21 Dec 2015

Create a Financial Calendar for the New Year

By Steve Burke
By Nathaniel Sillin

When was the last time you made a financial resolution on New Year's Eve? If you can't remember, you're in good company.

The Allianz Life Insurance Company of North America's annual New Year's resolutions survey (https://www.allianzlife.com/about/news-and-events for 2014 reported that 49 percent of respondents said that health and wellness were their first priorities for the coming year, up from 43 percent in 2013. Only 30 percent ranked financial stability as their top goal for the year.

In 2016, maybe it's time to push financial fitness to the top of your list by creating an annual financial calendar that helps you save, spend and invest a little smarter. Here are some suggestions to build your calendar:

Set three important money goals for the year. Three money goals may not sound like a lot, but if you've never thought about money goals before, establishing these targets can make a major difference in your financial life. Set goals that address key money concerns or serve as a springboard for a solid financial future. Choose what makes sense for you, but here are three basic goals to start with:

  • Create or reset your budget. If you've never made a budget before, spend a month or two tracking everything you spend. Review your findings closely and see whether you're spending less than you earn. If not, determine if you can cut spending to direct more funds to meet key goals. If you already have a budget, consider reevaluating your finances to see where you could cut costs.
  • Build an emergency fund. An emergency fund (http://www.practicalmoneyskills.com/emergencyfund) contains between three to six months of living expenses you can draw upon only in a real financial emergency such as unemployment, illness or a major unplanned expense.
  • Save for something special. Make one of your three goals a fun goal - a vacation, a new bike, a wardrobe upgrade - something that feels like a reward.

Here are calendar items that might help you reach those goals.

Make sure you note staggered receipt dates for each of your three free credit reports (https://www.annualcreditreport.com) from Experian, TransUnion and Equifax so you can keep a steady eye on your credit and spot irregularities if they happen.

Prevent severe money surprises by marking key repair or replacement dates on home, appliance and other personal expenses that might be coming up in the future. Use the time you have now to schedule inspections and estimates for each so you'll be able to start setting aside funds in advance.

Retirement readiness is another key calendar item. At least once a year, consider reviewing your holdings in retirement or investment accounts to make sure they're still performing as you've planned or if not, whether you need to restructure the investments in your portfolio.

Put the open enrollment dates for employer- or self-employment benefits on your calendar and then mark a date several weeks before to allow you to start thinking through necessary changes. The way you choose employer or self-employment benefits is a key part of your financial planning and should intersect with other independent money decisions you're making for yourself and your family.

Insurance renewal dates are important to mark as well. If you're not comparison-shopping for the auto, homeowners or health insurance coverage you buy on your own, there's a good possibility you're losing out on money, service or coverage.

Set two dates each year to review your overall finances. You might consider dates in June and November to see how you're doing with budget, savings, spending, investment and tax issues. The June date is for corrective actions; the November date is to determine the last-minute spending, savings or tax moves you want to make before December 31 and to set financial goals for the New Year. If you work with a qualified financial or tax expert, consider involving him or her in the conversation.

Bottom line: If you use a calendar or datebook to keep on schedule, add important money dates and activities so you can meet your lifetime financial goals.

17 Nov 2015

Think Twice About Spending That Bonus

By Steve Burke
By Nathaniel Sillin

When is a bonus not a bonus? When you fail to think about what that extra income will mean to your overall finances.

I don't mean to spoil the fun. Bonuses, particularly if they recognize your great performance during the year, are rewarding in a number of ways beyond money. It means your work is being noticed and you might rise higher in the organization - always a good thing.

However, in many organizations, bonus compensation has developed and transformed to a new entity, very different from how it was a generation ago. So before you book your dream trip to an exotic beachfront resort, take a closer look.

According to human resources and management consulting firm Aon Hewitt, (http://www.aon.com/human-capital-consulting/), some 90 percent of employers have either implemented or are considering something called "variable pay systems" that mean a greater reliance on "incentives, bonuses and cash awards," to reward high-performing employees.

Employers are signing on because it helps them slow the growth of overall payroll, which is the biggest fixed cost in any business. It also offers a way to boost performance among workers at all levels.

