Engagement Ring Cost – How Much of Your Salary Should You Spend?

So, you’ve decided to take the big step and propose to your sweetheart. Congratulations! It’s an exciting moment, but it’s also a nerve-wracking one.

Right now, your mind is probably teeming with questions: What’s the most romantic way to propose? Should you present a ring when you pop the question or hide it for your honey to find? And crucially, how much should you spend on it?

It isn’t just a problem for guys. In 2018, Brides magazine reported that record numbers of women are searching for ways to propose to their significant others — both male and female — and some of those proposals include a ring. But even for women expecting to receive a ring rather than give one, cost is an issue.

Getting married doesn’t just mean joining your lives. For most couples, it also usually means combining your finances. That means whatever sum your partner spends on your engagement ring is coming out of the money you’ll both have to live on in the future. It’s a decision that affects both of you.

The 2 Months’ Salary “Rule”

If you consult bridal magazines and other wedding-related resources, you’ll probably see many references to the “rule” that an engagement ring should cost one, two, or even three months’ worth of the bridegroom’s salary.

But did you ever wonder where this “tradition” came from? It was actually made up by De Beers, a cartel that controls most of the world’s diamond market.

According to the BBC, at the beginning of the 20th century, most engagement rings didn’t even contain diamonds. Beginning in the 1930s, De Beers ran an incredibly successful ad campaign to promote diamond engagement rings, which popularized the idea a ring should cost one month’s salary.

The campaign did so well De Beers pushed the concept even further in the 1980s, raising the suggested ring price for American consumers to two months’ salary. In Japan, it upped the ante still more, proposing three months’ salary as the benchmark price.

Clearly, this “tradition” doesn’t have a lot of history behind it. And yet, in less than 100 years, it’s become overwhelmingly pervasive. Not only do most engagement rings today contain diamonds, but according to The Knot, the amount the average American spent on one was $5,900 in 2019.

The average income for a single American that year was around $49,000, according to the United States Bureau of Labor Statistics, so the average ring price was between one and two months’ salary.

There’s one big problem with this formula: Most Americans don’t have this much cash to spare. According to a 2018 Bankrate survey, fewer than 30% of Americans even have the six months’ worth of living expenses experts recommend keeping in an emergency fund, let alone an extra one to two months’ salary to spend on a ring. And for single Americans, savings figures are even lower.

That means that to spend two or even one month’s salary on an engagement ring, most Americans must either drain their emergency savings or, worse still, start their married lives with debt. For many couples, that gets piled onto additional wedding debt and other debts they accumulated before their marriage, such as student loans.

This shared debt burden weighs on your finances throughout your married life. It hampers your credit scores, making it harder to buy your first home together. It could even affect your decisions about parenthood by putting the cost of having a baby out of their financial reach. Finally, based on a 2020 Fidelity study, it dramatically increases the chances you will fight about money.

In short, the De Beers ad’s message — that buying an expensive ring is the best way to get your marriage off to a happy start — has no basis in fact. In fact, according to a 2014 study at Emory University, the opposite is true. It found that men who spent $2,000 to $4,000 on their partners’ engagement rings were 1.3 times more likely to end up divorced than those who chose more modest rings priced between $500 and $2,000 — that’s an increased risk of 30%.

Setting Your Own Guidelines

As you can see, the two months’ salary rule is neither truly traditional nor particularly helpful. There’s no one-size-fits-all rule for how much to spend on an engagement ring. You have to figure it out based on your situation, factoring in both your finances and your partner’s expectations.

Learn What Your Partner Expects

Before you can even think about shopping for a ring, you need to know what kind of ring your partner wants. If you know them well — and you certainly should if you’re preparing to spend your lives together — you most likely have some idea what kind of jewelry they like.

But an engagement ring isn’t just any piece of jewelry. It’s a symbol of your love and commitment to each other. It’s something your partner is going to wear every day. You want it to be something they feel thrilled about and comfortable with.

Based on the DeBeers ads, it might seem like you can’t go wrong simply choosing the biggest diamond you can afford. However, that’s a vast oversimplification.

There are many differences among diamond rings, including the size and shape of the stone, the design, and the band metal. If your partner wants a gold ring with an emerald-cut solitaire diamond, presenting a platinum ring with a round diamond flanked by sapphires won’t be a pleasant surprise.

In fact, your partner might not want a diamond ring at all. Before the 1930s, most engagement rings didn’t contain diamonds. Maybe they’d prefer an old-fashioned ring with a different type of stone. Also, if they’re the socially conscious type, they may prefer to avoid diamonds because of all the environmental and human rights abuses associated with diamond mining.

It’s also not safe to assume your partner would prefer to have the largest ring possible. For one thing, it’s not the size or price of the ring that makes it meaningful. You could make a much better impression with a ring you had custom-designed to fit your partner’s taste than with a much bigger ring you simply picked out of a display case.

In a 2015 Brilliant Earth survey, nearly half of women and 30% of men said what mattered to them most about an engagement ring was its design, while only 6% of women and 8% of men said the size of the diamond mattered most.

