The cheapest cars to own...Big banks fined billions yet again...Financial skills sag in old age...Bachelor parties cost how much?!...And more
Welcome to MUTUAL INTEREST, the first place to check for all of the news and information you need to manage your money and build financial security. It also helps you understand what's going on in the economy, and how that affects you. This page is constantly updated, so bookmark it and come back often for the latest posts.
Want the best deal on a car? Pay attention to the five-year cost-to-own price, notes MarketWatch. According to Kelley Blue Book, the average five-year cost-to-own for a 2015 model is $50,781. But several vehicles come in well under that. The most economical by far is the subcompact Chevrolet Spark, costing just $26,905 over a five-year period. Need more space? The midsize Mazda6 comes in at $35,321. But the luxury Lexus LS will cost you a hefty $84,447 to own over that period.
SECOND THOUGHTS: Car loan rates are creeping up this year, but they're still low by historical standards. And some car companies are offering cut-rate loans. You may even be able to get 0% financing on a new car or truck .
May 22, 2015
Five of the world's largest banks, including JPMorgan Chase and Citigroup, were fined roughly $5.7 billion for brazenly manipulating foreign exchange rates to their advantage. Four banks pleaded guilty to criminal charges after their currency traders were caught boosting profits by using an exclusive electronic chat room and coded language to manipulate benchmark exchange rates for the euro and dollar.
April 20, 2015
Simple math problems and financial skills are some of the first to decline in diseases of the mind, notes a recent article in The New York Times. But even cognitively normal people can hit a point at which financial decisions become more difficult. According to a Center for Retirement Research at Boston College study, we hit our financial peak in our 50s. We plateau in our 70s and then start to decline and become more vulnerable. “Our nation’s wealth is disproportionately held by older adults, and they are exactly the group, particularly as they reach their 80s and 90s, that are most vulnerable. But our system has the fewest protections for those people,” David Laibson, a Harvard economics professor, told The Times.
SECOND THOUGHTS: Protect your money. Most families have a tragic story about elderly relatives who lost their savings. So it's crucial to watch out for these retirement-ruining money mistakes.
May 19, 2015
Going to a bachelor or bachelorette party this year? Plan to spend somewhere around $850. A survey for Priceline.com by Google Consumer Surveys says nearly a third of more than 1,000 invitees spent $850 or more on the pre-wedding party. Most of that cash went toward food and drink (28%), then entertainment (19%), airfare (18%) and hotels (16%). Gifts accounted for 12%, and the rest went to cabs and limos. That’s more than we spend on attending the wedding itself — $673 on average per guest.
SECOND THOUGHTS: If you can’t afford it, don’t go. It’s not worth going into debt over. But tell the bride or groom early if you can’t make it. “Tell them, ‘I’d love to attend, but I have a lot of unexpected expenses coming up,’ ” Jacqueline Whitmore, founder of etiquette school The Protocol School of Palm Beach, tells MarketWatch. There’s plenty of other things you can do with that money — like put it into a retirement account. Here are 7 smart things you can do with $1,000.
In 2014, the annual pay for CEOs soared 12.1%, according to a report from Towers Watson & Co. Workers, meanwhile, got only a 3% bump. “Obviously, inequality is a popular theme when you compare CEO compensation to the sluggish rate of salary growth,” Sean Snaith, director of the Institute for Economic Competitiveness at the University of Central Florida, told Marketwatch. CEOs benefited greatly from higher pension values, larger incentive payouts and higher values of long-term incentives like stock options and restricted stock.
SECOND THOUGHTS: Why was there such a big difference between CEO and traditional worker pay increases last year? “The labor market recovery has been relatively weak, but the stock market has been quite strong,” Snaith told Marketwatch. CEOs carry a lot of stock. It’s true — the more you make, the easier it is to save. But no matter what you make, you still have a shot at a comfortable retirement if you follow the rules. Check out how to save $1 million for retirement.
May 12, 2015
Sen. Elizabeth Warren, a Massachusetts Democrat, is targeting the 15 largest annuity providers, according to Bloomberg. That includes Allianz SE's U.S. Life division, TIAA-CREF, New York Life Insurance Co. and Prudential Financial Inc. She wants to know if their perks — car leases, Super Bowl-style rings, cruises and other kickbacks — encourage brokers to put their personal interests before their clients'. Recently proposed regulations by the Labor Department would require brokers to adopt a fiduciary duty, ensuring that they act in their retirement clients' best interests.
