Preparing Financially for a New Baby

Congratulations! You’ve just gotten the positive pregnancy test results and you’re breathless with excitement — and nerves. Or maybe you’re a few months along, and the mild panic is growing right along with the baby bump. Regardless, a baby means big changes, and some of those changes bring many new expenses. How will you pay for it all?

Whether you’re only thinking about having a baby, or your due date is fast approaching, there’s no need to stress about finances. By taking the necessary measures today, you can learn to cover these new expenses without falling into debt.

Here are some steps you can take to prepare financially for a new baby:

Pay down debt

There’s more than just a nursery to set up before your baby’s arrival. It’s best to get your finances in order to make it easier to manage all new expenses and prepare for your child’s future. If this involves getting rid of a mountain of debt, you can choose between these two debt-kicking plans:

The snowball method involves maximizing your payments toward your smallest debt balance first. Once it’s paid off, move on to the next-smallest debt, “snowballing” the payment from your previous debt into this one until it’s paid off, and repeating until you’re completely debt-free.
The avalanche method involves maximizing payments toward the debt with the highest interest rate and then moving on to the one with the second-highest interest rate until all debts are paid off.

Adjust your monthly budget

Babies don’t come cheap. When your little one arrives, you’ll need to spring for baby gear and furniture, a new wardrobe, diapers and possibly child care as well. According to the USDA’s most recent report on the cost of raising a child, the average middle-income family will spend approximately $12,350-$13,900 on child-related expenses before their baby’s first birthday.

Most of these expenses will be ongoing, and it’s best to make room in your budget for these new items before the baby is born. Spend some time reviewing your monthly budget to look for ways to cut back on spending and give you that wiggle room to cover baby-related expenses.

Set up a baby account

All those baby expenses can be overwhelming, but if you break them down into bite-sized pieces, they’ll be easier to manage. You can do this by putting away some money for baby costs as soon as you plan on having a baby or find out you’re expecting. Consider setting up a new savings account at Advantage One Credit Union for all baby expenses to keep this money separate from other savings. You may also want to automate these savings by setting up a monthly transfer from your payroll or checking account to your “baby account.”

Estimate prenatal care and delivery costs

While exact amounts vary by state and by insurance provider, prenatal care and delivery can cost thousands of dollars. This includes out-of-pocket expenses, co-pays and insurance deductibles. Be sure to prepare for these expenses by saving up for them or by allocating a large windfall, such as a tax refund or generous work bonus, to be used for paying for prenatal care and delivery.

Start saving for college

Hard as it may be to believe, your little one will one day be all grown up and ready to go to college. With college tuition now averaging $41,411 at private colleges, $11,171 for state residents at public colleges and $26,809 for out-of-state students at state schools, according to data reported by U.S. News and World Report, this can mean paying a small fortune to give your child an education. In addition to spreading the costs over nearly two decades, starting to save for your child’s college education now will give those savings the best chance at growth.

Consider opening a 529 plan before your child is born where your college savings can grow tax-free.

Write a will

No one wants to think about their own death when preparing for a birth, but writing a will — and purchasing life insurance if you haven’t already done so — can be the best gift for your child in case the unthinkable happens.

Welcoming a new baby is a life-altering experience, and can mean big changes for your finances. Follow our tips to ensure you’re financially prepared for your new baby’s arrival.

Your Turn: What steps are you taking to prepare financially for a new baby? Tell us about it in the comments.

Learn More:
nerdwallet.com
mint.intuit.com
thepennyhoarder.com

The Comprehensive Guide to Insurance Coverage

Insurance premiums can take a big bite out of a monthly budget, but not having enough coverage can be even more costly.  Let’s take a look at the five primary insurance types and the most important information to know about each one.

1. Health insurance

What is it? 

Health insurance is coverage that typically pays for medical, surgical and prescription drug expenses in exchange for a monthly premium. Many states mandate health insurance coverage and will collect fees, along with state taxes, from taxpayers who do not have sufficient coverage.

Types of health insurance plans

Health insurance plans are divided into two primary categories: public and private.

Public health insurance is provided at low or no cost through the federal and/or state government. The most common public insurance plans are:

  • Medicaid – Public insurance plan for low-income families and individuals. Eligibility requirements vary by state.
  • The Children’s Health Insurance Program (CHIP) – A federal and state program designed to cover children below the age of 18 whose families have incomes above the qualifications for Medicaid, but are too low to afford private health insurance.
  • Medicare – A federal health insurance program for Americans age 65 and older.

Private health insurance may be provided through an employer or purchased privately from the insurance provider, or through a broker.

