The COVID-19 pandemic wasn’t a catalyst to shift businesses toward digital transformation, it merely sped up the process. Businesses needed to scramble to move much of their operations online so workers could efficiently collaborate with each other and maintain business continuity during a difficult time.
Fortunately, departments not traditionally associated with the digital universe, like Bookkeeping, had an easier time adapting thanks to online services like Bookstime.com, a provider of digital bookkeeping tools with unique experience in difficult areas like sales tax automation, health benefits administration, and more.
Advantages of digital bookkeeping
Keeping track of every business transaction is among the most important and perhaps underappreciated tasks. Failure to keep track of transactions in a professional manner can result in a business owner making wrong decisions because they have inaccurate information.
Even worse, they might think they end the year with a profit but in reality, a bunch of small bookkeeping mistakes over several months means the business owner really lost money.
A shift to a digital platform eliminates these concerns. Online digital platforms make use of the most up-to-date accounting automation software that erases nearly every careless mistake. This is especially useful for a business owner who does the tedious but necessary job of bookkeeping themselves to save money. The more time a business owner spends on ancillary tasks, the less time they have to generate revenue and keep clients happy.
Some of the other advantages associated with going online include:
Eliminating clutter: keeping a clean home office is challenging enough but a digital platform means more space for higher priority files.
Save time: A digital bookkeeping platform is always available online with a few short clicks of the mouse. It can be accessed as needed and when needed in a few short seconds.
Environmental benefits: It isn’t unusual for a company to use at least 10,000 sheets of paper each year. Shifting resources online may seem like a small benefit but everyone has a responsibility to do a little bit more to protect our environment.
Case in point: Fill in a W-4
Every business owner is happy to hire new workers because it means they are expected to provide value to the company above and beyond their salary. But that doesn’t mean that the formal process is enjoyable.
One of the more undesirable parts of the hiring process is the pesky W-4 form that every employer has to ensure is properly filled in before a worker’s first day. Simply put, the W-4 form confirms how much income tax a worker wants to have withheld from their recurring paychecks. Under-withholding taxes means a worker will likely experience a shock come tax season as they owe money to the government. Over-withholding taxes means a worker is paying the government too much money and has to wait for a refund.
Digital bookkeeping can help simplify this process so you're less prone to errors. When other people’s finances are at stake, small careless mistakes could impact a worker’s desire to give the business owner 100% of their focus.
Businesses that shifted their bookkeeping process online to better navigate through the pandemic quickly realized this was a move that should have been done years ago. The advantages of having access to a clean and organized online tool far outweigh the costs.
Imagine finding your dream home, then, a week before closing the deal, losing your jobâand the house. House hunting during the coronavirus pandemic is no picnic.
COVID-19 has caused seismic changes not only to real estate markets, but also to the lives of home buyers hit with layoffs, furloughs, and other financial challenges. Just ask Katerina Rieckel, a digital strategist, knitwear designer, and first-time home buyer who, with her husband, was set to close on a glorious farmhouse in upstate New York in March.
But about a week before sealing the deal, Rieckel was laid off, which meant that she and her husband, a claims adjuster, could no longer afford the place.
As a part of our new series, “First-Time Home Buyer Confessions,” we asked Rieckel to share her story, and the hard-won lessons she wants to share with other first-timers.
Let her experiences show that even unemployment doesn’t need to spell the end of a house huntâalthough it may require you to dust yourself off after a loss and try, try again.
Katerina Rieckel’s farmhouse in upstate New York
Katerina Rieckel
Location: Troy, NY House specs: 1,544 square feet, 3 bedrooms, 2 bathrooms List price: $249,900 Price paid: $245,500
2020 has been a wild one. How did you end up buying a home in the middle of a pandemic?
We started looking for a house a year ago, about halfway through the summer. At the time, both my husband and I had recently got new jobs, so the first issue we ran into was getting pre-qualified for the mortgage without a long track record at those companies. We also both felt pressure, as our jobs were very new.
What were you looking for in a house, and what was your budget?
We were looking for a house in the country that was move-in ready, private with at least 5 acres. We started off with a small budget, max $200,000, which made our choices more narrow.
Our search continued well into the winter, and around January 2020, we finally saw a house that was all we ever dreamed of and more. It was over our budget, at $229,000, but it had been listed for over a year, so we felt there was a good chance we could get it for less than the asking price.
What did you love about this house?
It was a beautiful, slate-blue farmhouse sitting on top of a hill, surrounded by woods. The house was warm and inviting, with chickens running around, as well as a big diving pool, and a workshop in the basement connected with a two-car garage. We got along with the owners really well, and we were going to keep the chickens. Everything went very smoothly, until just over a week before closing.
Rieckel and her husband almost bought this house, but it wasn’t in the cards.
Global MLS
So what went wrong?
It was March, and COVID-19 hit hard. The digital marketing agency I worked for had clients pause their work for unknown time. I was laid off, which meant we couldn’t afford the house anymore, and had to back out of the deal.
I was crushed. We didn’t know what was going to happen, and the country was under a lockdown. We had plans for my parents to come visit us in our new house, but instead, I ended up with no job, no house, and I couldn’t see my family, since they live in Europe.
