TagRetirement

Can I Inherit Debt?

Man trying to role a huge boulder labeled "DEBT" up a steep hillWhen someone passes away leaving debts behind, you might be wondering if you have any personal liability to pay them. If you have aging parents, for instance, you may be worried about having to assume responsibility for their mortgage payments, credit cards or other debts. If you’ve asked yourself, “Can I inherit debt?” the answer is typically no, even though those debts don’t automatically disappear. But there are situations in which you may have to deal with a loved one’s creditors after they’re gone.

How Debts Are Handled When Someone Passes Away

Debts, just like assets, are considered part of a person’s estate. When that person passes away, their estate is responsible for paying any and all remaining debts. The money to pay those debts comes from the asset side of the estate.

In terms of who is responsible for making sure the estate’s debts are paid, this is typically done by an executor. An executor performs a number of duties to wrap up a person’s estate after death, including:

  • Getting a copy of the deceased person’s will if they had one and filing it with the probate court
  • Notifying creditors and other entities of the person’s death (for example, the Social Security Administration would need to be notified so any Social Security benefits could be stopped)
  • Completing an inventory of the deceased person’s assets and their value
  • Liquidating those assets as needed to pay off any debts owed by the estate
  • Distributing the remaining assets to the people or organizations named in the deceased person’s will if they had one or according to inheritance laws if they did not

In terms of debt repayment, executors are required to give notice to creditors who may have a claim against the estate. Creditors are then giving a certain window of time, according to state laws, in which to make a financial claim against the estate’s assets for repayment of debts.

If a creditor doesn’t follow state guidelines for making a claim, then those debts won’t be paid from the estate’s assets. But if creditors are less than reputable, they may try to come after the deceased person’s spouse, children or other family members to collect what’s owed.

Not all assets in an estate may be used to repay debts owed by a deceased person. Any assets that already have a named beneficiary, such as a life insurance policy, a 401(k), individual retirement account, payable on death accounts or annuity, would be transferred to that beneficiary automatically.

Can I Inherit Debt From My Parents?

Pencil erasing the word "DEBT"

This is an important question to ask if your parents are carrying high amounts of debt and you’re worried about having to pay those bills when they pass away. Again, the short answer is usually no. You generally don’t inherit debts belonging to someone else the way you might inherit property or other assets from them. So even if a debt collector attempts to request payment from you, there’d be no legal obligation to pay.

The catch is that any debts left outstanding would be deducted from the estate’s assets. If your parents were substantially in debt when they passed away, repaying them from the estate may leave little or no assets for you to inherit.

But you should know that you can inherit debt that you were already legally responsible for while your parents were alive. For instance, if you cosigned a loan with them or opened a joint credit card account or line of credit, those debts are legally yours just as much as they are your parents. So, once they pass away, you’d be solely responsible for repaying them.

And it’s also important to understand what responsibility you may have for covering long-term care costs incurred by your parents while they were alive. Many states have filial responsibility laws that require children to cover nursing home bills, though they aren’t always enforced. Talking to your parents about long-term care planning can help you avoid situations where you may end up with an unexpected debt to pay.

Can I Inherit Debt From My Children?

The same rules that apply to inheriting debt from parents typically apply to inheriting debts from children. Any debts remaining would be paid using assets from their state.

Otherwise, unless you cosigned for the debt, then you wouldn’t be obligated to pay. On the other hand, if you cosigned private student loans, a car loan or a mortgage for your adult child who then passed away, as cosigner you’d technically have a legal responsibility to pay them. Federal student loans are an exception.

If your parents took out a PLUS loan to pay for your higher education costs and something happens to you, the Department of Education can discharge that debt due to death. And vice versa, if your parents pass away then any PLUS loans they took out on your behalf could also be discharged.

Can I Inherit Debts From My Spouse?

When marriage and money mix, the lines on inherited debt can get a little blurred. The same basic rule that applies to other situations applies here: if you cosigned or took out a joint loan or line of credit together, then you’re both equally responsible for the debt. If one of you passes away, the surviving spouse would still have to pay.

But what about debts that are in one spouse’s name only? That’s where it’s important to understand how living in a community property state can affect your liability for marital debts. If you live in a community property state, debts incurred after the marriage by one spouse can be treated as a shared financial obligation. So if your spouse opened up a credit card or took out a business loan, then passed away you could still be responsible for paying it. On the other hand, debts incurred by either party before the marriage wouldn’t be considered community debt.

Consider Getting Help If You Need It

If a parent, spouse, sibling or other family member passes away, it can be helpful to talk to an attorney if you’re being pressured by debt collectors to pay. An attorney who understands debt collection laws and estate planning can help you determine what your responsibilities are for repaying debts and how to handle creditors.

