Author Archives: Common Cents

Intersections Of Life

There was you, and now there’s…almost…two

You are single….moving through life.  You are making a good income, and are financially savvy.  You have no outstanding debt,  no credit card debt, no outstanding loans, and you have your essential savings accounts set up and consistently and faithfully add to them.  You’ve done all the right things.  Great job! Congrats and kudos to you!  Keep up the good work!

Now you meet ‘someone special’.  You date, you are compatible in many ways, you become serious and start talking about a future together.  All very nice, very sweet, but slow down a bit.  Almost all the boxes are checked off in the ‘these are things I’d like in a lifelong mate’ column. ‘Almost’… being the key word.  The  box regarding finances isn’t checked off.  You’ve found out that he/she has a lot of outstanding debt.  It’s time to step back…. put the brakes on.

Your intended might be perfect in every way…. except…. you’re not on the same page handling finances.  He/she has outstanding debt, lots.  Mounting credit card debt, a college loan, a car loan…and they pay only the minimum each month.  They have a closet full of clothes and shoes, but think they still need more, they enjoy eating out more often than not, and think its necessary to have a drink or a few in order to have a good time.  These are red flags.  Every single one of them.

Even though a wonderful person, there is a problem. This is and will continue to be a major problem — for you — moving forward.  Their debt becomes your debt if you marry.  Their debt will bring your credit score down, because you would now be sharing the credit score number too.

Don’t make set future plans unless and until this debt is gone, and ways of saving and spending is on the same page as you. A financial plan is needed…now.  One that will eliminate their outstanding debt.

If you go forward with the relationship, you’re not only working on eliminating their debt, but should the ‘two become three’, (surprises do happen), then there are child care costs added to the bills, and you will wonder how someone so tiny needs so much and costs so much, maybe while all done on a single income because the other parent is the stay at home parent now.  So think hard….now.

Don’t be to quick to jump into a lifelong commitment.  Hold off, postpone the marriage vows, You can still stay involved, while showing him/her how to budget and stay within the perimeters of their income, all while they pay off their debt, and starting a savings plan that will continue on. If that’s not acceptable to the other, then it’s probably time to end the relationship and move on.

Starting out already in a financial hole is not a good idea.  Right from the beginning, being on the same page regarding finances is imperative in a relationship.

Once the debts are paid, exchange vows, and moving forward work together on the finances.  Having the same financial goals, and working together keeping and staying within a budget is imperative.

You worked hard to get where you are financially, if you go into a commitment with a messy financial history that has no end in sight, that’s not fair to you.  Don’t do that to yourself.

 

Keeping Bill Paying Organized

Setting up separate checking accounts

Think about it.  In your home you have cabinets and drawers to separate things.  You can go to a particular drawer or cabinet to get specific item to do a specific job. Having separate checking accounts for particular bills is just like that.  It keeps things organized.  You always know at a glance what you have, and what needs to be added.  That said….

A checking account for rent/mortgage with auto  deposits by you and auto withdrawals by the landlord/lender, is a good idea.  Another is to have an excess in the amount of 1-4 months of what the rent/mortgage is.  With your diligence of auto deposits, the auto withdrawal part is there so you don’t have to think about the payment date.  The 1-4 months of excess is there for  rent raises or moving costs, or to make a ‘principal only’ payment on your mortgage.

A checking account for monthly bills with auto deposits by you, and auto withdrawals by the creditor is also a good idea.  Keeping your check register up to date, this too will show you, at a glance, what you have in the account. And if things are getting a bit squeaky, meaning you need more money in it to cover upcoming bills, this is the time to revamp your budget.

A checking account for annual or semi annual bills and gifts.  This is worked in the same way with your deposits and the withdrawals are usually from insurance, taxes, registry fees, etc.

As far as the gift part goes, make a list of those you give gifts to…. write it out on paper.  Don’t leave any out — remember too the gifts you give to the friends of your children, all the birthday parties they go to. Some names will be there 2-4 times,(Birthday, Anniversary, Holidays, Mother’s/Father’s Day, Holiday gifts, etc). There are also Shower, Wedding, Baby gifts to add in.

Now… put a dollar figure next to each name.

Now… add up the dollar figure.

Are you surprised at what you actually spend on gifts?  While gift giving is a very nice gesture, it gets costly, and if you are scrimping somewhere else in your budget (you are on a budget, right?) ….or if you aren’t paying your bills in full and on time each month, …..then you need to cut back your gift list.  Do not let gift giving put you in the poorhouse. And remember, the money in this account is primarily for insurances, taxes etc.  You need the money there for these things.