SECOND THOUGHTS: Annuities guarantee specific returns over time. But investor advocates have warned that some carry high fees and big penalties for early withdrawals, making them risky investments, notes Bloomberg. Here's how to be a smarter investor in your retirement plan.
May 11, 2015
Wells Fargo, one of the largest banks in the U.S., has been charged with opening accounts and credit cards in customers' names without authorization, according to CNN Money. The civil complaint filed by the Los Angeles City Attorney alleges that bank employees opened the accounts to meet unrealistic sales goals and quotas. As a result, fees went unpaid, placing some customers in collection. Some even had negative information placed on credit reports. The complaint seeks a $2,500 fine for every unauthorized account.
SECOND THOUGHTS: If you're a Wells Fargo customer, check your accounts and credit reports for errors. Wells Fargo say it will vigorously defend itself against the allegations, but the statement it issued didn't exactly deny, or even address, whether the complaint is valid, notes CNN Money. So it's best to err on the side of caution.
May 8, 2015
The U.S. Labor Department's proposed new rules offering greater consumer protection for retirement savings would require financial advisers to put investors' interests first, according to The New York Times. That would eliminate loopholes allowing brokers to avoid their fiduciary duty when giving advice on money held in 401(k)s and IRAs. This is expected to save investors $40 billion over 10 years. “We have met way too many people who have worked their tails off for retirement … and then they were steered into a product that was unduly complex,” Labor Secretary Thomas E. Perez said in a statement.
SECOND THOUGHTS: This will be a boon for savers everywhere. But today we have to watch out for ourselves when it comes to retirement. The days of the corporate pension are on the way out. These 10 secrets to successfully save for retirement can help you along the way.
May 7, 2015
Tesla's newest product — the Powerwall — is a rechargeable lithium-ion battery that can be mounted on a wall, connected to the local power grid and used to power homes, notes CNN Money. Tesla says it can cut home electric bills by 25%. The battery can be charged overnight, when energy companies typically charge less for electricity, and used during the day to power the home. Prices start at $3,000 — not cheap — but many utility companies offer rebates.
SECOND THOUGHTS: Home batteries aren't a new thing. But the ones currently on the market don't pack much of a punch. Tesla claims its battery is far superior. Keep in mind that Tesla's battery works best with solar panels. So, while that power duo might take you completely off the grid, getting there will put a dent in your bank account.
The average domestic roundtrip plane ticket will cost $454 this summer, according to the Airlines Reporting Corp., down about $2 from 2014. In general, flights to Hawaii, Florida and New Orleans will be cheaper. But if you’re flying to New York, Denver or San Francisco, plan to pay more. Overseas travelers will see a bigger price break. Ticket prices to Europe are about $50 cheaper than they were last summer, with the average hitting $1,619.
The U.S. Department of Justice and Quicken Loans are suing each other over whether or not Quicken falsified data on FHA loans from mid-2007 through 2011, notes CNN Money. The Justice Department alleges that Quicken's culture "elevated profits over compliance" and that employees sought inflated appraisals and fudged borrowers' income to get FHA-insured loans. That cost the government millions, the Justice Department says. Anticipating the government's suit, Quicken sued the government over its investigation the week before the Justice Department's suit was filed, saying the claims were blatantly false. Now the fight is on.
SECOND THOUGHTS: Don't get pulled into a home loan that's too pricey. Wise home-buying never changes: It's about figuring out what you can afford, how much you can put into a down payment and then sticking to your plan. Here are some tips for figuring out how much house you can afford.
May 1, 2015
New drugs effectively treating everything from cancer to diabetes come with a steep cost. From 2010 to 2015, the price tag on more than 30 new drugs was $5,000 per month or more, according to Memorial Sloan Kettering Cancer Center in New York. One melanoma drug costs $150,000 per year, notes Bloomberg Business. So, despite an increasing number of available brands, the price of drugs — especially those for cancer — has soared. Those high prices could stifle innovation. “We can cut prices, cut the drugs that are covered, or cut the number of beneficiaries, and none of those are very palatable,” Stephen Schondelmeyer, a pharmacist and economist at the University of Minnesota, told Bloomberg Business.
