Category Archives: Tips & Tricks

Do Not Let Your Finances Stay In Limbo

Think… then…. Do

You’ve been budgeting and saving. All good. You’re staying within your budget and your savings are growing as is your retirement account(s), but…… what if something should happen to you?

We all know we are here now, but eventually, we die. The thing is we have no idea when, so you should be prepared for the ‘what if’, the ‘just in case’ the inevitable happens sooner rather than later. It’s easy to do, and best not to chance leaving your hard earned savings in limbo and then the state will take over and divvy it all up to relatives or those you don’t want it to go. There is a ‘listing’ of the order in which it goes to these individuals.

It’s best you choose. You have the chance to do that now, and it can always be adjusted for life changes (marriage, a new child, divorce, or if you no longer want a certain person(s) to inherit your savings.

First, put anything you can into a ‘Revocable Trust’, and put a beneficiary(s) on everything you can. A Trust is usually drawn up by a lawyer, but can be done using download trusts found online and is legal is some states. Revocable means you can change your mind about what is already in the Trust should you decide to do that. A Trust is also private. And, it does not go through Probate so there are no court costs.

Start with any banking accounts…. put beneficiaries on each. There is no cost to do this. A retirement account, in some cases, can also have beneficiaries at no cost, so check, and do.

Doing this will give you peace of mind knowing that your financials will get into the right hands, (the ones you chose), should the need arise.

Readjust Your Budget

Constant monitoring of your budget…..

Most of us live on a budget and while some can and do live within their means, others can’t or don’t.  The thing is, if you do, great!

But you have to continually monitor the budget  make sure you’re not overspending thus starting the slippery slope of a financial mess. However, if you can’t or don’t live within your means, you need to get on track immediately.

Prices go up, and we, basically don’t have any control of that, so what we need to do is subtract some of our ‘wants’. This may be temporary, that is if we will be getting a raise in pay (although that isn’t always the case). So…. write down all your expenses – every single one of them – putting them on paper is usually an eyeopener.

Making three columns – one for annual, one for monthly, and one for occasional expenses. The occasional list is usually the one that can be clipped or eliminated completely (entertainment, eating out/take out gifts, etc). Now add the columns putting the total of monthly and occasional columns together with the annual. This gives you your complete annual total.  Are you within your income figure??? If not, start with cutting back on the occasional list of things first. Doing this will, hopefully, bring you within range of your income.  Now……  stay within those limits.

The revamping of the budget need to be checked periodically. If not, you will find you overspend here and there and that’s when things start to get out of hand.

Be disciplined with this….. it’s to you advantage.

Obligations When You Lease An Apartment

It’s their apartment, they’re letting you lease it…..

That said, you have certain obligations to fulfill….. from the signing of the lease until you vacate.

In order to get the apartment, the owner checked you out,….. the information you gave and your credit score. This is done so that they know how much of a risk they’re taking by choosing you as the one who will be staying on/in their property. It is all legal and above board.

You sign a lease…. a legal document…. stating that you are leasing for a particular time frame at a particular price.  You probably have also paid first, last and security deposit. First month is obvious, last is actually to the benefit of both…. them so they have that last month’s rent and you so that the rent you would have paid that month gives you a start for the cost of the next place you move to, and the security deposit, which is usually equal to a month’s rent, is held by the owner for the purpose of any damage to the apartment done by you so they have money there to pay for the damages. If there is no damage you get the full amount back plus interest (it’s the law), or, if there is some damage, the cost is deducted and the remainder is sent back to you.

When you do leave a rental unit, you should leave it clean.  You don’t need a cleaning service, but it should be left ‘sweep clean’…. meaning that when the next tenant moves in, they can put their boxes etc on the floor and feel okay with that. They will clean the cabinets and bathroom again, and sweep and mop again, but you should leave the apartment completely empty and cabinets completely empty. When you move into your next rental, you would expect the same.

So remember, while you are renting, save a bit each month specifically for the first, last and security deposit, and of course the movers, so that when the time comes, you’re all set to pack and go….. and have the money already there and waiting.

The Impact of Paying Only the Minimum

Credit Card Savvy…..

You have a credit card…. do you know, really know… how to use it to your advantage?

The Savvy Rule…… Use your credit card for purchases you know you can completely pay for when the bill comes due. Otherwise,…… do not use it.

Reason???    …… You get the benefit of generating a high Credit Score.  You get the benefit of possibly getting something on sale so you save money there, but unless you pay for the item(s) in full when the bill comes due, you won’t.  You’ll wind up paying finance charges on the portion you don’t pay along with additional finance charges added each month on the unpaid balance.

And, if you’re late in paying, even one day late, you are charged a hefty late fee as well….. so the sale item (or whatever your purchases are) are no longer a bill for just the purchase(s), but rather a bill for the additional fees.