In the summer, I was very fortunate to get my job back. So we resumed our house hunt and began to search for a new contender.
When you started the search again, how had COVID-19 changed the market?
The housing market in upstate New York got totally crazy. I heard there were houses being sold within hours. The market was just incredibly competitive, and not many houses were being listed, as a lot of people didn’t want to let strangers in their house during the pandemic.
We saw about seven to 10 houses in person, but they usually ended up disappointing us, with some strange arrangements. For example, one house had around 25 acres, but half of that acreage was on the other side of the road, behind other people’s houses, which made it almost impossible to use.
The couple’s pet cat has settled into their new digs, too.
Katerina Rieckel
With such a competitive market, how did you end up finding the right house?
Finally, around halfway through the summer, I saw a house listed that I hadn’t noticed before. I called on it right away and set up a showing that evening.
The real estate agent told me we were really fast, as he had just relisted this house. Someone had been buying it, but backed out of the process because of personal reasons.
Their house has tons of privacy and a great view.
Katarina Rieckel
How did you know this house was the one?
The house had over 10 acres, it was in the country, and about 35 minutes to Troy. It was move-in ready, but definitely needed upgrades, as it looked like it got stuck in the ’80s.
Even though we didn’t like the style that much, we felt instantly comfortable and decided to put in an offer that same evening. It was partly due to the pressure of the market, but in the end, we are really happy we made this decision.
This house was totally 1980s, but Rieckel has been slowly updating it.
Katerina Rieckel
What surprised you most about the home-buying process?
Nothing prepares you for the amount of aggravation you have to go through. Buying a house is like getting a second job for about three months.
After a little work, Rieckel’s home looks lovely.
Katerina Rieckel
What’s your advice for aspiring first-time home buyers?
Don’t trust the photos! The photos got me a few times. For example, a lot of times, the photos of the house are taken so that you can’t see the neighboring houses.
You think, “Wow, that looks so private!” Then you drive there, and you realize there’s a house sitting right next to it. Since privacy was very important to us, we got disappointed a few times by this. We started doing drive-bys first, before going in with a real estate agent, whenever possible.
Rieckel moved in in time to enjoy her new home for the holidays.
Katerina Rieckel
Anything else home buyers should look out for?
Call the real estate agent and ask a lot of questions before you even go see the house, like what the property and school taxes areâvery important around here.
You also want to know what kind of heating the house has, as electric bills can really add up over the winter.
The driveway can also be a huge issue, which is why I think the first house we were buying was for sale for such a long time. It had a pretty steep driveway, which was definitely an all-wheel drive kind of thing in the winter.
We also changed who we were financing with while we were going through closing. We needed someone well-informed about the economy, who knew what they were doing and was ready to act fast.
Our first mortgage broker didn’t tell us as soon as interest rates started to go upâand basically sat on the information for a while. This is when we stopped trusting this person and went to work with a bank instead.
Maybe the best advice is not to fall in love with a house too quickly, since there can be so many setbacks that you will not see coming.
It took a little longer than expected, but this family is finally happy in their new home.
Katerina Rieckel
The post ‘I Lost My Jobâand My Dream House’: How This First-Time Home Buyer Bounced Back appeared first on Real Estate News & Insights | realtor.com®.
Adults often feel the pressure to act responsibly with everything related to their well-being and their wallets. And nothing says âadulting” quite like budgeting for medical expenses. It’s easy to think that health insurance will cover the majority of medical-related costs and thus can be overlooked in your budgetâa copay here, a deductible there… all can be handled without much ado, right?
Not so fast. Medical expenses should be a top budgeting priority, with out-of-pocket costs on the rise and the always-present risk that an unexpected medical expense could put a ding in your spending plans. Consider this: On average, healthcare costs account for about 8 percent of annual household spending, or nearly 7 percent of pretax income, according to the Bureau of Labor Statistics. Even if your health insurance kicks in to cover an expense, your budget for healthcare costs still needs to include your premiums (AKA the amount you pay for your health plan).
How do I budget for healthcare costs, you ask? Fair question. This can sound like a lot. To better plan for healthcare costs, consider these five steps:
1. Determine your total healthcare budget
When budgeting for medical expenses, it may be helpful to bucket your healthcare costs into three categories:
Fixed Premium: This is the set amount you pay for your health insurance. If you get health insurance through work, this expense may be deducted automatically from your paycheck.
Routine: These are your anticipated healthcare costs, even if they fluctuate. Think your copay for your annual checkup or the cost of a regular prescription.
Unexpected: These costs can be difficult to predict, like an unplanned trip to the emergency room or an urgent medical procedure.
When it comes to planning for healthcare costs, your medical and spending history is key. âThe best place to start in determining how much to budget for healthcare costs is to look at how much you actually spent on healthcare previously,” suggests CPA and personal finance blogger Logan Allec.
You can start by reviewing all of your receipts from your insurance company and healthcare providers and going through your bank and credit card statements to flag any healthcare costs you paid out of pocket over the past year, Allec says. (If you didn’t save all of last year’s receipts, don’t stress. You can contact your insurance and healthcare providers for documentation.) The final number you come up with is a good start for determining your annual fixed and routine healthcare expenses. (Those unexpected curveballs mentioned earlier? See tip 3.)
