The researchers think being well-off offers more options for dealing with adversity. If you have the money to quickly deal with a leaking roof, you'll feel more in control and less sad than someone without the funds. That's why it's crucial to build an emergency fund — for life's leaky roofs. Here's how to measure financial success
. The first measurement? An emergency fund.
February 10, 2015
More banks and other companies are offering free FICO scores, a once tightly guarded number you'd have to shell out cash to get, notes The New York Times. Citigroup just began making free FICO scores available to its cardholders. Chase says it will soon make them available to Slate cardholders. Ally's car loan borrowers will be able to get them in February. And even Sallie Mae is making them available to private student loan borrowers.
SECOND THOUGHTS: FICO, the Fair Isaac Corp., which created the FICO score, says the scores are used in 90% of credit decisions in the U.S. So if you can get a free score, use it to improve your credit. Check out our 7 smart moves to boost your credit score and improve your life.
February 9, 2015
About 20% of Americans admit they've spent $500 or more without their spouse or partner's knowledge, according to a new poll by CreditCards.com. What's more, about 6% admit to using hidden checking or savings accounts or secret credit cards. The website surveyed 843 American adults living with a spouse or partner. The results suggest 7 million Americans are keeping secret accounts — men more than women and young people more than old. "In most cases, the secret is mostly to avoid conflict and to make sure they get what they want," Paula Levy, a family therapist in Connecticut, tells the website.
SECOND THOUGHTS: There's no single correct way for couples to approach finances. But with a little bit of planning, you can achieve financial security together. Check out our money advice for a lasting marriage.
If you think you're paying more for food than you were a year ago, you're not crazy. Food prices in the U.S. are climbing, notes Yahoo Finance. The consumer price index for food rose 3.4% in 2014, a 1.1% increase from 2013, according to the most recent CPI report from the Labor Department. Over the last 10 years, the index's average annual rise was just 2.7%. For food eaten at home — items bought at the grocery — the index rose 3.7% compared with an increase of just 0.4% in 2013. And for food eaten at restaurants and other establishments, the index rose 3% in 2014, higher than the 2.1% rise the year before.
SECOND THOUGHTS: Make a little extra room in the budget for food or cut back. You'll see the biggest price increases for beef and veal, which rose 18.7%. Meats, poultry, fish and eggs were up 9.2%, the largest year-over-year rise in December in that category since 2003. And dairy and related products were up 5.3%. Need to create a budget? Use our Home Budget Calculator.
Millennials, born between 1980 and 2000, seem to be putting off having children until they feel financially stable. And there are worries that the declining birth rates could hinder the economy. Birth rates among 20- to 24-year-olds were down 2% between 2012 and 2013. Among 25- to 29-year-olds, rates have fallen by 1% each year since 2008, according to the Centers for Disease Control and Prevention. But older millennials, those 30- to 34-years old, are having kids. Birth rates rose among that group by 2% in 2013. Considering that millennials have higher levels of student debt, poverty and unemployment than their parents and grandparents did at the same stage, it's no wonder they're putting off having kids.
SECOND THOUGHTS: The average cost of raising a child in the U.S. has reached $250,000, not including college. But if you want kids, there's no right time to have them, notes Yahoo Finance. The best you can do is prepare yourself for what's to come. And planning for college costs is part of that. Here's how to figure out whether a 529 plan is right for your family.
If you've always wanted to visit Europe and just couldn't foot the bill, or if you just like Europe, it's nearly time to book your trip. Travel to Europe is about to get cheaper. The euro is falling so fast against the dollar that it shouldn't be too long before it's worth the same amount, notes The Washington Post. In fact, it's down to around $1.15 per euro from a high of $1.45 a few years ago. So if you're going anywhere in Europe other than Switzerland (which recently stopped pegging its currency to the euro), you'll have a much cheaper trip than you would have just a few years ago.
SECOND THOUGHTS: Take advantage of the booming U.S. economy, and go for a trip across the pond. Our economy is currently in a lot better shape than Europe's. It's good enough that the Federal Reserve is starting to think about raising short-term interest rates this year. And by the time you book your trip to Europe, the dollar may even be worth more than the euro, making it even cheaper.
