead of relying on headlines about average health care costs, estimate your later-life health care costs to make sure you aren't obsessively over-saving out of fear. You can go a long way toward that by getting some Medicare estimates. Pairing an Original Medicare plan with a Medigap policy or choosing a Medicare Advantage plan can take away a lot of uncertainty regarding out-of-pocket costs for deductibles and copays.

3. Purchase some long-term care coverage

One of the main reasons people end up in nursing homes is dementia, and one of the primary risk factors for getting dementia is a family history. If your parents or grandparents had it, it may be wise for you to pick up at least some long-term care insurance coverage.

Just keep in mind that buying a long-term care insurance policy is not an all or nothing proposition. You could opt for enough coverage to take the sting out of long-term care costs, while still keeping your premiums manageable.

Choosing a longer elimination period (how many days you have to be in a nursing home before benefits begin) will lower the cost of the policy. Other ways to save include opting for a lower daily benefit, a lower maximum benefit period (compare the costs of one, three, and five years as opposed to lifetime coverage), and doing so without inflation protection. (See also: Is Long Term Care Insurance Worth It?)

4. Buy a deferred annuity

The risk of getting Alzheimer's disease goes up with age. According to the Alzheimer's Association, 3 percent of people between ages 65 and 74 have the disease, whereas 32 percent of those over age 85 have it.

One way to manage the financial risk of an age-related disease such as Alzheimer's is to purchase an advanced-life deferred annuity. With this product, you pay a relatively small lump sum premium now in order to secure a guaranteed monthly benefit down the road. For example, a 65-year-old may be able to pay $10,000 now in order to receive $575 per month beginning at age 80. By comparison, if a 65-year-old wanted that much per month right now via an immediate annuity, he or she may have to pay $100,000.

5. Move closer to adult children

One more idea for keeping long-term care costs down is to live near or with your adult children during your retirement, assuming they are in a position (and are willing) to help you. Living close to a caring relative can lessen your dependence on — and the cost of — outside help for long-term care.

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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:

The U.S. Savings Rate Has Tanked — Here's Why That Matters

Dan Rafter — Tue, 21 Nov 2017 09:30:10 +0000

Are you stashing away fewer dollars in your retirement or savings accounts? You're not alone.

The U.S. Bureau of Economic Analysis reported that Americans are saving less money today than they have at anytime since 2007. The bureau reported that the U.S. savings rate fell to 3.1 percent in September 2017. That's the lowest it's been since this rate fell to 3 percent in December of 2007.

If you recall, 2007 wasn't a great economic time for the United States. It was the beginning stages of the housing crash and the Great Recession. This prompts the question: Is the low savings rate a warning sign that the national economy might be in line for a slowdown? And why are people saving less?

A lower savings rate could mean a few things

The lower savings rate might mean that consumers are more confident in the economy. Instead of putting their dollars in traditional savings vehicles, people are investing more in the stock market and other assets. That happens when the economy is strong and investors think they can realize stronger returns.

At the same time, consumers were spending more. The same report from the Bureau of Economic Analysis found that consumer spending rose 1 percent in September. That jump is the biggest since 2009.

Again, this could be an indicator that consumers are more confident in the national economy. But, it could also be a worrisome trend. The drop in the savings rate at the same time that spending is up might be a sign that Americans aren't necessarily earning more, but are spending more at the expense of their savings. This trend is a dangerous one, as it can put more people in financial trouble down the line.

Keeping your savings up to speed

Of course, you can't worry about what people across the country are doing. You can, though, take a look at your own finances to determine if you are saving enough money. Exactly how much should you be saving? That's a complicated question, but a few rules of thumb can guide you in the right direction.

Emergency fund

You should have an emergency fund in a low-risk savings account that you can use to pay for unexpected repairs or financial emergencies. Financial experts recommend that you have at least six to 12 months' worth of daily living expenses saved in an emergency fund. That figure might sound intimidating, but if you start saving just a bit now, your emergency fund can grow quickly. If you save $100 a month, for instance, you'll have $1,200 saved after a year. Boost that figure to $300 a month, and you'll have a financial cushion with $3,600 in it by the end of a year. (See also: 7 Easy Ways to Build an Emergency Fund From $0)

Retirement savings

How much you need for retirement varies depending on a host of factors; everything from what kind of retirement you want — one that involves a lot of traveling will cost more than one in which you spend most of your time golfing or fishing — and how much income you'll be earning each month.

As a general rule, financial experts recommend that you save 10 to 15 percent of your income each year for retirement starting in your 20s. If you hit this goal every year, you should be able to build a solid nest egg for your post-work years.

The challenge, though, is that this is such a general approach to retirement savings. It doesn't take into account the vagaries of your own financial situation. You might not have to save as much if you have royalty income, you plan to work part-time after leaving your full-time job, or you have inheritance money to rely on.

