How Hard it is to Hang Onto Your Money?

The following is a guest post. Enjoy! 

One of the main reasons that we use banks is security. Sure there are other benefits – organization, centralization of different accounts, cards, benefit programs, lending, etc. But central to a bank’s identity is the fact that they keep your money safe. The concept simply doesn’t work without that aspect.

That’s why the ongoing PPI scandal from the past several years has been so alarming. Bank customers, without their knowledge or consent, were issued policies for Payment Protection Insurance (PPI for short). PPI isn’t a bad form of insurance on its own, but when it is sold fraudulently, as it was to thousands of consumers across Europe by banks and insurers, then there is a major problem.

PPI claims have poured forth by the thousand since the scandal emerged several years ago. Multiple class action and individual lawsuits are pending, and many individuals have already received restitution. If you find PPI payments drafting from your account, it’s important that you read a PPI claims guide soon, and get in touch with PPI claims handlers.

PPI as Emblematic of a Deeper Banking Problem

Even if you do not personally have PPI auto-drafting from your bank account, there are a number of other ways that large banks have been recently caught in defrauding their own customers. We only have to look back at Barclays Bank as an example.

The results, in some cases, were harmless. In other cases, the bank mis-sold PPI insurance to many of its customers. Customers were confused when they had not received annual letters in the mail updating them to how much they were spending on protection and their rights to cancel.

Other large banks have had large-scale theft of customer data. These have included the loss of sensitive information, such as account and social security numbers. Wells Fargo is one of the banks that have had such breaches, but in this case, the bank responded well, by issuing free identity theft protection services for the affected customers.

In the end, banks are businesses just like any other. Just because they are large doesn’t mean that fraud and mistakes will not occur. For people with money stored in these institutions, it is important to demand that they do their due diligence in protecting the customer’s wealth and preserving the customer’s interests.

Don’t take it for granted that your money is safe in a major bank. Keep an eye on the balances of your accounts, and take action immediately if something seems amiss. Fast action will allow you to achieve quick resolution of any problem that you encounter. The sooner you bring problems to your bank’s attention, the more likely they will be to make the issue right.

Great Federal Programs For Boosting Your Savings

The following is a post by MPFJ staff writer, Toi Williams, who is a professional finance blogger for MarketBeat. She has backgrounds in personal finance, sales, and real estate.

Millions of Americans are having difficulty saving for their future. According to a report published in Forbes, roughly 63 percent of Americans say they would have difficulty coming up with $1,000 to handle a financial emergency.

The struggles of such a large segment of the populace has prompted the federal government to find ways to help. Government agencies have developed a number of programs designed to encourage saving by people of all ages.

Here are several of the most popular programs.

 

Saving For College

If you are planning on paying for college in the future, you might want to take advantage of a 529 plan. A 529 plan is a tax-advantaged savings plan designed to encourage saving for college costs. The plans are authorized by Section 529 of the Internal Revenue Code and are sponsored by states, state agencies, or educational institutions. All fifty states and the District of Columbia sponsor at least one type of 529 plan.

There are two types of 529 plans available, both with considerably different features. The first type is a pre-paid tuition plan, which allows savers to purchase units or credits at participating colleges and universities to lock in the current price. The credits can generally be used to cover tuition and mandatory fees. There may be exceptions for other qualified expenses provided by the plan’s sponsor.

Pre-paid tuition plans often have an age or grade limit for participants. The payments made from the plan are often based on the age of the student and the number of years of college tuition purchased. Depending on the plan chosen, the student will receive a lump sum or installment payments to pay for their college costs.

The second type of 529 plan is generally known as a college savings plan. These plans establish an account for the purpose of paying the student’s eligible college expenses. All qualified higher education expenses are covered, including tuition, mandatory fees, covered required supplies, and room and board. There are generally no age limits or residency requirements for these plans. Withdrawals from college savings plans can generally be used at any college or university.

College savings plans invest in stock mutual funds, bond mutual funds, and money market funds on behalf of the account holder. The investments in mutual funds are not guaranteed by state governments and are not federally insured, so losses are possible. However, earnings in 529 plans are not subject to federal tax as long as the withdrawals are used for eligible college expenses. They may not be subject to state tax either.

 

Saving For Retirement

The federal government is also trying to help more people save for retirement, which is an important goal for our country. About half of U.S. workers don’t get a pension or 401(k) from their employers and millions of workers do not have any retirement savings at all. As of the end of last year, 68 percent of America’s workforce reported that they are not participating in an employer-sponsored plan.

The United States Department of the Treasury developed myRA to remove common barriers to saving for retirement for people who don’t have access to an employer-sponsored retirement savings plans. myRA is a Roth IRA retirement savings account with no start-up cost, no fees, no minimum contribution requirement, and no risk of losing money. The plan is meant to be a starter account for long-term retirement savings. The idea is that participants will graduate to IRAs and employer-sponsored retirement plans once they get their retirement finances started with the myRA.

To be eligible for myRA, participants must make less than $131,000 a year (or $193,000 for married couples). People can contribute up to $5,500 per year to their myRA account (or $6,500 per year for those age 50 and over). The account maxes out at a balance of $15,000, but participants can keep a lower balance for up to 30 years. If either of those limits is reached, the savings will be transferred or rolled over into a private-sector Roth IRA.

Contributions can be made by linking a checking or savings account to the myRA, transferring after-tax dollars from a paycheck, or directing some of their federal tax refund to the account. Initial myRA investments are set at $25 with subsequent contribution limits set at $5. Most of the participants using myRA make monthly contributions that average between $50 and $100. If a participant changes jobs, they can keep contributing to the same myRA account without interruption.