Over time, you will get into the habit of checking a few times a month each of these accounts, making sure you are ahead of the game on each one.  This also saves any overdraft fees.

Organize your ‘financial cabinet’.  It will make things so much easier for you.  You deserve that.

Reducing or Eliminating Fees

Vigilance in keeping tabs on your accounts

We all have accounts, various bank and credit card, retirement, and they all charge fees.  Some of these can be easily avoided.  If you don’t keep tabs on your accounts, at years end, you will find that you’ve spent a small fortune on…….just fees.  Money that can be put into your savings.

Banks charge fees if you don’t adhere to the accounts’ rules….this is irksome because it’s your money, and they are using it.  But, nevertheless it’s true.  So, be vigilant about checking to make sure you stay within the agreement you signed up for.  That means, keeping at least a minimum balance, no overdrafts, staying within deposit/withdrawal and ATM limits,  If you don’t keep a watchful eye, you are paying them fees to hold your money.  You can find a bank with no fees.

Some credit cards have an annual fee.  Tons do not, choose one of those.  Credit cards are fine if you use them properly…make purchases, pay in full before the due date.  Most cards have reward points, so that’s a bonus for you, but only if they’re useful to you. The fees come in to play when you carry a balance resulting in huge interest charges on the balance carried over until the next bill.  If you only pay the minimum or anything less than the full amount of the bill, interest is added to that remaining balance and carried over again.  Late fees show up if you are even one day late. If they have an ‘afternoon mail delivery’, that delivery is posted the following day.  So it’s late, even though it was physically received on the due date.  Lesson:  Pay in full, before it’s due.

Retirement Accounts are necessary to have for future living.  You can, in some cases, oversee your own accounts, but usually a Financial Adviser has more knowledge and time. And they charge a fee for this service, it is legitimate, and because you want to have a nice nest egg, you need to find the best one.  So in choosing, interview some, find one you trust and feel confident with since they’re handling your future.  Ask if they are a Fiduciary…some are not.  A Fiduciary is one who serves in your best interest.  If they are not, they will usually be receiving a commission to sell you something that may not be the type of account that best serves….you.  So check.

All this is called due diligence.  It’s doing your homework before you decide.

 

In The Blink Of An Eye

Stuff happens……. expect the unexpected

Things can change quickly – in the blink of an eye.  Circumstances can change along with your priorities.  Because of what is now facing you, you have to shuffle things around, making things work while you’re figuring things out.  You’re not alone.  It happens to everyone at one time or another.  The thing is if you’ve been planning and preparing all along, the stress of what happens in life will be a little less stressful…if not, you can still get through this….just differently.

First…..  take a few deep breaths.  Focus on what is important.

If you find yourself out of work, your immediate goal is to keep a roof overhead, and food in the fridge.  If you know it will be a length of time, call your landlord or mortgage lender.  Explain the circumstance, and see if they can accept a different payment option.

You will still have to pay for your rent/mortgage in full, but letting them know of the situation you’re in might get you extended payment dates, or less payment each month until you can catch up.

It’s probably a hard phone call for you to make, but put your pride in your pocket, stay calm, focused, and understanding to their side too.  Your rent/mortgage goes to payments they pay out. It’s the chain of money.

And no matter the outcome of the call, say thank you, thank you for your time and understanding.  If you got a negative answer in the phone call, you may get a call back in a few days after they’ve thought of your plight, and have now come up with a payment plan you can both work out.

Make phone calls to any creditors, car loans, credit cards, etc.  Keep all up to date of any progress being made.  They make notes on your account, which will stop creditors from calling.

Food in the fridge…..  Use what you have on hand.  Be recipe creative.  At the supermarket avoid the snack aisle.  Eat less meat, eat more vegetables. Keep meals simple yet nourishing.  And do not waste any food.  Use leftovers within a few days, if not, freeze to use at a later date, maybe when you’re busy….just pull out the leftovers and reheat.  No cooking that night.  Leftovers in the fridge or freezer do not mean from a night of dining out or take out… cooking at home is cheaper.

Living on bare bones….. This can and needs to be done now.  No coffee stops, no quick stops for incidentals, no manicures/pedicures, no hairdresser, massages etc.  No eating out, take out, movies, shopping sprees…. nothing…..other than your overhead, and food (cooked at home).  Of course, medical/dental as needed is a necessity.  The idea is, you have no income, so don’t spend what you don’t have.  Don’t do that to yourself. Because if you do, it has to be paid, by you, adding in interest, late fees, and the vicious cycle of debt is added to your plate.