Additionally, a frugal partner might actively hate the idea of spending thousands on a ring when you could put that money to more practical use. In a 2014 ERA Real Estate survey, 50% of women said they would rather skip the large engagement ring and put that money toward the down payment on a house — and 17% said they had already done so.

There are even some people who would prefer not to wear an engagement ring at all. When I got engaged to my husband, I told him I didn’t want a ring because I disliked the idea of wearing a ring when he wasn’t — as if I were spoken for, but he was still a free man until the wedding day.

Instead, we opted for the Elizabethan custom of wearing our wedding bands on our right hands until the ceremony, then switching them over — which also happened to be cheaper.

The easiest way to find out what your partner wants in an engagement ring is simply to ask. If you don’t want to spoil the surprise of the proposal, try strolling past a jewelry store while out on a walk and casually asking which rings in the window they like best. You can also try asking their friends or family if they’ve ever talked about what they want in an engagement ring.

Finally, pay attention to anything they mention on the subject in conversation. Even if you’re trying to keep your proposal plans a secret, there’s a good chance they have an inkling about your intentions. If so, they may be dropping a few hints to help guide your shopping.

Evaluate Your Finances

What kind of ring your partner wants is only half the equation. You also have to figure out how much you can afford to pay for it. That depends on both your financial situation and that of your partner. You’re going to be sharing a home and expenses once you’re married, so the money you spend on this ring is really coming from both of you.

That doesn’t mean you necessarily have to ask outright how much they think you should spend — unless you know your partner would appreciate that kind of upfront approach. But it’s essential the two of you discuss your finances before getting married, and that discussion can give you a better idea of how much you can reasonably afford to spend.

Talking about money may seem unromantic, but it’s something you need to be able to do as a married couple. If you’re ready to make a lifelong commitment to each other, you should be prepared to talk openly about your financial situation. Topics to discuss include:

  • Your Income. The more you make as a couple, both now and in the future, the more you can reasonably afford to spend on a ring. If you have to draw down your savings to buy it, you’ll be able to replenish it quickly. Talk with your partner about how much you each make now and about expectations for future earnings.
  • Your Expenses. You can’t use your earnings to pay for the ring if they’re already committed to other expenses. Talk about how much each of you currently spends on living expenses and how much you’ll spend as a married couple. Then consider how much of your income that will leave to contribute to savings.
  • Your Current Savings. It’s obviously important to know how much you both have right now. If you don’t have enough saved to pay for the ring with cash, you have to go into debt for it, which isn’t the best way to kick your marriage off on sound financial footing.
  • Your Debts. Going into debt for a ring is an even bigger problem if you or your partner already have other debts, such as student loans or credit card debt. Be candid with each other about your current debts and how much they cost each month. This information matters when you’re deciding what type of ring you can afford.
  • Your Financial Goals. Finally, consider what other financial goals you and your partner want to save for. Possibilities include your wedding, paying off debts, buying a home, starting a family, and putting your kids through college. When you list all your goals and consider how much they matter to you, suddenly, a big ring might not seem like such a high priority.

Final Word

If your partner’s preferences are pretty much in line with what you can afford, you have no problem. However, if the ring of your partner’s dreams is simply beyond your means right now, you’ll need to find some way to compromise.

That could mean settling for a smaller ring, waiting longer while you save up for a big one, or looking for ways to make that fancy ring more affordable.

However, don’t lose sight of the fact that the ring isn’t the most crucial part of the proposal. What matters most is the person doing the proposing.

If your partner really wants to be with you, it will be the proposal that makes them happiest — not the ring that accompanies it. Presenting a smaller or simpler ring isn’t going to be a deal breaker. And by choosing a ring that fits your budget, you can leave yourself and your partner more money to live happily ever after on.

While you’re at it, you can protect your future finances by looking for ways to save on your other wedding expenses. Check out our marriage archives for tons of ideas.

Source: moneycrashers.com

Renters Beware: These Hidden Costs May Be in Your Lease

Utilities, pets, parking, amenities — there may be more to your rent payment than you thought.

By Leigh Raper

The rental market is extremely competitive in many urban markets right now. According to the Zillow Group Consumer Housing Trends Report 2017, renters account for 37 percent of all households in America — or just over 43.7 million homes, up more than 6.9 million since 2005.

This jump in the number of renters has put pressure on both tenants and landlords. Tenants are scrambling to find the right place, while landlords are trying to find the right price. And both parties are getting creative about how and when to spend their money.

Renters sometimes forget their landlord is running a business too — until they sign a new or renewed lease, that is. Renters may discover that while the rent seems reasonable, the landlord has included itemized charges for utilities or other amenities that add up to a sizable bottom-line difference.

Power play

Utilities are not exactly a hidden cost, but they’re often overlooked by tenants eager to move into a new apartment or renew their current lease.

Always factor utilities into the overall cost of the property. Landlord-tenant laws in each state govern how utilities can be billed, along with what recourse either party has in the case of missed payments or shutoffs.

