Sunday, October 30, 2016

12 Great Money Saving Tips for Halloween

Image result for halloween

Many venues, companies, colleagues, family and friends have planned Halloween parties or plan to attend events to celebrate Halloween.  Every year kids and adults celebrate Halloween either by trick or treating or attending Halloween parties or both. Companies advertise sales to lure customers into stores to purchase candy, costumes or other items for Halloween. Don’t get carried away with the sales and spend more money than you have or need to.

There are several ways to celebrate Halloween by decorating pumpkins, making pumpkin pie, buying candy for trick-or-treaters, jack-o-lanterns, decorations, bobbing for apples, and more. Due to Hurricane Sandy some may not be able to celebrate this year.  If you are lucky enough to attend an event or assist with trick-or-treating here are some 12 money savings tips for Halloween.

  1. Buy decorations during store sales. You can save anywhere from 20-70% off the original price.
  2. Make your own decorations, costumes, drinks or candy.
  3. Visit local vendors and haggle to good a good deal. 
  4. Visit the dollar store to buy decorations.
  5. Shop online to find coupons, compare prices and find discounts such as Amazon.
  6. Use a shopping list and stick to it.
  7. Use coupons to save money on food, decorations and costumes.
  8. Open candy bags one-at-a-time.  If you have any unopened bags of candy left after a week return it to the store to get a refund.
  9. Save decorations and costumes in good condition for next year.
  10. Swap costumes with family members or friends or use hand-me-down costumes from family members and friends.
  11. Shop at discounts stores instead or larger stores to get discounts on costumes and decorations such as Walgreens, Wal-Mart or Target.
  12. If you are having a party ask guests to bring a dish and use paper products.

Wednesday, October 26, 2016

20 Common Financial Mistakes People Make and How to Avoid Them

Image result for common financial mistakes

Many Americans make common financial mistakes and keep making wrong financial decisions regarding their money. It takes 23 days to develop a habit and 23 days to start a new one. 

To stop making mistakes requires acknowledging that you are making a mistake and requires changing your mindset. It also requires discipline, determination, commitment, perseverance and the willingness to make a change and do better. 

Everyone makes mistakes but the key is to learn from them so that you do not make them again in the future. Unfortunately, most people did not learn good financial habits growing up and as a result have or continue to make bad financial mistakes and learn financial lessons and skills through trial-and-error. Learn from the financial mistakes of others to avoid losing money, stress and fights with your spouse or partner.

If you are currently experiencing financial difficulties, it is of vital importance that you avoid making financial mistakes because it is the key to surviving your difficult times. Avoid mistakes multiple mistakes regarding your finances and avoid procrastinating about making a change, this only makes your situation worse.

Common financial mistakes that people keep making can wreak havoc on your life and may lead to financial disaster. These twenty tips will help you improve your financial situation and overcome your past mistakes and set you on the right path to financial stability.

Mistake 1 - Overdraft fees on bank accounts.

Solution:  Use online banking or setup text or email alerts to remind you when your account balance is low.

Mistake 2 - Paying late fees.

Solution: Pay bills on time or call creditors to setup payment plans.

Mistake 3 - Not reporting all income on your taxes.

Solution: Report all income on taxes even if you are unsure if it should be reported, this reduces your tax liability.

Mistake 4 - Paying an over-the-limit fee or an annual fee on a credit card.

Solution: Monitor your credit card balance to ensure you do not go over your limit and read the credit card disclosure or terms and conditions of the credit card to avoid paying penalties.

Mistake 5 - Buying an item you cannot afford.

Solution: Only buy items you can afford to pay back, purchase items with cash to prevent going into debt.

Mistake 6 - Not tracking your spending.

Solution: Create a budget to track how much you earn, spend and owe and include debt and financial goals in your budget.

Mistake 7 - Using credit cards for everyday purchases.

Solution: Pay the balance in full at the end of each month or immediately after your purchase to avoid paying finance charges and paying more than the item is worth.

Mistake 8 - Using payday loans or cash advances.
Avoid quick fixes.  The interest rate can be as high as 200%.

Solution: Earn extra income through a part-time job, selling items at a garage sale or flea market, selling items online or at thrift stores.