Contributions are invested in a new United States Treasury security that earns interest at the same variable rate as investments in the government securities fund for federal employees. The Treasury Securities Fund offered a return of 2.9 percent over the past decade, which is still better than a typical savings account. Participants can pull out the money contributed (but not the interest) at any time without penalty. Barring specific exceptions, participants can only withdraw the earned interest free of tax and penalty if they are at least 59-1/2 years old and made their first contribution to the account at least five years ago.

 

Investing In Securities

The TreasuryDirect program allows US individual investors to purchase Treasury securities directly from the U.S. government. Participants can choose from Treasury Bills, Notes, Bonds, Inflation-Protected Securities, and Series I and EE Savings Bonds. The TreasuryDirect website is run by the Bureau of the Fiscal Service under the United States Department of the Treasury.

The TreasuryDirect program eliminates many of the hassles that come from handling physical securities. The securities are held in the account in paperless electronic form. Because they are stored online, they cannot be forgotten or lost and heirs will be able to easily locate them in the future. According to the Treasury Department, there are billions of dollars in matured savings bonds outstanding that have yet to be redeemed.

Users can manage their savings portfolio online as their needs or financial circumstances evolve. From the website, participants can deposit money from their personal bank accounts or withdraw money from the TreasuryDirect account. To redeem the purchased securities, the user selects what securities they want to sell on the website and what account they would like the proceeds to be deposited in. There are no redemption limits to worry about and no fees for purchases.

TreasuryDirect’s security system is top of the line, requiring user names and passwords as well as security codes from a plastic card that the Treasury provides for the account. The money in the account is backed by the full faith of the U.S. government. The website also allows the transferring and gifting of savings bonds, which is a great way to get children and grandchildren on the path to saving for the future.

How about you all? Have you used any of these programs? 

Please share your experiences by commenting below! 

***Photo courtesy of https://www.flickr.com/photos/brizzlebornandbred/5025896783/in/

How to Get the Most Out of Your HSA

The following post is by MPFJ staff writer, Laurie Blank.  Laurie is a wife, mother to 4 and homesteader who blogs about personal finance, self-sufficiency and life in general over at The Frugal Farmer. Part witty, part introspective and part silly, her goal in blogging is to help others find their way to financial freedom and to a simpler, more peaceful life.

A health savings account – commonly called an HSA – is being touted as one of the hidden gems of wealth creation. If you’re eligible for an HSA, you can use it in a number of different ways that will help grow your wealth.

Experts call the HSA a “triple tax free” investment vehicle. Here’s why: First, the money can be contributed as a pre-tax investment. Second, earnings grow tax free. Third, qualified withdrawals are made tax free. Talk about a wealth builder’s dream!

Here are four things you can do to get the most benefit out of your health savings account.

 

Know the Contribution Limits

If you know the contribution limits for the HSA you can be sure to take full advantage of its benefits. For the current tax year of 2017, HSA contribution limits are as follows:

• $3,400 for a single person, $6,750 for a family
• $1,000 in catch-up contributions if you are age 55 or older

Know the HSA contribution limits for you particular situation and plan your contributions so that you can max out if you want or need to.

More cool things you should know about your HSA include the fact that you can change your contribution amount at any time during the year as long as you don’t go over the annual limit, and that withdrawals for qualified expenses are easy; usually done via a debit card, blank checks or via an online withdrawal.

 

Know What Your HSA Monies Can Be Used For

HSA funds can be used for a variety of different medical expenses, some of which may surprise you. Of course, HSA funds can be used for preventative care such as annual physicals, preventative screenings and well child checks.

However, health savings account funds can also be used for a variety of other things, such as:

• Tobacco cessation programs
• Weight loss programs for the obese
• Alternative health care such as acupuncture and deep tissue massage, provided those methods are also approved by your high deductible health plan and recommended by your primary doctor

Health savings account funds can also be used to pay for prescription medications, as well as some little known items such as braces, contact solution, bandages, breast pump supplies, artificial teeth and Braille books and magazines.

By knowing what items can be paid for via your health savings account, you can get the maximum benefit out of the funds you deposit in it. For more info on what qualifies for HSA withdrawals, go to this government website.

 

Understand Post-Retirement HSA Rules

After you reach age sixty-five, HSA withdrawal rules change a bit. First you can use health savings account funds to pay for most all Medicare premiums. Second, HSA distributions taken after age sixty-five are never penalized, even if they are not used for qualified medical expenses. However, distributions taken after age sixty-five that are not used for qualified medical expenses will be taxed.

 

Choose Your Investment Vehicles Carefully

It’s important when deciding how to invest HSA funds that you understand the risks involved with the available investment options and choose your investment vehicles carefully. Make a plan to balance risk as you choose how to invest your HSA contribution funds.

How about you all? What are your thoughts on health savings accounts? If you’re eligible, do you take advantage of one?

Share your experiences by commenting below! 

***Photo courtesy of https://www.flickr.com/photos/76657755@N04/6921653338/in/

Tax Free Ways to Pass on the Family Wealth

The following post is by MPFJ staff writer, Marie. You can read more of Marie’s articles over at her own blog, Family Money Values. Enjoy! 