Sometimes utilities are in the landlord’s name and included in the overall rent charge. Other times, tenants are required to place the electric or gas bills in their names. (Many municipalities require the water and/or sewer accounts to stay in the landlord’s name.)

Then there’s third-party billing: situations where master meters serve an entire building, in which case the landlord splits the charges among all the tenants and bills them individually. Third-party billing makes sense for the landlord, who can advertise a base rental price but charge the utilities as an add-on.

City ordinances

Certain cities have clamped down on third-party billing, which they view as deceptive. In Seattle, for example, the third-party billing ordinance covers all residents living in buildings with three or more units. The ordinance was written to protect tenants from unscrupulous landlords who were fraudulently overcharging them.

The Tenants Union of Washington State, a nonprofit dedicated to education, organizing and advocacy for tenants, provides detailed information for renters about third-party billing and other important issues related to utility costs.

Many of the best practices they recommend apply to all tenants, regardless of location:

  • Ask questions about utility service before you sign a lease.
  • Set up your utility accounts quickly.
  • Pay utility bills promptly and keep documentation of all payments.
  • Take steps to protect yourself with the landlord.
  • Act immediately to resolve utility disputes.

Other “hidden” charges

There are other fees, besides utilities, that your landlord might charge. Some of these are optional add-ons determined by a certain tenant’s particular situation, but others apply to everyone. Landlords in a competitive rental market might even increase these fees based on supply and demand.

The add-ons can include pet fees or a separate charge for parking. Some properties charge an application fee — whether or not the prospective renter is approved.

Other properties, particularly condos or developments subject to homeowners associations (HOAs), charge move-in fees for tenant-occupied units. Amenities, such as cable TV or internet access, which are not considered utilities under most ordinances, might also be billed through an HOA or the landlord.

Of course, this is all in addition to a security deposit and any rent you might have to prepay, like first and last month’s rent due upon move in.

Have questions? Need help?

Advocacy organizations, like the Tenants Union in Seattle, operate around the country. These nonprofits offer help and information to renters.

State agencies also provide information for both tenants and landlords. For example, Georgia’s Department of Community Affairs publishes a Georgia Landlord-Tenant Handbook on its website. A quick internet search will yield similar results in most states.

Sometimes, though, problems and questions can’t be resolved with online information. That’s where consulting an expert can be a smart solution.

Lawyers who specialize in landlord-tenant law not only are familiar with the underlying law in a given geographic region, but also have experience with the systems and processes that can efficiently and economically resolve disputes. Often, spending money for expert advice early on can yield big savings in the long run.


Note: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinion or position of Zillow.

Originally published April 8, 2016.

Source: zillow.com

10 Questions Retirees Often Get Wrong About Taxes in Retirement

You worked hard for your retirement nest egg, so the idea of paying taxes on those savings isn’t exactly appealing. If you know what you’re doing, you can avoid overpaying Uncle Sam as you start collecting Social Security and making withdrawals (including RMDs) from IRAs and 401(k)s. Unfortunately, though, retirees don’t always know all the tax code ins and outs and, as a result, end up paying more in taxes than is necessary. For example, here are 10 questions retirees often get wrong about taxes in retirement. Take a look and see how much you really understand about your own tax situation.

(And check out our State-by-State Guide to Taxes on Retirees to learn more about how you will be taxed by your state during retirement.)

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Tax Rates in Retirement

picture of tax rate arrow chart showing upward trendpicture of tax rate arrow chart showing upward trend

Question: When you retire, is your tax rate going to be higher or lower than it was when you were working?

Answer: It depends. Many people make their retirement plans with the assumption that they’ll fall into a lower tax bracket once they retire. But that’s often not the case, for the following three reasons.

1. Retirees typically no longer have all the tax deductions they once did. Their homes are paid off or close to it, so there’s no mortgage interest deduction. There are also no kids to claim as dependents, or annual tax-deferred 401(k) contributions to reduce income. So, almost all your income will be taxable during retirement.

2. Retirees want to have fun—which costs money. If you’re like many newly retired folks, you might want to travel and engage in the hobbies you didn’t have time for before, and that doesn’t come cheap. So, the income you set aside for yourself in retirement may not be much lower than what you were making in your job.

3. Future tax rates may be higher than they are today. Let’s face it…tax rates now are low when viewed in a historical context. The top tax rate of 37% in 2021 is a bargain compared with the 94% of the 1940s and even the 70% range as recently as the 1970s. And considering today’s political climate and growing national debt, future tax rates could end up much higher than they are today.

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Taxation of Social Security Benefits

picture of a Social Security card surrounded by stacks of coinspicture of a Social Security card surrounded by stacks of coins

Question: Are Social Security benefits taxable?

Answer: Yes. Depending on your “provisional income,” up to 85% of your Social Security benefits are subject to federal income taxes. To determine your provisional income, take your modified adjusted gross income, add half of your Social Security benefits and add all of your tax-exempt interest.