The Bottom Line

Son talks with his mother about her debtWhether or not you’ll inherit debt from your parents, child, spouse or anyone else largely hinges on whether you cosigned for that debt or live in a community property state in the case of married couples. If you’re concerned about inheriting debts, consider talking to your parents, children or spouse about how those financial obligations would be handled if they were to pass away. Likewise, you can also discuss what financial safety nets you have in place to clear any debts you may leave behind, such as life insurance.

Tips for Estate Planning

  • Consider talking to a financial advisor about how to manage and pay off debts you owe or any debts you might inherit from someone else. If you don’t have a financial advisor yet, finding one doesn’t have to be difficult. SmartAsset’s financial advisor matching tool can help you connect with an advisor in your local area. It takes just a few minutes to get your personalized advisor recommendations online. If you’re ready, get started now.
  • The Fair Debt Collection Practices Act caps the statute of limitations for unpaid debt collections at a maximum of six years, although most states specify a much shorter time frame. However, some debt collectors buy so-called zombie debts for pennies on the dollar and then – unscrupulously – try to collect on them. Here’s how to deal with such operators.

Photo credit: ©iStock.com/NiseriN, ©iStock.com/AndreyPopov, ©iStock.com/FatCamera

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Source: smartasset.com

Tips to Consolidate Credit Card Debt

Tips to Consolidate Credit Card Debt

Editorial Note: This content is not provided by the credit card issuer. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved or otherwise endorsed by the issuer.

If left unchecked, extensive amounts of credit card debt can cripple your finances. The good news is there are many ways to handle debt, though each requires a dedicated effort on your part. But if you can manage to consolidate credit card debt, you will reduce your burden relatively quickly. In the process, you’ll avoid the exorbitant interest rates that accompany most credit cards. Below we take a look at some of the most effective techniques you can use to make this goal a reality.

Find Out Your Credit Score

Before you can work on improving your credit and minimizing your debt, you have to know where you currently stand.

Many credit card issuers allow cardholders to see their FICO® credit score free of charge once a month, so check out if any of your cards include that free credit score. The three major credit bureaus – TransUnion, Experian and Equifax – also give out free annual credit reports. If that’s not enough, websites like Credit Karma™ and Credit Sesame provide a free look at your credit score and reports as well.

It is vital to review your credit report with a fine-tooth comb to ensure the accuracy of the information. If you find errors be sure to let the credit bureau in question know so the issue can be eradicated as soon as possible.

Zero Interest Balance Transfer Cards

Although it might seem counterintuitive to apply for another credit card to lessen your debt, a zero interest balance transfer card could really help. These cards typically include an introductory 0% balance transfer Annual Percentage Rate (APR) for six months or more. This ultimately allows you to move debt from one account to another without incurring more interest. However, once the introductory offer concludes, any leftover balances will revert to your base APR.

These offers aren’t totally free, though. Most cards also charge a balance transfer fee that’s usually between 3% and 5% of the transfer. Even with this initial payment, you will almost always still save money over leaving your debt where it stands currently.

If you want to consolidate credit card debt, here are three different balance transfer credit cards you could apply for, with varying introductory interest rates and transfer fees:

Balance Transfer Credit Cards Card Intro Balance Transfer APR Balance Transfer Fee Chase Slate 0% APR for first 15 months; then 16.49% to 25.24% Variable APR, depending on your creditworthiness No fee for first 60 days; then $5 or 5% of each transfer, whichever is greater Citi Double Cash Card 0% introductory APR for 18 months from date of first transfer when transfers are completed within 4 months from date of account opening; then 15.49% to 25.49% Variable APR, depending on your creditworthiness $5 or 3% of each transfer, whichever is greater BankAmericard® credit card 0% APR for first 15 billing cycles; then 14.49% to 24.49% Variable APR, depending on your creditworthiness No fee for first 60 days; then $10 or 3% of each transfer, whichever is greater Take Out a Personal Loan

Tips to Consolidate Credit Card Debt

The thought of taking out another loan probably doesn’t sound too appetizing to consolidate credit card debt. But a personal debt consolidation loan is one of the speediest ways to rid yourself of credit card debt. More specifically, you can use it to pay off most or all of your debt in one lump sum. That way, your payments are all merged into a single account with your lender.

The APR and length of the offered loan and the minimum credit score needed for approval are the main factors that should go into your final decision on a lender. By concentrating on these three components of the loan, you can map out what your monthly payments will be. As a result, you can more easily implement them into your financial life.