Perhaps from the moment you left home you have been struggling with all your might to become financially independent.  Maybe you worked hard, saved well then became a real estate tycoon by buying one rental home at a time until now you own multiple apartments.  Or perhaps you started a small, but very relevant web site that grew and grew until it started drawing the big bucks.  Or maybe you inherited some money from dear old Grandpa George, invested it and made it grow.

Now you have an unfamiliar problem.  Too much money, too many assets.  You don’t want your kids to have to start all over again, but how do you get the wealth to them without it being decimated by taxes?

Taxes can take a big bite, especially in the US – even now that the annual US Federal estate taxes don’t kick in until you have at least $5.49 million. But, some states do still charge estate taxes.  The inheritor does not pay these estate taxes, the estate of the deceased person does.

Laws can change rapidly, the US national debt is huge, revenue has to come from somewhere to pay it off.  Estate tax laws may become much less favorable in the future.  It pays to be alert to possible inroads to your hard earned money.

Back in 1996, when Mom died in the US, her estate was worth around $700,000 (which would be a bit over a million dollars in 2016).  It had to pay $80,000 ($122,375 in 2016 dollars) in estate taxes.  She and Dad worked hard for those dollars and would have been appalled if they had realized the government would get them on their deaths.

Your IRA can be a double whammy after you die.  It gets counted as part of that $5.49 million, your beneficiaries may have to take all the funds out within 5 years of your death AND the distributions get added to their taxable income, probably raising their income taxes significantly.

Canadian laws might be a bit more favorable. According to Canada Inheritance Tax Laws & Information:

“Non-registered capital assets are considered to have been sold for fair market value immediately prior to death. Any resulting capital gains are 50% taxable and added to all other income of the deceased on their final return where income tax will be calculated at the applicable personal income tax rates. They are taxed at the applicable capital gains tax rates.

The fair market value of a Registered Retirement Savings Plan (RRSP) or a Registered Retirement Income Fund (RRIF) is included in the deceased person’s income and taxed at the regular applicable personal income tax rates with no special treatment for any capital gains earned within the RRSP or RRIF.”

In other words, Canadians aren’t taxed on the entire worth of their assets, just the capital gains.

Currently in the US, there are several ways to avoid being taxed on your hard earned dollars.  Some of them apply in Canada as well.

Make annual gifts.

In the US, each person can give cash or assets valued up to a certain amount (which changes each year to account for inflation) to as many people as they want.  A husband and wife can each give up to that amount.  In 2017, the amount is $14,000 per giver to EACH person they give to.  If a person gives over that amount in one year, it is added to a lifetime gift/estate take exclusion amount.  Anything left in the estate over the exclusion amount is subject to estate taxes on death.

In Canada, each person can give unlimited cash to as many people as they want.  There really isn’t a ‘gift tax’ per se.

Of course, you can’t read the future, so you have to balance the desire to avoid taxation with the potential for your future need for that money.  You should make sure you have enough to care for yourself before giving any away!

Instead of cash, in the US, a person can give assets, including shares in a business.  Establishing a family limited liability company (LLC) is one way to pass along highly valued real assets (such as a vacation home), over time, without too much hassle.  The vacation home is titled in the name of the LLC.  The operating agreement of the LLC is set up to designate a manager-member type arrangement so that the original owners retain control.  Then the original owners (which probably are the parents) can gift shares in the LLC to the members, and may be able to do so at a discounted price (since LLC member shares are not as liquid as cash).  This results in the possibility of gifting assets actually worth more than $14,000 in one year to one member.

This passing of interest in the LLC from original owner to members can continue over time until the majority of shares are owned by members.  This strategy gets that vacation home out of your estate and into your heirs without taxation.  This same concept can also be used for more liquid assets, if desired.

Open a Roth IRA or Tax Free Savings Account.

In the US, people can establish a Roth Individual Retirement Account (IRA) and contribute certain amounts to it (which decline by income levels).  In Canada the Tax Free Savings Account (TFSA) is a similar vehicle.

Both provide for tax free earnings and withdrawal from the account tax free.

Soon to be changed laws in the US allowed beneficiaries of an inherited ROTH IRA to keep funds in it, withdrawing over their expected lifetime, so that the funds continued to grow tax free.  Some called this concept a STRETCH IRA – because the tax free status is stretched over multiple lifetimes. In Canada, any income following death is taxed as ordinary income.

Pay for College.

Since Canadians aren’t limited in the amount of cash they can give, this one really only applies in the US.

If you are wanting to pass along family wealth to the kids or grand-kids without using any part of the gift or estate tax exclusion amounts, you can directly pay for medial or college expenses.  You have to write the check out to the institution though and not to your child or grandchild to give to the institution.  It is important to note that this only applies to payment of tuition, not room or board or books, etc.

There are other, more complex ways of passing assets tax free (or tax reduced) to your heirs.  Estate planning is a complex topic and you should consult someone who knows the laws applicable to you and is familiar with your own situation before making decisions on what you should do.  This is especially true for those folks who have assets both at home and in other countries.

How about you all? Do you have other tax free ideas to pass on the family wealth?

Share your experiences by commenting below!

****Photo courtesy https://www.flickr.com/photos/68751915@N05/6757821397/

Gold Investments for IRA Accounts

The following is a guest post. Enjoy! 

There’s a growing trend where many people are adding precious metals, mainly gold, to their IRAs. It’s quite a literal way to turn your retirement nest egg into gold. The IRS does allow so-called “gold IRAs,” where owners can include precious metals in place of assets like stocks or bonds. Gold is, of course, included along with cash assets.