When budgeting for healthcare costs, Allec also says to anticipate if you’ll have any extra costs this year that you didn’t encounter last year. For example, are you scheduling a surgical procedure or expecting a child? Make sure you understand how much you will have to pay out of pocket by reviewing exactly what your insurance covers annually, and factor that into your plan for healthcare costs.
2. Put your health at the top of your priority list
Once you’ve estimated your annual healthcare costs, consider how you prioritize them against your other essential expenses, says Todd Christensen, blogger and financial educator from Money Fit.
As a guide, Christensen says that healthcare expenses should fall between necessities like your mortgage or rent, taxes, food, transportation and phone. âIf you have a hard time paying for prescriptions but make monthly payments to your cell phone provider, then you have prioritized your personal communications over your health,” he adds.
From budgeting for your insurance premiums to preparing for doctor visits and ordering prescriptions, think of paying for healthcare expenses as a “need” instead of a “want,” Christensen says. By adjusting your mindset to give your health the significance it deserves, budgeting for medical expenses will become second nature.
3. Set up an emergency fund
Remember those unexpected healthcare costs that are tricky to plan for? When creating a budget for healthcare costs, Christensen suggests creating an emergency fund. An emergency fund is an account that is set aside to help cover an unexpected financial or medical emergency, such as a procedure or medication that is not fully covered by your insurance plan.
Sunny skies are the right time to save for a rainy day.
Start an emergency fund with no minimum balance.
Start Saving
Online Savings
Discover Bank, Member FDIC
Experts typically recommend saving at least three to six months of living expenses in your emergency fund so you can pay for unexpected expenses without having to take on debt or dip into savings earmarked for other financial goals. But, according to Christensen, if you’re starting an emergency fund from scratch, it’s best to start small and focus on a goal that’s attainable for you.
“Initially, the amount is less important than the commitment to just do it,” Christensen says. Managing the account, however, does require some discipline. For example, going on a 10-day wellness retreat, however therapeutic the massage sessions may seem, probably does not qualify as an emergency.
On average, healthcare costs account for about 8 percent of annual household spending, or nearly 7 percent of pretax income.
4. Take advantage of health savings accounts
In addition to your emergency fund, there are also special health savings accountsâfunded by you or your employerâthat can help you cover your health expenses and plan for healthcare costs. Here are three common health savings tools to consider:
A Health Savings Account (HSA) can be for you if you’re enrolled in a high-deductible health insurance plan (HDHP), which is a plan that offers lower premiums in exchange for a higher deductible. An HSA lets you put money away on a pre-tax basis for eligible healthcare expenses, including certain dental work, eyeglasses and prescriptions. Contributions can come from you, your employer, a relativeâanyone who wants to fund the account. Also, the funds roll over from year to year with an HSA, which makes it a great long-term tool for budgeting for medical expenses. Note there is an annual limit for how much you can contribute.
Whereas an HSA can be funded by you and your employer, a Health Reimbursement Arrangement or a Health Reimbursement Account (HRA), is funded solely by your employer, and funds can be spent on predetermined medical expenses. What’s left over in the account can be rolled over to the next year. If you leave the company, however, you can’t take the funds with you.
With a Flexible Spending Account (FSA), you can have a certain amount of money taken from your paycheck, pre-taxed, and deposited into an account that’s used for qualified healthcare expenses. Both you and your employer may contribute to this plan, with a maximum contribution allowed by law. Unlike the accounts above, FSAs don’t generally roll over at the end of each year. Check with your employer for your plan’s specifics.
5. Evaluate health insurance choices carefully
To budget for healthcare costs effectively, consumer finance leader Trae Bodge suggests you take the time to evaluate your health insurance options to find the best plan for you and your family. For each plan, you’ll want to carefully consider the type of plan (are your preferred doctors, hospitals and pharmacies covered?), as well as the cost of premiums, deductibles, copays and prescriptions. Your health history may also be an important factor when considering different coverage options.
âIf family members go to the doctor frequently or have multiple prescriptions, it may be better for your budget to opt for a more expensive plan, given the coverage provided,” Bodge says.
If you’re an entrepreneur or self-employed, you can shop the Health Insurance Marketplace at healthcare.gov. But also look at comparable plans directly through insurance providers to better budget for healthcare costs, Bodge says. You might be able to save by choosing a smaller insurance company over a larger one or by signing up directly with the provider, Bodge adds.
Plan for healthcare costs today
When it comes to budgeting for medical expenses, a little planning today can go a long way toward providing for a more financially secure tomorrow. With a healthcare budget firmly in place, you’ll be better empowered to make decisions that are good for your healthâand your wallet.
The post Your Guide to Budgeting for Healthcare Costs appeared first on Discover Bank – Banking Topics Blog.
Annaâs email requesting help with her finances began with a unique confession.
âFarnoosh, my money problem garners little sympathy,â the 32-year-old wrote. âMy issue is that I make too much of it.â
Now, THIS is interesting, I thought. I immediately followed up with many questions.
Hereâs what I learned through our conversation:
The Denver-based Mint user earns $220,000 per year as an engineer. Annaâs also benefited from years of big bonuses and her net worth, not including her home equity, is close to a million dollars.