What do one-time bonuses or a conversion to a variable-pay system mean for you? Potentially, this could result in changes to your tax situation, the overall value of your employer- and government-based benefits and therefore, your long-term financial picture. Here are some questions to ask:

What kind of bonus is it? Make sure you understand whether a bonus is a one-time award or a shift to an ongoing bonus system. This is a money and a career question. If you are going to be evaluated under new benchmarks and measurements for work you've done every day, you should fully understand these new guidelines and how you can maximize them in your best interest.

Get qualified advice. A one-time bonus or a long-term change in the way you're being compensated is an important financial event. Consider speaking with a qualified financial planner or tax expert about any bonus news you receive and see how they think you should handle the money. Keep in mind that the Internal Revenue Service generally considers bonuses as supplemental wages that can be taxed at a higher rate. Check IRS Publication 15 for more detail. Keep in mind that your salary level - not extra money you get from bonuses or other incentives - provides the basis for calculating your employee benefits and what a lender might offer for mortgages or other credit. In some cases, it might be better to save or invest that bonus than to spend it outright.

Ask questions. Read any paperwork that accompanies your bonus information, write down questions and take them to your employer's designated human resource representative or manager directly.

Be practical, but don't forget the fun. Consider treating your bonus like your paycheck - evaluate what essential needs should to be addressed first and figure out what you can spend for fun.

Make a change if you need to. As more employers adopt variable pay and performance grading systems, consider issues beyond the money. For example, if you are doing work you love, will meeting new performance targets change how you feel about your job? Are you ready to take on the challenges of a workplace where you're graded and evaluated in a different way than you are used to? In some environments, new employee compensation methods can be liberating and financially rewarding; in others, it can make it tougher to stay. See where you stand, and if changing jobs might be worthwhile, consider looking for a better opportunity (http://www.practicalmoneyskills.com/personalfinance/lifeevents/work/landingjob.php).

Bottom line: The way workers are being paid is changing. It's important to understand how one-time or annual bonuses might affect your long-term finances.

09 Nov 2015

Your Year-End Financial Checklist

By Steve Burke
By Nathaniel Sillin

It will begin soon enough - all those "beat the rush!" ads for holiday shopping, activities and events. Right now, you have a great opportunity to beat the rush to organize your year-end finances and make some smart moves for the New Year.

Consider the following tasks for your year-end financial to-do list.

Total up your year-to-date spending. Whether you organize by computer or on paper, make sure your tracking system for spending, saving and investment is up to date. This way, you can make sure you are on budget for the year and ready with data for tax time. Once you are finished, determine your net worth - what you own less what you owe - and get an early idea of what you need to change next year.

Check in with your planner or tax professional. Late December is a busy time for financial professionals. Take a minute to see if they can review your numbers and make suggestions on year-end financial activities and new moves you should make in 2016.

Make sure you've reviewed all your credit reports for the year. You are entitled to one free copy (https://www.annualcreditreport.com) of each of your three major credit reports from TransUnion, Equifax and Experian. It's generally wise to schedule delivery of each at different points in the year to catch errors or irregularities.

Check and rebalance your portfolio. With the dramatic market swings this past year, be sure to check if your retirement and other investments are still on track with your investment goals. Get qualified help if necessary to see if the assets you own still fit your needs. And if you need to do any tax selling by the end of the year, now is the time to start thinking about it.

Check your insurance coverage. If you buy your own home, auto, life or other insurance policies, contact two or three agents representing highly rated (http://www.ambest.com) insurers to review the adequacy and pricing of your coverage. If you have made any structural changes or improvements to your home, make sure those actions are reflected in your homeowners insurance. Such work may boost your home's replacement value. Also, if you've had a major life or financial event like a new baby or the purchase of a new home it's time to make sure all your coverage is sufficient.

Update your W-2, benefits and estate plan if necessary. While you're updating your insurance and investment needs for big life events related to family, property or marital status, see if your tax withholding and employee health coverage and investments need review. Get qualified help to make this assessment if you are not sure.

Empty out your flexible spending accounts. If you have a Flexible Spending Account for health care or other qualifying expenses, it's time to submit outstanding claims from the doctor, dentist or optometrist. Remember you can only transfer $500 in your remaining balance over to the next year. Make any appointments or medical purchases you need to now and get the paperwork in fast.

Do a last-minute tax review. If you work alone or with a tax professional, review your annual income, investment and spending data to see if there's anything you can do in the final weeks of the year to save on taxes. If tax-deductible donations to qualified charities and nonprofits are recommended, consult sites such as GuideStar (http://www.guidestar.org), CharityWatch (https://www.charitywatch.org/home) and Charity Navigator (http://www.charitynavigator.org) to evaluate your choices so you know your contribution is being well spent.

