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Financial Advice Keeping You Broke & In Debt

The post Financial Advice Keeping You Broke & In Debt appeared first on Penny Pinchin' Mom.

Financial advice is great – when it is the right type of advice.  There are tips and strategies that can make you money.  However, there is also a lot of advice that will do nothing but keep you broke and in debt.  These are things you don’t want to listen to.

I remember when I was younger, my mom told me that I had to get a credit card because it would be important for any emergencies which came my way.  I followed her advice and got a credit card. And, wouldn’t you know it, the first time I used it was for an emergency. Or, what I thought was an emergency.

I woke one snowy morning and someone had hit my car — and fled. No note on my windshield.  Just a dented door with green paint. I was devastated.  I had worked so hard to afford that car.  Now, here I was having to pay money to get it back to the condition it once was.  Since I was broke, I followed my mom’s advice.  I used my credit card.

I remember watching it go through the reader.  I signed my name and I was done.   When the bill came the following month, I paid that minimum payment. I decided that credit cards were pretty slick!  They were simple to use and it was the way to get what I wanted now and I could just pay for it later.

In hindsight, my mom would have been better to teach me the importance of saving.  That way, I would have cash on hand to cover my emergencies and not rely on plastic.

Sadly, this is the way many people live their financial life. The take the advice of friends and family and follow it rather than listening to financial experts.  Here are some common financial advice myths.

 

BAD FINANCIAL ADVICE YOU MAY BELIEVE

1. Some debt is good to have

I hear time and time again that you have to have debt in order to have a good credit score.  That type of financial advice is pure nonsense.

There is no such thing as “good debt.” Debt is money you owe someone and it is never a good thing. It is, however, sometimes necessary in order to purchase a house or a vehicle.  While not what one would call good debt, it may be a debt you need to have in order to live.

The type of debt no one should have is credit card debt.  Ever.  There should never be any instance where you owe more on your credit card in any given month than the amount of money you have in the bank to pay it in full.

Continuing to accrue debt that you can not pay in full each month makes no sense at all.

 

2. You need a credit card for an emergency

My story above is all too common for many.  The opposite is true.  You can have a credit card, but should not use it only for an emergency.  However, if that is how you plan to pay for emergencies, you are setting yourself up for financial trouble.

We all know that emergencies will happen.  There is nothing we can do to prevent them.  However, the smart thing to do is to plan ahead for the unknown.  This is why a fully funded emergency account makes more sense than a credit card.

If you think about it, having to deal with the stress of the situation is bad enough.  Add to it the thought of increasing your debt in order to deal with it just makes the situation a work.  Now, you not only had to deal with the broken furnace but now, you will have to find a way to pay for it as your monthly bills just went up.

Your emergency fund will come to your rescue when it is needed.  Knowing the funds are there to help cover those expenses will instantly make you feel better when dealing with a stressful situation.

 

3.  Leasing a vehicle is better

This is the one that makes me scratch my head.  When you lease a vehicle, you never own it.   Instead, you are stuck in perpetual car payments. How does that make any sense at all?

The common reason many say they lease is that they don’t have to worry about having an older vehicle.  They know that they are driving a new vehicle every few years.  The truth is, if you take care of your car, your vehicle can last you for years.  I drove our minivan for more than 13 years!  And, when I was ready for an upgrade, my vehicle was 3 years old.  Nothing new here!

If you lease a vehicle for 3 years at $300 a month, you will pay nearly $11,000 to drive the vehicle.  At the end of 3 years, you give it back. You have nothing to show for it.  You have just thrown away $11,000.  Now, you have to either lease again or decide to purchase your vehicle.  You are starting over on those payments.

However, had you purchased a vehicle that would offer you the same monthly payment of $300 for 3 (or even 4) years, you would own your car.  You now have $300 a month income freed up to do with what you wish.

The smart move would be to save that $300 monthly amount so that in 8, 9 or even 10 years when you need a new car, you can pay for it in cash.  This money will also more than cover some of the repairs that may be needed as your vehicle ages.

 

4.  Renting is throwing your money away

If you rent, you probably this financial advice frequently.  It is common for people to feel that it makes more sense to buy a house as your money is going to build up equity in your property.  And, truthfully, for some people renting is a waste of money.

But not for all.

There are situations where you do not have the funds for your down payment.  It could also be a time in your life when you know there will be the potential for relocating to a new city or venturing down a new career path.

By renting, you also avoid the additional costs of home maintenance, insurance, and other expenses which go with owning a home.

The best way to know this one is to look carefully at your own budget and personal situation. If renting works for you, then that is the path you should follow.

 

5.  You should always buy a new car

Turn on any television program and you will see ads sharing low-interest rate payments to lure you into wanting that new car.  These ads make it sound extremely affordable and tempting.  But don’t fall for it.

The truth is that when you purchase a new car, it will depreciate most quickly in the first few years you own it.  In fact, most cars will lose half their value every four years.  For instance, if your car is $25,000 brand new, in just four years it will be worth $12,000.  Add another four years and now the car is worth just $6,000.

You should not be a car that is too old.  Instead, purchase a late model car with lower miles. It will cost less to operate and will more quickly pay for itself.

 

6.  You must go to college

Many high school students believe that they must go to college when they graduate. However, that is not necessarily the right decision for everyone.  Not all careers or jobs will require a college education.  And, if you do not have the funds to pay for it, you can certainly rack up quite a bit of student loan debt.

If you happen to select a career that requires a secondary education, then it can be worth the cost. But, make certain you have the passion needed to carry you through.  Otherwise, you may find yourself amongst the nearly 60% who drop out, you will find yourself left with a mountain of student loan debt and nothing to show for it.

Rather than attend a college, consider a trade school instead.  Or, if you know for sure you do want to go to school, spend some time trying different jobs to figure out where your passion lies.  There is no rule that says you have to start college immediately after you finish high school.  Know what you want to do and then decide where to go for your education.