After paying taxes and health benefits and maxing out her 401(k), Anna takes home between $8,000 and $10,000 each month. Her expenses mainly consist of a $1,200 mortgage payment, car insurance, gas, food and utilities, amounting to maybe a few thousand dollars per month.
The rest either goes into savings where she stashes about $5,000 to $10,000 for unexpected expenses or into a brokerage account where she has roughly $800,000 invested. A wealth management firm manages that portfolio and charges, she says, an annual 1% fee.
Anna has no consumer debt, besides her mortgage, which amounts to about $338,000. Itâs a 30-year fixed rate loan with a 2.85% interest rate. The home has appreciated in recent years with about $100,000 in equity (including Annaâs initial 20% down payment).
So, what is the problem, exactly?
âMy big worry is that I don’t have the habits to manage money well,â Anna told me. Her sizeable bank balance has her feeling financially free, although she worries about getting carried away with spending sometimes.
âWhen I see money in my bank account I rationalize that âyea, that vacation is doable. I donât hold back on the things that may seem frivolous,ââ she says. But It seems she wants more financial grounding and to be able to evaluate expenditures and price tags more critically.
Annaâs situation may be unique, but I think relatable in the sense that we all would like to feel more thoughtful with how we spend, save and invest. And while some may do well with earning money, it should not be assumed that they can also manage that money well.
I applaud Anna for wanting to be sure that, even with an impressive net worth, she is actually making wise financial decisions.
Hereâs my advice.
Take a Deep Breath
No need to panic when spending on things and experiences that you enjoy. From what I can tell Annaâs prioritizing the serious financial stuff first like contributing the max to her 401(k) and saving all of her annual bonuses in a brokerage account. She has no credit card debt and pays all her bills on time. Thatâs terrific.
Sometimes we just want to hear that weâre on the right track with our money and I have a very simple way to measure this:
If you manage each paycheck by saving, investing and paying all your bills first, then by all means, youâre entitled to have fun with whatever is left without any fear or regret. Am I right?
If youâve done the good work of taking care of your future with your money, then donât hesitate treating yourself and others with the remaining funds today. Splurge away and enjoy your hard-earned money. And remember to enjoy the moment.
Ditch Your Money Managers
I do think Anna could find a better home for her investments.
Paying one percent of her managed assets to this firm may not seem that high of an annual fee. But when you think about Annaâs balance of $800,000, thatâs $8,000 this year. What about next year and the decades after that as she contributes more to the account? That fee, compounded over the next 30 years, will amount to – conservatively – over one million dollars. Ouch.
That doesnât even factor in the expense ratios for each mutual fund thatâs in her portfolio.
If all Anna seeks is investment assistance, she may be better suited stationing her money with an automated wealth platform or robo-advisor where her money is largely invested in low-fee index funds or exchange-traded funds (ETF) and the portfolio management fee is typically 0.50% or less.
Of course, breaking up with your financial advisor is not always so simple. Itâs especially hard for Anna, as she equated her money managers to âfather figures.â
If I were Anna, I would just explain to my advisors over email something like, “I want be more conservativeâ¯withâ¯my money and that includes being extra mindful of the various fees that I’m paying. To that end, Iâve decided to manage my money more independently. Iâm sure you can understand. I appreciateâ¯yourâ¯help over the years. Please let me know next steps.”
Planners know the drill and are used to having clients end relationships.⯠Stay strong. Nobody can really argue with the fact that saving money is a good thing!
Establish Short and Long Term Goals
Anna wants to spend and save with more conviction. I think having some concrete, tangible goals can help.
For example, she shared that sheâd like to get married, have a family and own two homes â one near her office downtown and another in the mountains as a getaway.
So, the next step is to understand what these goals cost. What are, say, the going prices on a vacation home in her state? How much might she want to stash in a separate account for the future down payment on this property? Knowing the underlying costs of her goals can better direct how much to spend elsewhere.
Next time sheâs planning a vacation, she may be more inclined to price compare or hunt down better deals, as opposed to just judge whether the trip is financially âdoableâ by the amount of money in her bank account. Now sheâll have the image of that second home and its costs and will make a more informed choice.
Contribute to a Cause
Last but not least, when you feel you make more than enough, like Anna does, this is a great opportunity to be extra charitable. If sheâs seeking a way to give her money more meaning and feel purposeful in her financial life, this is a truly wonderful way to go about it. Discover a cause that youâre passionate about and make an impact as a volunteer and donor.
Have a question for Farnoosh? You can submit your questions via Twitter @Farnoosh, Facebook or email at farnoosh@farnoosh.tv (please note âMint Blogâ in the subject line).
Farnoosh Torabi is Americaâs leading personal finance authority hooked on helping Americans live their richest, happiest lives. From her early days reporting for Money Magazine to now hosting a primetime series on CNBC and writing monthly for O, The Oprah Magazine, sheâs become our favorite go-to money expert and friend.
The post Mint Money Audit: Managing Money When You Make Enough appeared first on MintLife Blog.
A trust can be a useful estate planning tool, in addition to a will. You can use a trust to remove assets from probate, potentially minimize estate and gift taxes and ensure that assets are managed on behalf of beneficiaries according to your wishes. There are different types of trusts you can establish and some are more specialized than others. Knowing how these broad categories of trusts compare can help with choosing the right option. When it comes to estate planning, including whether to create a trust, a financial advisor can help you make the most informed decision possible.