SECOND THOUGHTS: Medical debt is one of the single biggest threats to financial security. And while medical costs keep rising, you can still exert authority over how much you pay. Use these 10 smart moves to save on health care and stop getting overcharged.
April 29, 2015
If you're a wedding guest this year, plan to spend nearly $700. The annual American Express Spending & Saving Tracker says the average cost of attending a wedding this year is $673, up 14% from 2014. You'll spend even more if you're a wedding party member — $701. A lot of that will be spent on airfare ($225 per person), hotel accommodations ($170), dining out ($116) and dressing up ($95). Perhaps to compensate, most Americans will spend less on a gift — $106, compared with $109 in 2014. But for a family member, the gift bill rises to $142.
SECOND THOUGHTS: Remember, you don't have to go. If you can't afford it, check the RSVP box that says "no." Instead, stash the cash you would have spent in a 401(k). Every little bit counts. Check out how to save $1 million for retirement.
April 28, 2015
Just 53% of workers ages 25 to 64 had access to an employer-sponsored plan in 2011, according to a report from the New School. That's sharply down from 1999 (61%). That includes both traditional pension plans and 401(k)s. Traditional plans have been quickly fading out of the workplace — just 16% of workers with an employer-sponsored plan have one, while 63% have 401(k)s.
SECOND THOUGHTS: The fact that both types are fading is worrisome. There's a direct correlation between being prepared for retirement and having a retirement plan where you work. The median household net worth of couples ages 55 to 65 is just $325,300. That's simply not enough to retire on. Of those households, 55% will have to rely almost entirely on Social Security, notes the New School report. When it comes to retirement planning, you have to have a do-it-yourself mentality. Start with these 10 secrets to successfully save for retirement.
April 26, 2015
An Institute for Women's Policy Research report says 36% of millennial women —ages 25 to 34 — have bachelor's degrees or higher compared with just 28% of millennial men. Yet those women make an average of about $50,000 per year — the same as the average earnings for a man with an associate's degree. Men with bachelor's degrees earn about $20,000 more on average than women with bachelor's degrees, the report says. And even women with graduate degrees earn about $5,000 less than men with bachelor's degrees.
SECOND THOUGHTS: There is hope. Between millennial women and millennial men, the pay gap is smaller than the overall pay gap, according to the report. And in New York, millennial women make more than male colleagues. “That is probably the first time that we’ve ever seen that,” Barbara Gault, the institute's vice president and executive director, told Marketwatch. “It doesn’t reflect that women have surpassed men economically at all. It probably does reflect some progress.”
April 22, 2015
If you want a bachelor's degree for free, work at Starbucks. The coffee chain says it will offer employees free tuition at Arizona State University's online program. Starbucks had already offered two years of undergrad tuition at the school, and now is bumping it up to four years. Full- or part-time workers at Starbucks stores in the U.S. who don't already have a four-year degree can apply. You can't apply if you work at a "licensed store" like those inside grocery stores. Starbucks will reimburse students for tuition costs at the end of each semester.
SECOND THOUGHTS: Don't let this opportunity slip away. Tuition for ASU's online program is about $15,000 per year, notes CNN Money. Plus, Starbucks offers health care and a 401(k) with matching funds for full- and part-time employees. That's a great way to build your retirement and skip out on the student debt that many are saddled with after graduation. Basically, you get paid to go school.
April 21, 2015
Life insurance company John Hancock is offering a discount if you'll wear a Fitbit to track your health, location and body, notes CNN Money. The healthier your lifestyle, the bigger the discount. In some cases, up to 15% off. For a 35-year-old nonsmoker with a healthy weight and safe lifestyle, the average cost of a 20-year, $500,000 term life insurance policy is somewhere around $36 a month, according to Trusted Choice. That means a 15% discount would save about $5 a month, or around $60 annually. The program is available in 30 states.
SECOND THOUGHTS: Don't do this. It's a horrible idea. Divulging that much personal information for such a mediocre payoff is kind of, well, crazy. Your information would be stored in a database — heart rate, exercise patterns, gym frequency, where you go. Sounds a little Orwellian. And remember, the tracker works both ways. Feel like having a lazy day or a lazy week? If you don't exercise, you could lose that discount. Life insurance is cheap enough already. And if you're living a healthy lifestyle, chances are your premiums will be affordable without wearing a tracker.