Millennials are expected to surpass baby boomers as the nation's largest living generation in 2015, according to new numbers from the U.S. Census Bureau. The number of those ages 18 to 34 is expected to hit 75.3 million this year, surpassing 74.9 million boomers (ages 51 to 69). Millennials have immigration on their side, adding more numbers to their generation than any other, notes the Pew Research Center. By 2036, the population is expected to peak at 81.1 million.
SECOND THOUGHTS: Is Millennial Nation on track for retirement? A recent Gallup poll found that only half of investors start saving for retirement in their 20s. We can do better. Without traditional pensions to help us out, taking control of our own retirement is a must. Do you know what kind of return you can expect from your 401(k)?.
A recent study by the Pew Research Center found that about 55% of Americans say they are falling behind on finances. That's despite the fact that unemployment is down, companies are hiring and the economy is growing. In fact, most Americans say their income isn't keeping up with the cost of living, and it's not just one segment of society. Those earning more than $100,000 say they also are having problems — only 20% feel they are getting ahead. But older Americans, those with lower incomes and those with only high school diplomas feel the most left behind.
SECOND THOUGHTS: What's going on here? Stagnant income seems to be a big part of the problem. The current median income — $51,939 — is about where it was in 1995 after inflation, notes CNN Money. But we have to push through and save more. If you have an extra $1,000, here are 7 smart things to do with it.
The Affordable Care Act seems to be achieving one of its major goals. A recent survey by the health research group the Commonwealth Fund shows the percentage of Americans who had trouble with a medical bill or debt in the last year dropped from a high of 41% in 2012 to 35% in 2014, the first decline in a decade. The percentage of Americans who avoided medical care because of cost concerns also dropped, from 43% in 2012 to 36% in 2014. “We don’t know yet that the law is improving people’s health, but this is a first indication that people are affording care that they weren’t able to get in the past,” Sara Collins, a Commonwealth vice president who worked on the study, told The New York Times.
SECOND THOUGHTS: More than a third of all Americans struggle with the cost of medical care, The Times notes. If you don't have health insurance or your deductible is high, you already know the high cost of a simple checkup. But that doesn't mean you should skip tests or leave prescriptions unfilled. Here are 8 smart moves to save on health care.
A new report from the Consumer Financial Protection Bureau says nearly half of Americans seriously consider only one lender or broker before applying for a mortgage. About 75% fill out an application with only one lender. Why are so many failing to comparison shop? "It is a surprising finding, and it suggests that they're still fairly intimidated by the mortgage transaction," Richard Cordray, head of the government bureau, tells NPR. "Or they're a little distracted because, at the same time, they're picking out a house."
SECOND THOUGHTS: Failing to shop around can be costly. "The difference in even a half percent of interest racks up pretty quickly over five years to about $3,500 — and over the life of a 30-year loan, obviously, far more than that," Cordray says. "So this is real money for people — meaningful money." Here's an easy to way comparison shop: Search our database of the best mortgage rates from scores of banks and mortgage companies in your area.
Stop looking at your retirement portfolio — it could be ruining the growth of your savings. So says a new study from Columbia University Professor Michaela Pagel. When people check their holdings frequently and attempt to rebalance them on their own, they end up making investment decisions they believe will decrease the pain of losses and increase happiness — but they often end up worse off. “Most people, if forced to look at their portfolio every single day, would make a very poor investment decision. They would find it so painful that they would not invest anything,” Pagel tells the Columbia Business School. The solution? Just don't go there.
SECOND THOUGHTS: The market fluctuates, but historically it has gone up. “There’s a pretty good chance the market will go down on any given day or week, but the probability of loss is much lower when you look over a long-run period such as two decades,” Pagel says. Want to save more? Take a look at our 7 rules for a successful 401(k) retirement account.
We need to be “patient” for a few more months, but the day interest rates finally start to climb for CDs, money market and savings accounts appears to be getting closer. That's the signal the Federal Reserve seems to be sending with its latest policy statement, released today. Unless something very bad happens to the world's economy between now and then, it appears the nation's central bank will begin pushing short-term rates higher by mid-summer or early fall.
