Important Home Maintenance Tasks I Do Every Fall

September 26, 2018

Earlier this year I wrote about home maintenance tasks I do in the spring to keep our house running efficiently. I thought it an appropriate time to revisit this issue as we move into fall to point out some things I do to make sure the house is ready for winter.

One of things I love about living in Colorado is the four distinct seasons we experience. But the fluctuations in temperature and moisture can be hard on a house. Making sure things are set for the winter helps avoid costly issues that heavy snow and freezing temps can cause.

Here are some of the things on my fall to-do list to make sure we are set for the first snow:

Winterize the lawn

As the grass starts to turn dormant for the winter, I like to give it a good feeding in the later part of fall. This helps the grass green up better in the spring and is critical to maintaining a healthy lawn.

How I do it: I head to the local garden center and pick up a winterizing fertilizer. Then I like to mow first to pick up any leaves one last time before I apply the fertilizer. Make sure to water it in and you are all set for a healthy lawn come spring!

Store garden hoses

Make sure all hoses are removed from your outdoor faucets and empty of water. Leaving them attached increases the chances of water backing up into the pipes inside the exterior walls. If that water freezes, it can crack the faucet or pipes.

How I do it: I make sure all hoses are removed from outdoor faucets early in the fall just in case a sudden cold spell rolls through. I also store the hoses in the garage over the winter to lessen exposure to the elements and prolong the life of the hoses.

Drain the sprinkler system

Even sprinkler lines that are underground can freeze, so it is a good idea to make sure your sprinkler system is ready to go for winter before it is too late. Of course, make sure the controller is off and inside valves are shut down.

How I do it: I prefer to hire an irrigation professional to come in and drain our system. They will also blow out all the lines with an air compressor to make sure all the water is out. This usually costs around $75, but it is cheaper than having to replace burst lines and valves in the spring (or having to buy an air compressor)!

Clean the gutters

I do this in the spring too, but after all the trees drop their leaves, make sure to clean out those gutters for the winter. Rain and snow melt that doesn’t flow freely can freeze and cause pricey damage.

How I do it: I use a blower and my hands (with gloves) to make sure the gutters are clean. I also look for any damage or sagging that needs attention. If you see a lot of asphalt from your roof shingles, check out the roof while you’re up there to make sure it is in good repair. It’s important to mention safety here – using a leaf blower on the roof requires concentration and strength. If you have a steeply pitched roof or are at all concerned about being steady on your feet, hire a professional for this task.

Check and service your furnace

The middle of freezing temps in the winter is no time to find out that your furnace is on the fritz. Making sure everything is working before winter will keep your family comfortable and safe on those frigid winter days (and nights). Regular maintenance may also be required in order to keep any warranties valid on your HVAC system.

How I do it: I schedule an appointment with a heating and cooling company every year to inspect and service our heating system. It usually costs $70-$100 for them to come out to the house. I also make sure I change the filters every 60 days – I do this year-round. How often you change your filters depends on your household – my colleagues with multiple pets change theirs out more often.

Other things to consider

Much of this may depend on the climate you live in, but some other things to look at include:

Making sure there are no air leaks around doors and windows.
Check your chimney to ensure it is free of debris and animal nests.
Trim back plants and trees. Keep limbs and branches away from your house to avoid damage and excess moisture.

There you have it – another installment of our home maintenance series! Just like spring, looking after your home in the fall helps keep costs down and efficiency up.

How Your Employee Benefits Can Help You After A Natural Disaster

September 25, 2018

Have you recently been impacted by a natural disaster, such as Hurricane Florence or a fire out West? Employees in many parts of the country are reeling from the effects of Mother Nature’s wrath. If you’ve been affected by a natural disaster, you may be at a loss on where to turn to begin to recover or rebuild. Your employee benefits can offer some resources to help you:

Reach out to your Employee Assistance Program (EAP)

Your Employee Assistance Program (EAP) is the first place to start for online and 1 x 1 resources, including:

Housing challenges;
Help dealing with trauma or emotional effects of the disaster;
Legal guidance;
Child care or eldercare resources; and
Dealing with emergency financial problems, such as loss of income due to the disaster.

Call your Financial Helpline

If your company has a workplace financial wellness benefit, call your Financial Helpline or schedule an in-person consultation to review your situation with a financial coach. Your financial coach (like one of our CERTIFIED FINANCIAL PLANNERS™ or a financial counselor in your EAP program) can give you guidance on ways to:

Triage what bills to pay;
Handle your mortgage lender or creditors;
Manage a loss of income;
Deal with your insurance company;
Figure out if you should file for short term disability if you’ve been injured;
Weigh the pros and cons of taking unpaid leave under the Family Medical Leave Act; and
Determine whether you should take a 401(k) loan or hardship withdrawal.

Find an attorney through your legal benefit

If you have a legal benefit at work, this is a great place to find an attorney to help you navigate any legal issues like:

Disputes with your insurance company;
Problems encountered during rebuilding; or
Difficulties with your mortgage lender or landlord.

Open enrollment is coming up soon, so if you anticipate legal issues, consider enrolling in the voluntary legal benefit for next year – it is usually not expensive. If you don’t have a legal benefit at work, ask your EAP if they make legal referrals to an attorney.

Get extra PTO from employee time-off donations

If your home has been damaged, or you’ve been displaced, you will need time off to deal with this. Your company may offer emergency paid leave after a disaster, or access to PTO donated by fellow employees. Check with your HR department to see if your company has a supplemental Paid Time Off policy or a bank of employee time-off donations, and what the procedure is for applying.

File for short term disability

If you have been injured in the disaster, you may not be able to work while you are recovering. Check with your HR Department about your short term disability insurance benefits. Keep in mind that short term disability insurance often covers only 50-60 percent of your salary, so you will need to downsize your expenses while you are away from work.

Ask for unpaid leave under the Family and Medical Leave Act

If you need an extended period off to care for an injured family member or your own health issues, you may need to ask for unpaid leave under Family and Medical Leave Act (FMLA) of up to 12 work weeks. You’ll be required to use all your available PTO before the leave kicks in, as well as pay for your employee benefits, such as health insurance, during the period of leave.

Access a retirement plan loan or hardship withdrawal

If cash is tight because you’ve been displaced, as a last case scenario you may consider borrowing against your 401(k). In a worst case scenario, you would also be able to take a hardship withdrawal to make emergency repairs. Before you apply, make sure to talk through the pros and cons with a financial planner (see above) as there are downsides to this strategy. There may be alternatives if you need cash immediately.

Find emotional and health support through your wellness program

You may be so busy dealing with your enormous list of things to do that you have not taken time to process your emotional reaction to what happened. Check with your company’s wellness program to see what resources are available to you to help you cope, such as:

Support group for employees for dealing with the disaster;
Meditation and mindfulness;
Exercise and yoga; and
Health screenings.

Not sure where to start? Ask your HR Rep

If it’s all too much and you’re not sure where to start, call your HR Representative. They will be able to steer you in the right direction, and let you know what company resources are available to you.

3 Financial ‘Truths’ For Young People That Might Be Wrong

September 21, 2018

One of the things I most often hear from people about personal finance is how much they wish they had learned about it when they were younger. In talking to younger people, I do see a lot of awareness about the importance of financial wellness. Unfortunately, there are also a lot of myths and generalities circulating around about how young people should manage their money.

Here are three of the most common:

1. Common financial “truth” that might not be right for you: Focus on paying off your student loans early.

I get it. No one likes paying student loans and we’d all like the day to come as soon as possible when we no longer have to make those payments. However, student loans typically have relatively low interest rates (at least for undergrads) so any extra cash you have would probably be better off used to pay down higher interest debt like credit cards or invested for a greater expected rate of return (especially if you can get matching contributions in your employer’s retirement plan).

A good rule of thumb I suggest is to pay down debts early if the interest rate is above 6% since you may not earn as much by investing extra savings instead. If the interest rate is below 4%, you should probably just make the minimum payments since you can likely earn more by investing the extra money. If it’s between 4-6%, you can go either way depending on how comfortable you feel with debt vs. your risk tolerance with investing. (The more conservative you are, the more it makes sense to pay down debt vs investing.)

Alternatives to paying it off ASAP

So, what should you do with your student loans? First, see if you can refinance your debt to get a lower interest rate. (Just be careful about switching from government to private loans since you lose a number of benefits.) If the rate is low, you might even want to switch to an extended payment plan since the lower payments will free up savings you can use for other goals like saving for emergencies, buying a home or retirement. If the rate is high, try to pay it down early after building up an emergency fund, getting the full match in your retirement plan and paying down any higher interest debt.