This too shall pass.  Think positive thoughts.

 

 

Important Things To Keep

Hang on to these….

Whether you save them scanned into a document folder on your computer, or in paper form in a safe place, it is wise to have handy, and in some cases necessary to have certain original documents in paper form because they may have a ‘raised seal’.

Birth certificates, your own along with spouse, children’s, Adoption papers, Marriage certificate, Divorce NISI (final), Social Security card(s) for all in your family, Medicare card(s), Medical insurance card(s), Life Insurance Policy(s) for all in your family, Military Discharge papers. These certificates/documents are sometimes needed in ‘Original’ form. Birth, marriage, divorce NICI, Military papers with a raised seal, original Social Security card, and sometimes Life Insurance Policies.  Scanning them as a backup is fine, but do keep the originals in a safe place.

Car loan documents until the loan is paid in full. When the loan is paid, the lender will send the Title for your car – it can’t be sold without it.  Having the Title means you own the car outright, so keep the original sent to you. You can toss all but the final loan document payment. Keep the Car Insurance Policy.  Each year the insurance policy is renewed, so you can toss the previous year and keep the new.  Keep the Excise Tax payment receipt each year until you sell the car.

Mortgage Loan documents – when the mortgage is paid off, the lender will send a Mortgage Discharge Letter which will have a date stamped, which proves you own the property outright… keep the Discharge letter sent to you. Homeowners Insurance Policy is also renewed annually, so keep the policy and toss when the new one arrives. Keep the Real Estate Tax payment receipts (sometimes the mortgage lender pays these taxes from your escrow account, and the information is on your loan documents.

Keep your Renters Lease Agreement until you move out. Your current Renters Insurance Policy should be kept, and when renewed annually, toss the old.

Keep at least the last 3 bank statements, as you receive the latest, toss the oldest.

Keep any Retirement Account documents.  Some statements are quarterly, some semi-annually, and others annually.  Keep what pertains to your Retirement nest egg.

Income Tax Documents / State and Federal, for 7 years. Also keep your final pay stub each year. If you change jobs during the year, keep the final stub from the company you had worked for. Keep the W2 from every year’s end from any/all jobs.  When you apply for Social Security, it could be your only proof you worked (and paid into Social Security) from that job. Once on Social Security, toss the W2s.

And don’t forget about your Estate Planning Documents, Will/Trust, Living Will, HIPAA Release Authority, Durable Power of Attorney, Health Care Proxy.  The accessibility of these documents should be told to a trusted individual(s) in case of your illness or death.

Whether you scan them into a Document file, or keep them in a home fire safe, or a bank safe deposit box, these are essential to keep and will be handy if and when they’re needed.

It’s better to have them handy when needed rather than spending unnecessary time to track them down.

Certificate of Deposit …. CD’s

What to do when a CD matures….

A Certificate of Deposit also known as a CD usually has a better interest rate than a regular savings account, or a checking account.  That said, unlike a regular savings or a checking account, it does have other stipulations.

They have ‘Maturity Dates’, meaning they have to stay put for the length of time of the chosen CD.  Usually they run 6 months or more, but if the bank is running a ‘special’, sometimes they have a 1 – 3 month one.  How you decide is knowing when you might need your money.  If it’s a savings that you’re leaving for a while, you may choose a 12 month one.

You may not want to choose one more than 2 years, because interest rates change often and you may lose out on a better rate during that time frame that yours is locked in. So think first, then choose one that fits for you.

You can close it out earlier, but with penalties…..usually about 3 months of interest.  Some banks allow it and some don’t ….so check first.

Maturity…. About a month before the CD matures, you should get notification of the upcoming date.  Start checking on the rates at other banks and comparison shop so you’ll get the best  rate for the length of time you want.  If you let the maturity date slide by, the bank automatically rolls it over into a new CD at the current rate for the same length of time.

You can also add to it at the time it matures, then roll it over in the same bank, or a different one choosing a new maturity date and interest rate.

If you’re not sure what you want to do, you can notify the bank that you want to close the CD when it matures, and they can ‘hold’ it as a regular savings (at the rate of a regular savings), giving you time to decide.

CD’s are good because your money is FDIC insured at the bank, and you’re getting a better rate than a regular account.  It’s up to you to choose a length of time.

Cars….Buy or Lease

Is buying or leasing the better option for you?

After you’ve looked around, checked types of vehicles, and prices, and have decided which one suits you best, how are you planning to pay for it?

Don’t forget to check out the previously owned cars, sometimes the car dealership will have their own ‘Protection Plan’.  These can be a good choice, especially if you can get a ‘Company Leased’ car, as they are gently used by a company and their clients, and can save thousands.