Mistake 9 - Using checking cashing places or liquor stores to cash checks which charge high fees.

Solution: Use direct deposit for free. 

Mistake 10 - Credit score monitoring.

Solution: Avoid buying credit score monitoring, you can check your credit score yourself and most major banks offer a free option to view your credit score.

Mistake 11 - Not tracking spending. 

Solution: Record receipts of all purchases and reconcile daily, weekly or monthly to track spending and to catch errors quickly.

Mistake 12 - Not saving for retirement.

Solution: Retirement is meant for one person.   You will need enough income to cover your monthly bills and expenses for at least 30 years.

Mistake 13 – Using auto dealer financing.

Solution: Obtain an auto loan through your local bank or credit union that offer better deals and will give you the best interest rate based on your credit score.  Dealer financing comes with lots of extra fees and hidden costs.

Mistake 14 - Extending a loan.
Avoid extending the car loan for more than 4 years or extending a mortgage loan beyond 30 years.  Paying a couple of more points in interest and extending the loan for another year or two is expensive.

Solution: Obtain a loan you can afford. Purchase a cheaper auto or purchase a smaller home. One you pay it off you will be in a better financial position to upgrade.

Mistake 15 - Continuing to apply for credit once you have been denied or have maxed out your credit cards.
This lowers your credit score.

Solution: Use credit as a backup payment method. Use only two to three credit cards. Keep credit card balances at 20% or less of the limit. Use a debit card or cash to purchase items.

Mistake 16 - Misusing introductory rates.

Solution: When the introductory rates expire, the balance plus any new purchases are charged at a higher interest rate and you could end up owing more debt than you did before transferring the balance.

Mistake 17 - Using home equity loans to remodel a home or pay off debt.
If you experience difficulties in making payments, you could default on the loan and risk losing your home. Since the amount that you can borrow is based upon your home’s value, as the value of your home decreases, so does your equity.

Solution: Obtain a personal loan or line of credit, earn extra income or save up to pay the amount.

Mistake 18 - Using a credit card advance.
Few understand that payments made to the credit card will first go toward regular purchases. Since cash advances carry higher interest rates than credit cards, problems arise when balances are carried over and both interest and fees compound.

Solution: Earn extra income, obtain a personal loan or create an emergency savings account.

Mistake 19 - Withdrawals from your retirement account.
If you withdraw money prior to retirement age or if you leave your job, you’re obligated to pay back the entire borrowed amount generally within 30-60 days. If you don’t, the unpaid balance will be treated like a distribution and you’ll owe taxes on the money and be charged a penalty.

Solution: Create an emergency savings account to cover monthly bills and expenses for 9-12 months to reduce usage of credit card, home equity loans, and other risky financial products.

Mistake 20 – Not checking your credit report.

Solution: Check your credit report at least once a year and at least three months before to major purchase to ensure all the information is accurate and to avoid any surprise accounts that may appear on your reports that you are not aware of.

Saturday, October 22, 2016

Will Versus Trust Which One is Right For You

Image result for will versus trust

An estate is property owned by you at the time of your death including: real estate, bank accounts, stocks, bonds, mutual funds, life insurance policies, and personal property such as cars, jewelry, and art.  Estate Planning ensures that your property and health care wishes are honored, and that loved ones are provided for after your death.  Estate planning can include wills, trusts, and health care directives.  

According to Retirement Made Simpler study, women and younger and lower-income adults were less likely than men to say they participate in a 401k plan offered by their employers.  Approximately 53% of adults feel that even if their 401k account has lost value, it is as important to continue contributing to it. 

Everyone whether you work or not should have a will and a trust. A trust helps to avoid estate taxes and cannot be contested which prevents conflict and arguments among relatives after your death.

A will is states how property, income and possessions should be distributed after death and identifies a person or persons who are authorized to manage the estate. A trust is a legal agreement that allows a trustee to hold assets (property and income) on behalf of a beneficiary. Trusts can be setup and distributed in many ways. There are benefits of having a will and benefits of having a trust. You cannot have a trust without a will but you can have a will without a trust.