Thinking about starting a remodeling project? Take time to check out the Cost vs. Value survey from Remodeling Magazine. It compares the average cost of 36 popular remodeling projects with the value those projects retain at resale in 102 U.S. markets. This is a great way to see if your project is worth it. For 2015, the survey's overall cost-value ratio slipped to 62.2%, ending two years of gains. Only five projects saw their ratios rise in the 2015 report, with midrange roof replacement leading the way.
SECOND THOUGHTS: Before you remodel, think it through. Some homeowners get so excited, they only focus on the result. Here are the 11 biggest remodeling mistakes to avoid.
Private pension plan funding took a dive last year, hitting levels not seen since right after the financial crisis, according to professional services firm Towers Watson. The average private pension plan was only about 80% funded at the end of 2014, down from 89% in 2013. And the pension deficit jumped to $343 billion by the end of last year, almost double what it was in 2013. Funding fell for a couple of reasons: Interest rates dropped, so pension plans have fewer dollars for the future. And many plans adjusted for improved lifespans, so benefits will be paid out longer. Those two things canceled out any benefits from a raging stock market in 2014, Alan Glickstein, a senior retirement consultant at Towers Watson, told The Washington Post.
SECOND THOUGHTS: Where will pensions land in 2015? It's anyone's guess. The Fed is expected to raise short-term interest rates this year — a potential boon for pensions. Yet bond markets could get hit unexpectedly — a negative for pensions. Don't have a pension? Then, like many of us, you'll have to rely on your company 401(k) or other savings for retirement. Here's what kind of return we can expect from our 401(k).
Looking for a raise? You're not alone. Of nearly 900 workers surveyed by Glassdoor.com, 35% said they'd be on the hunt for a new job if they didn't get a salary bump in 2015. Those under age 35 and those making less than $50,000 per year were most likely to quit. But 36% of those between ages 35 and 44 said they'd take a walk if they didn't get a raise, and 31% making more than $100,000 would do the same. About half of employed adults said they expect a 3% to 5% hike. Confidence about finding a new job is also up. Close to half said they were confident they'd be able to pick up a job matching their experience and salary within six months, the highest level since early 2009, notes CNN Money.
SECOND THOUGHTS: If you're planning to ask for a raise, here's a tip: Do it after your company has had a great quarter and when your boss is doing well at work, Rusty Rueff, a former Fortune 500 HR executive and board member at Glassdoor.com, tells CNN Money. That's when your boss will have the most leverage with the higher-ups. Start the convo by asking the boss about your performance, and convey how much you want to succeed at the company, Rueff suggests.
Want to save like the rich? Don't bank on your house being your main wealth builder. A recent report from Edward Wolff, an economist at New York University, offers insight into the portfolios of the top 1% (a net worth more than $7.8 million), the upper middle class (more than $400,000 but less than $7.8 million) and the broad middle class. The wealthiest 1% of Americans have only about 9% of their net worth tied up in their home, compared with 28% for the upper middle class and 63% for the broad middle class. So where do the top 1% invest? Nearly half (47%) of their gross assets are in unincorporated business equity and other real estate. Financial securities account for 27%. Those in the middle class hold over three-fifths of their wealth in their primary residence, just 9% in business equity and other real estate, and 16% in financial securities.
SECOND THOUGHTS: This helps explain why the housing bust and recession were tougher for the middle class, notes The Wall Street Journal. Housing has been slow to recover, while corporate profitability and the stock market have soared. But let's not discount homeownership for the middle class. It's still an investment and a stepping-stone to financial security. Just make sure to avoid these 10 big mortgage mistakes.
While the highest-paid employees still get executive pensions and other benefits, many underlings get only a 401(k). According to data from Bloomberg, CEO compensation at large U.S. companies was 204 times higher than the pay of workers on average in 2013. That's a 20% jump since 2009. The retirement compensation of Gregg Steinhafel, who recently stepped down as Target's CEO, highlights the disparity. He received retirement plans worth more than $47 million. That's 1,044 times the average balance — just $45,000 — that Target workers have saved in the company's 401(k) plan. Steinhafel got $27.7 million from a combined pension and deferred compensation plan, $9.8 million from an earlier deferred compensation plan and $9.9 million in interest. And that's on top of the more than $20 million in cash salary and bonus he earned in the five previous years.