If you have a college degree, you can expect to earn an average of $20,300 more a year than peers without one, the Federal Reserve Bank of San Francisco reports. Over the past four decades, that's how much more college grads have earned, on average, than their peers. The bank says an undergraduate degree yields a lifetime return on investment of more than $420,000. “A college degree comes with higher earnings, some insurance from the ups and downs in the economy and a path up the economic ladder,” writes Mary Daly, associate director of research.
SECOND THOUGHTS: Stash away that extra cash. And start when you're young. The earlier you start saving for retirement, and the more you put away, the better off you'll be. Check out these 10 secrets to successfully save for retirement.
April 17, 2015
Dan Price, founder of Gravity Payments, is bumping up the minimum salary at his company to $70,000 per year. Assuming a 40-hour workweek, that's somewhere around $36 an hour. To do it, Price cut his own salary from nearly $1 million to $70,000 and is using 75% to 80% of the company's anticipated 2015 profit — $2.2 million. The move certainly highlights the disparity between CEO and employee pay. Chief executives make around 300 times more than the average worker, notes The New York Times. “The market rate for me as a CEO compared to a regular person is ridiculous — it’s absurd,” Price told The Times.
SECOND THOUGHTS: If your CEO decides to be this generous, put that extra cash away for retirement. The average salary at Gravity is $48,000 a year. With a bump up to $70,000, Gravity employees now have somewhere around $22,000 extra per year to stash away for their golden years. And that can make a huge difference. Keep in mind that saving for retirement can be surprisingly easy if you make just a few savvy decisions. Check out these 10 secrets to successfully save for retirement.
April 16, 2015
No credit? No problem. Fair Isaac Corp., creator of the FICO score, has launched a new score based on payments of utility and telecommunications bills. It should make it easier for millions to build credit. The new score will have the same 350 to 850 range as the existing FICO score. "We want to observe those consumers that have been paying, for example, their mobile, land line and cable bills responsibly," Dave Shellenberger, a senior FICO director, tells CNN Money. "We know that these can indicate good future payments for other types of credit options."
SECOND THOUGHTS: When you check your credit reports annually for accurate info, you'll need to add a couple of places to your list: National Consumer Telecom & Utilities Exchange (run by Equifax) and LexisNexis Risk Solutions. If you find any inaccurate information, dispute it. A good credit score is key to the best rates and terms on a loan.
April 15, 2015
The median amount Americans have in a 401(k) savings account is $18,433, according to a recent report from the Employee Benefit Research Institute. And nearly 40% of employees have less than $10,000 stashed away. Those are dismal numbers. Of course, the median is higher among workers ages 55 to 64 — $76,381. But that's simply not enough to pay for health care and daily living in retirement, notes USA Today. It shouldn't come as a shock that the top financial worry of Americans is now retirement.
SECOND THOUGHTS: What is happening here? "401(k)s were never designed as the nation's primary retirement system," Anthony Webb, a research economist at the Center for Retirement Research, told USA Today. "They came to be that as a historical accident." When 401(k) plans began to popularize, defined benefit plans starting disappearing. And we're now responsible for building our own secure retirement. But if all your employer offers is a 401(k), you've got to sign up and make the most of it. Check out these 7 rules for a successful 401(k) retirement account.
April 13, 2015
More education among the non-college-educated wouldn't mean less inequality. That's because inequality is being driven up by the sharp upward momentum of the very rich, something education can't fix, notes The New York Times. Yet, more education would improve lives and economic potential among workers, says a report from the research group Hamilton Project. With a more educated labor force, middle-income workers would earn about 9% more, the study says. “Increasing the educational attainment of men without a college degree will increase their average earnings and their likelihood of being employed,” the authors write.
SECOND THOUGHTS: If you're a parent, you probably want your kid to have a shot at college. But tuition is rising, and the only way you'll ever be able to pay for it — or even some of it — is to start putting money aside as soon as you can. A state-sponsored, tax-free college savings plan can help. See if a 529 plan is right for your family.