Applying for a personal consolidation loan can have a detrimental effect on your credit. Unfortunately, most institutions will run a hard credit check on you prior to approval. However, many online lenders don’t do this, which might ease your mind depending on the severity of your debt situation.

These loans are available through a wide variety of financial institutions, including banks, online lenders and credit unions. Here are a few examples of some of the most common debt consolidation lenders:

Common Debt Consolidation Lenders Banks Wells Fargo, U.S. Bank, Fifth Third Bank Online Lenders Lending Club, Prosper, Best Egg Credit Unions Navy Federal Credit Union, Unify Financial Credit Union, Affinity Federal Credit Union Auto or Home Equity Loan

If you own assets like a home or car, you can take out a lump-sum loan based on the equity you hold in them to consolidate credit card debt. This is a great way to reuse money you paid toward an existing loan to take care of your debt. When paying back your auto or home equity loan, you’ll usually pay in fixed amounts at a relatively low interest rate. Even if this rate isn’t great, it’s likely much better than any offer you’d receive from a card issuer.

Equity loans are technically a second mortgage or loan, meaning your house or car will become the loan’s collateral. That means you could lose your house or car if you cannot keep up with your equity loan payments.

Create a Budget

Tips to Consolidate Credit Card Debt

To build a budget, you first need to figure out your approximate monthly net income. Don’t forget to take into account taxes when you’re doing this.

You can then start subtracting your variable and fixed expenses that are expected for the upcoming month. This is where you will likely be able to identify where you’re overspending, whether it’s on food, entertainment or travel. Once you’ve completed this, you can begin cutting back where you need to. Then, use your surplus cash to pay off your debt one month at a time.

It shouldn’t matter if you’re dealing with substantial credit card debt or not. A monthly spending budget should always be a part of how you manage your finances. While this is likely the slowest way to eliminate debt, it’s also the most financially sound. At its core, it attempts to fix the problem without taking funding from an outside source. This should leave very little financial strife in the aftermath of paying off your debt.

Professional Debt Counseling

Perhaps since you’ve found yourself in serious debt, you feel like you want professional help getting out of it. Well the National Foundation for Credit Counseling® (NFCC®) is available for just that reason. The NFCC® has member offices all around the U.S. that are certified in helping you consolidate credit card debt.

These counselors won’t only address your current financial issues and debt. They’ll also work to create a plan that will help you avoid this situation again in the future.

Agencies that are accredited by the NFCC® will have it clearly displayed on their website or at their offices. If you’re not sure where to look, the foundation created an agency locator that’ll help you find a counselor nearby.

Borrow From Your Retirement

Taking money early from your employer-sponsored retirement account obviously isn’t ideal. That’s means borrowing from your retirement is a last-ditch alternative. But if your credit card debt has become such a handicap that it’s affecting all other facets of your life, it is a viable option to consolidate credit card debt.

Because you are technically loaning money to yourself, this will not show up on your credit report. Major tax and penalty charges await anyone who has trouble making payments on these loans though. To make matters worse, if you quit your job or are fired, you’re typically only given 60 days to finish paying it off to avoid incurring a penalty.

Tips To Consolidate Credit Card Debt

  • If you take the time to come up with a budget, don’t let it go to waste. While you might find it tough to stick to, especially if you’re trying to cut back, it is the best way to manage your money correctly. Even if a budget becomes habit, stay vigilant with where your money is being spent.
  • Although a financial advisor will cost money, he or she might be able to help you keep your finances in check while ultimately helping you plan for the future as well. However, if this isn’t an option for you financially, stay on track with your NFCC® debt counselor’s plan.
  • There are so many ways to gain access to your credit score that there’s virtually no excuse for not knowing it. It doesn’t matter if you do it through one of the top three credit bureaus, FICO® or one of your card issuers. Just remember to pay attention to those ever-important three digits as often as possible.

Editorial Note: This content is not provided by the credit card issuer. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved or otherwise endorsed by the issuer.

Photo credit: ©iStock.com/Liderina, ©iStock.com/ferrantraite, Â©iStock.com/cnythzl

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Source: smartasset.com

6 Ways I Saved Money On College Costs

Check out this list of ways to save money on college costs. This is a great list!How much does college cost? This is a question many wonder. There’s rarely a week that goes by where I don’t receive an email from a student or parents of a student who are looking for ways to cut college costs. That’s why today I want to talk about college costs and how you can create a college budget that works so that you can save money in college.

College is very expensive – there is no doubt about that.

However, I want you to know that it IS possible to get a valuable college degree on a budget!

The average public university is over $20,000 per year and the average private university totals over $45,000 once you account for tuition, room and board, fees, textbooks, living expenses and more.

Even with how expensive college can possibly be, there are many ways to cut college expenses and create a college budget so that you can control rising college costs.