2. Common financial “truth” that might not be right for you: Roth accounts are better for young people.

Unlike traditional pre-tax accounts, Roth accounts don’t give you any tax break now, but the earnings can grow to be withdrawn tax-free after age 59 ½ as long as you have the account at least 5 years. The argument here is that young people have more time to grow those tax-free earnings. They’re also early in their careers so they may be in a higher tax bracket in retirement.

Why you might not want to use Roth at this point

However, if you’re trying to save for emergencies or a home purchase and are just contributing to your retirement plan to get the match, you may want to make pre-tax contributions and use the tax savings for your other goals. Even if you’re focused on retirement rather than more immediate goals, a traditional pre-tax account may still be better for you if you’ll end up paying a lower tax rate in retirement.

If you plan to go back to school full-time, you can also convert those pre-tax dollars to Roth at a time when you’re in a fairly low tax bracket. If you’re not sure which makes sense, you can split your contributions between pre-tax and Roth or contribute to your employer’s plan pre-tax (it may even be the only option) and to a Roth IRA (which has additional benefits).

3. Common financial “truth” that might not be right for you: Invest aggressively while you’re young.

There is some truth in this. The longer your time frame, the more aggressively you can generally afford to invest your money and young people tend to have long time horizons before retirement. There are a couple of important caveats here though.

Consider your time frame

The first is that not all of your money has a long time frame. For example, financial planners generally recommend that one of your first goals should be to accumulate enough emergency savings to cover at least 3-6 months of necessary expenses. This is especially important for young people who are more likely to change jobs and haven’t had as much time to accumulate other assets like home equity or retirement plan balances to tap into.

You may have other short term goals to save for like a vacation or home purchase. Any money you may need in the next 5 years should be someplace safe like a savings account or money market fund since you won’t have much time to recover from a downturn in the market.

Don’t forget your own personal risk tolerance

Speaking of downturns, the second problem is that this advice ignores risk tolerance. Many young people are new to investing and may panic and sell at the next significant market decline. If this sounds like you, consider a more conservative portfolio (but not TOO conservative). If you have access to target date funds, you may want to pick a fund with a year earlier than your planned retirement date. You can also see if your retirement plan or investment firm offers free online tools to help you design a portfolio customized to your personal risk tolerance.

It all depends on your personal situation

Of course, there are plenty of young people who should pay down their student loans early, contribute to Roth accounts and invest aggressively. The key is to figure out what makes the most sense for your situation. If you want help, see if your employer offers free access to unbiased financial planners as an employee benefit or consider hiring an advisor who charges a flat fee for advice rather than someone who sells investments for a commission or requires a high asset minimum that you may not be able to meet.

In any case, you don’t want to make the wrong choice now, and regret it when you’re older.

A version of this post was originally published on Forbes

Having Trouble Letting Your Savings Account Build Up? Try This Life Hack

September 19, 2018

Modern banking is amazingly convenient. With the improvement of banking apps these days, you can pay bills, send money to friends and even deposit checks without getting up from your couch. However, this convenience can also make it too easy to get to our savings. (Anyone else remember taking your check to the bank to cash it before they close on Friday? Or forgoing a purchase because you didn’t withdraw enough from the drive-thru teller?)

When it’s too convenient

If you find that whenever you build up a balance in your savings account it somehow gets sucked into your spending account, convenience may be part of the problem. With a few touches on your phone you can move money from your savings account to your checking (i.e. spending) account, no pants needed.

The key to letting your savings build up

Rather than going old-school, there is a way to remove this temptation without deleting your banking app. It’s all about using a separate banking institution for your savings. To get started, search online for a high yield savings account. “High yield” is a relative term – these accounts are only paying about 1.55% to 1.85% right now – but that is higher than the 0.08% most savings accounts pay that are offered at more traditional banks. Most of these accounts have very low minimums to start (some as low as $1.00) and you can transfer money from your high yield savings account back to your checking (spending) account when you need it.

The downsides, which could be upsides

The downsides of most high yield savings accounts include no ATM fee reimbursements, no checking and you must establish the account online. Plus, there’s usually a lag of at least a couple days between requesting money and having it show up in your checking account. If you’re looking for a way to save your savings from yourself, then these “downsides” can actually work to your advantage in keeping your savings there.

Making it automatic

I recommend setting up an automatic draft from your current checking (spending) account into your new high yield savings account every time your paycheck hits your account. Use our Easy Spending Plan to compare where your take home pay is going to help you find a reasonable amount to set aside, then plug that amount into our Daily Savings Calculator to see how your account can grow if you actually let it alone.

Setting a ground rule for yourself

The key to success with this method is this: to prevent the easy swipe back to your savings account, do not access your high yield savings on your phone (or the device you use the most). Make it a rule that you will only access it on the device you use least frequently. So for example, I do most of my banking on my phone (paying bills, checking balances, transferring money to my kid’s accounts, etc.) and I rarely access my banking account on my laptop.

Therefore the only place I log in to my high yield savings account is my laptop. And it works. Getting up off my couch and walking to my laptop gives me time to think if it is really worth moving my savings to my spending account and allows that account to grow for what it’s intended – to be there when I need it, not when I want it.

How To Replace Important Documents

September 18, 2018

Replacing vital documents that may have been destroyed during a hurricane, flood, fire or other disaster can be overwhelming, and since you may not even need some of them for years, it’s easy to forget or not even realize what you’re missing until it’s a critical need and possibly too late. I know that if I lost my home or had it totally flooded, it would take me awhile to even start thinking of what I lost. To that end, I created a list of the items that would be the highest priority to replace, along with links to the various agencies that can help.

Although the process varies with the document type, these general steps can help you get started. Before diving in, keep in mind that many of these agencies may want to mail new documents to you. If the home that you list as address-of-record has been destroyed, you should contact your local post office first and ask if you can pick up your mail or have it forwarded to a new, temporary location prior to having new documents mailed out.

Identification (ID) Cards

State-issued identification

If your driver’s license or state-issued ID needs replaced, contact your state motor vehicle agency. You may need to provide other forms of ID that contain your photo, full name, and date of birth, so confirm with them what you’ll need to bring with you to prove your identity.

Social Security card

Contact the Social Security Administration (SSA) to request a replacement card. This service is free of charge, but there are pretty stringent requirements for proof of ID, so you may need to complete some of the other steps first. You can also call (800) 772-1213 or visit a local Social Security office.

Medicare ID card

The SSA can also help you replace a lost or destroyed Medicare card.

Medicaid ID card

Contact your state Medicaid office to request a replacement.

Permanent Resident (green) card

The U.S. Citizenship and Immigration Services (USCIS) can help you replace a lost or destroyed permanent resident (green) card.

Military ID card

Learn how to report a lost or destroyed military ID card and how to get a replacement. You’ll likely have to go to a local office to apply.

Passport

If your passport was lost, destroyed, or suffered water damage, you must report the loss immediately. Once you report it, it is invalidated by the State Department and can’t be used if it is found later. However, taking this step may be one of the first you need to take in order to provide proof of ID for some of the other documents you’ll need.

Replacing a damaged passport

Passports that have water damage can no longer be used. In order to replace it, you’ll need to apply in person at an acceptance facility or at a local passport agency. You will need the following:

The damaged U.S. passport
A signed statement explaining the damage
Form DS-11 (Application for U.S. passport)
Citizenship evidence (i.e., birth or naturalization certificate)
A photocopy of citizenship evidence
Present ID (in person)
A photocopy of ID
One passport photo
The ability to pay the fees

Replacing a lost passport

If your passport is completely gone, you will also need to apply in person and include the following:

Form DS-64 (Statement regarding lost or stolen passport)
Form DS-11 (Application for U.S. passport)
Citizenship evidence (i.e., birth or naturalization certificate)
A photocopy of citizenship evidence
Present ID (in person)
A photocopy of ID
One passport photo
The ability to pay the fees

According to my research, if your citizenship evidence was lost or damaged as well and you are unable to replace them before applying for your passport, you can request a file search for an additional fee if you have previously been issued a passport.

Expedited service

If you are traveling in two weeks or less or need a foreign visa in 4 weeks or less, you can make an appointment at a passport agency for expedited service. This is the quickest way to get your passport, but you will be charged an additional $60. You can make an appointment online or call (877) 487-2778.

Vital records

Birth certificate

If you were born in the U.S.

Find the vital records office in the state where you were born and check with them to see if you can obtain a certified copy of your birth certificate without any identification and follow the instructions.