The best advice is to max out contributions to an IRA and/or 401(k) account. Then meet with a certified financial planner who can study your current financial situation to determine if you are on pace to meet your retirement goals. (See also: 10 Signs You Aren't Saving Enough for Retirement)

And about that national savings rate? Just because some Americans are spending more and saving less doesn't mean you have to follow the trend. Stick to your savings goals if you want to enjoy a lower-stress financial life.

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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:

Your Good Credit Doesn't Mean You Have Good Money Habits

Dan Rafter — Thu, 12 Oct 2017 09:00:06 +0000

Your credit score is great. You have no trouble qualifying for auto or mortgage loans. Credit card providers stuff your mailbox with offers for rewards-laden cards. You're obviously practicing good money habits, right?

Not necessarily. It is possible to have a high credit score while still struggling with bad financial habits. Don't let your solid score blind you to these key money mistakes that could cause you financial pain.

Carrying a balance on your credit card

If you charge items on your credit cards each month and make at least your minimum required monthly payments, that will boost your credit score. And if you have high enough credit limits, carrying a moderate balance on your credit cards each month won't drag your score down too much.

But carrying a balance on a credit card, even if it isn't preventing you from having a high credit score, is a big financial mistake. It's not unusual for cards to come with interest rates of 17 percent, 18 percent, or even 20 percent. If you carry a balance on your cards from month to month, those high rates can cause your credit card debt to soar.

The better move? Only charge what you can afford to pay back in full each month. That will help maintain your good credit score without leaving you with an ever-growing pile of credit card debt. (See also: The Fastest Method to Eliminate Credit Card Debt)

You're not saving anything

Maybe you pay all of your bills on time. Maybe you don't have any credit card debt at all. But if you don't have any savings, that's not a good financial sign.

How much you've saved, or haven't saved, doesn't impact your credit score. Whether you have $20,000 in a savings account or $100, your credit score won't budge either way. It's important to have a strong credit score and to pay your bills on time, of course. But not having any money leftover to build a savings is a bad money move. (See also: 4 Easy-to-Fix Reasons Your Savings Account Isn't Growing)

You've never built an emergency fund

An emergency fund is a bit like having savings; only with this kind of fund, you're saving money, usually in a low-risk savings account, specifically to cover unexpected financial emergencies. That way, if you suddenly must shell out thousands of dollars to repair your car, you won't have to resort to charging this expense on a credit card. You can take the funds out of your emergency fund instead.

Also like savings, you can have a high credit score and no emergency fund. Having a high credit score is no excuse for not building this financial safety net. (See also: How to Balance Saving for Retirement, Emergency Fund, and Paying Off Debt)

You're way behind on saving for retirement

It's possible to enter your golden years with a stellar credit score but no money saved for retirement. That's because the amount of money you've socked away in an IRA or 401(k) plan is not factored into your credit score.

Don't let your strong credit score, and your easy access to loans and strong credit cards, blind you to the fact that you're not saving enough for retirement. It's nice to have a good credit score after you've left the working world, but that score won't mean much if you can't afford to pay your bills. (See also: How Much Should You Have Saved for Retirement by 30? 40? 50?)

You're struggling to pay the bills each month

You might never miss a utility bill, mortgage payment, or auto payment. But what if covering these bills each month is a constant financial struggle? What if you never have enough money left over to invest or deposit into an emergency or retirement fund? Your credit score won't suffer, but your financial health is a different story. (See also: How to Escape the Paycheck-to-Paycheck Cycle)

Again, it's easy to let a high credit score trick you into thinking you're in solid financial shape. But if paying the bills is a tightrope act each month, your high credit score is merely hiding deeper financial problems. One unexpected financial hiccup — such as a blown hot water heater or leaking roof — could suddenly set you back. And then you might not be able to cover every bill when the due dates arrive. (See also: Pay These 6 Bills First When Money Is Tight)

The key is to focus on both increasing your savings while continuing to take the steps that have led you to a solid credit score. Cut back on your optional spending to start building savings and an emergency fund. Open a 401(k) plan or an IRA to start saving for retirement. Even saving a little each month is better than doing nothing.

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

6 Money Problems Our Grandparents Never Had

Sarah Winfrey — Mon, 21 Aug 2017 08:31:10 +0000

Life has changed quite a bit over the past 75 years. Sometimes, it's hard for us to think about what life was like for our grandparents and great-grandparents all those years ago. This can be especially true when it comes to money.

Financial problems are not immune to changing times. As the times have changed, so have the issues and challenges we've had to deal with. While our grandparents and great-grandparents surely had their share of financial problems, there are some they simply never had to face.

1. Online identity theft

Identity theft has been around as long as there have been identities to steal. But, since our grandparents didn't have the internet (at least until they were much older), identity theft was not as big of a concern as it is today. Since information wasn't digital, no one could hack into a database to steal credit card numbers, Social Security data, and other personal identification details. Our grandparents didn't have to peruse their credit reports for cards, loans, and other lines of credit that had been fraudulently taken out in their names.

Today, we have to be proactive about protecting ourselves from fraud. According to a recent study by Javelin Strategy & Research, 6.5 percent of consumers experienced identity fraud in 2016, a number that continues to rise every year. The same report from the previous year found the average incident cost was $1,585.