Save time and cut back on waste with online bill pay and deposits. Automatic online bill pay means you won't have to waste time writing checks or risk late payment fees. Scheduling bill payment through your checking and savings accounts can save time and money, while setting up regular electronic deposits to savings and investment accounts can also help you save money before you are tempted to spend it.

Bottom line: Doing a last-minute review of your finances can potentially save money and help you save, spend and invest smarter in the coming year.

28 Sep 2015

Building a Fraud-Free Family

By Steve Burke
By Nathaniel Sillin

A generation ago, most families didn't think about financial fraud. Today, it can come in many forms - over the phone, through the mail and increasingly, online. It's an equal opportunity crime that affects consumers of all ages.

For the 15th straight year, the Federal Trade Commission tapped identity theft as the number one source of consumer complaints in its 2014 Consumer Sentinel Network Data Book (https://www.ftc.gov) released in February. The agency also noted a "large increase" in so-called "imposter" scams - phone calls and emails from thieves purporting to represent the government as a way to steal data and money from unsuspecting adults.

Young people - particularly students - may be the fastest-growing group of fraud targets. Due to their dependence and sometimes unwitting use of computers and mobile devices, young people may be the greatest potential victims of financial fraud, according to a 2015 study (https://www.javelinstrategy.com) by Javelin Strategy & Research. More than 64 percent of respondents said they were not "very concerned" about identity fraud, but were far more likely to find out they were fraud victims long after the damage occurred, such as through a call from a debt collector or a rejection letter from a lender.

Most consumers under the age of 18 shouldn't have a credit record at all. But as digital thieves become more sophisticated and federal agencies become occasionally vulnerable to hackers, critical privacy data like Social Security numbers - which many parents obtain for their children in infancy to save or invest money or buy insurance on their behalf - could be at risk years before a child ever opens a bank account or applies for a loan.

For all of these reasons, it may be time to think about a family fraud plan. Here are some steps to consider.

  • Check the accuracy of all family credit data. Parents should begin by checking their own credit reports (https://www.annualcreditreport.com/index.action) to make sure creditor data and loan balances are accurate and no inaccuracies or unfamiliar lenders have crept into their information. Once clear, adult children can make sure senior relatives are taking similar steps. As for minors, the three major credit agencies - TransUnion, Equifax and Experian - have their own website guidelines for confirming and evaluating a minor's credit data.
  • Make sure mailboxes are safe from thieves and any document with an account number or identifying data is destroyed before it is placed in the trash. The same goes for tax returns that are no longer needed.
  • Learn how to protect all mobile computer and handheld data and have a plan in place in case any family member loses a smartphone, tablet or laptop/desktop computer. Tips are available online, from smartphone service providers and device manufacturers.
  • Online, by phone and in person, be wary of collection demands or requests for Social Security numbers or other specific account data unless the identity of the caller can be verified. Fraudulent calls are called "vishing" scams, similar to "phishing" scams that involve fraudulent emails, texts and websites used to illegally collect personal data.
  • Install all software security updates immediately on mobile devices and computers and ensure passwords are unique and frequently updated.
  • Sign up for fraud alerts from banks, credit card issuers or investment companies to receive immediate word of unusual or potentially illegal activity on accounts.

Bottom line: Identity thieves and other financial fraudsters watch consumer behavior closely and are equally adept at stealing money and data in person, over the phone and online. Have a plan in place to protect the entire family.

24 Sep 2015

From Strip to Chip: Everything You Need to Know About the New Generation of Payment Cards

By Steve Burke
By Nathaniel Sillin

If you've received a replacement for your credit or debit cards in the mail lately, take a closer look. That little gold chip on the front is going to make it tougher for thieves to steal your data.

By year-end 2015, Visa estimates that 63 percent of cards in American wallets will feature this new technology (www.VisaChip.com) aimed at derailing counterfeit fraud. The new chip adds a unique, one-time code that changes every time you use your card to make an in-store payment. That automatic security code change makes your data nearly impossible to use to create a counterfeit card.

Counterfeit or "cloned" cards account for about two-thirds of in-store fraud to the tune of $3 billion, according to Boston-based research firm Aite Group. The transition to chip cards is expected to be nearly complete by year-end 2017.