Not all gold is eligible to be included in IRAs. For example, if you come by a very rare gold coin, it may be considered precious among collectors, but is rather useless when it comes to being included in an IRA. The IRS has a strict category for types of gold that can be included in the forms of bars or coins. There are many other requirements as well.

Reasons to Add Gold to Your IRA

Before getting onto the intricacies of adding gold to an IRA, it’s important to consider why. If you have ever paid attention to gold prices, you would know that it’s extremely volatile. It may not make sense to include gold in an IRA right away. But, it’s important to consider how gold is valued. The value of gold is measured in an inversely proportional manner to paper currency. Meaning, when the price of the dollar goes up, price of gold comes down. But when the price of the dollar stumbles, gold value picks up.

Think about this scenario: In 2001, an ounce of gold cost $271. In 2010, the same ounce was worth $1,896, which is an increase of about 700 percent. That remarkable value can be attributed to the Great Recession. Assets like gold are most important during time of economic crises. When the dollar plunges as it did during the recession in 2008, physical gold can hedge an investment portfolio against devastating losses. In this sense, many people add gold to diversify their retirement investment portfolios.  No one can predict what the market will be like in decades when you retire. So, gold assets can protect your lifelong savings in case of an economic calamity.

Add Gold with a Self-Directed IRA

You can only add gold to your IRA if it is self-directed. Investments in traditional IRAs are usually made up of currency-based assets like stocks, mutual funds, and certificates of deposits. If you want to diverge from such assets and add gold, then you need to exercise a certain amount of control over your account. This is what a self-directed IRA is. The owner of a self-directed IRA can tell the bank or another trustee what to invest in. Trustees do not usually say no to gold investments as long as there are plenty of cash investments as well.

You cannot have an entirely gold IRA. That makes little financial sense. Rather, you can add a small amount of gold to your IRA to protect cash assets in case of another economic downturn. When you have gold in your IRA, you will have to keep up with gold news and price charts. It’s very important to check gold prices today on a daily basis when adding this precious metal to your IRA.

Choose a Good Trustee

You are required to entrust your IRA to a custodian or a trustee you can rely on. There are certain federal requirements these trustees have to meet. You can get a bank, an investment firm or a certified gold dealer company to be the trustee of your IRA as long as legal requirements are met. You may have to spend some time searching for a firm that allows gold in IRAs.

Once you get through all the requirements, having gold in your IRA will protect your future wealth no matter what the political climate is.

Secure Your Future Retirement By Avoiding These Missteps in Your 40s

The following post is by MPFJ staff writer, Melissa Batai.  Melissa is a freelance writer who covers topics ranging from personal finance to business to organics to food.  She blogs at Mom’s Plans where she shares her family’s journey to healthier living and paying down debt.

When you’re in your 40s, you may begin to feel a great deal of financial pressure.  Your children are growing up, and the expenses associated with that begin to pile up.  You may find yourself shelling out money for more expensive extracurricular activities, higher grocery bills thanks to your children’s endless appetites, car payments so your children can begin driving themselves, car insurance payments, and college tuition.

As if that is not enough to put a strain on your budget, this may also be the time when your aging parents need more support, both financially and physically.  You may be helping them out monetarily or helping them out physically, which may mean less time at work for you as well as less income.

This decade, more than any other, is the one where your choices can make or break your future retirement.  This is partly because if you make a mistake financially in your 40s, there is not much time to recover financially, unlike mistakes you may make in your 20s when you have four or five decades to recover before retirement.

In your 40s, be careful to avoid these financial mistakes:

 

Refinancing Your Home and Extending the Life of Your Mortgage

Refinancing your home for a significantly lower interest rate is a smart money move.  However, too often, people refinance to lower their interest rate, but then they also extend the life of the mortgage.  True, this can reduce your monthly payment, which may offer you financial relief now, but it can later wreak havoc with your finances and your target retirement date.

Let’s say you bought a house when you were 35, and you pay on the loan for 10 years.  You are now 45 and have just 20 years left on your loan; you would own the home free and clear at age 65.  This works out rather nicely as 65 is a time when many people retire.  However, if you refinance at 45 and extend the loan back to the original 30 year term to lower your payment and create some financial breathing room in your budget, your home won’t be paid off until your 75.  This can cause quite a strain in retirement.

Many people do not have enough money set aside in their retirement account to comfortably cover a house payment, especially as medical expenses typically increase as you age.

You may say that you won’t retire until the home is paid off, but you can’t always control that.  Sometimes medical issues make retirement come earlier than planned.

 

Taking Out a Home Equity Loan

When you feel a financial crunch, your first thought may be to tap the equity in your house by taking out a home equity loan.  After all, the interest rates are usually much lower than a loan you can take out at your bank or a credit card.  You can also extend repayment time, often to 10 or even 15 years, which is typically not available on a loan that you get from the bank.

However, if you’re unable to make your home equity loan payments, you can lose your house just as you could if you weren’t able to make your mortgage payment.  In addition, if your home loses value during the time you’re repaying your home equity loan, you may find yourself underwater, meaning you owe more on the house than the house is worth.  If you need to sell during this time, you would need to pay the difference between the current value of the house and what you still owe between the mortgage and the home equity loan, which is often tens of thousands of dollars.  Too often, people who are underwater are unable to even put their home on the market because they know they won’t be able to generate the money needed to pay off the house loan when they sell their house.

 

Taking Out a Student Loan for Your Child

When your child is ready to attend college, you may feel a natural instinct to help him.  College is expensive, and you may not want your child saddled with student loan debt.  However, there are plenty of alternatives to taking out student loans for your child.