Though our financial institutions are looking out for us, we have to be wary about where we use our credit cards online, and we have to pull those yearly credit reports, just in case. Every year, we have to deal with the potential for tax fraud, and we must constantly weigh whether it's worthwhile to share our information online in return for whatever goods and services we are getting in exchange. (See also: 18 Surprising Ways Your Identity Can Be Stolen)

2. Credit cards

Our grandparents and great-grandparents simply didn't have or use credit cards in anywhere near the same capacity as we do today. For the most part, their mentality was this: Either they had the money to buy what they needed, or they didn't. If they didn't, they simply went without. This straightforward approach to money meant they were probably better at budgeting than many of us are today.

Now, according to the Federal Reserve, 70 percent of Americans have at least one credit card, with the average being 2.6 cards according to Gallup. In houses that carry credit card debt, a NerdWallet study found the average amount to be a whopping $16,425 as of 2017. As a nation, that's a grand total of $764 billion that we owe on our cards. (See also: The Fastest Way to Pay Off $10,000 in Credit Card Debt)

Our grandparents didn't have to deal with credit card debt, but they also missed out on many of the benefits of credit cards, like points, miles, and cash back programs. (See also: 14 Awesome Credit Card Perks You Didn't Know About)

3. Student loans

The first federal student loans in the United States were offered in 1958, under the National Defense Act. The institution of student loans simply missed most of our grandparents' generation. Now, according to Student Loan Hero, 44.2 million Americans are dealing with student loan debt, and repayment is so difficult that it is a crisis for many people.

In homes that carry student loan debt, NerdWallet found the average amount owed is over $50,000. Since 1985, inflation has seen the cost of college fees and tuition rise by nearly 500 percent. It's no wonder we have to take out loans to pay for school.

While our grandparents didn't have to deal with these enormous student loans, there was a trade-off: They also found it much harder to go to college. Loans today make it easier for people to get the education they want or need to pursue their dreams, so we have more educational opportunities than our grandparents did. But, that opportunity comes at a steep price. (See also: 7 Unique Ways Millennials Are Dealing With Student Loan Debt)

4. High health care costs

Getting quality medical care didn't always cost as much as it does now. In 1958, the average person spent $134 per year on health care costs (and many of our grandparents were born before that, when costs were even lower). Even if you adjust for inflation, that's only around $830 by today's standards. In 2016, the average person spent $10,345 dollars on health care. That's a massive leap.

It shouldn't be a surprise that health insurance is a huge debate in our country, because most people can't afford this much out of pocket. Health care costs have gone up for many reasons, including the advancement (and expense!) of technology, the high cost of becoming a doctor, and the drain of long hospital stays and drawn out illnesses. Our grandparents and great-grandparents may not have had such high health care costs, but again, there was a trade-off: They also didn't have access to the advanced technology and treatments that we have today. (See also: The One Question You Need to Answer to Choose the Best Plan on the Health Care Marketplace)

5. Saving for retirement

In our grandparents' day, many jobs came with pensions. You worked a certain number of years, or until you reached a certain age, and the company let you retire with plenty of money to live out the rest of your life. It wasn't up to you to figure out a 401(k), the various types of IRAs, and more. Instead, you invested in a company, and that company took care of you when you left the working world. (See also: If You're Lucky Enough to Receive a Pension, Here Are 6 Things You Need to Do)

Now, we have to invest for ourselves, because pensions are disappearing. According to the Bureau of Labor Statistics, in 1990, 42 percent of private industry employees who worked full-time had a pension. By 2012, that number was down to 22 percent. And it's still falling. Companies aren't looking out for our retirement anymore, so we have to do it ourselves.

While pensions had many perks, they didn't give workers the flexibility that we have today in planning for retirement. Now, we can choose how to invest our retirement savings, and exactly how much we put into those accounts. Although funding our retirement takes a lot more work these days, we at least have the benefit of more control and flexibility with our savings. (See also: 4 Retirement "Rules of Thumb" That Actually Work)

6. Rising food costs

Things cost more now than they did in our grandparents' day. While we also make more money than they did, it's not enough to keep up with the rising cost of everyday life. Since 2003, food and drink costs have risen by 36 percent. Our earnings, on the other hand, have only gone up 28 percent.

A dozen eggs only cost $0.60 in 1950. By 2010, that cost was $1.79 per dozen, and it's only getting higher. Sure, that's one small item. However, when you multiply that by all of your groceries, that's a significant change between the prices our grandparents paid and the ones we pay now.

The silver lining to those rising food costs is that we now have many more options in where and how we purchase groceries, which gives us a chance to find the best deals. Apart from the grocery store, you can do a cost comparison with your local farmers market or wholesale retailer, like Costco. Recent years have also seen a boom in community-supported agriculture (CSA) shares, in which you receive farm-fresh, seasonal produce (and sometimes dairy!) for a fraction of what you'd pay at the store. Today, you can even save money by having your groceries delivered right to your doorstep. (See also: 10 Affordable Alternatives to the Grocery Store)

We also have more ways to find savings on those rising food costs. Apart from good, old-fashioned coupon clipping, there are numerous apps and websites (such as Ibotta, SavingStar, and Checkout 51) that offer stellar deals and cash back on grocery purchases. (See also: The 8 Shopping Apps That'll Actually Save You Money)

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

Are You Ruining Your Retirement by Spoiling Your Kids?