If you’re married and file taxes jointly, here’s what you’ll be looking at:

  • If your provisional income is less than $32,000 ($25,000 for singles), there’s no tax on your Social Security benefits.
  • If your income is between $32,000 and $44,000 ($25,000 to $34,000 for singles), then up to 50% of your Social Security benefits can be taxed.
  • If your income is more than $44,000 ($34,000 for singles), then up to 85% of your Social Security benefits are taxable.

The IRS has a handy calculator that can help you determine whether your benefits are taxable. You should also check out Calculating Taxes on Social Security Benefits.

And don’t forget state taxes. In most states (but not all!), Social Security benefits are tax-free.

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Withdrawals from Roth IRAs

picture of a jar labeled "Roth IRA" with money in itpicture of a jar labeled "Roth IRA" with money in it

Question: Are withdrawals from Roth IRAs tax-free once you retire?

Answer: Yes. Roth IRAs come with a big long-term tax advantage: Unlike their 401(k) and traditional IRA cousins—which are funded with pretax dollars—you pay the taxes on your contributions to Roths up front, so your withdrawals are tax-free once you retire. One important caveat is that you must have held your account for at least five years before you can take tax-free withdrawals. And while you can withdraw the amount you contributed at any time tax-free, you must be at least age 59½ to be able to withdraw the gains without facing a 10% early-withdrawal penalty.

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Taxation of Annuity Income

picture of an elderly couple discussing finances with an advisorpicture of an elderly couple discussing finances with an advisor

Question: Is the income you receive from an annuity you own taxable?

Answer: Probably (at least for some of it). If you purchased an annuity that provides income in retirement, the portion of the payment that represents your principal is tax-free; the rest is taxable. The insurance company that sold you the annuity is required to tell you what is taxable. Different rules apply if you bought the annuity with pretax funds (such as from a traditional IRA). In that case, 100% of your payment will be taxed as ordinary income. In addition, be aware that you’ll have to pay any taxes that you owe on the annuity at your ordinary income-tax rate, not the preferable capital gains rate.

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Age for Starting RMDs

picture of elderly man blowing out candles on a birthday cakepicture of elderly man blowing out candles on a birthday cake

Question: At what age must holders of traditional IRAs and 401(k)s start taking required minimum distributions (RMDs)?

Answer: Age 72. The SECURE Act raised the age for RMDs to 72, starting on January 1, 2020. It used to be 70½. (Note that, although the CARES Act waived RMDs for 2020, they’re back for 2021 and beyond.)

As for the amount that you are forced to withdraw: You’ll start out at about 3.65%, and that percentage goes up every year. At age 80, it’s 5.35%. At 90, it’s 8.77%. Figuring out the percentages might not be as hard as you think if you try our RMD calculator. (Note that, beginning in 2022, RMD calculations will be adjusted so that distributions are spread out over a longer period of time.)

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RMDs From Multiple IRAs and 401(k)s

picture of a spiral notebook with "Required Minimum Distributions" written on the front coverpicture of a spiral notebook with "Required Minimum Distributions" written on the front cover

Question: Are RMDs calculated the same way for distributions from multiple IRAs and multiple 401(k) plans?

Answer: No. There’s one important difference if you have multiple retirement accounts. If you have several traditional IRAs, the RMDs are calculated separately for each IRA but can be withdrawn from any of your accounts. On the other hand, if you have multiple 401(k) accounts, the amount must be calculated for each 401(k) and withdrawn separately from each account. For this reason, some 401(k) administrators calculate your required distribution and send it to you automatically if you haven’t withdrawn the money by a certain date, but IRA administrators may not automatically distribute the money from your IRAs.

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Due Date for Your First RMD

picture of a piggy bank with "RMD" written on the sidepicture of a piggy bank with "RMD" written on the side

Question: Do you have to take your first RMD by December 31 of the year you turn 72?

Answer: No. Normally, you have to take RMDs for each year after you turn age 72 by the end of the year. However, you don’t have to take your first RMD until April 1 of the year after you turn 72. But be careful—if you delay the first withdrawal, you’ll also have to take your second RMD by December 31 of the same year. Because you’ll have to pay taxes on both RMDs (minus any portion from nondeductible contributions), taking two RMDs in one year could bump you into a higher tax bracket.

It could also have other ripple effects, such as making you subject to the Medicare high-income surcharge if your adjusted gross income (plus tax-exempt interest income) rises above $88,000 if you’re single or $176,000 if married filing jointly. (Note: Those are the income thresholds for determining 2021 surcharges.)

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Taxation of Life Insurance Proceeds

picture of a life insurance contract with money laying on itpicture of a life insurance contract with money laying on it

Question: If your spouse dies and you get a big life insurance payout, will you have to pay tax on the money?

Answer: No. You have enough to deal with during such a difficult time, so it’s good to know that life insurance proceeds paid because of the insured person’s death are not taxable.

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Estate Tax Threshold

picture of the words "Estate Tax" next to a judge's gavel and moneypicture of the words "Estate Tax" next to a judge's gavel and money

Question: How valuable must an individual’s estate be at death to be hit by federal estate taxes in 2021?

Answer: $11.7 million ($23.4 million or more for a married couple). If the value of an estate is less than the threshold amount, then no federal estate tax is due. As a result, federal estate taxes aren’t a factor for very many people. However, that will change in the future. The 2017 tax reform law more than doubled the federal estate tax exemption threshold—but only temporarily. It’s schedule to drop back down to $5 million (plus adjustments for inflation) in 2026. Plus, during his 2020 campaign, President Biden called for a reduction of the exemption threshold sooner.

If your estate isn’t subject to federal taxes, it still might owe state taxes. Twelve states and the District of Columbia charge a state estate tax, and their exclusion limits can be much lower than the federal limit. In addition, six states impose inheritance taxes, which are paid by your heirs. (See 18 States With Scary Death Taxes for more details.)

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Standard Deduction Amounts

picture of a 1040 tax form with a pen laying on it next to the standard deduction linepicture of a 1040 tax form with a pen laying on it next to the standard deduction line

Question: If you’re over 65, can you take a higher standard deduction than other folks are allowed?

Answer: Yes. For 2021, to the standard deduction for most people is $12,550 if you’re single and $25,100 for married couples filing a joint tax return ($12,400 and $24,800, respectively, for 2020). However, those 65 and older get an extra $1,700 in 2021 if they’re filing as single or head of household ($1,650 for 2020). Married filing jointly? If one spouse is 65 or older and the other isn’t, the standard deduction increases by $1,350 ($1,300 for 2020). If both spouses are 65 or older, the increase for 2021 is $2,700 ($2,600 for 2020).

Source: kiplinger.com

How to Hire An Attorney

Maybe you’re buying or selling real estate, trying to resolve a dispute with a neighbor, starting a business, or going through a divorce. When life gets legal, you’ll likely need access to a good attorney.

But there’s a lot to think about when hiring the services of a lawyer, especially if you’ve never retained one before.

While personal referrals can be a great place to start, it’s also important to find an attorney who has experience that is relevant to your legal situation.

Fortunately, there are a number of resources and websites that can help you hone in on a reputable lawyer that fits your needs, as well as your budget.

Knowing the right questions to ask before you sign on the dotted line is also key to getting the right fit.

Here are some beginner tips and tricks to help guide you through the process of hiring a lawyer.

Knowing Where to Look

Most lawyers concentrate in a few legal specialties (such as family law or personal injury law), so it’s important to find a lawyer who not only has a good reputation, but also has expertise and experience in the practice area for which you require their services.

Below are some simple ways to begin your search:

Word of Mouth Referrals

One of the best ways to find a lawyer is through word of mouth. Ideally, your family and friends may have worked with someone that they can refer you to. Better still if their situation is similar to yours.

But even if a recommended lawyer doesn’t have the right expertise, you may still want to contact that attorney to see if they can recommend someone who does.

You might consider asking your accountant for a recommendation as well, since these two types of professionals often refer clients back and forth.

Local Bar Associations

Your local and state bar associations can also be a great resource for finding a lawyer in your area.

County and city bar associations often offer lawyer referral services to the public (though they don’t necessarily screen for qualifications).

The American Bar Association also maintains databases to help people looking for legal help.

Your Employer

Many companies offer legal services plans for their employees, so it’s worth checking with your human resources department to see if yours does.

You’ll want to understand the details, however, before you proceed. Some programs cover only advice and consultation with a lawyer, while others may be more comprehensive, and include not only advice and consultation, but also document preparation and court representation.

Legal Aid or Pro Bono Help

Those who need a lawyer, but can’t afford one, may be able to get free or low-cost help from the Legal Aid Society. You can often find out who to contact by searching online and typing “Legal Aid [your county or state]” in your computer’s search bar.

Consider reaching out to local accredited law schools as well. Many schools run pro bono legal clinics to enable law students to get real world experience in different areas of law.

Online Resources

There are a number of online consumer legal sites, such as Nolo and Avvo , that offer a way to connect with local lawyers based on your location and the type of legal case you have.

Nolo, for example, offers a lawyer directory that includes profiles of attorneys that clue you in on their experience, education, fees and more. (Nolo states that all listed attorneys have a valid license and are in good standing with their bar association).

Martinedale-Hubbell also offers an online lawyer locator , which contains a database of over one million lawyers and law firms worldwide. To find a lawyer, you can search by practice area or geographic location.

Doing Some Detective Work

Once you’ve assembled a short list, it’s a good idea to do a little bit of sleuthing before you pick up the phone.

This includes checking each attorney’s website–does it look cheap or professional? Is there a lot of style but little substance?

By perusing the site, you can also get details about the lawyer or firm, such as areas of expertise, significant cases, credentials, awards, as well as the size of the firm–and, size can actually be an important consideration.

A solo practitioner may not have much bandwidth if they have a heavy caseload to give you a lot of hand holding if that matters to you. However, their prices may be more budget-friendly than a mid-sized or larger firm.

While larger firms may be more expensive, they may have more resources and expertise that makes them the better option.

You may also want to make sure the lawyers on your consideration list are in good standing with the bar, and don’t have any record of misconduct of disciplinary orders filed against them.

Your state bar, once again, is a good place to get this kind of information. Some state bar websites allow you to look up disciplinary issues. The site may also have information on whether the attorney has insurance.

You may also be able to search the state bar’s site by legal specialty, which can help you confirm the lawyers you’re looking at really do have expertise in the area of law you need council in.

The Martindale-Hubbell online directory can be helpful here as well–it offers detailed professional biographies and lawyer and law firm ratings based upon peer reviews, which may help when choosing between two equally qualified candidates.

Asking the Right Questions

Many lawyers will do a free initial consultation. If so, you may want to take advantage of this risk- and cost-free way to get a sense of the attorney’s expertise and character. This is also a good opportunity to get a sense of the costs.

Whether you’re able to arrange a face-to-face meeting, or just speak over the phone, here are some key topics and questions you may want to address:

•  Do they have experience in the area of law that applies to your circumstances?

Further, you may want to get the percentage break-down of their practice areas. If you need someone to help you with setting up a business, for example, and that’s only 10 percent of what they do, that practice may not be the best fit.

•  Do they work with people in your demographic? If the practice only represents high net worth clients, and you’re not in that income bracket, they could be a mismatch. You can also get a sense of their typical clientele by asking for references from clients.

•  How much time can they commit to you? And, how do they like to communicate–phone calls? Email? Ideally, you want a lawyer who can make you a priority and is able to respond to your questions in a timely manner, rather than leave you dangling for days or weeks.

•  What are the fees and how are they charged? For example, they may charge hourly, or they may work on a contingency basis, meaning if you successfully resolve your case they get paid. Also find out if they require a retainer (an upfront fee that functions as a downpayment on expenses and fees), as well as what is included in their fees, and what might be extra (such as, charges for copying documents and court filing fees). Ideally a lawyer will explain their fees and put them in writing.

You may also want to use this meeting or conversation to judge the lawyer’s character and personality, keeping in mind that chemistry counts.

The attorney you’re interviewing could have all the right credentials and awesome experience, but in the end, if their personality strikes you as a little prickly, or the vibe is off, even if you can’t exactly put your finger on it, you may want to trust your gut, walk away and keep searching.

The Takeaway

Choosing an attorney is an important decision–much like choosing a financial advisor, doctor, or other professional who will have a significant impact on your life.

As much as you want to just get on with what may be a challenging or stressful situation that you need legal help with, it’s a good idea to take your time, cast a wide net for referrals, then create–and carefully vet–your short list.

Finally, you’ll want to have an open conversation with any lawyer you are considering to make sure you feel he or she is a good fit for you and that you understand, and can afford, all the fees involved.

Whether you’re looking for a lawyer to help you buy a home, start a business or facilitate any other life transition, it’s a good idea to get your finances in order as well.

One simple move that can help is to sign up for SoFi Money®. SoFi Money is a cash management account that allows you to earn competitive interest, spend and save–all in one account.

Another perk: SoFi Money doesn’t have any account fees, monthly fees, or many other common fees.

Check out everything a SoFi cash management account has to offer today!

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SoFi Money is a cash management account, which is a brokerage product, offered by SoFi Securities LLC, member FINRA / SIPC .
Neither SoFi nor its affiliates is a bank.
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Source: sofi.com

Blanket Mortgage Loans – Definition, Pros & Cons of Using for Real Estate

For real estate investors, juggling multiple property deals and loans can get complicated.

Blanket loans often help simplify matters. Borrowers take out a single loan to cover multiple properties.

Even so, blanket loans come with their own quirks and have their pros and cons. Before entering into a blanket loan as an investor, make sure you understand exactly what you’re getting yourself into.

What Is a Blanket Loan?

A blanket loan is simply one loan that attaches to several real estate investment properties.

For example, if you buy a portfolio of five properties, a blanket loan allows you to take out one mortgage that covers all five buildings. The lender attaches a lien against each property, so if you default on your loan, the lender can foreclose on all five properties to recover their money.

Lenders do typically include a release clause, allowing the borrower to sell individual properties held as collateral as part of a blanket loan. However, they require the borrower to either repay a portion of the loan at the time of sale or put the money toward another investment. The lender then attaches a lien to the new investment property as a replacement for the sold collateral property.

That keeps their collateral — your remaining properties secured by the blanket loan — sufficient to cover their loan risk.

Who Takes Out Blanket Loans?

Blanket mortgages are exclusively for real estate investors and developers, not homeowners.

Investors can use blanket loans in many ways to invest in real estate. Landlords can take out a blanket mortgage to buy a portfolio of turnkey rental properties, as outlined above. Flippers could do likewise, to buy several fixer-uppers to renovate and flip, all with one loan. As they sell off properties, they typically repay a proportion of their loan.

Real estate developers use blanket loans to buy large swaths of land that they plan to subdivide into many units. As they build and sell off those units, they can either repay portions of the loan or put the money toward adding more properties to the portfolio.

Businesses with multiple locations and commercial properties can also use blanket loans. That could mean refinancing multiple existing loans into one blanket loan, or using a blanket loan to buy several new locations in one sweep.

When You Should Use a Blanket Mortgage

As touched on above, you can either use a blanket loan at the time of purchase or you can refinance to consolidate multiple mortgages into one loan.

It makes sense to use a blanket loan at the time of purchase if you plan to buy multiple properties simultaneously. You may also be able to negotiate staggered funding if you buy multiple properties in rapid succession but not quite simultaneously.

Another possibility with blanket mortgages includes buying only one new property, but securing the loan against other properties you own for additional collateral. Real estate investors sometimes do this in lieu of making a down payment on the new property.

For example, say you own a property worth $100,000, but you only owe $50,000 on it. You want to buy another property for $100,000, and the lender demands a $20,000 down payment.

Rather than cough up the $20,000 in cash, you offer your existing property as additional collateral for the new mortgage loan. The lender agrees to fund the full $100,000 for you to buy your new property, but puts liens on both properties. They now hold the first (and only) lien against your new property, and they have a second lien against your old property.

Advantages of Blanket Loans

Blanket mortgages come with several upsides for real estate investors.

To begin with, they can save on lender fees and settlement costs by holding one combined closing rather than having to pay separately for several. Lenders charge flat fees in addition to points, and those flat fees add up quickly. Title companies also charge many flat fees for each closing. With blanket loans, borrowers can pay those flat fees once, rather than at each settlement.

Aside from saving money, combining financing for several properties into one loan can also keep your finances and cash flow simpler. Rather than keeping track of 20 mortgage payments and loans, you need only track one or two.

When buying new properties, blanket mortgages can potentially reduce or eliminate your down payment if you use equity from an existing property for a cross-collateralized loan. Consider it one more way to pull equity out of your properties — and one that doesn’t require a totally separate settlement with its attendant costs.

Larger loans often mean more negotiating room for you as the borrower as well. Lenders don’t need to charge as many points on a $1 million loan to make it worth their while, compared to five $200,000 loans. Similarly, borrowers can often negotiate lower interest rates as well.

Downsides of Blanket Loans

Blanket mortgages come with their share of risks and disadvantages.

To begin with, it can be hard to find lenders that offer these loans. Up to this point in your real estate investing career, you may have established relationships with two or three lenders — none of whom might offer blanket loans. That forces you to go out and build new relationships with lenders who do.

Expect more intensive scrutiny by the lender for these larger, more complex loans. Rather than using a garden variety underwriter, bank managers might underwrite these larger loans themselves. Lenders might ask more probing questions and require more extensive documentation and paperwork from you. They may require higher credit scores than their typical loan products.

Blanket loans often come with shorter loan terms than traditional mortgage loans. Rather than the 25- or 30-year loan terms you’re used to, lenders often limit blanket loans to 10 to 15 years. That could come in the form of a balloon payment, or the loan could be entirely amortized over those 10 to 15 years. In the case of short-term amortization, that means higher monthly payments.

Finally, blanket loans pool your risk for many properties into a single loan. If you default on that loan, you could lose all the properties secured by it to foreclosure, not just one. In contrast, if you hold separate loans for each property, in a crisis you could isolate your losses to one property as long as you can afford to make your other monthly payments.

Where You Can Borrow Blanket Loans

Conventional mortgage lenders don’t typically allow blanket loans. Commercial lenders, portfolio lenders — who keep loans on their own books rather than selling them — and hard money lenders often do allow them.

Make no mistake, these lenders usually charge more than your personal home mortgage lender. But they also allow far more flexibility, and as a real estate investor, that flexibility is often necessary.

Call up your local community banks to ask whether they offer blanket loans for real estate investors. You can also reach out to portfolio lenders such as Lending Home and Rental Home Financing to inquire about them. For commercial loans, make sure you choose a commercial lender, because even many portfolio lenders only handle residential (single-family and 2-4 unit multifamily) properties.

Word to the wise: start building these connections now, before you actually have a time-sensitive deal on the line. Real estate investors need to be able to move fast and close deals quickly, else they risk losing the deal entirely.

Final Word

The average mom-and-pop property owner with a couple units on the side of their full-time job will probably never need to take out large blanket loans. But for real estate developers and full-time real estate investors, blanket loans can help them scale their investment portfolios faster and cheaper.

Start expanding your network of lenders now, before you have a hot deal at risk of falling through. Think in terms of building a financing toolkit of many different options for buying your next investment property — or portfolio of properties.

Source: moneycrashers.com

2021 Tax Brackets Are Here: Here’s What You’ll Owe Next Year

The year 2021 is looking a lot like 2020, at least in terms of taxes.

The IRS released its inflation adjustments for 2021 federal income tax rates and brackets. While these changes are unlikely to have a huge impact on your bottom line, there are a few things you should be aware of.