What Is a Trust?
A trust is a type of legal entity that can be created in accordance with your state laws to manage your assets. The person who creates a trust is called a grantor and they have the right to transfer assets into the trust. They can also choose one or more trustees to oversee the trust and manage the assets within it.
The trusteeâs job is to manage assets according to the grantorâs specifications on behalf of one or more trust beneficiaries. For example, you might set up a trust to hold assets that you want to be distributed among your three children when you pass away. Or you might choose your favorite charitable organization to be a beneficiary of your trust.
There are many different kinds of trusts and they can be categorized in different ways. For instance, a revocable trust can be changed during the grantorâs lifetime. If you have this type of trust and you want to add assets to it or change the beneficiaries, you can do so while youâre still living. An irrevocable trust, on the other hand, involves a permanent transfer of assets.
Trusts can also be categorized as grantor or non-grantor. In a grantor trust, the trust creator retains certain powers over the trust, including rights to the trustâs assets and income. Trust assets may be included in the trust creatorâs estate when they pass away. With a non-grantor trust the trust creator has no interest or control over trust assets. Trust assets are generally excluded from the trust creatorâs estate at their death.
Benefits of Trusts in Estate Planning
Trusts can be used inside an estate plan to perform a number of functions. For example, you might create a trust to:
Pass on specific assets to your chosen beneficiaries
Ensure that certain assets arenât subject to the probate process
Manage estate and gift tax liability
Protect assets from creditors
Ensure that a special needs beneficiary is cared for when youâre gone
Receive the proceeds of a life insurance policy when you pass away
Some of these scenarios may call for a simple trust, while others may require a more specialized trust. One thing thatâs important to keep in mind is how each one is treated for tax purposes when creating a simple vs. complex trust.
Simple Trust, Explained
A simple trust is a type of non-grantor trust. To be classified as a simple trust, it must meet certain criteria set by the IRS. Specifically, a simple trust:
Must distribute income earned on trust assets to beneficiaries annually
Make no principal distributions
Make no distributions to charity
With this type of trust, the trust income is considered taxable to the beneficiaries. Thatâs true even if they donât withdraw income from the trust. The trust reports income to the IRS annually and itâs allowed to take a deduction for any amounts distributed to beneficiaries. The trust itself is required to pay capital gains tax on earnings.
Complex Trust, Explained
A complex trust also has certain criteria it must meet. In order for a trust to be complex, it must do one of the following each year:
Refrain from distributing all of its income to trust beneficiaries
Distribute some or all of the principal assets in the trust to beneficiaries
Make distributions to charitable organizations
Any trust that doesnât meet the guidelines to qualify as a simple trust is considered to be a complex trust. Complex trusts can take deductions when computing taxable income for the year. This deduction is equal to the amount of any income the trust is required to distribute for the year.
There are also some other rules to keep in mind with complex trusts. First, no principal can be distributed unless all income has been distributed for the year first. Ordinary income takes first place in the distribution line ahead of dividends and dividends have to be distributed ahead of capital gains. Once those conditions are met, then the principal can be distributed. And all distributions have to be equitable for all trust beneficiaries who are receiving them.
Simple vs. Complex Trust: Which Is Better?
When it comes to simple and complex trusts, one isnât necessarily better than the other. The type of trust that ultimately works best for you can hinge on what you need the trust to do for you.
A simple trust offers the advantage of being fairly straightforward when it comes to how assets and income can be distributed and how those distributions are taxed. A complex trust, on the other hand, could offer more flexibility in terms of estate planning if you have a sizable estate or numerous beneficiaries.
When comparing trust options, consider whether you want to retain control or an interest in the assets that are transferred to it. If you choose a simple or complex trust, youâre choosing a non-grantor trust which means youâll no longer have an interest in the trust assets. Talking to an estate planning attorney or trust professional can help you decide which type of trust may work best for your financial situation.
The Bottom Line
The main difference between a simple vs. complex trust lies in how income and assets are distributed and how those distributions are taxed. Whether it makes sense to establish a simple vs. complex trust can depend on the size of your estate, the nature of the assets you want to include and your wishes for managing those assets. Itâs important to understand the tax rules before creating either type of trust as well as how a trust fits into your larger estate plan.
Tips for Estate Planning
Consider talking to a financial advisor about whether it makes sense to use a trust to plan ahead for the distribution of assets or to manage estate and gift taxes. If you donât have a financial advisor yet, finding one doesnât have to be complicated. SmartAssetâs financial advisor matching tool can help you connect with a financial advisor in your local area. It takes just a few minutes to get your personalized recommendations online. If youâre ready, get started now.
While trusts can offer numerous benefits, creating one doesnât necessarily mean you donât also need a last will and testament. You can use a will to distribute assets that you donât want to include in a trust. Or you could create a pour-over will to transfer assets into a trust.
The financial camps are divided between paying off your smallest first vs. your highest interest student loan. So whoâs right? Finance people can agree on a few things. Some debts like payday loans and IRS back taxes are worse than…
The post Which Student Loan Should You Pay First? appeared first on Modern Frugality.
