Monday’s need-to-know money news

Zemanta Related Posts ThumbnailToday’s top story: The pros and cons of couples keeping their finances separate. Also in the news: What you need to know about deducting mortgage interest, how paying old debt will affect your credit score, and when to have the retirement talk.

Should Couples Keep Their Financial Assets Separate?
The pros and cons.

Deducting Mortgage Interest: What You Need to Know
Getting the most from your mortgage deductions.

Will Paying an Old Debt Hurt My Credit Scores?
What you need to consider before writing a check.

Tips for couples: How to have the retirement talk
One of the most important conversations you’ll ever have.

Un-budgeting: When Your Household Budget Has Gone Too Far
You know what they say about too much of a good thing.

Monday’s need-to-know money news

Today’s top story: Improving your budget in 2014. Also in the news: The little things that are killing your budget, eliminating excuse making, and how to start digging out from under holiday bills. Credit card background

How to Budget Better in the New Year
Smart budgeting is essential to your financial health.

5 Small Things That Are Killing Your Budget
All those $5.00 subscription fees add up quickly.

11 Money Excuses to Stop Making in 2014
Cross these excuses off of your list.

How To Recover From Your Holiday Spending
Don’t let the holidays haunt you through the New Year.

4 Ways to Protect Your Money
Insurance, insurance, insurance.

Single mom’s expenses leave no money for food

Dear Liz: I’m a single mom with three kids. My mortgage is $1,700. My other monthly bills include $355 for a car loan, $755 for school tuition, $350 for utilities, $790 for credit cards, $200 for gas, $208 for braces and $235 for a 401(k) contribution. This leaves no money for food. I get no child support. How can I pay down my credit card debt? I don’t have any money for a baby sitter or I could get a second job.

Answer: The way you pay down credit card debt is by reducing expenses and increasing income to free up extra cash. If that’s not possible, you may need to consider bankruptcy, given the amount of debt you’re carrying.

If you’re paying only the minimums on your credit cards, that monthly bill indicates you have close to $40,000 in credit card debt. Since you can’t cover your basic expenses, you’re probably adding to that debt pile every month. That needs to stop.

You don’t say why you aren’t receiving child support, but if the father isn’t dead or disabled he should be helping to support his kids. Your state has an enforcement agency that can help you. Child support enforcement is often part of a state’s social services department, although it may also be offered by the state attorney general or its revenue (tax) department.

One obvious, if painful, place to trim is private school tuition. If the school can’t offer you financial aid, you should consider placing your kids in the best public school you can manage.

What you don’t want to do is trim your retirement plan contribution. You’re probably getting a company match, which is free money you’ll need to sustain yourself in retirement.

In general, your “must have” expenses — shelter, transportation, food, utilities, insurance and minimum loan payments — should equal no more than 50% of your after-tax income. If your must-haves exceed that level, it will be tough to make ends meet, particularly if you’re trying to pay off debt and save for the future.

Creating a budget that works

Dear Liz: I’m beginning to realize that I have no idea how to budget. I make plenty of money but always seem to come up short. I’m trying to find the best person to help me make a budget. Do I talk to a CPA or a financial counselor? If so, how do I find the right person?

Answer: Budgeting has three basic steps: figuring out where your money is going now, deciding where you want it to go in the future, and monitoring your spending to make sure you stay on track with those goals.

Just because something is simple doesn’t mean it’s easy, however. People often fail to account for predictable but irregular expenses, such as car repairs. Once those crop up, the budget is thrown into disarray and people often give up on the spending plan.

Budgeting also can be difficult if you’re overspending on your overhead. If too much of your income is going for basic expenses, you may not have enough left over to live a comfortable life, pay off debt and save for the future, regardless of how many other expenses you trim. People who spend too much on shelter (mortgage or rent) and transportation (car payments and attendant costs) in particular often find they can’t create a balanced budget. Your “must haves” — shelter, transportation, food, utilities, insurance and minimum loan payments — ideally should be 50% or less of your after-tax income to create a workable budget.

Some people find that online solutions, such as the Mint.com financial tracking site, are enough to get them started with a budget. Other people need hands-on help. If your tax pro or financial advisor has experience helping people create and monitor budgets, that’s certainly one place to turn. Otherwise, check to see whether your local community college offers basic money management courses. Another option is a nonprofit agency affiliated with the National Foundation for Credit Counseling at http://www.nfcc.org. Many of these agencies offer classes or hands-on help creating budgets.

Monday’s need-to-know money news

Credit card backgroundToday’s top story: Four credit card strategies to get you through the holidays. Also in the news: Bank of America teams up with Khan Academy, how to recover from a setback in retirement planning, and how to make saving money a little less painful.

4 Holiday Credit Card Strategies
Don’t go into holiday shopping without a battle plan.

Tips for Recovering from a Financial Setback in Retirement
Don’t let a momentary setback derail your long term goals.

Khan Academy Teams Up with Bank of America
The duo will offer personal finance lessons.

5 Big Budgeting Mistakes Most People Make
Tracking your actual expenses is absolutely crucial.

5 Ways to Make Saving Money a Little Easier
Simple tips to take the sting out of saving money.

Friday’s need-to-know money news

Credit Check 1 How to cure your financial jealousy, steps to improve your credit score, and understanding the Affordable Care Act.