Getting financial advice from family and friends, be it solicited or not, can be helpful.  However, just make sure that what they say makes sense and do your homework.  Following what they say can often lead you down a path of increased debt and unhappiness.

Please note that I am not a certified financial advisor and the information shared on this site is based on my personal experiences.   It is important you consult with a tax or financial professional for assistance for your financial situation.

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Auto, Student Loans

4 Practical Ways to Leave College Debt-Free

A college student looks down at her notebook and smiles because she'll leave college debt-free.

The following is a guest post by Lisa Bigelow, a content writer for Bold.

When it comes to paying for college, the anxiety about how to leave college debt-free starts early. And for thousands of grads who are buckling under the weight of monthly student loan payments that can cost as much as a mortgage, that worry can last for as long as 25 years.

According to EducationData.org and The College Board, the cost of a private school undergraduate education can exceed $200,000 over four years. Think you can avoid a $100k+ price tag by staying in-state? Think again—many public flagships can cost over $100,000 for residents seeking an undergraduate degree, including room and board. And with financial aid calculators returning eye-poppingly low awards, you’d better not get a second topping on your pizza.

In fact, you’d better hope that you can graduate on time.

The good news is that you can maintain financial health and get a great education at the same time. You won’t have to enroll as a full-time student and work 40 hours a week, either—each of the methods suggested are attainable for anyone who makes it a priority to leave college debt-free.

Here are four practical ways you can leave college debt-free (and still get that second pizza topping).

1. Cut the upfront sticker price

Don’t visit schools until you are certain you can afford them. Instead, prioritize the cost of attendance and how much you can afford to pay. Staying in-state is one easy way to do this. But if you have wanderlust and want to explore colleges outside state lines, an often-overlooked method of cutting the upfront cost is the regional tuition discount. Many US states participate in some form of tuition reciprocity or exchange programs. You can explore the full list of options at the National Association for Student Financial Aid Administrators website.

Let’s explore how this works. As a resident of a New England state, for example, you can study at another New England state’s public university at a greatly reduced cost if your home state’s public schools don’t offer the degree you want. So, for example, if you live in Maine but want to go to film school, you can attend the University of Rhode Island and major in film using the regional tuition discount.

Some universities offer different types of regional discounts and scholarships that appear somewhat arbitrary. The University of Louisville (in Kentucky) includes Connecticut in its regional scholars program. And at the University of Nebraska, out-of-state admitted applicants are eligible for several thousand dollars in renewable scholarship money if they meet modest academic standards.

If you already have your heart set on an expensive school and you’re not likely to qualify for reciprocity, financial help, or merit aid, live at home and complete your first two years at your local community college.

Here’s another fun fact: in some places, graduating from community college with a minimum GPA gives you automatic acceptance to the state flagship university.

2. Leverage dual enrollment and “testing out”

When you enroll in a four-year college it’s pretty likely that you’ll spend the first two years completing general education requirements and taking electives. Why not further reduce the cost of your education by completing some of those credits at your local community college, or by testing out?

Community college per-credit tuition is usually much cheaper than at four-year colleges, so take advantage of the lower rate in high school and over the summer after you’re enrolled in your four-year college.

But beware: you’ll probably need at least a C to transfer the credits, so read your institution’s rules first. Also, plan to take general education and low-level elective classes, because you’ll want to take courses in your major at your four-year school.

If you’ve been given the opportunity to take Advanced Placement courses, study hard for your year-end exams. Many colleges will accept a score of 3 or higher for credit, although some require at least a 4 (and others none at all). Take four or five AP classes in high school, score well on the exams, and guess what? You’ve just saved yourself a semester of tuition.

3. Take advantage of financial aid opportunities

After taking steps one and two, you probably have a good idea of what the leftover expense will be if you want to leave college debt-free. Your next job is to figure out how to cut that total even more by using financial aid. There are four types to consider.

The first is called need-based aid. This is what you’ll apply for when you complete your Free Application for Federal Student Aid. Known as the FAFSA, this is where you’ll enter detailed financial information, and you’ll need at least an hour the first time you complete this form. Hint: apply for aid as soon as the form opens in the fall. It is not a bottomless pot of money.

There is also medical-based financial aid. If you have a condition that could make employment difficult after graduating from college, you may be eligible, and qualifying is separate and apart from financial need and academic considerations.

The third type of aid relates to merit and is offered directly by colleges. Some schools automatically consider all accepted applicants for merit scholarships, which could relate to academics or community service or, in the case of recruited athletes, athletics. At other universities, you’ll need to submit a separate scholarship application after you’ve been admitted. Some merit awards are renewable for four years and others are only for one year.

If you didn’t get need-based or merit-based aid then you still may qualify for a private scholarship. Some require essays, some don’t, and some are offered by local community organizations such as rotary clubs, women’s organizations, and the like. Don’t turn your nose up at small-dollar awards, either, because they add up quickly and can cover budget-busting expenses such as travel and books.

4. Find easy money

Small-dollar awards really add up when you make finding easy money a priority. Consider using the following resources to help leave college debt-free:

  • Returns from micro-investing apps like Acorns
  • Tax return refunds
  • Browser add-ons that give you cashback for shopping online
  • Rewards credit cards (apply for a travel rewards credit card if you’re studying out of state)
  • Asking for money at the holidays and on your birthday
  • Working part-time by capitalizing on a special talent, such as tutoring, photography, or freelance writing

Leave College Debt-Free

Finally, if you have to take out a student loan, you may be able to have it forgiven if you agree to serve your community after graduation. The Peace Corps is one such way to serve, but if you have a specialized degree such as nursing, you can work in an underserved community and reap the rewards of loan forgiveness.


Lisa Bigelow writes for Bold and is an award-winning content creator, personal finance expert, and mom of three fantastic almost-adults. In addition to Credit.com, Lisa has contributed to The Tokenist, OnEntrepreneur, College Money Tips, Finovate, Finance Buzz, Life and Money by Citi, MagnifyMoney, Well + Good, Smarter With Gartner, and Popular Science. She lives with her family in Connecticut.