Dan Rafter — Tue, 15 Aug 2017 08:00:06 +0000

It's true that most parents would do anything for their kids, and giving them money is no exception. Parents are all too willing to hurt their own financial health to provide a more comfortable life for their children.

When parents spend too much on their children, they can easily damage their own chance of enjoying a stable retirement. The best approach is to help your children when they need financial assistance, but be wary of providing so much help that you're hurting your own financial picture. That could, in turn, make you a financial burden on your children in the future.

Nearly half of Americans say they risk their retirement to help their children

Parents aren't shy about extending financial assistance to their children and family members. A 2017 report from Merrill Lynch and Age Wave, Finances in Retirement: New Challenges, New Solutions, found that 48 percent of Americans age 50 years and older are willing to overextend themselves financially to provide their children with a more comfortable life.

The survey also found that 60 percent of these respondents would delay their retirement, and 40 percent would return to the working world after retiring, if they needed to provide extra financial support to family members. In fact, the majority of respondents had provided financial support in the past year, for an average amount of $6,500.

There's nothing wrong with helping a family member in need, of course. The problems begin when parents give so much to their children and other relatives that they run the risk of not having enough for their own retirement.

It starts with college tuition

Many parents really begin to hurt themselves financially when their children are ready to attend college. They do this by spending too much of their own money to help pay for their children's education, often dipping into their retirement savings or putting off saving completely.

This isn't surprising, given the high tuition rates at colleges across the country. The College Board reported that the average cost of tuition and fees for the 2016–2017 school year was $9,650 for state residents at public colleges, and $33,480 for private colleges — not including the cost of room and board.

It's easy for parents to overextend themselves to help their children pay for their college education, but doing so can only hurt parents in the long run. It's important for parents to continue saving for retirement, even if that means they can't give as much money as they'd like to help their children through college. There are loans for college, but not for retirement. (See also: 3 Reasons Not to Save for Your Child's College Fund)

Restraint is key

This is important: Parents can help their children financially, but they are under no obligation to ruin their own finances doing so. It's difficult for parents to do, but sometimes the best answer to an adult child asking for extra money is to say, "No."

If you're wondering if you are giving your children or other family members too much money, take a close look at your own finances. Are you on track to meet your retirement goals? Are you struggling to make all your monthly payments on time? Are you running up credit card debt too quickly?

If so, you might need to be less generous with your family members. The Merrill Lynch study said that adults should work with their children and family members to provide them with a financial education that will help them make better money decisions. They should also encourage their children to attend more affordable state schools rather than private colleges.

Keep in mind how much money you can afford to give or loan to family members without compromising your own retirement. After all, you don't want to become a financial burden to your children in the future by spending too much today.

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It's Never Too Late to Fix These 5 Money Mistakes From Your Past

Emily Guy Birken — Fri, 31 Mar 2017 09:00:15 +0000

Making mistakes is part of life, and this is particularly true when it comes to finance. Since money is such a taboo topic in our culture, we often have to learn good money behavior through trial and error.

The problem is that our culture also considers errors as something to regret, rather than opportunities to learn. This can land us in a shame-filled cycle of inaction.

Forgiving yourself for financial mistakes is not the same as condoning or ignoring them. It's simply giving yourself the opportunity to move on from the past. Stop beating yourself up over these common youthful money mistakes and take action to fix them instead.

1. Taking on too much student debt

Taking out a student loan has become the default method for the majority of college students to pay for their education. According to a 2016 Market Watch report, "about 40 million Americans hold student loans and about 70 percent of bachelor's degree recipients graduate with debt."

With the near ubiquity of student loans, however, comes the problem of students taking on more debt than they need or can comfortably pay off once they graduate. Student loans can feel like an easy way to pay for more school than you can afford, or even a way to fund things you don't really need, like your own apartment or spring break vacations.

This can be exacerbated by the fact that college students and their parents don't always completely understand the differences between types of student loans, which can leave them all the more susceptible to overwhelming debt.

How to fix it

If you are kicking yourself for running up a student loan tab that you can't afford, start your journey to self-forgiveness by investigating your repayment options. The first step is to call your lender and explain the situation. If you have federal student loans, you may be eligible for a modification of your repayment plan based on your income. Even if you have private loans, talking with your lender can let you know what options are available that will give you more breathing room.

Once you have made whatever changes you can to your repayment plan, then take the time to write down everything you got for the money you borrowed. For instance, in addition to your education, you might list the friends and connections you made at college, the experiences you had, the insights you gained about yourself and your area of study, and the way the loans allowed you to focus on college instead of tuition.

