Today’s top story: Why military families are at an increased risk of identity theft. Also in the news: What Millennials can teach Boomers about financial planning, the most important thing on your credit report, and how to leap over savings hurdles.
Military Families Remain Easy Prey for ID Theft
Military families have their information stolen at twice the rate of regular consumers.
What Gen Y Can Teach Boomers About Financial Planning
Millennials are more financially conscientious than one might think.
The Most Important Thing on Your Credit Report
It’s all about payment history.
5 Huge Hurdles to Saving and How to Avoid Them
Every little bit helps.
5 tips for saving at the grocery store
Whatever you do, don’t go to the grocery store hungry.
Ask Michael Hedlund, an Oregon law school graduate who repeatedly failed the bar and then went to work as a juvenile counselor. A federal appeals court decided he didn’t have to pay $53,000 of the $85,000 in student loans he still owed.
Or Janet Rose Roth of Nevada, who was freed from over $95,000 in federal student loans even though she was employed for most of the time she owed the money and never made voluntary payments on the debt.
Or Carol Todd, who dropped out of the University of Baltimore School of Law and was allowed to erase nearly $340,000 in education debt. A bankruptcy judge ruled her Asperger’s syndrome made it impossible for her to hold a job that would allow her to repay the loans.
These three court decisions, all made within the past two years, challenge many misconceptions about who can and can’t get relief in bankruptcy court.
The cases have something else in common: the debtors didn’t, or couldn’t, pay for help. Roth represented herself in court while law firms represented Hedlund and Todd in their appeals pro bono, or without a fee.
My Reuters column this week (“Bankrupt? How to get student loans erased“) discusses how few borrowers actually try to get their loans discharged in bankruptcy, and whether cost is a factor. You can read it here, and get all my Reuters columns here.
Today’s top story: Where to save for retirement if you make less than $100,000. Also in the news: Financial therapy, the least prepared states for retirement, and a guide to refinancing your mortgage.
Don’t Wait For Obama’s MyRA: The Best Places To Save For Retirement If You Make Less Than Six Figures
The best time to start saving is now.
Do You Need Financial Therapy?
You don’t need to deal with money problems alone.
Retirement readiness looks grim in many states
Wake up, South Carolina!!
Four-Step Guide to Refinancing Your Home Mortgage
Lower interest rates could save you money.
Money-saving tips for seniors
Easy ways to keep some extra money in your wallet.
Today’s top story: How to avoid medical identity theft while at the doctor’s office. Also in the news: What you need to do with your 401(k), ways to save on child care, and nine jobs with the biggest earning potential.
4 Things Your Doctor Doesn’t Need to Know
Avoiding medical identity theft.
No plan for your 401(k)? You’re not alone
Just having a 401(k) plan isn’t enough.
6 ways to cut child care costs
Without sacrificing quality!
9 Jobs With the Biggest Earning Potential
You probably shouldn’t rely on the second one.
7 Steps To A Secure Retirement For Women
Preparing and securing the future.
Dear Liz: We received $100,000 from the sale of some undeveloped land. We are trying to figure out the best way to pay off our bills. Our primary residence has a balance of $173,000 at 4.25% and is a 30-year loan. We also own a home we rent out in which we cover the mortgage with the rent income. The balance on it is $131,500 at 4.5% for a 20-year loan. This home is often a burden when tenants change on an average of every 1 to 2 years, and we don’t have the income to cover the mortgage without the rental income. My husband took a $20,000 loan out of his retirement fund for closing costs for our primary residence, a debt that is being paid back through paycheck deductions. We also have an auto loan with a balance of $7,800 at 2.74% and credit cards with varying interest rates with total owing of $22,000. What should we do?
Answer: Your first task should be examining your spending habits to see why you have so much credit card debt. If you don’t fix the problem that’s causing you to live beyond your means, you’re likely to find yourself in a deeper hole eventually, regardless of how well you deploy this windfall.
You also should see if you’re on track with retirement savings. Boosting your retirement plan contributions at work and to individual retirement accounts can help you convert this money into long-term economic security.
Next, pay off the credit card debt and consider retiring the retirement plan loan. If your husband lost his job and couldn’t repay the debt, the outstanding balance would become a withdrawal that would incur income taxes and penalties.
Any money that’s left over can go into an emergency fund to protect against job loss and to keep you from going into debt between tenants. Your low-rate car loans and tax-advantaged mortgage debt aren’t top priorities for repayment, but you can start paying them down over time once your other bases are covered.
Dear Liz: We have a son who is a high school junior and who is planning on going to college. We met with a college financial planner who suggest we put money in a whole life insurance policy as a way to help get more financial aid. Is that a good idea?