Leasing:  You will have to put money down, and then make payments over 2 or 3 years as specified in the agreement with the dealership.  Usually, depending on the chosen vehicle, the down-payment is a few thousand dollars, and the monthly leasing loan is a couple of hundred dollars each month until the maturity date of the lease is up.  At that time, you have the option of turning in the vehicle, but if there is any damage, you have to pay to have it fixed.  Then you can walk away, with no money in your hand, or no vehicle to drive…. but you can lease again repeating the process.  Or, you can choose to buy the car you’ve been leasing,  purchasing it at a price specified by the dealer….taking into consideration money, but not the full amount, you have been paying in the lease agreement.  A car loan would be taken out to finish paying for the car, because you are now ‘purchasing’ the car which would then be yours at the end of the loan.

Buying:  Dicker…Make your best deal.  If your Credit Score is high, you can get a lower interest rate on the loan.  Now, put an amount you’ve decided as a down-payment, the more you put down, the less the monthly payments. Take out a car loan for the balance.  Choose a length of time from 2 years – 7 years…most go with 3-5.  Check a few different lengths of time so you’re sure the monthly payment will fit easily into your monthly budget.

When the loan is paid off, the car is yours and you will receive the Title from the lender.  Until the loan is fully paid, the lender ‘owns’ the car and if you default on payments, the lender can/will repossess and sell the car. When you do receive the Title, put it in a safe place, because when you sell the car, you need the Title. It is also wise to save registration and excise tax receipts as well as any maintenance records/receipts to show a new buyer you’ve maintained the car. Of course when you sell the car, the proceeds are yours to put toward another.

**When the loan is paid off, continue writing a check for the loan amount each month, but instead, pay yourself that loan amount.  Put it into your Retirement, or one of your Savings Accounts.

In either case, whether buying or leasing, before leaving the lot, it has to be registered with the DMV, have plates, and insurance coverage.  Within 7 days it needs an inspection sticker.  You will receive an insurance policy, renewable annually.  It’s an important document, keep it safe.

Getting Along With What You Have

Use what you have, stop spending on more

If you’re trying to get out of debt, your goal is to get your bills to zero balance.  Once that happens, your goal is to save, save, save.

This is done very simply…..  Stop buying. Use what you already have.  Get along on less. These things can be done.  And yes, — you — can do it!

We have all bought clothing items that we wear only a few times, then decide we no longer like it, so it hangs in the back of the closet.  Been there, done that.  Instead, empty your closet. Surely there are several items you have worn only a few times…. or not at all.  Most of us tend to wear the same few things…our favorites.  But start using the other items too. Have a fashion show in your room. Use what you have, pair things with your favorite pieces, making a whole new look.  Put colors together to see how they ‘pop’, layer, add a scarf, belt etc.  And then enjoy the compliments that will come your way.  Do this with a friend, and swap items. Stay out of clothing stores, and stop online shopping and browsing.  Shop in your closet. You’ll save $$$.

In the kitchen, there are so many new small appliances, and gadgets available.  But, if they are rarely used, or if they can be used for one type of cooking one recipe, it isn’t worth having.  Although the latest rage, there are only a few that are truly worth having.  A slow cooker, where you can put the food in, turn it on, it will be ready by supper.  Another is a pressure cooker …. where a pot roast dinner can be ready in less than 30 minutes.  And vegetables in 3 minutes.  A microwave steamer is great for almost anything, and can reheat leftovers in a matter of minutes, without drying it out.  Small gadgets are useful and again the old standbys can be used for multiple tasks. They’ve done so for decades.  You do not need them all, they’ll just sit in the drawer.

Furniture pieces:  When purchasing furniture, find pieces that do double duty…not only useful for what it was meant for, but also has storage, so your room always looks neat.  Don’t overfill your room(s) with furniture pieces.  Simplify.  Less is best.  Change smaller pieces around, switching them into another room.  Swapping things around, even lamps, pictures, etc.,  gives a whole new look.  Fast, easy (and free) redecorating.

 

 

Taking out a Loan

Adding the Cost of a Loan into Your Budget

At some time, maybe more often than a few times, you’ll need to ‘Take out a Loan”.  It may be a Student Loan for College, a Car Loan, an Equity Loan, a Mortgage  Whatever the type, and whatever the length, before you sign on the dotted line, be very sure the payments fit within your budget.  Know before you sign….because for the next several years, the loan is a legal expense. If it doesn’t fit into your budget easily, don’t sign on the dotted line.