These are the most common private health insurance plans:

  • HMO: Health Maintenance Organization – The most restrictive plans that only work with a network of healthcare providers. The insured must choose a primary care physician (PCP) who is in the network to benefit from coverage. To see an out-of-network specialist, the insured will need a referral from their PCP. HMOs tend to have cheaper premiums than other health insurance plans.
  • PPO: Preferred Provider Organization – The most flexible health insurance plans, which allow the insured to choose an in-network doctor at a lower cost, or an out-of-network doctor at a higher cost. There is no referral necessary to see a specialist. Premiums are generally more expensive than other plans.
  • EPO: Exclusive Provider Organization – A blend of HMO and PPO plans, EPOs do not cover out-of-network physicians, but do not require referrals for specialists. Premiums on EPOs fall between HMOs and PPOs.
  • POS: Point of Service – Another blend of HMO and PPO plans, POS plans will require a PCP on an HMO-style network, while also allowing out-of-network options at a higher cost. A referral is required for specialists. Premiums are generally more expensive than HMO plans but less expensive PPOs.

2. Life insurance

What is it?

Life insurance is a contract between an insurance company and a policyholder that guarantees a sum of money to the policyholder’s designated beneficiaries when the policyholder dies, in exchange for monthly premiums paid during the insured’s lifetime.

Types of life insurance

These are the five most common kinds of life insurance plans:

  • Term insurance – The most basic form of life insurance, with a predetermined term, usually ranging from one to 10 years. Plans are renewable at the term’s end, but the premiums will increase with each renewal. Term policies generally have the cheapest premiums, but no cash value.
  • Whole life insurance – Offers policyholders a cash-value component coupled with increased protection. Premiums can be locked in throughout the term, and a portion of premiums goes toward the policy’s cash value. The insured can borrow up to 90% of the cash value, tax-free, but loans reduce the policy’s death benefit.
  • Universal life insurance – Offers increased flexibility for policyholders. Premiums can go up or down, or even be deferred within certain limits. Cash values can be accessed and withdrawn, though this directly decreases the death benefit. Face values can be modified as well.
  • Variable life insurance – Fixed premiums and investment options make this policy the choice for true risk-takers. The policyholder’s cash value will be invested in the insured’s choice of stock, bond or money market portfolio. Cash values and death benefits will fluctuate along with the investments’ performance. These policies usually have higher fees than universal life insurance, but all cash value accumulation grows tax-free.
  • Universal variable life insurance – A blend of universal and variable life insurance, these policies offer flexible premiums and the ability to modify face values, along with investment options.

3. Auto insurance

What is it? 

Auto insurance is a contract between a policyholder and insurance company, protecting the policyholder from financial loss in the event of an auto accident or theft. The coverage is provided in exchange for a monthly premium. Some form of auto insurance is required in all 50 states.

Types of auto insurance policies

These are the primary categories of auto insurance coverage:

  • Liability coverage – Includes coverage for bodily injuries, property damages or auto damages to another motorist if the policyholder is at fault.
  • Comprehensive coverage – Pays for damages and losses to the car that were not caused by another driver.
  • Personal injury protection – Covers medical bills for the policyholder and their passengers in the event of an accident.
  • Collision insurance – Covers damages to the policyholder’s car if it’s involved in an accident.
  • Uninsured/under-insured motorist protection – Pays for damages caused by another motorist who does not have sufficient (or any) coverage.
  • Gap insurance – Pays the difference between what the policyholder owes on a financed or leased vehicle and what it is valued at when there’s a total loss of the vehicle.

4. Long-term disability insurance

What is it?

Long-term disability insurance is an insurance policy that provides income replacement for workers if they are unable to work due to a debilitating illness or injury.

Types of long-term disability insurance

There are two primary types of long-term disability insurance policies:

  • Own-occupation disability insurance defines a disability as an inability to work at your regular occupation. Benefits are paid even if the policyholder can work at another job.
  • Any-occupation disability insurance defines a disability as an inability to work at any occupation. These plans are generally cheaper, but claiming benefits can be more difficult.

5. Homeowners/renter’s insurance

What is it?

Homeowners insurance is a policy designed to protect homeowners and their families from liability and financial loss in case of damage to their home and belongings in exchange for monthly premiums. Renters insurance is purchased by tenants and only covers damage or theft of their personal property.

Types of homeowners insurance policies

  • HO-2 – A policy that only protects against 16 specified perils.
  • HO-3 – A broad policy protecting against all perils other than those excluded in the policy.
  • HO-5 – A premium policy that usually protects newer homes and covers all perils, except the few excluded in the policy.
  • HO-6 – Insurance for co-ops/condominiums, which includes personal property coverage and liability coverage.