You'll see very slight differences in using these cards. First, you'll need to insert a chip card into a new slot on built for chip cards and keep it there until your purchase is complete. You won't have to swipe traditional magnetic strip on the back anymore. You will still be able to sign, enter a PIN or just pay-and-go for everyday transactions as before. Just remember to take your card with you when the transaction is complete.

However, if you are currently using an old but unexpired card or if the business where you're doing a transaction doesn't have the upgraded chip card equipment, don't panic. The strip on the back of your card will continue to work with all card terminals for the foreseeable future.

For merchants - the collective name for the stores, restaurants and other businesses where you use credit and debit cards every day - the transition to chip cards is moving along as well. According to a recent survey by Visa, approximately 90 percent of business owners are aware of chip technology and about 70 percent have already upgraded their equipment or have plans to do so. Current estimates show that 47 percent of U.S. terminals will be able to read chip cards by the end of the year.

There's one more incentive for all businesses to get on board with chip card technology: Starting October 1, liability for some counterfeit fraud may shift from the card-issuing financial institutions to retailers unless they are able to accept and process chip card transactions.

For merchants, processing chip transactions will likely involve a hardware or software upgrade somewhat similar to upgrading a cellphone contract. In many cases, the terminal will be included in the cost of the service. About a third of merchant terminals are already chip card-capable and just need a software update to fully function.

For the smallest businesses, some low-cost options for upgrading card acceptance terminals can cost $100 or less. Square https://squareup.com/contactless-chip-reader, for example, recently announced a new $49 card reader that accepts chip cards as well as mobile payments and they're giving away 250,000 of them to small business customers at no cost.

If you travel overseas regularly, you've probably already seen chip card technology in action. It's based on a global standard called EMV and is already at work in countries moving to cashless options for private and public goods and services.

One final note. While you're waiting for your new chip cards, you'll still be able to use your current strip-based credit cards in new machines under their zero liability fraud protection rules. However, debit card security rules are different, so it is best to check with your bank on their guidelines so you know your funds are secure.

Bottom line: The move from strip to chip cards will create a more secure environment for credit and debit card users. However, consumers will still need to keep their cards safe and confirm the accuracy of all their spending data.

27 Aug 2015

Money Prep for Prospective Parents

By Steve Burke

By Nathaniel Sillin

It costs parents an average of $245,340 to raise a child from birth to age 18.

That figure from the U.S. Agriculture Department is just one reason why prospective parents are advised to consider parallel financial planning for child-based expenses and retirement. The key is to start doing it as early as possible - in a December 2012 article in The New Republic, adults are starting families later than previous generations. In short, savings needs for childcare, college and retirement seem on a tighter collision course than ever.

For prospective couples or single parents, any discussion of family should begin with the pros and cons of starting a family in terms of personal, lifestyle and career success. In short, the question "Do we want kids?" should come before "Can we afford kids?"

Once family goals are settled, it's wise to evaluate where current finances stand. While many couples have a thorough money talk (http://www.practicalmoneyskills.com/moneyquestions) before they wed, it works for family planning, too. Couples and single parents will benefit from complete financial transparency before pregnancy, adoption proceedings or fertility treatment starts.

Utilize qualified financial and tax advice to fit specific circumstances. Consult trusted family and friends for referrals to qualified financial planning and tax experts. Also check current tax rules for how to handle and potentially deduct certain costs related to adoption or fertility treatments.

Research thoroughly and bookmark resources online. The IRS website (http://www.irs.gov/Individuals/Parents) continually updates its summary of tax issues for parents which can guide overall planning. New authors and bloggers emerge daily on virtually every aspect of parenting; friends, relatives and colleagues can also provide resources.

For prospective parents who are employed, it is a good idea to evaluate benefits well ahead of a pregnancy, fertilization procedures or adoption. Depending on specific circumstances, employees should review health and general benefits for routine and emergency medical coverage, medical leave policy and extras like child care benefits. Couples should compare their coverage to determine who has the best family coverage overall.

Start planning for childcare expenses as soon as possible. Full- or part-time childcare services for working parents can be surprisingly expensive and difficult to obtain depending on location. In 2015, the White House reported that the average cost of full-time care for an infant was about $10,000 a year, and a 2014 Boston Globe (https://www.bostonglobe.com) report noted state-by-state estimates that were significantly higher. For peace of mind and affordability, it is advisable to tackle the childcare issue as early as possible. Prospective parents might also speak with a qualified tax advisor about whether it is more advantageous to claim the Child and Dependent Care Credit on their taxes or pay childcare expenses from a Flexible Spending Account at work.