A few states don’t require a government-issued photo ID, or they will accept other solutions like a sworn statement of your identity. Some states allow your mother or father whose name is on the birth certificate to submit a notarized letter with a copy of their own photo ID.
If you need to get a copy of your birth certificate quickly, ask the vital records office at the time you place your order about getting expedited service or shipping.

If you were board abroad or on a military base outside the U.S.

If you were born to American parents abroad, they should have registered your birth with the U.S. Embassy or consulate in that country and received a Consular Report of Birth Abroad. You can get a copy of this report from the U.S. Department of State. Depending on the country, a vital records office in the nation may also list the birth.

If your parents did not register your birth with the U.S. Embassy, you may have to contact the hospital where you were born. You may also try contacting the base operator or public affairs office for the appropriate military branch if you were born on a base.

If you were born abroad and adopted by a U.S. citizen

The country in which you were born issued your birth certificate, so that adds another wrinkle. If you need a replacement, contact the nearest foreign embassy or consulate for that country to get started. A child born in a foreign country and adopted by a U.S. citizen does not receive a U.S. birth certificate. If the document is in a language other than English, you should also seek the embassy’s help in getting the document translated if you require authenticated documents.

If you have a child who was adopted from a foreign country and you need their birth certificate, fill out an application for replacement of naturalization/citizenship form or contact U.S. Citizenship and Immigration Services for further help.

Marriage certificate

To obtain the document that proves you were married, contact the vital records office in the state or county where you got married. Even though the guidelines vary by state, all requests will require:

Full names of both spouses at time of marriage
Month, day, and year of the marriage
Place of marriage (city or town, county, and state)
Purpose for which copy of marriage certificate is needed
Relationship to persons whose marriage certificate is being requested
Daytime telephone number (include area code)

Death certificate

You may need to provide a copy of the death certificate of a spouse or other family member for a variety of legal reasons including life insurance claims, pension benefits for a surviving spouse, or spousal Social Security benefits; applying for Medicaid benefits; changing joint bank and credit card accounts, utilities, mortgages, vehicle titles, and leases; and remarrying.

If the death occurred in the U.S.

You can request a certified copy of a death certificate from the vital records office of the state or territory in which the death occurred. See the instructions for that state or territory for details such as fees, address to write to, and the requestor’s required identification. In addition to your state’s requirements, all requests should contain:

Full name of the person whose death certificate is being requested
Their sex
Their parents’ names, including maiden name of their mother
Month, day, and year of their death
Place of death (city or town, county, and state; and name of hospital, if known/applicable)
Purpose for which the copy is needed
Your relationship to the person whose record is being requested
Your daytime telephone number with area code

If the death occurred outside the U.S.

You will need to obtain a copy of the Consular Report of Death of a U.S. Citizen Abroad for U.S. legal proceedings. See Death of an American Abroad for details on obtaining a copy of this report.

Divorce decrees and certificates

A divorce decree is an official document from the court that grants the termination of a marriage. It includes specific details of the divorce and is issued by a state vital records office. A divorce certificate shows that a divorce occurred but does not state all of the same information as a divorce decree. Either may be required in a variety of instances later in life, so you’ll want to make sure you have a copy.

U.S. divorces

Divorce Decree: contact the “county clerk’s office” or “clerk of the court” for the county or city in which the divorce was granted.

Divorce Certificate: Contact the state vital records office in which the divorce was granted.

Overseas divorces

If the divorce occurred outside the U.S. and you are in the U.S., contact the appropriate country’s embassy or nearest consulate to find out how to get a copy of the divorce decree.

United States law does not require U.S. citizens to register a foreign divorce decree at an embassy. But if the foreign country in which your divorce took place is a signatory to the Hague Convention on the Authentication of Documents, you may bring your divorce decree to a U.S. Embassy or consulate to have it certified.

Military records

Request Standard Form 180 (SF-180) from any office of the Veterans Administration, American Legion, VFW or Red Cross, or download from government archives.

Take it one thing at a time

Some of these documents will be crucial to continuing daily life, so you’ll want to prioritize replacing them as soon as you can. Others can wait, but if you’ve lost any of these during a recent disaster, try to make time to slowly work on the process of obtaining replacements so you’ll have them when you need them.

Ways To Get Creative So You Can Save More Money Without Giving Up Perks

September 17, 2018

At some point in life, most people find themselves in a situation where they simply need to cut back on expenses in order to save more money for whatever reason. When that time comes, usually the little “perks” they’ve added to their life make the most sense to cut first. It’s easier these days to find an alternative to cable. It makes sense to buy coffee less often on your way to work, or to buy clothing when it’s on sale.

But what about those other expenses that technically fall under the category of perks, but cutting them out of the budget feels more like giving up a need that makes sure you’re life can keep on track? Sure, you’re paying for a convenience, but some expenses that are discretionary feel more like a necessity to keep your life running smoothly.

Spending more money than we have is not an option, at least not if you want to be financially well. When it comes time to trim back on those things that may seem like luxuries you can’t live without, here are some tweaks that might help you to keep those “perks” while still cutting back on spending.

Get creative with your cleaning service

Amount saved: $70-$150/month

No matter what’s going on, you still need your place cleaned, and chances are you have a cleaning service in the first place because you’re either too busy or just too overwhelmed with the task of cleaning. Before you start giving yourself the new nickname of Cinderella and thinking you have to cut a cleaning service out of your budget completely, consider a few of these ideas:

If you usually have your house cleaned weekly: Consider stretching out the time between services and having your home cleaned every two weeks, once a month or once every other month. You may have to get out the vacuum a few more times or learn to live with a little more dust, but knowing it will be done eventually can help.
If your house is just too big: Cut down on the hours you pay for help and just have them clean part of the house – have high traffic areas cleaned every week and others only every other week or less.

When you really need to eliminate the expense entirely: Check out Pinterest or this Better Homes & Gardens List for some house cleaning schedules to help you stay on top of it all on your own. A little structure goes a long way, and remember that you can break it into chunks. Here are some tips on how often you should clean everything.

Re-work your gym membership to fit your needs

Amount saved: $10 – $150 or more/month

Make sure you’re not paying for perks you don’t use: If you really want to stick with your current fitness facility, check to see if you can opt for a less expensive membership that takes out access to things you don’t use. For example, you may be paying for fitness classes you rarely join or access to a pool you have zero desire to get in to.
Shop around: You might be able to find a cheaper membership at a competitor’s location. There are some fitness centers like Planet Fitness where you can get a membership for as low as $10 per month for access to the basics.
Check your benefits: Many employers offer their employees access to corporate discounts on gym memberships. Don’t forget to check your health insurance – the plan we have at Financial Finesse offers partial reimbursement of membership fees to certain facilities as long as you go a certain number of times per month.

When you really need to eliminate the expense entirely: Working out at home can be just as effective – check out these personal training apps that seem to be highly rated.

Compromise on carry-out with a meal prep service

Amount saved: potentially hundreds/month

So many people I talk to say that carry-out food is the issue with their budget. Believe me, I’ve been there: life happens, the kids have to eat and there just isn’t any time to cook. You try to find the healthier options, but eating out can be expensive for the family, and healthy options add to that cost.

A meal prep service might be just what you need. Plan it out and give yourself the flexibility to have at least one day each week where you don’t have to worry about what you’ll make for dinner or realize at the last minute that there isn’t anything in the fridge to cook. Once it’s in the budget, you don’t have to feel bad about giving yourself the needed break. And, you won’t spend unexpectedly.

There are many ways to cut back and work within your budget so that you can save for that vacation you’ve been wanting to take, or cover your tuition when you go back to school, or send your kids to college, or for other goals like retirement. A little creativity can help you to put together a spending plan that works best for your needs and lifestyle without having to completely give up those perks that make your life run smoothly.

Should You Pay Off Your Credit Cards With A 401(k) Loan?

September 07, 2018

Are you making payments on your credit card balances but not making much progress in paying them down? If high interest debt is causing you to lose sleep, it can be really tempting to take a loan from your retirement plan to pay it off. It could be the step that gets you back on track financially or sends you off the financial cliff. This is a high-risk decision. How do you decide if it makes sense for you?

Many employees ask themselves this question

Every day, my fellow planners and I talk to employees on our Financial Helpline who are contemplating taking a retirement plan loan to pay off debts. There’s no “one size fits all” answer to whether an employee could benefit or be hurt. Is it ever OK to borrow from your 401(k)? I’ve worked with employees who used a retirement plan loan to gain some financial wiggle room and pay off their debt for good. I’ve also talked to employees who took loans, only to call again for another a loan in a year because they built up large credit card balances again.

When to even consider a retirement loan to pay off debt?