Each plan type will also include some extent of liability coverage. Most policies will only cover events if they are sudden and accidental. Some natural disasters, like earthquakes and floods, require a separate policy for coverage.

Types of renters insurance policies

Renters insurance policies will generally fall within either:

  • Replacement-cost plans – Will pay for the full cost of replacing your damaged or stolen belongings up to a predetermined cap. This plan offers more robust coverage, but premiums are generally higher.
  • Cash-value plans – Will only offer payouts to cover what the damaged item was worth at the time of the disaster.

Insurance is a big part of financial responsibility. Use our guide to help you make the right choices in all major types of insurance coverage.

Your turn: What are your best tips for buying insurance?

Learn More:
policygenius.com
smartasset.com
iii.org
allstate.com
nerdwallet.com
investopedia.com

Navigating the Current Auto Loan Market

If you’re in the market for a new set of wheels, get ready to experience sticker shock. Prices on new and used cars have soared since the beginning of 2020, and experts aren’t expecting them to fall anytime soon. Here’s what you need to know about the current auto loan market and how to navigate it successfully.

Why are auto prices so high? 

The coronavirus pandemic has touched every sector of the economy, and the auto industry is no exception. According to the U.S. Consumer Price Index, the price of used cars and trucks has jumped a full 9.4% in the last 12 months, while the price of new cars and trucks increased by 1.5%. The drive behind the increase is multifaceted and linked to several interconnected events.

When the pandemic hit American shores, demand for new and used cars increased significantly. This was largely due to the many people who were avoiding public transportation for safety reasons. The mass exodus from big cities and their high rates of infection also boosted the demand for new cars.

At the same time, supply of new and used cars dried up, thanks to these factors:

  • The pandemic put a freeze on the production of new vehicles for nearly a full business quarter. The factory shutdowns reduced output by 3.3 million vehicles and sales dried up, along with subsequent trade-ins.
  • The production freeze prompted chipmakers to focus on the electronics industry instead of creating chips for automakers. Now, the industry is still scrambling to keep up with the automakers’ demand.
  • Business and leisure travel was halted for months. This led to a steep decline in travelers renting cars, which in turn led to rental agencies holding onto more of the cars in their lots instead of selling them to used car dealerships.

The rise in demand and shortage of supply naturally triggered a steep increase in the prices of both new and used vehicles.

Rethink your auto purchase

If you’re in the market for a new car and the price tags are scaring you, you may want to rethink your decision. If your car is in decent condition, consider holding onto it a little longer until the market stabilizes. To go this route, consider the following tips to help make your car last longer:

  • Use a trickle charger to keep the battery in excellent condition.
  • Change your filters regularly.
  • Follow the service schedule. Most cars need to be serviced every 10,000 miles.
  • Keep all fluid levels high. This includes coolant, oil, antifreeze and windshield washer fluid.
  • Drive carefully to avoid sudden braking and prolong the life of your brakes.
  • Replace spark plugs when they begin showing signs of wear or melting. Depending on the vehicle, spark plugs need to be replaced every 30,000-90,000 miles.
  • Check your tires regularly and rotate and inflate them as needed.
  • Pay attention to all warning lights that are illuminated on the dashboard.
  • Have your car rust-proofed to keep the exterior looking new.

Tips for buying a car in today’s market

If you’ve decided to go ahead with buying a car, it’s best to adjust your expectations before hitting the dealership.

First, a seller’s market means many dealerships will not be as eager to close a deal as they tend to be. They have more customers than they can service now, and that can translate into a willingness to move only slightly on a sticker price of a car, or a refusal to negotiate a price at all. Processing a car loan may now take longer, too.

Second, expect to pay a lot more than usual for your new set of wheels. If you’re looking to purchase a new car, prepare to pay approximately $40,000. Also, as mentioned, supply of new cars is down while demand is up, so you likely won’t have as many choices as you may have had in the past.

The used-car market has been hit even harder by the pandemic since prohibitive prices and a short supply has pushed more consumers to shop for used cars instead of new vehicles.  This increase in demand, coupled with the dwindling supply, has driven the prices of used cars up to an average of $23,000, according to Edmunds.com. If you’re thinking of buying a used car, prepare to encounter a highly competitive market where bidding wars are the norm and cars are super-expensive.

If you’re looking to take out an auto loan, consider one with your credit union. The most recent data shows that auto loans at credit unions are a full two points lower, on average, than auto loans taken out through banks. Car prices may be soaring, but credit unions continue to deliver lower rates and customer service you can really bank on.

