Today’s top story: How early withdrawals can take a chunk out of your retirement savings. Also in the news: The smart way to go into debt, retirement mistakes you need to avoid, and three ways consumers become victims of identity theft.
How Early Withdrawals Can Tax Your Retirement Savings
Taxes and penalties abound.
The Smart Ways to Go Into Debt
Yes, you read that correctly.
The 7 Retirement Mistakes That Finance Experts Tell Their Clients to Avoid
You don’t want to make these.
3 Ways Consumers Fall Victim to Identity Theft
You’ll want to avoid these, too.
Laziness Can Cost You: 5 Ways Renters Set Themselves Up for Failure
Due diligence and research is an absolute must.
Today’s top story: How to raise kids who are smart about money. Also in the news: How to save on your trip to Disney World, deciding when to hire a financial adviser, and the five things identity thieves are hoping you’ll do.
3 Ways You Can Raise Kids Who Are Smart About Money
Starting them off early.
Twelve Money-Saving Tactics for Disney World
Don’t turn your wallet over to Mickey.
When is the right time to hire a financial adviser?
Knowing when it’s time to get help.
5 Things Identity Thieves Want You to Do
Don’t give the jerks what they want.
Risk and Responsibility: Should You Cosign on a Loan?
Assessing a huge responsibility.
If your cell phone works overseas (and not all do), your wireless carrier is happy to sell you an international plan that typically includes a small amount of minutes, texts and data at what feels like a pretty inflated cost. (The cheapest option from AT&T: 120 megabytes of data for $30 a month, $10 for 50 messages, $30 for 80 minutes, for a total of $70 per month per phone for a fraction of what we’re used to at home.)
Apparently, if you don’t use your phone much, you might be fine with that. Given the way I use my phone—to scan email, translate signs and menus, find my way around, coordinate plans with friends and family, book restaurant reservations and check opening hours for museums —I couldn’t imagine paying so much for so little.
The good news is that you can get a lot more for a lot less, as long as you can get your hands on an unlocked phone. Fortunately for us, my iPhone was no longer under contract and we had an old iPhone 3 that my daughter could use, so AT&T sent instructions on how to unlock each one. A friend lent us a Samsung he’d purchased for overseas travel.
I unlocked our phones the day we left for Europe (I was still able to use it in the States that day, as per usual). Once we landed in London, we found our way to a little mobile phone shop just across the street from Harrods and picked up a SIM card for five pounds (about $8.50), which included a five-pound credit for talk time. The gentleman behind the counter inserted the new cards, showed us our new phone numbers and told us where we could buy a package of minutes, texts and data (just around the corner at a news stand, as it tuned out).
Our British numbers worked even after we arrived in France, but I wanted more data than the small plan we bought. Two blocks away from our apartment was an Orange store where another nice gentleman sold us SIM cards (for five euros, including a five-euro credit) plus calling/text/data plans. For 30 euros each, Daughter and I got plenty of minutes, texts and a full gigabyte of data for the month we’re spending in Paris. Hubby, who is not as entranced with the online world, got a less generous plan for 20 euros.
You can, by the way, buy SIM cards at airports, train stations and lots of other locations from kiosks or news stands. I highly recommend finding a mobile phone shop that has someone to help you set up your service, though, especially if you’ve never done it before.
My plan paid for itself just on our recent road trip to the D-Day beaches. I used Google Maps navigation as a GPS to get us from the edge of Paris to every location on our agenda and back again, complete with turn-by-turn voice instructions. That saved us the $12 daily rental fee for our four-day trip.
Dear Liz: Your tax expert’s answer to a person who wanted to roll over a $30,000 capital gain on a mutual fund missed an important point. Since the couple were solidly in the 15% tax bracket with a taxable income under $72,000, they should qualify for the 0% federal capital gain tax rate. (They may, of course, owe state taxes.)
Answer: They may not have had a capital gain at all, as other tax pros have pointed out. When people own mutual funds, the earnings are often reinvested each year. If the couple paid taxes on those earnings, their basis in the mutual fund would increase each year. To know if the couple had any capital gain, we’d need to know that adjusted tax basis. In any case, the original answer — that you can’t roll over the gain on a mutual fund into another investment to avoid capital gains taxes — still stands.