The first question to ask yourself is whether you’ve exhausted your other options. A 401(k) loan should be the last thing you consider, not the first. Strategies you could try before taking a retirement plan loan include:

Initiating a balance transfer to a zero or lower interest card. This strategy can work well for those who have good credit but a high balance. Keep paying the same amount every month and your debt will be paid faster. See here for the pros and cons of balance transfers and here for when it may make sense.
Sell something. Use the proceeds to pay off some of the debt. So many of us have a lot of stuff we don’t use anymore. Is there anything you can sell to raise some extra cash? My fellow planner Kelley Long once sold almost everything she owned online, including her car, to raise cash before a big move. Another strategy I mention a lot: have a garage sale.
Find a side gig. Do you have some time during a typical week to earn a little extra cash? Even $50 or $100 dollars per month can help you pay more than the minimum on your cards and blast your debt down. (Use this calculator to see how this works.)

Benefits of a 401(k) loan to pay off credit cards

If you’re considering a 401(k) loan to pay off credit cards, chances are that you think your credit card debt has gotten out of hand. Wouldn’t it be great to get those balances down to zero or at least to a point that’s manageable? If you’re up to your neck in credit card debt, the benefits of borrowing from your retirement plan look pretty attractive:

You’ll pay interest to yourself, generally at a much lower rate than your credit card interest rates.
Loan payments come out of your paycheck, so as long as you’re working for the same company, repayment is automatic.
You’re likely to pay off the total balance sooner, since regular 401(k) loans have a maximum five year term.
Your loan will not be reported to credit bureaus, so there’s no effect on your credit score.

The high risks of using a 401(k) loan to pay off other debt

This sounds too good to be true, right? Before you initiate that loan, make sure you know all the risks. There are many:

Big taxes and penalties if you leave or lose your job while the loan is outstanding. If you’re planning to leave your job during the loan period, it’s usually best not to take the loan. Most retirement plans require that retirement plan loans be paid back within a short time frame after an employee is no longer employed with the company. If you can’t pay it back, the unpaid loan balance is reported to the IRS as a retirement plan distribution and is taxable to you plus an additional 10 percent penalty if you’re under age 59 1/2. However, you may be able to salvage the situation by contributing the balance amount to an IRA rollover before you file taxes for that tax year.
You will lose out on growth if the market goes up. Think of 2017, when the S&P 500 increased nearly 19 percent. The power of compounding grows the longer a profitable investment is held. You’ll have the most success if you contribute, invest wisely, and let your investment returns compound over a very long period of time.
If you don’t radically change your cash management habits, you could run up big credit card balances again. Then you’d have the 401(k) loan and new credit card balances to pay. It could be a slippery slope. If you’ve got access to financial coaching in your company’s workplace financial wellness program, make sure to take advantage of it. Working with a financial coach can help you get a better handle on your cash flow so the situation that prompted you to take a retirement plan loan doesn’t happen again.
You could be stuck with the 401(k) loan even after bankruptcy. If you aren’t able to pay off all your debt with the loan and end up having to file for bankruptcy protection, you’ll still have to pay off your 401(k) loan. Retirement plan loans aren’t discharged in bankruptcy.

It’s a last resort, not a first source of cash

Before taking a retirement plan loan to pay off credit cards, make sure you’ve done absolutely everything you can to get on top of your credit card debt and that you understand the substantial risks involved. If you’ve got access to a financial wellness program at your company, work with a financial coach to evaluate your situation clearly and weigh the pros and cons. Consider limiting yourself to one loan – and make a commitment to get a handle on your cash flow so you won’t be compelled to consider another one.

One way to really get ahead

By the time you’ve paid off your retirement plan loan, you’ve probably gotten used to the loan payments coming out of your paycheck. Now that you’re done, set up automatic deposits from your paycheck to a savings or money market account for the same amount. That way you’ll build up emergency savings so you hopefully won’t have to build up credit card balances or take a retirement plan loan again!

A version of this post was originally published on Forbes.

Ways To Help Others Without Hurting Your Own Finances

September 06, 2018

One of the joys of working in my role is how many people I speak with who are wonderful, good-hearted people. They love giving back, whether it’s money they give to charities, religious organizations, or even family and friends. Sometimes I talk to people who volunteer so much to help a cause that it’s like they have a second job.

The caretaker’s connundrum

This is all very commendable. But what happens when you give so much money to others that you don’t have enough left to build your own emergency fund, save for retirement, or cover your own bills? Or when you spend so much time helping that you aren’t able to pick up more hours to help meet your own financial goals? Or what if your family and friends look to you to bail them out of financial trouble, help them start a business, allow them to come live with you for free, etc. but then leave you in the lurch with big bills?

This is a common situation I encounter, and I admire people with such big hearts, but I also feel for them because I know that the solution isn’t to just stop doing it. Here are some thoughts and ideas that I’ve shared with people who feel torn between a desire to give back to others versus taking care of themselves. The good news is that there are ways to be creative and do both.

3 ideas to consider about giving

1) Time is money

If you typically give cash donations or pay people’s bills for them, don’t forget that giving your time can be just as beneficial as giving actual cash. You can help serve food at the homeless shelter, volunteer for the kids’ ministry or another ministry at church or spend an evening cleaning at the local animal shelter. If you’re more inclined to help out people you know, the same concept applies: what about rolling up your sleeves to help someone repaint their house so they can save money, or be available to help them babysit while they go on a job interview?

2) If your situation has changed, your giving may need to change

It’s tempting to keep up a level of giving that you’re used to even after you may have had a drop in your income or even an increase in your overall expenses. You can still give at a level that works for your budget AND volunteer some of your time or services. If gift giving is the issue, plan ahead for birthday and holiday gifts and buy items on sale. Have a game plan for your spending, so you aren’t caught off guard.

3) Other creative ways to help that don’t require you to give up resources

If someone you care about comes to you with a need that would put you out financially, you don’t just have to say no. Be an ear to your friend or family member and offer them guidance or help them find resources available so they can be better equipped to help themselves. You may learn something for yourself in the process! Here are some ideas:

Are they unable to work due to physical or health issues? Perhaps they qualify for government assistance like food stamps or Social Security Disability. Help them do the research and apply.
Did they lose a job? They might be eligible to receive unemployment pay. Offer to wait with them at the office while they apply.
Do they make too little money in general and are struggling to make ends meet? United Way is a great resource to see what programs they might be eligible for within the county where they live. Some programs will give them funds towards paying bills. Beyond that, you can be a resource and help them figure out next steps when they can’t pay their bills.
Are they going through something that has them down emotionally, which also might be negatively impacting their performance and work and in other areas of their lives? Have them check with their HR department at work to see if they have access to a counselor through an Employee Assistance Program (EAP) at work.
Did they recently have a baby and are struggling with the added financial responsibilities? Here are some employee benefits that could help new moms/parents in general.
Is the baseline issue that they aren’t able to get a handle on how they manage their money? Help them create a budget and find ways to cut back and find extra money in their current budget. Be a good role model and show them how to do it, rather than just giving them money.

Sometimes all a person really needs is a caring friend to empower them to get on their feet and hold them accountable for taking the steps to helping themselves. Helping others and giving back can bring great joy and a sense of purpose, so keep that up but remember to make sure you are financially sound first. That puts us in a better position to best help others along the way.

Why It Irks Me So Much When People Joke About The Lottery As Their Retirement Plan

September 04, 2018

You don’t have to work as a financial planner long before someone jokes to you that their retirement plan is to win the lottery. I have a reputation of being an irreverent smart aleck, so this shouldn’t bother me – but it does. Here’s why.

Reason #1: The math

The first reason is just the simple math. If you spend $10 a week on lottery tickets (which is 260 chances to win if you’re buying five $2 tickets per week), that adds up to $520 a year. Granted, some of those tickets will win so let’s assume you win $4 nine times and $7 once for a total of $43 throughout that year. Adding it up, your lottery tickets cost $520 – $43 = $477. If you do this for 10 years, you would have spent $4,770.

If instead you put that $477 per year into a mutual fund that earned an average 5% per year over those same 10 years, you would have $6,000. Taking it up a notch, let’s imagine you put that $477 into your 401(k) and got a 50% match. In that scenario, after 10 years you would have $9,000. Playing leads to a loss of $4,770 and investing leads to an account worth $6,000 to $9,000.

Reason #2: The dangerous money mindset

The second thing that bugs me even more is the mindset that often goes along with playing the lottery. To me it is a dangerous one — it’s the mindset that says: I’m never going to get ahead anyway, so in order for me to retire, I need to “get lucky.”

