Today’s top story: What you should do if you’re late with your credit card payments. Also in the news: How the homes of baby boomers could become liabilities, what 20% of tax payers are doing wrong, and why you should freeze your spending now to save for the holidays.
What to do if you’re late on credit card payment
Communication with your card company is essential.
How Baby Boomers’ Homes May Become Liabilities
A dramatic population shift could spell trouble for Boomers.
What 20% of Taxpayers Are Doing Wrong
Moving into the e-filing age.
How to Freeze Your Spending Now to Save for the Holidays
They’re right around the corner.
Apply All Your Bonuses to Principal When You Have High-Interest Debt
Getting out of debt quicker.
Dear Liz: Our grandson’s stellar high school performance and his family financial situation were such that he was admitted to his state university with grants sufficient to pay all school fees, including room and board, with no loans or work-study. His grandmother and I have a 529 account in his name that has enough money to pay about twice his estimated books and living expenses, given this level of financial aid.
His other grandparents gave him a high school graduation present of a check for four times the annual estimated books and living expenses. Does he need to amend this year’s financial aid form to reflect this generous gift? Should I suggest he put part of the gift aside for future years to diminish the effect on future financial aid?
Because of his unexpected gift, we plan to not use the funds in the 529 account until needed for his undergraduate or possible graduate school expenses. If he doesn’t need the money, we plan to transfer the balance to his younger sister’s 529 account.
Answer: Your grandson won’t have to amend this year’s financial aid forms but he will have to declare the gift on next year’s form. That could indeed reduce his financial aid package, since such gifts are considered to be the student’s income and thus will be counted heavily against him next year.
There’s not much that can be done about it now, but generous grandparents in this situation might think about holding off on their gifts until the student’s final year in college when financial aid is no longer a consideration. Paying that last year’s expenses, or paying down any student loan balances, would be a gift without repercussions.
Dear Liz: How do you prioritize financial goals on a small salary? I am 24 and a college graduate with about $40,000 in student loan debt. Because I work full-time at a nonprofit educational organization, about half of my loans qualify for the Public Service Loan Forgiveness program, so I currently only pay the monthly payment on a private loan and two other small loans. I earn a small salary, but I have always been drawn to jobs in service-oriented, nonprofit fields, and I am perfectly fine with the fact that I’ll never have a career with a six-figure salary. My problem is that after rent, utilities, student loan payments, groceries and other such monthly bills, I have very little money left over to divide among my different financial goals. I make a small monthly contribution to my company-sponsored 403(b) plan, but I’m also trying to rebuild my savings after paying out of pocket for an expensive root canal. I occasionally earn some extra cash from baby-sitting, and I live a fairly simple lifestyle — I own my used car, I walk to work — yet I feel like I’ve barely been making a dent in any of my goals — saving for retirement, rebuilding savings and paying off student loans. How can I leverage what’s left over at the end of the month to reach my goals? Would it be better to focus on one goal rather than all three?
Answer: Many people in your situation focus on a single goal hoping to make faster progress. They don’t fully realize what their single-mindedness is costing them.
Prioritizing debt repayment over saving for retirement is particularly costly. Not only do you give up potential company matches, but the money you don’t contribute can’t earn future tax-deferred returns. At your young age, every $100 you contribute could grow to more than $2,000 by the time you hit retirement age, assuming 8% average annual returns, which is the historical long-term average for the stock market. In fact, the younger you are, the more you give up by not contributing to a retirement fund. Ask any of your older co-workers if it gets any easier to save for retirement. They’ll probably tell you that they wish they’d gotten serious about retirement savings when they were a lot younger.
Building up your emergency savings may seem prudent as well, but you don’t want to do so at the expense of your retirement fund or instead of paying down high rate debt.
So here’s your game plan. Instead of divvying up what you have left after paying bills, start by paying yourself first. Contribute at least 10% of your income to your company retirement plan. Then investigate the possibilities of consolidating your private student loan into a fixed-rate loan, since rates probably will rise in the future. If you can lock in a low rate, it would then make sense to start building up your emergency savings. If you can’t, you might want to divide your money between savings and debt repayment.