How to Combat Financial Envy
The greener grass isn’t always the better grass.

5 Budget Busters Draining Your Wallet
Simple changes to monthly expenses could make a big difference.

5 Steps to Improving Your Credit Score
Paying attention to your credit reports are key.

4 Ways to Build Credit Without a Credit Card
Loans can be a big help.

Obamacare 101: Your Questions Answered
Understanding the Affordable Care Act, aka Obamacare

Wednesday’s need-to-know money news

Doctor feesNegotiating medical bills, why a financial power of attorney is a must, and the pros and cons of “pocket listings”.

Is It Ever Too Late to Negotiate a Medical Bill?
How soon do you need to question that eight dollar aspirin?

Why You Need a Financial Power of Attorney
Preparing for the unexpected is a necessity.

Poll: Just 32% of Americans Keep a Household Budget
Which percentage do you fall in to?

How to Pay Less for High-End Homeowners Insurance
High-End home insurance doesn’t need to break the bank.

Should You Sell a House Under the Radar?
Is the privacy worth the price?

Friday’s need-to-know money news

The hackerBanks are watching your Facebook account, escaping a lease, and keeping your cool.

The Identity Theft Flu: 5 Ways to Stay Healthy

There’s no way to completely protect yourself from identity theft, but here are some ways to boost your financial immune system.

Using Social Media to Stop Online Payment Fraud

Your Facebook status updates could soon be used to verify your financial state.

Is Creating a Personal Budget a Good Idea?

Experts debate the pros and cons of personal budgets.

When and How to Break a Lease

Tips on how to break a lease as painlessly as possible.

Smart Ways to Slash Your Summer Bills

How to stay  cool without melting your wallet.

When “the basics” eat up too much of your income

Dear Liz: My husband and I are recovering from a job loss four years ago. We used up all our savings and home equity. My husband is now employed, but we are struggling to keep ahead even with a salary of about $100,000. I was a stay-at-home mom for the first 10 years of our kids’ lives and now I work two part-time jobs to help with our expenses. We are trying to follow the 50/30/20 budget plan you recommend, but can’t seem to get our “must haves” — which are supposed to be no more than 50% of our after-tax income — down from 80% to 90%. Most of the rest goes for “wants,” such as the kids’ dance classes and soccer teams and for cellphones. We’re not saving anything although we’re trying to whittle down our credit card debt. I have tried several times to refinance our first and second mortgages and home equity line of credit but have found we don’t qualify because too much is owed on our modest three-bedroom, one-bath house, which has gone down significantly in value. We also have two car loans that are worth more than the cars, and the insurance is killing us. Amazingly enough, we have never been late on a payment. We just can’t get ahead. Did I mention that both kids need braces?

Answer: You clearly can’t afford your life, and things will only get worse if you don’t get your spending in line with your income.

Your first step should be to consult with a HUD-approved housing counselor, who can advise you of your mortgage options. You can get referrals from http://www.hud.gov. If your first mortgage is held by Fannie Mae or Freddie Mac, you may be able to refinance it through the federal government’s Home Affordable Refinance Program. Recent changes in the program have helped more underwater homeowners refinance. Even if you’ve been turned down by one lender, you can try with another. One way to search for HARP quotes is through Zillow’s online mortgage quote service at http://www.zillow.com/mortgage-rates/.

The Federal Housing Administration and the Veterans Administration also have streamlined refinancing programs for their underwater loans.

Government programs usually define an “affordable” payment as one that’s 31% or less of your gross income, but that may be too high for many families to comfortably handle. Ideally, your housing costs — including mortgage, property taxes and insurance — would consume no more than about 25% of your gross (pre-tax) income.

If you exhaust your options and can’t get your mortgage payments down to an affordable level, you should consider a short sale of your home. Moving is terribly disruptive and expensive but it’s better than letting a house sink your finances.

Then take a look at your cars. The average annual cost of owning a car is $8,946, according to AAA. You can make the argument that one car is a necessity, but having two is typically more of a convenience than a “must have.” Getting rid of one could dramatically lower your insurance and transportation costs.

Since you’re underwater on both, you’ll need to look at which is cheapest to operate and which is closest to being paid off. If they’re the same, then your choice is easier — you can work toward paying that car off faster so you can sell it. Otherwise, you’ll have to weigh which loan to target first.

Another way to get your budget balanced is to make more money. That may mean asking for more hours at your jobs or looking for opportunities that pay better.

What’s a “must have”?

Dear Liz: You’ve written frequently about the 50/30/20 budget, where no more than 50% of your after-tax income should be spent on “must haves” so that you have 30% for “wants” and 20% for debt repayment and savings. In which category would alimony fall? How about car payments?

Answer: Any expense that can’t be put off without serious consequences is considered a must-have. Since you could be sued or held in contempt of court for not paying your alimony, that would certainly qualify as a must-have. So too are all required loan payments, since failing to pay those will lead to credit card damage, possible lawsuits and, in the case of vehicles, repossession. Other must-haves include shelter costs, food, utilities, other transportation costs, insurance and child support.