April 22, 2024 By Leave a Comment

This week’s money news

This week’s top story: 8 ways to personalize your rental and get your deposit back. In other news: Life insurance for small business, how couples can share the mental load of money management, and how to plan for retirement.

8 Ways to Personalize Your Rental — and Get Your Deposit Back
Cosmetic upgrades can help personalize a rented home, but you will likely pay out of pocket and have to return the home to its original state when you move out.

Do You Need Life Insurance for Your Small Business?
Life insurance is an important part of business planning to protect your family, team and clients.

How Couples Can Share the Mental Load of Money Management
There’s no ‘I’ in ‘team’ — but there are some of them in ‘weaponized incompetence.’

Retirement Could Come Sooner Than You Think — How to Plan for It
Take these steps to strengthen your retirement plan in case you have to stop working sooner than you would like.

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April 22, 2024 By Leave a Comment

How to escape from a money rut

Sometimes, climbing out of a money rut starts with a pep talk — to yourself.

“I like affirmations and speaking out loud,” says Giovanna Gonzalez, a financial educator and author of “Cultura & Cash.” Her favorite affirmations are statements like, “I am not a reflection of my money mistakes,” “I can improve my financial situation,” and “My finances are within my control.”

If you find yourself repeating frustrating money patterns, such as overspending or struggling to pay off debt, that kind of attitude shift can help get you on a different path, Gonzalez says. “Mindset is so important, and sometimes we end up being very hard on ourselves for making bad money choices. If we don’t forgive ourselves, it can be a barrier to doing better.” In Kimberly Palmer’s latest for the Washington post, learn how to escape from a money rut.

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April 22, 2024 By Leave a Comment

Q&A: Can my credit score really be marred over $20?

Dear Liz: I have had great credit for years. Late last year, I somehow overlooked a $20 payment due from one of my credit cards. My score dropped by more than 50 points, from about 815 to 765. I quickly paid the $20 and contacted the issuer. They told me they were required by law to report my delinquent payment, which I found out was not true. I went back and forth with them, but they would not do anything to help. I did file an inquiry with one of the credit bureaus, but I was told there was nothing they could do without the issuer’s cooperation. I spoke with someone in the issuer’s corporate offices, but he could not have cared less. It turns out that this hit on my credit could last seven years — and all over $20. I charge thousands of dollars every year on credit cards and pay the balance every month. Is there anything else I can do to restore my credit to the previous levels?

Answer: The federal Fair Credit Reporting Act does require creditors to report accurate information to the credit bureaus. However, some people say they’ve been able to get their accidental late payments removed by writing “good will” letters to their issuers. These letters explain what happened, emphasize the customer’s previous record of on-time payments and politely request the issuer extend some good will by removing the one-time lapse from their credit reports.

Your issuer is under no obligation to grant your request, and some categorically say they won’t. But it can’t hurt to try.

You also can use this incident as a reason to review how you pay your credit cards. Setting up automatic payments to cover at least your minimum payment will ensure this doesn’t happen again. Keep an eye on your credit utilization as well. Aim to use 10% or less of your credit limits. If you find it difficult to keep your charges below that level, consider making multiple payments each month to keep your balance low.

The unexpected drop in your credit scores was painful, but the good news is that you still have great scores. This oversight is unlikely to have any lasting effect on your financial life. And if you continue to use credit responsibly, your scores will improve over time.

Filed Under: Credit Scoring, Q&A
April 22, 2024 By Leave a Comment

Q&A: Complicated condo question

Dear Liz: You recently answered a question about gifting a condo. I understood the first part of your answer: If the person receiving the gift lives in the condo for two of the last five years, then there is no capital gains exposure. The second part of your answer is a little confusing to me. You wrote, “However, her taxable gain would be based on your tax basis in the property: basically what you paid for the home, plus any qualifying improvements.” So, if my mother gifted her condo to me and she paid $50,000 for it 40 years ago, and the condo today is selling for $250,000, what is my capital gains exposure? To keep it simple, assume no capital improvements or other factors.

Answer: Living in and owning a home for two of the previous five years does not erase someone’s capital gains exposure. Instead, they’re entitled to exclude up to $250,000 of home sale gains from their income.

In the case you describe, your potentially taxable capital gain would be $200,000. That’s the selling price of $250,000 minus your mother’s tax basis (which is now your tax basis) of $50,000.

If you owned and lived in the home at least two of the previous five years, your exclusion would more than offset your gain, so the home sale wouldn’t be taxable. If you didn’t make it to the two-year mark, you could get a partial exemption under certain circumstances, such as a work- or health-related move. For more details, see IRS Publication 523, “Selling Your Home.”

Filed Under: Inheritance, Q&A, Real Estate, Taxes
April 17, 2024 By Leave a Comment

This week’s money news

This week’s top story: What student loan borrowers should know if MOHELA is your servicer. In other news: Pregnant workers must get time off for birth, abortion, what not to do during mortgage preapproval, and 5 questions to ask when helping an older parent with money.

MOHELA Senate Hearing: What Student Loan Borrowers Should Know
If MOHELA is your servicer, you’ll continue to make student loan payments as usual. But in the long run, lawmakers could step up scrutiny of MOHELA and other federal servicers.

New Rules: Pregnant Workers Must Get Time Off for Birth, Abortion
Regulations under the Pregnant Workers Fairness Act include time off for childbirth, abortion, miscarriages and more.

What Not to Do During Mortgage Preapproval
You could hurt your home loan application by taking on new debts, changing jobs or otherwise calling your financial stability into question.