Answer: Your “college financial planner” is actually an insurance salesperson who hopes to make a big commission by talking you into an expensive policy you probably don’t need.
The salesperson is correct that buying a cash-value life insurance policy is one way to hide assets from college financial planning formulas. Some would question the ethics of trying to look poorer to get more aid, but the bottom line is that for most families, there are better ways to get an affordable education.
First, you should understand that assets owned by parents get favorable treatment in financial aid formulas. Some assets, such as retirement accounts and home equity, aren’t counted at all by the Free Application for Federal Student Aid or FAFSA. Parents also get to exempt a certain amount of assets based on their age. The closer the parents are to retirement, the greater the amount of non-retirement assets they’re able to shield.
Consider using the “expected family contribution calculator” at FinAid.org and the net cost calculators posted on the Web sites of the colleges your son is considering. Do the calculations with and without the money you’re trying to hide to see what difference the money really makes.
Most families don’t have enough “countable” assets to worry about their effect on financial aid formulas, said college aid expert Lynn O’Shaughnessy, author of “The College Solution.” Those that do have substantial assets have several options to reduce their potential impact, including spending down any custodial accounts, paying off debt and maxing out retirement plan contributions in the years before applying for college.
Another thing to consider is that most financial aid these days comes as loans that need to be repaid, rather than as scholarships or grants that don’t. So boosting your financial aid eligibility could just mean getting into more debt.
Meanwhile, it’s generally not a good idea to buy life insurance if you don’t need life insurance. The policy could wind up costing you a lot more than you’d save on financial aid.
If you’re still considering this policy, run the scheme past a fee-only financial planner—one who doesn’t stand to benefit financially from the investment—for an objective second opinion.
Today’s top story: Should you splurge or save with your tax refund? Also in the news: Saving for the end of the world, understanding Obamacare tax penalties, and why free checking is becoming a thing of the past.
Tax refunds: Cheap thrills or savvy savings?
End-of-world money moves to make
Why should the zombies get your money?
Obamacare Tax Penalties: Will You Have to Pay?
Understanding the new insurance penalties.
Free checking disappearing at the big banks
Free checking is going the way of free toasters.
Will Opening Credit Cards Help My Credit
Possibly. But proceed with caution.
Today’s top story: Choosing between the standard or itemized tax deduction. Also in the news: Taking steps to a better financial future, money mistakes to avoid during your 20s, and the four letter word that can ruin your credit.
Should You Take the Standard or Itemized Tax Deduction?
While one might be easier, the other could save you more money.
7 Steps To A Better Financial Future
Begin with the end in mind.
Money Mistakes to Avoid in Your 20s
Don’t makes mistakes in your 20s that you’ll be paying for in your 40s and 50s.
The 4-Letter Word That Can Ruin Your Credit
Take a guess.
3 Ill-Advised Reasons Not to Buy Life Insurance
You’re not getting any younger.
The Consumer Financial Protection Bureau today called on major credit card issuers to provide free scores to their customers on their statements or online. The regulator’s idea is that low scores could tip people off to problems in their credit reports–problems they might not otherwise find, since too few people get their free credit reports each year.
Creditors use a variety of scores to evaluate and monitor their customers–scores that measure everything from the likelihood of default to the likelihood the user will stop using the card. It’s the score that measures the likelihood of default that the regulators want customers to see.
I believe you should be able to see any score that’s used to evaluate you, and that you shouldn’t have to pay for it. Getting scores from your credit card company could be a good start, assuming the companies aren’t allowed to sub in some “FAKO” score that no one actually uses.
The problem comes in the execution. Seeing their scores is likely to make a lot of people upset, and not just the folks with low scores. People with high scores usually want to know why their scores aren’t even higher. Credit card companies may not want to mess with having to explain how scores work or take the heat for a process they don’t control. (Credit scoring formulas are created by other companies, like FICO-creators Fair Isaac, and applied to data held by the credit bureaus.)
We’ll have to stay tuned to see if any major issuers bite. In the meantime, you can get free scores from sites like Credit.com and Credit Karma, although they aren’t the FICO scores most lenders use. For those, you’ll need to go to MyFico.com and pay.
Today’s top story: How to protect yourself during online transactions. Also in the news: Finding financial help when you’re not wealthy, saving money at the gas pump, and how to tell if your financial dreams are based in reality.
4 Tips for Secure Online Transactions
Protecting yourself while shopping online.
How to Find a Financial Advisor If You’re Not Rich
You don’t need to be loaded in order to get advice.
3 Secrets to Saving Money at the Pump
Following these tips could save you almost $500 a year.
Financial Goals: How To Tell If Yours Are Truly Realistic
Keeping your head out of the clouds.