This is now called a financial nightmare!  If you pay the minimum or anything other than the full balance the fees pile up, and continue to pile up so you’re in a financial hole that can take years to climb out of.

And….. your Credit Score will take a nosedive causing headaches when you want to get an apartment, mortgage or a loan…. as they check out your history and if your’e too risky at repaying, then they’ll deny your request.

So…….  Use a credit card wisely……..   Charge —- then pay…..  Pay the full balance when you receive the bill.

If you can’t do that…… then don’t use the credit card!

The Impact of Inheriting Money

Yes, …. Impact.  Because there are timelines and taxes.

Hopefully, you’ve been saving all along. Putting money into an emergency fund, a 6-12 month income fund should there be a job loss, and, of course, a retirement fund. Along with all that, maybe you’ve been saving for a house, or children or college. Perfect.

Now, someone dear has passed and left you a sum of money. Maybe it’s in a 401 plan, or another retirement vehicle. Maybe it’s in a bank account.  You need to know what happens when it now become yours. Do so as soon as possible by calling the company or bank where the money is held.

You need to tell them you have inherited it. Ask if it needs to be changed into your name and how. Ask how long you have to disburse the funds and any tax ramifications when you do. Ask if, in the case of a 401 and the RMD amount has already been accessed by the deceased person (they started that at age 72), there are rules there for you to follow on how it will be disbursed to you and when. Or, in some cases, you can have the part of the account left to you re-titled to your name, and continue the account that way, hopefully adding to it yourself as time goes on.

You shouldn’t wait too long before you alert the company(s) that the person is deceased. You will, of course, need proof. Most retirement plans have beneficiaries in place set by the owner of the account. You will need their death certificate, and your ID info. Have this ready when you make the call.

Hopefully, before you start taking the money, you have a sound financial goal for it. Surely your benefactor wouldn’t mean for you to spend it foolishly…. after all, they more than likely struggled somewhat to save it. So, treat it wisely and make your benefactor proud with your choice(s).

 

 

 

 

Begin Retirement Savings Early

Start a Roth the first year you’re working…

Although retiring seems decades away…and it is… the time to start saving for it is now. This is because if you are now in your mid 20’s, what you save has about 40 years to grow. And if you are consistently diligent about doing so, you will have a nice nest egg to enjoy in retirement.

If you’re not sure where to start, a Roth might be a good idea. Get it opened and contribute to it — as much as you can. There is a $6,000. annual limit, so aim for that. Each year, add to it. Since the money is earned income, you pay income tax on it, but when you put the $6,000. into a Roth, it grows throughout the years tax free. This means that when you start withdrawing,  (the earliest age is 59 1/2), but you aren’t required to withdraw from it until you want, it is tax free.

Even if you are contributing to a 401k or other retirement plan, a Roth is a smart idea too. As your career advances, and your income grows, put as much as you possibly can into your retirement fund(s).

If you have a plan that your employer contributes to as well, sometimes referred to as a matching plan, which means for every dollar that you put in, your employer matches that dollar amount for you too.  It’s free money from your employer, so you put in all you can up to the maximum allowed and in essence, you’d be saving twice as much.

You should rely on only you for your retirement. So start saving as early as you can and save as  much as you can.

It will be the difference between doing things you’d like to do to enjoy your retirement, or having to budget and not being able to enjoy your retirement.

The choice is ultimately yours, so choose wisely. What you save now is a gift to you later.

Multiiple Savings Accounts

See at a glance savings….

Since there are different reasons why we are saving, there should also be different accounts…. one for each reason…. because we are less likely to dip into any other than the one that is specifically set aside for the intended purpose. It also means that we can, at a glance, see how we are doing with each of our savings goals.

The Emergency account should have at least $1,000. in it. This would allow you to dip into that should a dental problem, or a need for new tires for your car, or a plumbing issue etc arise.  It means that you’d be able to take care of the problem, pay for it and not worry about it again.  But don’t forget to replenish the account should you take any money out…. after all, stuff happens.

You should have an account set up for at least 6-9 months of your take home income… then strive for 12 months.  Loss of a job, can and does happen, usually unexpectedly. So, to have the money you’d usually bring home, already there, will take the added stress of wondering how you’d keep a roof over your head and pay your other bills. However, this does not mean that you start (or continue) to eat out, do take out or any other entertainment spending). And, you should not utilize more money in a week’s time than you normally would. This account is solely for necessities while you’re unemployed. So, live frugally.

If you’re saving for a new house, figure an approximate price range you think you’d be able to afford. Check online for homes for sale in the area you’re thinking of. This will give you an idea of the cost in that area. Now save 20% of the cost of what you think you could afford. Above that, save about an added $5,000. for legal fees at the time of the purchase. And have some extra in the account for lawnmower, patio furniture etc., to complete the picture.