The auto loan market has been hit hard by the coronavirus pandemic. Follow the tips outlined here to navigate today’s car market successfully.

Your Turn: Have you recently bought a new set of wheels? Share your best tips on navigating today’s auto market in the comments.

Learn More:
chicagotribune.com
marketwatch.com
barrons.com
cnbc.com
yourautoadvocate.com

How to Adult: Personal Finance for the Real World

Title: How to Adult: Personal Finance for the Real World

Author: Jake Cousineau

Paperback: 235 pages

Publisher: Independently published

Publishing date: March 23, 2021

Who is this book for? 

  • High school graduates, college students and any other young adult who needs to prepare for the financial realities of adulthood.
  • Young adults who’ve made money mistakes due to a lack of financial education and want to learn how to better handle their money in the future.

What’s inside this book?

  • A clear, easy-to-understand explanation of financial topics, like compound interest, mutual funds, insurance deductibles, Roth IRAs and more.
  • Practical examples and real-life anecdotes to bring financial lessons home.
  • Hands-on tools to help readers jump-start their financial journeys.
  • A “Build Your Skills” section at the end of each chapter inviting readers to test their knowledge and retention of the chapter’s material.

5 lessons you’ll learn from this book: 

  1. The foundational concepts of personal finance and building wealth.
  2. How to avoid costly financial missteps.
  3. How to budget, save and invest your money wisely.
  4. How taxes and insurance work.
  5. How to prepare for life’s big expenses.

3 questions this book will answer for you:

  1. What are the financial basics I need to know to make it in the real world?
  2. How can I avoid making money mistakes as a young adult?
  3. Can I learn about finances without breaking my brain over complicated jargon and complex concepts?

What people are saying about this book:

  • “This! This is what I needed when I was in high school. It is also what I needed when I was in college, and when I bought my first car, and when I bought my first house, and when I opened my first credit card. Every high school student in America should have to pass a class that uses this book. The real-world examples are relatable and make the reader feel like they are armed with the knowledge they need. It doesn’t just make you book smart. It makes you street smart.” — Stukent Personal Finance
  • “In How to Adult, Jake Cousineau engages readers using a blend of storytelling, analogies, charts and research to deliver key financial lessons. Whether it’s comparing index funds to sports teams, or interest to pineapple on pizza, Jake has a gift in delivering financial advice in a way that will educate adults, young and old alike!” — NGPF Personal Finance
  • “The author does an excellent job of explaining complex concepts in clear terms using common language. I learned something new about taxes despite having filed them for the past 15 years. Clever and approachable. Highly recommend.” — Zach G

 Your Turn: What did you think of How to Adult? Share your opinion in the comments.

Learn More:
amazon.com
thefishow.com

How Much Does it Cost to Have a Dog?

Q: I’d love to have a dog, but I’m not sure I can afford one. What kind of expenses am I looking at if I bring a furry canine friend home?

A: Owning and caring for a dog doesn’t come cheap. But, if you work out the numbers before moving forward, you’ll know what to expect and have an easier time budgeting for these new expenses.

Here’s a rundown of what buying and owning a dog can cost.

Start-up costs

First, let’s take a look at the larger expenses that you’ll, fortunately, only need to pay once.

If you decide to buy a purebred from a breeder, it’ll run you $500-$2,000. This cost may be offset by lower healthcare expenses, as purebreds from reputable breeders are generally healthier. If you get your dog from a shelter, you can pay as little as $50 or up to $200.

You’ll need to spring for some doggy gear before bringing your pet home, including a bed, a collar and leash, a feeding bowl and some toys, for starters. Combined, these should run you, on average, about $50-$100.

If you want to get your dog trained, you can pay as little as $25 for a single class, or up to $300 for a full course of training, plus resource materials.

Next, is getting your dog spayed or neutered, which can add $20-$300 to your initial costs.

Licensing, vaccinations and a microchip will bring that total up by $110-$360.

Total one-time costs: $255-$3,060

Ongoing costs

Once you’ve paid the costs to bring your dog home, you’ll need to consider what it costs to care for your pet each month.

Dog food

Your four-pawed friend’s got to eat, but how much is dog food going to run you? That depends on several variables.

First, how much are you able to spend? The cheapest dog food can cost less than a dollar a pound, but if you go gourmet, expect to pay gourmet prices, or up to $1.60/lb.

The size of your dog also plays a role in how much the food will cost. A small 3-pound pup will only need 140 calories a day, or ⅓ cup of food, while a 100-pound beast will need a whopping 1,925 calories a day, or 4½ cups of food.

Finally, consider your dog’s special dietary requirements. A bag of food for dogs with sensitive stomachs can cost as much as $2.60/lb.