April 12, 2015
Move over millennials, it's Generation Z's time in the spotlight. And they could make a big splash. According to a recent story in The New York Times, Gen Zers (born mid-1990s to early '00s) have grown up in a healthier economy and are eager to get out in the world. They're independent, curious and driven. Meanwhile, around a third of millennials are still living with their parents, according to a 2015 report by the Census Bureau. The Times notes that in order to attract Gen Zers out of college, even well-known organizations will have to rethink recruiting practices. This generation has the potential to make a big impact on the U.S. economy.
SECOND THOUGHTS: Speaking of being young and driven, your first job out of college is a great place to start saving for retirement. If your employer offers a 401(k), take full advantage. Here's how to become a smarter investor in your retirement plan.
April 11, 2015
Americans need to step up personal savings rate
According to new numbers from the Department of Commerce, the personal savings rate for the first two months of 2015 is higher than for any month in 2013 and 2014. It stood at an annual rate of 5.8% of income in February 2015. A year earlier, it was at 5.5%. And the year before that, it was at 4.7%. We haven't seen a personal savings rate this high since 2012. That December, the rate hit 10.5%, nearly double what it is now.
SECOND THOUGHTS: Looks like we're progressing more slowly on our way to return to the double-digit rates that most financial experts say we need to be investing in our futures. Now you can stash away up to $17,500 in your 401(k) account. Check out these tips to become a smarter investor in your retirement plan.
April 9, 2015
According to CNN Money, that pricey iPhone in your pocket might save you time and money on health care. Apple's new apps — HealthKit and ResearchKit — make it easy for to measure and share health information. Doctors say the technology could make care more efficient and less costly. Being able to monitor patients, especially those with chronic diseases, could reduce visits, ensure procedures are done at the right time and promote patient knowledge. It could also reduce duplicate blood tests or expensive X-rays, notes CNN Money.
SECOND THOUGHTS: Being able to track your health care 24/7 seems like a very beneficial idea. On the other hand, your doctor will likely know whether you're following instructions and fitting in your daily trip to the gym. Critics say this type of technology could be another way for hospitals and doctors to pass off responsibility onto patients, notes CNN Money.
April 8, 2015
According to a new analysis by Pew Charitable Trusts, the middle class is declining in every state. Between 2000 and 2013, the percentage of middle-class households shrank. Pew defines the middle class as those making between 67% and 200% of a state's median income. The biggest loss occurred in Wisconsin, where the share of middle-class households fell 5.6 percentage points to 48.9% of the population. Wyoming lost the least number of such households, declining by just 0.3 percentage points to 51.2%.
SECOND THOUGHTS: Whether this is a bad thing or not depends on where the middle class is going, notes CNN Money. If they're climbing up the economic ladder, that's a plus. Certainly one way to move up the ladder is to keep building wealth. Use these 7 rules for a successful 401(k) retirement account, and you'll be well on your way to building more wealth.
April 7, 2015
Full-time, year-round female workers in 2013 were paid only 78.8% of what male counterparts earned, according to new data from the Census Bureau. And an analysis by The Washington Post shows there were only nine jobs out of 342 listed where women out-earned men that year. The biggest gap was among producers and directors, where women earned a median of $66,226, or nearly $4,000 more than men. But in most cases, women didn't earn that much more — around $1,000 or less. Cleaners, wholesale and retail buyers, transportation security screeners, and social and human service assistants were also among jobs where women made more than men.
SECOND THOUGHTS: Job tenure, experience, hours, education and other variables can affect earnings. Those weren't factored into the Census Bureau data. And while discrimination is certainly a possible explanation for the wage gender gap, there's no way of telling for sure what explains it, notes The Post.
April 6, 2015
The IRS says the average 2014 tax refund is $2,893. And there's a good chance you'll get one. In fact, more than four-fifths of returns processed so far have resulted in refunds. Over the last few years, about eight of 10 filers have qualified, getting an average of $2,800. But here's something you may want to check into: The IRS has $1 billion in unclaimed refunds from tax year 2011 that are owed to an estimated 1 million filers. If you're one of them, it's time to get on the ball and claim your dough.
SECOND THOUGHTS: Spend it or save it? Sure, it might be more fun to spend it. But it'll be a lot more beneficial to stash that refund away in your retirement account. Just check out how much of a boost contributing an extra $2,893 can give your 401(k) by using this 401(k) calculator.
