Q&A: Job hopping can be a good strategy for young workers

Dear Liz: I am a millennial and just started a new job at a very small company. I really like the work I do and the leaders of the company. However, I don’t make enough to move out of my parents’ home and be financially secure. I live in the Washington, D.C., area and make $50,000. For an entry-level position it’s a good salary, but this area is so expensive. I wanted to stay at this company for at least two years to add stability to my resume. Now I’m considering moving to a cheaper area so I can move out on my own and not face a financial strain. But I don’t want to be a millennial job hopper, and I don’t want to disappoint my boss.

Answer: Being a millennial job hopper can actually be a good thing in the long run. A 2014 study for the National Bureau of Economic Research found that people who switch jobs more often early in their careers have higher incomes later in life. Economists Martin Gervais, Nir Jaimovich, Henry Siu and Yaniv Yedid-Levi contend that young job-changers are more likely to find their true calling, which leads to greater productivity and higher income. Sticking with one job can mean settling for paltry raises, while changing jobs can mean bigger jumps in pay.

Changing locations, meanwhile, can be a powerful way to boost your standard of living. Living on a below-average income in a city with above-average costs can be a recipe for misery, so congratulations on being willing to explore alternatives. Since you’re living in one of the costliest cities in the U.S., those alternatives include most of the U.S.

The good news is that you have a job and a place to live, so you can take your time searching for what’s next. In the meantime, you can build up your savings to help pay for the move.

As for disappointing your boss, understand that most bosses are grown-ups. They realize that people can and do move on to better opportunities.

Friday’s need-to-know money news

download (1)Today’s top story: Why you should be wary of payday loans for small businesses. Also in the news: NerdWallet’s best credit card tips for October, financial fine-tuning to do before year’s end, and ten ways to make the most of your rewards credit card.

Worries Grow Over ‘Payday Loans for Small Businesses’ — What You Need to Know
Looking out for astronomical interest rates.

NerdWallet’s Best Credit Card Tips for October 2016
Time to activate your rewards.

Financial fine-tuning you must do before year’s end
Money actions worth considering.

10 Ways to Make the Most of Your Rewards Credit Card
Maximizing your rewards.

Thursday’s need-to-know money news

phone-scammerToday’s top story: Protecting yourself from debt collection scams. Also in the news: Building a small emergency fund while living paycheck to paycheck, how Millennials can save for retirement, and how to stop wasting your frequent flier miles.

Spot Debt Collection Scams and Protect Your Money
Defending yourself from scams.

Saving $1,000 When You’re Living Paycheck to Paycheck
Building a small emergency fund.

Deck is stacked against Millennial savers: Here’s how to succeed
How to save and invest for retirement.

How to stop wasting your frequent flier miles
Don’t leave any miles unused.

Wednesday’s need-to-know money news

teen-creditToday’s top story: What it takes to succeed on a debt management plan. Also in the news: How to stash cash and still eat well in college, using price matching to save, and how to prepare your finances for a layoff.

What It Takes to Succeed on a Debt Management Plan
Staying on track.

5 Ways to Stash Cash and Still Eat Well in College
You don’t have to live on ramen.

Use Price Matching to Avoid Leaving Money on the Table
Getting the lowest price available.

Prepare Your Finances for a Layoff
Preparing for life without a paycheck.

Stop balancing your checkbook

shutterstock_38185810-2Think about how difficult it was to clean a house 100 years ago, or make a phone call, or travel across the country.

Tasks that were routine then — like, say, beating a rug to clean it — have all but disappeared.

Likewise, technology has obliterated or automated a lot of the money tasks that were once mandatory for people who wanted to be responsible with their finances. In my latest for the Associated Press, how to start doing your financial chores differently.

Tuesday’s need-to-know money news

140404-cash-atm-1203_33aa88b2625872d25efbac961d07e3a0-nbcnews-ux-2880-1000Today’s top story: What to know about credit counseling for bankruptcy. Also in the news: What to do when your ATM spits out counterfeit money, how your state department of insurance can be of assistance, and what to look out for when donating to Hurricane Matthew victims.

What to Know About Credit Counseling for Bankruptcy
What to expect from the mandatory counseling.

Your ATM Spit Out Counterfeit Money. Now What?
It could depend on your relationship with your bank.

