Liz Weston

June 7, 2013 By Liz Weston

Friday’s need-to-know money news

The inconvenient costs of convenience checks, the effects of the sequester on the unemployed, how to save money by purchasing an energy efficient home, how to save your financial sanity when your kids move back home and why hurricane season means it’s time to check your auto insurance coverage.

The True Costs of Credit Card Convenience Checks

The checks sent by your credit card company under the guise of convenience could lead to some very inconvenient fees.

Why the Unemployed Are Seeing Smaller Checks

The effects of sequestration mean 11% to 22% cuts for unemployment checks.

Bill Would Sweeten Loans for Energy-Efficient Homes

Purchasing an energy-efficient home could land you a larger mortgage and a lower interest rate under a Senate bill introduced with broad real estate industry support.

How to Set Money Ground Rules For A Boomerang Kid

With over 13% of parents having a grown child living at home, it’s important to set financial ground rules in order to keep the peace.

Hurricane season: Make sure your car is covered

Hurricanes damage hundreds of thousands of cars, but insurer rules prevent last-minute buying of coverage. Now is the time to review your policy.

Filed Under: Liz's Blog, Saving Money, The Basics Tagged With: auto insurance, Credit Cards, Insurance, mortgage, mortgage rates

June 6, 2013 By Liz Weston

Thursday’s need-to-know money news

Good credit, stolen credit and ways to save on travel to the vacation home you should have purchased when mortgage rates were historically low.

Five Reasons Why You Can’t Ignore Your Credit

While living debt free is a good thing, living credit free can have unforeseen and expensive consequences.

Here’s Everything We Know About The Rakuten/Buy.com Credit Card Breaches

If you’ve shopped at the online marketplace recently, you should pay very close attention to your statements.

26 Secrets to Save on Travel

Flying on a Saturday afternoon may not sound like fun, but it could save you big bucks.

Farewell 3% Mortgage Rates

Job gains and an improving economy signal the end of historically low mortgage rates.

Filed Under: Liz's Blog Tagged With: Credit Cards, Credit Reports, Credit Scores, credit scoring, database breaches, FICO, FICO scores, mortgage refinancings, mortgages, travel

June 5, 2013 By Liz Weston

Wednesday’s need-to-know money news

Here are some of the top money stories around the Web:

How to Pay Student Loans You Can’t Afford

With interest rates on federal Stafford Loans set to double on July 1^st, Credit.com’s Gerri Detweiler breaks down the four main income-based repayment programs.

The Surprising Downside of Cutting Up Your Credit Cards

While it may curb your spending, cutting those credit cards in half could hurt your credit score.

Banks Lag on Consumer-Friendly Checking Practices

After surveying 36 of 50 of the country’s largest banks, the Pew Charitable Trusts’ Safe Checking in the Electronic Age project discovered that not a single one met all of the recommended practices.

Are You Paying the iTunes Tax?

The days of tax free internet purchases could soon be over.

Filed Under: Liz's Blog Tagged With: banking, Credit Cards, Credit Scores, credit scoring, FICO, FICO scores, Student Loans

June 3, 2013 By Liz Weston

“Permanent” employment? No such animal

Dear Liz: My spouse has tenure at a university. Given that one of us will always be employed, should we change the way we look at the amount of money we keep in an emergency fund or our risk tolerance for investments?

Answer: Even tenured professors can get fired or laid off. Tenure was designed to protect academic freedom, but professors can lose their jobs because of serious misconduct, incompetence or economic cutbacks, such as when a department is eliminated or a whole university is closed. About 2% of tenured faculty are dismissed in a typical year, according to the National Education Assn.’s Higher Education Department.

That’s more job security than in most occupations, of course. Your spouse also may have access to a defined benefit pension, which would give him or her a guaranteed income stream in retirement. Those factors mean you reasonably can take more risk with your other investments.

As for your emergency fund, you may be fine with savings equal to three months of expenses. But consider that if your spouse were to be dismissed, he or she probably would have a tough time finding an equivalent position. If the institution starts having financial difficulties or if there is any reason to suspect that he or she could be dismissed, a fatter fund could come in handy.

Filed Under: Budgeting, Investing, Q&A, Saving Money Tagged With: emergency fund, Investing, investment risk

June 3, 2013 By Liz Weston

Don’t sweat the small (FICO) stuff

Dear Liz: Over the last couple of years I have managed to pay off my credit cards. I know that closing those accounts will hurt my credit so I kept them open. When I checked my credit report, I found that my rating had gone down and was told that I had to actually use the credit cards and pay them off to keep my score up. I’ve been doing that over the last year or so and my credit score responded well. This past month my credit score went down again by a few points and I learned that it was because the credit card companies had rewarded my diligence by raising my credit limit. This apparently hurt my score. What’s up with this? Is there any way not to get dinged by the reporting agencies?

Answer: Higher credit limits would reduce the percentage of available credit you are using, and that should help your credit scores, rather than hurt them. So the score you’re seeing either isn’t a FICO score, which is the score used by most lenders, or you are being given questionable information about what affects your scores. Many score monitoring systems are set up to give you explanations for any change in your numbers, but those explanations might be vague or might not accurately depict what’s truly influencing your scores.

Your FICO credit scores change all the time, based on the ever-changing information in your credit reports. Variations of a few points shouldn’t be a cause of concern. Continue to use your cards lightly but regularly, paying the balances off in full each month. Over time, the variations will smooth out into higher scores.