March 31, 2015
NPR recently put out an interactive map that shows how union membership has fallen over the last 50 years in each state. Nearly a third of U.S. workers belonged to a union in 1964. Today, just one in 10 workers belong. New York has the highest share of union workers, with 71% of government workers there in a union. Alaska and Hawaii have the second- and third-highest rates. Overall, the West Coast, Midwest and upper East Coast have the most union workers today.
SECOND THOUGHTS: Where did all the unions go? Back in 1964, there were plenty of manufacturing jobs in the Midwest, and many of them were unionized, NPR notes. But the number of jobs in manufacturing has fallen, and fewer of the remaining manufacturing jobs are unionized. The unions, and the benefits they provided, are slowly fading.
March 30, 2015
NPR recently put together a chart that shows what middle-class families living in the nation's 30 most populous cities make annually. The city with the highest median income — $103,000 — is San Jose, California. That's in the heart of Silicon Valley, where 13% of families have annual incomes of $250,000. The city with the lowest median annual income? Detroit, at $30,000. The national median is $64,000 per year. NPR used data from the 2013 American Community Survey, counting households with two or more people related by birth, marriage or adoption. Suburbs and rural areas, for the most part, weren't included.
SECOND THOUGHTS: This offers an easy way to judge where you fall on the income distribution ladder. Income and cost of living vary by location, but a better measure of how you're doing financially than income is how much wealth you're building. You can make $250,000 a year or more, but if you're not saving any of it, you're missing the goal: A secure retirement. Here's how to save $1 million for retirement.
March 28, 2015
The amount of money couples are spending on their wedding day is on the rise, notes CNN Money. In 2014, that amounted to an average of $31,213, according to a new report from The Knot. That's a 4% increase from 2013, when couples spent $29,858. Most of the 2014 bill went to the venue (an average of $14,006). The engagement ring and band were next most expensive, costing $5,855 and $3,587, respectively. And the average price to cater per guest was $68.
SECOND THOUGHTS: With $31,213, you could almost max out your 401(k) twice, and you could certainly max out your 401(k) and IRA in the same year. Indeed, opting for a cheaper big day could be very beneficial to your retirement (assuming you tuck that extra cash away in a retirement account). Before you commit to spending a ton of money on your wedding, it's important to get a better understanding of how well you're managing your money — and what you need to do better. Here's how to measure financial success.
March 27, 2015
About 50% of U.S. households haven't saved a dime for retirement, according to a new study by the National Institute on Retirement Security. In fact, nearly 40 million working-age households don't even have a retirement account. Those who do save in a retirement account have an annual income nearly 2.4 times higher than those who don't, which highlights the growing gap between the haves and have-nots, notes a report from Yahoo Finance. Across all households, the median retirement balance is just $2,500. Bear in mind that Fidelity Investments recommends having five times your current income by age 55 to be on track for retirement.
SECOND THOUGHTS: Many of us are struggling to save. But if your employer offers a 401(k) plan, you've got to make the most of it. Contribute at least enough to get a full match. Here are 7 rules for a successful 401(k) retirement account.
If you have to choose between your retirement security and your child's college costs, pick the former. Otherwise, your kids could end up paying for your expenses in old age, notes Time Money. That may seem obvious, but according to a recent T. Rowe Price survey, more than half of parents say spending retirement money on college costs is preferable to their kids graduating with debt. Around 58% of parents have dipped into their retirement account at least once for expenses. And about half of parents plan to work for as long as they can and don't see a reason to save. Those aren’t encouraging statistics.
SECOND THOUGHTS: If it doesn't derail your savings plan, paying for college for the kids is great, notes Time Money. If it does, leave it up to your kids to find an alternative way to pay for their education. It's not worth sacrificing your retirement. Instead, boost your investing knowledge and build up your retirement. Here's how to become a smarter investor in your retirement plan.
March 23, 2015
Real estate agents are intentionally listing homes below their value to create bidding wars, according to The Washington Post. In the past, the list price of a home was typically the seller's ceiling, and buyers could negotiate down from there. But now. bidding starts at the buyer's floor. Real estate agents are using this tactic to boost the number of bids on a home, creating something of an auction. That's making the market confusing and difficult to gauge for prospective buyers. For instance, a home might be priced at $200,000, but the sellers may intend to sell it for much more after bidding starts.