This takes the responsibility and accountability toward an individual’s own future and pins it on some unseen force that is out of their control. What irks me is that preparing for a comfortable retirement is, for the most part, 100% in the control of the everyday worker.

Sure, life throws curveballs and it’s tough to juggle the competing priorities of today versus the future, but at the end of the day, everyone is in control of their own money habits and if you have $10 per week to buy lottery tickets, then you definitely have $10 per week to save for your future.

What it really takes to retire comfortably

I’m really close to my 30-year anniversary in the financial planning industry, which means that I have talked with literally tens of thousands of people. With very few exceptions, the people who were in a position to retire did the following:

Spent less than they made
Invested their savings in things like their 401(k), income producing real estate, a business, etc.
When they did take on debt, they paid it off as fast as they could
They monitored their spending and investments at least once a quarter

While some of these people may have “gotten lucky” and bought Apple or Alphabet 20 years ago, or bought an investment property that really did well, they still followed these same 4 steps. And that’s what really matters.

Take control of your financial future today by working toward the steps that are proven to work, no luck required.

How To Start Your Emergency Fund

August 29, 2018

One of the crucial components to your financial foundation is to have an emergency fund (I know, not breaking any news here). Having an emergency fund lets us navigate life’s curveballs (medical bills, car repairs, home repairs, etc.) without having to spiral into credit card or other high interest debt.

But there is often a significant difference between knowing we should do something and taking the all important first step to action. Let’s look at a few simple steps to starting an emergency fund on the way to improving our overall financial stability.

Step 1: Review your spending plan

The purpose of this post isn’t to get in to budgeting (I prefer the term “spending plan”), but one of the biggest hurdles most people face in getting started is the feeling that there just isn’t any money left over to save. To get over that hurdle, try these ideas:

Pay yourself first – If your intention is to save whatever is left over in your checking account at the end of each month, it is likely you’ll find there isn’t anything left to save. If you’re like me, money in the checking account finds a way to get spent. Shift your savings intention to the top of your monthly budget – make it a priority and put the money there before you start spending!
Find the money – Once you pay yourself first, you may need to find an area or two to cut back in the rest of your spending plan to make it happen. If you decide that you are going to save $50 per month into your emergency fund, look for small adjustments you can make elsewhere to make that happen – it could be as simple as skipping five $10 fast food meals per month.

Step 2: Automate!

Set your saving commitment up to happen automatically – you’ll be surprised the impact this has on getting your emergency fund up and running. I suggest setting up an account at a different financial institution than your checking account. You want to have the two accounts linked but having them at separate places lessens the temptation to move money out of your emergency fund.

Once the account is set up, set up either an automatic transfer from your checking account each month, or check with your employer to see if you can have funds deposited automatically from your pay into your emergency fund.

Step 3: Set milestones

Most financial planners suggest having 3-6 months’ worth of expenses in your emergency fund. That can be a considerable number and seem almost impossible when starting at zero. Make that a stretch goal and instead shoot for having $1,000 to start, then $2,000 and so on.

When you reach a milestone, be sure to celebrate that accomplishment! By having milestones on the path to the goal, it makes a game of it and helps you realize that every dollar saved gets you closer to winning the game. That momentum builds quickly, and you may find you are wanting to save even more to reach your goals along the way.

Getting started is the hardest part

Taking these few steps will help you on your way to building that emergency fund, and hopefully it will be easy riding from there. Like most things, getting started is actually the hardest part. Once you start, it becomes a habit and will make an enormous difference in how you view your own financial situation.

Being able to take that next emergency in stride financially gives you the power to accomplish other financial goals as well. So get started today and know that you can do this!

How To Fit Tithing Into Your Other Financial Priorities

August 28, 2018

There are a number of opinions out there on whether people who are paying off debt and/or under-saving should tithe (the practice by some religions of giving 10% of your income to the church) before paying off debt and saving. I’ve spoken with many people who struggle with this answer. Often, they have already gotten into a bit of debt and aren’t really sure how much they should or can afford to tithe.

I won’t get into whether or not you should tithe — to me that’s a decision everyone has to make for themselves and I’m not trying to make any religious statements here. But for those who decide that it is an important priority, there are ways to do it while also keeping your finances in order. The last time I was asked this question by someone struggling with making it all work, here is how I framed my guidance:

Think of it this way:

1) Commit to the idea fully – If tithing is a priority for you, write out your plan to make it happen. Be specific with how much you will give and how often.

2) Write it in to your budget – Once you know how much you are going to tithe, subtract that amount from your monthly income and create a budget to live off what’s left. It’s really the only way to make it work.

We mean well, but often, we make the decision to buy the car, purchase the home, etc., BEFORE considering how much we can afford after tithing. Things could be smoother if we account for the tithe and then decide how much of a car or mortgage payment we can afford.

3) Cut back on other spending – If you find you can’t tithe at the level you wish, look for areas in your budget where you might be able to cut back in order to make it work. Think about your own personal priorities.

4) Find ways to increase your income – Explore opportunities to earn additional cash to help pay down your debt or save by working more hours, having a second job, etc.

5) Don’t tithe on credit – If you feel led to give more, go back to step two and make room in your budget to give more instead of putting your tithe on a credit card. Tithing on credit will add to the time it will take you to pay off your debt.

6) Make sure you’re getting your full tax deduction – If you itemize your taxes, you may be able to claim a deduction for the amount (or a portion thereof) of the tithe you give.

Remember that you are in control

You don’t have to feel guilty about tithing instead of paying off debt or saving. You just have to find a way to make it all work. If it’s important to you, add tithing as a line item in your budget and make your financial decisions based off what is remaining.

Recognize that tithing while in debt could take you longer to pay off your debt or save. You have the control to work more hours, cut back on spending elsewhere, or slowly increase your level of giving overtime as you free up more cash and start giving the amount you ultimately want to give.

The 5 Biggest Financial Mistakes People Make In Their 40’s

August 24, 2018

Those mid-life years can be crazy. Between growing your career, raising a family, dealing with aging parents, paying off debt and saving for college, all while trying to just enjoy life while you’re still young, it can seem like you’ll never be able to retire.

But trust me. Eventually, you’ll want to.

Here are the five biggest mistakes I see people making in their 40’s that will limit their options in their 60’s and how to avoid them.

Mistake #1: Buying the biggest house they can afford before maxing out retirement.

I remember the excitement of getting my own apartment in my 20’s and making trade-offs so I could afford to live in a cool downtown loft, even though it was a big financial stretch for me. It’s easy to get into that mindset and adopt it as a lifestyle, but it’s important that it doesn’t become your long-term modus operandi. Eventually your housing expenses should feel very manageable and allow you financial wiggle room to work on other goals like retirement, college savings or even paying off your own student loans.

Upsizing your home

If you’re upsizing your home to accommodate a growing family or just want a nicer place to live, don’t just take it as a given that increased income should equal increased square footage and the latest kitchen remodel. Yes, it’s important to live in a good neighborhood and you want to have space for everyone to feel comfortable, but maxing out on housing when you’re not maxing out on retirement* is a huge long-term mistake.

Consider how busy your family is during these years and how little time you may actually be spending at home, relatively speaking. Buying a less expensive home that meets your needs but nothing more will give you financial choices that your house rich but cash poor neighbors won’t have in the future.

* maxing out on retirement = contributing the maximum allowable amount to your 401(k), 403(b), SEP-IRA, Roth IRA or other retirement savings vehicle.

Mistake #2: Under-insuring.

Most people think of health and life insurance when the topic comes up, but arguably the most important insurance you’ll need in your 40’s is disability insurance. According to the Council for Disability Awareness, more than half of Americans who are classified as disabled are in their working years (18-64). And while most of us think of an accident causing a disability, you’re actually much more likely to become disabled by something as common as a back injury or cancer.

Disability insurance

If you have disability insurance through work, awesome. Check to make sure what it covers though. For instance, if you only have long-term disability coverage, the benefits usually don’t kick in for about 3 months so you need to make sure you have short-term disability coverage, savings or accrued PTO that would cover those initial 3 months without pay. If you don’t have any coverage, this should be the next insurance you look into purchasing.

Life insurance

Life insurance is also important if you have a family who would suffer financially from your untimely death. Lifehappens.org has a great calculator to help you figure out how much you need, and you may be able to plug any gaps pretty cheaply through a group policy at work or even through your college alumni association. The majority of my life insurance coverage is through a group term policy I bought through my membership in the AICPA, an organization that supports CPAs.

If you have a pre-existing condition or other factor that would typically cause you to miss out on the lowest rates, then the best time to buy term life insurance is when you start a new job. Many employers’ group plans allow new employees to enroll without any type of underwriting, but only if they enroll immediately upon hire. Check with HR to see what your options are there.