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How Do You Use a Degree That Isn’t Very Specific?

Hello! Enjoy this post from my friend Martin. I know this situation applies to many out there (the possibility of what you or others may believe to be useless degrees), so hopefully this post can help someone out! 

“Why did you waste your time on that degree?”

The most ignorant question in the world. You deserve a smack across the face if you’ve ever asked anyone this. There’s no such thing as a waste of time if you learned a few things and opened your eyes a little. Also, it’s none of your business what someone else studied, unless you of course paid for their full education.

Why would you ask someone this?

The person with the degree doesn’t possess the power to time travel and change things. It’s already too late. They have the degree proudly hanging on the wall. There’s no need to be a ruthless jerk who puts down their friends. The person on the other end will get highly defensive and the argument won’t be pretty.

Why would you ask such an ignorant question?

Sadly, European relatives ask this all of the time. So do friends on Facebook. Most people will ask about why you studied what you did. It’s fairly standard small talk.

 

Do you need to earn a highly targeted degree?

All stats out the window, the answer is no.

You don’t need to do anything. You can’t force yourself to study a topic that you despise for four years of your life. This never ends well. If you do complete your studies and find work in the field, you won’t be happy because you never wanted to do this in the first place.

Can you imagine working in a field that you despise until you’re 65? That’s at least 40 years. That would be one miserable existence.

While I highly suggest that you study a subject that can open up opportunities for you after college, I also realize that not everyone has life figured out in their teens.

When I had to decide what I wanted to study I was 17. Due to my late birthday, I had to figure everything out at this young. I remember choosing a community college because I had no clue of what else to choose. I started at a community college at 17 and somehow managed to survive. I was completely clueless about why I was even there.

You can’t be expected to have your life figured out in your teens. It’s okay if you don’t study the most specific topic.

 

How do you use a degree that’s not in demand?

Well, you don’t have to find a work in your specific field. There’s no rule that states you need to work as a Historian just because you studied history.

You don’t have to find work in the exact field that you studied. You have other options, such as:

  • Totally changing gears. You can pick up a trade or find work in a totally new field. Some of my friends have become bloggers and front line management.
  • Starting your own business. Do you have a business idea in mind?
  • Graduate school. My friend went to graduate school since they had high grades and found work in management.
  • Using your alumni relations connections. Your alumni department could open your eyes.
  • Travel. Have you thought about teaching English abroad?

If your degree isn’t in demand, that’s okay because you can still be in demand. You don’t have to live and die based on your degree. You’re not your degree. You have more to offer this world than the piece of paper that you picked up on stage.

 

Should you feel guilty about having useless degrees?

Nope.

There’s no rule that states you must work in the field that you studied. Most of my friends are in completely unrelated fields. I don’t really know anyone that went to directly find work in their specific field. The only friends that are using their degrees 100% are my friends who became teachers and nurses. Those fields are very specific and you can’t get in without the correct credentials.

Everything else can’t be taught.

Do you think there’s a four year program for bloggers like Michelle? Hell no.

Do you think there’s a program that teaches you how to solve problems? Not really.

Is there a college degree that encourages you to take risks? Nope.

College is a wonderful experience. This is your first taste of the following:

  • Freedom.
  • Responsibilities.
  • Deadlines.
  • Love.
  • Failure.
  • Massive hangovers.
  • Depression.
  • Confusion.

Very little of what you study in college will be used in your real life. I hate to admit this, but I don’t remember anything from the classroom lectures when I look back.

Why did I attend college?

I earned my degree in business so that I could tell people that I got my degree in business. Plus, I was the oldest boy in my family and the first to attend college. Making my parents proud was priceless. Oh, and I didn’t want to get kicked out of the house.

The world’s not going to end because your degree isn’t in the most profitable field. You’re not a failure because you studied something that interested you. It’s your life. You did what you wanted to. If you didn’t study anything specific then that’s okay because you’e not restricted to one field of work. You just need to decide on what you’re going to do next.

Are you using your college degree? Why or why not? Do you have useless college degrees?

 

The above is a post from Martin of Studenomics, where you can read about financial freedom and not have to worry about missing a party. Martin has just launched, Next Round’s On Me, where he helps you with your financial journey in your 20s.

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Uncategorized

The Ultimate List of More Than 50 Budget Categories You Must Use

The post The Ultimate List of More Than 50 Budget Categories You Must Use appeared first on Penny Pinchin' Mom.

It is no secret that you need a budget.  But, it is imperative that it includes everything.  Take the time to review your spending and don’t leave anything off of it.  Below you will find a list of household budget categories you need to include. Forgetting even one off might be a big mistake.

It is no secret that the number one thing you must do to take control of your finances is to create a budget.  Without one, you really can’t see where your money goes.  Or, more importantly, you don’t get to direct your money to be spent as you would like for it to be!

While there are posts on how to create a budget, one question I get frequently is, “What categories should I include in a budget?”   When you are new to making a budget, something such as a personal budget categories list can help.  I agree.

As you create yours for the first time, it is important you don’t leave off anything important. A successful budget is one that includes a line item for every way you spend your money.

If you are just learning about budgeting, you will want to check out our page — How to Budget.

There, you will learn everything you want to know about budgets and budgeting.

 

To help you get a jump start on with your budget, and to make sure you don’t leave off any categories, download our free budget template.  This form has helped thousands get started with creating a budget.

SIMPLE BUDGET CATEGORIES 

Once you have your form, you are ready to figure out your budget categories!  While you may not have each of these as individual line items on your form, just make sure you include them all somewhere in your budget!

 

DONATIONS OR CHARITY CATEGORIES

These are all of the monthly donations you make to various charities.  Don’t forget about those you may make only once or twice a year as well!

Church
Medical Research
Youth Groups

 

SAVINGS CATEGORIES

While not needed to live, it is crucial that you always pay yourself before you pay anyone else.  Once you meet your necessary expenses, ensure you are saving enough each month.