It wasnât until a few months after my husband and I got married that I decided to check both our credit scores. While my husbandâs credit score wasnât horrible, it certainly didnât qualify as âexcellent.â This got me thinking about how newlywedsâ financial histories can affect both spousesâ finances moving forward, and how critical it is to acknowledge this realityâideally before getting hitched.
Why Itâs Important to Have a Good Credit Score
Manisha Thakor cuts right to the chase in her book On My Own Two Feet: âYour credit score is essentially your financial reputation in numeric form.â
Aiming for an excellent credit scoreâgenerally defined as 750 or moreâis a worthy goal, owing to the range of ways in which it can save you money. Credit scores are critical when applying for loansâfor instance, car loans and mortgages. In addition, many employers consider prospective employeesâ credit scores during the hiring process.
A high credit score means you can access lower interest rates when borrowing, because creditors will view you as reliable. The perceived risk that youâll default on your loan is lower compared to those with poor credit scores. Lower interest rates, especially on large amounts borrowed over significant timeframes, can save you thousands and thousands of dollars!
A poor credit score can indirectly hurt your financial efforts as well; consider the fact that when youâre paying over the odds in debt repayments, youâre committing fewer dollars to saving and retirement planning.
photo credit: LendingMemo via photopin cc
Till Debt Do Us Part
Marriage makes you one combined financial unit.
However, that doesnât mean your credit scores are merged; your credit history continues to be maintained on an individual basis. One spouseâs poor credit cannot directly damage the individual score of the other spouse.
That being said, if you apply for a loan as a married couple, creditors look at both your credit scores to determine your eligibility and terms. So, if one of you has the credit of an angel whereas the otherâs credit history is limited or even littered with missed payments and liens, you may find your application is denied.
But, this is not just about loan applicationsâpoor credit can belie more than just a few bad credit card habits. Other financial follies, like paying taxes late, not focusing on saving, and day-to-day overspending, could be lurking in the closet.
What Do You Do After Youâve Said I Do?
While bad credit isnât good news, itâs not necessarily a reason not to get married. And, itâs not necessarily the precursor to divorce! It is, however, an alarm signaling that it is time to get clear on your joint financial situation and start communicating. Make sure you do this respectfully and compassionately to minimize blame and financial stress. (If youâre the type of person whoâd like to know this information from prospective partners before things get serious, there are now dating sites catering just to you.)
Once youâve identified that one of you has less-than-optimal credit, itâs time to take action. Here are four top tips for taking immediate action:
1. Check your credit report for mistakes: Errors are, unfortunately, pretty common and can be really detrimental. Check your report at least once per year.
2. Make payments on time: Yes, this is stating the obvious, but it needs to be said! Mary Beth Storjohann of Workable Wealth says, â35% of your credit score is based on how you pay your bills (making this the biggest determining factor for your score)! Are you often late of missing payments? The impact of just one 90-day late payment goes way beyond the three months you took to pay, so set up automatic bill payments.â
3. Lower your debt-to-credit ratio:Â This is how much debt you have as a proportion of your overall credit limits. 30% of your credit score is based on the amount of money you owe versus the amount of credit available to you. The higher the amount of credit youâre utilizing, the more negative the impact on your score. Keep the debt level as low as possible (30% of your limits, or less).
4. Pay down your debt faster:Â Make more than the minimum payments wherever possible by utilizing the snowball method or targeting the balance with the highest interest rate to pay down first.
photo credit: natloans via photopin cc
Alongside these tips, itâs super important to remember that improving your credit score wonât happen overnight. The length of time it takes for your score to improve is directly related to reasons for the drop. It can take anywhere from a few months to several years for your credit report to reflect the positive changes youâre making. As Mary Beth notes, âThe most important thing is to be proactive in clearing up any issues.â In addition, two of the criteria factored into your score are the length of your overall credit history and the average age of your accounts.
So, donât be discouragedâbe patient and give it time.
And, Finally, Some Tips on What Not to Do!
There are always two sides to every coin so, while youâre following the tips above, make sure that youâre not unwittingly hurting your score and negating your good work.
Be mindful of the following ways that you could be hurting your credit score:
1. Opening too many new accounts:Â This comes back to the point that the average age of your accounts is a key factor. Opening lots of new accounts reduces that average.
2. Closing too many old accounts:Â Older accounts indicate that you have managed payments for a long time and increase the average age of your accounts. When you close credit card accounts, this also decreases the amount of credit available to you, which can reflect negatively if you have other accounts that are still carrying high balances (it essentially increases your debt to credit ratio).
3. Signing up for lots of retail incentive programs:Â Every time you apply for credit, the company issuing the credit will request information about you from the credit bureaus. Too many of these requests can reduce your score.
4. Over-utilizing your credit. Mary Beth advises, âIf youâre depending on your credit cards to fund your daily expenses and lifestyle needs, but arenât able to pay them off in full at the end of each month, something needs to change. Start tracking your spending and get a handle on your expenses.â
In summary, start taking positive steps, be aware of actions that can hurt your credit, and focus on building solid financial foundations for the future.