Mistake #3: Trying to time the market.

If you funded a Roth IRA or other savings account recently, were you tempted to just let the money sit in cash while you wait for a market dip? Waiting to invest due to fears of a short-term loss ignores one of the key fundamentals of investing, which is that you’re in it for the long haul. You are trying to time the market and much research has shown that it doesn’t work. In fact, even people who get it 100% wrong by investing on the highest day before a crash are still better off than people who stay out altogether.

Just do it.

The best way to take advantage of the long-term growth of the stock market is to just get in. A popular phrase in the investing world is that the best time to invest was yesterday, the next best time is today and the worst time is tomorrow. Pick your investments according to your timeline and risk tolerance, pull the trigger, and then let them ride.

If you need the money in 5 years or less, you should not be putting it in the market in the first place. So if you’re investing into a 529 college savings plan for your college senior, you’re wise to keep that in cash. But if it’s for your toddler or even a 7th grader, get it in the market. Even if there is a big dip in the near future, by the time your kid is looking at college admissions, any market crash in this decade will be old news.

Mistake #4: Allowing kids’ activities to take priority over other goals.

I don’t have kids yet, but I can tell you right now that when the time comes, we will be doing our darndest to encourage our kids to find activities they love that DON’T involve expensive fees, regular weekend travel for competitions and outrageous costs for costumes and uniforms. I remember our next door neighbors complaining about the cost of travel hockey for their son growing up. Looking at where he is now, I know for certain that those years of expenses did not have any effect on their son’s chances of future success.

By the time your kids are hooked on soccer, cheer, dance, gymnastics or whatever activity they love, it will probably feel like it’s too late to say no. If you’re already on that path, you’ll have to find other areas in your life to cut back on so that the costs of the activities don’t take away from your long-term savings goals. And whatever you do, avoid credit cards to plug the gaps. Putting just one $10,000 season on a 17% rate card could cost you almost double that amount in interest by the time you pay it off.

Mistake #5: Over-withholding on taxes then spending the refund on spring break.

As interest rates begin to rise back to more reasonable levels again, letting the IRS serve as your savings account is an even worse idea than it was before. If that’s the only way you can find to save money then try this: Drop your withholdings to break even as much as possible at tax time, then take the increase in your paycheck and have it automatically deposited to an online savings account.

Why an online savings account? Two reasons:

They generally pay higher interest rates than your standard “bricks and mortar” bank.
The lag time between requesting money and having it arrive in your checking account is typically several days, which is deterrent enough to keep most people from impulse-spending their balance.

Remember, the little things add up, and that goes both ways in accumulating debt and savings. That’s why it’s not impossible to catch up if you’re behind in saving for retirement in your 40’s, but the longer you put it off, the more severely your options will be limited in retirement. What are you waiting for?

7 Steps To Planning A Budget-Friendly Vacation

August 23, 2018

As a parent of a newborn and toddler, I can totally relate to people who feel like they just don’t have the money to get away, but are practically dying for a vacation. We give so much time to our careers, our spouses, friends and family and while those are all important to us, we all could use a break away from responsibilities… A “brain break” to keep you sane. It makes all the early mornings, late nights, missed lunch breaks, days dealing with a sick kid, etc., more manageable.

Vacations can be budget killers though, especially when we make impulse purchases for a get-away. The key is to start the planning before you start to go nuts so you can travel (and regain your sanity) without breaking the bank.

I reached out to a friend who manages to travel multiple times throughout the year with a family of four. She and her husband have two young children, both under the age of five, just like us. Here’s how she makes it work.

1. Plan ahead

It seems so obvious, but many of us don’t take the time. My friend and her husband take one international trip each year to celebrate their anniversary without the kids. The way they do this is that they start to plan the trip one year in advance, which means they are already planning next year’s trip while on this year’s.

They also take a minimum of two family vacations within the States, which they plan for that at least six months in advance. One thing that planning ahead does is that it helps them to avoid peak season pricing. That way they are able to take the same trip for less money than someone who waits until summer is here before booking their flight, hotel, etc.

2. Add it to the budget

Yep, a lot of keeping our money in check comes back to how we manage it on a day to day, month to month basis. Determine how much you’re willing to spend on vacations for the year, then figure out how much to save each month to get there. To make sure the savings happen, treat it like a bill you have to pay. You may have to cut back in some other areas to reach your goals.

3. Create a separate account

Consider putting your travel funds in a separate savings account where you bank. You can move the funds to your Travel Account manually each paycheck or set up automatic transfers.

4. Decide where, how often and what ahead of time

In order to budget, it will be important to decide how you like to travel, especially if money is tight. Do you prefer extended stays where you’re fine spending a week or two away at a middle-of-the-road hotel where you aren’t too concerned if the food is just ok? Maybe you’ll even opt to cook on vacation and save money there. This could allow you to spend more time on vacation, if that’s most important.

On the other hand, you may be fine with taking only one or two trips, but go all out. Some people would much rather have a breath-taking, pampering experience where they don’t lift a finger, even if it’s only for a couple of days.

5. Be mindful of when

If you can keep your dates flexible, you won’t be forced to spend more during peak travel seasons. This can be a HUGE money-saving strategy. My friend says that being flexible also helps her family take advantage of deals for last minute travel as well.

6. Work to stay on budget when you go

In order make sure they don’t go over their budget, my friend has a few strategies. For local trips, they use cash for everything except for booking the hotel. She plans everything out beforehand including using TripAdvisor to look at menu options so she can come up with a daily spending budget for the trip. Hotels that have breakfast included in the room help with this as well.

7. Don’t forget stay-cations

You don’t have to leave your ZIP code in order to have a fun getaway. Setting aside $200-300, or whatever works for you, for a weekend trip to a local resort can be just as sanity-saving. The kids feel like they are out of town on vacation and the parents get a break from cleaning, cooking, and some other responsibilities. It’s a win for the entire family.

So what are you waiting for? Spring break will be here before you know it. Get planning! Finally taking a vacation…AND staying within your budget… it’s a win for the whole family!

Why Your Regular Credit Card May Not Make The Best Travel Partner

August 20, 2018

Do you have any upcoming summer plans? If so, you might want to think twice about which cards you don’t leave home without. A recent trip I took to Switzerland and Germany reminded me of how the best credit card(s) for a vacation might not be the same credit card(s) you normally use.

More than just the rewards

When choosing a travel rewards card to book your vacation, don’t just look at the reward rate. Consider other benefits you might use like trip cancellation/interruption insurance, auto rental collision coverage, complimentary airport lounge access, lost or delayed baggage insurance, trip delay reimbursement, roadside assistance, and emergency assistance and benefits. If you’re traveling internationally, you might want to see if the credit card(s) you’re bringing charges foreign transaction fees and if the auto rental insurance coverage is valid where you’ll be traveling.

Converting to other travel rewards

Consider whether the card(s) allows you to convert points to other travel rewards programs as well. This can multiply the value of your points, depending on the value of the program you convert to. Just make sure they’re points you’ll actually use.

For example, Starwood points are currently listed as the most valuable at 2.7 cents per point, but I rarely, if ever, stay in Starwood hotels. For me, the runner-up Amtrak points would be more valuable even though they’re only worth 2.5 cents per point since I do ride Amtrak a lot.

Watch for annual fees

Finally, be aware that a lot of the best travel rewards cards charge annual fees. Don’t let that scare you away, but don’t ignore them either. It all depends on how much you travel. Do the math and see if the higher rewards would pay for the additional fee.

My personal choice for a travel card

For example, my personal choice for travel is the Chase Sapphire Reserve™ Card despite a hefty $450 annual fee. For one thing, I get an annual credit of $300 for travel expenses, making it really a $150 annual fee as long as I spend at least $300 a year on travel. (If you don’t, it’s not worth it.)

I also earn 3 points for every dollar spent on travel (and dining out) and get all the benefits listed above plus credit for global entry fees and a 50% increase in the value of my points (making them 4.5 points for every dollar spent on travel and dining out) when used in the Chase Ultimate Rewards Program®.

That doesn’t mean that card is right for everyone. If you travel less, you might prefer one with a lower or no annual fee. Just don’t assume that the best card(s) to book your trip and take with you on your journey will be the same card(s) you use every day.

How I Bought A New Car After An Accident

August 16, 2018

A lot of the financial guidance out there about making big purchases such as a car focuses on building up savings and shopping around for the best deal. But what happens when you need a car right away?