This exercise will give you a chance to feel gratitude for the loans. You are now the beneficiary of your younger self's choices — both the good and the bad. Recognizing all of the benefits you got from your student loans will help you move from being angry at yourself, to looking at your current loan payments as a gift to your younger self.

2. Not budgeting or building an emergency fund

I don't know a single person who did not immediately begin spending money hand over fist after landing their first well-paid job. That means anything from immediately purchasing an expensive car to relying on restaurants for meals rather than cooking. Even people who carefully budget their money when working for low salaries have a tendency to start making it rain as soon as their paychecks get bigger.

This can cause problems in two ways. Sometimes, the good salary doesn't last forever because of a layoff or other change in your financial circumstances. And sometimes, you keep making good money, but your lifestyle continues to inflate — which means you can never seem to get ahead.

In either case, the lack of a budget and an emergency fund means that a financial blow can turn into a crisis, leaving you cursing yourself for every unnecessary purchase you made when the money was good.

How to fix it

Budgeting may be the last thing on your mind when the lack of money hits the fan, but creating a budget is exactly what you need to do in an emergency. Don't waste your time beating yourself up for the spending choices you made before the financial crisis — just sit down with your bank statements, credit card accounts, and bills, and figure out your income and outflow. Learning to budget in the middle of a crisis might be painful, but it will ultimately help you feel in control of your money.

Once you have a budget system in place, it's time to start looking back on your spending habits. What did you buy that you now regret? Why do you regret it? Do you feel regret now only because an emergency came up and you didn't have the funds, or do you actually feel the purchase itself added nothing to your life? If you truly regret the purchase, why did you make it?

It can hurt to ask yourself these questions, which is why it is important to regard your past purchases with curiosity and compassion, rather than guilt or anger at yourself. But once you have answered these questions, you will have a better understanding of why you made those unnecessary purchases — which will help you avoid the same spending traps in the future. Understanding the reasons behind your bad money habits can help you develop financial mindfulness to make better choices going forward.

3. Not saving for retirement

Most people don't think to start putting money aside for retirement when they are young. In your 20s and 30s, not only does retirement seem too far away to worry about, but you've got plenty of competing needs that seem more important.

Of course, if you read any advice on retirement, it's clear that saving as much money as you can when you are young is the best route to a secure retirement. Unfortunately, this advice can feel like it's meant to shame anyone who didn't start funding their 401(k) on the day they started their first job. That's not helpful to late funders.

How to fix it

When it comes to retirement, we should all save early and save often. Unfortunately, financial advice tends to beat the "save early" drum so much that it's easy to believe that there is such a thing as "too old to start saving for retirement." But as long as you are bringing in an income, you can save for your retirement. Write down your future goals and your vision of retirement, so you can get excited about saving. Then you can let go of the anger at your younger self, and start putting money in your retirement accounts today, tomorrow, and beyond. (See also: 7 Retirement Planning Steps Late Starters Must Make)

4. Racking up credit card debt

I got my first credit card in college. Though I tried to pay off the bill every month, it got away from me pretty quickly. Sometime in my senior year of college, when I realized that there was no way I could pay off my bill, I made the decision to just let the debt rack up, since I'd have a good-paying job after graduation and could take care of it then.

Of course, after I graduated, I was unable to find a job for about three months, and the first job I did land was working retail for $8.25 an hour. My credit card debt crept up even more.

My youthful problems with credit card debt are incredibly common. When you get your first sweet taste of credit, it's pretty hard to stop using the plastic even when your budget can't handle your charges. The fact that you're not required to pay off the cringe-inducing full amount allows you to assume the problem will take care of itself, as I did.

Then, one day, you realize that you are in debt up to your eyeballs with nothing to show for it, and you are kicking yourself for your youthful credit card spending.

How to fix it

Start by recognizing the fact that humans are not wired to be able to handle the combination of instant gratification plus delayed payment. Young adults are particularly susceptible to this, which is the very reason why credit card companies have been banned from college campuses.

Once you recognize this, it becomes much easier to start digging yourself out of the hole. You can much more easily leave your credit cards at home and remove them from your favorite e-tailer sites when you realize the cost of their convenience. Sending extra money to your credit card each month also starts feeling like steps toward freedom. (See also: 5 Ways to Pay Off High Interest Credit Card Debt)

5. Buying too much car

Buying a new car for yourself can be one of the most satisfying moments in young adulthood. You can finally choose the car you want to drive, rather than making do with a beater or your parents' minivan. So it's very easy to go hog-wild when you're in a position to buy a new car. You can get the horsepower, or the luxury, or the bells-and-whistles you've always dreamed of having.

But the monthly payments end up being a bigger deal than they seemed when you were in the showroom, and your high-end car keeps needing expensive maintenance and insurance. When you realize how much you could have saved if you opted for that reliable low-key sedan instead, you want to kick your younger, flashy self.

How to fix it

Once you have forgiven yourself for putting too much emphasis (and money) on your car, you can start thinking more rationally about your transportation needs. If your vehicle is just a means to get from point A to point B, then what do you really need from it? What's the minimum that would be acceptable for your transportation?