If you are in your employer’s retirement plan, you pay those before you get your paycheck, so you would not include them.  However, make sure you account for the different types of savings accounts you may have.

Emergency Fund Savings
Annual Fees, such as taxes, insurance, and dues
College Savings
Investments
Christmas/Birthdays/Anniversaries
Additional Retirement (outside of your employer’s plan)

Read More:  Yearly Savings Challenge

 

CATEGORIES FOR HOUSING

No one will forget to add housing to their budget.  But, make sure you include the amount you may save for repairs and other expenses. To figure out how much to budget, look over your prior year spending and divide that total by 12.  You will add this to your savings, but you can track it under your housing budget category.

First Mortgage
Second Mortgage (if applicable)
Property Taxes
Insurance
Home Owner’s Association Dues
Maintenance
Housekeeper/Cleaning
Lawn Care

 

PERSONAL BUDGET UTILITIES CATEGORIES

You can’t live without your water and electricity.  It is essential that you don’t leave any of these off of your budget either!  These are some of the basic budget categories most people will not intend to forget, but just might.

Electricity
Water
Gas/Oil
Sewer
Trash
Cable/Satellite/Streaming Services
Internet (if not part of your cable bill)
Phone

Read more:  How to Lower Your Utility Bills

 

FOOD

You have to eat. There are only two ways that happens  — you cook or you eat out. Make sure you include both of these categories in your budget.

Groceries
Dining Out

 

TRANSPORTATION CATEGORIES

You have to be able to get around.  That doesn’t always mean a vehicle as it could mean using other means of transportation.  Whatever method you use, make sure you include all of those expenses in your budget.

Remember that you may not have to pay for some of these items each month, but it is essential you budget for them monthly so that the funds are available when needed.

Vehicle payment (make sure you include all payments for all vehicles)
Fuel
Insurance
Taxes
Tags/Licensing
Maintenance
Parking Fees
Taxi/Bus Fares

 

CLOTHING

A line item many people leave off of their budget is clothing.  They forget that it is a necessary expense.  While this doesn’t mean you should go and buy new clothes all of the time, it does allow you to replace items which are worn out.

It is also essential that parents include this item as kids need clothes a bit more frequently.

Adult Clothing
Kids Clothing

 

CATEGORIES FOR HEALTH

Don’t forget your health expenses when determining a budget.  Make sure you include the money you pay towards your co-pays during the year.

Health Insurance
Dental Insurance
Eye Insurance
Doctor Visits
Dental Visits
Optometrist
Medications
Deductible Savings

 

PERSONAL ITEMS CATEGORIES

Personal is a “catch-all” category which may contain much of your discretionary spending!  Some of the most common types you need to include:

Haircuts/Manicures/Pedicures
Life Insurance
Child Care/Babysitting
Toiletries (if not included in your grocery budget above)
Household Items (if you did not already include in your groceries budget above)
Education/Tuition
Dry Cleaning/Laundry
School Dues/Supplies
Magazines
Gym Memberships
Organization Dues
Postage
Pet Care (food, grooming, shots, boarding)
Photos (school and family photos)
Random Spending (always useful as a way to pay for the things you may not have broken out in your budget)

 

RECREATION

We all love to spend some time doing things we love.  Don’t forget to include your entertainment category when determining your budget.

Entertainment (movies/concerts)
Crafts
Hobbies
Parties
Vacations

 

DEBTS

Once you pay off your debt, these will go away entirely and will no longer be needed.  You can learn how to get out of debt and get started with that (once you have your budget).

Credit Cards (all debt)
Unsecured loans
Home equity loans
Student loans
Medical loans

 

Now you have the categories you need for your budget!  Take the first step in getting control of your finances by putting this to work for you.

caclulator on desk to figure budget categories

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Student Loans

Do College Rankings Matter?

student at college campus mobile

All articles about college rankings should perhaps be read with a grain of salt and primarily through a lens of what matters most to individuals about the college experience and what they’re hoping it will be an investment toward.

Prominent publications and people have conveyed a variety of views about whether college rankings matter:

The editor-in-chief of the Science Family of Journals said no in May 2020. “To any logical scientific observer, the fine distinctions of where schools show up on this (U.S. News & World Report Best Colleges) list are statistically meaningless—but try telling that to a roomful of alumni or parents,” H. Holden Thorp wrote.

Ian Bogost, distinguished chair at Georgia Tech, wrote in The Atlantic in June 2020: “The absurdity of a numerical ranking mechanism for colleges becomes apparent the moment you look at how U.S. News calculates it. The methodology reads like a Dungeons and Dragons character sheet: 8% for class size; 10% for high-school-class standing; 4.4% for first-to-second-year student retention, and so on.”

But just because the consensus leans toward “no” doesn’t mean it should be the last word on anyone’s ultimate decision about where to go to school.

Even U.S. News & World Report says on its best-colleges website: “The rankings provide a good starting point for students trying to compare schools. … The best school for each student, experts say, is one that will most completely meet his or her needs, which go beyond academics.”

What Are the College Rankings?

There is no single, ultimate, etched-in-stone set of college rankings. All over the world, there are entities using a wide array of criteria to appraise universities.

Rather than expecting a “yes” or “no” to the question of whether college rankings matter, it would be more beneficial to understand why “It depends” could be more appropriate.

If you’re aiming for an education from a prestigious school, and money is no object—well, first of all, congratulations and good luck.

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Car Insurance

A Guide to Rental Reimbursement Coverage

You’re involved in an accident, your car is wrecked, and your insurer has stepped in to cover the damages. All is well, and you only have the deductible to worry about, but what happens before the car is fixed? How do you continue to get to work every day and take the kids to school when your car is in the repair shop for the next few days or weeks?

That’s where rental car reimbursement coverage steps in. If you have this optional coverage on your car insurance policy, you won’t need to worry.

Keep reading to learn how this coverage option works.