As outlined in my last blog, I was recently in a car accident. What I didn’t say in that blog was that my car was totaled. Because of this, I was suddenly thrust into the car-buying market without a plan. I typically like to spend months researching a car purchase but this time my process was greatly condensed. I hate buyer’s remorse, but my 5-member family is busy and one car would not cut it for long.

Here are the steps to quickly prepare for your next vehicle purchase

Determine the type of vehicle you need

As much as I am going to miss my old vehicle (we named the car John), it had been less than ideal for our family for some time. When we bought the sedan we were just a family of 3. We are now a family of 5 with 3 car seats/boosters. We determined that this was a good opportunity to not just replace what we had, but find something that would give the kids more space. Doing this helped us focus our search. Picking a car based on need can simplify things in an environment where you find every car in a 50-mile radius within seconds on your phone.

The search is on

Once we knew what amenities to look for, we began the search. There are dozens of apps and sites to choose from. For my search, I preferred tools that could give me easy to view pictures, the ability to filter searches based on price, mileage, and vehicle features. I also preferred tools that gave me a measure of the value of the vehicle. This helped me to understand how much negotiation room there was in the price.

New versus used

The advantage of a new car is that you are the first person to own the car and so you know the standard of care and maintenance history. Also new cars usually come with manufacturer’s warranties. The downside to buying a new car is the price and the fact that the value of the vehicle depreciates significantly once the car is driven off the lot.

Because of the size of my family and the amenities they enjoy like leather and entertainment, used cars have often been a better value for me. While a used car forgoes the rapid depreciation in value of a new car, they often present their own risk. Unless the previous owner kept good records, it can be hard to determine the level of care the vehicle received. Also, unless you buy a low-mileage used car there is high likelihood the manufacturer’s warranty has expired.

In those cases you might consider buying a warranty. To mitigate the concerns about the maintenance, request a vehicle history report like Carfax. In many cases those are available free online. It also does not hurt to have an experienced mechanic look at the vehicle to determine if maintenance costs will likely be needed in the short term.

This is what I do to make sure I’m not buying a used lemon, but instead a quality used car that will last as long as I need it to last.

Buy versus lease

Before you negotiate the price for the vehicle, it’s good know how much car you can afford. Most of the car search apps and sites offer a calculator that will give you an idea of the monthly car payment. You will want to reach out to your bank or credit union to get loan terms before going on a car lot as well.

Most dealerships are incentivized to get you to finance through them and I have seen price breaks for choosing dealer financing. Even if it is a good deal, having your own independent loan quote is still a good idea to have bargaining power – this will help to ensure that you get a loan at a reasonable interest rate. Also, the dealer may try to match your bank’s terms, which is what happened with us.

Leasing can be a reasonable alternative to taking out a loan, especially if monthly payment is an issue for your budget. However, leasing a vehicle means you’re pretty much locking yourself into having a car payment for the foreseeable future. This article offers 5 questions that can help you determine if leasing is the right move for you. For me, I like the idea of eventually being free of a car payment, while still having a car. That’s why we opted for financing.

By assessing your needs and shopping with a knowledge of what you are looking for, along with your preferred plan to pay for it, you can be certain to walk away with a car purchase you can feel good about for years to come. Now to find a name for this new car…

5 Back-To-School Savings Tips You May Not Have Heard Before

August 09, 2018

I’ve talked with several people lately about how back to school shopping for their kids is so expensive. They are surprised by how much some items cost and even if they aren’t surprised, they feel like it’s never really in the budget. With a little bit of planning, however, it doesn’t have to be such a shock to the finances every year – I’ve also talked with friends who, while they agree it’s an expensive time of year, they feel they’ve mastered a few techniques to better manage the damage.

Here are some of the things those who feel more prepared are doing that you could help you get ready for back-to-school going forward.

1) Get next year’s supply list now. – If your child is in 2^nd grade this year, go to the 3^rd grade teacher and get the supply list for that class as well. Retailers know that parents need stuff right now, so you’ll pay full price. Wouldn’t it be better if you knew what you needed when that stuff goes on sale? Stocking up a year ahead of time can save you big bucks next summer.

I’ve heard some people say they were able to get a box of crayons for $.17 and notebooks for $.20. Wow! It’s best to buy staple items like notebooks, pens, pencils, paper, glue, folders, and pencil sharpeners, just in case the supply list changes a bit before your kid is ready for that next grade.

2) Add your kids as a line item in your budget. – Consider setting aside spending money for each child. You could start that now, at the beginning of next year as a beginning of the year goal, or even next year in May when school is out, but the key is to start saving at least a few months out. The money adds up overtime. To make it fit in the budget, you may have to cut back in other places. Check out some ideas on ways to save that you may not have thought of.

3) Take advantage of tax-free weekend, but don’t wait until then to start shopping. – There are definitely savings to be had during tax-free weekends, but you might find items on sale during that weekend are actually cheaper when fewer people are likely to be shopping for back to school items. Find out when your state’s tax-free weekend is this year and start planning ahead for what you’ll stock up on.

4) Think ahead when buying clothes. – As long as you have the closet space, shop the next size up when clothes are on sale. Even if you just get at least two weeks of clothing for your kid to start school and purchase remaining pieces over time to add to their closet, you might feel less pressure. You also won’t be forced to buy at a time when things are expensive, just because they happen to outgrow everything and don’t have anything to wear at that time. Sure, he’s a size four now, but if size five is on sale, use the money you set aside for him and get the next size up – he’ll need them eventually! (just be careful not to go crazy on trendy items and focus on the basics with this strategy)

5) Make money off those old clothes and shoes. – As your kids outgrow their clothing, consider selling it at a place like Once Upon a Child that buys gently worn clothing for others to be able to purchase from that store. Then, use the funds you make to replenish items in your kids’ closet. You can replenish it with gently used clothing from that same store or new clothing. Either way, you’re in control.

If you have young kids, back to school time is going to roll around for many years to come, so it’s a good idea to establish some money-saving habits now. Planning ahead and making the most of sales year-round can relieve a lot of the stress so you don’t feel like you have to borrow against your 401(k) or add to a high interest rate credit card balance that isn’t in your budget in order to get what your kids need for school.

How To Pay Off Credit Card Debt ASAP

August 08, 2018

Is one of your financial goals getting out of credit card debt so that you can start directing that money toward something more fun like a new home, college education or retirement? Throwing away money on credit card interest is an incredible waste.

The best way to avoid this, besides staying out of debt in the first place, is to work to lower your interest rates as much as possible while paying off your debt as quickly as possible. Here’s how I dug myself out of $8,000 worth of credit card debt after college:

Make a list. I listed all of my accounts in order of interest rates, starting with the highest.
Set a fixed payment. I started paying the minimum on all cards except for the one with the highest rate. I paid as much as I could afford on that account, initially starting out with a fixed $200 per month payment.
Look for promo offers. When I received an offer to open a new card with a 0% promotional interest rate on balance transfers, I applied and received a card with a $2,000 credit limit.
Incorporate balance transfers strategically. I transferred $2,000 from the highest rate card to the new card but kept paying the highest amount on the original card.
Roll payments together when an account is paid off. Once that card was paid off, I added $200 to the amount I was paying on the card with the next highest interest rate.
Mark your calendar. I marked my calendar for when the 0% promo rate was to expire and a month before, I opened a new 0% card and transferred the balance over.
Focus on cards charging interest. I continued to pay down my other cards that charged interest with gusto.
Use windfalls. Anytime I came across extra money such as a tax refund or a signing bonus for a new job, I sent the money straight toward my highest interest rate credit card.
Keeping everything at 0%. Eventually, I was just left with the balance on the 0% card. I continued to pay it down aggressively, and when the promo rate expired, I continued to open new accounts at promo rates to transfer the balance.
Enjoy freedom. Within about five years, I was debt free.

Things to consider

Credit score

First, every time I applied for and opened a new account, my credit score took a hit. This only worked for me because I had excellent credit, which I maintained through on-time payments for all my debt, including my student loans, car payment and even utilities.

Balance transfer fees

Second, each balance transfer incurred a fee that was typically a percentage of the balance I was transferring. I had to make sure the interest I was saving by transferring the balance was more than I paid in a balance transfer fee.

Putting the cards away

Finally, I had to actually stop using credit cards in order for this to work. Once I was out of the debt, I did go back to using credit cards, but I kept a close eye on the balance so that I was able to pay it off each month.

If your credit isn’t great, you may not qualify for low promotional rate cards. If that’s the case, then consider calling up your credit card companies and request that they lower your rate. You may even suggest that if they lower your rate, you’ll transfer other balances onto that card. Remind them of your on-time payment history and threaten to transfer your balance away if they don’t work with you.