Going through this thought exercise allows you to think about what you really need, and will help you do the research necessary to find the right car for your life. Then you can trade in your too-much car for something more appropriate, or drive something that meets your barest of needs until you have paid off the mistake of buying too much car.

And don't forget — you can always put some racing stripes on “Old Reliable” if you want it to represent you. Loving your car doesn't have to be expensive.

Let it go

Feeling shame over things you did in the past is a way of letting your mistakes continue to hurt you. Yes, you may have screwed up when you were younger and it might be hurting your bottom line right now. But you give that old mistake far more power over your future if you continue to beat yourself up for it instead of simply accepting it and doing what you can to bounce back from it. Step out of regret and into action today.

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

8 Money Moves to Make Before You Start Investing

Mikey Rox — Wed, 17 Aug 2016 09:00:08 +0000

I'm a staunch advocate for investing — especially if the alternative is piling up money in a savings account just to have "savings." Savings are great, but you only need so much in that offensively low-interest account. Put the excess to work, hopefully making even more money out of your investment. Before you take that plunge, however, there are a few financial matters you need to mind.

1. Organize Your Budget and Expenses

If you're considering making an investment — whatever it may be — you should have a solid handle on how much money is coming in and going out on a monthly basis. You want to make sure you can afford the investment without teetering on the edge of debt, but this also is a good time to find any weak spots in your budget so you can address them accordingly. Online money-tracking services like Mint.com can make this task much easier on you, and help you stay on track over the long term.

"When you know where your money goes, you are in control and can be thoughtful about aligning spending with priorities," says Carla Dearing CEO of SUM180, an online financial planning service. "Mint, for example, gives you complete access to your data through the website and your mobile device, whether you use iOS or Android. Better yet, Mint keeps an eye on your money for you. It even sends alerts to remind you to pay your bills or when you go over budget."

2. Get That Emergency Fund in Order — Stat!

In almost every "money moves" article I write, the "emergency fund" usually pops up somewhere. That's because it's a critical and indispensable part of your overall financial picture. You should have a sizable cushion in the bank to cover life's little mishaps, and that "should" becomes a "must" when you add investing to the equation. If you don't have an emergency fund, you have no business investing — bottom line.

Just how much dough are we talking for an emergency fund to be considered satisfactory? Six times your monthly expenses, according to Dearing.

"Be disciplined about saving a little every month until your emergency fund is where it needs to be, even if it means sacrificing little luxuries once in a while," she says. "Remember to replenish the account every time you use it. Having your cushion ready whenever you need it will give you a great sense of security and freedom. It will also free you up to work on other savings goals without getting derailed by unexpected expenses."

3. Pay Off Your High-Interest Debts

You don't need to be completely out of debt before you start investing. Many financial advisers argue that you should be debt free before you start investing, but that's just not true. Most people don't pay off their homes for up to 30 years, and you wouldn't want to wait that long before you start a retirement fund.

You should, however, pay off your high-interest debts. They'll drag you down faster than the Titanic.

"Whether it's a credit card or student loan, it doesn't make any sense to invest and make a market average return of 7% annually while you're paying 20% on credit debt," says Nick Braun, founder of a pet insurance company. "Pay off your high-interest debts first, then start using excess income to save for the future."

4. Contribute to Your Retirement Savings

Retirement savings is an investment. It may not seem like it now, because what you're funding seems so far away — but you'll see it as such when you reach retirement age. Which is why, before you start throwing money at other investment opportunities, you need to invest in yourself. If you don't have a retirement account set up yet, make that a priority. If you have one currently, like a 401K, for instance, take advantage of free, pretax contribution opportunities where available, like matching funds from your employer. Then max those contributions out so you don't miss a single cent.

5. Contribute to an HSA

If you have a health insurance policy that comes with a qualifying Health Savings Account, take full advantage of it and fully fund it.

"Most contributions are tax-deductible, and withdrawals to pay qualifying medical expenses — at any time in life — are tax-free," explains Kevin Gallegos, vice president of Freedom Financial Network in Phoenix. "These accounts are essentially emergency funds devoted to health care costs, and so savings have a double benefit of tax relief and savings."

6. Refinance Your Student Loans

Are student loans holding you back from building your savings or investment accounts or from making other types of investments? Free up some of your budget by refinancing your loans for a lower monthly payment.

"The average Class of 2016 graduate owes more than $37,000 in student loan debt," says financial expert Michael Blattman, professor at University of Maryland. "With 43 million borrowers nationwide, Americans owe nearly $1.3 trillion in student loan debt. Individually, this crushing debt delays borrowers' life decisions, such as getting married, investing in the stock market, buying a house, or having children. Collectively, it's hampering the U.S. economy."

You don't, however, have to be part of these statistics. Take back some of your financial freedom by making a call to your loan provider(s) to discuss refinance options that are right for you.

7. Get Started on a Taxable Investment Portfolio

After you've maxed out your retirement accounts, Dearing suggests starting a taxable investment portfolio. You can get started investing with just a few simple steps.

