Category Archives: Budgeting

financial-peer-pressure

How To Prevent Financial Peer Pressure

When you feel obligated to attend events, buy new clothes or generally keep up with the Jones, you may be flirting with debt. All these expectations mean additional expenses, and often due to financial peer pressure.

These days, were constantly told to buy luxury goods via the celebrity culture that lives on every TV channel and newsstand. Its easy to get caught up in it all. If you feel its time for a change, weve got suggestions on how to cut back.

Explain Yourself

Are your friends part of the problem? Having a social life doesnt need to mean busting your budget with expensive nights out, mini vacations or shopping sprees.

While friends often have varying financial situations, you should still be able to talk about money. Especially, if you feel youre your hang time is clouded by financial pressures. Be open and tell them that you’re trying to reduce unnecessary expenses.

Plan Low-Cost Time Together

Instead of planning expensive entertainment options, initiate low-cost events that fall within your budget. Host a pot luck dinner or game night and invite your closest friends. This will allow you to spend time together without breaking the bank.

Set A Savings Goal and Track Your Progress

Determine a set amount of money that you want to save by a certain time. Goals will help you manage your spending in the short term, while working to accomplish what you want out of the long term. Set up automatic savings and be sure to track your progress. Seeing your savings grow may encourage you to further curb your spending.

Trick Yourself Into Saving

If you have trouble saying no, it might help to eliminate the temptation to spend altogether. Employ a couple simple tips that will make it more difficult to spend your money.

  1. Carry fewer cards or try operating only on cash. Its completely different to spend 60 bucks with cash, versus the ease with which you can slide your card.
  2. Write down your goals and carry them on you. Keeping your goals in mind and finding low-cost alternatives can help you protect yourself from the pitfalls of financial peer pressure, such as credit card debt.
Roth-IRA-College-Education

Can You Tap Into a Roth IRA for College and Education?

Roth individual retirement accounts are designed to help you save for your retirement, but they can also be used for college costs if you’re in a tight spot financially. The Internal Revenue Service allows you to withdraw the money you contributed to your Roth IRA at any time without penalty or taxes. But if you withdraw earnings which you won’t touch until you’ve taken out all of your contributions, they’re taxable.

If you’re under 59 1/2, the earnings are usually hit with an additional 10 percent early withdrawal penalty. But, qualified higher education expenses allow you to avoid the penalty. Whether you’ve used up all of your loan options, or you don’t want your credit score potentially affected by taking out a student loan, tapping your Roth IRA can provide much-need college funds with a minimal tax hit.

  • Request a distribution from your Roth IRA by contacting the financial institution that holds your account. Each financial institution has a slightly different form, but you have to provide your name, identifying information, account number and how much you want to withdraw.
  • Spend your distribution on higher education expenses. To qualify for the penalty exception, which saves you the 10 percent additional tax on early distributions of earnings, you must spend it on tuition, required fees, books, supplies and equipment at a college, university or trade school. If the student is enrolled at least half-time, room and board also count as qualifying expenses. You won’t have to submit receipts with your tax return, but you should keep them just in case you get audited.
  • Report the distribution on your income taxes. If you took out only contributions, you won’t owe any taxes or penalties and you just have to note the amount withdrawn. But if you took out some of your earnings, too, those earnings count as taxable income. As long as you spent the money on qualified educational expenses, you don’t owe the early withdrawal penalty, but you must fill out Form 5329 to report the withdrawal to the IRS.

Keeping your educational goals on track can be a difficult task, but being able to leverage some of your savings in a flexible way can help keep those goals within reach. Knowing your options can help you decide on the best plan for your needs as they change over time.

This article is provided for general guidance and information. It is not intended as, nor should it be construed to be, legal, financial or other professional advice. Please consult with your attorney or financial advisor to discuss any legal or financial issues involved with credit decisions.

Published by permission from ConsumerInfo.com, Inc., an Experian company.     © 2014 ConsumerInfo.com, Inc.   All rights reserved.

Pay-Bills-With-Student-Loan

Can a Student Pay Bills With a Student Loan?

Technically, according to the U.S. Department of Education, you can only use your student loan money to pay for qualified education expenses at your school. However, once the money is in your hands, there is limited oversight for how you spend the money, which can make it very tempting to rack up substantial student loan bills for non-educational purposes.

Qualified Expenses
According to the U.S. Department of Education, qualified educational expenses include not only your tuition, but also “room and board, fees, books, supplies, equipment, dependent child care expenses, transportation, and rental or purchase of a personal computer.” Your school can give you a list of the costs of attendance so that you know how much is allotted to each category of expenses. Some of your bills will qualify to be paid with student loans, like your rent, utilities, food and school supplies. But its not just free money ”you’re not supposed to use your student loans for vacations, or closing out old expenses, like paying off old credit cards.