It will be tough to swing all this. You may be able to make it easier by finding a roommate or a cheaper place to rent, or looking for more outside gigs such as baby-sitting until your income rises enough to allow you to comfortably pursue all your goals.
Today’s top story: The dangerous trap of online payday loans. Also in the news: How to erase your credit card late fees, the best way to ask for a raise, and how to survive financially when needing time off from work.
Consumers Warned About Pitfalls of Online Payday Loans
An immediate solution can cause long term problems.
Your Personal Finance Weapon Is Within Reach: Erase Credit Card Late Fees
Banks are showing more willingness to forgive.
The best way to ask for a raise
Practice, practice, practice.
3 Ways to Take Time Off Work Without Destroying Your Finances
How to minimize the financial damage.
J.P. Morgan says about 76 million households affected by cyber breach
Another day, another massive security breach.
Today’s top story: How to boost your credit score by rearranging your debt. Also in the news: Why borrowing from your 401(k) is a bad idea, how long you need to keep your tax records, and you still have time to cut this year’s tax bill.
Can Rearranging My Debt Boost My Credit Score?
Playing the credit card shuffle.
Borrowing from 401(k) can cost more than you think
Your monthly retirement income could be reduced by hundreds.
How Long Should I Keep My Tax Records?
This time, being a pack rat can pay off.
You may still be able to cut last year’s tax bill
But you better act fast.
What Twenty-Somethings Need To Know About Retirement And Social Security
The sooner you start saving, the better off you’ll be.
The Right Way to Help a Family Member Buy a Home
Making the process easier for both of you.
Why These 4 Personal Finance Myths Perpetuate Money Problems
Some long overdue mythbusting.
Retirees: 9 easy ways to cut spending
How to painlessly reduce your spending.
How You Can Get Good Financial Advice for Free
Take advantage of free Certified Financial Planner days.
Keep Track of Your Hourly Wage, Even If You’re Salaried
Your time is as valuable as your money.
Today’s top story: The best money moves you can make for the end of the year. Also in the news: How to protect yourself from the next massive security flaw, hackers hit one of the country’s largest grocery store chains, and how to manage your finances when faced with cancer.
The Next Massive Security Flaw You Should Worry About: Bash
Time to check your router.
The Best Money Moves for Autumn
Preparing your budget for the end of the year.
Another card system hack at Supervalu, Albertsons
Keep an eye on your accounts if you’ve shopped at these store.
Despite insurance, 1 in 3 cancer survivors incur $10,000+ debt
What you can do when facing a serious diagnosis.
How Financially Secure Are You?
Could you survive an unexpected emergency?
Dear Liz: My husband recently told me that he has saved many coffee cans full of loose change over the years. When I suggested we might at least roll the change to make it easier to count should we ever need it, he was not interested! I understand he just wants it available in an emergency, but just the transportation of these things to a coin counter (that may or may not be available) makes me want to find a better way to honor his idea of saving change in a more realistic way. Perhaps roll while watching TV, then ask a bank to convert to dollar coins as a way to reduce the bulk?
Answer: It’s hard to imagine how your husband expects to deploy those coins in an emergency. Does he envision lugging them to the grocery store or gas station? Does he imagine any retailer would accept a coffee can of change as payment? Many retailers won’t even accept rolled coins, since they don’t know what’s inside those wrappers.
Converting the coins into bills, or better yet to savings in a bank, is a far more practical option. You can use commercial coin sorters, but they typically take a hefty cut. Coinstar, for example, charges a 10.9% service fee, although that is waived if you choose to be paid with a retailer’s gift card or voucher.
Another place to check is your bank. Some have coin sorters available to customers, although you may have to deposit the result rather than take it immediately in cash.
Alternatively, your bank may supply you with wrappers — or it may not accept change at all. The only way to know is to call and ask.
If you do decide to roll the change, consider making a small investment in a coin sorter. You can spend $200 or more on a commercial version, but there are well-reviewed versions on Amazon that cost around $25.