Total monthly cost: $20-80 

Preventative health care and routine well visits

All dogs will need some medication to prevent common conditions, like heartworms, fleas and ticks. Some vets may recommend vitamins or other supplements and dogs should also have their teeth brushed occasionally. Costs for these preventative measures will vary by the size of the dog and its general health.

Most vets also advise dog owners to bring their pets in for a wellness checkup at least once a year. The cost of this visit will vary by location and practitioner.

Total monthly cost: $20-80

Grooming and bathing 

If you’ll be giving doggy baths at home or out in the yard and trimming its claws, you can save hundreds of dollars a year. If you’ll be hiring someone else to do the washing and occasional grooming, these costs can add another $100 to your monthly dog costs.

Total monthly cost: $0-100

Doggy day care, boarding and walking

Here’s where doggy costs can start to skyrocket.

Doggy day care averages $40 a day, while individuals who travel often can expect to add another $100 to their pet costs for every overnight stay. Hiring someone to walk your dog will bring these costs up even more, with professional dog-walking services charging as much as $30 for every half-hour walk.

Total monthly cost: $0-600

So, how much does it cost, in total, to own a dog? After the initial costs, expect to pay anywhere from $40 to $960 a month, depending on how much you choose to spend and how often you’ll need to leave your pet in day care.

That furry friend doesn’t come cheap, but you can’t put a price on the companionship, and boundless love, that a dog will bring you. Be sure to review the costs before bringing your pet home, and to make sure you can comfortably afford these new expenses.

Enjoy your four-legged friend!

Your Turn: Have you recently purchased or adopted your own furry friend? Tell us how you cover your new expenses.

Learn More:
moneyunder30.com
thesprucepets.com
pawp.com
thrillist.com

Your Complete Guide to Retiring Alone

Saving for retirement involves lots of planning and calculations for every adult; however, if you are not married and don’t have children, you’ll need special strategies for retirement saving and planning.

If you are anticipating a single retirement, you are not alone. According to the U.S. Census, approximately half of all American adults are married. In addition, close to one-third of baby boomers don’t have children. Others may age alone due to the death of a spouse, a divorce or estranged or unavailable children.

Here’s what you need to know about retiring alone:

Create your own support system

One of the greatest challenges of retiring alone is not having a built-in support system through a spouse and children. Isolation and feelings of loneliness can be one of the strongest factors in early aging and general unwellness, so it’s a good idea to build your own support system if you’re planning on retiring single. This can take the form of a close group of friends who live near your home and are happy to join you for fun outings or occasional errands. If you don’t have this group of friends, make new ones by attending local social events through Meetup.com, befriending your neighbors in your community, or spending time at a senior center for active adults.

Identity your most trusted friend

It’s a good idea to choose one friend to serve as your emergency contact and to make decisions on your behalf in case you become incapacitated for any reason. Failure to appoint this person can mean decisions about your health and welfare can be relegated to your closest living relative, which may be someone with whom you have no relationship at all.

Choose your trusted contact and draw up a medical power of attorney so they can make decisions for you if the need arises. Save this person’s contact info in your phone, titled “In Case of Emergency,” or “ICE”, so someone can easily find this number in your contacts should the need arise.

Get creative about your housing options

When looking for a place to retire alone, there are loads of options to consider:

Move abroad to a country with a low cost of living where you can check out the sights, get to know the culture, and experiment with the cuisine.
Team up with a friend or two for built-in companionship and shared living expenses.
Choose a retirement community with senior-friendly amenities and walkable conveniences.

Consider long-term care insurance

Did you know that most adults turning age 65 will need long-term care at some point in their lives?

Long-term care can be expensive. As a single retiree, you’ll likely feel more secure knowing you have coverage for a long-term care facility or at-home care should the need arise. A long-term care policy may not be cheap, but may be worth the security it brings you.

Know your Social Security claiming options

If you have never been married, or have never had a marriage that lasted 10 years or more, your Social Security claiming options are simple. You are likely best waiting until age 70 to claim, unless you believe your life expectancy will be shorter than average. If you do claim your benefits before reaching full retirement age, and you continue working, make sure your income does not exceed the Social Security earnings limit at the time, or you may end up owing money.

If you have a previous marriage that lasted 10 years or longer, you may be able to claim a spousal benefit based on your ex’s earnings record and switch over to your own benefit amount when you reach full retirement age. If your spouse is deceased, you may be eligible for a widow/widower benefit based on your late partner’s earnings record.

Be sure to review your options carefully before making your choice.