A retirement account is, although decades away, important to start and then continue to add to so that when you do retire, (and it comes quicker than you’d think), you have money set aside to live and do some things you didn’t have time for before. If you have a retirement plan at work which your employer matches, do not neglect to add to that. If not, a Roth IRA is a good start, where you contribute $6,000. annually, paying taxes on it now, and it grows tax free. Don’t rely on social security or company pension plans. Rely on yourself only. Anything else is a bonus.

Be diligent about your savings…. it’s a gift to you.

 

What Are HOA Fees?

Buying a Condo? …. Check HOA Fees

When purchasing a Condo as opposed to a free standing home, note that there are HOA fees… Homeowners Association Fees. These are monthly fees paid by the owner of the condo unit which will be in addition to your mortgage (PITI … principal, interest, taxes, insurance).

However, the monthly fee is paid to the Homeowners Association or Condo Management Company.  It usually covers inside and outside maintenance  for the building(s) and grounds (landscaping, snow removal) and electric and heat for the common areas of the building (hallways). Some will also cover water and heat. So before you sign on the dotted line, know what it covers, because what it doesn’t is yours to pay.

Usually, there will be an Annual Homeowners Meeting where the Management gets together with the unit owners and gives them a rundown of the past year costs and the outlook for the costs for the coming year…. it is also where they will let you know if there will be an adjustment of the cost of your HOA fees.  Note: They never go down, so expect to pay a little more each year.

This is why it is imperative to realize that when you purchase your condo, the fees will go up and so keep this in mind to adjust your budget accordingly.

There should be a considerable amount of money set aside for larger emergency items (roof, parking lot paving etc), in a bank account for this purpose, but if there isn’t, there will be an assessment charge to each condo unit owner to pay for the needed expense….it will be split evenly or by the square footage of each unit. This cost can be several thousand, depending upon what is needed and its’ cost.

HOA fees for a condo takes the place of inside and outside maintenance costs for a free standing home. The difference between the two is that if you own a free standing home and want to save money, you will do the landscaping and snow removal yourself, as well as if your home needs a new roof or a new paint job. That will, of course, fall completely on you.

So, no matter whether you buy a condo or a home, there is upkeep and cost associated with it.

 

What Exactly Is Your Asset Worth?

Know your asset worth and how to handle it.

We all have assets….possessions. Whether they consist of material things, or financial things. Make a list of your assets…your bank account(s), stocks, bonds, retirement accounts, car, home, and all that is in it.  These, are your assets….your estate.

What you want to do is have more in your financial assets than in your material assets.  Reason being, that you will need your financial assets down the road, when you retire (and it comes quicker than you think).  Having a decent financial portfolio (savings, iRA’s, stocks, bonds etc., is what you will use to live on in retirement. So, how you save now will mean how well you will live later.

You have only you to depend on for this. Pensions, and even social security is not a definite part of your future income, so you can’t depend on it.  It is why it is imperative to be diligent and save as much as possible now and as you move forward in your working years.

You should also speak to an Estate Planner. Check around, and find one you trust. After all, they will be guiding you with your financial matters.

You should have your accounts include a beneficiary and a contingent beneficiary should the inevitable happen. This is done so that your assets will go to those you choose, rather than having the state take over and your assets will go to someone you may not want to have them.

A Trust is a good idea as it is private, and does not go through Probate after your death. A Revocable Trust can be drawn up and it can be changed at any time if you change your mind for any reason about your choice of beneficiaries. Probate is costly and is not private. A Will is not private and has to go through Probate. And Probate Court costs are pricey. Therefore, stick with drawing up a Trust.

 

Add Climate/Climate Change To Your Home Buying Plans

Future climate/climate change is important…

You thought you had it all set…… but did you think to add in what the future holds in terms of climate for the state / area you chose?

Every state, and every area in each state has its good and bad points.  It’s usually at the top of the list of reasons why people choose that area or state where they’d like to spend their money on a home. But the climate is shifting some, and though it can be years down the road before any noticeable shift is seen, it is happening…. there are also annual natural disasters occurring in some states.

And because of that, homeowners insurance costs should be considered as there is word out now that in at least one state, (and maybe others), you cannot buy homeowners insurance through some insurance companies. That of course means that if a natural disaster happens, and you own a home which gets damaged, or destroyed completely, you have no insurance coverage. If you are able to insure it, you can be sure that the cost is high.

Now there is no crystal ball telling us exactly where these natural events will happen, but the reason it’s brought up is that you should at least think of that when you’re planning.

Maybe an option might be to buy in a different state / area where most of your likes are checked off, except for the weather there, so it is your second choice.  But this could work if you buy in your ‘second choice’ area and go to your favorite area or state on vacations.  And there are those of you who will say it doesn’t matter because if may never happen anyway. And, you may be right. The idea is to bring it to your attention, and then you decide what works best for you.