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Retirement Challenges for Baby Boomers and What to Do About It

Many people dreamed of retirement from the day you began working. You watched your parents’ move into their golden years, and envied them, just a little, for the freedom received when work life was over. Perhaps some traveled, while others doted on grandchildren. Regardless of how they spent their time, it was the ability to do as they pleased without worrying about finances, that painted such an idyllic picture.

Now, it’s your turn. You are approaching an age that was supposed to allow you the freedom your parents had. However, for many baby boomers, that image of retirement is still very much the dream it was when you started working. Economic downturns, the eroding relationship between employee and employer, virtually extinct pension plans, and insufficient planning, have caught the baby boomer generation by surprise. This generations’ retirement will be very different from the one their parents enjoyed.

The Myth of Social Security

Every other day you hear about the woes of the Social Security program. The trust fund is running out of money, and by the year 2037, it will be completely exhausted. Social Security payments are not a form of savings for retirement. Instead, it is a pay as you go plan, where today’s workforce pay for today’s seniors. Longer life expectancy expanded disability payouts, and a smaller working population are turning the payout numbers upside down.

The shift from contributor to recipient percentage will grow from 2.8 to 1 in 2015 to 2.1 to 1 by 2035. Tax increases and payout decreases could extend the program for future generations. However, for the 59% of the baby boomers who have made retirement plans based on the receipt of Social Security as a major source of income, the challenge could be income replacement after retirement occurs.

The Retirement Savings Conundrum

Based on Insured Retirement Institute (IRI) data, in 2016, as high as 45% of baby boomers surveyed have nothing saved for retirement. These numbers are a significant decline from just two years ago in 2014, where 8 in 10 respondents had some level savings. The declining trend in investment balances explains the reliance on Social Security, but it’s the lack of a plan for supplemental income that is keeping so many boomers in the workforce. Healthcare costs are rising, and the cost of living is growing at a faster rate than wages, making it difficult for older workers to keep up.

The Age of Retirement is Growing

A recent trend addressing the lack of savings and rising costs, includes, putting off the long-coveted retirement in favor of continuing to build a nest egg. Although early retirement is still age 62, most are working until 65 or beyond. Many potential retirees plan on waiting until age 70 or older, and many are looking for second careers to supplement social security income. In the baby boomer age bracket, the IRI report estimates 6 out of every ten people, eligible for retirement, are choosing to stay in the workforce, and 26% of that number expects to work until 70 or older. There is a significant jump from the 2011 report that stated only 17% planned to continue working into their seventh decade.

The Great Recession’s Impact on Retirement

Between December 2007 and June 2009, the world experienced The Great Recession. Baby boomers, quickly put savings on the back burner to keep up with the declining situation. Paying basic living became the top priority and finding or maintaining employment became a struggle forcing some into early retirement, permanently impacting their financial security. Others lost large amounts of their investment portfolios with little or no time to recover. Increased market fluctuations lead to selling investments, which proved to be a flawed strategy because they didn’t stick around for the stock market recovery.

The IRI reports that 30% of baby boomers have stopped contributing to retirement accounts, and 16% took early withdrawals. As a result, 46 out of every 100 baby boomers have insufficient or no retirement savings, a significant jump from the 2014 numbers, which concluded only 21% had insufficient funds.

Heavy Debt Loads of Boomers

It was once taboo to retire with debt, but now, the majority are leaving jobs without clear balance sheets, hoping social security will be enough. Mortgage debt, a staggering amount of credit card balances, student loan payments, and unforeseen medical debt take center stage in this growing problem.

Nearly 25% of adults retire with mortgage debt with average balances of $24,500. Whether it was trading up for a larger home or refinancing to fund a lifestyle, Baby Boomers have found expanded debt payments strangling their retirement budgets. In a bid to keep up with house payments, some file early for Social Security payments, permanently limiting future income. Receiving payments at the age of 62 can reduce payouts as much as 30%, leaving thousands of dollars on the table.

Credit card debt for the average retiree between the ages of 65 to 69 is $6,876. For a household headed by someone 75 or older, the amount doesn’t change significantly at $5,638, as an illustration of surging senior debt.

The Solution to the Problem

Though the boomer generation is looking at a different retirement, all is not lost.

Working longer: Seniors in good health have the option of remaining in the workforce or finding second careers using valuable job skills gained over your career. By continuing to work, you can use wages to cover monthly obligations, reduce debt balances, and save for emergencies. Meanwhile, delaying social security builds the monthly payout by approximately 8% a year beyond the standard retirement age.

Downsize your home. Reducing housing costs through a smaller home, living in a less expensive town, and multigenerational living, are options creating more money for savings and debt reduction.

Downsize your lifestyle. Eliminate debt accumulation and attack debt balances with vigor. Using a budget and tracking spending will help you stay on track and measure your progress.

With self-discipline and time, you can find your way to a successful retirement.

How to Save Money This Thanksgiving

As store displays convert from Halloween decorations to Christmas, you begin to think about the upcoming Thanksgiving holiday. Who is coming to dinner, what will you serve, and which traditions will continue. Even though Thanksgiving does not get the marketing power of Christmas, most families spend hundreds of dollars on food, travel, and entertainment the last weekend in November.

The USDA National Agricultural Statistics Service predicted this year 243 million turkeys would be available for purchase during the holiday season, which is a 4% increase over 2015. The USDA also predicts Americans will consume 859 million pounds of cranberries. Add sugar ham, biscuits, mashed potatoes, stuffing, and your favorite holiday casserole, and there is a lot of food to prepare. Add the cost of getting to the event, hostess gifts, and other entertainment and you could wind up spending several hundred dollars before the holiday is over.

Here are a few ideas on saving money this Thanksgiving season.

Save Money on Turkey Day Travel

The day before Turkey Day is one of the ten busiest days to fly and the American Automobile Association predicts nearly 40 million families will travel during the holiday weekend. Higher travel volume raises the cost of getting to your destination, clogging roads, and airports, often leading to frustrating delays.

Airlines use dynamic pricing which fluctuates with demand. The result is higher ticket prices on flights taken on popular days. Airlines For America Trade Association expects 27.3 million people to travel between November 18 and November 29, with the Wednesday before Thanksgiving, and the Sunday and Monday after, being the busiest days for flying. To combat this, consider traveling on alternate days, including Thanksgiving Day.

Compare the cost of driving to the flight. While driving takes longer, it can save money if the budget is tight and you only need to travel a reasonable distance. When traveling with multiple people, the savings are exponential.

Prepare for delays and pack patience. The planes and roads are full and weather delays common. Packing snacks and drinks (an empty water bottle when flying) will reduce food costs. Good snacks include apples, oranges, nuts, beef jerky, pretzels, protein bars, or dark chocolate.

Black Friday Discounts

The day after Thanksgiving produces masses stampeding retail stores looking for discounts. Online research and trip planning will help you capture discounts without overspending. Some retailers have upped sales to Thanksgiving Day, leading to shopping sprees after the big meal. In an effort to compete with growing online stores, some retailers are making deals available online, eliminating the need for a trip the store. Now, instead of running out at 3 am the day after Thanksgiving, you can shop online while waiting for the turkey to cook or watching football.

While door buster deals typically require a visit to the store, combining coupons with sales could lead to enough savings to avoid the after Thanksgiving chaos. Website such as CouponSherpa and Retail Me Not will help you find extra discounts at your favorite stores.

How to Save When Hosting Thanksgiving Dinner

Hosting dinner often means a lot of money to purchase dinner for a crowd or spending a day or more in the kitchen preparing food. Being the host of this mouthwatering holiday feast does not need to break the bank if you take advantage of potential savings.