First, let your children know, from the time they are in upper elementary school, that you will not be able to help pay for their college education.  (Does this sound too harsh?  Trust me, your children will be glad when you’re retirement age and have enough money to take care of yourself because you made saving for your own retirement a priority.  Your children will be glad that you are not their financial responsibility, especially when they’re just starting out.)

By letting your children know this early, they can pick local colleges that will be cheaper, they can apply for scholarships and grants, and they can save money themselves for college.

Yes, if you don’t take out loans for your children, they will probably have to take out student loans themselves.  Remember, they are the ones who may qualify for loan forgiveness based on their career.  That will never be an option when a parent holds student loans.  Also, children with student loans can choose an income-contingent based repayment plan; parents can’t.

The government takes very seriously defaulting on student loans and will recoup their money if you stop paying.  “Federal payments to borrowers who have not made scheduled loan repayments can be withheld to repay the loan, including tax refunds and Social Security retirement or disability benefits” (US News).

Finally, if you don’t take out student loans for your children and you’re doing well financially and saving enough for retirement, you can always choose to help your children pay down their student loans faster.

Simply put—don’t take out student loans for your children.  Just don’t do it.  You and your child will be glad you didn’t twenty years from now.

 

Raiding Your Retirement Account

Once you start to amass a fair amount in your retirement account, you may be tempted to tap into that account when you hit a financial bind, which is likely in your forties.  However, there are significant drawbacks to raiding your retirement fund.

First, you lose the ability for the money you withdraw to continue generating interest and growing your nest egg further.

Second, you’ll need to pay a 10% penalty for withdrawing the money if you’re under the allowable age.

Third, the money that you withdraw will count as taxable income on your tax returns, so you’ll also need to pay taxes in addition to the 10% penalty.

Your 40s can be the time when you secure your retirement funding and can begin to plan for a relaxing, enjoyable retirement.  However, as you face dual financial stress in your 40s from increased financial needs from your growing children and your aging parents, you may feel pressure to find more money to infuse in the budget.  This pressure can lead to any of the above unwise financial decisions that can derail your retirement plans and lead you to a difficult financial position in your 60s and 70s.

How about you all? What financial moves do you suggest people in their 40s avoid to keep their future retirement secure?

Helping Kids Prepare Financially for Driving and Car Ownership

The following post is by MPFJ staff writer, Laurie Blank.  Laurie is a wife, mother to 4 and homesteader who blogs about personal finance, self-sufficiency and life in general over at The Frugal Farmer. Part witty, part introspective and part silly, her goal in blogging is to help others find their way to financial freedom and to a simpler, more peaceful life.

One of the biggest parenting – and child – milestones is when your child becomes old enough to start driving on their own. Driving and car ownership are big responsibilities in many ways. Along with the responsibility to drive safely on the road, kids need to be taught the financial costs of driving and car ownership as well. Here are some tips on how you can prepare your kids for the financial impact of owning and driving a vehicle.

Calculate the Costs with Them

It’s important to teach your children a good deal ahead of when they get their license that driving and vehicle ownership costs money. When they become old enough to get their learners permit, sit down with them and start having discussions about what kind of car they want to drive, the costs of purchasing the car, purchasing gas, the cost of car maintenance and repair and the cost of insurance.

Since you’re spend-tracking (you are spend-tracking, right?), go over your own transportation costs with them so they can get a real-life idea that driving and car ownership costs money.

Don’t Pay for Everything

This is just my personal opinion, but I’m a huge believer in having kids pay for at least part of their transportation costs, even while they’re still under eighteen. Kids tend to hold more respect for that which they’ve worked hard to pay for.

Whether it’s a car, a college education or whatever, there can be a lack of understanding with kids regarding the work that it took to be able to pay for those things. When you give some or all of the responsibility for paying for car costs to your child, you help them to appreciate the privilege of driving, to learn real-life lessons about how the world works and you help them prepare for the transition to independent adult.

Set Rules for Driving Preparedness

It’s helpful when kids and parents have a mutual understanding of how vehicle ownership and driving responsibilities will work in your home. For instance, if your child wants to have their own car, show them how to set some money aside for a car maintenance/repair fund. Make sure they have enough money saved for an insurance deductible in case of an accident.

If your child will drive a family car, set clear rules about when they can use the car, when they can’t, and who will pay for what portion of gas, insurance, etc. It’s important too to have a clear discussion about what the consequences will be if the house driving rules are broken, who will pay the fine if your child gets a ticket and so on. When your child knows clearly how the rules work beforehand, there will be less pushback when a consequence needs to be administered or when they’re handed the bill for the increased insurance premiums due to getting a speeding ticket.

Other Driving and Vehicle Ownership Suggestions

There are other responsibilities that go along with driving besides the financial ones. For instance, one of our house rules is that we don’t push our kids to get their license right at the legal age of sixteen, instead allowing them to determine when they’re emotionally ready for the responsibility. It’s important to teach your children these rules as well:

• Never talk, text or browse on your phone will driving. Pull over in a safe place if you have to make a call or text
• Obey all traffic and driving laws at all times (this will be easier for kids if they see their parents doing the same)
• The better you take care of your car, the less it will cost you
• Make sure to insist that those who ride in your car wear seat belts at all times and stay calm while on the road so that they don’t distract you as you drive
• Always be attentive, cautious and defensive when you drive, watching out for other drivers who may be distracted or aggressive
• Avoid confrontations with other drivers by being polite on the road and heading to the nearest police station if there’s trouble
• For tips on what to do if your vehicle breaks down on the road, check out this AAA Auto Checklist.