The key to success here is never wavering on that large payment amount. Being strategic about how you pay off your cards can also trim months or even years off your debt. Use this Debt Blaster to calculate the difference it will make.

What To Do If You Have A Car Accident

August 07, 2018

A few weeks ago, I was driving through an intersection a few blocks from my home. I had taken this route hundreds of times but it was different today. I heard a sudden honk from a car horn and looked up to see a vehicle bearing down on my driver’s side door. A few seconds later all my afternoon plans changed.

I was involved in a car accident.

After checking my person to see if everything was ok with me physically, I slowly exited the car. I was thankful that the situation was not any worse, but I also knew I had some work to do. It was incumbent upon me to get the right information so that I would be compensated for the damages. This was definitely not my fault. Here’s what I did to make sure I was covered.

Gather up the information

Take pictures of the damage and the scene – Because the collision occurred in a busy intersection, I knew there was a high likelihood the vehicles would need to be moved, so I got myself to safety and took a few quick pictures of the vehicles in their post collision positions. I also took pictures of the vehicle damage, along with the license plate of the other party.
Take pictures of or exchange insurance and contact information – Once we were in a safe place, the other driver and I exchanged names, contact information, and insurance information. This is usually the point in time you discover if the other party has insurance in place. You may need to report the collision to both companies so having the other party’s identifying information is crucial.
Get the information from any witnesses – Several people who witnessed the collision approached to tell their version of the event. I made sure to obtain contact information for them as well. The experience can be a bit of whirlwind, so you will want to make sure you have a good witness or two that can lay out the events clearly in case of a dispute.

Prepare to tell your story again, and again, and again

When the police arrive – Once an officer arrived on the scene, he asked those involved in the collision what happened. It’s important to give your version of events in an easy to understand manner. Once the vehicles were moved to an even safer environment, the officer asked each party separately what happened. What he was looking for was consistency in our points of view. When the officer was done, he gave us information regarding how to retrieve the official police report.
Talk to both insurance companies – Even though you have up to 24 hours to report an accident to your insurance company, it makes sense to do it while the events are fresh. Upon arriving home, I went ahead and contacted my own insurance company first. I did that because I wanted my insurance company to have on record my version of events in case the other driver attempted to contact them as well. After that I called the other party’s insurance company to make a claim. Be aware that both companies will likely record your statement.

Getting things back in order

Get yourself checked out medically – Even if you feel good physically, go ahead and make an appointment to see your doctor as soon as possible. The initial shock of a collision can produce enough adrenaline in the near term to make you feel ok, but you want to have a professional be sure that you did not overlook something once the adrenaline wears off. This can be really important if you find yourself with a back or neck injury after the fact.
Getting back on the road – Our family of 5 is a 2-car household by necessity, so I began working with my insurance company on obtaining a rental car and starting the process of having the damage appraised on my vehicle right away. It was a good time to pull out my policy and review the benefits I was eligible to receive. In situations where you are not at fault, you can often choose which company would handle the claim (although this may vary from state-to-state). Even if the other party claims responsibility, it may make sense to use your own company because it may offer higher or better coverages. Then your company can send the other company a bill for what is owed.

Walking away safely from a car accident is always the primary goal. Taking these steps can also give you peace of mind that your action will give you the best opportunity to make your financial situation whole after a car accident as well.

Do You Have To Carry A Balance For The Best Credit Score?

July 31, 2018

One of the more confusing parts about maintaining an ideal credit score is how a credit card’s utilization is measured. It’s true that lenders want to see that you have open lines of credit that you’re actually using, but does that necessarily mean you have to keep a balance on a credit card to prove that? The answer is a definitive no, but let me review a few key things to further drive that point home.

Credit card companies report users’ information monthly

While it may seem like the slightest slip-up in your credit behavior has an overnight effect, most credit card companies actually only report account information on a monthly basis. They are reporting the timeliness of your recent payments, the current balance and whether or not the account is in good standing.

How this can help you

Since your credit card company probably doesn’t pick the exact date that your payment is due, as long as you’re using your card on occasion, your credit report will likely still show a balance on your card even if you pay it off each month. As long as you’re paying it off on time each month, that fact is also reported, and the account will most likely boost your score due to responsible usage and on-time payments.

How this might hurt you

If you’re regularly maxing your card out and leaving it that way until your next payment is due, even if you pay it off every month, there’s a strong chance that the utilization of that credit line could be hurting your score.

How to play this to your advantage

First of all, try to avoid maxing out your card, even if you can pay it off each month. If you have to do that and having a great score is important at the same time, just try to pay the balance off ASAP, rather than waiting until the payment due date.
Second, if you’re just looking to show proper behavior, simply use your card for one or two expenses you already have, such as filling up with gas or paying your cell phone bill. It’s easiest to maintain the habit of paying it off each month if you only use it for relatively predictable expenses, which allows you to better budget your payments.
In other words, where people mess this one up is when they rationalize that using their card to splurge on a trip to a favorite store or restaurant will keep their score high, neglecting to factor the extra spending into their budget.

The bottom line is that you DON’T have to carry a balance over from month to month, which typically incurs interest charges, in order to maintain a high credit score. Do your best to pay your card off each month, and enjoy a high score while also keeping your other important financial numbers high.

Should You Pay An Item In Collections Or Just Let It Fall Off Your Report?

July 25, 2018

I was speaking with a client the other day about things she should consider before purchasing her first home. The conversation was going well until I asked her about her credit score. Oddly, her number was fairly low, despite her responsible use of credit.

She paid all bills on time, and her credit card use was minimal. As she eventually divulged, she did have this one old medical bill that went to collections. The amount was a whopping $81.00. Not eighty-one hundred and not eight thousand one hundred… $81.00.

In her case, the bill had been out there in collections land for a few years, and she was unsure as to whether she should pay it or just let it eventually fall off her credit report. She could easily afford to pay it, and we agreed this was the thing to do. However, her situation did cause me to ponder her question further…

When is it okay to just walk away?

The general and responsible answer to this question is Never. If we owe, we owe, and we have a contractual obligation to pay what we owe. Legally, there are steps a bill collector may take to collect money that is owed, including lawsuits leading to judgments enabling them to garnish your wages, pull funds from your bank account, or place liens on any real estate you own. There are, however, some options to get some financial breathing room on a temporary or permanent basis.

When the debt is several years old

You have probably heard that after several years, an uncollected debt eventually drops off your credit report. For the most part, this is true. Even though an unpaid bill may no longer be reported on your credit after seven years, this doesn’t mean the debt itself has gone away. In fact, collections agencies sometimes engage in tactics to keep the debt “current,” which means that the 7 year clock hasn’t even started ticking yet. And as long as a debt is shown as current and past-due, your credit score will suffer.

Each state has laws (statutes of limitation) regarding how long a collector may continue collecting a debt by suing you in court. Some debts, such as student loans or taxes owed to the IRS, NEVER go away. Even after the statute of limitations on debt collection lawsuits expires, a collector may continue efforts outside the courts to collect a debt – potentially forever. It is possible that your delinquent loan or bill could be sold and resold to a series of debt collectors over and over. Even though you may be willing and able to just let it go, the collections industry can be very tenacious.

You don’t (and likely won’t) have the money

If your difficult situation is likely to be temporary, contact your creditors and request assistance. Ideally, you want to talk to your creditors before missing too many payments. Otherwise, your lender may write off your bad debt and hand it off to a bill collector. Negotiating with a debt collector is not impossible, but your options to explain your situation and negotiate more favorable payment terms may be severely limited.

If your situation is both permanent and extreme, meaning there is no way under the sun you could ever find the money needed to pay the debt, you may be a candidate for personal bankruptcy. Before you file, however, many states require you to first complete a pre-bankruptcy counseling session with a certified credit and debt counselor. Even if you elect not to file for bankruptcy, meeting with a debt counselor is a good idea to help you objectively evaluate your situation and decide if it makes sense to take this sober financial step. Personal bankruptcy is the only legal way to truly “walk away” from your debt, but it comes with some lengthy consequences.

Remember to breathe

Owing money on a bill you can’t pay is an emotional situation, and it is natural to feel frustrated or even helpless about what to do next. A good place to start is by taking an honest and detailed review of your finances, either on your own or with the help of a trusted, unbiased financial planner or similar advisor. You may be surprised at how many good alternatives you actually do have.

Keep in mind that paying a past-due debt and having it show as finally closed may not give your credit score the immediate boost you’re looking for – it will still be reflected as something that you paid late. The further you can get that delinquency in the rear-view mirror (and paying it off gets that clock started), the more your score will improve until the item is a distant memory.