Limited Oversight
When you take out student loans, the money usually goes directly to your school to fund your tuition. After that, any excess amount gets paid out to you as a refund. For example, say you borrowed $15,000 and your tuition and fees charged by the school is only $9,000. You would then receive a $6,000 check that you could then spend on other bills, like your rent or books. Though you’re not supposed to use the money for non-educational expenses like vacations, and you’re required to sign a statement saying you’re using the loan proceeds for educational purposes, U.S. News notes that students can find themselves in substantial debt because they borrow extra to live extravagantly. This could result in charges of fraud, which carry could result in fines, jail time, or both.

Loss of Tax Deduction
One of the ways the government tries to make education more affordable is allowing you to deduct a certain amount of qualifying student loan interest each year. If you use your student loans for expenses that aren’t qualified, you can’t deduct any of the interest on the loans as “student loan interest” when tax time comes. For example, say that you took out a $20,000 student loan and spend $19,000 of it on qualified expenses and $1,000 on paying off old credit card debt. Technically, you’re not allowed to deduct any of the interest.

Long-Term Effects
While student loans may feel like free money because they’re so easy to get for most people, you will have to pay them back. And, like other debts, they show up on your credit report. Don’t worry, just having student loans isn’t a death threat for your credit score. If you borrow responsibly and pay back your debt as agreed, it can help your score. But, if you’ve lived lavishly and racked up excessive debt with late payments or are defaulting on, you’re going to have a very hard time getting approved for additional loans, such as a car loan or mortgage, in the future.

This article is provided for general guidance and information. It is not intended as, nor should it be construed to be, legal, financial or other professional advice. Please consult with your attorney or financial advisor to discuss any legal or financial issues involved with credit decisions.

Published by permission from ConsumerInfo.com, Inc., an Experian company.     © 2014 ConsumerInfo.com, Inc.   All rights reserved.

New-or-Used-Car

Buying New vs. Buying Used: Pros and Cons

One of the first decisions youll make before buying a car is whether youll choose to look at new or used vehicles. New cars and used cars both offer certain advantages to buyers, and which is better for you at the time of your search is a unique decision based on both your own desires as well as your financial capability. Your credit can also play a role in determining whether you should buy new or used, since available capital and financing rates depend largely on your credit score.

Financing
Many buyers look to finance the purchase of their vehicle whether new or used, as even used cars typically cost tens of thousands of dollars. If you’re not in a position to pay cash for your car in full, you may need to apply for a car loan from either the dealer or an outside financial institution. As with most loans, the higher your credit score, the lower the interest rate you can generally get on a car loan.

One of the advantages of financing a new vehicle, says Car and Driver, is that you can usually get a lower interest rate than on a used car loan. This is because new vehicles havent been hit with depreciation yet but the second they leave the lot, the car will start depreciating. However, a new car will also generally cost you more over time simply due to the higher cost hit upfront.

Customization
When you buy a new car, you can potentially get it just the way you want it ”its a chief advantage of buying a new vehicle. If you’re a patient buyer, you can custom order the vehicle with all factory options to your exact specifications. If you’re in more of a hurry, you can list your desired build and email dealers to see if your desired car already exists on a lot. If not, dealers can often locate a car very similar to your request and secure it for you. With a used car, you’ll have to choose from vehicles that are currently available in the marketplace. This means you may have to compromise on one or more factors that define your ideal vehicle, like color, drivetrain or interior options.

Warranty and Maintenance
According to Kelly Blue Book, the warranty that accompanies many new cars offers peace of mind that you can’t generally match when you buy a used car. Manufacturers offer warranties of between three and 10 years on new cars, during which time you may only be liable only for “wear and tear” items such as tires and brakes. With a used car, you’ll generally have only a short bit of warranty left ”or possibly none at all. When the warranty expires you’ll be responsible for all repair costs, which generally grow as a car ages. These expenses can eventually outweigh the lower cost you originally paid for the car.

Depreciation
Depreciation is perhaps the most significant negative factor in buying a new car versus a used one. New cars typically lose 25 to 45 percent of their value in the first few years of ownership ”with a major chunk disappearing as soon as they drive off the lot. If you can wait out those first few years and buy used, the first buyer will have absorbed the majority of the car’s depreciation and sorted out any early settling-in service issues. In terms of absolute price, you can often get a good deal on a car that’s just a few years old.

