Buying a Home
Always Conduct the Walk-Through Inspection
Unless you're just starting out, buying a home also involves selling a home. Your goal is to get the highest sale price possible for the home you buy: That not only maximizes your return on investment but also makes buying a new home a little easier. Simple and relatively inexpensive ways to boost the value of your home include painting, installing new floors, installing energy-efficient replacement windows (especially in older homes), and improving curb appeal: Landscaping, power-washing decks, and sprucing up the exterior.
Improvements shouldn't cost a lot. Your goal is to make your home look and feel clean, well-maintained, and inviting most buyers will pay more to purchase a home that is "move-in" ready.
Refinancing a Home
What is Mortgage Recasting?
"Recasting" a mortgage is a fairly simple concept. Say you want to pay down a chunk of loan principal and have your monthly payments reduced as a result that would be a mortgage recast. (A mortgage could also be recast because you want to extend the term of the loan because you're struggling financially the result is lower monthly payments but a longer term to repay the loan.)
You can always pay down your principal in small amounts or in a large amount simply by applying those funds to the balance of your loan. Once you do, your loan term automatically gets shorter because you owe less in total and your normal monthly payments will pay off the resulting smaller balance more quickly. But your monthly payment will stay the same throughout the term of the loan, even though the number of years it takes to pay off the loan may be reduced. If you want to pay down principal and start making a lower monthly payment, you'll need to have the loan recast.
Recasting is a form of refinancing, but typically doesn't require as much paperwork or cost. However, some mortgage companies will not be able to recast your loan if they sold the loan to other investors if that's the case, those investors may not be willing to recast the loan. In that case refinancing will be necessary.
Saving for College
Filling Out Financial Aid Forms? Be Very Careful
Most schools require parents to fill out the Free Application for Federal Student Aid, or FAFSA, form when applying for financial aid. The form is sent to a central processing facility where information is then made available to schools. That makes applying for financial aid handy but if you make a mistake on the form, it may be rejected, and the delay could cost you thousands of dollars. In some cases electronic systems notice and alert you to simple errors; in other cases you won't find out until later that the form was filled out incompletely or inaccurately. If applying for financial aid in a timely fashion is critical to ensuring your child can attend a college or simply to help you pay for that expense take the time to review the FAFSA form very carefully before you submit it. Don't assume the "system" will quickly alert you to any mistakes.
Saving for Retirement
How Much Will You Need? In Some Cases Less than You Think
A key component in retirement planning is determining how much money you'll need. (After all, how can you determine how much to save unless you know how much you'll need when you're retired?) While you may not realize it, some of your expenses will actually go down or be eliminated. Hopefully your mortgage will be paid off at some point; if not, you may decide to move into a smaller, less expensive home since your children will no longer be living with you. Other expenses may no longer be necessary as well: Child care, life insurance, retirement savings, and even car expenses. As you plan for what you'll need, make sure you take into account what you will no longer need as your lifestyle changes.
Preparing for Taxes
Looking for a New Job? Expenses May Be Tax Deductible
Legitimate costs for pursuing another job within your field can be deducted: The cost of trips; the cost of education that will help you improve interviewing skills, resume writing skills, etc; the cost of career counseling as long as the money is spent in the reasonable pursuit of a new position, those expenses can be deducted. And you don't have to successfully land a new job; what matters is that you are legitimately pursuing another opportunity.
Job search costs are itemized in the miscellaneous expenses category on Schedule A. You can only deduct the amount of your miscellaneous expenses that exceeds 2% of your Adjusted Gross Income, so don't forget to track other costs like educational expenses, non-reimbursed expenses relating to your current job, and investment and tax-related expenses.
Starting a Family & Teaching Kids to Save
Employ Your Kids and Save
If you own a small business, hiring your children can be a great way to cut taxes on your income by shifting it to someone who is taxed at a lower (sometimes zero) rate. The main requirement is that family employees must be at least seven years old. Then the first $5,700 of their earned income is not subject to income tax, since that is the current standard deduction for a single taxpayer.
Keep in mind you must pay what is considered a "reasonable" wage for services performed by a family employee. A "reasonable" wage is what you would otherwise pay a commercial vendor for the same service, after making an adjustment for the child's age and experience. If a landscaping service would charge $20, it's reasonable to pay your child the same amount since cutting grass is considered to be relatively unskilled labor.