A single retirement may look a bit different than a retirement shared with a life partner, but by planning ahead and following the tips outlined above, these can be the best years of your life.

Your Turn: Are you planning for a single retirement? Share your best tips and ideas with us in the comments.

Learn More:
snugsafe.com
kiplinger.com
forbes.com
thebalance.com

What is Credit Card Interest and How Does it Affect Me?

Getting your first credit card is super-exciting. That small piece of plastic is a gateway to adulthood, and when used responsibly, it can be your first concrete step toward establishing sound financial habits to last a lifetime. Unfortunately, though, many teenagers and young adults don’t know enough about credit card interest when they open their first credit line (such as with a credit card) and end up deeply in debt — and quickly.

Don’t let this be you! Be sure to learn all you need to know about credit card interest and how it works before you apply for your first credit card.

What is credit card interest?

Interest on a line of credit is money the credit card issuer charges to the cardholder for borrowing money every time they use their credit card. The interest is generally set at an annual rate known as the annual percentage rate, or the APR. Credit card companies use the APR to calculate the amount of daily interest the cardholder is charged for purchases as well as the unpaid balance on the line of credit associated with the card.

Important credit card terms to know

Before learning how credit card interest is charged, you’ll need to know some basic credit card billing terms:

  • A credit card billing cycle is the period of time between credit card billings. Billing cycles can range from 20 to 45 days, depending on the credit card issuer. During that time frame, any purchases, credits and interest charges will be added to or subtracted from the balance.
  • When the billing cycle ends, you’ll receive your credit card statement, which will reflect  all unpaid charges and fees for this period of time.
  • The statement will also highlight the payment due date, which tends to be approximately 20 days after the end of the billing cycle.
  • The time frame between the end of the billing cycle and the payment due date is known as the grace period. If you neglect to pay your bill in full before the grace period ends, the outstanding balance will be subject to interest charges.

Calculating interest charges

To calculate your interest charge for a billing cycle, follow this formula:

Step 1:  Divide your APR by the number of days in a year to get your daily periodic rate, or the amount of interest your credit card issuer charges cardholders during each day of the billing cycle.

For example, if your APR is 18.5%, you’ll divide that by 365 to get your daily periodic rate of .0005%. (0.185 / 365 = .0005)

Step 2: Multiply the daily periodic rate by your average daily balance, or the balance you carry during each day of your credit card’s billing cycle, to get your daily interest charge. To find your average daily balance, look on your credit card bill. You can also determine your average daily balance by taking the sum of the balances at the end of each day in the billing cycle, and dividing that number by the total number of days in your billing cycle.

Using the numbers in the above example, if your average daily balance is $1,200, you’d multiply this number by your daily periodic rate (.0005%) to get a daily interest charge of $0.60. (0.0005 * 1,200 = 0.60)

Step 3: Multiply your daily interest charge by the number of days in your billing cycle.

Staying with the above example, if your billing cycle is 30 days, you’d multiply $0.60 by 30 to get an interest charge of $18 for this billing cycle. (0.60 * 30 = 18)

Avoid paying interest

Credit card issuers will only charge interest if you carry a balance from one month to the next. If you pay your balance in full before the grace period ends, there will be no interest charged. It’s a good idea to familiarize yourself with the payment due date on your credit card billing cycle and to set a reminder to pay your bill before it’s due whenever possible.

If you have a large outstanding balance and paying it in full at the end of the billing cycle is not possible, at the very least try to pay more than just the minimum payment each month. It’s also a good idea to avoid charging more purchases to your card if there is already an unpaid balance. Remember: A credit card purchase that is not paid off before the payment due date can mean paying for that purchase for months, or even years, to come.

Credit cards are a necessary part of life. Building a strong credit history can open the door to long-term loans and other financial opportunities, but neglecting to learn how credit card interest works can lead to a spiral of debt. Before opening your first credit card, brush up on your knowledge of how credit card interest works and how it affects you as a cardholder.

Your Turn: Have you recently opened your first credit card? Share your beginner tips for responsible credit card use in the comments.

Learn More:
magnifymoney.com
investopedia.com
finder.com
credit.org

Spring Clean Your Finances

Spring is a great time of year to clear your house of accumulated junk and make it sparkle. Why not do the same for your finances? Junk can accumulate there, too. In fact, some of your money matters may need a good wipe down this season. It is especially true this year, when many Americans are still recovering from the financial fallout of COVID-19, or maybe wondering how to use the latest round of stimulus checks. Whatever your current situation, a thorough spring-cleaning for your finances is a responsible move this time of year.