Rental Car Reimbursement vs Rental Car Insurance

Before we go any further, it’s worth clarifying the potential confusion surrounding rental car coverage and rental car reimbursement coverage. The former includes damage waivers, property insurance, and liability coverage and protects you when you are driving a rental car.

You will be offered this type of insurance when you rent a car and can also get it through your current insurance policy or through your credit card, bank account or travel insurance.

As for rental car reimbursement, it is designed to cover the costs of renting a vehicle when your car is in the shop or has been stolen.

Rental car reimbursement only applies if your insurance company is paying for the repairs and those repairs are covered by your insurance policy. It is a coverage option that is typically only available to policyholders who have collision coverage or comprehensive coverage insurance.

What Does Rental Car Reimbursement Cover?

Rental car reimbursement is designed to cover the cost of a rental car, but there are limits. Most insurance companies will only cover you for 30 days and many also set a daily limit, often between $50 and $100. This means that you can’t claim for costs above this or for a rental period that extends beyond it.

In some states and in some situations, you may not even need to add rental reimbursement coverage to your policy as the at-fault driver could be responsible for your rental costs. In the event of a car accident caused by a fully-insured driver, their liability insurance may cover you for transportation costs, while also paying for the damage done to you and your vehicle.

However, there is a coverage limit that means they may not be liable for all the costs you pay to the rental car company. In such cases, having rental car reimbursement coverage on your policy will cover the difference and ensure you’re not out of pocket.

How Much Does it Cost?

The cost of rental reimbursement insurance differs from state to state and provider to provider. Your costs will also be higher if you are deemed to be a high-risk driver and have a history of at-fault accidents and insurance claims. Generally, however, you can expect to pay anywhere from $3 or $4 a month extra to $15 or $20 a month extra.

It’s not a huge amount because the cover provided is very limited. For instance, at $50 a day over 30 days, the insurer’s liability is just $1,500, which is a fraction of the amount they can expect to lose with other coverage options.

How Does the Process Work?

You’re involved in a minor accident and your car is taken to the body shop, now what? If you have rental coverage, you can do one of the following:

1. Pay for it Yourself

When you pay for the vehicle yourself, you have more choice about what car you rent and from where you rent it, and you can also get it as soon as you need it. If you choose this option, just make sure you keep a record of all the costs so you can report these to the insurer and get your money back.

By choosing this method, you have more control and providing you have cover, you shouldn’t encounter any issues when seeking reimbursement. Get the rental vehicle you want, drive it off the lot, and wait for your car to be fixed and your expenses to be covered.

2. Let Your Insurance Company Do It

The second option, and the best option, is to go through your insurance company. They will contact the rental company on your behalf and deal with all of the red tape, ensuring you only get a car that you are fully covered for and providing you with all the necessary details at the same time.

By going through your insurer, you can avoid the hassle and they may even help you to get a better deal. 

It’s worth noting, however, that your insurer will not pay for additional rental car coverage like damage waivers. But as noted already, your auto policy may already provide you with the cover that you need.

Should You Get Additional Car Rental Reimbursement Coverage?

On average, you will use rental car coverage just once in a 10-year period, and you may only need it for a few days at a time. To determine whether this additional coverage option is right for you, simply calculate how much it will cost you on a monthly basis and then compare this to how much it is likely to offer you.

For instance, let’s assume that you are charged $10 a month for this additional option. This means you will pay $120 a year or $1,200 over ten years. Assuming you’re being offered a maximum of $50 per day for 30 days, this means the benefits are capped at $1,500.

If you’re paying $15 a month instead, that’s $180 a year, $1,800 a decade, and more than you will get back. And, in both cases, we’re assuming that you rent a car for the full 30 days at the maximum allowed price, which is somewhat rare. As a result, you can probably overlook this additional coverage option when those are the prices quoted.

Bottom Line: Choosing Insurance Coverage

From car rental coverage and rental car reimbursement to roadside assistance, new car replacement and more, there is no shortage of options for the average driver. 

But as tempting as it is to add all of these options to your auto insurance policy in the knowledge that you’ll be fully covered, the costs can spiral out of control very quickly. You could find yourself spending an excessive amount of money unnecessarily, and at a time when everyone is watching their budgets, that’s never a good thing.

Think about rental car reimbursement carefully and reject it if you don’t need it, even if it is only $10 or $20 extra a month. 

 

 

A Guide to Rental Reimbursement Coverage is a post from Pocket Your Dollars.

Source: pocketyourdollars.com

Family Finance, Personal Finance, Real Estate

What Does a Real Estate Attorney Do?

If you’re planning to buy or sell a house or a rental investment property, you might consider hiring a real estate attorney.

A real estate lawyer can provide legal protection. They can help you navigate the home-buying process, which can be complex.

In fact, many states require a real estate lawyer to be present at closing. 

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Even if you live in a state that doesn’t require you to have a real estate attorney, it’s important to have one by your side.

But it’s also important to know who you’re dealing with, what they can do for you, and what’s in it for them.

Real estate attorneys can help structure transactions and closing. They will review documents well in advance before the closing to make sure there are no errors.

Real estate lawyers, however, can only represent one of the parties. The buyer and the seller’s interests can often be in conflict. Therefore, the attorney should never represent both parties. 

Besides representing you in sales transactions, real estate attorneys can represent you in a courtroom as well.

During the home-buying process, disputes between the buyer and the seller may arise that will have to settle in court.

The real estate attorney’s qualifications

A real estate attorney, just as any lawyer, has attended 3 years of law school. In law school, they take courses in law in general, including real property and other real estate classes.

During law school, they may do internships at law firms which specialize in real estate law.

Once they graduate law school, they take to bar exam in the state they want to practice in.

Once they become licensed to practice, they can work in a law firm specializing in real estate law.

The real estate lawyer’s fees

A real estate attorney can charge by the hour or a fixed fee. How much their charge for their services depends on their reputation, their level experience, the level of complexity.

Regardless of the fee, your attorney will discuss it with you. Their hourly fee is typically between $150 to $350.

They’ll draft a retainer agreement and make the necessary disclosures before you can retain them.