SECOND THOUGHTS: "Target throws workers a cracker, and top executives take the cake," Ron Pierce, a former worker at the retailer's distribution center in Stuarts Draft, Virginia, tells Bloomberg. "Who can even spend $47 million? I'd like to see a chunk of that go for pensions for all employees." Good point, Ron. Something has got to give. But fewer and fewer companies are offering traditional pension plans. If the only retirement plan your employer offers is a 401(k) account, you've got to sign up and make the most of it. Here are 7 rules for a successful 401(k) retirement account.
On average, couples spend around $30,000 on their wedding day, according to media company XO Group. Yet the more you spend on your wedding, the shorter your marriage will be, according to a study by Emory University economics professors Andrew Francis and Hugo Mialon. Here's the breakdown: Fellas, put between $2,000 and $4,000 toward an engagement ring, and you'll be 1.3 times more likely to get divorced compared with those spending between $500 and $2,000. For men and women, shell out more than $20,000 on the big day, and you'll up your odds of divorce by 3.5 times compared with couples keeping it between $5,000 and $10,000. But the best odds come when you spend $1,000 or less on the festivities. One possible explanation for this phenomenon is that post-wedding debt stokes marital tension, Francis and Mialon tell Ozy.com. Another potential problem: The wedding has become the highlight rather than relationship and commitment. Whatever the reason, spending on weddings is completely out of control. It's now a $55-billion-a-year industry, according to research firm IBIS World.
SECOND THOUGHTS: Don't skimp on the guest list. According to the report, a hefty guest list has the opposite effect than heavy spending. Simply spend less per person, notes Ozy.com. Make your own playlist instead of having a DJ. Grab a couple of Polaroid cameras instead of having a photo booth. Pick a cheaper venue. You'll thank yourself later when you get your bank statement and have plenty saved to stash in your 401(k) account or IRA.
With the tax code getting more complicated and the IRS budget shrinking, this tax season could get pretty messy, notes CNN Money. In fact, it could be the worst since 1985, when computer failure, lost returns and delayed refunds plagued the IRS, Nina Olson, the national taxpayer advocate, said at a recent conference. The IRS top-line budget is about 10% less than in 2010, the number of IRS personnel has fallen by at least 8% and the IRS' training money has dropped by more than 85%. Meanwhile, the number of taxpayers has jumped 7 million. That means less taxpayer service and possibly delayed refunds. The major worry of the IRS is that deterioration in taxpayer service and enforcement will create long-term risk for a tax system that's based on voluntary compliance. "If the compliance rate goes down by 1%, it costs the government $30 billion a year. That's almost three times the entire budget of the IRS," IRS Commissioner John Koskinen said at the same conference where Olson spoke.
SECOND THOUGHTS: What should we expect? For starters, a lot of waiting. Only 53% of calls to the IRS will be answered (meaning 47% won't be), and callers will wait an average of 34 minutes to talk to another human, Olson said. Tax preparers will wait around 52 minutes. There's also a small chance — very small — that our refunds will be delayed. Unfortunately, all we can do as taxpayers is be patient.
According to a new poll from Gallup, 26% of Americans began saving for retirement before age 25, with 7% of that group starting before they turned 20. About half of today's investors started saving sometime before they turned 30, 28% said they started at some point in their 30s, 14% waited until their 40s and 8% waited until they were 50 or older. On average, retired and nonretired investors combined started saving at age 30. But most of us, although we should be, aren't saving as much as possible. Most investors (69%) believe that they could save more — a median of $250 more each month, according to the poll.
SECOND THOUGHTS: Compound interest is a powerful tool, but it needs time to really do its magic. That's why it's crucial to save as much as possible while you're young and keep adding to the pile. If you can swing stashing away a little extra cash each month, don't hesitate to add to your 401(k) or IRA. Keep in mind that Washington is letting us make slightly larger 401(k) contributions in 2015. And maxing out your 401(k) each year is a stepping-stone to financial security in retirement.