Driving and car ownership are big responsibilities, both financially and otherwise. The more you can teach your kids ahead of time on how to be prepared for those responsibilities, the better they’ll be able to handle all of the tenets of driving.

How about you all? What other suggestions do you have for teaching your kids about driving responsibilities?

Share your experiences by commenting below!

***Photo courtesy https://www.flickr.com/photos/statefarm/7979445278/

Office Work Hacks

The following post is by MPFJ staff writer, Marie. You can read more of Marie’s articles over at her own blog, Family Money Values. Enjoy! 

Getting along and getting ahead in the office involve age old problems.  Here are some problems with ideas on solutions.

Inability to focus is causing you to be less productive.

You head into the office each day refreshed and ready, but once you get logged in to your applications, the next thing you know it’s lunch time and you haven’t accomplished anything!

Hack: Downsize distractions and focus on priorities.

You can’t control your office environment, but you can change its effect on you.  If the guy in the next cube has a constant stream of visitors, talks to himself out loud, plays loud music or just otherwise distracts you – put on your headphones (they will discourage visitors from approaching and can block the noise).  Reduce clutter in your area so that you aren’t distracted by it.  If you are in a high traffic area, see if the company will put up some noise and sight protection in the form of higher cube walls, signs or other preventative measures.

Focus on priorities by writing down the very most important things that you accomplish each day, and listing tomorrow’s priority tasks.  Check in once in a while with the boss or project leader to make sure you are on track.  Avoid diverting phone calls, emails, text messages, and non-essential or less important project tasks so that you have laser like focus on the priority items.  BUT, if you get stuck working on priority items, it is OK to switch off temporarily to work other items – as long as you get back on track fast.

You feel invisible to the boss.

A boss or mentor higher in the corporate chain of command is an important ally when trying to advance your career.  He or she can steer special projects to you, make you known to other executives, put you in for a raise or bonus, push your ideas, save you from a general layoff, or help in a myriad of other ways.

Hack:  Go face to face

Electronic or phone communication is fine, but your boss is inundated with it day in, day out.  Get to know the boss by going face to face on select topics.  You won’t be invisible long – but take care to be visible in a positive way!

Here are some ways to to meet person to person with your boss.

If he assigned a task or deliverable to you and you finish it successfully, try hand delivering it with a very short verbal reminder of what it is and when it was requested.

If your boss does an annual evaluation, request a touch base meeting once a quarter or twice a year to ‘verify that I’m on track’ with what is needed.

Ask around to see what your boss’s outside interests are, and if you have similar ones, strike up a conversation in the lunch line, bathroom or break-room about the topic.

Volunteer for special projects or activities in which your boss is also involved.   Working directly together on a project will allow you to directly demonstrate your ability, creativity and productivity.

If your boss is not at the same location as you are, try using the phone, video calls or attempting to schedule a visit to his or her location for a special meeting on something important to the boss.

Your work performance suffers due to co-worker or staff member office socialization.

Yes, you are part of a group.  Yes, the group is important.  Some socialization is good for the group and good for productivity, but too much is just a waste of time.  Creativity can be spawned by some group socialization, but so can negative, hurtful gossip that distracts you from the job at hand.   If your good friend in the next department makes a habit of stopping by for a chat each day, and ends up talking for half an hour, the benefit of inter-department communication is outweighed by the loss of work time from both of you.

Hack: Turn the talk back to work subjects.

Don’t be a jerk, do visit for a few minutes, but then gently turn the talk back to what is going on with the project, or a new idea you had to make things better, or a discussion of how to go about the next steps you both need to take.  Don’t get me wrong, managers can gain a lot of good perspective by being open to informal communication with their staff and peers, but perspective on who will take the Superbowl may not be all that beneficial.

Use off hours (such as breaks, lunch and after work time) to really socialize with co-workers.

Meetings suck your office time, then you have to stay late to get your actual work done.

As a manager, I attended and ran a lot of meetings.  There were very good reasons to hold many of the meetings, but often the purpose was not realized.  Sometimes (actually many times) the meeting participants are unprepared to fully participate in what could be a great meeting. Sometimes the meeting organizer isn’t aware of other work that should be happening in the meeting time frame.  Meetings don’t equal work done (usually), but can be beneficial in some cases.

Hack:  Make your meetings meaningful.

When you attend a meeting:

• Understand its purpose.

Question the meeting purpose it doesn’t make sense or if a meeting is not the way to achieve that purpose, but question in private.

• Make sure you should be attending – are you an interested party, can you contribute? Check in with the meeting organizer or your boss if you are unsure why you are attending and then:
• Participate fully.

As the meeting organizer:

• Make sure you have a purpose.

Consider carefully whether a meeting is the very best way to achieve that purpose.

• Verify that each and every meeting participant is required.
• Hold the meeting for the shortest possible time, with the tightest possible agenda.
• Lead efficiently.
• If you hold a lot of meetings, get training on how to lead effective ones and how to accomplish things without meetings.

Any meeting where the leader talks and everyone else sits around fidgeting is a failure!

Work sucks but you don’t feel like you can do anything to change the way things are.

When we lack seniority, we often don’t feel empowered to put our own imprint on our work place.  If we try, sometimes we are told “This is the way we do it – it’s always been done this way”.  Yet you do know of a better way – or at least think you do.