Continue reading below to read about the many different ways I cut college costs. While I was not perfect and still racked up student loan debt, I did earn three college degrees on a reasonable budget.

Related articles:

  • How I Graduated From College In 2.5 Years With 2 Degrees AND Saved $37,500
  • How I Paid Off $38,000 In Student Loan Debt In 7 Months
  • The Benefits of Paying Off Student Loan Debt Early
  • Should I Ruin My Retirement By Helping My Child Through College?
  • How To Save Money – My Best Money Saving Tips

 

1. Take classes at a community college to cut college costs.

Whether you are in college already or you haven’t started yet, taking classes at a community college can be a great way to save money.

Earning credits at a community college usually costs just a small fraction of what it would cost at a 4-year college, so you may find yourself being able to save thousands of dollars each semester.

There is a myth out there that your degree is worth less if you go to a community college. That is NOT TRUE at all. When you finally earn your 4-year degree, your degree will only say where you graduated from and it won’t even mention the community college credits at all. So this myth makes no sense because your degree looks the exact same as everyone else’s’ who you went to college with. You might as well save money because it won’t make much of a difference.

I only took classes at a community college during one summer semester where I earned 12 credits, and I still regret not taking more. I probably could have saved around $20,000 by taking more classes at my local community college.

Also, you are most likely just taking general credits at the community college, so it’s not like you would be missing much by taking classes there instead of a college that has a better reputation for the major you are seeking.

If you do decide to go to a community college, always make sure that the 4-year college you plan on attending afterwards will transfer all of the credits. It’s an easy step to take so do not forget! You should do this before you sign up and pay for any classes as well as to make sure that ALL of the classes will transfer succesfully.

 

2. Take advantage of high school classes to lower your college budget.

Many high schools allow you to take college classes to earn both college and high school credits at the same time.

This is something I highly recommend you look into if you are still in high school, as it saves time and is one of the best ways to save money on college costs.

When I was in my senior year in high school, nearly all of my classes were dual enrollment courses where I was earning college and high school credit at the same time. I took AP classes and classes that earned me direct college credit from nearby private universities. I left high school with around 14-18 credit hours (I can’t remember the exact amount). This way I knocked out a whole semester of college. I could’ve taken more, but I decided to take early release from high school and worked 30-40 hours a week as well.

 

3. Take all the credits you can to stay within your college budget.

At many universities, you pay a flat fee. So whether you take 12 credit hours or 18 credit hours, you are paying nearly the exact same price.

For this reason, I always recommend that a student take as many classes as they can if they are going to a college that charges a flat fee tuition.

If you think you can still earn good grades and do whatever else you do on the side, definitely get full use of the college tuition you are paying for!

 

4. Apply for scholarships to lower your college costs.

Before you start your semester, you should always look into scholarships, grants, FAFSA, and more. You usually have to turn in any paperwork around spring time for the following semester, so I highly recommend doing this right now if you are going to college in the fall.

Another myth will be busted right now. Many believe that all scholarships are impossible to have or it means you have to win a contest. That is just a myth.

I received around $16,000 a year in scholarships to the private university I attended. That helped pay for a majority of my college tuition. The scholarships were easy for me to get as they were all just because I earned good grades in high school and scored well on tests. I received scholarships to all of the other colleges I applied for as well just for good grades, so I know they can be found as long as you do well in high school!

There are other ways to find scholarships as well. You can receive scholarships from private organizations, companies in your town, and more. Do a simple Google search and I am sure you will find many free websites that list out possible scholarships for you to apply to.

Tip: Many forget that you usually have to turn in a separate financial aid form directly to your college. Don’t forget to do this by the deadline each year!

 

5. Search for cheaper textbooks to lower your college budget.

Students usually spend anywhere from around $300 to $1,000 on textbooks each semester, depending on the amount of classes they are taking and their major.

For me, many of my classes required more than one book and each book was usually around $200 brand new. This means if I were to buy all of my college textbooks brand new, I probably would have had to spend over $1,000 each semester.

I saved a decent amount of money on college textbooks by renting them and finding them used. Renting them was nice because I just had to pay one fee and didn’t ever have to worry about what to do with the textbook after the class was done, as I only had to return them. There was no worrying about the book being worthless if a new edition came out, which was nice! Buying books used was nice occasionally as well just because sometimes I could make my money back.

I recommend Campus Book Rentals if you are looking for textbook rentals. Their rentals are affordable and they make getting the textbooks you need easy.

Read: How To Save Money On Textbooks + Campus Book Rentals Review

 

6. Skip the high price of living on campus to cut your college budget.

To save more money, I decided to live on my own. I didn’t have the option of living at home after high school and living on campus would have cost me a ton of money.