SECOND THOUGHTS: Be careful and try to remain unemotional when purchasing a home, especially if you're in a bidding war. Otherwise you could end up paying more than you should. That's why it's crucial to figure out how much house you can afford before you go house hunting.
March 20, 2015
By removing the word “patient” from the policy statement released after today's meeting of its rate-setting committee, the Federal Reserve has opened the door for increasing rates as early as this June. Once the central bankers start nudging rates higher, the return savers get on their certificates of deposit, money market and savings accounts should also start to grow. That move will feel long overdue to millions of Americans who’ve watched their savings languish for more than six years as the Fed has kept rates at record lows to bolster the economy.
March 18, 2015
The three major credit bureaus — Experian, Equifax and TransUnion — have agreed to new guidelines to handle disputes on credit reports, according to a settlement announced by the New York attorney general. The deal will require the agencies to use trained employees to work with lenders to resolve mistakes flagged by consumers on their credit profiles, notes CNN Money. Right now, only about 15% of all disputes are resolved internally by credit-reporting firms. The settlement will also change how companies report unpaid medical bills, which account for about 52% of all debt on credit reports, and will take aim at predatory lenders.
SECOND THOUGHTS: It's wise to check your credit report for errors. By law, you're allowed one free credit report from each of the three major credit bureaus annually. Correcting errors may give your score a boost. And scores are a major player in the terms you get on a mortgage, an auto loan and whether you qualify for a credit card.
March 18, 2015
Americans are saving more for higher ed. In 2014, the amount in 529 college savings plans hit a record $248 billion, up 9% from 2013, according to the College Savings Plans Network. We're also saving earlier — 31% of the plans were opened by parents when their child was under a year old. "You really should be starting to save for college as soon as your child is born," Betty Lochner, chair of the College Savings Plans Network, told CNN Money. State 529 plans allow holders to save money and withdraw it tax-free for approved college costs.
SECOND THOUGHTS: We still need to save more. The average amount in individual 529 accounts hit an all-time high of $20,474. But as CNN Money notes, in-state public school tuition, fees and room and board average about $19,000 per year. Before you decide to invest in a 529 plan, crunch the numbers and make sure you're meeting your own retirement needs. Here's how to figure out if a 529 plan is right for your family.
March 17, 2015
Child Care Aware America says day care can cost up to $14,508 a year for an infant and $12,280 for a 4-year-old in a center. And in 31 states, it's more expensive to send an infant to day care than it is to send a kid to a public university. Fact is, parents don't have time to save for day care like they do for college, notes Yahoo Finance. Only 12 U.S. states meet the U.S. Department of Health and Human Services' benchmark for affordable care: 10% of a family's income. Costs for single moms average well more than that: 40% of median incomes in all 50 states.
SECOND THOUGHTS:Do everything you can to save on day care. Yahoo Finance notes that sibling discounts are available at some centers. Take advantage if your employer offers a flexible spending account for child care. And turn to family members to watch your kids when possible.
Feeling down? Blame Facebook. Researchers at Nanyang Technological University, Bradley University and the University of Missouri-Columbia find that heavy Facebook users can feel envy, which can lead to depression. Their survey of 736 college students concludes that following your friends on Facebook can make you feel sad. "If Facebook is used to see how well an acquaintance is doing financially or how happy an old friend is in his relationship — things that cause envy among users — use of the site can lead to feelings of depression," Margaret Duffy, a Missouri journalism professor, told CNN Money.
SECOND THOUGHTS: Give Facebook the boot. Or at least cut down your time on the site. There are plenty of apps out there now — SelfControl, Freedom — that can help you limit your time on social media. Just think about all of the productive things you can do instead — managing your finances, for example — when you're not idling away hours on Facebook.
Thomas J. Stanley, author of The Millionaire Next Door, recently passed away after a car accident. The personal finance book he wrote was arguably one of the most important ever written. It provides a well-rounded road map for building financial security. Its main lesson: Most of the rich grow wealthy because of modesty, thrift and prudence, notes The New York Times. Those people are happy to live in starter homes, they don't shell out cash for irresponsible adult children and they certainly don't buy luxury cars.