Hack: Figure out how your company solicits or allows input. 

Most companies have implemented multiple ways for employee ideas to trickle up to higher levels of management.  Many companies long for the great employee suggestions and go to great lengths to make sure they are heard.  You just need to figure out what those currently are.

A few methods I have seen at various employers include:

Company wiki’s with sections for various parts of the company – where anyone can post an idea.

Ongoing braintrust meetings – open invites for certain departments, levels or mixes of employees gather to present and discuss ideas for new products, process improvements and etc.

Awards – formal channels to submit written proposals to an award committee to review and get implemented.

Third party award systems – third parties sometimes are hired to come in and solicit money saving suggestions from the folks closest to the work.  These usually come with some pretty significant ‘prizes’.

Special calls to action – a director or vice-president is on a special mission and requests ideas on how to accomplish that mission.

Company Strategic mission committees – most companies have a mission, with goals, strategies and tactics to get to them.  Ask around to find out who is eligible to work on these committees, offer up strategies and tactics or be on the projects to implement them.

Brainstorming meetings – typically held around one particular topic.

Once you understand the change procedures, explore the particular item you want to change.  Learn the history of how and why the process came to be.  What was tried before, would it fail again now?  Was your idea previously suggested?  How could it be implemented differently to be more effective?

Of course, you can always just talk it over with the boss or your other co-workers.  Building support for your change can give its chances of adoption a big boost.

The above work hacks are based on my own work experience and may not necessarily work for you.  It’s always good to get the lay of the land before diving in head first on some of these things.

How about you all? What work hacks have you seen?  Are there issues in your workplace interfering with your productivity?

Share your experiences by commenting below!

***Photo courtesy https://www.flickr.com/photos/83532250@N06/7650804342/

Set Goals to Create Additional Streams of Income

The following post is by MPFJ staff writer, Chonce. You can read more articles by Chonce over at her personal blog, My Debt Epiphany. Enjoy! 

How many streams of income do you have? When my husband got laid off early last year, we realized that one stream of income just won’t cut it anymore.

Diversifying your income can provide you with more financial security which is why it’s a great idea to set goals to create additional streams of income this year.

Why You Need More Income Streams

Most millionaires have an average of 7 different streams of income. Whether you’re trying to be a millionaire or not, you can probably agree that the more income you have coming in from various different sources, the more financially secure you’ll be.

When my husband got laid off, he lost his entire income in one fatal swoop. Luckily, I was working at the time and freelancing on the side with more than 10+ different clients. It was safe to say that by me having multiple streams of income, it really helped up get through that rough patch.

Income diversification can not only help you feel more stable, it can also allow you to meet your other financial goals quicker and allow you to earn more money over time as well.

Here are a few ways to diversify your income this year.

Start Freelancing

If you can provide a service to others on the side of your full-time job, it can be a great way to create an additional stream of income. There are so many different ways to freelance whether you like to write, edit, design graphics, take photos, do customer service or data entry work and so on.

The best part about freelancing is that you can choose your own clients to work with and set your own rates and hours. You don’t have to work an extra 30 hours per week if you don’t want to or know you won’t have the energy. Once you build your network and start finding clients, you can maintain as little or as much work as you want.

If you want to perform the tasks you do at your day job on the side for others as well, that’s an option as long as your employer is okay with it. For example, if you work at a daycare and want to offer some of the parents babysitting services on weekends, as long as your employer is fine with it, you can earn some extra money that way.

I used to take my son to a child care center that allowed that and parents like me were relieved since the center was closed during evenings and weekends.

Back when I worked at a web design firm, I used to think about how much the graphic designers and programmers I worked with could have earned if they did a few freelance projects on the side.

A graphic designer can easily earn an extra $1,000 per month by taking on only 1-2 extra projects on the side.

Sell a Product

Want to sell a product your created or a product on the market that you believe in? Consider this semi-passive way to diversify your income.

If you like to create handmade products and goods, consider setting up an Etsy shop and selling your items online. You can also design t-shirts to sell, create an e-book, flip used items for profit by selling them on sites like Amazon and Ebay.

I knew a blogger who wanted to pay off her student loans so bad that she started buying gently used designer clothing at thrift stores for cheap then selling them online for a profit.

As another option, you can sell products through a direct sales company so you can earn commission from each sale. Companies like Avon, Stella and Dot, Beach Body and Premier Designs, are all great options but there are tons of direct sales companies out there depending on what you’re interested in.

You can show your product catalogs to family, friends, and coworkers and make extra money that way.

Invest

Investing is a great way to diversify your income by creating passive income streams. You can invest in the stock market or in peer-to-peer lending.

You can also invest in real estate. Crowdfunded real estate will allow you to share the costs of investing in commercial and residential properties if you don’t want to purchase a property entirely on your own.

However, if you do purchase a small home or condo, you can earn money each month by renting it out and allow your tenants to pay off the mortgage for you.

Start Brainstorming With This Master List of 20+ Ideas

As you can see, there are quite a few options for diversifying your income this year. Below, I’ve compiled a list of specific ways that you can create additional streams of income. With these ideas, you shouldn’t even consider having one job or a single income stream a possibility anymore.