This post was written by Erika Torres of GoGirl Finance. GoGirl Finance is a fast-growing community of women seeking and providing financial wisdom across money management, lifestyle, family and career. For more finance tips, follow GoGirl Finance on Twitter @GoGirlFinance
The post Spouse Has Bad Credit? How It Affects You. appeared first on MintLife Blog.
Surgery is a prestigious field that requires a high degree of skill, dedication and hard work of its members. Not surprisingly, surgeonsâ compensation reflects this fact, as the average salary of a surgeon was $255,110 in 2018. This figure can vary slightly depending on where you live and the type of institution at which you work. Moreover, the path to becoming a surgeon is long and involves a substantial amount of schooling, which might result in student loan debt.
Average Salary of a Surgeon: The Basics
According to the Bureau of Labor Statistics (BLS), the average salary of a surgeon was $255,110 per year in 2018. That comes out to an hourly wage of $122.65 per hour assuming a 40-hour work week â though the typical surgeon works longer hours than that. Even the lowest-paid 10% of surgeons earn $94,960 per year, so the chances are high that becoming a surgeon will result in a six-figure salary. The average salary of a surgeon is higher than the average salary of other doctors, with the exception of anesthesiologists, who earn roughly as much as surgeons.
The top-paying state for surgeons is Nebraska, with a mean annual salary of $287,890. Following Nebraska is Maine, New Jersey, Maryland and Kansas. Top-paying metro area for surgeons include Cincinnati, OH-KY-IN; Winchester, WV-VA; Albany-Schenectady-Troy, NY; New Orleans-Metairie, LA; and Bowling Green, KY.
Where Surgeons Work
According to BLS data, most of the surgeons in the U.S. work in physiciansâ offices, where the mean annual wage for surgeons is $265,920. Second to physiciansâ offices for the highest concentration of surgeons are General Medical and Surgical Hospitals, where the mean annual wage for surgeons is $225,700. Colleges, universities and professional schools are next up. There, surgeons earn an annual mean wage of $175,410. A smaller number of surgeons are employed in outpatient Care Centers, where the mean annual wage for surgeons is $277,670. Last up are special hospitals. There, the mean annual wage for surgeons is $235,770.
Becoming a Surgeon
You may have heard that the cost of becoming a doctor, including the cost of medical school and other expenses, has soared. Aspiring surgeons must first get a bachelorâs degree from an accredited college, preferably in a scientific field like biology.
Then comes the Medical College Acceptance Test (MCAT) and applications to medical schools. The application process can get expensive quickly, as many schools require in-person interviews without reimbursing applicants for travel expenses.
If accepted, youâll then spend four years in medical school earning your M.D. Once youâve accomplished that, youâll almost certainly enter a residency program at a hospital. According to a 2018 survey by Medscape, the average medical resident earns a salary of $59,300, up $2,100 from the previous year. General surgery residents earned slightly less ($58,800), but more specialized residents like those practicing neurological surgery earned more ($61,800).
According to the American College of Surgeons, surgical residency programs last five years for general surgery. But some residency programs are longer than five years. For example, thoracic surgery and pediatric surgery both require residents to complete the five-year general surgery residency, plus two additional years of field-specific surgical residency.
Surgeons must also be licensed and certified. The fees for the licensing exam are the same regardless as specialty, but the application and exam fees for board certification vary by specialty. Maintenance of certification is also required. Itâs not a set-it-and-forget-it qualification. The American Board of Surgery requires continuing education, as well as an exam at 10-year intervals.
Bottom Line
Surgeons earn some of the highest salaries in the country. However, the costs associated with becoming a surgeon are high, and student debt may eat into surgeonsâ high salaries for years. The costs of maintaining certification and professional insurance are significant ongoing costs associated with being a surgeon.
Tips for Forging a Career Path
Your salary dictates a lot of your financial life, such as how much you can afford to pay in rent and the slice of your paycheck that goes to taxes. However, there are some principles that apply no matter your income bracket, like the importance of an emergency fund and a well-funded retirement account.
Whether youâre earning a six-figure surgeonâs salary or living on a more modest income, itâs smart to work with a financial advisor to manage your money. Finding the right financial advisor that fits your needs doesnât have to be hard. SmartAssetâs free tool matches you with financial advisors in your area in 5 minutes. If youâre ready to be matched with local advisors that will help you achieve your financial goals, get started now.
The best way for first-time home buyers to come up with a down payment for a home: save for one, of course! But sometimes you’re in a hurry. Maybe your dream house just popped up on the market, or youâve simply had it with being a renter. Whatever the reason, youâre ready to buy a house, now. But while your credit is good and your career is stable, you still need to come up with that big chunk of change for a down payment.
Watch: 4 Things You Can Give Up to Make a Down Payment
Never fear: There are plenty of ways to amass a sizable down payment fast. Check out these tactics, along with their pros and cons.
1. Dip into your 401(k)
If you’ve been socking away money in your 401(k), it is possible to borrow from that for a home loanâand get that cash in hand fast.
âMost 401(k) plans allow you to borrow up to 50% of the vested balance, or up to $50,000, and it takes about a week,â says Todd Huettner, owner of Huettner Capital, a residential and commercial real estate lender in Denver.
