Q&A

Q&A: Should extra cash go to retirement or emergency savings?

April 10, 2023 By Liz Weston

Dear Liz: I have an excessive amount of money in my bank checking and savings account (about $20,000 in each) and need to know where to invest it. My financial planner advised putting it in my 401(k), but I can’t transfer a chunk of money, I can only increase the percentage I contribute (which is currently at 10% of my salary). I have IRAs, but I can only deposit a certain amount there as well. Where would be the best place for this extra money to go that will pay interest?

Answer: You may not be able to put the money directly into your 401(k), but you could boost your contribution rate at work and tap the “excess” money in your accounts to make up the difference in your paychecks.

First, though, make sure you have an adequate emergency fund. Most financial planners recommend keeping a reserve equal to three to six months’ worth of expenses. This money should be kept in a safe, liquid account, such as an FDIC-insured bank account. You don’t need to settle for the tiny amount of interest many banks pay, however. Some online high-yield savings accounts are now paying over 4%.

Q&A: Caught in the IRS backlog

April 10, 2023 By Liz Weston

Dear Liz: In 2021, we helped two of our children buy a condo. One of them confessed she hadn’t filed taxes for several years. We worked on the returns together, and it turned out that nothing was owed. Meanwhile, the IRS has never acknowledged the delayed tax filings or refunded the (small) overpayments. Shouldn’t the IRS have completed these filings by now?

Answer: The IRS says it has processed all paper and electronic individual returns for tax year 2021 or earlier if those returns had no errors or did not require further review. Returns that were filed late, however, may still be part of the agency’s backlog.

Your child can try using the “Where’s My Refund?” tool on the IRS site or create an online account to check for possible updates. Keep in mind that there’s a three-year limit to claim a refund; after that point, the U.S. Treasury gets to keep the money.

The best free museums in Paris

April 7, 2023 By Liz Weston

Museums in Paris typically aren’t cheap, with adult ticket prices often ranging between $15 and $20, depending on the exchange rate. There are, however, a number of absolutely wonderful museums in Paris that are also absolutely free.

Here are some that I highly recommend:

The Musée Carnavalet. This Paris history museum is housed in two gorgeous 17th-century mansions in the Marais district. One of its highlights greets you as soon as you walk in: a collection of shop signs, some dating back to the Middle Ages. Another of my favorite rooms is an intact Art Nouveau jewelry store designed by Alphonse Mucha. Several beautifully decorated rooms, some imported from other mansions, illustrate how the upper crust lived in previous centuries. Downstairs you can see prehistoric tools as well as statues, jewelry and other remnants of Paris’ time as a Roman settlement. Upstairs there’s an extensive collection of Revolution memorabilia as well as maps, models, paintings and other exhibits illustrating the city’s history. Don’t miss the small but well-curated gift shop for unique items, including magnets shaped like some of those iconic signs.

Petit Palais: The Petit Palais is another Paris museum where the building rivals the artwork. Both it and the nearby Grand Palais are considered outstanding examples of the Beaux-Arts style (think “over the top, more is more” architecture characterized by lots of statues, columns and decoration). The Petit Palais has a fine collection of paintings and sculptures from the 19th and 20th centuries, but I love it for its beautiful interior garden, which you can enjoy while having lunch or coffee in the museum cafe. The Petit Palais is located just off the Champs-Élysées, not far from the Place de la Concorde.

A view of Place des Vosges from Victor Hugo’s apartment.

Maison Victor Hugo. You can check out two Paris must-sees with one visit: the Place de Vosges, a prestigious square in the Marais that dates to the early 1600s, and the home of Victor Hugo, who lived in one of its mansions from 1832 to 1848. Hugo wrote a big chunk of “Les Misérables” here and also indulged in a hobby of reworking old Gothic furniture. He wasn’t a bad draftsman, either; his drawings decorate several of the rooms.

Musée de la Vie Romantique. The “Museum of Romantic Life,” dedicated to the Romantic period in French art and literature, is housed in a compound once owned by painter Ary Scheffer in the Pigalle neighborhood, about a 15 minute walk downhill from Sacre Coeur. The writer George Sand attended salons there, and the exhibits include some of her (surprisingly good) landscape paintings as well as a large oil portrait of her. Once again, a highlight is the museum’s garden and cafe–another great place to rest your feet before heading back out onto Paris’ lively streets.