The attorney’s role in real estate transaction

Real estate attorneys can have many roles. Their roles will vary depending on whether it is a simple transaction or a complex one, and whether a real estate broker is involved.

In some cases, a real estate broker can handle many aspects of real estate transactions. If that case, the real estate attorney’s role is often limited.

In other instances, the real estate lawyer plays a crucial role in all phases of the real estate transaction.

Nonetheless, a real estate attorney’s roles include acting as a legal counselor, negotiator, advisor and coordinator.

Real estate attorney as a legal counselor

A real estate attorney acting as a legal counselor can handle drafting the proposed contract. If there is a broker involved, the broker will prepare the contract.

But, your attorney will review it for any proposed changes. Your lawyer can also draft the deed and examine title documents.

If you retain a real estate agent or broker, your attorney may also review the broker’s agreement before you sign it.

Real estate attorney as a negotiator

If you hire a real estate lawyer before you sign a contract or before engaging in any contract negotiations, your attorney will assume that role. All communications from the other party or his or her attorney will be directed to your lawyer.

Your attorney will negotiate proposed changes to the contract, including the price of the house. They will review any mortgage contingency clauses.

In addition, your real estate attorney can negotiate the following matters:

  • Personal property to be included;
  • Repairs before closing;
  • The closing date;
  • You may not get a mortgage commitment within the stipulated date in the contract. So, your attorney may negotiate an extension of time to obtain the mortgage;
  • You may need an early possession of the house. Your lawyer can negotiate that.

Real estate attorney as an advisor

You, as a client, may not need strict legal advice. You may just want your lawyer to be present for general advice. If you’re a first time home buyer or an elderly buyer, your attorney can also act as an advisor.

Real estate attorney as a coordinator

Your attorney can also act as your coordinator. Residential closings involve a lot of steps. And not everyone involved will follow them.

So, one of your real estate lawyer’s role is to contact the brokers, the title insurers, the mortgagees. They will also monitor the progress of obtaining financing, title policy, etc.

They will also contact the other attorney to make sure all parties are ready for the closing.

Your attorney’s responsibilities before closing

If you hire a real estate lawyer to represent you either as a seller or buyer, his or her responsibility before closing include the following:

  • Make sure you, as a buyer or seller, can fulfill the requirements imposed by the real estate sale contract
  • Review the title insurance;
  • Check the mortgage commitment;
  • Monitor status of the contract contingencies;
  • Examine closing documents for accuracy;
  • Coordinate closing date and time with the mortgage lender, seller and buyer’s broker;
  • If buyers will not attend the closing, obtain power of attorney for property to cover documents to be signed at closing;
  • Get wire instructions for payment of balance due at closing

In case a dispute arises between the parties, the real estate attorney can represent you in court.

Issues that might arise include damages and earnest money forfeiture, specific performance, misrepresentation, etc.

Do I need a real estate attorney?

Some states require a real estate attorney to be present during closing. They include Massachusetts, Maine, Alabama, Connecticut, Delaware, Georgia, Florida, Kansas, Kentucky, Virginia, West Virginia, South Carolina, Rhode Island, Pennsylvania, New York, North Dakota, Mississippi, New Hampshire, and New Jersey.

If you don’t live in any of these states and the District of Columbia, it’s really up to you if you want to hire a real estate attorney. If you’re just trying to save money and can barely afford to buy a house, you’re probably don’t need a real estate lawyer.

But if your real estate transaction is complex, a good real estate attorney can be an asset.

The bottom line…

Some states do not require you to have a real estate attorney during closing. However, it’s worth the cost hiring one especially if you’re buying a house in foreclosure.

Work With A Financial Advisor Near You

If you have questions beyond hiring a real estate attorney, you can talk to a financial advisor who can review your finances and help you reach your goals. Find one who meets your needs with SmartAsset’s free financial advisor matching service. You answer a few questions and they match you with up to three financial advisors in your area. So, if you want help developing a plan to reach your financial goalsget started now.

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The post What Does a Real Estate Attorney Do? appeared first on GrowthRapidly.

Source: growthrapidly.com

Estate Planning, Home

Popular Housing Markets During the Pandemic

There’s something weird happening with the real estate markets today. Normally in a recession, demand for rentals goes up while demand for houses goes down. But if there’s anything 2020 has taught us, it’s that everything is turned on its head right now. 

Instead, we’re seeing an interesting trend: despite the ongoing pandemic, home-buying is experiencing higher demand now than they have been since 1999, according to the National Association of RealtorsⓇ (NAR). If you’ve been hoping to buy a home soon, you’re probably already aware of this weird trend, and excited. But is it the same story everywhere? And is a pandemic really the right time to buy? 

How the Pandemic is Changing Homeownership

This pandemic is different from any other in history in that many people — especially some of the highest-paid workers — aren’t being hit as hard as people who rely on their manual labor for income. This, coupled with an ultra-low mortgage rate environment and a new lifestyle that’s not fit for a cramped apartment, is creating the perfect storm of high-dollar homebuyers. 

“I didn’t want to pay someone else’s mortgage to have three roommates,” says Amy Klegarth, a genomics specialist who recently purchased a home in White Center, a suburb of Seattle where she was formerly renting. “I moved because I could afford to get a house with a large yard here for my goats, Taco and Piper.” 

Whether you have goat kids or human kids (or even no kids), you’re not the only one looking for a new home in a roomier locale. According to the NAR report, home sales in suburban areas went up 7% compared to just before the pandemic started. In some markets, it’s not hard to understand why people are moving out. 

Where Are People Going?

Apartments are small everywhere, but they’re not all the same price. For example, homes in cities tend to be 300 square feet smaller than their suburban counterparts. Some of the hottest home-buying markets right now are in areas where nearby rents are already too high, often clustered around tech and finance hubs that attract high-paid workers. After all, if you can’t go into the office and all of the normal city attractions are shut down, what’s the point of paying those high rental costs?