5 Questions to Ask When Helping an Older Parent With Money
Credit still matters as we age. Here’s how you can help parents or other older adults check in on theirs.

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April 15, 2024 By Leave a Comment

Q&A: Handling family property, when to take retirement and building credit history

Dear Liz: My wife and I plan to leave our house to our four children. My concern is that one may want to sell and split the proceeds; another may want to keep the house, rent it and divide up the income; and of course there’s always the real possibility that one may want to move in and live in it (we live in a nice community in California). My goal is to prevent doing anything that drives a wedge between them. Any advice on how best to approach this issue short of requiring the house be sold?

Answer: You’ve identified some of the complicating factors of leaving property to multiple heirs. There are many others, including changing circumstances and inclinations. The one who now wants to move into the property may be nicely settled elsewhere when the time comes. Or the one who’s keen on creating a rental may decide that screening tenants, collecting rent and fielding 3 a.m. calls about plumbing problems is too much hassle. Some of the heirs may be in a better position than others to absorb the ongoing costs of maintaining the home, including taxes, insurance and repairs. Even if their financial circumstances are roughly equal, they may have trouble agreeing on the timing and cost of repairs or improvements. And that’s assuming there are no reversals of fortune. Someone who is adamant about keeping the home may find themselves in need of funds later. And so on.

Your life isn’t immune to change either, by the way. You, or your widow, may want to downsize someday or need to sell the house to fund long-term care needs.

An experienced estate planning attorney can help you sort through your options because this is a common scenario and one that can be approached in different ways, including requiring the house to be sold, creating a trust or forming a family partnership to manage the property.

The attorney also can help you frame the discussion you’ll want to have with the kids. Knowing their current preferences and circumstances may be helpful, but given your goal, it’s also a good opportunity to emphasize the importance of family unity. Let your kids know you expect them to put family first and that harmonious relationships are worth more than any piece of real estate could be.

Filed Under: Credit Scoring, Q&A, Real Estate, Retirement
April 15, 2024 By Leave a Comment

Q&A: Waiting to apply for retirement benefit or not

Dear Liz: I am recently divorced but was married for 20 years. My ex is 12 years older and he waited until 70 to start collecting Social Security benefits. I am 62 and self-employed. My retirement benefit is greater than half of his (but not by much). It is my understanding that after his death I can collect his full benefit, provided I am at least 67 when I apply, even if I start taking my own benefit now at 62. Is that correct?

Answer: Yes, but he could live a long time. Starting your own benefit now means you’ll get much smaller checks for years, perhaps even decades, compared with what you’d get by waiting. Plus, any benefit you take before your full retirement age would be subject to the earnings test, with $1 withheld for every $2 you make over a certain amount ($22,320 in 2024).

You may not have much choice, but if you do, waiting to apply is usually the best option.

Filed Under: Q&A, Retirement, Social Security
April 15, 2024 By Leave a Comment

Q&A: Retail cards are often easier to get than credit cards

Dear Liz: You recently answered a question from someone who was rejected for a credit card because of a lack of credit history. Years ago, my wife was rejected for similar reasons. She signed up for a card with a local retailer, then successfully reapplied for the credit card six months later. Maybe the industry has consolidated enough that this won’t work anymore, but it did then.

Answer: Retail cards are often easier to get than credit cards, although these days people also can start their credit histories using secured cards or credit-builder loans. Secured cards offer a credit line equal to a deposit made to the issuing bank. With a credit builder loan, the borrowed amount is stored in a savings account or certificate of deposit that the borrower can claim after a set number of monthly payments.

The original questioner already had a credit history, however, along with high credit scores. The issuer that rejected their application cited a lack of an installment loan history. In other words, there was no mortgage, student, auto or personal loan showing on their credit reports. That’s not something that typically would keep someone from getting approved for a credit card, hence the recommendation that the questioner call the issuer and ask for a reconsideration.

Filed Under: Credit Cards, Q&A
April 8, 2024 By Leave a Comment

This week’s money news

This week’s top story: How to make sure you have enough auto insurance coverage. In other news: Limited gender markers add hurdles for nonbinary people, consider paying workers more often to retain them, and why adding a child as an authorized user might not help their credit.

How to Make Sure You Have Enough Auto Insurance Coverage
Rising medical, auto repair and vehicle costs now mean drivers could be underinsured. Here’s how to be sure you’re fully covered.

Limited Gender Markers Add Hurdles for Nonbinary People
Conflicting federal and state rules leave many nonbinary and transgender people with mismatched IDs, which complicates everyday tasks.

To Retain Workers, Consider Paying Them More Often
You can test out a more frequent payroll schedule or offer on-demand access to earned wages as an employee benefit.

Why Adding a Child as an Authorized User Might Not Help Their Credit
Here’s what to know about the potential limitations of adding your kid as an authorized user and alternative ways they can build credit.

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April 8, 2024 By Leave a Comment

What college students need to know about payment apps

For college students, sending money to friends has never been easier thanks to peer-to-peer payment apps like Venmo, PayPal and Cash App. But that convenience poses risks, including vulnerability to errors, fraud and the tendency to overspend.

As a result, payment apps can contribute to financial stress at a time when young people are learning how to manage their finances on their own. “Peer-to-peer payment apps are cash on steroids because they’re a straw stuck into your bank account,” says Anne Lester, author of “Your Best Financial Life.”

Not only does that make spending easier and more “frictionless,” Lester explains, but it also means “if you trust the wrong person, then you’re in big trouble,” because it can be difficult or impossible to get the money back. In Kimberly Palmer’s latest for ABC News, learn what college students need to know about payment apps.

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