Instead, I found a very cheap rental house (the house was VERY small and probably could have been considered a tiny home) and was able to somewhat easily commute to work and college from it. I probably saved around $500 a month by living on my own instead of on campus, and I learned a lot by living on my own at a young age as well.

If you can live at home though and want to save money, I highly recommend it if it’s an option for you. You can save thousands of dollars a semester by doing this!

I understand that some are against this because it may impact your “college experience,” but I think most people would be fine not living on campus, especially if it’s not in the budget. You could probably save around $40,000 over the years on your degree by living at home.

How did you cut college costs and control your college budget? How much student loan debt did you have when you graduated?

 

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Source: makingsenseofcents.com

We Want to Retire to Florida or a Florida-Type Atmosphere and Buy a Condo With Lots of Amenities for $250,000—Where Should We Go?

Retirement locales in Florida and South CarolinaGetty Images

Dear MarketWatch,

My wife and I are looking to retire in three years from New Jersey to Florida or a Florida-type atmosphere — warm weather, no snow!

We will be getting around $5,000 from Social Security monthly and will have a little over $1 million spread among savings/401(k)/house equity. We want to buy a condo for about $250,000 that has all the extras like pools, restaurants, social activities and near the beach.

Can you make any suggestions?

Thanks,

Marty

Dear Marty,

With 1,350 miles of coastline in Florida alone, never mind the rest of the South, you have many possibilities for your retirement. But as you can imagine, properties closest to the beach are more expensive, so “near the beach” may involve some compromise.

I started my search with Realtor.com (which, like MarketWatch, is owned by News Corp.) and its picks of affordable beach communities, but didn’t stick to it exclusively.

My three suggestions are just a starting point. No place is perfect, not every development will have all the amenities you want, and every town has its own personality, so you may want to think about what else is important to you. You also may want to consider gated communities and townhomes, not just multistory condominium buildings.

As you narrow down your list, I recommend you visit at least twice — once in the winter to experience the crowds in high season and once in the summer to understand what southern humidity is like. It’s worse than in New Jersey.

Think about how you will build your new social network, even with all the social amenities in your condo building. Don’t rule out the local senior center or the town’s recreation department.

Consider renting for the first year to test it out to make sure you’ve picked the right area.

Then there are the money questions. The last thing you need is a surprise.

You’ll have condo fees; they can be quite high, particularly in a high-rise building along the beach. What do they cover and what don’t they cover? How much have fees been rising over, say, the past 10 years? How does the board budget for bigger repairs? More broadly, are you OK with the condo association’s rules?

Ask about the cost of both flood and wind insurance given that the southern coastline is regularly threatened with hurricanes. That’s on top of homeowner’s insurance. Or are you far enough inland that you can get away without them?

Walk into the tax assessor’s office to try for a more accurate tax assessment than your real-estate agent may give you. And since this would be your primary residence, ask about the homestead exemption.

And don’t forget that you’re trading your New Jersey heating bill for more months of air conditioning; what will that cost?

Finally, three years isn’t that far away. Start decluttering now. That’s hard work, too.

Here are three coastal towns to get you started on your search:

Venice, Florida

Venice Beach pier
Venice Beach pier

frankpeters/iStock

This town of nearly 25,000 on the Gulf Coast is part of the Sarasota metro area, deemed by U.S. News & World Report to be the best area in the U.S. to retire. Venice is 25 miles south of Sarasota and its big-city amenities; it’s 60 miles north of Fort Myers, the runner-up in the U.S. News listing.

It also made Realtor.com’s list of affordable beach towns for 2020.

This is a retiree haven — 62% of residents are 65 and over, according to Census Bureau data.

While you can always travel to the nearby big cities, when you want to stay local, see what’s on at the Venice Performing Arts Center and the Venice Theatre. Walk or bicycle along the 10.7-mile Legacy Trail toward Sarasota and the connecting 8.6-mile Venetian Waterway Park Trail to the south. The latter will lead you to highly ratedCaspersen Beach.

Temperature-wise, you’ll have an average high of 72 in January (with overnight lows averaging 51) and an average high of 92 in August (with an overnight low of 74).

Here’s what is on the market right now, using Realtor.com listings.

Boynton Beach, Florida

Boynton Beach condos
Boynton Beach condos

Carl VMAStudios/Courtesy The Palm Beaches

On the opposite side of the state, smack between Palm Beach and Boca Raton, is this city of about 80,000 people, plenty of whom are from the tri-state area. More than one in five are 65 or older.

Weather is similar to that in Venice: an average high of 73 in January and 85 in August.