If you default on your loan — by not making payments on time, or missing payments altogether, the lender can – an will – repossess your car if its a car loan, or put your home in foreclosure if its your mortgage.  It is imperative that you know  that you can make all the payments for the length of the loan.

Do you homework — check around for rates.  Obviously, the lower the interest rate, the better. If you have a high Credit Score, you can often get a lower interest rate than advertised.  Ask if  should you decide to ‘Prepay’ your loan, you won’t be penalized.  Prepaying means either making extra payments, or paying the loan off completely before the maturity date…a good thing on your part, but some lenders don’t allow that. Once the loan begins, it is imperative that you make your payments as specified within the loan, and make those payments before the due date.  This means you stay in good standing with not only the loan company, but it is a direct link to your Credit Score.

Keep any loan documents in a safe place, and most especially, the final one that says it’s fully paid off….keep the last one indefinitely.

Estate Planning — Be Prepared

If you have ‘stuff’…..you have an estate

Most people think that to have an estate you must have a few million dollars, live in a mansion with butlers and maids and a chauffeur.  Not so.

If you live at home, or have a studio apartment, a 1-2 bedroom condo, or a home of any size; if you have a bank account with $25., or a car, if you have personal items. If you have any or all of these, you have an estate.

Estate Planning is essential for any size estate, even when in your 20’s.  It means you have set up specific legal documents not only designating beneficiaries to inherit your estate should you die, but also setting up health directives for your care should you become too ill to care for – or make decisions at the time for – yourself. These documents can and should be updated…adding to or subtracting from…due to life changes; birth, adoption, marriage, divorce, remarriage, etc. These legal documents are your wishes and will be followed as stated.  This will also mean that should it become necessary to utilize any or all of them, a loved one won’t have to make choices for you, and although trying hard to do the right thing, may not choose what you would have wanted done.

More likely than not, these documents will be in your safe for a long time.  The idea is to have them at the ready should the unexpected happen.  Look over them occasionally making any changes as needed along the way.  We all take our last breath…. we just don’t know when that will be.

You should also talk to a trusted relative or friend about your final wishes, what type of arrangements you’d prefer as to the disposition of your remains (whether you wish to be buried or cremated). You should also tell this person(s) where these documents are kept.

Beneficiaries:  You should have beneficiaries on everything…even your $100. savings account. If you don’t, should you die, what you have lies dormant for 3 years, then goes to the state.  There can be high probate costs and lengthy court delays, and in the end, what is left could go to someone you didn’t want to give it to.  There is a legal ‘chain’ of how the state decides.

Instead, you decide.  Put beneficiaries on everything….(you can change them if you want to).  This doesn’t cost anything to do…check with your bank, insurance policy, retirement account, etc.  You can put Primary Beneficiary(s), and Contingent Beneficiary(s).  The Primary(s), would receive it first, if they have died it goes to the Contingent(s).

Health Care Proxy:  Medical decisions for yourself…directing medical professionals to abide by your wishes for your care.  It also gives the person(s) you trust, availability to your health records and your doctor can speak to them regarding your health.  The person(s) you choose is your proxy…while you are being cared for.

Durable Power of Attorney:  Living document naming one or two trusted people. They will be able to pay your bills, sign checks, withdraw money from your bank account for your benefit and make any legal and financial decisions for you should you be unable to do so for yourself.

Living Will: Your wishes for medical directives, should you become incapable of making them for yourself, due to a catastrophic incident.

Will:  Your wishes as to who will inherit your estate, how it is divided and to whom, and can list specific cherished items and a recipient of your choice for each.  You can also add an addendum (a change), to it, rather than rewriting a new one. Wills usually go through Probate.

Trust: There are two kinds, Revocable and Non-revocable.  Revocable means you can make changes.  Non-revocable means you cannot.  There are also different types of trusts within each.  It is/can be done in place of a will. A Trust will avoid probate costs.  A trust is private. No one, other than those mentioned in the Trust will know of its’ contents.

All of the above, except the Non-revocable Trust, can be changed.  At every life change, they should be looked over, and updated if necessary.  Or, most certainly, if you, yourself want to take someone off, due to family dynamics. And, it is also a wise idea to add a phrase to avoid anyone (without naming names), who you don’t want added to it, or in any way receive any part of your estate from getting it.  The following is an example:

“Let it be known that any and all other person or persons not mentioned in this My Last Will and Testament (or Trust), I have omitted purposely and not through accident or mistake”.

Having each of the above, gives you peace of mind, knowing that your wishes, whether you are ill, or have passed away…. your wishes will be followed.