According to a December 2020 Zumper report, the top five most expensive rental markets in the U.S. are San Francisco, New York City, Boston, San Jose, and Oakland. But if you’re ready to buy a home during the pandemic, there are nearby cheaper markets to consider.

If You Rent in San Francisco,  San Jose, and Oakland, CA

Alternative home-buying market: San Diego, Sacramento 

  • Average rent: San Francisco, $2,700, San Jose, $2,090; Oakland; $2,000
  • Average home value (as of writing): San Diego ($675,496) and Sacramento ($370,271)
  • Estimated mortgage payment with 20% down: San Diego ($2,255) and Sacramento ($1,236)

Big California cities are the quintessential meccas for tech workers, and that’s often exactly who’s booking it out of these high-priced areas right now. Gay Cororaton, Director of Housing and Commercial Research for the National Association of Realtors (NAR), offers two suggestions for San Francisco and other similar cities in California. 

San Diego

First, is the San Diego-metro area, which has a lot to offer people who are used to big-city living but don’t want the big-city prices. An added bonus: your odds of staying employed as a tech worker might be even higher in this city. 

“Professional tech services jobs make up 18% of the total payroll employment, which is actually a higher fraction than San Jose (15.5%) and San Francisco (9.3%),” says Cororaton.

Sacramento

If you’re willing to go inland, you can find even cheaper prices yet in Sacramento. “Tech jobs have been growing, and account for 7% of the workforce,” says Cororaton. “Still not as techie as San Jose, San Francisco, or San Diego, but tech jobs are moving there where housing is more affordable. It’s also just 2 hours away from Lake Tahoe.”

If You Rent in New York, NY

Alternative home-buying market: New Rochelle, Yonkers, Nassau, Newark, Jersey City

  • Average rent: $2,470
  • Average home value (as of writing): New Rochelle ($652,995), Yonkers ($549,387), Nassau ($585,741), Newark ($320,303), or Jersey City ($541,271)
  • Estimated mortgage payment with 20% down: New Rochelle ($2,180), Yonkers ($1,834), Nassau ($1,955), Newark ($1,069), or Jersey City ($1,807)

Living in New York City, it might seem like you don’t have any good options. But the good news is you do — lots of them, in fact. They still might be more expensive than the average home price across the U.S., but these alternative markets are still a lot more affordable than within, say, Manhattan. 

New Rochelle and Yonkers

Both New Rochelle and Yonkers are about an hour’s drive from the heart of New York City, says Corcoran. If you ride by train, it’s a half hour. Both New Rochelle and Yonkers have been stepping up their appeal in recent years to attract millennials who can’t afford city-living anymore (or don’t want to be “house poor”), so you’ll be in good company. 

Nassau

“NAR ranked Nassau as one of the top places to work from home in the state of New York because it has already a large population of workers in professional and business services and has good broadband access,” says Cororaton. If you have ideas about moving to Nassau you’ll need to move quickly. Home sales are up by 60% this year compared to pre-pandemic times. 

Newark or Jersey City

If you don’t mind moving to a different state (even if it is a neighbor), you can find even lower real estate prices in New Jersey. This might be a good option if you only need to ride back into the city on occasion because while the PATH train is well-developed, it’s a bit longer of a ride, especially if you live further out in New Jersey. 

If You Rent in Boston, MA

Alternative home-buying market: Quincy, Framingham, Worcester

  • Average rent: $2,150
  • Average home value (as of writing): Quincy ($517,135), Framingham ($460,584), or Worcester ($284,936)
  • Estimated mortgage payment with 20% down: Quincy ($1,726), Framingham ($1,538), or Worcester ($951)

Boston is another elite coastal market, but unlike New York, there’s still plenty of space if you head south or even inland. In particular, Quincy and Framingam still offer plenty of deals for new buyers.

Quincy

If you like your suburbs a bit more on the urban side, consider Quincy. Although it’s technically outside of the city, it’s also not so isolated that you’ll feel like you’re missing out on the best parts of Boston-living. You’ll be in good company too, as there are plenty of other folks living here who want to avoid the high real estate prices within Boston itself.

Framingham

Framingham is undergoing an active revitalization right now in an effort to attract more people to its community. As such, you’ll be welcome in this town that’s only a 30-minute drive from Boston.

Worcester

“Now, if you can work from home, consider Worcester,” says Cororaton. “It’s an hour away from Boston which is not too bad if you only have to go to the Boston office, say, twice a week.” Worcester (pronounced “wuh-ster”) is also a great place for a midday break if you work from home, with over 60 city parks to choose from for a stroll.

Renting Market(s) Average Rent for 1-Bedroom Apartment Housing Market Options & Avg. Monthly Mortgage*
San Francisco, CASan Jose, CAOakland, CA $2,700 San Diego ($2,255) Sacramento ($1,236)
New York, NY $2,470 New Rochelle ($2,180) Yonkers ($1,834)Nassau ($1,955)Newark ($1,069)Jersey City ($1,807)
Boston, MA $2,150 Quincy ($1,726)Framingham ($1,538)Worcester ($951)

*Average home mortgage estimates based on a 20% down payment.

Should You Buy a House During a Pandemic?

There’s no right or wrong answer here, but it’s a good idea to consider your long-term housing needs versus just what’ll get you through the next few months. 

For example, just about everyone would enjoy some more room in their homes to stretch right now. But if you’re the type of person who prefers a night on the town, you might be miserable in a rural area by the time things get back to normal. But if you’ve always dreamed of a big vegetable garden or yard for the family dog, now could be the right time to launch those plans. 

Another factor to consider is job security. And remember that even if you’re permanently working from home today — and not everyone has this ability — living further from the city could limit your future opportunities if a job requires you to be on-site in the city.

Finally, consider this: most homes in outlying areas weren’t built with the pandemic in mind. For example, “… open floor plans were popular, pre-pandemic,” says Cororaton. “If the home for sale has an open floor plan, you’d have to imagine how to reconfigure the space and do some remodeling to create that work or school area.” 