This article is provided for general guidance and information. It is not intended as, nor should it be construed to be, legal, financial or other professional advice. Please consult with your attorney or financial advisor to discuss any legal or financial issues involved with credit decisions.

Published by permission from ConsumerInfo.com, Inc., an Experian company.     © 2014 ConsumerInfo.com, Inc.   All rights reserved.

Lease-to-Own-a-Home

How to Rent a House with the Option to Buy

Renting a house with the option to buy can be a way to secure a house and lock in a price before you’re ready to buy. When you do a rent-to-buy transaction you typically pay some money upfront in addition to paying rent every month. The upfront money is usually applied to the purchase price, which helps you build equity and be able to afford the house when the time to buy it comes.

The drawback to a rent-to-buy contract can be that you usually have a limited period during which to buy, and you will usually lose the extra money youve spent if you don’t purchase the house. This means that it’s best to rent-to-buy only if you’re sure you’ll eventually be able to buy the home. There are several steps to deciding whether or not to rent a home with an option to buy.

Step 1

The first step is the most obvious find a rent-to-buy home. A real estate agent may be able to help you find one. Another strategy could be to ask the owners of homes that are available for rent if they’re open to a rent-to-buy contract while also asking the owners of homes that are for sale if they’d be willing to let you rent-to-buy the house.

Step 2

The second step is to negotiate the up-front and monthly costs of the rent-to-buy agreement so that payments will fit within your budget. You can start by establishing a monthly rent for the property. Since rent-to-buy rent usually includes both a fair-market rent and additional money for the purchase of the property, it will be more than what it would cost to simply rent the house. You will also need to determine how much the up-front option fee will be. This money can be applied towards your purchase or, if you don’t buy, it may stay with the current owner.

Step 3

Finally, the contract should specify how long your option lasts. For instance, if you rent a $125,000 house in a market where the typical rent is $1,000 per month, you might put $3,750 down as an option fee and pay $1,200 per month with $200 getting applied to the purchase price as long as you buy within three years.

Make your payments on time every month and while you’re doing that, monitor your credit reports to see if your financial situation will allow you to get a mortgage. A mortgage broker might be able to help you with strategies for managing your credit, if necessary. He can also give you guidance as to what kind of score you will need to get a mortgage and how much it will cost you.

Warnings

When you buy a rent-to-own house, consider having an attorney or real estate agent look over your contract to ensure that your interests are protected, especially if the seller still has a mortgage.

Depending on the terms of your agreement, its possible that you will lose the money you put down if you aren’t able to buy, so it’s usually best to rent to buy only if you’re sure you will be able to eventually purchase the house. Otherwise, you could simply rent and save money toward someday buying a house.

This article is provided for general guidance and information. It is not intended as, nor should it be construed to be, legal, financial or other professional advice. Please consult with your attorney or financial advisor to discuss any legal or financial issues involved with credit decisions.

Published by permission from ConsumerInfo.com, Inc., an Experian company.     © 2014 ConsumerInfo.com, Inc.   All rights reserved.

about-paying-taxes

How to Teach Your Teenager the Importance of Paying Taxes

While paying taxes might not be a fun thing to do, it is a fundamental requirement of living in the United States. The responsibility to pay even stretches to children and teenagers who earn enough to reach the Internal Revenue Service’s income minimums. Whether it’s preparing a teenager to pay taxes now or letting him or her know what will be expected when landing a new job, explaining the basics of the tax system can save your child from surprises down the line.

Step 1

Describe the many services that the government provides, perhaps putting special focus on those that will be of interest to the teenager. Explain the concept of “public goods and services,” which encompass roads, defense, parks and recreation and all cost money. Break it down for your child and explain how the government funds roads to their favorite skate park or public safety at their city amphitheater.

Step 2

Explain that the government collects income taxes from people who earn money. These funds are then allocated by the government in some other good or service.  Describe that taxes normally get automatically taken out of paychecks through a process called withholding but that your child will probably still have to file the correct income tax   forms to let the government know how much tax he or she actually owed.

Step 3

Teach your child the difference between owing taxes at the end of the year and getting a return from the Federal Treasury. For many Americans, sending in a tax return means that they get a tax refund check from the government, giving them back some or all of what they paid throughout the year, so filing a tax return could work out well for her. Owing simply means you didnt pay enough in taxes throughout the year and getting a return simply means you overpaid.