Pull out your wallet, and get ready to pay a fine if you didn't carry health insurance last year. Under the Affordable Care Act, you'll now face a fine if you were uninsured. That's unless you qualify for one of about 30 exemptions, notes the Associated Press. How much will you pay? For 2014, it's the greater of $95 per person or 1 percent of household income above the threshold for filing taxes. That's jumping up significantly in 2015, when not carrying health insurance will cost you the greater of 2 percent of income or $325. And by 2016, the average fine could be around $1,100. Of course, many will be exempt. According to H&R Block, the tax prep giant, around 4 million uninsured will pay penalties while 26 million will qualify for exemptions. Turbo Tax has a free tool called "Exemption Check" that allows you to see where you stand.
SECOND THOUGHTS: Being uninsured comes with some large financial risks. Medical bills can stack up into the tens of thousands of dollars if you have an accident. Plus, you'll now get fined. The Tax Policy Center offers a tax penalty calculator that helps you weigh your potential fine against average premiums. For a single individual with no dependents making an adjusted gross income of $50,000 per year, the penalty for not having health insurance would be $399 for 2014 and $794 for 2015, according to the calculator. Depending on the health insurance plan you choose, those penalties amount to three or four premium payments.
Tipping at restaurants might soon be a thing of the past, at least in major metropolitan areas. According to CNN Money, more restaurants, especially in big cities, are adopting no-tipping policies and using alternative menu pricing to compensate employees. For instance, patrons of Bar Agricole and its sister Trou Normand in San Francisco will not be expected to leave a tip starting Jan. 1. Instead, owner Thad Vogler will increase his menu prices by 20% to compensate the staff. Naturally, customers will no longer need to worry about breaking out the old smartphone calculator at the end of the night to calculate tip amount. Plus, staff will get steadier pay. "It's time for the restaurant business to be more like every other industry and charge what's appropriate rather than relying on other people to compensate its workers," Vogler tells CNN Money.
SECOND THOUGHTS: Volger has a great point. So let's kick tipping to the curb. It's an obsolete concept. With gratuity already included in the bill, eating at a restaurant becomes a more streamlined experience for both the restaurant and the customer. And as long as restaurant owners compensate their staff appropriately, service shouldn't suffer. No doubt, getting rid of tipping won't be easy. It's a cultural norm. But if you walk into a restaurant with a no-tipping policy, resist the urge to leave a few bucks extra. Your tip is built into the bill.
Last year was the best year for job growth since 1999. More than 2.95 million jobs were created, according to the Department of Labor. The big concern throughout the recovery has been that jobs were being added too slowly, frustrating workers. But that wasn't the case last year. Indeed, the U.S. economy added more than 200,000 jobs every month in 2014 except two — January and August. November was the by far the best month for job gains, with 353,000 jobs added. And the unemployment rate is also down. It dropped in December 2014 to 5.6% from 6.7% in December 2013. This year could be just as good or better. By the end of 2015, the unemployment rate is expected to drop to 5.2%, according to a survey of economists by CNN Money.
SECOND THOUGHTS: It could be a great year to find a new job. "American businesses are on a hiring binge," Sal Guatieri, senior economist at BMO Capital Markets, told CNN Money. "It clearly suggests the economy is on a much stronger growth track than the first four years of the recovery." Of course, while job growth is taking off, wages aren't. Wages rose by just 1.7% over the past year, barely ahead of inflation. That stagnation in wages is tough on workers. And it makes it even more important to diligently save. Here are 7 rules for a successful 401(k) retirement account.
Bay Area drivers in California might soon spot a Google vehicle with no human behind the wheel. That's right. Google is planning to test its first "fully functional" self-driving prototype on the roads. It still needs approval from the government, but the two-seater is a sign that driverless cars could soon become a staple in Silicon Valley neighborhoods, notes the San Jose Mercury News. Google is just one of seven companies that have won approval from the state Department of Motor Vehicles to test driverless cars on public roads. Google's new prototype has an electric battery and a speed cap of 25 mph, ensuring it can't get in too much trouble.
SECOND THOUGHTS: No doubt about it — this is the future of transportation. Google is aiming to have the car tooling around Northern California next year, according to Mashable. And Audi, Mercedes-Benz, Delphi Automotive, Tesla, Bosch and Nissan are all also testing driverless cars.