To get set up, call one of the high-quality, low-fee money management companies, like Vanguard, Fidelity, or T. Rowe Price, tell them about yourself, and ask them to tell you what type of account or fund you need, and what minimum investment requirements apply. These companies, which are the gold standard in the financial services industry, are extremely knowledgeable and committed to serving their clients (who, in the case of Vanguard, are also their shareholders).

"Companies like this get you started with a comprehensive, diversified, low-cost fund that will serve you well as a beginning investor," says Dearing. "Follow their recommendations and you won't go wrong."

8. Set Savings Goals for Your Taxable Investment Portfolio

Once you have your taxable investment portfolio established, set goals — $10,000, then $25,000 and, eventually, $100,000.

"When you are just starting out, choose one or two tax-advantaged funds, like the Vanguard Total Stock Market ETF or the Vanguard Small Cap Index ETF, or similar index funds," Dearing suggests. "These passively managed funds do a minimum amount of buying and selling — what the industry calls 'churning' — which translates into significantly less taxable investment income for you to deal with each year. They also tend to outperform most actively managed mutual funds over time."

Revisiting the goal aspect of this equation, it helps to have a contribution target in place so you have a solid idea of what you're trying to achieve. Likewise, make sure that it's a goal that you can achieve. $10,000 may take a while to reach, but you can do it. If that goal is too steep for you right now, start smaller. There's no harm in that. The most important part of this is that you set the bar just high enough to accomplish it and be motivated by your success to continuing striving further.

Do you have additional suggestions on money moves to make before investing? I'd love to hear your thoughts in the comments below.

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:

With Micro-Investing, Your Smartphone Pays YOU

Kat Tretina — Mon, 15 Aug 2016 10:00:07 +0000

Approximately two-thirds of Millennials do not have any money invested in the stock market due to concerns about risk, putting them at a distinct disadvantage when it comes to retirement. Without regular returns and compound interest, young professionals will need to sock away a much larger amount of money to retire.

But new, micro-investing apps can help Millennials dip their toes into the stock market. Because the invested amounts are small, and the apps make investing accessible, young adults are more likely to start contributing money and earning returns.

What Is Micro-Investing?

Micro-investing, where users invest tiny amounts of money on a regular basis, allows people to start investing with relatively small sums. Some brokerages have investment minimums as high as $1,000; for those just starting out or battling debt, coming up with that first $1,000 can be overwhelming.

With micro-investing, your account is linked to your debit card or bank account. Every time you make a purchase, such as your morning coffee, the apps round up the purchase and the difference is invested in stocks. While the amounts are negligible and you are likely not even going to notice the withdrawals from your account, small investments build over time and help you develop the habit of saving and investing.

These innovative apps and platforms make investing simple and easy to do, even if you are new to financial management.

Acorns

Acorns' name is derived from the saying "From little acorns mighty oaks grow." Its goal is to empower people to build a large nest egg from small, regular investments. The app links to any credit card or debit card. When you make a purchase, the app rounds up and deposits your change into a portfolio of exchange-traded funds (ETFs). There are different portfolios available depending on your risk tolerance, from conservative to aggressive. If you do not know where to begin, Acorns also provides recommendations based on your age and target retirement date. There are no minimum account balances or commission fees, but there is a monthly cost of $1 and a management fee of 0.5%.

Robin Hood

Robin Hood is one of the few apps that offers zero-commission stock trading. It features a simple and intuitive design and allows you to connect to your bank account and make recurring deposits. You can shop for specific stocks or sell shares directly from your phone. Each day, the menu will show you how much you have earned on the market. Once you are ready to withdrawal money, the funds are easily transferred to your bank with the touch of a button.

Stash

Stash is one of the newest apps on the market. Their motto is if you have $5, two minutes, and a phone, you can be an investor. It is a tool that allows you to buy fractional shares, rather than having to pay the entire amount for a single share yourself. You can pick investments based on what is important to you, such as clean energy or fair trade. Stash charges $1 a month with no commissions. Special offer: Wise Bread users can get $5 to get started with Stash!

For Millennials spooked by the stock market and traditional stock market investments, micro-investing apps can be a useful tool to help them test the waters and get used to regular investing. These apps enable users to start investing with just small amounts, eliminating one of the main barriers to entering the stock market. With regular contributions and patience, over time, these small amounts can grow to substantial amounts of money.

Are you a micro or macro investor?

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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:

13 Money Goals You Can Still Reach by 2017

Mikey Rox — Fri, 12 Aug 2016 09:00:08 +0000

We've passed the halfway point of 2016, and maybe you're down on yourself because you haven't achieved some of your annual financial goals. Life can sometimes derail our money-saving plans — and that can make you feel like a failure. But the year isn't over yet. So chin up, buttercup! It's never too late to give your money a makeover, like with these 13 money goals that are still attainable by 2017.

1. Increase Your Emergency Fund

Whether you want to increase your fund by $500 or $1,000, there's still time to build your bank account.