Musée Cognacq-Jay. Another standout museum in the Marais is the former home of Ernest Cognacq, founder of La Samaritaine department store chain, and his wife, Marie-Louise Jay. The museum’s collection focuses on 18th century art, including paintings, sculptures, furniture and decorative arts, but more than half the pictures I took were of the lovely mansion itself.

You can find a list of other free museums at Paris’ official tourism site, along with a lengthy list of museums that are free on the first Sunday of the month (including heavyweights like the Centre Pompidou and the Musée d’Orsay). Some of these free-Sunday tickets must be reserved well in advance, however. If you can’t land a slot at one of the biggies, consider my all-around favorite Musée des Arts et Métiers, a science and technology museum that proves the French invented everything of importance, or Cité de l’Architecture et du Patrimoine, a museum of architecture and monumental sculpture at the Trocadéro.

A tip for families: Children under 18 are typically free even at the more expensive museums. Also, free admission is often extended to people under 26 if they’re residents of European Economic Area countries.

Q&A: Why asking for lower card limits can hurt your credit scores

April 3, 2023 By Liz Weston

Dear Liz: My wife and I recently paid off our home mortgage and now have only our two Visa cards, which we pay off in full each month. Depending on our monthly expenses or purchases, those balances rarely exceed a few hundred to possibly as high as a thousand dollars. Each card has a limit of several thousand dollars and would be much higher had we not previously requested lower limits on the accounts.

My credit scores have plummeted from well over 800 to the low 700s. One site that reports credit scores suggested that I open more credit accounts, because lenders supposedly like to see a variety of accounts when assessing creditworthiness.

This makes no sense to me. I have had an excellent credit track record for decades.

I’m concerned that with our current scores we may not qualify for preferred (0%) financing when we make a couple of car purchases in the not-too-distant future. While we could pay for those purchases in cash, my preference would be to take advantage of such a financing option and keep my money in accounts that would continue to increase in value.

Are we stuck with this situation unless we are willing to go into further debt?

Answer: No, but you need to be a little smarter about how you handle your credit.

You didn’t help yourself by asking for lower credit limits. The formulas like to see a big gap between the amount of credit you have and the amount you’re using, even if you pay in full each month. Ideally you would keep your utilization percentage in the single digits.

The closure of your only installment loan likely took a toll on your scores as well. As you were informed, credit scoring formulas favor those who responsibly handle a mix of credit — loans as well as cards. You can have good scores using just credit cards, but you might not achieve the highest possible scores without an installment loan.

Does that mean you won’t get 0% financing when you’re ready to buy a car? Perhaps, but 0% financing is pretty hard to find these days anyway and may not be the deal you think. You typically have to give up manufacturer rebates to get special financing deals and dealerships are often more resistant to negotiating on price. In other words, what you save on interest may be more than offset by a higher price tag for the car. You may find yourself better off using a low-cost auto loan from a credit union or paying cash.

If you do want to finance the cars, start by asking your credit card companies to restore those higher limits. Consider opening another credit card account or two if the first vehicle purchase is six months or more in the future because your credit will need a few months to recover from the temporary ding of the applications.

Another option is to get a small personal loan, which would add an installment loan back to your credit mix. Only you can decide whether paying some interest now is worth the possibility of paying less interest on a future auto loan.

Q&A: Grandma needs tax help

March 27, 2023 By Liz Weston

Dear Liz: My grandma is 78, divorced, and has not filed taxes in the last decade. I was wondering what she should do because she is head of the household and taking care of three adopted kids and needs help.

Answer: Please help connect your grandmother with AARP Foundation Tax-Aide, which provides free virtual and in-person tax help. You may be able to help her make an appointment and gather the documents she’ll need to file those missing tax returns.

Your obviously busy grandma may have procrastinated on filing her taxes because she worried about a tax bill.

But depending on her income and circumstances, she may have been eligible for refundable credits or other tax breaks that could have put money back in her pocket. (The tax law provides a three-year window to claim a refund, so she would already have lost out on refunds from the earlier years.)

If she does owe taxes and penalties, the IRS has payment plans that could help. A Tax-Aide volunteer will explain her options for paying any overdue bills.