Here are some ways to spring clean your finances:

Sweep out your budget

It’s time to shake out the dust in your budget! Review your monthly spending and find ways to cut back. Have you been overdoing the takeout food this year? Buying up more shoes than you can possibly wear? Pare down your budget until it’s looking neat and trim.

Freshen up your W-4

Tax season is prime time for revisiting the withholdings on your W-4. If you received an especially large refund this year, you may want to adjust the amount you withhold. The IRS’s tax withholding estimator  can be a useful tool to help you determine the perfect number.

Deep clean your accounts 

If you’ve switched from one bank or credit union to another, you may have dormant accounts that are still open and may be charging you fees. Or, perhaps they’re holding onto money you’ve forgotten you have! And don’t forget about the 401(k) you may have from an old job. Now may be the time to transfer those funds to your current 401(k).

This spring, do a Marie Kondo on your finances and get rid of any accounts you don’t need any longer. A minimalist approach to your finances will make it easier to manage your accounts. It will also give your savings a greater chance at growth, and help you avoid fees for unused accounts.

Toss out your debt

Get ready to kick that debt for good!

If you’ve been stuck on the debt cycle for too long, make this spring the season you create a plan to break free.

First, trim your budget or consider a side hustle for earning some pocket money, designating these extra funds for your debts. Next, choose a popular debt-busting approach, such as the avalanche method, in which you pay off debts in order from highest interest rate to lowest, or the snowball method, where you start with the smallest debt and then move up your list as each is paid off. Once you’ve chosen your approach, maximize payments to the first debt on your list, making sure not to neglect the minimum monthly payments on your other debts. Before you know it, that debt will be gone!

Dust off your saving habits

Have you been remembering to pay yourself first? Get into the habit of maximizing your savings this spring with a tangible financial goal. You can also make savings an itemized line in your budget. This way, you’ll have funds set aside for this purpose, instead of savings only happening if there’s money left over at the end of the month. Finally, automate your savings by setting up a monthly transfer from your checking account to your savings account. Never forget to pay yourself first again!

Make your investments sparkle

Whether you’re an experienced investor or you’re just getting your feet wet, it’s time for a spring cleaning of your investments! Check if your allocation strategy is still serving you well, whether you need to adjust your diversification and if your retirement accounts are on track for your estimated retirement timeline.

Make your stimulus count

Don’t let your stimulus payment and tax refund blow through your checking account. Instead create a spending plan for the funds that includes paying down debt, allocating some of the money for long-term and short-term savings and possibly investing another portion of the payment. Don’t feel guilty about using the rest of your stimulus check to splurge on a purchase or experience you’ve been wanting for a while now. The money is being distributed with the hopes that it will help stimulate the economy, and the best way to do that is to spend — just don’t go overboard.

Spring is the perfect time to give your finances a thorough cleaning. Follow our tips to make your money matters shine!

Your Turn: How are you spring cleaning your finances this season? Share your tips with us in the comments.

Learn More:
nerdwallet.com
thebalance.com
doughroller.net

What You Didn’t Know About Home Loans

A home loan, otherwise known as a mortgage, enables you to purchase a house without paying the full price out of pocket at the time of the purchase.

For most people, buying a home is the biggest financial transaction of their lifetime. For that reason, if you’re in the market for a new home, it’s best to learn all you can about home loans and how they work before you get too deep into the process.

Here are some things you may not know about home loans:

Rates fluctuate daily

Borrowers who are eager to secure a home loan with a low interest rate may get into the habit of checking mortgage rates as often as some people check the weather. Interest rates fluctuate every day, which means the rate you see today may be different than the one you see when you actually are approved for the loan.

The cheapest interest rate does not guarantee the cheapest loan

When choosing a lender, borrowers will often choose the one offering the lowest interest rate, but this can actually be to their detriment. There are other factors to consider, including closing costs and the lender’s policy on releasing equity for a line of credit or a loan. Also, in adjustable-rate mortgages (ARM), the loan featuring the lowest interest rate may not have the lowest rate a few years down the line and may actually cost more in the long run.

A fixed-interest rate mortgage can ultimately cost you more

When interest rates are low, many home-buyers choose a mortgage with an interest rate that is fixed throughout the life of the loan, believing it is the most cost-effective choice. This may or may not be correct. A fixed-rate mortgage might comes with higher exit fees, or fees paid to the lender when the loan is repaid. Also, if rates drop further throughout your loan’s term, you won’t be able to take advantage of the new rates unless you refinance. Finally, interest rates on fixed-term mortgages are generally higher than the initial rate on ARMs.