Ideally, you should have about three to six months' of income in reserves. If you're not in a position to save this much, aim for an emergency fund sufficient to help you get through most unexpected expenses, like a home or car repair. You'll have to make a few sacrifices, such as spending less on entertainment or shopping less, but with five months left in the year, you can hit this goal by saving $100 to $200 a month.

2. Start Planning for Retirement

Your retirement account isn't going to grow itself. The older we get, the more important it is to plan for the future. If you haven't started saving for retirement yet, now's the time to get serious. Talk to your employer about enrolling in the company's 401K plan. If this isn't an option, open an Individual Retirement Account (IRA) through your bank or with the help of a financial adviser.

3. Increase Retirement Contributions

Then again, maybe you're already saving for retirement, but feel now's the time to increase your contribution. Whether you're currently contributing 2% or 5% of your income to a retirement account, set a goal of increasing your contribution by at least 1% before the end of the year.

4. Reduce Expenses

It's easier to attain money goals when you reduce expenses and free up cash. For the next four to five months, eliminate or reduce at least one expense a month. This can include downgrading your cable package or getting rid of cable altogether (it's a common trend these days), using coupons to lower your grocery bill, or riding your bike or carpooling to work a few days a week to save on transportation costs. The savings add up quickly, and before you know it you'll have a bigger bank account.

5. Create a Second Income Stream

Our income isn't always enough to meet our money goals. Rather than complain about your situation, think creatively about ways to increase your income. Working a side hustle a few days a week can generate money to build your savings account, pay off debt, or start saving for retirement.

If you're an expert in your field, offer consulting on the side. Or if you have excellent writing skills, look into freelance writing opportunities and share your knowledge. Don't think your second income stream has to be glamorous, either. If you don't mind odd jobs or getting your hands dirty, you can make extra money around the neighborhood cleaning houses, doing handyman work, or cutting grass.

6. Give Up a Costly Habit

Bad habits are expensive.

Before the end of the year, make a concerted effort to eliminate at least one bad habit. This includes things like drinking too much alcohol and smoking, as well as habits that aren't as dangerous to your health but detrimental to your finances. Do you have a routine of stopping for coffee and breakfast every morning on the way to work? If you can eliminate this $5 daily purchase from your budget, you'll save about $25 a week, or $100 a month.

7. Simplify Your Life

Less can be more. If you're tired of clutter or feel the stuff you own takes too much of your time and energy, set a goal to simplify and unload a few possessions. Selling off items can put extra cash in your pocket, plus you can save money on storage fees and free up space in your house, garage, attic, or basement.

8. Give to Charity

It's not too late to make a charitable donation and give back. While you're simplifying and decluttering your life, consider donating a few items to your favorite organization. You'll not only help someone in need, you can write off charitable donations on your tax return and lower your tax bill.

9. Purchase Life Insurance

Life insurance is necessary for everyone, but especially for people with children and other dependents who rely on their income. A policy can cover the cost of a funeral and burial, plus pay off any expenses you leave behind, such as a mortgage and credit cards.

There are no hard-and-fast rules regarding the amount of coverage to purchase, but some money experts recommend a policy that's eight to 10 times your income. If you already have a policy, review your coverage to make sure it's adequate for your needs. If you don't have a policy, it's time to get one.

10. Budget Your Money

If you overspend every month and can't get ahead, the problem could be poor budgeting. The truth is, attaining many of your money goals by 2017 will require an airtight budget. You have to know what's coming in and what's going out before you can come up with a plan for your personal finances. Now's the time to put pen to paper and review your income and expenses to determine a reasonable amount to spend in various spending categories, such as food, transportation, entertainment, shopping, etc.

11. Say No to Credit Card Debt

Credit cards are simple and convenient, but they're also a source of pain and suffering if you let balances grow out of control. Before the end of the year, come up with a plan to pay off or pay down at least one credit card. Don't stop until you're debt free. (See also: How to Get Rid of Interest on Your Credit Card Debt)

You can achieve this goal by paying more than your minimums every month. Or negotiate a lower interest rate with your creditors so that more of monthly payments go toward reducing the principal. Since the amounts we owe make up 30% of our credit scores, paying off credit cards also increases your credit score.

12. Automate Your Finances

Paying bills on time also contributes to a higher credit score. Forgetting a due date and paying late can result in late fees, and when bills arrive 30 or more days past due, your credit score suffers. To avoid these situations, automate your finances. Set up automatic bill payments between your bank and creditors and you'll never miss another due date.

13. Check Your Credit Report

Everyone should check their credit reports at least once a year and dispute erroneous information. If it's been more than 12 months since you last reviewed your reports, visit AnnualCreditReport.com today and get a free copy of your reports from each of the three bureaus. Credit report mistakes and fraudulent activity can drive down your FICO score and trigger credit rejections and higher interest rates on loans and credit cards — and when you're charged higher interest rates, you pay more for credit.

What are some of your money goals that you'd like to reach by the end of the year? How do you plan to meet those goals? Let's discuss in the comments below.

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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: