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Mint interfaces with all your banks and delivers it in a clean, minimal, cloud-based package.
Have some time off during the summer months and can spare some time to up your money game? Or maybe you’re raking in extra cash from summer side gigs. Either way, you might want to think about some investing. Sure, the siren of impromptu getaways in exotic locales may be beckoning, but you’ll want to look out for your future self.
Here are some simple ways you can invest in the summertime:
Low-Cost Index Funds
Don’t have $1,000 to get started? Invest in a diversified, low-cost index fund, recommends Sean Gillespie, co-founder and Financial Planner at Redeployment Wealth Strategies. An index fund is a type of mutual fund that is managed by index trends, and thus have lower fees. And lower fees means more of that cash will go back to you.
“Doing that takes care of asset allocation and diversification, two of the three most important habits inside any portfolio, right out of the gate,” explains Gillespie.“(The third aspect is risk tolerance.) “The power of starting sooner rather than later is nothing short of astonishing,” says Gillespie, and you’ll see how much your money will grow. To start, figure out an amount you can comfortably invest every month. Be sure to keep it top of mind, and make it a priority.
Stocks? Maybe Not…
By choosing a widely diversified portfolio that matches how much risk you are prepared to take, you won’t have to go through the stress of picking stocks, explains Miguel Gomez, a Certified Financial Planner at Lauterbach Financial Advisors. And of course, make sure pick a portfolio that matches your specific goals.
For example, if you’re investing for, let’s say, the next two to five years, you probably don’t need to take risks in the stock market, says Gomez. But if you’re squirreling away money for something that’s happening beyond 10 years, then it probably makes sense to opt for a riskier approach.
One of the easiest things you can do is sock away money each month into an employer-sponsored retirement account, such as a 401(k) or Roth IRA. The annual contribution limits for both 401(k) and Roth IRA is $18,500.
Find out if your employer offers matching contributions. ”Most employers offer a matching program, where the firm will invest a certain percentage of the funds invested by the individual,” says Sahil Vakil, CFA®, CFP®, and managing director of MYRA Wealth.
You can also commit to start by donating a small percentage, then up the percentage every few months. Another tactic? Contribute part—or all—of your annual raises toward your employer retirement account. That’s money you most likely won’t notice.
The best way to save is not to have to think about it at all. There is a sublime magic to the “set it” and forget it” approach. Your money grows without your having to put in any effort.
Set up auto transfers to an IRA or taxable account, recommends Levi Sanchez, a Certified Financial Planner and co-founder of Millennial Wealth.
“If you’re automating your investments, you’re more likely going to commit to it,” says Sanchez. To start, save a small amount each month, then ramp it up over time. The important thing is to get into the habit of doing it now. That way when you have more to put away, you’ll already have paved the inroads to investing, so to speak.
Another simple way to get started investing is to try one of the handful of micro investment apps out there. Popular ones include Acorns, Robinhood or Stash. There’s a low to no minimum deposit to get started, and you start by contributing a few dollars to your investment accounts.
Acorns rounds up your transactions from your connected savings and credit card accounts. With Stash, you can pick from several different portfolios based on your interests. If you ever want to ramp up your investments, you can set up auto-transfers, or add more accounts. “The amounts are small, but add up over time and are a great way to get started,” says Sanchez.
Invest Extra Money Earned from Summertime Gigs
Summer is a great way to take on side hustles, either from pet sitting for vacationers, helping people uproot to new digs (it is peak moving season, after all) or through ride sharing. While you might want to use a solid chunk of extra summer earnings to pay off debt or for the inevitably expensive holiday season, set aside a small portion solely for investing. You can try a micro-investing app (see above) or make extra contributions to a retirement account.
If you’re juggling multiple gigs, you can designate the money you earn from certain side hustles for “fun” goals, another as “get ahead” money to put toward your savings, and another just for investing. For instance, money you earn kid-watching and as a rideshare driver can go toward your vacation fund, while income coming in from freelance tape transcribing can be used just for investing.
By making investing a top-of-mind priority, you can develop the habits and willpower to keep you saving for retirement. You’ll surely be grateful you made the moves you did today.
*This blog post does not constitute, and should not be considered a substitute for legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.
The post Easy Ways to Start Investing Your Money This Summer appeared first on MintLife Blog.
Before my husband and I got married, we had a conversation about merging our finances. I wasn’t too worried about his financial habits – he’s always lived a frugal lifestyle – but I wanted to know how compatible we were. I was more than a little surprised to find out he had no credit score.
As it turns out, he had avoided getting a credit card all through college because he was scared of falling into debt. The way he saw it, there was no reason to use credit if he only made purchases he could afford with cash. That may sound responsible, but it took us over six months of using a prepaid card to build his score enough for a traditional card. Years later, we were able to use our stellar credit scores to help qualify for our first mortgage.
Things worked out for us, but it would have been a lot easier if he had started using a credit card while in college. The student credit card is designed exactly for this purpose – here’s what you need to know about them.
Why Get a Student Credit Card?
If your parents are covering most of your expenses and you already have a debit card, why do you need a credit card? After all, isn’t a credit card just an easy way to get into debt? That may be partially true – and a misused credit card is absolutely the quickest path to financial ruin – but it can also be the best way to build credit.
A student credit card is like a starter pack for your financial life. It’s not the shiniest, flashiest card with the best features, but it will help build your credit score. It might also be a better choice for you than a secured card or a prepaid credit card.
Even if you don’t believe in taking out loans, a healthy credit score is necessary for navigating life. Almost every landlord will run your credit and won’t approve your application if you don’t have a good score. If you eventually try to buy a house or take out a car loan, you’ll need a solid score for that too. Even the hiring process sometimes involves divulging your credit score.
When you have a student credit card, payments are reported to one or all three of the main credit bureaus: Experian, Equifax and TransUnion. Every time you pay your bill, the card issuer notifies the credit bureau. Those transactions become a report card that adds up over time.
It can take less than a year of on-time payments to build a successful credit score, so it’s not impossible to leave college with respectable credit. Having a good score before you graduate is a good start for a successful financial life post-college. Credit scores range from 300 to 850, with higher scores qualifying for the best rates and loan products. Once you reach a 700 score, you might decide to apply for a credit card with better features.
How to Qualify for a Student Credit Card
To qualify for a student credit card, you have to be a current college student. You also need to provide proof of income to the card issuer. Scholarships, grants or work-study don’t count as income, but part-time jobs do. If you’re under 21 and don’t have a job, you can ask a parent to cosign on the card. Remember, when a parent cosigns it means they’ll ultimately be responsible if you default on the card with an outstanding balance.
To look up your credit report, go to AnnualCreditReport.com. You’ll find credit reports from all the credit bureaus, showing any current or past forms of credit. That includes student loans, auto loans, personal loans and any other debt product.
Even if you’ve never taken out a loan before, it’s wise to check your credit report every once in a while. Identity theft is common, and thieves can open new lines of credit in your name for years before you find out. The sooner you discover any problems or mistakes on your credit report, the sooner you can fix them.
If you get denied for a student credit card, look into a secured credit card that requires a deposit to act as collateral. A secured card is another stepping stone to building good credit. Another option could be to become an authorized user on the credit card of someone you trust (such as a parent), which allows you to piggyback off their responsible spending.
How to Use One Responsibly
A credit card is a tool, not a toy. A credit card is not an excuse to buy a new laptop, take a weekend trip or go on a shopping spree. All the money you charge on a credit card will be your responsibility, whether you pay for it now or later.
When you look at your credit card statement, there are three figures you’ll want to take a look at (in addition to scanning the transactions). One will be the statement balance, which is the total of your balance when the billing period ended. One number will be the minimum amount due, which is how much you need to pay to stay current. The third figure will be the current balance, which is the balance owed on the card the day you look at it.
Ideally, you should pay the statement balance or current balance every time the credit card bill is due. If you pay the minimum or less than the statement balance, you’ll be charged interest fees on the remaining sum (unless you received an initial 0% APR rate).
Interest on a credit card can add up quickly because of how the minimum amount is structured. The minimum amount is usually between 1-3% of the total bill. If your balance is $500, your minimum bill might be $15.
A credit card balance is a revolving debt, which means there’s no set deadline on when you need to repay the money in its entirety. If you only make the minimum payment every month and keep using the card, you could be in debt for years and pay hundreds (at a minimum) in interest.
It’s also recommended to keep your utilization under 30% of the total available credit as higher utilization could result in a lower credit score. For example, if your credit limit is $1,000, to stay under 30%, you don’t want to charge more than $300 before paying it down. When you utilize more than 30% of your credit, credit bureaus might start to think you’re using a credit card to fund an unsustainable lifestyle.
A great way to use a student credit card responsibly is to put one small recurring bill on the card, like your cell phone or internet bill. Then, you can set up automatic payments to the credit card from your bank account. This way you won’t ever miss a bill or spend more than 30% of your available credit.
What are the Downsides?
Student credit cards are a great option for young people with no credit, but they don’t offer the same range of rewards that other cards do. You’re unlikely to earn a free trip to Miami with a student card, for example. Ideally, a student card would be used just long enough to improve your score and qualify for a better credit card.
Student cards also carry the same inherent risk as other forms of credit, in that they can be a gateway to debt. Swiping a credit card is easy and mindless, especially if you don’t check the balance until the statement comes. Plenty of young people have learned this lesson the hard way, setting themselves up to struggle in early adulthood – or saddling their parents with an undue financial burden.
Student credit cards also can have higher interest rates, which means any revolving debt will accumulate more debt at a higher rate. That’s why it’s important to transition to a traditional card as soon as possible.
How to Compare Student Credit Cards
Not every student credit card is the same. Each has their own set of fees, benefits and drawbacks. Here are the best ways to compare student cards before finding the best one for you.
The APR is the card’s annual interest rate. Credit cards only charge interest if you don’t pay the balance in full, which means you don’t have to worry about the APR unless you won’t be able to pay the full bill every month.
Some cards offer 0% APR for a certain amount of time, usually around six months. During that period, you can only pay the minimum amount and not be charged interest. Be familiar with the details of your introductory rate, for example, if you pay a bill late, the 0% offer may be revoked and you’ll be charged back interest for previous billing cycles.
Some card issuers charge an annual fee, between $25 and $99. Avoid getting a card with an annual fee if possible.
Credit cards often have rewards, such as cash-back on certain categories or points you can redeem for merchandise, travel and more. Pick the rewards system that works best for you. If you travel a lot, cash-back on travel purchases makes more sense than 5% cash-back at grocery stores.
Be sure to understand the cash-back or rewards policy thoroughly. Some require you to manually sign up or activate the cash-back beforehand in order to get credit for your purchases.
Some credit cards provide sign-up bonuses, like a $100 bonus when you spend $500 in three months. This is a one-time benefit and only available for new customers. Be cautious of spending the required amount unless you know you can pay it off. Rewards and bonuses are canceled out when you carry a balance and pay interest.
Most student credit cards have low credit limits, often around $500. A credit limit is how much money you’re allowed to charge on the card. The higher the limit, the more money you have access to.
Some student credit cards come with free perks, such as free credit score notifications or identity theft monitoring. Each of these benefits varies based on the card.
If your credit history isn’t long enough, lenders may view it as “insufficient” and you may have trouble qualifying for a credit card or other loan. And that’s where the challenge begins. Lenders don’t want to give you credit when you don’t have a credit history, but it’s hard to build a credit history when you can’t get credit.
The best way to establish a good credit history is slowly, over time. Make payments on time. Pay off balances as you go, or at least keep them reasonably low. As the years go by, all your responsible behavior can help you build a good credit history.
You say you can’t wait to get started? Okay, here are some things you can do now.
Consider a secured credit card.
Even if you have a short credit history, you may still be able to qualify for a secured credit card. For this type of credit card, you deposit cash that serves as your credit limit.
Consider any fees and charges when deciding between secured cards. And be sure the card you choose reports your account activity to the major credit bureaus including TransUnion®. Not all cards do this, so you want one that highlights your great track record.
Ask about credit where you bank, shop or get gas.
If you already have a savings or checking account, your bank may approve you for a card with a low credit limit.
You can also try applying for a gas credit card or store credit card. These usually have smaller credit limits, but it’s often easier to qualify for them. Gas credit cards are usually good at only one chain of gas stations, but you can take advantage of discounts and perks. Store credit cards are also limited, but they often offer rewards like cash back, points for certain purchases, or benefits like free shipping.
Talk to lenders before you apply.
For people without long credit histories, some lenders may examine data from less traditional sources, like utility or rental payments. If your credit history is relatively brief, it’s perfectly appropriate to ask your lender if they’ll look at alternative data when they’re considering your application. Just do it before you apply–asking after you’ve been denied may be less effective.
Look into a credit builder loan.
This works on the same principle as a secured credit card, except it’s a loan.
Here’s an example of how it works. Let’s say you take out a small loan from a bank and then use that loan to open one of their Certificates of Deposit (CDs). The bank holds the CD, while you make regular payments on the loan. When you’ve paid off your loan, you own the CD. You end up with some savings, plus a good credit track record.
The downside? Any interest and fees you have to pay on the loan. Be sure you choose a lender that will report your on-time payments to the three major credit bureaus. And try to find a bank that offers low rates and fees.
Become an authorized user.
You can ask someone (usually a family member or close friend) to add you as an authorized user on their credit card. That way, the account’s history will be added to your credit report.
Of course, you’ll want to choose a person whose account is in good standing. There’s always the risk that he or she could miss payments, end up in collections, or even go bankrupt. In that case, their bad behavior could hurt your credit report. So, if you do become an authorized user, monitor your credit report to be sure there are no issues and payments are being made on time.
Don’t apply for multiple credit cards within too short of a time frame.
Applying for lots of credit cards all at once may seem like a good way to kickstart your credit history, but it can actually hurt your credit and raise alarm bells for card issuers. Be selective. Look for the best rates from brands you know.
Be careful about closing accounts.
Closing credit accounts may significantly shorten your credit history. Accounts you close will eventually stop appearing in your credit reports and won’t be calculated in your credit score. Here’s an example. Let’s say you have two credit cards: one with a $20,000 credit limit and zero balance and another card with a $10,000 limit and a $5,000 balance. If you decide to close the $20,000 limit card because you no longer use it, this may negatively affect your utilization ratio (the amount of debt you’re using compared to the amount you have available), your credit score and your credit history. So unless a card has high fees, consider leaving it open. Make a few small purchases every so often and pay them off monthly.
At TransUnion, we believe in Information for Good. Whether it’s creating web-based financial products or sharing expert tips, insights and news on our blog, our mission remains the same: putting powerful tools and resources in your hands to help you know your credit, protect your identity and more effectively manage your financial picture.
This blog post does not constitute, and should not be considered a substitute for legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.
The post Why Credit History Matters and How to Help Grow It appeared first on MintLife Blog.
Finding an insurance policy can be a tedious process, especially dealing with the jargon involved. Insurance policies are, after all, legal contracts between you and your insurer. These contracts have to navigate the conditions of a wide range of claims, for a wide range of scenarios. They tell you who is and isn’t covered, and what is and isn’t covered.
Insurance policies become so abstract that even everyday words we take for granted — like “you” and “we” — need to be clearly defined. Doing so leaves no ambiguity, no snags. At least, that’s the idea.
But because you have a life, you probably don’t speak insurance. That’s not a problem. We’ll outline car insurance terms that don’t usually come up during family dinners or on a first date. And “we’ll” do so (meaning, I’ll do so) in plain English. That way “you” (as in you, the reader) can be a savvier shopper.
Your deductible is what you pay out of pocket before coverage kicks in. Say someone careens into your car while it’s parked. They cause $3,000 worth of damage and your deductible is $500. You’d first pay the deductible toward repairs, and your insurer would pay the remaining $2,500.
Whether you choose a higher or lower deductible is up to you. Higher deductibles usually mean lower premiums because you’re taking on more of the financial risk. A lower deductible means a higher premium, but you’d pay less out of pocket for a claim.
To put it simply, a binder is a temporary insurance policy. It can come in handy when you need proof of insurance on-the-spot.
If, for example, you’re getting a car loan, your loan company will likely ask for proof of insurance. Your insurer can provide you with an insurance binder so that you’re not waiting for your insurance policy to be processed. A binder is typically good for 30 or 60 days and falls off once your formal insurance policy is produced.
Full Coverage Car Insurance
It’s a phrase used frequently, but truth be told, there’s actually no such thing as “full coverage.” When people use this term, they’re likely referring to comprehensive and collision. Together, these guard your ride against an array of perils.
Comprehensive helps cover you for most damages not caused by collisions. That means vandalism, falling trees, theft, fires and mudslides, to name a few.
Collision coverage helps pay for damages caused by — you guessed it — collisions, be they with another car or an object. In order to add collision to your policy, many insurers require you to have comprehensive coverage, too.
Financing or leasing a car? This coverage could help pay the difference — or the gap — between what you owe on it and how much it’s worth when you have an accident.
Especially if you’re leasing, your contract will likely require you to have gap coverage. What’s more, it might be included automatically.
If it isn’t, however, you may want to seriously consider adding it ASAP. There’s a good chance the gap will be there for at least a couple years. You’d be responsible for the difference, and it could save you from being thousands of dollars in the red.
It’s also important to note that comprehensive and collision are typically required in order to add gap insurance. If you’re unsure about that, you can always check the declaration page on your policy.
What’s the declaration page, you ask? Perfect segue.
Also simply called “dec,” this is typically the first page of an auto insurance policy. It provides the who, what, where and when of your insurance plan. You’ll find pertinent info like:
- The names of everyone listed on your policy
- Excluded drivers
- Your policy number
- The start and end dates of your policy term
- Your address
- Your insurer’s address
You’ll also find info on your coverages, limits and deductibles, which can be especially helpful. The dec doesn’t provide all-encompassing detail, but it is an easy-to-read summary.
You might notice another individual listed on the dec page — the loss payee. This is either a person or an institution that has a stake in your vehicle.
So if you’ve just financed a car, say, then the lender would be listed as the loss payee. Because they’re loaning you money for the purchase, they have an “insurable interest” in it and want to protect their investment. By being listed on your policy, the loss payee can stay up to speed with its status and have peace of mind — just like you — knowing that coverage is still in effect. You’ll also find your loss payee’s name, address and contact info on the dec page.
Anything Amiss? Ask.
If anything’s ever unclear, don’t hesitate to ask your insurer. That’s what they’re there for, after all. Besides, asking questions can be a skillful way to gauge just how top-notch and transparent an insurance company is.
Familiarizing yourself with the basic nomenclature of insurance can not only help remove its otherwise ominous-sounding tone. It can help you fully understand what you’re looking at when it comes time to evaluate your insurance needs — without having to make a day of it. You have better things to do.
Eric Madia is Vice President of Product Design at Esurance, where he is responsible for designing the company’s personal lines products. Eric has 23 years of experience in the insurance industry, focused primarily on underwriting, pricing, and product innovation. You can learn more about Esurance home and auto insurance policies by visiting their website.
*This blog post does not constitute, and should not be considered a substitute for legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.
For many growing up, summers used to mean camp, school vacation, part-time jobs, and internships. But for Millennials, specifically those in their mid-20s to early-30s who might have some more discretionary income, the word ‘summer’ can sometimes become synonymous with ‘splurge.’ Summertime is the season for concerts, new wardrobes, dinners out with friends, and you guessed it – travel, travel, travel.
Which makes total sense! The weather is nicer, the days are longer, school is out, and work is typically slower. But don’t be fooled, airlines, hotels, concert venues and even those Airbnbs, know summer is prime time too. According to the 2018 Travelport U.S. Vacation Survey, Millennials (ages 18-34 years old) are most likely to spend more on their upcoming vacations than other age groups, with one out of three willing to spend $5000 or more!
Typically with this type of experiential spending – whether it be a fancy dinner spot during your vacation in Italy, a museum tour in London, or a must-see artist on tour – it can’t be returned. An experience is not like an expensive pair of jeans you bought at Nordstrom on impulse because hey, you look good and why not #TreatYoSelf. Those can easily be returned if you revisit and find they aren’t worth the investment, but spending a day on a rented boat? Not so much.
So if your spending this summer got (or is still getting!) a little out of hand, it’s time to get back on track. 2018 isn’t over, people! Use the next five months to regain lost ground on personal finance goals. Here’s how to get started.
Assess the Damage
Ok, so you went a little bit overboard? As the expression goes, ‘there’s no use crying over spilled milk,’ and there’s no point in stressing over purchases that can’t be returned. Honestly, we’re all human and we all make mistakes – especially financial ones! The good news? Nothing can’t be undone. Yes it may take a while to rebuild a credit score or a savings fund, but there are plenty of ways to get things back on track
First thing’s first: rip of the bandaid, look at the damage done, and ask yourself a few questions. How high is my credit card bill? Can I afford to pay this off now? When is my next paycheck? Will that help cover some of the splurge? I don’t want to dip into my emergency fund, but do I need to? The best counteract to getting overwhelmed is getting organized. Spend time checking your bills and looking at your bank account balance and credit statement.
The next step? Rewrite your budget to fit your current reality. “Budgeting” makes people think of limiting their fun and restricting their choices, but if you take the holistic view, budgeting actually helps relieve constraints and increase life choices down the line. Mint helps you build personalized budgets that make sense for you today and set you up for success tomorrow. If your wallet had an active, lively summer, maybe try to cool it down a little in the fall to rebalance. Think: home cooked meals, fewer workout classes, and no overpriced lattes.
Whether your 2018 personal goals include reducing credit card debt, spending less, adhering to a budget, or paying off more loans, the best thing you can do to get back on the horse is to check your credit score. Our friends over at Turbo give you your score completely free and with personalized advice to help get you where you want to be financially.
If you see your score has taken a ding – don’t freak out! Working to improve your credit and your credit score might seem like black magic, but I promise it isn’t. In reality, your credit score is based on very real, very measurable criteria – and you do have the power to change it. Here are three of the easiest ways to improve your credit score:
- Set up autopay: Whether or not you make payments on-time is the single most important element in the calculation of your credit score. As long as you pay your bills on or before the deadline, your score will be in good standing.
- Increase your credit limit: One of the biggest factors in determining your credit score lies in how much of your current credit balance you’re using. Every credit card has a credit limit or a maximum amount you can spend. Your credit score will take a hit if your credit balance is more than 30% of the available limit. WARNING: do not use this increase as an excuse to up your spending!
- Keep old accounts open: Your credit age makes up 15% of your credit score, and the only way to increase the age is to keep old accounts open and avoid opening new ones. Every time you open a new credit card or take out a new loan, the average age of your score decreases. In other words, if you just sit tight with the accounts you have now, your score will likely increase on its own.
Learn from Your Mistakes
We’ve all seen the movie clip of a shopaholic freezing her credit card in a block of ice. This may be semi-effective, but is it realistic? Hell no. It may be a way to tackle spending right now, but it’s hardly a long-term strategy. The best way to really take hold of your finances and get back on track is to be real with yourself. Have the #RealMoneyTalk with yourself, set goals, and actually work on keeping them!
Remaining aware of how much you are really spending with a credit card also helps to encourage cautious consumption. In addition, try leaving it behind every so often. Although we’ve been encouraged to “never leave home without it,” there are moments when this advice may actually make it seem easier to use it rather than being cautious of what that phrase really means. Most days, leaving the credit cards at home isn’t an inconvenience and carrying a debit card or paying with cash will help you feel more in charge of your finances while setting you up to improve your numbers.
Splurging, especially in the summer, is fun, exciting and easy, but it IS detrimental to your financial health. The best way to get ahead of the urge to spend is to again, be real with yourself. Building money into your budget for little (and occasionally big) indulgences is a healthy way of allowing yourself the ability to afford something fun while keeping yourself on track with your goals. This also helps you battle “frugal fatigue” and prevent yourself from making impulsive purchases.
What did you splurge on this summer? Shake it off and tell us in the comments!
The post How to Get Your Money Back on Track After Summer Splurges appeared first on MintLife Blog.
When shopping for credit cards, your jaw may drop at the steep annual fee for the premium cards out there. Those gold-star perks do come with a price: We’re talking several hundred dollars and upwards. So when is the annual fee worth it? Here’s how to figure out whether you should fork over a hefty annual fee on a platinum credit card:
Make Sure the Perks Are Worth It
Simply put, you’ll want to make sure the perks outweigh the costs So if that travel rewards card charges a $100 annual fee, if you get over $200 in miles or points toward free travel, paying extra for that card might be worth it.
What to look for include higher than average reward points per dollar, plus the extra features and travel-related benefits. With cash back cards, it’s easy to calculate the break-even point, explains Eric Rosenberg of Personal Profitability. “You can do a little math to figure out exactly what you need to spend on the card annually to earn back your fee and make a profit.”
A Three-Pronged Approach to Assessing Value
Another way to gauge whether a premium credit card is worth the annual fee is to assess three major things: 1. short-term value, 2. day-to-day value, and 3. experiential value through premium travel benefits, says Kathy Hart, a travel hacking enthusiast.
Short-term value is the generous introductory bonus that comes with many premium credit cards. For instance, on some cards you can earn 50,000 bonus points if you spend $3,000 on your card within the first three months.
The day-to-day value is how many points you’ll net for everyday purchases. Some offers include up to three points for every dollar in certain categories. You can also score more points for rotating spending categories, such as groceries in the fall, or gas during the winter months.
Last, experiential value are all the neat travel perks that are widely promoted. This could include some sweet perks such as free ride share while traveling, meals on flights, and access to airport lounges replete with yummy snacks and beverages. Some cards may offer several hundred dollars in travel credit that you can use each year.
A word of caution: Don’t use credit cards unless paying the balance in full every month, points out Hart. “The benefits of travel points are negated if you are paying interest or fees,” she says. If you’re just starting out, start slowly.
Look at the Full Benefits
Besides the premium, heavily advertised perks of a credit card, you’ll want to get acquainted with your card’s full suite of benefits, says Lee Huffman, a personal finance and travel writer. “There are often underused perks—like price protection, VIP lounge access, purchase protections, extended warranty coverage, or primary rental car insurance—that can really provide huge value for you if you knew they were part of your card benefits.” You’ll want to compare these benefits with the other cards to see if you should keep it or apply for another one.
Track the Perks You’ve Cashed In On
Sure, there may be perks. But are you taking full advantage of them? Keep tabs on all the perks you’re raking in, estimate how much each perk is worth, then do the math to figure out if the fee is worth it. “Evaluate whether you are utilizing the benefits of the card,” says Hart. “ If you find you’re not using the card, see if you can downgrade it, or switch to a card that has a lower—or no annual fee.
To make sure the annual fee is worth it, review your cards annually. “Credit card benefits are constantly changing, so a card that worked perfectly for you last year, may not be the right one going forward,” says Huffman. “Make sure the bank is earning your business every year.” For instance, if one of your platinum cards starts to limit lounge access or reduces the number of free luggage, consider not renewing the card when the fee is due.
Another way to see if the card is worth its weight in annual fees? Add up all the value of the rewards and benefits the card offers you, but then to subtract what you would have received if you switched to the next best card with an annual fee, suggests Steele. If the difference is more than the cost of the annual fee, then the card’s a keeper.
And you’ll want to track your use as an individual that year, not just how much the card offers. So even if the card offers several hundred dollars in travel perks, but you only use, say $100 and the card has a $150 annual fee, it may not be worth it to you. And maybe the perks you end up using the most changes. For instance, while last year you were all about the free on-flight baggage, and this year you are tapping in to And if the perks you end up using the most change you’ll want to take that into consideration.
Contact the Credit Card Company to Negotiate
Flex your negotiation muscles and see if the credit card issuer is willing to waive the annual fee. The best time to do it is right before the annual fee is due, points out Huffman. Let the credit card issuer know you’re considering closing the card because you’re not sure if the benefits are worth the annual fee any longer.
You just might be able to get them to toss in a few additional rewards to sweeten the deal. “It doesn’t work 100 percent of the time,” adds Steele, “but I’ve been successful enough that it’s worth the call.”
Before reaching out to the credit card issuer, do your homework. If you’re a customer with solid credit and have been stellar at making on-time payments, you’ll have more leverage. Plus, see what existing cards have comparable rewards and benefits with lower fees.
Consider Comparable Cards
Wondering if you should switch to another credit card? The trick is to add up the total value of a card’s rewards and benefits, then minus what you would’ve received if you switched to the next best card with an annual fee, says Jason Steele. If it ends up not being worthwhile, it might be time to switch to another credit card.
While you may initially experience sticker shock with those platinum credit cards that come with a, say, $450 annual fee, if you would end up benefiting from the travel-related and rewards points, it could end up being worth that extra chunk of change.
Jackie Lam is a personal finance writer. Her work has appeared in Investopedia, Magnify Money and The Bold Italic, and she’s been featured in Money, Kiplinger, Forbes and Woman’s Day. She runs Cheapsters.org, a blog to help freelancers and artists with their money, and to balance their passion projects and careers.
*This blog post does not constitute, and should not be considered a substitute for legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.
The post How to Know if a Card With an Annual Fee is Worth It appeared first on MintLife Blog.
If you’re a first-time homeowner, congratulations! Welcome to a world without landlords, roommates, or security deposits. You found your perfect place and successfully navigated the mortgage paperwork (which should be an Olympic sport).
Now that you’ve made a huge life purchase, it’s important to make sure that your investment is protected. Whether it’s preparing for unexpected repairs, severe weather, or accidents, make sure you’re ready to handle any curveballs that life may throw your way.
Prepare for repairs
It’s never fun to think about “what if.” But if an appliance breaks or your roof leaks, it’s better to be prepared. Here are a few things you can do:
Build repair costs into your budget
Imagine this: it’s the middle of summer and your central air breaks. A new unit could cost you up to $7,000 — not exactly pocket change. Having money set aside for costly repairs can help protect you from financial stress. Experts recommend stashing away 1 to 2 percent of the purchase price of your home for these types of situations. For example, if your home was $300,000, you should budget $3,000 to $6,000 per year, or $250 to $500 per month.
Make routine maintenance a priority
You take your car into the shop for regular upkeep. Shouldn’t your home receive the same care? Routine maintenance allows your property to retain its value. Regularly replace your heat and air conditioning filters to keep systems running at peak performance. Safely check your roof at least twice a year for signs of damage. And while you’re up there, remember to sweep away any debris and clean your gutters too.
Get familiar with your homeowners insurance policy
You don’t need to memorize every sentence, but having a basic understanding of what’s covered will help you feel even more confident when something needs fixing.
Prepare for severe weather
Mother Nature is known for her powerful storms, yet a recent Esurance survey found that only 25 percent of respondents proactively prepare for potentially damaging weather events. Take these steps to ensure your home is ready:
If a storm is expected in the next few days, get ready
Keep an eye on the forecast and remember, storms can be dangerous. It doesn’t hurt to have an emergency kit on hand. Basic items include a flashlight, batteries, first-aid supplies, a can opener, a whistle, nonperishable food, and a hand-crank radio.
If you have enough time, install special storm windows and trim any weak tree branches that could fall on your home. Clean out your rain gutters so they’re fully operational. Get familiar with your circuit breaker and water supply in case you need to shut off either one. Make sure you review an emergency plan with your family or household.
If a storm is headed your way, act fast
Use your best judgement depending on the type of weather and severity. Move any outdoor furniture or accessories into your garage. Relocate your belongings away from windows. Make sure a fire extinguisher is close at hand and evacuate if you need to. No matter what you’re dealing with, try to stay calm.
After the storm, assess damage
In the aftermath of a storm, carefully assess any damage. While filing a claim can feel daunting — especially as a first-time homeowner — reliable insurers like Esurance are there to help make the process easier so you can get back to your life.
Prepare for accidents
It’s bound to happen — a big “oops.” But you can take efforts to help ensure you and your home are protected against life’s mishaps:
Take fire safety seriously
Between 2011 and 2015, there were more than 350,000 house fires each year across the U.S. Burning candles, using fireplaces, and cooking at high heats can all lead to disaster if you’re not keeping a watchful eye. Make sure smoke alarms are fully operational. When burning candles, position them away from curtains, furniture, and other flammable materials. And never leave your kitchen unattended while cooking.
Know your coverages
Let’s say your son’s friend falls off your swing set and breaks his arm. An innocent accident. But your home insurance may include something called family liability protection. Translation: if someone gets hurt on your property and you’re legally on the hook, your insurance can help protect you.
Understanding when your homeowners insurance has your back can give you some much-needed peace of mind. Because you can’t predict if a dead tree branch will fall through your roof. Or if the mailperson will slip and fall on your sidewalk. Life happens. But by taking steps to make sure you’re prepared and understand the basics of your homeowners insurance policy, you’ll be ready for just about anything.
Eric Brandt is the Managing Director and Chief Claims Officer at Esurance. He has more than 20 years of experience in the insurance industry as a claims leader for personal, commercial, specialty, and disability lines of business. Eric draws on his experience in claims leadership to write on a variety of auto and home insurance-related topics. To learn more about Esurance’s home insurance policies, visit their website.
My husband and I are meticulous budgeters. Every expense is categorized and accounted for, from our monthly Netflix bill to our yearly charity contributions. We even have separate accounts for discretionary purchases. So when we recently planned to move from our apartment in Denver to a newly-purchased home in Indianapolis, we assumed the budget we’d cooked up would be right on the nose.
We were so, so wrong.
It’s not that we went over budget by a catastrophic amount, but the amount of surprising little expenses we encountered was staggering. The act of moving your entire life across the country is so complicated that it becomes almost impossible to predict exactly how much money you’ll spend – and that’s assuming everything goes right. If your car dies on the highway or your new place isn’t ready when promised, it could end up spelling disaster for your budget.
That’s why it’s so important to prepare for every little expense accordingly. You may never be able to account for all the variables, but you can ease the anxiety of moving by drawing up the most detailed budget possible.
If you’re about to move, here are some surprise expenses you may encounter.
My friend Ellie moved into a newly-purchased house a few weeks before we did. She mentioned that she and her husband had spent hundreds of dollars eating out during the course of their move. They still had a month left on their apartment lease after closing on their home, and they used that time to paint the new place, refinish the floors and complete minor repairs before moving in.
During that time, they ate out almost every night. They were both so tired after working for hours on end that the idea of cooking a meal was just too exhausting – and food ended up being one of their largest moving expenses.
I was really confident that my husband and I would be able to stay responsible about our eating habits during the move, but our experience has been exactly the same. We’ve been eating pizza, frozen meals and Chinese food more often than not.
Even if you’re normally meticulous about meal planning, sometimes you just don’t feel like spending time in the kitchen after a long day of packing or installing light fixtures. With our new home still in shambles, I’d rather spend an hour assembling furniture or hanging up pictures than cooking a healthy and frugal meal.
Eating out isn’t the only food-related expense we’ve encountered. When you move across the country like we did, you might have to leave behind groceries if there’s not enough room in your car or moving truck. Replacing that food adds up quickly.
Food expenses can be hard to avoid, but you can mitigate the cost by asking friends and family for a little help. If you know someone who loves to cook, they may be willing to prepare frozen meals for you ahead of time to defrost as needed. Beyond that, just try to choose reasonably frugal options and settle back into a more sustainable routine as quickly as possible.
Lost or Broken Items
The chances of losing or breaking something during a move is almost 100%. Sometimes it’s just a dinner plate or a picture frame – sometimes it’s your work computer or a rare antique vase. This expense is hard to predict and even harder to plan for, but there are some things you can do.
If you’re moving on your own, Make sure to properly secure your items and take an inventory of everything important. It can help to separate everything by category and clearly label all your boxes. Set aside a hundred dollars or so in your budget to deal with anything getting damaged or lost.
If you’re using movers, chances are they offer some form of insurance to cover damaged items, and some moving companies offer coverage with no extra charge. You’ll usually have to pay a deductible before the insurance kicks in, but that’s better than not being covered at all.
Buying extra insurance when you’re renting a moving truck is also a good idea. You never know when you’ll accidentally scrape the truck backing out of the driveway or a stray rock will skip up and hit the windshield. Basic supplemental insurance costs approximately $100, but can save you from paying thousands in damages.
When calculating moving expenses, I forgot to add a significant category: gas. It sounds harmless – and might be if you’re just moving across town – but it can add up when you’re travelling across state lines.
My husband and I share a 2005 Toyota Corolla that gets decent gas mileage, and the entire Denver-to-Indianapolis move only cost us $90 in fuel. What I failed to consider was the moving truck, which had much lower gas mileage at about 12 miles a gallon. We spent $322 on gas for the truck, an expense I definitely wasn’t planning on.
If you’re moving a long distance like we were, and driving a car with poor gas mileage, remember to calculate those costs beforehand. I like using the GasBuddy Trip Calculator tool, which takes your car’s specific miles-per-gallon into account.
It’s also a good idea to get a tune-up before you drive hundreds or thousands of miles. We paid for an oil change before the move and had the mechanic examine our car to make sure it wouldn’t break down on the highway.
Even so, a few hours into the drive, our sedan’s check engine light came on. It ended up being a glitch, but a more serious issue could have cost hundreds or even thousands – and completely screwed up our moving timeline.
Unless your company is transferring you across the country, you probably have to take time off work for a move. If you’re self-employed like my husband and I, moving takes up a lot of time during which you can’t work. We spent a whole week packing, driving to our new location, unpacking and decompressing from the stress.
If your income will be affected by the move, make sure to factor that into your budget. Be generous when calculating how long the move will take, remembering that it usually ends up taking more time than you bargained for.
Moving doesn’t necessarily cost a lot because you have to rent a truck or pay for professional help – it’s all the little costs that add up into a full-blown budget disaster.
Here are a few smaller surprise expenses we encountered:
Tips for Movers
We hired movers to load up our moving truck in Denver, and then later to move us from our temporary apartment to our new house. We tipped the movers each time, $25 each in Denver and $40 in Indianapolis to account for 100 degree weather. That ended up totalling $115 in tips. Tipping is optional and some consider it unnecessary, but both sets of movers did a great job and I wanted to thank them for being careful with our possessions.
If you’re going to hire movers, plan on tipping them unless they’re being blatantly lazy or reckless. At the very least, have some bottled water and snacks for them.
We were lucky to have a friend who worked at a grocery store and rounded up enough boxes for the move. Unfortunately, we didn’t have enough blankets and towels to wrap our valuable and delicate items. We ended up buying blankets from the moving company the day of, costing $15 each and $75 in total.
We also had to buy extra tape, a tape gun and a sturdy lock for the moving truck so our items wouldn’t get stolen. The total cost for those extra moving supplies was $105.
Another minor purchase that we didn’t plan on was an air mattress. We packed up all our belongings the day before we moved, so we didn’t have a bed to sleep on. I rushed to Target to pick up a $50 air mattress. It wasn’t incredibly comfortable, but cheaper than a last-minute hotel room.
Waiting Too Long to Book
The sooner you book a moving truck, the better. Prices increase the closer you get to the move, and you’ll end up paying hundreds more if you procrastinate. I learned this the hard way when I rented the truck for our 2015 cross-country move less than two weeks before the big day. Our total cost ended up being $1,210.
Afterwards, a friend of mine told me she saved hundreds by booking months out. I tried her tactic when we moved out of Denver, reserving the truck in February for our May move. We booked the same size truck, used the same rental company, drove the same distance and paid $350 less.
Plus, the moving truck company didn’t make us stick to our original moving date. We could change the day for free once we had the reservation. As soon as you decide you’re going to move, find a rental company and choose a reservation. You’ll save hundreds and won’t be scrambling at the last minute.
About to buy a home? Feeling totally prepared?! Ha!
During the homebuying process, there are a ton of terms you’ll encounter that could be confusing or even deceiving. Unless you have the time and expertise to promote your property yourself or look for a new one, you will probably turn to a real estate broker for help. But it’s still important to learn the jargon you’ll encounter along the road of homeownership yourself! It can make the mortgage process less intimidating and provide even more clarity on the timeline of your home purchase.
We’ve rounded up some of the most common real estate terms that make prospective home buyers think: WTFinance does this actually mean?! (Trust us, you’re not alone!)
APR: Annual Percentage Rate
Think of this as the actual yearly cost of borrowing money. When buying a home, APR reflects the interest rate, mortgage broker fees, and other charges that you pay to get the a loan. An example of a 10% home APR would be: $1000 borrowed x 10% APR = $100 interest owed. The higher your credit score, the more likely you’ll qualify for a lower APR which means less additional money to worry about owing after the purchase goes through.
ARM: Adjustable Rate Mortgage
If you don’t plan on making your new home your forever home, it might make sense to look at an adjustable rate mortgage (ARM). Although all ARMs have 30-year terms, you’ll commonly see a reference to a 5-, 7-, or 10-year ARM. This timeframe refers to a period at the beginning of the loan term when the interest rate is fixed. During this initial period, you can get a lower rate than you would with a fixed-rate loan over the same 30-year term. This is because bond investors don’t have to try to adjust for inflation 30 years down the line. They have the opportunity to adjust more closely with current market rates once the fixed period is up. So if you’re planning to stay in your home for only a few years, you may be able to pay less interest during that time frame.
An Escrow is a service where a third party holds something of value (like a down payment during the closing of a big purchase) to ensure that the conditions of the contract are met. It is often provided through mortgage lenders that can bundle your mortgage payment, homeowners insurance and property taxes into one monthly payment. While you don’t have to opt in to an escrow account, it could be a more convenient way to divide your homeowners insurance costs and taxes over 12 months so you’re not paying it all at one time.
Fair Market Value
The Fair Market Value of a home is the agreed upon price a buyer is willing to pay a seller on the open market. It is often determined by an appraisal, especially for mortgages or a home equity loan. The best way to determine a property’s fair market value is to compare it to other home prices of a similar square footage, in similar neighborhoods.
HELOC: Home Equity Line of Credit
A HELOC offers a credit limit equal to a portion of the difference between the market value of your home minus the value of your mortgage. Most people use HELOCs to make home renovations.
For example, if you owe $90,000 on your mortgage and the home is appraised at, say, $200,000, you have about $110,000 in equity. A HELOC will usually provide a line of credit up to 90 percent of your home’s equity. How much you receive will depend on the outstanding mortgage, your credit history and other factors.
Even with a HELOC, you may experience a shortage of funds. If that is the case, you can reduce your renovation budget or break up the project into a couple of phases to give yourself more time to save and finish the project with cash.
HOA Fee: Homeowners Association Fee
Whether you’re looking to buy a house, condo, or apartment, be advised that many places and neighborhoods have a corresponding homeowner’s association that is responsible for maintenance of common areas and enforcement of HOA policies and restrictions. Having a communal swimming pool is awesome, but beware: HOA fees can rise when the HOA budget runs dry or when major repair work is needed, and can also make a property more difficult to sell in a slow real estate market.
Before signing on the dotted line, remember to estimate your total property expenses which typically includes insurance, HOA fees, property taxes, utilities and maintenance costs.
Sounds easy right? Don’t worry, ‘what does a mortgage really mean’ is not a dumb question!
As defined by Zillow, “A mortgage is a loan that a bank or mortgage lender gives you to help finance the purchase of a house. It is most advantageous to borrow approximately 80% of the value of the house or less. The house you buy acts as collateral in exchange for the money you are borrowing to finance the mortgage for a house. A mortgage payment is composed of four parts: principal, interest, taxes and insurance. It is normally paid on a monthly basis.”
Fortunately, those who can only afford a small down payment have a number of mortgage options to make up the difference when purchasing a home. Here are some of the most common: Fannie Mae and Freddie Mac-backed mortgages can require as little as 3% down, and there are few barriers to getting one. At least one of the buyers must be a first-time homeowner, it must be a single-family home, the buyer must live there full-time and the mortgage has to have a fixed interest rate.
You can ask your lender about applying for a Fannie Mae or Freddie Mac-approved mortgage.
Property tax is determined by the assessed value of your piece of real estate and the current rate in your location. They are used as a source of revenue for local government including public services such as firemen, police, and school funding. You can check a property’s municipality’s current tax rate by going online to your local government’s tax/revenue department’s site.
Now that you’re fully versed in real estate lingo, feel confident to tackle all of the ropes of the home buying process. Don’t feel intimidated – you got this!
A new season means it’s time for new clothes. But how do you refresh your closet without blowing your summer budget? Fortunately, you don’t have to sacrifice your trip to the beach just to get that new pair of sandals. Use these tips to create a budget and strategically plan out your purchases.
Sell What You Don’t Need
If you’re working with almost no budget, turn your old clothes into cash for new ones. Go through your wardrobe, gather gently used items you no longer wear and sell them on secondhand sites or to consignment stores. Use the money from these clothes to refresh your closet with new pieces.
If you’re like me it’s been a couple of years since you’ve really taken stock of what’s in your closest, and it’s probably worth taking another look, freshen it up a bit! There are probably some things that you can get rid of to make room for some new clothes. Look through the back of your closet and the bottom of your drawers, and if there are things you have forgotten about or haven’t worn in years, I think it’s safe to say you won’t miss it them if they’re gone.
If there are pieces that you think you might wear again, do the hanger test. Hang all of your clothes the same way and when you wear it turn the hanger the other way. Check back in a couple of weeks and see if you’ve worn them. If not, you can probably purge them too! Another good test is to box up your “maybes” and check back in 30 days to see if they are still in the box. If they are, clearly you do not need them.
Take a look at your clothes that survived the purge and get organized. I like to organize my clothing by type (dresses, pants, tops etc.), but some people prefer a system based on color. Whichever way works for you, I highly recommend getting organized, as it will help you assess what items you need, what you want and what is truly missing.
It will also help you to identify the styles of clothing that you gravitate toward, helping you figure out what works for you when it comes to purchasing new pieces. Are you looking at a closet full of dresses? Or are your drawers full to the brim with tees and shorts? This will help you understand your personal style and adjust your shopping list accordingly. After all, there’s no need to replenish your shorts supply if you really prefer to wear dresses and skirts.
Next, evaluate your closet to see if you’re missing any true staples. Did you finally have to get rid of your favorite maxi dress because it was just too worn out? Did that favorite pair of denim cutoffs finally have to be retired? You’ll want to replace these pieces because they are classics that you can build your summer looks around. Start making a list of everything you need to buy, based on your inventory. If you realize you already have your basic maxis, shift dresses, shorts and tees, you can simply add shoes and accessories to your list.
Build a Budget
Once you know exactly what you need, plan out a careful budget that encompasses your shopping list. Rather than going to the stores and roaming aimlessly, give yourself an exact number to work with for each piece. For instance, if you know you need a new dress, you might budget $50 maximum for it. If you happen find the perfect dress at a higher price point, revisit your budget and shopping list and eliminate another item or two to make up for the added expense. Having a defined budget—and keeping track of exactly how much you spend on what—will help keep you from wasting money on impulse buys and clothes you’ll never wear.
Now, to the fun part! The new clothes. Buying new clothes can be a daunting task, especially if you are on a limited budget. Check out your local vintage stores or shop secondhand sites online. With consignment stores and sites, you can find quality pieces at a fraction of the typical cost. Shopping secondhand means there’s a better chance you’ll wind up under budget—which means more money for summer fun.
With some advanced planning, it’s easy to stay on track of your clothing finances and get a whole new wardrobe at half the cost.
Catherine Claire is a stylist and a fashion blogger who can create amazing outfits on a small budget. She is the cofounder of The Crystal Pressand also writes for thredUP.com, an online/offline consignment and thrift store with a large selection of wallet-friendly women’s dresses.