Loved ones can also lend financial assistance to a new family in a variety of ways. Affordable basics include general parenting advice, as-needed babysitting services and sharing coupons and hand-me-downs like clothing, toys and unneeded child-related equipment in good condition. For those willing to lend financial support, such options might include a Coverdell Education Savings Account, 529 college savings plan or a gift of cash or assets to the child subject to IRS rules. Also, anyone can directly pay medical expenses in full for someone they do not claim as a dependent under certain circumstances. If friends or family members offer financial help, encourage them to evaluate options with qualified financial and tax experts.

Finally, prospective parents should become dedicated bargain hunters and savers with an equal focus on handling childcare expenses and supporting retirement goals. Both financial goals are equally important.

Bottom line: It pays to plan early for a family. Evaluate your finances, reach out to friends and family for advice and get help from qualified experts if you need it
18 Aug 2015

Getting Your Home Ready to Sell

By Steve Burke

By Nathaniel Sillin

As the economy improves, today's sellers are facing a very different environment than they were before the housing market stumbled in 2006.

Today's housing market features new procedures and standards, not the least of which are continuing borrowing hurdles for prospective buyers. If you are thinking about a home sale in the coming months, it pays to do a thorough overview of your personal finances and local real estate environment before you put up the "for sale" sign. Here are some general issues to consider:

Make sure you're not underwater. You may want to buy a new home, but can you afford to sell? The term "underwater" refers to the amount of money a seller owes on a house in excess of final sales proceeds. If what you owe on the home - including all selling costs due at closing - exceeds the agreed-upon sale price, then you will have to pay the difference out of pocket. If you're not in a situation where you absolutely have to sell now, you may want to wait until your financial circumstances and the real estate market improves.

Evaluate your finances. Before you sell, make sure you are ready to buy or rent. Making sure all three of your credit reports (https://www.annualcreditreport.com/index.action) are accurate is an important part of that process.

Consider "for sale by owner" vs. "for sale by broker." "For Sale by Owner" (FSBO) signs were a common sight in many neighborhoods during the housing crisis. Shrunken home values convinced many sellers to sell their property themselves rather than pay 5-6 percent of profit in broker commission. However, consider what a licensed real estate broker could accomplish in your specific situation. Many experienced brokers have market knowledge and negotiating skills that could potentially get a better price for your property. Deciding which route to take shouldn't be an overnight decision. Check leading FSBO and broker sites and talk with knowledgeable friends, attorneys and real estate professionals to learn as much as you can.

Think twice before spending on improvements. Not every home construction project pays off at sale time. Remodeling magazine's annual Cost vs. Value Report (http://www.remodeling.hw.net/cost-vs-value/2015/) tracks both pricing and cost recovery for leading remodeling projects. Before fixing up a bathroom, kitchen or any other area of your home, research whether the work will actually pay for itself at sale. For many sellers, it might be advantageous to hire a licensed home inspector to identify any structural, mechanical or major appliance repair issues that could delay or compromise a sale.

Don't forget moving costs. According to the American Moving and Storage Association, a leading industry trade group, the average professional interstate move of 1,220 miles costs an average of $5,630; in state, the average moving cost is $1,170. After all the costs involved in selling a home, don't forget how much it costs to relocate.

Bottom line: Selling your home requires planning. Before putting it on the market, get solid, qualified advice on how to sell smart in a still-recovering housing market.

03 Aug 2015

Over 50? Supersize Your Retirement Savings

By Steve Burke

By Nathaniel Sillin

If you're over age 50 and not sure whether you're going to be able to retire, it's time to focus, get advice and build a realistic plan.

You're not alone. The U.S. Government Accountability Office recently reported that most households approaching retirement have low savings, adding that nearly half of households led by individuals or couples aged 55 and older having no retirement savings accounts at all.

The first step is to define where you really stand financially. Consider speaking with a qualified financial and tax advisor to define your present financial circumstances. Such a conversation should take into account your household income, tax situation, debt and retirement assets in any form. Reviewing these factors can help shape your decisions about supersizing your retirement plan for maximum safe returns. While a customized plan is generally the best way to approach shortfalls, here are some general approaches.

Take time to reevaluate your budget (http://www.practicalmoneyskills.com/budgeting). To accelerate retirement saving and investing, you need to find the money first. Non-mortgage debt is a major retirement savings obstacle. Better budgeting can help you find the money to pay off debt quicker. Adjust your spending across the board so you can accomplish this while adding more money to savings over time.

Know that you're going to need to accelerate your savings. Estimates vary, but generally, after age 50, it's best to direct at least 10 percent of your gross income in savings and investments to cover living expenses when you stop working. If you are employed, review your contribution and income limits for the most popular self-directed and tax-advantaged retirement savings vehicles. Those include :

  • 401(k), 403(b) and most 457 plans, which will have a maximum annual contribution limit of $18,000 in 2015
  • Individual Retirement Accounts (IRAs) - both Traditional and Roth - which will have maximum "catch-up" contribution limits of $6,500 (the regular $5,500 limit plus $1,000 for taxpayers aged 50 or over by yearend 2015)

If after all this effort you're still not able to find enough money to put away, consider making a greater effort on the income side. Many individuals boost their savings through a second job or freelancing from home. Consult qualified financial and tax professionals to make sure you're handling this extra income correctly from a tax perspective and putting it in investments that make sense for you.

Downsizing to a smaller home or an apartment in a lower cost-of-living destination or deciding to move in with friends or family at minimal costs may also provide additional savings for retirement. But first, consider what you might get for your home. If you are able to sell a primary residence at a significant profit over your purchase price - above $250,000 for a single taxpayer and above $500,000 for married taxpayers filing jointly -speak to a tax professional about ways to avert a significant tax liability.

Finally, put proper financial safety nets in place. Make sure you have an emergency fund (http://www.practicalmoneyskills.com/emergencycalc) set up so you won't be forced to dip into savings to cover unexpected expenses. And don't forget insurance - having the right amount of property and casualty, health and disability insurance can protect your retirement nest egg from significant risk.

Bottom line: Building a retirement fund after age 50 is challenging, but not impossible. Get solid tax and financial advice, start downsizing immediately and don't forget critical financial safety nets.

Nathaniel Sillin directs Visa's financial education programs. To follow Practical Money Skills on Twitter: www.twitter.com/PracticalMoney.

29 Jul 2015

10 Ways to Become Financially Independent

By Steve Burke

By Nathaniel Sillin

After the 2008 economic crisis, many people assumed they would never be able to reach true financial independence - the ability to live comfortably off one's savings and investments with no debt whatsoever.

However, individuals willing to use their time horizon to plan and adjust their spending, savings and investment behaviors might just find financial independence is possible. Here are 10 ideas to get started.

1. Visualize first, then plan. Start by considering what your vision of financial independence actually looks like - and then get a reality check. Qualified financial experts can examine your current financial circumstances, listen to what financial independence means to you and help you craft a plan. The path to financial independence may be considerably different at age 20 than it is at age 50; the more time you have to save and invest generally produces a better outcome. But at any age, start with a realistic picture of your options.

2. Budget. Budgeting (http://www.practicalmoneyskills.com/budgeting/) - the process of tracking income, subtracting expenses and deciding how to divert the difference to your goals each month - is the essential first task of personal finance. If you haven't learned to budget, you need to do so.

3. Spend less than you earn. It might be obvious, but it's one of the most difficult financial behaviors to execute. Adhering to a lower standard of living and expenses will help you put more money into savings and investments sooner.

4. Build smarter safety nets. Emergency funds and insurance are rarely discussed in combination. The traditional definition of an emergency fund is a separate account for cash that can be used instead of credit to repair a broken appliance or other expense that may run a few hundred dollars. However, many people keep insurance deductibles high to keep premiums low. Would you have enough cash on hand to cover an insurance deductible if you had a sudden claim? If not, build your deductible amounts into your emergency fund.

5. Eliminate debt. Though consumer debt levels have generally fallen since the 2008 financial crisis, the Federal Reserve Bank of New York reported in February that home, student loan, auto and credit card debt began creeping up again in 2014. Getting rid of revolving, non-housing debt (http://www.practicalmoneyskills.com/costofcredit) is one of the most effective ways to free up money for savings and investment.

6. Consider your career. Financial independence doesn't require you to quit a career you love, but you really can't get to financial independence without steady income to fuel savings and investments that will build over time. Speak with qualified advisors about your income, benefits and retirement picture first, and see if you might be able to expand your sources of work-related income, such as consulting part time. Also keep in mind that over the age of 50, the Internal Revenue Service allows you to make catch-up contributions (http://www.irs.gov/Retirement-Plans/Plan-Participant,-Employee/Retirement-Topics-IRA-Contribution-Limits) to both 401(k) and IRA accounts.

7. Downsize. You'll generally reach wealth financial goals faster if you can cut your overall living expenses. For some, that means selling your home and moving to a smaller one or to an area with lower living costs and taxes. You can also sell or donate property you don't need and use those proceeds to extinguish debt or add to savings or investments.

8. Invest frugally. Become a student (http://www.dol.gov/ebsa/publications/undrstndgrtrmnt.html) of investment fees and commissions because they can cut significantly into your principal. Make a full evaluation of fees you are paying on every investment account you have and if you're working with a licensed professional who sells you financial products, know what fees they're charging for their investment and advisory services.

9. Buy assets that generate income. Stocks, real estate, collectibles or cash investments all have up and down markets. But do your homework and focus on investments bought at attractive prices that are likely to appreciate over time. Also, don't forget to study the tax ramifications of any investment transaction you make.

10. Always know where you are financially. Financial planning isn't about making one set of financial decisions and assuming you're set. Lives and situations change and your financial planning must be flexible enough to withstand both positive and negative changes without derailing your hopes for financial independence. If your forte is not investment, financial planning or tax matters, by all means bring in qualified experts to help. But financially independent people generally have their money issues at their fingertips not only for their own use, but for estate purposes as well.

Bottom line: Financial independence involves diligence and a bit of sacrifice, but even the smallest moves can yield big outcomes.

20 Jul 2015

Make Sure Your Freshman Gets a Money-Smart College Start

By Steve Burke

By Nathaniel Sillin

Does your college-bound freshman know how to handle money at school?

Campus life can test even the most disciplined young adults on money matters. In the final weeks before you help your student pack up for the dorm, it's a good time to pack in some money lessons as well.

Start with what college will cost. On average, the Class of 2015 graduated with a little over $35,000 in student loan debt, according to Edvisors (http://blogs.wsj.com/economics/2015/05/08/congratulations-class-of-2015-youre-the-most-indebted-ever-for-now/). Depending on your financial situation and how you've planned for your child's college education, start with an overview of how your student's college costs will impact your finances now and after graduation.

If your child will be paying off personal or student loans once they graduate, discuss how that reality should define financial choices throughout college. That doesn't mean saving every penny and having no fun at all, but such a talk should reinforce how handling money intelligently, setting priorities and getting a jump on savings can position your child for a much stronger financial start upon graduation.

Train them to budget. If your child hasn't learned budgeting skills (http://www.practicalmoneyskills.com/budgeting),it's time for a crash course. Budgeting is the first essential skill in personal finance. Teaching children to budget now gives them a head start on dealing with post-graduation debt or long-term goals like affording a home or car. Because teens often live their lives on smartphones, familiarize yourself with the growing range of budgeting apps (http://www.usatoday.com/story/money/2015/04/27/budgeting-apps-affect-spending-habits/26190991/) to keep their money management on course.

Talk through on-campus banking and credit needs. Many parents start their kids with custodial savings and checking accounts at their local bank when they are younger. If your bank has branches in the teen's college town, that relationship can easily continue. Responsible credit card use is also wise to start in college. Keep in mind that The Credit Card Accountability, Responsibility and Disclosure (or Credit CARD) Act of 2009 requires that anyone under 21 without independent income have a co-signer to qualify for a card. As such, you'll be able to keep track of your child's credit use. However, if they default, you'll be on the hook - so monitor your child's bank and credit relationships closely until you agree they're ready to manage them on their own.

Cover credit monitoring and identity theft. With smarter online thieves emerging every day, your child is at risk of identity theft from the minute he or she is assigned a Social Security number. While most teens generally don't have a credit report until they start earning a paycheck at age 16, be on the lookout for fraudulent activity earlier (http://www.consumer.ftc.gov/articles/0040-child-identity-theft) and make sure they get in the habit of ordering the three free credit reports (https://www.annualcreditreport.com/index.action) they are entitled to each year. Throughout college, consider sitting down with children so you can review their annual credit reports together.

Bottom line: There's plenty to do in the final weeks before your kids leave for college. Don't forget to reinforce important money lessons before they go.

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