Benefits of a Will:
  1. If no will court decides who gets your assets
  2. Living spouse and children get assets and if no children next to kin gets assets
  3. Identifies who will take care of children and who manages will
  4. Minimizes legal and court fees
  5. Laws vary by state
  6. No absolute right to estate
  7. Signed by 2-3 witnesses

Benefits of a Trust
  1. Maintains privacy
  2. Minimize gift and estate taxes
  3. Can’t have trust without a will
  4. Can put conditions on how your assets are distributed after you die
  5. Covers only specific assets (life insurance, property, etc.)
  6. Use if you have a net worth of $100,000 or more
  7. Use if you want to maximize estate tax exemptions

Tuesday, October 18, 2016

Social Security is Not a Retirement Strategy

Image result for social security is not a retirement plan

One of the biggest questions of those near retirement or in retirement ask is, “Will I have enough income during retirement to cover my living expenses?" The second biggest question asked is “Should I factor in Social Security (SS)”? Retirees should always include Social Security when creating their retirement portfolio.

The first thing you need to find out is if you are eligible for SS benefits. The time to find this out is at each job you work or by calling the Social Security Administration.

A common misconception by most people is that if SS taxes are taken out of your paycheck then you must be eligible for SS benefits. This is not true. Some employers do not pay into SS but are required to participate in a retirement plan. Find out whether your employer participates in SS and whether your position is be covered by SS. If jobs you work are not eligible for SS benefits and do not offer a retirement plan, you will need to create an alternative to make up for the missing income. Many federal government employees, certain railroad workers, and employees of some state and local governments are not covered by SS.

You will need at least 40 credits to be eligible to collect SS benefits provided you meet all the other requirements. If you are eligible for SS benefits the amount shown on your yearly statement, is an estimate and is not the amount you will receive when you begin collecting SS benefits. This is due to the windfall elimination provision reduction formula the Social Security Administration applies to determine your monthly SS benefit.

However, there are limits on how much you can earn while collecting SS benefits, and if you exceed those limits, your SS benefits will be considerably reduced. If your earnings exceed a certain level, up to 85 percent of Social Security benefits may be taxable. At full retirement age, no income restrictions apply and there is no penalty for additional income earned.

According to research by Prudential, SS benefits for those aged 65-74, accounts for 54 percent of total retirement income, for those aged 75-84, 61 percent and those 85 and older 66 percent.

One advantage of collecting SS benefits - it is guaranteed income for life that increases over time due to a mandatory Cost of Living Adjustment (COLA). COLA increases SS recipients’ benefits by a specific percentage because of yearly inflation. SS benefits also include spousal coverage. Benefits of a deceased recipient can be passed to a current spouse or child under age 18.

You must contact a Certified Financial Accountant (CPA) to determine the portion of your SS benefits that will be subject to taxes. You will also need to consultant a financial advisor to find out the best strategy to maximize your SS benefits. The best approach is to setup a meeting with your CPA and Financial Advisor and ask them to develop a strategy for you.

Most financial advisors do not calculate replacement rates the same way the Social Security Administration does which substantially changes the retirement income calculation. Ensure your financial advisor uses the Social Security Administration’s replacement rate to determine the most accurate retirement income calculation.

Unfortunately, most employees do not have a pension plan or retirement plan so their only income during retirement is Social Security. Pension plans are nearly extinct and employees now have to rely on employer provided retirement plans or their own personal savings in addition to SS benefits. In many instances, a combination of these is required to meet basic financial needs during retirement; some retirees may need all three sources. One factor to consider is living cost increases and many retirees are living longer. Other factors to consider: where you live, your needs, your health status, and your other financial obligations that can quickly erode your fixed monthly income. There are three options that you can take when collecting SS benefits:

·         Early retirement. If you take your SS benefits at 62, your monthly payments will be permanently reduced between 20% and 30%, depending on your date of birth.
·         Normal retirement. The "normal" or "full retirement age" that ranges from 65 to 67 depending on your date of birth.
·         Late retirement. You can wait until 70 to take your SS benefits.

Retirement must be carefully planned and must include the expertise of professionals such as a Certified Financial Accountant and Financial Advisor to ensure that you maximize your SS benefits and minimize your tax liabilities.