SECOND THOUGHTS: Get your hands on The Millionaire Next Door and read it through. Pick it up at the library, borrow it from a friend or purchase a used copy on Amazon. It's well worth a read. Everyone has a shot at accumulating a healthy nest egg and financial comfort by saving well and not spending lavishly. Take a look at these 10 secrets to successfully save for retirement.
Student loan debt, even just a little, can drastically eat into your ability to build wealth, notes The Atlantic. It cites a report from the Federal Reserve Bank of New York that a whopping 34% of students owing as little as $5,000 default on their loans. A default can have a major negative impact on your finances, resulting in garnished wages and even Social Security benefits. Plus, it can ruin your credit, hurting your opportunity to purchase a home or get other loans.
SECOND THOUGHTS: If you can, avoid student loans. And if you're a parent, see if a 529 plan is right for your family. A state-sponsored, tax-free college savings plan might be exactly what you need to save for your child's college future.
Fidelity Investments is offering retirement savers a little more incentive. With its new IRA Match program, customers transferring a traditional, Roth or rollover IRA worth at least $10,000 can get up to 10% of their annual IRA contributions matched by Fidelity, according to Yahoo Finance. That's a perk often reserved for corporate 401(k)s. Accounts with $10,000 to $50,000 will have 1% of their contributions matched for three years. That rises to a 1.5% match for accounts between $50,000 and $100,000, 2.5% over $100,000, 5% over $250,000 and 10% for accounts over $500,000. Depending on account size, you'll get a match of $55 up to $550 per year.
SECOND THOUGHTS: The government created IRAs to encourage people to save more for retirement and provided tax benefits to make them more attractive. Fidelity's new program further sweetens the deal. Generally speaking, IRAs are easy to use. But there are still some things you need to know. Check out these 7 IRA mistakes to avoid.
Whether you stash away cash at every chance or spend it like there's no tomorrow, it may be partially due to your genetics. A new report in the Journal of Political Economy tracked changes in the net worth of twins between 2003 and the end of 2007. It found that identical twins are significantly more similar in savings behavior than fraternal twins. Genetic differences explained about 33% of the variations in savings rates. In other words, your genes could have a lot to do with how much you save, notes Quartz.
SECOND THOUGHTS: Genes are no excuse for failing to save. Regardless of what your biology says, saving for retirement is a must. Here are 7 rules for a successful 401(k) retirement account.
The latest Labor Department report shows the U.S. economy added 295,000 jobs in February, causing the unemployment rate to fall to 5.5%. That's the lowest it's been since May 2008, right before the financial crisis hit. And it's also the 12th month in a row that the economy has added over 200,000 jobs. Just a year ago, the unemployment rate was at 6.7%. "We have the wind at our back and confidence across so many sectors of our economy," Labor Secretary Tom Perez told CNN Money. Last month, jobs were added in retail, health care and business services, with retail adding the most — 32,000.
SECOND THOUGHTS: The jobs are coming back. What about wage growth? In February, wages rose only 2%. That's dismal compared with wage gains in a healthy economy — usually between 3.5% and 4%. When will we see wage growth get back on track? Jim O'Sullivan, chief U.S. economist at the research firm High Frequency Economics tells CNN Money that "it's not unreasonable to think, at some point in the next year, we're going to get more clear-cut wage acceleration."
According to The Washington Post, 15 students of the failing Corinthian Colleges are refusing to repay their federal student loans in protest, hoping the government will forgive their debt. “Corinthian took advantage of our dreams and targeted us to make a profit,” the Corinthian 15 wrote to the U.S. Department of Education. “You let it happen, and now you cash in. We paid dearly for degrees that have led to unemployment or to jobs that don’t pay a living wage. We can’t and won’t pay any longer.” While many private loans in Corinthian's Genesis program will be forgiven, it's up in the air whether the government will forgive its loans.
SECOND THOUGHTS: There are serious consequences for those who don't repay their student loans. In addition to losing your paychecks, tax refunds and a portion of your Social Security, it can also ruin your credit. So it's not a good idea to stop paying your loans. But there are other ways to make college more affordable after you graduate. Check out these tips to rid yourself of student loans without paying.