Here are some other things to look for:

  • Outdoor space
  • Area for homeschooling
  • Broadband internet access
  • Proximity to transport routes
  • Office for working from home

Is It More Affordable to Buy or Rent?

There aren’t any hard-and-fast rules when it comes to whether it’s cheaper to rent or buy. Each of these choices has associated costs. To rent, you’ll need to pay for your base rent, pet fees and rent, parking permits, deposits, renters insurance, and more. To buy, you’ll have an even bigger list, including property taxes, maintenance and upgrades, HOA fees, homeowners insurance, closing costs, higher utility bills, and on.

Each of these factors has the potential to tip the balance in favor of buying or renting. That’s why it makes sense to use a buy vs. rent calculator that can track all of these moving targets and estimate which one is better based on your financial situation and the choices available to you. 

In general, though, most experts advise keeping your housing costs to below 30 percent of your take-home pay when setting up your budget. The lower, the better — then, you’ll have even more money left over to save for retirement, your kid’s college education, and even to pay your mortgage off early. 

The post Popular Housing Markets During the Pandemic appeared first on Good Financial Cents®.

Source: goodfinancialcents.com

DIY

Mint Money Audit: Making the Most of a Side Hustle

This week’s Mint audit introduces us to Selena, 48, a mom of two living in San Antonio, Texas. She is a community college director and her husband, 51, is a full-time graphic designer who also manages a booming side hustle in the same industry.

Selena and her husband have already achieved some impressive financial accomplishments, thanks to tracking their finances on Mint, leveraging coupons and shopping at thrift stores. They’ve paid off $52,000 in student loans and invested in a piece of land next door for $26,000, which they believe has appreciated by nearly 40% since purchasing it a few years ago.

But with retirement looming and two children (currently ages 9 and 12) to possibly put through college, Selena wants to learn about additional money moves that could better prepare them for future expenses. She would also love to pay off the family’s 30-year mortgage before she retires in the next 10 to 12 years. Currently they’re on track to pay it down by 2030.

First, a breakdown of their finances:

NET INCOME

  • Hers: $56,000
  • His: $40,000 plus an additional $40,000 in freelance work
  • Total: $136,000 per year

DEBT

  • Just paid off student loans and a property loan (for the lot next door)
  • Credit Card Debt: $0
  • Mortgage: $163,000 (Monthly payment, including real estate tax, is $1,985)
  • Car note: $5,300 (should be paid off within the year)

RETIREMENT SAVINGS

  • Selena’s teacher pension: Roughly $5,000 per month at retirement if she retires in 12 years ($3,800 if she retires in 6 years).
  • Various IRAs between the two of them: $65,000
  • Estimated social security payments: $2,500 to $3,000 (combined)
  • Husband does not have a 401(k)

RAINY DAY SAVINGS

In an emergency, the family has at least six months of expenses saved up or roughly $35,000.

COLLEGE SAVINGS

Selena and her husband haven’t specifically saved for their children’s college education. They’re concerned that a 529-college savings plan might limit their children’s options, if they didn’t choose to attend a traditional college program.

Recommendations

Leverage the Side Hustle

All in all, I think the family’s finances are in solid shape. But if they’re interested in further securing their future, I would suggest investing the annual side hustle income (which currently sits in a bank account earning no interest) to advance retirement savings and carve out an account for their two children.

Starting that side hustle was a very smart money move because it effectively boosted the family’s net income by 40%. And according to Selena, the business, which they operate out of their living room, is only growing, with profits expected to grow another 30% in the future.

Income from side hustles is how I managed to pay off debt in my 20’s and boost savings. Today, it’s more prevalent among working Americans. More than 44 million Americans have a side revenue stream, according to a recent survey by Bankrate. “Having a side hustle is fiscally responsible,” says Susie Moore, founder of the program Side Hustle Made Simple and the new book, “What If It Does Work Out: How a Side Hustle Can Change Your Life.” “It’s an economic hedge that mitigates disruption to wealth building and future planning. There is no such thing as a fixed income,” she says.

So, let’s do some math and see how far this $40,000 per year side revenue stream can go using a compound interest calculator.

Retirement

The couple’s retirement nest egg is not too shabby. Not including their existing IRAs, the couple has about $8,000 a month coming to them in retirement between social security and Selena’s pension. That amount, alone, basically replaces their current full-time income. (And I do recommend Selena wait 12 years before retiring so that she can take advantage of the maximum pension payment.)

But with all the uncertainty around social security and future health care costs, it can’t hurt to save a little more, right? By placing $6,500 in a Roth IRA each year for the next, say, 15 years (Selena’s husband can qualify for the catch-up contribution since he is 5- years old), they’ll have an additional $142,000 for retirement that won’t be subject to taxes. This assumes an average annual return of 4%. They can open a Roth IRA at any bank.

Future Savings for Children

While a 529 plan may not be the best fit for this family, Selena still would like to carve out savings for her kids’ future endeavors, be it to start a business or attend an alternative school. For this, I’d recommend opening a 5-year certificate of deposit or CD and placing $25,000 in it this year. The going yield right now for a 5-year CD at that deposit level is averaging a little more than 2%.

Then, every year, as income rolls in from the side hustle, create a new 5-year CD and deposit $25,000 in it. Do this for the next four or five years. All CDs will have matured by the time her youngest is starting college (or pursuing something else). And they’ll have at least $100,000 plus interest reserved for their kids. If they do choose to go to college, the family’s prepared to help pay for in-state tuition at one of the fine Texas universities.

Mortgage Payoff

After funding the Roth IRA each year ($6,500) and the annual CD contribution ($25,000), the family’s left with $8,500. They could choose to put this toward the mortgage principal to knock a few years off their payoff schedule. Or, they may want to just hold onto it for that annual family vacation. And if I’m being honest, I’d say, go for the vacation! They deserve it!

The post Mint Money Audit: Making the Most of a Side Hustle appeared first on MintLife Blog.

Source: mint.intuit.com