Ask Liz Weston

Get smart with your money

Liz Weston

Monday’s need-to-know money news

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crop380w_istock_000009258023xsmall-dbet-ball-and-chainToday’s top story: Becoming debt free and staying that way. Also in the news: How to find the leaks in your budget, six ways to become “rich”, and what to do if you need a credit increase.

How to Become Debt-Free — and Stay That Way
It’s not as impossible as it sounds.

How to Find & Fix Your Budget Leaks
Sealing the money drips.

6 ways to become rich without even trying
Well, maybe a little trying.

Need Some Flexibility? 6 Ways to Increase Your Credit Limit
Proceed with caution.

Disability Benefits: How Social Security Decides If You Deserve Them
Deciphering the formula.

Q&A: Work from home jobs

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Dear Liz: Are there legitimate “work from home” Internet job opportunities, or are all those advertisements just scams?

Answer: You should be skeptical of advertisements in general and particularly advertisements about an area as scam-filled as work-from-home opportunities.

Yes, many people make a living working from home. They’re typically employees of companies that allow them to telecommute, or they’ve launched successful businesses or they’re answering phones for a call center. They are not unskilled people making a killing at jobs that require little effort, which seems to be what most of the scams promote.

You can research legitimate opportunities by starting with legitimate websites. AARP, Bankrate.com and Kiplinger all have good articles on the topic.

Q&A: How to escape a timeshare

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Dear Liz: How do I walk away from a timeshare? It’s paid off but we have yearly maintenance fees that are now $3,600 each year. This will be prohibitive in retirement, and it’s quite a burden now. The developer won’t let us give it back, and we can’t sell it because the resale companies are sharks that demand money upfront. Can they ruin our credit if we stop paying? Is there any way to protect ourselves?

Answer: If you stop paying your annual maintenance fees, your account can be turned over to a collection agency. That will trash your credit, and you could be sued.

Many people who buy timeshares don’t realize they’re making a lifetime commitment, said Brian Rogers, owner and operator of Timeshare Users Group. Even after any loans to buy the timeshare are paid off, owners owe maintenance fees on the property. Maintenance fees typically rise over time and may be supplemented by special assessments to repair or upgrade resorts as they age.

The good news is that you may be able to get out from under these fees by selling your timeshare, and you don’t have to use a resale company that charges an upfront fee. In fact, you shouldn’t, since those arrangements are frequently scams, Rogers said.

The amount you’re paying indicates that you own a timeshare at an upscale resort. (The average maintenance fee is closer to $800 a year, Rogers said.) If that’s the case, your timeshare may have some value, even if it’s only a tiny fraction of what you paid. Owners at less desirable resorts often find they can sell their timeshares for only $1, and may have to pay others to take the timeshares off their hands.

You can list your timeshare for sale at no or low cost on EBay, Craigslist, RedWeek or Timeshare Users Group, among other sites. To get some idea of what it’s worth, enter the name of the resort into EBay’s search engine and click on the “completed sales” box on the lower left side of the page. Timeshare Users Group and RedWeek offer additional advice on selling timeshares.

You also could consider renting out your timeshare, using those same sites. Many owners discover they can offset or even completely cover their maintenance fees through such rentals, Rogers said.

Q&A: How to fund a Roth IRA

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Dear Liz: I have quite a bit invested in stocks in a regular brokerage account. I’ve held them for many years, and to sell them would mean huge capital gains taxes. I’d like to move some of these into a Roth IRA, so that I can avoid paying taxes on their appreciation and dividends, since I plan to hold these for quite some time. Is it possible to move these stocks into a Roth IRA without selling and repurchasing?

Answer: Nope. Uncle Sam typically gets his due, with one major exception.

Roths have to be funded with cash, and direct contributions are limited to $5,500 per person per year, plus a $1,000 catch-up contribution for those 50 and over. Your contributions would be further limited once your modified adjusted gross income exceeds $181,000 for married couples and $114,000 for singles, said Mark Luscombe, principal analyst for tax research firm CCH Tax & Accounting North America. A big-enough capital gain, on top of your regular income, could push you over those limits.

If you want to avoid paying capital gains, just hold the investments until your death. Your heirs will get the investments at their market value and can sell them immediately without owing any capital gains. There may be other taxes involved, however. If your estate is worth more than $5 million, it may owe estate taxes, and a few states levy inheritance taxes on heirs.

Friday’s need-to-know money news

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imagesToday’s top story: The biggest mistakes car buyers make and how to avoid them. Also in the news: How to land your dream home this summer, saving big on your wedding expenses, and how we can learn from the money mistakes of celebrities.

5 Mistakes Car Buyers Make
Pay attention to how long you’ll pay.

7 Ways to Land Your Dream Home During the Summer
Look for a diamond in the rough.

Easy ways to save $10,000 on your wedding expenses
Location, location, location.

5 celebrity money mistakes we can all learn from
One word: prenup.

Cash 4 Phones: 5 Tricks to Buying and Selling Used Electronics
Turn those dust collectors into cash.

Our apartment in Paris

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Eiffel TowerWe’ve settled into our home for the next few weeks: a comfortably funky 3-bedroom apartment on the top of an older building not far from the Moulin Rouge.

Travelers will tell you that if you’re planning to stay more than a few days here (and indeed in many major cities), it makes a lot more financial sense to rent a place than to stay in a hotel. Not only is it cheaper*, but access to a kitchen and (often) a washer and dryer will further reduce your costs. And this time, I knew enough to get a place with an elevator.

Another way to travel cheaper: public transport. We’re less than a block from a Metro station and the bus stop is literally across the street. Several grocers and a good boulangerie (bakery) are nearby, as well as a number of restaurants when we don’t feel like cooking.

We used the Homelidays site, now known as HomeAway, to find this place, and AirBnB to book a flat in Edinburgh.  I relied heavily on other users’ reviews, seeking out the listings that have a bunch of them. (I’ll let other people take a chance on the newbies.)

The one thing we gave up was flexibility. Most of the listings we considered had pretty strict cancellation policies, with substantial deposits (usually half the rent) and steep forfeitures if you change your mind. Fortunately, our plans were pretty well set.

*We’re paying about $140 a night for three bedrooms and two baths. Before we arrived, we spent one night at the Westin Paris Vendome using points. The room we occupied typically costs over 500 euros per night, or nearly $700. There are much cheaper hotels, obviously, but you typically pay a couple hundred bucks for a small room, so renting an apartment can really make sense.