Building Good Credit
Boost Your Credit Score Simply by Asking
The higher your credit score the easier it is to qualify for credit and to qualify for lower rates and better terms. One way to improve your credit score is by improving your credit used to available credit ratio (the amount you have borrowed versus the amount you are allowed to borrow.) For example, say you have a $10,000 credit limit on a credit card and have a balance of $9,000. Your ratio is 90%, since you are using 90% of your available credit (on that card.) The lower your ratio, the better your credit score since that implies you use credit wisely. You can improve your ratio by paying off balances, but you also may be able to improve you ratio by asking creditors to raise your credit limit. If you have a $10,000 limit, a balance of $9,000, and you ask for your limit to be raised to $12,000, your ratio instantly goes from 90% to 75%. Since every 20-point increase in your credit score is likely to result in lower interest rates or easier to access credit ask and you may receive.
It's Your Money
Many people hire financial advisors to help them manage their investments. It makes sense: Financial planners and wealth advisors are experts and stay on top of trends, industry practices, changes in tax laws, etc.
So if you choose to hire an advisor, great: But make sure you always stay in charge of the decisions made regarding your money. Your advisor works for you you ultimately should make final decisions and retain control of how your money is invested. Take input from your advisor, ask questions, seek guidance, but only make decisions with which you are comfortable. If you feel your advisor doesn't listen closely to your concerns or needs, find another advisor.
After all, it's your money.
Auto - Buying and Insurance
A number of automobile manufacturers now offer "free" maintenance when you purchase or lease a new car. BMW and Volvo have offered no-cost maintenance for some time, and this year General Motors and Ford also announced free maintenance programs. Just make sure you know what is and is not covered. BMW, for example, will replace brakes and even windshield wiper blades as part of their free maintenance program; Cadillac only covers oil changes, tire rotations, and air filters (in addition to standard warranty coverage, of course).
So when you consider the cost of buying a new car, factor in savings after you make the purchase as well the amount you save could be considerable.
Insuring your Children
As part of a comprehensive benefits package, many employers offer life insurance coverage for the employee's spouse and/or children. Typically the spousal coverage is a fairly good deal. Even though the policy amount may be fairly low, the premiums are often also low. Insuring your children may make less sense, though: Since you are not financially dependent on your children, if they pass away you will not need funds to cover the resulting loss of income, since most kids don't generate an income that goes towards supporting the family.
If you wish to compromise, you may decide to purchase enough coverage that will cover funeral expenses. (While that sounds morbid, it may be a practical way to defray the relatively high costs of funeral services.) Otherwise, think twice before you carry life insurance on your kids the only time anyone needs life insurance is when someone else is financially dependent upon them.
Safeguarding Your Financial Information and Identity
Hiring Minds Want to Know
Your resume and job application provides a wealth of information about you but so does a Google search. Many employers search the Internet for information about prospective employees, verifying employment histories, where you've lived, what experiences you have had, as well as to get a sense of who you are beyond what appears on your resume. If you don't want prospective or current employers to have access to personal or private information, set your social media accounts to "private" status, or better yet resist the temptation to share your "life" online. Think of it this way: If you aren't willing to share something with everyone online, don't share it online at all.
Internet and Mobile Banking
When You Apply Online… Know Where You're Applying
Completing an online loan application is certainly convenient, but make sure you know where and how often your information will be used. If you apply for a loan or other services at a specific financial institution, that institution will be the only party privy to your information. But if you apply for services at a site that will then distribute your information to a number of different parties, you not only lose some control over your information but you also may find that multiple parties will access your credit report.
Say, for example, that you fill out one online application with a firm that will then solicit offers from a number of financial institutions. Each institution will review your information and each institution may pull a credit report. The firm soliciting "bids" from other financial institutions will certainly try to maintain your privacy and confidentiality, but you may not wish to take that risk. (Plus, multiple credit inquiries could negatively impact your credit score.)
When you apply online, know how your information will be used.
Financial Organization, Planning, Budgeting
Should You Plan to File Taxes Separately or Jointly?
In most cases married couples file taxes jointly. Even if you and your spouse have dramatically different incomes, tax rates typically work out in favor of filing jointly. But occasionally that might not be the case. Say, for example, that your spouse has a relatively low income but has significant medical expenses this year. In order to claim medical expenses as a deduction, those expenses must exceed 7.5% of gross income. Filing separately could enable your spouse to meet the 7.5% threshold, itemize medical costs, and lower your total tax burden. Don't automatically assume filing jointly is your best bet, especially if you face unusual circumstances during the year. Tax planning is a year-round effort, not just something to do when it's time to file your taxes.