Boynton Beach is in the middle of developing the 16-acre Town Square project that will include a cultural center and residential options, among other things. Still, this is an area where one town bleeds into the next, so whatever you don’t find in Boynton Beach, you’ll probably find next door.

At the western edge of town is the Arthur R. Marshall Loxahatchee National Wildlife Refuge, 145,000 acres of northern Everglades and cypress swamp. The Green Cay Nature Center is another natural attraction.

You can also hop Tri-Rail, a commuter train line that runs from West Palm Beach to the Miami airport with a stop in Boynton Beach, when you want to go elsewhere. The fancier Brightline train is adding a stop in Boca Raton to its existing trio of West Palm Beach, Fort Lauderdale and Miami; the current plan is for a mid-2022 opening.

This city has many amenity-laden retirement communities, and the median listing price for condos and townhouses fit your budget, according to Realtor.com data. Here’s what’s on the market now.

Myrtle Beach, South Carolina

Myrtle Beach, FL
Myrtle Beach, FL

Kruck20/iStock

If you’re ready to look beyond Florida, Myrtle Beach, S.C., with nearly 35,000 people, made Realtor.com’s 2018 and 2019 lists of affordable beach towns, and Murrells Inlet, just to the south and home to just under 10,000 people, made the 2020 list. The broader Myrtle Beach area, known as the Grand Strand, extends for 60 miles along the coast.

Summer temperatures in Myrtle Beach are a touch cooler than Florida; an average high of 88 in July, with lows averaging 74.

A word of warning: In the winter, average overnight lows get down to around 40, and average daytime highs reach the upper 50s. Is that acceptable, or too cold?

Myrtle Beach boasts of its low property taxes, especially when combined with the state’s homestead exemption. While you may think of the city as a vacation destination, 20% of residents are 65 or older. (Nearly 32% of Murrells Inlet residents are seniors.)

Here’s what’s for sale now in Myrtle Beach and in Murrells Inlet.

The post We Want to Retire to Florida or a Florida-Type Atmosphere and Buy a Condo With Lots of Amenities for $250,000—Where Should We Go? appeared first on Real Estate News & Insights | realtor.com®.

Source: realtor.com

6 Signs Your Personal Finance Software Makes Life Easier

6 Signs Your personal finance software makes life easier

6 Signs Your Personal Finance Software Makes Life Easier

Finding personal finance software is easy, because there are countless choices in mobile apps, online programs, and finance software you can run on your home computer. But they’re certainly not equal. Personal finance software should make your life simpler, not more complicated, and it should be customizable for your particular life, goals, and needs. You know you’ve found great software when your financial life becomes easier over time. Here are 6 signs your personal finance software makes life easier.

1. You Haven’t Paid a Late Fee in Months

Does your personal finance software let you know in advance of when bills are due? It should be easy to set up automated alerts that tell you a few days before monthly, quarterly, or yearly bills are due, so you can take care of them and avoid annoying and guilt-inducing late fees. Ideally your software should notify you by text, so you’ll be sure and get the message whatever you’re doing and wherever you are.

2. Spending Categories Correspond to Your Actual Life

When personal finance software requires you to shoehorn your actual spending patterns into pre-set spending categories, the result can be confusion and frustration. Look for software that lets you create an unlimited number of spending categories you can customize. Do you buy your employees breakfast once a month? You can make a spending category for it. Are you a coffee or microbrew aficionado? You can make a spending category for it. Your budget should conform to your life, not the other way around.

3. You See How Trimming Budget Fat Affects Financial Goals

Sometimes it just doesn’t feel worth it to hold back at the grocery store after a long day or when buying Christmas presents. But when your personal finance software shows you exactly how disciplined spending helps you achieve your financial goals, like a vacation or paying off a loan, it’s easy to avoid giving in to those little temptations you face every day. When you can see how your discipline pays off, you’re more likely to stick with your good habits.

Start now: Get budgeting software from Mint to help manage your finances and make everyday life simpler by clicking here.

4. You May Have Faced One or Two Painful Truths

Powerful personal finance software can tell you things like how much you spent on fast food last week, or how much you’ve paid in non-network ATM fees this month. Sometimes, getting control of your personal finances means facing some harsh truths, like how much those little extras add up to. Your software should also be able to tell you how much more quickly you can reach financial goals if you cut a certain dollar amount from various spending categories. It’s a great way to stay on track to your goals.

Meeting finance goals with personal finance software5. You Know Exactly How Close You Are to Meeting Financial Goals

Maybe you want to save for retirement, or build up a down payment on a home. Your personal finance software should show you exactly how close you are to your goal at any time. You should also be able to receive monthly emails that track your progress and see how your everyday spending decisions affect how much you’ll have left over at the end of the month. Don’t settle for software that doesn’t let you track your progress easily.