How Your State Department of Insurance Can Help You
Answers beyond Google.

Watch out for charity scams for Hurricane Matthew victims
Be cautious when donating.

Monday’s need-to-know money news

hidden-fees1Today’s top story: Costly financial fees you might not know you’re paying. Also in the news: Why Millennials love auto leasing, ten smart money moves that take ten minutes or less, and why nearly 7 in 10 Americans have less than $1,000 in savings.

Costly Financial Fees You Might Not Know You’re Paying
A closer look at hidden fees.

Why Millennials Love Auto Leasing
Does it make financial sense

10 smart money moves to make that take 10 minutes
Take ten minutes to get closer to your goals.

Nearly 7 in 10 Americans have less than $1,000 in savings
Where do you stand?

Q&A: How to build a cushion against all those pesky expenses

Dear Liz: We’re both retired and live on retirement checks. When expenses exceed our income, we draw from savings, but the balance is going down fast due to a new air conditioning unit, real estate taxes, etc. How do we put that money back and build a cushion in the checking account so our savings isn’t used to cover us month to month?

Answer: You need an emergency fund for truly unpredictable expenses, but you also should have a bunch of savings “buckets” to cover less regular but still predictable expenses. These would include property taxes, insurance, home repairs, car repairs, vacations, medical bills, holiday expenses and any other bill you face regularly but not monthly. You can track these buckets in a spreadsheet or set up separate savings accounts for each goal. Online banks typically let you set up multiple savings subaccounts for free.

Here’s how it works. If your next property tax installment is due in six months and you’ll owe $3,000, you transfer $500 a month into the property tax savings account to cover that bill. If you’re planning on a vacation in nine months, divide the expected cost by nine and transfer that amount to savings each month.

Estimating some costs can be tricky. You often can use last year’s spending as a guide, or seek out authoritative sources. Edmunds.com’s True Cost to Own feature, for example, can help you estimate repair and maintenance costs for many vehicles. With home repairs, Consumer Reports can help you calculate how long various systems tend to last and how much they cost to replace, which will allow you to save accordingly. Or you can just use the rule of thumb to put aside 1% of your home’s value each year into an account to cover maintenance and repairs.

You may not always guess correctly, but setting aside something throughout the year can help you meet these big expenses as they arise without having to dip into your emergency fund.

You may discover that you can’t set aside enough to cover these less regular expenses and still pay your monthly bills. If that’s the case, you may not be able to afford your current lifestyle and may need to trim some costs.

Q&A: Parents paying a child’s private student loans

Dear Liz: My husband and I are paying my youngest son’s private student loans. My husband is paying two loans and I’m paying three. I have plans to retire next year. Should I tell the lenders after I retire and give my loans to my son to take over?

Answer: If these are private student loans, then you and your husband probably co-signed them with your son. That means you’re equally responsible for the debt and can’t just walk away without consequence.

Some lenders do release co-signers if the student borrower is creditworthy. The lenders typically don’t volunteer information about this option, so your son would need to request it. The Consumer Financial Protection Bureau has a form letter your son can use to ask for information about the process.

If that doesn’t work, your son may be able to refinance or consolidate the loans with a new lender to get your names off the loans.

All this assumes your son is willing and able to take over this responsibility. If he’s not and you stop paying, your credit scores will suffer and you could face collection actions.

Q&A: The insecurity of bank security questions

Dear Liz: I recently opened an account at a bank that boasted “multi-factor authentication,” but I looked into the claim and it turns out the bank is using passwords plus answers to security questions, such as the name of your first pet, as the “multi-factor authentication.” I expect you know that the real multi-factors are something you know, like a username and password, something you have, like a code that has been sent to your phone or email, and something uniquely inherent to you, like a fingerprint. Clearly, this bank is misrepresenting its “multi-factor authentication.”

Answer: If there was any doubt about how insecure security questions are, it should have been settled with the hack of the IRS’ Get Transcript service. The criminals gained access to 700,000 taxpayer accounts by correctly answering multiple questions with answers supposedly known only to the affected taxpayers. In reality, the answers to many security questions can be purchased from black market databases or simply found by perusing people’s social media accounts.

If your financial institutions are still using security questions to identify you, you should demand to know why. If the institution doesn’t offer at least two-factor authentication (a password plus a code), you should consider putting your money somewhere else.