Step 4

Explain that the IRS can add penalties and interest to the tax bill if it isnt paid or if a return isnt filed. Talk about how the IRS can collect unpaid taxes, interest and penalties.  If you fail to pay taxes, the IRS can file a notice of federal tax lien, which is a public record that can be accessed by the credit bureaus. Depending on the scoring model used, this can have a huge impact on your credit score.

Step 5

Tell your teenager about other taxes. Remind him or her that many purchases are subject to sales tax, which pays for state and local services. It can also be a good time to talk about state taxes, property taxes and other taxes that are tied to specific services and purchases like vehicle license taxes. It can be a great opportunity to teach your teenager about good credit management.

About the Author
Solomon Poretsky has been a writer since 1996, with experience in the fields of financial services, real estate and technology. Poretsky holds a Bachelor of Arts in political science from Columbia University.

This article is provided for general guidance and information. It is not intended as, nor should it be construed to be, legal, financial or other professional advice. Please consult with your attorney or financial advisor to discuss any legal or financial issues involved with credit decisions.

Published by permission from ConsumerInfo.com, Inc., an Experian company.     © 2014 ConsumerInfo.com, Inc.   All rights reserved.

Solo-Retirement-Planning

Retiring Alone? Advice for Solo Retirement Planning

Its easy to find advice on retirement planning and most of it is geared towards married couples. But singles retire too, and saving for retirement is even more important when you know youll be entering your golden years solo. Yet, studies by the Vanguard Center for Retirement Research indicate that singles save far less for retirement than couples do.

Singles saving for retirement have the same ultimate goal as couples to have enough money to ensure theyll have an adequate (or better) monthly income after theyve stopped working. Singles have access to the same basic sources of retirement income that couples do, including Social Security benefits, IRAs, 401(K)s, employer pensions, and investment earnings.

However, singles need to give extra attention to certain areas of retirement planning. For example, if you are a widow or widower, you need to ascertain if you are better off taking spousal Social Security benefits or your own. If your spouse made more income than you did during your working years, his or her benefit might exceed what you would receive on your own.

Long-term care planning is also vital for solo retirees, who wont have access to care from a spouse if they become unable to care for themselves. Long-term care insurance can help ensure singles dont need to rely on the kindness of relatives or strangers for the help theyll need later in life.

Housing is also particularly important to anyone retiring alone. Your retirement home should be just big enough to meet your needs without being a burden to take care of. The home and city where you retire should afford you easy access to health care, shopping and social or cultural outlets. Remember, you wont need extra space to share with someone else, but you also wont have a spouse to rely on to do all the driving or all the chores if you cant.

This article is provided for general guidance and information. It is not intended as, nor should it be construed to be, legal, financial or other professional advice. Please consult with your attorney or financial advisor to discuss any legal or financial issues involved with credit decisions.

Published by permission from ConsumerInfo.com, Inc., an Experian company.     © 2014 ConsumerInfo.com, Inc.   All rights reserved.

debit-or-credit

Pros & Cons – Bank Debit Card Usage

Debit cards look like credit cards, can usually be used like credit cards, and in many ways are as convenient as credit cards. When you use debit cards, you don’t run the risk of having a credit score harmed by a late payment, either. On the other hand, they don’t affect your credit, which is something you may want to do if you plan to finance a home or apply for a personal loan.

Little Application Process

Getting a debit card is relatively easy and can be a benefit. Many banks give them to you automatically when you apply for a checking account and as long as you’re in generally good standing with the banking system, you should be able to get one. However, some financial institutions may still check your credit report before issuing you a debit card.

No Monthly Payments

Your debit card is directly linked to your checking account. When you use your debit card to make a purchase, the money is immediately withdrawn from your checking account. This means that you don’t have to pay back what you buy ” you’ve already paid for it. It also means that you don’t have to budget to make monthly payments and run the risk of paying them late and harming your credit.

No Credit Score

A debit card looks like a credit card and often works like one, but it isn’t one. Since you aren’t borrowing money and paying it back, you aren’t establishing a record of payment history. Your debit card won’t show when you review your credit report, and using it won’t affect your score since it isn’t a credit account.

Helping Your Credit

One of the ways to build credit history is to use a credit card moderately and pay it off regularly. Using a debit card wont provide this added benefit. This is because payment history is a factor used to calculate your credit score and making on-time and in-full payments can contribute to your score.

Identity Protection

Most credit cards have similar fraud protection safeguards in place. If a thief uses your debit card maliciously, they may have direct access to your financial institution. Banks also track for suspicious activity or signs of fraud. Both your credit card and debit card can be protected from fraudulent activity ”depending on the issuers policies. However, fraud can happen to anyone, so its best to check your credit report regularly to verify the information included is accurate and report any unauthorized activity.