Filed Under: Credit & Debt, Credit Scoring, Q&A Tagged With: Credit Cards, Credit Scores, credit scoring, FICO, FICO scores

June 3, 2013 By Liz Weston

Catch me on CNBC today

I’ll be discussing how 10 years of savings can be worth more than 30 years of savings on today’s “Closing Bell” with Kelly Evans and Scott Wapner.

Today’s 20-somethings have a unique–and easily blown–opportunity to set themselves up for their future. Because of the power of compounding, the money they save now for retirement is worth far more than if they start even a few years later. The idea that you can put it off and “catch up” when you’re older? Basically, it’s a myth, since it’s so very, very hard to make up for missing that early start.

NBC News columnist Bob Sullivan outlines how this works in “When $30k is worth more than $90k.”

The takeaway? Paying off debt is important, but not as important as saving for your future. Opportunities to save for retirement really are “use it or lose it,” and blowing them off could make your future self the real loser.

Please join us around 4:50 p.m. Eastern/1:50 p.m. Pacific for the discussion.

Filed Under: Liz's Blog

May 31, 2013 By Liz Weston

How to avoid moving scams

The last time we moved, our stuff was held hostage.

The mover had a variety of entirely bogus reasons for hanging onto our stuff while trying to exceed the written, “not to exceed” estimate. Among the excuses: We didn’t tell him there were steps at the new house (there were two) or it was at the fringes of Los Angeles (we’re actually quite close to the geographic center of the city).

At the time, I didn’t know that reputable movers were being bought up by bad guys who pulled these stunts, or that moving in many areas is so lightly regulated that they can get away with this crap.

If you’ve got a move planned this summer, take the time to check out Consumer Report’s tips for avoiding scams.

One of the best tips I know isn’t included: Ask your employer, or another major company in the area, which companies they use to move their executives. These movers won’t be the cheapest, but since they rely on repeat business, they’re far less likely to be scamsters.

In the end, I paid a couple hundred dollars more than we agreed to ransom our stuff–much less than the $1,000 or so the mover demanded, but still too much. If we ever have to move again, I’ll be a lot more diligent in choosing a mover.

Filed Under: Liz's Blog Tagged With: movers, moving expenses

May 29, 2013 By Liz Weston

It’s National 529 Day!

Who doesn’t love obscure commemorative/promotional days? But this one is worthwhile since it brings attention to the state-run college savings plans that can help you pay for your children’s future education.

Here are the most important facts you need to know about college savings:

If you can save for college, you probably should. The higher your income, the more the financial aid formulas will expect you to have saved for college–even if you haven’t actually saved a dime. Even people who consider themselves middle class are often shocked by how much schools expect them to contribute toward the cost of education. (By the way, it’s the parents’ assets and income that determine financial aid, so if you don’t help your kid with college costs, he or she could be really screwed–no money for school and perhaps no hope of need-based financial aid.)

More savings=less debt. Most financial aid is in the form of loans these days, so your saving now will reduce your kid’s debt later. (A CFP once told me to substitute the words “massive debt” when I see “financial aid.” So when you say, “I want my child to get the most financial aid possible,” I hear: “I want my child to get the most massive debt possible.”

529 plans get favorable treatment in financial aid formulas. These accounts are presumed owned by the parent, so less you’re expected to spend less than 6% of the total each year–compared to 35% of student-owned assets.

Learn more by reading “The best and worst 529 plans” and this primer on Motley Fool.

Filed Under: College Savings, Liz's Blog Tagged With: 529 college savings plan, college, college costs, College Savings, college students, college tuition, Student Loan, student loan debt, Student Loans

May 29, 2013 By Liz Weston

Split credit accounts when you split with a spouse

Dear Liz: I just finished paying off my last credit card and checked my credit report as I am now separated from my wife. I found we had one joint account that she had not been paying. There are two stretches of five months each of no payment.

I immediately called up the creditor and paid off the balance and the creditor closed the account due to the lack of payments. This one account killed my credit score. I also found two old accounts on my credit report that are both still active but I have not used them for years. Both accounts are in good standing.

I was thinking that if I started using the accounts again, paying them off each month, it would boost my credit score faster. I am looking to buy a house this summer and would have an easier time with a better score. Do you think using the old accounts would help improve my score faster or do you think my score would be better if I closed those accounts?

Answer: Closing accounts can’t help your credit scores and may hurt them. You should avoid closing any credit account when you’re trying to improve your credit rating.

Your experience shows why it’s so important to separate financial accounts when you’re separating from a spouse. Failure to pay any joint account can hurt both parties’ scores. This would be true even if you were divorced and had a divorce decree making her responsible for the debt. Your creditors don’t have to pay attention to such agreements.

Lightly using a few credit cards can help you recover from missteps like this one. “Lightly” means charging 10% or less of their credit limits, and you should pay the balances in full each month, since carrying credit card debt doesn’t help your scores. You shouldn’t expect your scores to bounce back overnight, however. If you had good scores before this incident, it may take you a few years to recover completely.

Filed Under: Credit & Debt, Credit Cards, Credit Scoring, Divorce & Money, Q&A Tagged With: Credit Cards, Credit Scores, credit scoring, Divorce, FICO, FICO scores, marriage

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