But it will cost you: If you take funds out of your 401(k) earlyâthat is, before you’re 59½ years oldâyouâre going to take a 10% penalty on that withdrawn money. And it counts as gross income, which can bump you into a higher tax bracket.
Check out this Wells Fargo calculator to see what your penalties would be. In addition to penalties, most companies require you to repay that vested money over five yearsâor sooner if you quit or get axed. So be sure your career is stable.
2. Crack your IRA
Digging into your IRA usually carries the same 10% penalty of breaking open your 401(k) piggy bank, with one major difference: The penalty doesn’t apply to first-time home buyers. And unlike a 401(k), you donât have to repay what you take out of an IRA. However, the withdrawal is still taxable. Plus thereâs the matter of not repaying yourself, which can hurt your long-term retirement. So if you take out a sizable chunk, restoring this nest egg to its former level will take you many years.
3. Hit up your boss
Let’s get real: You donât want to stroll into your bossâ office and demand help buying your house. But you can ask if your company has an employer-assisted housing program. Think about it: Companies hate employee turnover, so what better way to keep you around than pitching in to help you buy a home? It’s a win-win: Home loans are often low- or zero-interest and are usually structured to be forgivable over a period of time, often five years, which further encourages employees to stay put. The downside? Not all employers offer it. Hospitals and universities most often do, so be sure to ask to avoid overlooking this ready source of financial assistance.
4. Explore state and city programs
Local assistance programs abound to help you scratch up cash for a down payment. Offered by either your state, your city, or nonprofits, these programs often partner with banks, who hope to gain clientele they might pass over otherwise: Bank of America, for instance, recently launched a searchable database of local programs. Wells Fargoâs partnership with NeighborhoodLIFT offers down payment assistance up to $15,000.
The catch? You’ll need to qualify. For NeighborhoodLIFT, for instance, your household income has to be no more than 120% of the median in your area.
5. Get a gift from family or friends
Understandably, many home buyers turn to their family for help buying a home, and for good reason: There are no limits on how much a family member can “gift” another family member, although only a specific portion can be excluded from taxes ($14,000 per parent).
But it’s not just as easy as that. Gifters, even family, will need to provide paperwork in the form of a gift letter. And if the gifter is a friend, it gets even more complicated. For example, you’ll have to wait about 90 to 120 days before you can use any of those funds.
The post 5 Speedy Ways to Come Up With a Down Payment appeared first on Real Estate News & Insights | realtor.com®.
Along with the excitement of purchasing a new home, comes the additional costs that you will be expected to pay as a homeowner. Apart from covering the mortgage of your home, you’ll have additional expenses – such as home insurance – that you will be expected to cover. If you’re looking to budget for a home purchase, it’s important that you consider these costs as they can add up to thousands of dollars each year.
To help you make educated decisions when budgeting, we’ve compiled a list of the major home ownership costs in one free, downloadable guide. Get the Home Ownership Costs to Consider guide here.
Home Insurance
Home insurance policies help protect against serious damage and destruction, like fires, leaks, floods, or break-ins. It also protects a homeowner from personal liability. Some banks may offer home insurance products, although you can typically purchase a home insurance policy through a home insurance agent or broker.
Tip: You may get better rates if you use a broker or agent. It’s also important to keep in mind that policies typically renew on an annual basis.
Condo Fees
The cost of maintenance fees should be taken into account when you’re buying a condo. This recurring cost is in addition to your mortgage and impacts how much home you can afford.
Your mandatory monthly fee will vary by your building and square footage. It typically covers:
Utilities (such as water and garbage collection)
Building insurance
Maintenance of common areas (such as the gym, pool, front desk, hallways, landscaping)
Building reserve fund (covers emergencies and long-term maintenance projects such as a new roof or elevators repairs)
What Are Status Certificates?
If you’re looking to purchase a condo, you’ll want to look into obtaining a status certificate so that you have as much information about the building and your unit as possible before buying. A status certificate provides valuable information about the condo corporation and its financial
situation. It includes details on the budget, legal issues, the reserve fund, maintenance fees, and any fee increases expected in the future.
Tip: You’ll want to carefully review your status certificate with your lawyer before making a purchase.
Property Tax
Property taxes are paid annually by homeowners to their municipality. These taxes are ongoing and are separate from your mortgage. Your annual property tax can often be paid in installments.
Tip: It’s important to remember that this cost is not due at closing, but is a recurring cost.
How Are Property Taxes Calculated?
Your property tax rate will vary depending on the value of your property as assessed by your provincial assessment authority. This is then multiplied by a rate that falls between 0.5% to 2.5%.
How Do You Pay Property Taxes?
You can pay your property taxes either through your mortgage provider or directly to your municipality.
Your Utility Bills
When you purchase a home, you’ll have to set up or transfer your utility bills to your new home. If you live in a condo, these costs may be included in your monthly maintenance fee. Your utility bill will include:
Hydro (electricity)
Heat
Water and Garbage
Internet, Phone, Cable
For the full details on the home buyer’s journey including examples, advice, pictures and sample calculations, download a copy of our free Home Ownership Costs to Consider Guide here.
The post A Guide To Everything You Need To Know About Home Ownership Costs [Free Download] appeared first on Zoocasa Blog.
Katerina Rieckel
Sally Elford/Getty Images