A lower credit score can cost you tens of thousands of dollars in interest

Most people know that a higher credit score is generally awarded with a lower interest rate, but not many people know to what extent this is true. A high credit score can translate into tens of thousands of dollars in interest payments over the life of a home loan. A credit score difference of 100 points can increase a monthly mortgage payment by $150 or more, depending on the size of the loan and the interest rate.

If you’re thinking of applying for a home loan soon and your credit isn’t in the “very good” category (higher than 740), it may be worthwhile to spend a few months working to boost your score before you apply for a mortgage.

The housing market impacts rates

While the federal funds rate will have the greatest impact on the rise and fall of interest rates, the state of the housing market will affect it, too.  Lenders need to turn a profit from their loans, which means the higher the volume of loans they process, the less they need to earn from each one to remain profitable. Consequently, when the housing market is booming and lenders are granting loans on a frequent basis, they will be more inclined to offer lower interest rates to borrowers.

You can have your mortgage payments automated

Your home loan payments will likely be your largest monthly bill, and missing a payment or paying it late can have serious consequences. Fortunately, you can avoid these scenarios by signing up to have your monthly mortgage payments automatically deducted from your checking account. Most lenders provide this service; check with yours to see if this is an option they offer.

Buying a home will likely be the biggest purchase you ever make. Be sure to find out all there is to know about mortgages and their interest rates before applying for a home loan.

Your Turn: Do you have another lesser-known fact about home loans to share? Tell us about it in the comments.

Learn More:
kloze.com
wyndhamcapital.com
binvested.com
bankrate.com

Beware Stimulus and Tax Scams

It’s stimulus season and tax season at once, and scammers couldn’t be happier. They know that taxpayers are eager to get their hands on their stimulus payments and tax refunds. As consumers are working to file their taxes before the May 17 deadline, all that paperwork and payments mean people may be letting their guard down. For a scammer, nothing could be better!

The IRS is warning of a surge in scams as the tax agency continues processing tax returns and distributing stimulus payments to eligible adults who have not yet received them. Here’s all you need to know about the latest round of stimulus and tax scams:

How the scams play out

In the most recent IRS-related scams, scammers will con victims into filing phony tax returns, steal tax refunds or stimulus payments or impersonate the IRS to get victims to sign documents or share personal information, such as Social Security numbers or checking account numbers. The scams are pulled off via email, text message or phone. Sometimes, victims will be directed to another (bogus) website where their device will be infected with malware. Other times, the victim receives a 1099-G tax form for unemployment benefits they never claimed or received, because someone has filed for unemployment under their name. Unfortunately, the losses incurred through most of these scams can be difficult or impossible to recover.

What you need to know

As always, information is your best protection against these scams. Here’s what you need to know about the IRS, the stimulus payments and tax returns:

The IRS will never initiate contact by phone or email. If there is an issue with your taxes or stimulus payment, the agency will first communicate via mail.
There is no “processing fee” you need to pay before you can receive your stimulus payment or tax refund.
The IRS is not sending out text messages about the stimulus payments. If you receive a text message claiming you have a pending stimulus payment, it’s from a scammer.

There is no need to take any action to receive your stimulus payment. Likewise, aside from filing your tax return, there is nothing additional you need to do to receive your tax refund.

If you’ve been targeted

If you receive a suspicious phone call, text message or email that has allegedly been sent by the IRS, do not engage with the scammer. Block the number on your phone and mark the email as spam.

If you are a victim

If you are the victim of identity theft related to taxes or stimulus payments, there are steps you can take to mitigate the loss.

If you received a 1099-G for unemployment benefits you’ve never filed for or received, it’s best not to ignore it. Contact your state’s unemployment office to report the fraud. It should be able to send you a corrected 1099-G showing you did not get any benefits.

First, report the scam to the correct authorities. If a fraudulent tax return was filed in your name, the IRS will mail you a Letter 4883C or 6330C to verify your identity. You may also need to call the toll-free number provided on the letter and visit an IRS Taxpayer Assistance Center . After reporting the fraud, you’ll likely need to file a paper tax return. Complete an Identity Theft Affidavit (Form 14039) and attach it to the back of your paper return.

If you’ve mistakenly shared your information with a scammer and they’ve stolen your stimulus check, you will likewise need to let the IRS know. Visit Identitytheft.gov where you will receive a personal recovery plan that will hopefully minimize the damage done by the scammer and help you reclaim your lost funds.

It’s tax season and stimulus season, so it’s also scam season! Keep your guard up and follow the tips outlined here to prevent yourself from falling victim to one of the many circulating scams. Stay safe!

Your Turn: Have you been targeted by a stimulus or tax scam? Tell us about it in the comments.

Learn More:
wfmz.com
freep.com
cnbc.com
irs.gov