Dear Liz: My wife and I accrued $28,000 of credit card debt over the past eight years. In addition to a sizable student loan bill for law school, our home mortgage and the expenses associated with three young children, we are struggling to get ahead enough to knock our credit card debt down. While we make good income between the two of us, it would seem not enough to pay more than the minimum on our debts. We have curbed a number of our bad habits (we eat out less, take lunch to work, say no to relatives) but the savings are not translating to lowered debt. Our 401(k)s are holding steady and we continue to contribute and I don’t want to touch those (I did when I was younger and regret it.). We’ve been considering taking out a home equity line of credit to pay off the cards and reduce the interest rate. Of course we have to be disciplined enough to not go out and create more debt, but I think my wife got the picture when I said no family vacations for the next few years. What are your thoughts?
Answer: You say, “Of course we have to be disciplined enough to not go out and create more debt,” but that’s exactly what many families do after they’ve used home equity borrowing to pay off their cards. They wind up deeper in the hole, plus they’ve put their home at risk to pay off debt that otherwise might be erased in Bankruptcy Court.
Bankruptcy probably isn’t in the cards for you, of course, given your resources. But before you use home equity to refinance this debt, you need to fix the problems that caused you to live so far beyond your means.
You’ve plugged some of the obvious leaks — eating out and mooching relatives — but you may be able to reduce other expenses, including your grocery and utility bills. If those smaller fixes don’t free up enough cash to start paying down the debt, the next places to look are at your big-ticket expenses: your home, your cars and your student loans. There may not be much you can do about the latter, although you should explore your options for consolidating and refinancing this debt. That leaves your home and your cars. If your payments on these two expenses are eating up more than about 35% of your income, then you should consider downsizing.
What you don’t want to do is to tap your retirement funds or reduce your contributions below the level that gets the full company match. Retirement needs to remain your top financial priority.
Reducing your lifestyle may not be appealing, but it’s better to sacrifice now while you’re younger than to wind up old and broke.
Top 5 Personal Financial Planning Websites
Putting it all on virtual paper.
Is Free Wi-Fi Dangerous?
Free Wi-Fi can end up quite costly.
5 Ways to Lower Your Health Care Bills
How to keep a lid on your health care costs.
Freelancers, Here’s How To Do Your Taxes
One of the downsides of freelancing life.
If You Can’t Understand a Financial Move in Five Minutes, Wait First
Waiting could save you from making a big mistake.
Today’s top story: How to avoid currency exchange fees while traveling. Also in the news: How finances can reveal an unfaithful spouse, howto avoid ruining your retirement plan, and why it’s so important to include your digital assets in your estate planning.
5 money saving tips for exchanging currency
How to save on fees during your overseas travel.
11 Financial Signs Your Spouse is Cheating on You
There’s always a paper trail.
4 Ways to Ruin Your Retirement Plan
You’ll want to avoid these.
5 ways to protect your online assets
The importance of including your online accounts in your estate plan.
10 steps to take if you hope to retire soon
The sooner you start, the better off you’ll be.
How to Buy a Home in a Competitive Real Estate Market
Getting the right lender is crucial.
The Everyday Household Item That Can Keep Your Credit Card Safe
You’ll never look at a bag of coffee the same way again.
Top 7 Retirement Milestones You Need to Know
Retirement planning doesn’t end when you get the gold watch.
5 Types of Bad Credit Loans to Avoid
The quick fix will be painful in the long run.
Don’t Wait: 6 Good Financial Habits for 30-Somethings
The sooner you start, the better off you’ll be.
Today’s top story: 9 ways hotels try to grab your cash. Also in the news: What it costs to close your bank account, how to pay off your high interest credit card debt, and what you need to know before purchasing life insurance.
9 Hotel Gotchas
Don’t get caught by surprise while traveling this summer.
The Costs of Closing Your Bank Account
Here come the fees.
Ways to Pay Off High-Interest Debt
Start chipping away.
10 things life insurance agents won’t say
Educate yourself before purchasing a plan.
4 big ways your expenses could rise in retirement
Travel is one of them.