  • Find Sales on Turkeys. Turkey is the main dish at most holiday feasts and goes on sell for pennies a pound at many grocery stores. There is usually a spending threshold which is easily met if you are hosting a family dinner. If you need more than one turkey, consider spreading your shopping over more than one store. The low-priced turkeys are frozen leading to an earlier purchase than fresh turkeys.
  • Grocery Savings. In addition to the turkey, you must make or buy side dishes and dessert. Stores put family favorites on sale, and you can shop with coupons and price matching at stores to increases food savings.
  • Simplify Decorating. It is not necessary to overspend on decorations. Have family members bring a favorite centerpiece or involve children in making place settings. Some scented candles and holiday greenery can create a homey feel on a budget. Sometimes the simplest decorations bring the most warmth to your home. Use leaves, pinecones, or branches for a natural fall feel or purchase pumpkins or gourds, common in the fall, as a
  • Potluck Thanksgiving. Having guests bring a side dish or dessert will save you time in the kitchen and reduce the food bill. It is also a chance to enjoy the cooking of others. This option may not be practical, depending on how far family must travel.
  • Prepare a Traditional Meal. Foods required for a traditional Thanksgiving meal hit rock bottom prices the week before Thanksgiving. Food such as turkey, sweet potatoes, stuffing, cranberries, pumpkin, and apples, go on sale. Deviating from these items add interest at the dinner table but may require more costly ingredients driving up your overall cost of food.
  • Plan for Leftovers. Find ways to use leftovers that create more meals and reduce food waste. Convert leftover turkey into tacos, stir fry, or soup. Leftover mashed potatoes can become potato cakes.
  • Do Not Be a Bartender. Serving alcohol can sharply increase the cost of hosting a large meal. Instituting a BYOB policy will allow family members to bring their favorite beverages without impacting your budget. If you want to serve alcohol stick with bottles of wine or beer rather than serving several cocktails and mixed drinks.

We want to enjoy time with family, yet all the preparations can lead to an increase in stress and spending. Set a budget before you shop and work with what you have. You can adjust the menu to fit your budget and ask for help where needed, to ensure money is not among the holiday stresses you experience. By spending less on Thanksgiving, you will have more for the rest of the upcoming holiday season.

Top Reasons Millennials Are Susceptible to Financial Fraud

Millennials are very comfortable with electronics and social media platforms disclosing private information, and may not worry about the possibility of financial fraud. Yet, their comfort with technology and social platforms are the very thing that makes them more vulnerable than previous generations.

In 2014 a study conducted by the Federal Trade Commission revealed that those between the ages of 20 to 29 are the most affected when it comes to identity theft. This age group comprises of 20% of all complaints regarding identity theft. In 2015, another study conducted by Javelin concluded that college students were at higher risk of identity theft, yet less likely to recognize when they experience a stolen identity. The Javelin report revealed that 22% of college students experiencing identity theft did not realize it until being contacted by a debt collector. The problem is not as simple as increasing awareness and securing financial data more effectively.

FTC’s Consumer Sentinel Network Data Book determined that in 2013 Millennials lost 1.6 billion dollars from banks, lenders, and collection agencies. A victim of identity theft incurs a personal loss averaging $2,200.

Here are common activities that increase your risk:

Sharing Sensitive Information Online

Being accustomed to technology, Millennials do not adequately comprehend the dangers of sharing sensitive information online and give out information too freely. A Visa study completed in Canada found that 45% of young Canadians posted their credit card information through text, phone, social media, or email, without considering the consequences.

Even though you may not post detailed information or images on Facebook, Instagram, or Snapchat, you can still share too much information over unsecured networks. American Bankers Association says consumers are being asked to participate in card cracking schemes through social media. The scammer will ask the consumer to provide an account number and personal ID on Facebook or Twitter with the promise of payment. The scammer will then deposit a fake check into the account, and then withdrawal all existing funds. The individual did not realize they were giving a stranger access to their money. Unfortunately, in cases where you give someone personal account information, the bank will not replace the funds stolen from the account. Similar scams resulted in 11.6 million dollars in losses in 2014.

Less Debt but Easier for Hackers To Steal Your Money

Due to the tightening legislations, it is harder for Millenials to qualify for a credit card. As a result, Millennials tend to avoid credit cards when starting out. Approximately 1/3 of individuals under the age of thirty have never owned a credit card according to a recent survey.

The subsequent reliance on debit cards reduces the accumulation of debt and requires you to live within a budget. However, the occurrence of identity theft can result in a higher level of financial loss when a hacker gains access to checking or savings accounts. For example, a stolen wallet resulting an unauthorized credit card charges, is not a direct loss to the consumer, because the bank or merchant covers the loss. However, money stolen from a checking or savings account requires a higher level of proof and a longer time for any replacement of funds. Closely checking bank statements, immediately reporting discrepancies, and protecting your financial data will help secure your money from thieves.

Using Public Wi-Fi to Bank Online

Young adults don’t think twice about checking account balances anywhere. Let’s say you are in a store and want to make a purchase. It would not be uncommon to jump online through the store’s Wi-Fi network to check the bank balance before making the purchase. The US Department of Homeland Security survey showed that 72% of Millennials had checked balances on unsecured networks putting them in danger of bank fraud. Public Wi-Fi is not secure, meaning everything you do while connected could potentially be seen by a third-party stranger using the hot spot.

Experts recommend that you do not enter or log into sensitive accounts when connected to a public network. IT experts also warn that connections to social media or email accounts can also result in an increased risk of hacker access due to common passwords. Be cautious on any website requiring you to key in passwords or other sensitive information. Connecting through a virtual private network (VPN), will encrypt the data transferred during your connection.

Making Purchases On Your Phone

The Ponemon Institute and ThreatMatrix discovered that 60 percent of Millennials make purchases on their phone in comparison to only 25 percent of baby boomers. Due to the rapidly changing technology, online shopping is not fully developed, leaving holes for hackers to gain access to private data.

Smart Phones also tend to have less protection with regard to firewalls and virus software, which give hackers access to your data. It is safer to log into a website and make a purchase from a desktop or laptop, rather than your phone. As capabilities for buying through smartphones and tablets increase, it is critical to ensure your device has adequate fraud protection software.

Millennials Openly Share Personal Information

Millennials share private information on social sites, along with sharing video or streaming accounts with friends. For example, instead of having individual Netflix accounts, you share them with your friends. Extremist conducted a study in 2015 that concluded ½ of individuals ages 18 to 29 share video streaming passwords, increasing the risk of identity theft. The sharing does not stop with videos and movies. A Visa Canadian study shows that Millennials are more likely to share their card numbers with friends and family putting them at a higher risk of fraud.

One of the challenges with easy access to online information is that a hacker may collect individual pieces of data from different sources. They may gain your birthdate from Facebook, your address from public records, and your account information from a tweet you sent to your sister, to make a purchase. Now they have everything they need to open an account in your name.

Millennials are a generation of individuals that typically trust each other. However, sharing too much personal information can lead to financial problems when strangers steal your data.

When Creditors Can Garnish Retirement for Delinquent Student Loans and What to Do About It

The issue of high student loan debt among Millenials is well documented and reaches the stage of politicians and activists. However, borrowers nearing or in retirement are also finding student loan payments to be problematic. More than $150 million dollars was garnished from social security wages in 2013 to pay back delinquent student loans held by seniors. Debt incurred to pay for a child’s schooling, as well as their own education, accounts for the growing percentage of student loans among seniors, to the tune of $60 billion dollars to borrowers over 50. The trouble is that senior default rates are much higher than other age groups and reached over 50% for borrowers over the age of 75. Seniors between 65 and 74 have a 27% default rate compared to the average default for Millenials at only 12%. Unfortunately, these numbers have an upward trend, which can leave seniors depending on social security, without enough funds to pay for basic needs.

One of the big challenges with student loans is that there are few relief options on the debt. It is very difficult to receive a bankruptcy discharge, and it is one of the few debts the Government will garnish Social Security wages to collect. For seniors depending on Social Security to keep them out of poverty, this is a devastating blow.

Help with Repayment for Federal Student Loans

  1. The first payment is due nine months after leaving school, giving former students the opportunity to find a job or better-paying employment before repayment starts.
  2. Deferrals and forbearances are available for those struggling with temporary shortages in income.

These two benefits offer temporary relief to the borrower. However, they are not a long-term solution to the student loan problem seniors face. They extend payments and lead to higher amounts owed in repayment, increasing the risk of wage garnishments. It also leads to more interest payments and a higher cost for the education received.

Power to Garnish Social Security

Because most student loans are offered through the government, they have the right to garnish wages on defaulted loans. Creditors typically do not have access to Social Security for garnishments. However, when it comes to student loans, the Department of Education can take up to 15% of the Social Security payment or amounts over $750, leaving seniors with less to live on in retirement. Congress has not updated the threshold in two decades to adjust for inflation. Such an adjustment would protect up to $1,000 a month in social security wages. The Department of Education does not require a court order from a judge to obtain a garnishment, leading to faster or more frequent deductions.