 

 

About the Author
Solomon Poretsky has been a writer since 1996, with experience in the fields of financial services, real estate and technology. Poretsky holds a Bachelor of Arts in political science from Columbia University.

 

This article is provided for general guidance and information. It is not intended as, nor should it be construed to be, legal, financial or other professional advice. Please consult with your attorney or financial advisor to discuss any legal or financial issues involved with credit decisions.

Published by permission from ConsumerInfo.com, Inc., an Experian company.     © 2014 ConsumerInfo.com, Inc.   All rights reserved.

pay-down-debt-or-save

Which is Better? Paying Off My Debt or Starting a Savings

As the saying goes, when it rains, it pours. And while it might seem more responsible to pay off debt first, if you dont save for a rainy day, you might find yourself right back in the debt you just got yourself out of. Instead, find a balanced approach to paying off your debt, while also putting away should an emergency arise.

According to the experts at Mint.com, you should have between three and six months salary saved in case of emergencies. But this doesnt mean you should put paying your credit cards or loans on hold that could ruin your credit and have you drown in debt.

First, organize your finances and calculate how much youre spending. If frivolous spending has you exceeding your budget, learn how to cut expenses so you can put more toward your savings instead. Continue to stay up current with all of your payments while putting away as much as you can in your savings.

Once you have met your initial savings goal, consider taking a closer look at your debt. If high-interest rates and are cutting deep into your budget, consider paying more than the minimum due to get yourself out of debt faster.

The secret to balancing your payments between paying off your debts and saving for an emergency is to avoid accruing additional debt. Once youre out of debt, you can increase your efforts to build your savings. This will only help you meet your financial goals, could help change your credit ratio as well!

 

This article is provided for general guidance and information. It is not intended as, nor should it be construed to be, legal, financial or other professional advice. Please consult with your attorney or financial advisor to discuss any legal or financial issues involved with credit decisions.

Published by permission from ConsumerInfo.com, Inc., an Experian company.     © 2014 ConsumerInfo.com, Inc.   All rights reserved.

budget-for-new-parents

Five Budgeting Ideas for New Parents

Planning for the arrival for a new baby can be exhilarating. Then sticker shock sets in. The truth is, having a new baby doesn’t have to completely drain your wallet. Let’s take a look at a few ways you can budget for the arrival of your new bundle of joy.

Plan for Expenses
Before doing any sort of financial planning, you need to understand the ongoing expenses you should expect in the long and short term when welcoming a new baby into your life. This includes clothing, daycare, formula versus breast-feeding and using disposable diapers. It doesnt include one-time costs such as baby furniture, gear, nursery items and toys.

Develop Financial Safety Nets
Given the costs of bringing a baby into your life, having a safety net to cover a variety of risks is essential. Reduce your monthly expenses as much as possible to pay down debt and then save cash for emergencies. Consider taking out life and disability insurance to take care of your family in the event you die or become disabled and unable to provide for them. Also, dont forget to add Junior to your health insurance policy so that his or her medical issues dont compromise the familys well-being.

Think Creatively About Child Care
Daycare can be so expensive that it takes your breath away. Depending on your income, you may consider staying at home to reduce or eliminate the cost of childcare. Some parents nanny share,  where two households split the cost of one nanny. They may have the nanny work out of one home while caring for both children while the parents split the costs. Another option is part-time care given by a relative.

Spend According to Your Budget
If money is tight which describes the situation for most new parents now isnt the time to spend frivolously. Going to flea markets and yard sales for baby clothes or toys can be a budget saver. As your baby grows out of these items, you can sell them or donate them for a tax deduction. However, while you may be in the mood to save money, think twice before purchasing used baby items that may have safety issues. For example, a used car seat might have outdated safety features or hidden damage could cause it to fail in a crash.

Get Help From Uncle Sam
Quite a few tax advantages can help defray the costs of supporting your little one. If your employer offers a flexible spending account, you can set aside pretax funds to cover costs such as daycare and inevitable medical expenses. Be sure to get the account started soon enough to cover childbirth expenses. Come tax time, one of the larger tax breaks is the child tax credit, which is up to $1,000 for a child under 17. Also, claiming your child as a dependent reduces your overall tax liability.

 

This article is provided for general guidance and information. It is not intended as, nor should it be construed to be, legal, financial or other professional advice. Please consult with your attorney or financial advisor to discuss any legal or financial issues involved with credit decisions.

Published by permission from ConsumerInfo.com, Inc., an Experian company.     © 2014 ConsumerInfo.com, Inc.   All rights reserved.