6. Your Personal Finance Software Goes With You Everywhere

Personal finance software that links your computer and your mobile devices empowers you to make smart spending choices anytime, anywhere. Thinking about buying an item you unexpectedly find on sale? You can check your account balances right on your phone and know instantly if you can afford it. You can also set up convenient alerts that can tell you right away such things as whether you’re approaching your credit limits on your credit cards.

Personal finance software has come a long way since the days you had to manually enter checkbook balances and draft amounts. Today’s software offers an astonishing array of features that not only help you achieve financial goals, but actually make your everyday life easier. And when it links your accounts to your computer and your mobile devices, like Mint does, you have all the budget tools you need, wherever you go.

Start now: Get budgeting software from Mint to help manage your finances and make everyday life simpler by clicking here.

The post 6 Signs Your Personal Finance Software Makes Life Easier appeared first on MintLife Blog.

Source: mint.intuit.com

Should I Cash Out My 401k to Pay Off Debt?

Paying off debt may feel like a never-ending process. With so many potential solutions, you may not know where to start. One of your options may be withdrawing money from your retirement fund. This may make you wonder, “should I cash out my 401k to pay off debt?” Cashing out your 401k early may cost you in penalties, taxes, and your financial future so it’s usually wise to avoid doing this if possible. When in doubt, consult your financial advisor to help determine what’s best for you.

Before cashing out your 401k, we suggest weighing the pros and cons, plus the financial habits you could change to reduce debt. The right move may be adjusting your budget to ensure each dollar is being put to good use. Keep reading to determine if and when it makes sense to cash out your 401k.

How to Determine If You Want to Cash Out Your Retirement

How to Determine If You Want to Cash Out Your Retirement

Deciding to cash out your 401k depends on your financial position. If debt is causing daily stress, you may consider serious debt payoff plans. Early withdrawal from your 401k could cost you in

Deciding to cash out your 401k depends on your financial position. If debt is causing daily stress, you may consider serious debt payoff plans. Early withdrawal from your 401k could cost you in taxes and fees as your 401k has yet to be taxed. Meaning, the gross amount you withdraw from your 401k will be taxed in full, so assess your financial situation before making a decision.

Check Your Eligibility

Depending on your 401k account, you may not be able to withdraw money without a valid reason. Hefty medical bills and outstanding debts may be valuable reasons, but going on a shopping spree isn’t. Below are a few requirements to consider for an early withdrawal:

  • Financial hardships may include medical expenses, educational fees, bills to prevent foreclosure or eviction, funeral expenses, or home repairs.
  • Your withdrawal is lower or exactly the amount of financial assistance you need.

To see what you may be eligible for, look up your 401k documentation or reach out to a trusted professional.

Assess Your Current Financial Situation

Sit down and create a list of your savings, assets, and debts. How much debt do you have? Are you able to allocate different funds towards debts? If you have $2,500 in credit card debt and a steady source of income, you may be able to pay off debt by adjusting your existing habits. Cutting the cord with your TV, cable, or streaming services could be a great money saver.

However, if you’re on the verge of foreclosure or bankruptcy, living with a strict budget may not be enough. When looking into more serious debt payoff options, your 401k may be the best route.

Calculate How Much of Your Retirement Is at Risk

Having a 401k is crucial for your financial future, and the government tries to reinforce that for your best interest. To encourage people to save, anyone who withdraws their 401k early pays a 10 percent penalty fee. When, or if, you go to withdraw your earnings early, you may have to pay taxes on the amount you withdraw. Your tax rates will depend on federal income and state taxes where you reside.

Say you’re in your early twenties and you have 40 years until you’d like to retire. You decide to take out $10,000 to put towards your student loans. Your federal tax rate is 10 percent and your state tax is four percent. With the 10 percent penalty fee, federal tax, and state tax, you would receive $7,600 of your $10,000 withdrawal. The extra $2,400 expense would be paid in taxes and penalties.

The bottom line: No matter how much you withdraw early from your 401k, you will face significant fees. These fees include federal taxes, state taxes, and penalty fees.

What Are the Pros and Cons?

What Are the Pros and Cons?

Before withdrawing from your 401k, there are some pros and cons to consider before cashing out early.