Individuals 65 and older hold 18 billion dollars in student loan debt, and a wage garnishment can drastically reduce the quality of life among our most vulnerable citizens.

If You Are at Risk, What Should You Do?

When you struggle to make payments or have gotten behind, the first step is to contact the servicing company. Currently, only a small percentage of borrowers use the income-based repayment options. While it results in more payments over a longer period, if it prevents a garnishment, it will improve cash flow.

Alternative repayment options may include the following:

Forgiveness: In some cases, student loans can receive a discharge through bankruptcy. There is a provision for seniors unable to pay when their anticipated financial situation is not likely to improve. The judge considered the date of the loan disbursement, the age of the borrower, and other considerations will determine whether a judge will approve a discharge. It is not common even for seniors living on Social Security as their only income.

Disability requires full and permanent disability as determined by the Social Security Administration, to qualify for discharge.

Repayment Plans that are Income Based: Payments can extend to 20 or 25 years, lowering the monthly payment. At the end of that time, any remaining balance will qualify for discharge. Such action may mean carrying loans to the grave but will preserve your Social Security payments. It is possible to have a $0 payment and still count towards the required years. To qualify for an income-based program, you must reapply each year and submit tax returns to determine the payments for the next 12 months. The payment compares your gross income to the poverty level in your state of residence and also considers the size of your household to determine a monthly payment.

Loan Consolidation: If you are in default on your student loans, you may still qualify for a consolidation to combine interest and payments. You may only consolidate one time. Consolidation offers the benefit if a single payment to simplify the repayment process.

Public Service Forgiveness. Working for a public service company for ten years results in the discharge of any remaining balance. Service does not require consecutive years and may be a way to eliminate student loans faster. Public service includes educational jobs, state or federal employment, and other public service positions. Some non-profit work also qualifies under this program.

Personal student loans secured by the Federal Government, issued by the Department of Education qualify for these options. In some cases, Parent Plus loans qualify as well.

The servicing company will help you provide a workable solution to protect your income, including Social Security wages from garnishments. In some cases, they can offer a forbearance to reset the clock on the debt, and help with the application for consolidation or an income-based repayment option. It is more difficult to bring a defaulted loan current, to stop any existing garnishments, making it important to get help early in the process.

Pros and Cons of Using Retirement Accounts to Pay Off Debt

Accruing large sums of debt over the years and facing years of high-interest payments is discouraging in the best circumstances. If you earn enough to make the minimum payments, do you really want to hold 15 plus interest debt for 30 plus years? Payments each month, barely move the balance, long after you stop using the card. Impatience leads to a search for creative solutions.

One solution to reduce debt faster is to use existing retirement funds. Retirement accounts can include, IRAs, 401K, 403b, and 457 plans that will give you the opportunity to save for retirement, through tax-advantaged accounts. However, using retirement balances to pay off debt, may eliminate tax benefits and result in less available for retirement needs.

Borrowing Against Retirement Funds Versus a Withdrawal

While IRA’s do not allow loans, many work retirement accounts such as 401Ks do offer loans against existing balances. Instead of withdrawing money from your retirement account, a loan gives you use of the money and time to pay it back without paying taxes on the funds. There are, however, risks involved with using retirement fund to reduce debt balances.

If you choose to access retirement savings, there are several benefits of utilizing a loan as opposed to withdrawals. Here are a few of the key reasons:

  • You may have to pay penalties and additional taxes if you take a withdrawal before you are 59 1/2.
  • When you repay the loan, the payment does not count towards the maximum contribution for the year, but a return on borrowed funds.
  • There are no etax consequences if you follow the IRS rules regarding borrowed money. There are restrictions on how much you borrow and how long you have to repay. If you fall outside these guidelines taxes and penalties may apply to any remaining balances.

Pros to Paying Your Debt Down with Retirement Accounts

Save Interest. 401K loans typically have lower interest rates than bank loans, saving money on the repayment. Since you are paying yourself interest, you also limit the rate of return on the borrowed money during the repayment period. Those funds are no longer available for alternative investments at a higher rate of return. You are, however, eliminating much higher interest rate debt at a low cost of borrowing.

Increase Contributions. Debt reduction can free up cash flow to increase retirement contributions and pay the debt off faster than you could accomplish by paying the high credit card interest for many years to come. This strategy only works if you channel all your savings into paying off the loan and rebuilding your retirement account through an automated process. Failure to take this step can lead to higher levels of spending and new debt, rather than capitalizing on the savings.

Roth IRA Withdrawals. While IRA’s do not offer loans, regardless of your age, you may access the principal (the amount you contributed) to a Roth account as long as it has been in the account for five years. This action permanently reduces balances, and any new contributions are subject to annual limits. However, you avoid the repayment requirement along with taxation and penalties as long as you only withdraw actual contributions and not earnings. Taking earnings out of the account before 59 ½ could cost you the tax-free benefits along with a 10% penalty.

Cons To Paying Your Debt Down With Retirement Accounts

Taxable Income. Withdrawals from a 401K or traditional IRA result in taxes paid as ordinary income in the year of the withdrawal. Taking a large amount to eliminate debt can result in heavy taxation at higher levels, reducing the amount of cash you have to pay down debt. A loan is not treated as a withdrawal, although it reduces the money available to grow in the account while a loan balance remains.

Difficulty Replacing Funds. Most people are behind in saving for retirement and using funds from retirement accounts for either a loan or withdrawal, depletes those balances even further. The longer you take to set aside money in retirement the less time it has to grow. The result in more dollars required to build an adequate amount in retirement. Removing retirement funds should always be a last resort because you cannot borrow your way through retirement. Funds taken from retirement accounts are difficult to replace.

Protection From Creditors. Collection laws protect retirement accounts from creditors and typically owners retain the account even if debt negotiation or bankruptcy follow. Moving funds away from this protection gives creditors claims against the money in company retirement accounts and pension plans. There are two exemptions; creditors may access some funds in personal IRAs and pension or retirement funds paid to you as income may be subject to creditor payments.

No Opportunity to Change Spending Habits. Debt accumulated due to poor money management require more than a quick payoff. They also require a careful look at how you prioritize spending. Without addressing the cause, you could potentially lose retirement funds and still end up with debt problems down the road, which could eleave you struggling in your retirement years.

Eliminate ecompound interest while the loan balance remains. You could lose up to five years in compound interest by using funds to pay down debt, reducing the ability of the account to grow adequately for retirement needs.

Job Change. Any change in employment requires full repayment of the loan between 60 and 90 days from your last day on the job. Any remaining balance is deemed as a withdrawal, resulting in potential taxes and penalties. A job change could be voluntary or involuntary with the same results. eA loan is only a better option if you plan to continue working and plan to stay at your place of employment until the loan is fully paid off. Typically, the maximum repayment is five years, unless the funds are used to purchase a home.

Double Taxation. 104K contributions use pre-tax dollars, but repayment uses after-tax dollars, leading to taxed funds in the account. When you withdraw the funds at retirement, they will be taxed again as ordinary income.

Decreasing The Long Term Effects Of Borrowing From Retirement Accounts

Replace the loan balance as quickly as possible. Consider taking the amount you currently pay in debt and contribute the full amount to paying back the loan, to minimize the long-term effects.

There are multiple options to eliminate debt and tapping retirement funds may not be the best one. Reviewing your credit and potential long term consequences will help you decide if that is the right decision. Use caution with any solution that depletes savings for debt reduction, which can be difficult to replace.

Tax Benefits for The Self-Employed

The fringe benefits of self-employment are many. You may create a side income on the weekends, work evenings to earn extra income, or you can create a full-time job for yourself and others. You can set your hours and have the freedom of being your own boss.

Almost anyone doing contract work can qualify for small business deductions, even if the work is part time. Sole proprietors and incorporated businesses may qualify, giving many people access to additional tax deductions when it comes time to file. The key to receiving deductions is to treat the work as a business. You must earn income and have a profit motive. To learn more about whether you qualify for self-employment deductions click here.

In addition to gaining more control over your time, there are also a number of tax benefits for those who establish good record keeping practices.

Most tax advantages require action during the tax year, to qualify.

Office Expenses

Supplies purchased for the business typically qualify for tax deductions. Office expenses might include general office supplies such as a stapler, paper, pens, and other office needs. It also expands to other products like printers, computers, lamps, furniture and other costs of creating and maintaining an office space. Think of a work environment and the types of items an employer provides. When you buy these items for the business, use they become deductible.

Phone And Internet Services

Business expenses like a cell phone or use of the internet may be deductible. You receive a full deduction for services exclusively used for business purposes but can deduct a percentage based on the amount of time you use the services for work related activities. All forms of communication qualify including fax services, landline phones, cell phones, VIOP charges, or the internet used for the business.

Health Insurance Premiums

If you do not qualify under another plan, such as your full-time job or a spouse’s policy, you typically may deduct insurance premiums from taxes. Qualifying plans include health insurance, dental or vision plans, and long-term care policies. Premiums required for a spouse and dependents, also qualify as a deduction.


Food deductions come in a couple of forms. First, there is food brought into the office for business meetings. The other is outside food at restaurants, where you might take a client or prospective client to lunch or dinner to discuss business. Lately is food costs during travel.

In order to take deductions for food costs, you must maintain records on the direct cost fo the food, including tips, along with who the meeting was with and the nature of business discussed.


While you may be able to deduct entertainment as a tax deduction, the IRS has many restrictions pertaining to entertainment. For a deduction to qualify as entertainment, you must discuss business during, immediately before, or immediately after the entertainment. The RIS limits entertainment deductions to 50% of the cost. It is very important to keep detailed records of the business activity conducted and how it pertains to the expense of entertainment.

Travel Costs

Travel costs can include within your city or out of town. Travel costs can include meetings with clients, conferences, trade shows, and other business activity. Qualifying deductions for travel must include a specific agenda relating to the business. These tasks can include finding new customers, meeting with potential or existing clients, or learning new skills to improve the business. You may include the cost of transportation, lodging, and meals. Transportation can include rental cars, Uber, plane fare, and so forth. Travel expenses are 100% tax-deductible except for meals and entertainment, which are only deductible up to 50% of costs. Record keeping should include both receipts and a record of activities.

Vehicle Deductions

If you use a car for business, related expenses can be tax deductible, even if you do not use the vehicle exclusively for the business. The IRS has a standard mileage rate, for those who track business mileage, or you can deduct actual vehicle expenses. To qualify you must maintain mileage records or receipts for vehicle operating costs. In 2015 the IRS allowed a mileage rate of 57.5 cents per mile. If you choose vehicle costs, you may include costs such as oil changes, registration fees, repairs, gas, and car insurance. You deduct a percentage based on the amount of business versus personal use.

Home Office Expenses

Having a dedicated workspace within your home allows you to deduct the cost of the office space, as a business expense, regardless of whether you rent or own your home. To calculate the deduction, you need the total square footage of the home and the square footage of the dedicated work space. You are then allowed to deduct a percentage of mortgage interest, depreciation of the home, property taxes, homeowner’s insurance, utilities, and maintenance costs.

Small business owners qualify for a home office deduction if you qualify as a home business (including having earned income), use the space exclusively for work purposes, and it must be the primary business location.

Required Payments

Everyone who earns money must contribute towards Medicare and Social Security. In 2015 the rate for both social security and Medicare was 7.65% for both employers and employees for a total of 15.30% of income. The self-employed must pay both the employer and employee contributions for all income up to $118,500 in wages when social security caps out. There is no cap on Medicare costs. Single filers with income over $200,000 and married filing jointly over $250,000 pay an additional 0.9% in Medicare costs.

Fortunately, the self-employed may deduct the employer portion of the payment as a business expense.

Miscellaneous Deductions

Other deductions might include credit card interest, the cost of industry related publications and subscriptions, continuing education, and retirement plan contributions.

Operating a business, whether for extra income or full-time employment, can be a great way to improve family finances and get additional tax benefits along the way. You must follow the IRS guidelines exactly and maintain good records to prove you qualify for all the deduction you take.

Guide to Your Company 401K

Whether starting a new job or reviewing next year’s options, company benefits can save you money and help prepare for your future. Many companies offer employees health insurance, life insurance, and retirement plans which build a strong financial future beyond earnings. Taking the time to understand your company 401K plan will help you get the most from this valuable benefit.

Most consumers have access to retirement accounts both through independent accounts and connected to employment. Company retirement benefits offer a way to automate savings, simplifying the process, and growing retirement funds faster. The sooner you begin to set aside money, the more you will have when you reach retirement. Increased life expectancy, means seniors retiring now can expect to live decades in retirement, making it more important than ever to participate in these plans, when available.

Private companies offer 401Ks which provide tax incentives to encourage participation. Other types of company retirement accounts include 403Bs (non-profit organizations), 457Bs, or TSPs (government employment), provide similar benefits.

How 401Ks Work

Company Plans are either automatic or voluntary. Automatic enrollment deducts a minimum amount from your check and invests the money conservatively. Voluntary plans require you to act, in order to participate. Either way, you typically decide how much of your paycheck (usually pre-tax dollars) to contribute towards your retirement plan. Each pay period a percentage of your income adds to existing account balances.

In addition to choosing the amount to contribute you must also select where the money goes. Failure to take the second step could lead to contributions sitting in a cash savings account until you direct the funds elsewhere. Typically, the company offers a range of mutual funds and possibly company stock as investment options within the 401K.

Tax Benefits

Every payday, your employer deducts a predetermined amount from your paycheck before taxes. These funds purchase the investments you selected. The money placed in the 401K are not taxed before contributions and grow tax-free until withdrawn. You pay taxes at the time of withdrawal on the full balance. The technical term for this transaction is called a pretax contribution. 401K investments reduce taxable income in the year of the contribution.

Choosing Investments

Employers select pre-determined investment choices which typically consist of mutual funds with varying levels of risk. A mutual fund is essentially a group of company stocks or bonds bundled into one fund. They offer diversification, lower risk, and more stability than investing in individual stocks or bonds. They require less money and allow you to purchase partial shares, making them a good fit for the regular contributions of a 401K.

The employer cannot advise you on an investment strategy.

How Much to Invest

Most companies allow you to adjust the level of contribution on your benefits page anytime you want. At a minimum, you should invest to the company match, which can double the investment dollars each paycheck. The average employee works 40 years and with higher life expectancies it is not unrealistic to fund 30 years of retirement. In that respect, the more, the better. Start with a percentage you are comfortable with and then increase the amount by 1% every six months or every year.

Financial experts recommend saving a minimum of 10% for young adults and 20% or more for those over 40, who are behind in retirement savings.

Employer Match

Many companies match the amount of money invested in a retirement account. Matches can be up to 100% of a percentage of your contributions. For instance, if your company offers a 100% match up to 6%, it means if you contribute 6% of your pay the company will add 6% resulting in 12% of your income building retirement accounts. A match is free money from your employer.

Limits of Contributions

There is a limit to the amount you may add to retirement accounts and still gain the tax benefits.

Those under 50 can invest up to $18,000, where those over 50 have an additional $6,000 for a cap of $24,000 annually. With an employer match, the maximum annual contribution to a 401K account may not exceed 53,000.

Withdrawal from A 401K Account

To gain the maximum tax benefits funds must remain in the account until you reach 59 ½. Funds taken prior to this time owe a 10% tax penalty unless they meet one of the limited exceptions. You pay income taxes when you withdraw funds on the full amount.

Required Mandatory Distributions or RMDs must begin by the age of 70 ½. Failure to comply could leave you taxed at 50% on the required distribution amount.

“Borrowing” From The 401K Account

You may take out a loan on your 401K account without accruing any penalties. The company determines the amount of money you may borrow but typically limit loans to 50% of the balance. The required repayment period cannot extend beyond five years, and typically the company auto deducts payments from each paycheck. Failure to repay the loan within this time will result in a distribution and potentially a 10% penalty plus taxes, on any remaining balance. Changing employers will also result in required repayment within 60 days of leaving the job, to prevent the balance from being counted as a distribution and taxed.

Transferring A 401K

Switching employers allow you to take the 401K with you. Depending on the balance you may leave it with the previous employer, move it to the new 401K plan, or transfer it to an IRA (Individual Retirement Account). As long as a direct transfer occurs, there are no tax consequences. If you choose to receive a check, you have 60 calendar days to deposit the funds into an approved account to avoid taxation and possible penalties.

A 401K account is a very helpful tool for retirement planning. It automated the process and will set aside a certain percentage of your income before you ever see it. Because of tax penalties, there is a strong incentive to leave the funds in place until retirement.

What Everyone Should Know About Chapter 13 Bankruptcy

In 2005, Congress rewrote bankruptcy laws, steering more consumers to Chapter 13 bankruptcy filings, which require repayment of some debts, rather than a full discharge. Additional steps for the consumer are now in place, and the cost of attorney representation rose due to the new requirements. Congress also set time limit restrictions which impact consumers who may find the need to file for bankruptcy a second time.

As with all debt issues, failure to address the underlying problem, in conjunction with the bankruptcy filing, it is likely that money problems will persist. Chapter 13 begins with mandatory credit counseling, in an effort to educate consumers and give them money management tools needed to prevent a reoccurrence.

Credit Counseling

Consumers must complete a required credit counseling course by an approved agency before filing for Chapter 13. The agency will grant a certificate of completion at the end of the course and discuss an individualized repayment plan, also required by the courts. Consumers are not required to agree with or sign the proposed repayment plan, but the form must be submitted to the bankruptcy court when filing the petition. The purpose of taking the class is to determine if a different course of action would be better suited to the financial situation. To find out who the approved credit counseling agency in the local district, contact the bankruptcy court.

Items Required When Filing for Chapter 13

To file consumers must bring the certificate of completion from the credit counseling agency and a copy of the repayment plan.

The bankruptcy petition.

A list of assets and liabilities including statements from retirement accounts and qualified education or tuition accounts, also known as a 529 plan, including any interest accrued. A complete list of your property is also required.

Proof of income for the previous 60 days, along with a statement of net monthly income from all sources along with any anticipated increase in income or expenses after filing. Courts also require the name and address of all employers, the amount, and frequency of pay.

Tax returns for the previous year, unfiled taxes for prior years, as well as updated copies of any filings while the case is open. A couple may file a joint or an individual petition regardless of how they file taxes.

An accounting of all monthly obligations, including a compiled list of all creditors, the amount owed and nature of the claims, and complete and accurate addresses. A detailed list of monthly living expenses includes costs for food, clothing, housing costs, utilities, taxes, transportation, medical costs and so forth.

The statement of financial affairs. In December of 2015, the accepted form changed to Form B 107.

Copies of all executory contracts and unexpired leases. An “executory contract” is a signed agreement between two participants where the act of the agreement is not currently fulfilled by one or both of the parties. An “unexpired lease” means that the time period for that contract has not yet run out. Here is a general list of items that will fall under this heading; agreements for boat docking privileges, business contracts, business leases or residential rental agreements, automobile leases, contracts of sale for real estate, copyright and patent license agreements, homeowners’ association fees, insurance contracts, leases of real estate (surface and underground) for the purpose of harvesting natural resources, personal property leases, such as equipment used in generating an income, service contracts, and time-share contracts are just a sampling of what could fall into this list.

Required financial information gives the court-appointed trustee a complete and accurate picture of the financial affairs so they can make recommendations to the judge regarding the consumer’s ability to pay the outstanding debts.

Filing Fees and The Bankruptcy Trustee

The Federal Government sets administrative and filing fees. For those filing Chapter 13, the bankruptcy court charges a $150 filing fee and a $39 miscellaneous administrative fee but does not include attorney fees. The filer will typically pay all fees at the time of filing. However, a judge may divide payments into four installments with the last payment no later than 120 days from the date of filing. Joint petitions only require one filing fee and one administrative fee. Failure to pay court fees on time may result in a case dismissal.

The appointed trustee oversees and administers the case by initially evaluating the financial status of the filer and then collecting and distributing payments to creditors.

Advantages of A Chapter 13

The creditor’s stay stops all collection activity including filed lawsuits once creditors receive the notice of filing. The stay is not permanent and will remain in place until the courts decide on a repayment agreement. As long as a stay is in effect, creditors must halt wage garnishments, foreclosure actions, and collection attempts. In the case of a foreclosure, failure to make regular payments will not stop the lender from securing a judgment.

Chapter 13 also contains an automatic stay that protects a co-signer. A creditor may not seek to collect a “consumer debt” from a shared liability such as a joint account. Consumer debts are considered to be personal, family, or household debts.

Repayment Arrangements

The repayment plan begins with the creditors’ meeting, held between 20 and 50 days after filing, and mandatory for the filer. Creditors may ask questions and receive clarification about the consumer’s financial well-being before finalizing a repayment plan. The bankruptcy judge will not be in attendance to preserve their impartiality. Typically, parties use this meeting to resolve problems with the repayment plan.

After the meeting, unsecured creditors can petition the court to receive its share of the monetary distribution by filing claims within 90 days of the meeting. A government entity has 180 days to file a proof of claim.

Repayment Plan Hearing occurs after the meeting of creditors and repayment begins after the judge’s approval of the plan.

Before Discharge

Filers must complete a mandatory debtor education course before receiving a discharge. The class focuses on responsible financial behaviors caused by mistakes leading to the bankruptcy. The education is meant to help consumers understand past mistakes and to provide tools for modified spending habits.

The Aftermath

Repayment plans last between 36 and 60 months, during which time the court discourages any new debts. Securing a new loan typically requires court approval. There can be difficulty in acquiring new debts because the courts basically own your income. Spending money on unapproved expenses could lead to a case dismissal. Some additional debts such as unexpected medical bills may be added to the plan after it is initiated by amending the approved plan.

Court regulated Chapter 13 is an arduous process that negotiates all open unsecured debts and establishes a repayment plan based on current income and financial circumstances. During the repayment period, the courts maintain a great deal of control over your budget. At the end of the repayment plan, any additional balances are discharged, alleviating you from the legal obligation of repayment.

The Differences Between a Will and a Trust and Which Do You Need

In the world of legal jargon, we often hear terms that are familiar to us. However, their legal meaning eludes us. Two of these terms are “Will” and “Trust.” Knowing and using these legal documents appropriately can help build a total estate plan to protect your loved ones.

What is a Will

A Will lays out the distribution of your assets and indicates which heirs will inherit what assets. It can also direct care for dependent children. You select an executor, who will manage your affairs after you die along with specifics on desired funeral arrangements. You may change your will at any time and death activates the will. Laws differ between states, requiring state specific wills, based on your legal residence. Each adult needs their own will to cover assets in their name or legal interest in assets jointly held. Wills are less expensive and less complicated than a trust and will save money for simple estates. The downside is that they are expensive to probate and can take a year or longer to settle.

What is a Trust

A Trust is a document that takes effect as soon as you create it. A trust serves as a business entity and gives you more control over asset distribution. For example, you can instruct a trustee to maintain an account for minor children directing when and how much they receive. A will would grant the heir all the money at once, regardless of the child’s age. A trust allows for asset distribution to begin before, at or sometime after your death.

The Trust entity include a trustee, who holds title to the assets and manages the account. Prior to your death, you can be the trustee for your trust, giving you full control of all assets until your death. After establishing the trust, it is necessary to retitle assets into the trust. One significant benefit of a trust is it bypasses probate, allowing heirs to obtain their inheritance faster and saving the estate money. Trusts are also private records, unlike wills which become public documents. Having a trust does not eliminate the need for a will, which covers all assets not listed in the trust.

Do You Need a Will or a Trust

With the raising of federal estate taxes to over 5 million dollars per person, most estates are less concerned with taxation. However, those with significant assets, businesses, real estate holdings, minor children or dependent adult children, can all benefit from a trust.

Simple estates divided evenly among all children can pass the majority of their assets through beneficiaries, leaving only a small percentage to the will and the probate process. The use of asset titles can impact asset distribution, as a strategy to pass more assets to heirs without the use of probated wills.

Wills cost the least upfront but cost more upon death and take the longest to complete. Trusts are more expensive upfront but add an element of privacy, are more tax efficient, and can deal with complicated income streams or special needs of dependent children. Whichever route you choose, take the time to complete a will or trust ensuring your assets go to your loved ones and not court costs and fees.

Creative Ways To Save Money On School Lunches

When you’re trying to save money on school lunches for your kids, there are different schools of thought. Creative lunches are a challenge when you have to come up with five lunches a week. It is expensive to resort to Lunchables because you are paying for the convenience of premade packaging. It is boring to fix the same sandwiches and sides each day. Fortunately there are easy ways to make lunches creative, heathy and affordable.

Get The Kids Involved

Making lunch for your kids gives you an advantage because you know what your kids like to eat. While school lunches are working towards healthier options, healthy foods can end up in the garbage if they are choices your kids don’t enjoy. Some families find if they place options in different containers the kids can choose one item from each container to prepare their lunch. When children help with grocery shopping and prepare their lunch each day, they not only pick items they will eat, but learn about food choices along the way. They can prepare their lunches in advance making the morning routine as smooth as possible.

Stock Up On Reusable Containers

Bento boxes are very popular and make a great lunch box because there are dividers to separate food. They are reusable making them both convenient and economical. Buying individual size packages is expensive, and even using disposable baggies adds up over the course of the year. Plastic containers keep food separate and prevent sandwiches from getting smashed.

Buy In Bulk

Buying a large bag of snacks and sides is the most economical. Get a 2-pound bag of carrots and then put an individual size in the reusable container. Repeat the process with any fruit, vegetable, or a snack included with lunch. You control the type of snacks your children can choose from as well as portion control. Warehouse stores like Costco and Sams offer large bulk packaging at significant savings.

Have Fun With Lunch

Lunch does not always need to be a sandwich and a bag of chips. Young children particularly like to see fun shapes. You can cut sandwiches into fun shapes with large cookie cutters. Instead of a sandwich send cheese and crackers to keep it interesting. Soups in a thermos will stay hot until lunch. Many items when properly packed will stay cold until lunch and include items such as spring rolls or sushi.

Send a Reusable Water Bottle

Disposable water bottles and drink boxes add up quickly and can add significantly to the cost of lunch. Instead send a reusable water bottle and mix up the drink based on what your child enjoys.

There are many ways to reduce the cost of school lunches. Thinking outside the box can help you get creative and encourage children to make healthy food choices in an economical way.

Fall Benefit Check-Up – Flexible Spending Accounts

Flexible Spending Accounts (FSA) are becoming more popular as consumers take advantage of the increased savings. Employees can set aside a little money each pay period to cover bills incurred throughout the year. Typically spending accounts are offered to assist with either health care costs or child care costs, and some companies offered both accounts.

How Plans Work

During your benefits enrollment period, you choose a dollar amount to deduct from your paycheck to fund the account. There are a few key benefits which make these funds particularly valuable:

  • Pre-tax deductions reduce taxable income and give you more buying power for your money. In exchange all funds must pay for either medical costs or child care, depending on the account.
  • No waiting period. You get the benefit of your annual contribution at any time during the year. You will have access the full amount of your yearly determined total on the first day of eligibility.
  • Lots of flexibility to cover needed costs. A medical FSA can pay for braces, deductibles, co-pays, prescriptions, and even some over the counter medicines. Child care can cover day care, after school, and in some cases, summer camps.

Considerations When Using a Flexible Spending Account

Although recent tax law changes enable some plans to roll over funds to the next calendar year, many still operate under “use it or lose it” rules. Employees lose any remaining balances at the end of the year. Under the new rules, you can roll up to $500 over to the next year for employers offering the new benefit. Other FSA accounts give employees a grace period of 2 ½ months into the new benefit year to use the money.

Impact on tax credits. Using and FSA account to pay for day care eliminates the child care tax credit because you have already received a benefit. There may also be an impact the tax deductibility of healthcare costs due to the FSA tax benefits. FSA contributions can also impact your ability to contribute to a Healthcare Savings Account (HSA). Your tax advisor can help you determine which route will offer the highest benefit.

FSA Alternatives

Any company which offers a qualifying, high deductible health plan, allows employees to contribute to Health Savings Account or HSA. Like an FSA, you can have a pre-determined amount sent to your HSA account each paycheck. The deposit is pre-tax and available for doctors’ visits, prescriptions, dental and other unreimbursed health care costs. HSA accounts roll over each year and never expire. They are also available independent of employers so you can take it with you if you change jobs.

A high deductible policy is any policy with an annual individual deductible of $1,300 and a family deductible of $2,600 or higher. Out of pocket maximums cannot exceed $6,550 for an individual and $13,100 for a family. In addition to the higher limits, you cannot have coverage through another health plan (such as your spouses). You may not be a dependent on another tax return (including eligibility). Those enrolled in Medicare also do not qualify.

Those with medical and child care expenses often benefit from taking advantage of FSA accounts offered through employers. They help spread your costs over the course of the year and increase the value by using pre-tax dollars.

Fall Benefit Check-Up – Disability Insurance

Most employees participate in employee health and life insurance plans. Mandatory health insurance and employer paid plans for both types of policies lead to high levels of employee participation. Disability insurance is left to your discretion and typically does not receive any employer paid premium supplements to encourage enrollment. However with approximately 10 billion dollars in annual claims, carrying a policy could save your family from high medical costs or loss of income due to an accident or disability. Employers offering plans are on the rise, giving more employees a chance to gain this valuable coverage.

Disability insurance comes in both short, and long term options, both having their advantages. Here is what you need to know before deciding if you want to enroll.

Short Term Disability

Short-term disability covers time away from work due to an injury, accident or health issue, and typically covers 100% of your current salaried income. Overtime, commissions, and other variable pay does not factor into the benefit amount. Often there is a short waiting (elimination) period of around two weeks, on most policies, before benefits begin. Coverage is typically limited to disabilities lasting no more than three to six months. Breaking a leg playing basketball or surgery may fall under short-term disability and pay benefits. During the elimination period employees often use vacation or sick days to prevent an interruption in income. Once approved for short term disability, benefits typically pay weekly, and your base pay or a predetermined dollar amount dictates the payment amount.

Long Term Disability

Long term disability covers longer health issues or injuries but does not require permanent status like Social Security. Payments are typically only 60% of base pay, which may not eliminate the financial strain but are better than a total loss of income. Long term illnesses like cancer or those requiring multiple surgeries may result in a long term claim. Those experiencing a permanent disability also benefit. Long term disability typically starts after the short term policy stops and lasts until you are released back to work by your doctor. The payout amount is typically a preset daily limit based on your pay and should be updated annually to reflect any pay increases.

Supplemental Policies

Due to the smaller payout percentage of long-term coverage, some companies offer long-term supplemental policies which can increase the benefit amount to 100% of income or account for variable pay you need to cover bills. Supplemental policies are a per day or per week dollar amount rather than a percentage of base pay.

Common Traits of Employee Based Policies

Disability insurance does not gain value over time and typically will not transfer when you change employers. Policies do not require health checks or consider pre-existing conditions. Typically there are no health questions or qualifications to pass. Payments are set based on the agreement with the employer and are typically lower than individual policies found on the open market.

Buying disability insurance is a protection or hedge against financial losses due to time away from work as a result of an illness or injury. If your family relies on your income and you do not have six months in emergency savings, a short term disability policy could be a cost effective way to prepare of the unforeseen. Long term policies can keep your family financially on track if a major injury or illness should impact your family.

The Cloud and Financial Safety

With the popularity of the Cloud growing by the day, and individuals and companies availing themselves of the service, it would seem to be a prime target for cybercrime. A potential customer might ask the question, “If I send my financial data to the Cloud will it be safe? The answer is a resounding, “Yes.” Let’s explore why.

Learning the Basics

The Cloud is not an ethereal idea suspended above us. It is a real place. Picture a football field size warehouse, filled with hundreds of servers, all networked together. Now picture this image copied several hundred times with warehouses scattered across the country. These server networks make up the Cloud. Companies such as Amazon Web Services (AWS), Microsoft Azure, and Google Docs guard the stored data with online and physical plant security. Passwords, physical scans, and passcards are among the security measures taken by individual companies to secure their campuses. The buildings themselves are nondescript places with no signage or logos. Most people don’t even know what these buildings house.

Cloud Storage Risks

While Cloud storage is generally very safe, nothing is infallible. Hackers actively strive to locate security leaks and steal valuable information from both companies and individuals. To combat this, you can choose to store data in more than one cloud account so you will have access to a second account if something happens to the first. Other consumers back up sensitive data onto external hard drives that are kept at home or in a safety deposit box.

Cloud security, however, is among the toughest systems to break. Teams of IT engineers work to keep systems updated and improved, reducing security risk. Most companies also protect data against subpoenas or other disclosures with a legal team which reviews all legal request before responding.

Advantages of Cloud Storage

Keeping personal data stored on a home computer could lead to a loss if a natural disaster and a system failure occur. Information like tax returns, bank information, and even personal photographs are difficult and expensive to replace. There are many Cloud services offering consumers enough storage at no cost, that nearly everyone can have easy and safe access to remote files. Storing information on the Cloud also gives you access to personal files from any electronic device, rather than only a specific computer, increasing the Clouds convenience.

Beyond The Cloud

In addition to storage options, data safety also relies on vigilant consumer behavior. Using encryption, changing passwords frequently, using strong passwords, spreading data across multiple accounts, and only using secure networks will increase your protection.

In the face of regular news stories regarding breaches in security, it is difficult to know how to protect yourself. Using the Cloud in combination with taking personal security measures, you can store data in a safe and convenient way.

Tips for Responding to Identity Theft

Identity theft became a financial crisis for over 12 million consumers last year. It seems no matter how tight the security, thieves stay one step ahead of the game. They hack into corporate websites, personal accounts and steal numbers while you make a purchase. Regardless of how it happens, there are a few tips to minimize the damage and reduce the time it takes to correct the problem.

Cancel Your Account

The financial institution issuing the credit card or maintaining the account is your first phone call. They will freeze the account, review purchases to identify unauthorized transactions, and walk you through their investigative process. Banks have large fraud departments that follow up on incidents and get your account back in order. It is standard procedure to close an affected account and open a new one.

Audit All Your Accounts

It may be that a thief obtained one or multiple accounts. You should closely review each statement for several months before and after the noticed discrepancy to ensure you are not held liable for unauthorized purchases. Include unused or inactive accounts in your search as thieves do not discriminate.

Equifax, TransUnion, and Experian

Sometimes identity theft involves charges to an open account. Other times it involves opening accounts you did not authorize. A check of your credit report will identify any approved applications for credit you have not authorized. When identity theft occurs you have a right to a free credit report, even if you have already viewed your report in the previous twelve months.

Notify the Federal Trade Commission (FTC) 

Identity theft ranks among the highest number of complaints with the FTC. They deal with incidents involving more than one account or the theft of social security numbers. They have teams which investigate cases and work with authorities to catch and stop criminals.

Call the Police in the Jurisdiction of the Theft

Filing a police report helps track incidents of theft and gives you access to help. The free credit report is contingent on having a police report to document what happened. This document also aids banks and financial institutions which investigate cases of fraud.

Place a Fraud Alert on Your Credit Report

You may contact one credit bureau and place a fraud alert on the account for 90 days. They will then contact the other two bureaus giving you additional protection on your credit. This action does not prevent an application from being approved but requires additional steps by the potential creditor to ensure you are the one applying for credit. With a police report, you can file an extended fraud alert beyond the initial 90 days.

Leasing versus Buying: Which is right for you?

You want a new car and have an idea of what you want to purchase. Now you must decide how you will buy the vehicle. Unless you are paying cash, some form of financing is required, and you must choose between a traditional loan or a lease. Here are the pros and cons of each option to help you make the right choice for your situation.

When Buying Is the Best Choice

Banks and dealers both offer loans with competitive rates. You will qualify for the car you want, based primarily on your income and credit score. A simple application and required verifications can get you in a vehicle often in a few hours. Most loans charge a fixed rate of interest for a term of three to seven years. Extending the loan further will give you lower monthly payments but result in higher overall costs.

Down payment requirements vary based on qualifications. Those with excellent credit may need minimal down payments while poor credit may require several thousand dollars. Lower credit scores also increase interest rates and can lead to much higher loan fees. The lending institution will hold the car’s title until paying the contract in full. Selling the vehicle before payoff requires the assistance of the lender and a release of the title to the buyer.

Buying is best for owners who keep the vehicle until payoff and beyond. When buying a car, the loan process is simple, and the costs are relatively transparent.

When Leasing is the Best Choice

A lease also requires the completion of a credit application and qualifying for the lease with your credit score largely dictating the terms offered. Leases can range from a year to four or five years with the three-year lease being the most recommended.

Upfront costs typically require higher down payments, resulting in lower monthly payments for the lease term. At the end of the lease, you will return the vehicle to the dealer with a buyout option.

Most auto lease terms will allow you to drive the vehicle 12,000 miles a year with a surcharge for going over. If you notice that you are driving more than that, ask for an extension to 15,000 to 18,500 miles at an additional cost. Driving more miles may raise your monthly payments, but will reduce fees charged when the lease ends.

Your contract will contain a residual price, and once the contract ends, you may choose to buy the car for this residual price. If you decide to return the vehicle to the leasing company at the end of the contract, they may charge for wear and tear or failed maintenance. If the vehicle is perfectly maintained, you may receive your security deposit back. Most buyers find they owe additional fees when the lease terminates.

Leasing is a good option for buyers who do not drive many miles, follow the car maintenance schedule and like to trade up every couple years.

How to Calculate the Total Cost of Car Ownership

Kelley Blue Book lists the average price of a new car in America at over $33,000. While the advertised price and monthly payments are upfront expenses, the other costs of owning a vehicle may go unnoticed. There are many things to consider when evaluating the total cost of car ownership including the following:

Overall Costs of Owning a Car

The average monthly payment based on Experian Automotive is $482. But this is only the actual cost of the vehicle. AAA’s driving cost’s study determined that for a vehicle that is driven 15,000 miles a year, all costs of ownership total up to be $8,698 a year or $725 per month, nearly double the car payment. Costs vary depending on the type of vehicle and its age. Older vehicles may have lower or no payments, but higher maintenance and repair costs. The AAA study found SUV’s cost 58% more than a sedan.

Ongoing Costs of Ownership?

Fuel. What grade of fuel do you use and how many miles do you drive? The cars mileage will largely impact the variable costs of operating the vehicle. AAA notes that fuel costs average $1,682 a year and varies based on the car you drive. Newer cars tend to get better mileage, saving you money in the long run.

Tires. According to AAA, the average cost of tires is $147 annually for those driving an average of 15,000 miles per year. That means replacing tires every four years which can cost $60 and up depending on the tires you select and who installs them.

Maintenance. Oil changes, tire rotations, battery inspections, and tune-ups add up to an average of $767 per year to keep the car safely on the road. Failure to maintain the vehicle could lead to higher costs and expensive repairs down the road.

Repairs come into play once the car warranty expires. Nearly all car parts wear out and require replacement. Older vehicles may have more repairs, but the costs may be lower than new vehicle repairs that require expensive computer systems to troubleshoot.

Taxes and fees. Every year owners pay property tax on the vehicle, above and beyond the sales tax and fees charged at the time of purchase. On average AAA estimates, owners pay $665 a year in state and local taxes and fees, including licenses and registration costs.

Insurance costs factor in the type of car you drive, along with your driving record, miles which you drive, zip code where you live, and other risk factors. Mandatory insurance coverage can range from $30 to $400 a month and must factor into the total cost of ownership.

Interest on a vehicle loan. The interest rate and the loan term will determine the total interest paid to drive your car. The average length of car loans is now 67.2 months or 5.5 years with an average interest rate of 4.56%. Taking out a high-interest loan can double the cost of buying a car and the longer the loan term, the more you will pay in interest.

How Do You Compare?

Taking the above factors into account will help you calculate the cost of owning a car. Whether you are deciding whether to trade up or keep your current car or wanting to downsize to one less vehicle in the home, understanding the total costs will help you make better financial decisions on car ownership.

Investing in Yourself Through Continuing Education

Educational pursuits no longer end when you turn 21 with a college diploma. Technological advances are rapidly changing employment requiring workers to continually update skills to remain competitive. This changes the way education is viewed. Continuing education may include anything from a single class to learn a specific skill directly related to your job, yearly continuing educational requirements in your field, or advancing skills through additional degrees. As the need for additional learning has grown, the price of getting that continuing education, has also risen dramatically.

Advantages to Pursuing Additional Education

More qualified for current job. When beginning a new role, mastering the job at hand is initially accomplished through internal training. Aside from learning new systems and other job-related skills, mastering the industry you are working in can create job security. Improving your skill set also has the ability to lead to promotions and other advancements within the company that might not be available without additional training.

Make more money. One of the most common motivators for continued education is higher pay. Additional opportunities may open up due to increased education. Many jobs have minimum qualifications that include educational majors or degrees. Statistically, the more education you have the higher your lifetime earnings will be.

Build your resume. Increasing your skill set makes you more valuable to your current company but also increases opportunities within your industry. Improving your skill set makes you more marketable. Education can increase mobility and land you a job quicker.

Keep up with technology and industry changes. As new products become available and technology improves, having a current and updated skill set is beneficial. Automation is changing the way we work and what jobs are available. Many jobs are becoming extinct. Staying current with industry improvements can prepare you for changes.

Gives you a competitive edge. Recognizing the need to maintain upgraded skills and returning to school is a common phenomenon, no matter your age. In order to remain competitive in the marketplace, and in your current job, you may find yourself competing with others who have higher-level educations, or more job skills. By continually upgrading your skills, you will find yourself in a competitive position as your market and industry move forward.

Establish yourself as an expert. Maintaining and upgrading skills allows you to increase your specialization, be recognized as an expert in the industry, and command higher pay both inside and outside of your current employment.

Increase business and social network. The classroom experience, even if it’s online, can allow you to work and associate with other classmates, professors, and trainers. This increases your visibility within the industry and creates networking among like-minded professionals.

Improves discipline. It’s one thing to attend school at the age of 18 or 19 and dedicate full time efforts to your studies. Most who return to school during their career, do not have the luxury of full time school without employment. Maintaining a job and family obligations, while you attend school, requires discipline. This ensures the most important priorities continue to be addressed and increases focus which can improve other areas of your life, as well.

Ability to change careers. Staying with the same employer for your entire career is rare today. Whether you become bored or tired in your current job, or technology changes are making the job obsolete, career mobility can be accomplished through additional education.

How to Know If Continuing Education Is Right for You

Consider your professional goals and where you want to be professionally in five or ten years. What skills will you need to obtain in order to reach those goals? Consider that job requirements will change over time. You want to stay on the cutting edge of whatever field you are in to maintain marketability and competitiveness. What direction is your industry headed and what skills do you need to stay ahead of the curve? Having the level of education required to qualify for upcoming opportunities will put you in the driver seat of your career.

Looking at your motivation can help ensure it will be an investment that pays off in the end. Continuing education serious decision with significant financial consequences.

Being a lifelong learner can open doors and create new opportunities that would never be available without it.

Does Supporting Adult Children Impact Retirement?

Millennials struggle for independence is well documented: Approximately 25% are still living at home and another 1/3 receive regular financial assistance from aging parents¹. This generation’s struggle to gain comfortable footing into adulthood is having a significant toll on parents who are trying to fund their own retirements.

The dynamics are complex. From the millennials standpoint, even among those with college degrees have faced unemployment in the double digits and rampant underemployment. Student loan balances are staggering, which equals struggling with high debt and low wages. Add increases in costs of living and it’s easy to understand why parents are being called upon to pitch in with children who are well into their 20’s and 30’s.

Among Baby Boomers supporting adult children, 2/3 have provided support for children over 21. Add in GenX (those in their 40s-50), and that number rises to 73%, with half providing primary support for adult children. These dynamics are creating a retirement crisis. In addition to helping adult children, for Americans facing retirement age, there is a larger portion of people struggling with low savings rates and unprecedented debt balances. Seniors well into retirement are carrying mortgages and credit card debts and bankruptcies among seniors are soaring.

The raw numbers indicate parents should be cutting off children much sooner than they are, yet most are willing to make big sacrifices. It is really hard to say no to a child in need and seniors or soon to be seniors are paying the price in the following ways:

  • Debts not being paid off prior to retirement. The new reality is that seniors are entering retirement carrying heavy loads of credit card debt and still paying down mortgages. Medical bills and now even student loan debts are taking their toll.
  • Not enough in retirement savings. Savings accounts for millions entering and in retirement are still dismal. 29% of those over the age of 55 have no savings according to the Government Accountability Office (GAO), and only 48% have “some retirement savings.” Median savings accounts average $104,000 for those between 55 and 64 and only increase to $148,000 for those between 65 and 74. These numbers amount to recommended withdrawal rates well below what it takes to survive. of only $649 a month².
  • Not enough insurance coverage. When parents continue to support adult children, there is less money available to cover their needs. High debt levels reduce disposable income which also makes it harder for seniors to maintain adequate insurance. This might be in the form of carrying higher deductibles on things like auto or homeowner’s insurance, but also impact the ability to pay for insurances such as Long Term Care.
  • Delayed retirement is a common result of assisting adult children. When aging parents are in good health this might be an inconvenience but not a serious issue. However, as health issues arise, delayed retirement can have additional consequences.

Many parents are finding themselves supporting adult children well into their 20’s and even into their early 30’s. While the support may not last forever, paying for rent, utilities and cell phone bills can add up to hundreds and even thousands of dollars a year. This same money that was once used to pay off debt or otherwise prepare parents for retirement is going toward support. The long term consequences may be that these parents end up depending on those same children, for their own care and support, when they run out of money.


Further reading:


Dissecting Your Financial Aid Letter

College acceptance letters are coming in the mail and you are excited for your child to start their new adventure that can cost upwards of $100,000 or more over the next several years. As a parent you also know the need to figure out how to pay for this new adventure. With the FASFA completed, you now have the task of comparing acceptance letters with financial aid letters to determine which school will provide the best value.

Financial aid often creates better value for more expensive schools if they are providing more grants and scholarships for your child., Of course, it is tempting to go with the least expensive school but understanding financial aid letters is actually the key to choosing the most affordable school, among the colleges or universities your child has been accepted.

While there is no standardization among acceptance and financial aid letters, there are key elements that are common among them. Separating loans from free money and understanding out of pocket costs is explained in each financial aid letter.

Financial aid packages are offered for one year and, unless there is a multi-year scholarship in place, this amount can change significantly from year to year. Regardless of income, everyone should complete the FASFA because both federal and school financial aid use this form to determine eligibility for aid.

What Determines Financial Aid Eligibility:

    • Cost of attendance (COA). The school is only allowed to offer aid up to 100% of the cost to attend that particular school.
    • Household income. In cases of divorce, the custodial parent will complete the FASFA and use their family income, including step-parent’s income, if applicable. Schools might require non-custodial parental income, but federal financial aid does not.
    • Family size. In cases of divorce the custodial parent’s household is used.
    • Number of people in the household attending college.
    • Field of study. Grants or scholarships are available for specific degree tracks.
    • Participation in athletics.
    • Family background.
    • Scholarships and grants received outside the school you are considering.


Understanding the Financial Aid Letter involves evaluating its four key elements:

  1. Cost of attendance (COA) which includes tuition, fees, books, room and board, and anticipated living expenses.
  2. How much aid you are receiving will include grants, scholarships, work study, and student loans. Evaluating aid offered comes in two categories: Funds which must be paid back, such as student loans, and funds that do not require repayment, such as grants and scholarships.

    Work study programs offer the student an on campus job to assist with paying for living expenses. This money does not go towards tuition and fees.

    Student loans are either subsidized or unsubsidized, and must be repaid after graduation. Subsidized loans offer government payments for the accrued interest while your child is attending school.

  3. Expected Family Contribution (EFC) is the amount your family is expected to pay out of pocket for schooling.
  4. The Gap is any amount left over that you or your child must pay out of pocket. This can be part of living expenses, requiring the student to living more frugally to cover the difference. Other sources of funds might be through private loans or parent plus loans.

Decisions around financial aid could have lasting effects, as each year you will go through the process of evaluating out of pocket costs. If you have not created a college fund, borrowing more money may be required to assist with schooling costs. Your student can be part of this process and family conversation. Experts recommend the student have “skin in the game,” by working part time, or otherwise contributing to college costs.