• Babysit
• Offer a cleaning service
• Buy a rental property
• Drive for Uber or Lyft
• Rent out your car when you’re not using it with Turo
• Rent out your home or a property with Airbnb
• Write an ebook that helps a specific target audience solve a problem
• Start a blog and monetize it
• Sell your crafts and creations on Etsy
• Design T-shirts via Tee Spring to sell online
• Become a freelance writer
• Become a virtual assistant
• Become a freelance photographer
• Sell your images to stock photo websites
• Sell clothes or books online
• Tutor students online or in your community
• Invest in the stock market by building a dividend portfolio
• Flip a house
• Become a peer lender
• Buy website domain names then resell them online
• Host direct sales parties

How about you all? How will you create additional streams of income this year?

Share your experiences by commenting below!

****Photo courtesy https://www.flickr.com/photos/striatic/101594790/

How Millennials Are Avoiding Credit Card Debt

The following is a post by MPFJ staff writer, Toi Williams, who is a professional finance blogger for MarketBeat. She has backgrounds in personal finance, sales, and real estate.

Young Americans under the age of 35, who are often referred to as millennials, are increasingly avoiding credit cards and the debt that tends to come with them. Roughly 63 percent of millennials don’t have a credit card, versus only 35 percent of older adults, according to data from the Federal Reserve. The data also suggested that millennials are using credit cards less than people of a similar age did in the past.

The number of Americans under the age of 35 holding credit card debt has reached its lowest level since the data was first collected in 1989. According to the Survey of Consumer Finances, roughly 37 percent of American households headed by someone aged 35 and under held credit card debt in 2013. That is down nearly a quarter from immediately before the financial crisis that began in 2008. The level has not fallen as much for any other age group.

 

Reasons For Avoiding Credit Cards

There are numerous reasons for millennials’ avoidance of credit cards. Some young Americans say that they are avoiding credit cards because they have lived through the damage such debt caused during the financial crisis. Others say that they avoid credit cards because they do not trust the financial markets. Some watched as consumer and small business credit lines were cut off in the midst of the financial crisis.

Some millennials are dealing with much larger student debt loads than previous generations. The Project for Student Debt found that student debt increased an average of 6 percent each year from 2008 to 2012. According to federal data, the average American under the age of 35 now has $17,200 of student debt. That is 182 percent higher than Americans of the same age had in 1995. These burdensome student debt loads make it hard for them to take on any more debt.

Laws passed after the financial crisis also make it much harder for younger people to secure credit cards. The Credit Card Accountability, Responsibility and Disclosure Act of 2009, or CARD Act, mandated that borrowers must prove they have the means to repay the debt. The CARD Act also altered the lending landscape by restricting the ability of banks to market their products on college campuses. Today, many of the tents that credit card companies used to pitch all over college campuses to advertise their products have vanished.

Many young Americans believe the risks involved with debt outweigh the benefits. Credit cards offer the temptation to spend beyond one’s means. The idea with a credit card is you’re essentially putting money down that you don’t have and making a promise to repay it back with additional money for the convenience of having what you want right now. Some millennials simply prefer to pay for things as they go, without having to worry about paying a bill later.

Millions of millennials are using payment methods that do not involve debt for their purchases. Debit cards, which draw funds directly from a bank account, offer many of the same payment advantages as credit cards without the risk of accumulating debt. For online purchases, an app like Venmo or an online payment service like PayPal can be used.

 

The Consequences of Avoiding Credit Cards

Millennials’ avoidance of credit cards could prove detrimental in the long term, not just for them, but for the financial system as well. Historically, credit card use during the young adult years have made Americans more comfortable with making larger purchases with debt when they are older. Having a credit card also helped them establish a credit score, giving them more access to financial services later in life.

Having a good credit score is more important for this generation than previous ones because today, many more things are tied to credit scores. Credit scores are used to determine interest rates on mortgages and personal loans, may be used as a qualification for a rental home or employment opportunity, and may be used in the determination of insurance premiums. Those with low credit scores or non-existent credit histories find themselves paying more for the same financial services that others obtain at a much lower rate.

Fortunately, millennials don’t need to go into debt to get a good credit score. By paying off the credit card debt completely each month, they can still have good reports sent to the credit bureaus based on the open account. However, a survey by Bankrate found that only 40 percent of millennials with credit cards pay off their balances in full each month, compared with 53 percent of older adults. Millennials were also most likely to miss payments completely.

 

Finding a Good Credit Card

For millennials that do choose to use a credit card, picking the right card is key. Those just starting with credit cards should choose the card with the lowest annual interest rate without being distracted by offers for cash back or rewards. Until you have experience using the card, you will not know whether the rewards offered are worth it or even if you will spend enough to qualify for the rewards. You can always get an additional card with rewards after you have established your credit history.

Finding a credit card with a reasonable interest rate may be difficult for most millennials. According to Experian, the average millennial has a VantageScore of 628, which lenders largely consider subprime. Even for millennials with higher scores, the lowest available APRs offered on new credit cards topped 15 percent on average last summer according to CreditCards.com, marking a five-year high. These rates are expected to rise with future rate hikes by the Federal Reserve, as there are legal limits on certain card fees but no limit on APRs.

While choosing the best interest rate seems simple, it isn’t. Even after you have the card, it’s best to simply assume that the company can change your rate at any time for any reason. The key to ensuring that the rate stays as low as possible is minding the fine print and playing by the rules.

Be aware of when introductory offers end and what transactions they apply to. Review the information for all the fees that apply to the card, including annual fees, balance transfer fees, and cash advance fees, even if you don’t think you would ever use that service. There are many websites available online that will compile the information for several different cards into an easy to read format for comparison.

***Photo courtesy of https://www.flickr.com/photos/128185330@N03/17705922131/in/