Pros:

  • Pay off debt sooner: In some cases, you may pay off debt earlier than expected. By putting your 401k withdrawal toward debt, you may be able to pay off your account in full. Doing so could help you save on monthly interest payments.
  • Put more towards savings: If you’re able to pay off your debt with your early withdrawal, you may free up your budget. If you have extra money each month, you could contribute more to your savings. Adding to your savings could earn you interest when placed in a proper account.
  • Less financial stress: Debt may cause you daily stress. By increasing your debt payments with a 401k withdrawal, you may save yourself energy. After paying off debt, you may consider building your emergency funds.
  • Higher disposable income: If you’re able to pay off your debts, you may have more financial freedom. With this freedom, you could save for a house or invest in side hustles.

Cons:

  • Higher tax bill: You may have to pay a hefty tax payment for your withdrawal. Your 401k is considered gross income that’s taxed when paid out. Your federal and state taxes are determined by where you reside and your yearly income.
  • Pay a penalty fee: To discourage people from cashing out their 401k, there’s a 10 percent penalty. You may be charged this penalty in full.
  • Cut your investment earnings: You gain interest on money you have stored in your 401k. When you withdraw money, you may earn a lower amount of interest.
  • Push your retirement date: You may be robbing your future self. With less money in your retirement fund, you’ll lower your retirement income. Doing so could push back your desired retirement date.

6 Ways to Pay Off Debt Without Cashing Out Your 401k

6 Ways to Pay Off Debt Without Cashing Out Your 401k

There are a few ways to become debt-free without cutting into your 401k. Paying off debt may not be easy, but it could benefit your future self and your current state of mind. Work towards financial freedom with these six tips.

1. Negotiate Your Credit Card Interest Rates

Call your credit card customer service center and ask to lower your rates on high-interest accounts. Look at your current interest rate, account history, and competitor rates. After researching, call your credit card company and share your customer loyalty. Follow up by asking for lower interest rates to match their competitors. Earning lower interest rates may save you interest payments.

2. Halt Your Credit Card Spending

Consider restricting your credit card spending. If credit card debt is your biggest stressor, cut up or hide your cards to avoid shopping temptations. Check in on your financial goals by downloading our app for quick updates on the fly. We send out weekly updates to see where you are with your financial goals.

3. Put Bonuses Towards Your Debt

Any time you get a monetary bonus, consider putting it towards debts. This could be a raise, yearly bonus, tax refund, or monetary gifts from your loved ones. You may have a set budget without this supplemental income, so act as if you never received it. Without budgeting for the extra income, you may feel less tempted to spend it.

4. Evaluate All Your Options for Paying Down Debt

If you’re in dire need to pay off your debts, look into other accounts like your savings or emergency fund. While money saved can help in times of need, your financial situation may be an emergency. To save on early withdrawal taxes and fees, you can borrow from savings accounts. To cover future emergency expenses, avoid draining your savings accounts entirely.

5. Transfer Balances to a Low-Interest Credit Card

If high-interest payments are diminishing your budget, transfer them to a low-interest account. Compare your current debt interest rates to other competitors. Sift through their fine print to spot any red flags. Credit card companies may hide variable interest rates or fees that drive up the cost. Find a transfer card that works for you, contact the company to apply, and transfer over your balances.

6. Consider Taking Out a 401k Loan Rather than Withdrawing

To avoid early withdrawal fees, consider taking out a 401k loan. A 401k loan is money borrowed from your retirement fund. This loan charges interest payments that are essentially paid back to your future self. While some interest payments are put back in your account, your opportunity for compounding interest may slightly decrease. Compounding interest is interest earned on your principal balance and accumulated interest from past periods. While you may pay a small amount in interest fees, this option may help you avoid the 10 percent penalty fee.

As your retirement account grows, so does your interest earned — that’s why time is so valuable. While taking out a 401k loan may be a better option than withdrawing from your 401k, you may lose out on a small portion of compounding interest. When, or if, you choose to take out a 401k loan, you may start making monthly payments right away. This allows your payments to grow interest and work for you sooner than withdrawing from your 401k.

This type of loan may vary on principle balance, interest rate, term length, and other conditions. In most cases, you’re allowed to borrow up to $50,000 or half of your account balance. Some accounts may also have a minimum loan balance. This means you’ll have to take out a certain amount to qualify. Interest rates on these loans generally charge market value rates, similar to commercial banks.

Pulling funds from your retirement account may look appealing when debt is looming over you. While withdrawing money from your 401k to pay off debt may help you now, it could hurt you in taxes and fees. Before withdrawing your retirement savings, see the effect it could have on your future budget. As part of your strategy, determine where you’re able to cut out unnecessary expenses with our app. Still on the fence about whether withdrawing funds is the right move for you? Consult your financial advisor to determine a debt payoff plan that works best for your budgeting goals.

The post Should I Cash Out My 401k to Pay Off Debt? appeared first on MintLife Blog.

Source: mint.intuit.com