Because these are the 2021 tax rates, they’ll determine your tax bill that will be due in 2022. You’ll use 2020 rates and brackets when you file your taxes on or before May 17, 2021. That’s 32 days later than usual due to the tax deadline extension.

How the 2021 Tax Brackets Break Down

There are seven tax brackets that range from 10% to 37%. The 2020 and 2021 tax brackets break down as follows:

Unmarried Individuals

Tax Bracket Taxable Income for 2020 (use when you file in 2021) Taxable income for 2021 (use when you file in 2022)
10% Up to $9,875 Up to $9,950
12% $9,875 to $40,125n $9,950 to $40,525
22% $40,125 to $85,525 $40,525 to $86,375
24% $85,525 to $163,300 $86,375 to $164,925
32% $163,300 to $207,350 $164,925 to $209,425
35% $207,350 to $518,400 $209,425 to $523,600
37% Over $518,400 Over $523,600

Married Individuals Filing Jointly or Surviving Spouses

Tax Bracket Taxable income for 2020 (use when you file in 2021) Taxable income for 2021 (use when you file in 2022)
10% Up to $19,750 Up to $19,900
12% $19,750 to $80,250n $19,900 to $81,050
22% $80,250 to $171,050 $81,050 to $172,750
24% $171,050 to $326,600 $172,750 to $329,850
32% $326,600 to $414,700n $329,850 to $418,850
35% $414,700 to $622,050n $418,850 to $628,300
37% Over $622,050 Over $628,300

Heads of Household

Tax Bracket Taxable income for 2020 (use when you file in 2021) Taxable income for 2021 (use when you file in 2022)
10% Up to $14,100 Up to $14,200
12% $14,100 to $53,700n $14,200 to $54,200
22% $53,700 to $85,500 $54,200 to $86,350
24% $85,500 to $163,300 $86,350 to $164,900
32% $163,300 to $207,350 $164,900 to $209,400
35% $207,350 to $518,400 $209,400 to $523,600
37% Over $518,400 Over $523,600
Pro Tip

Not sure of your filing status? This interactive IRS quiz can help you determine the correct status. If you qualify for more than one, it tells you which one will result in the lowest tax bill.

Tax rates apply to the income within each bracket. So if you’re an unmarried individual with taxable income of $50,000, you won’t pay 22% of that $50,000 to Uncle Sam.

According to the 2021 tax brackets (the ones you’ll use for next year’s return), you’d pay:

  • 10% on the first $9,950
  • 12% on the next $30,575 ($40,525 – $9,950 = $30,575)
  • 22% on the next $9,475 ($50,000 – $40,525 = $9,475)

2 Tax Changes That Could Affect You in 2021

The modified tax brackets aren’t the only changes for 2021. About 60 tax provisions were adjusted in the new year. A few highlights:

  • The standard deduction will rise slightly: For 2020, the standard deduction is $12,400 for single filers and people who are married filing separately. In 2021, it will rise by $150 to $12,550 for single taxpayers. For those who are married filing jointly, the standard deduction will rise by $300, from $24,800 in 2020 to $25,100 in 2021.
  • Some limited-income families can get an extra $68. The maximum Earned Income Tax Credit will increase in 2021 to $6,728, from $6,660 in 2020. You need at least three children to qualify for the maximum amount.

3 Tax Rules That Aren’t Changing in 2021

  • IRA contribution limits won’t change. The traditional IRA and Roth IRA contribution limits will remain at $6,000 for people under 50. The extra $1,000 “catch-up” contribution the IRS allows people 50 and older to make won’t change either. You can still fund your IRA for 2020 until tax day, which is May 17, 2021.
  • 401(k) contribution limits aren’t changing either: If you have an employer-sponsored tax-deferred retirement plan, like a 401(k) or 403(b), your maximum contribution is still $19,500 in 2021. The additional “catch-up” contribution workers ages 50 and older can make will also remain at $6,500.
  • There’s no limit on itemized deductions. The Tax Cuts and Jobs Act of 2017 suspended these limits.

Ready to Start Your 2021 Tax Prep?

If you’re ready to dive into your taxes, you can check out this comprehensive summary of 2021 tax changes courtesy of the IRS.

Even if you’re not ready to jump into 2021 tax planning mode just yet, keep in mind it’s a good time to check your tax withholdings and make adjustments if necessary. Just make sure you file your return or ask for an extension by the May 17 deadline. If you can’t afford your tax bill for 2020, it’s essential that you file a tax return anyway and ask for an IRS payment plan.

Robin Hartill is a certified financial planner and a senior editor at The Penny Hoarder. She writes the Dear Penny personal finance advice column. Send your tricky money questions to [email protected]



Source: thepennyhoarder.com

How Much Does a Living Will Cost?

How Much Does a Living Will Cost? – SmartAsset

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Confronting our health and what might happen to us someday is not an easy task. Even though estate planning is emotionally challenging, it’s a necessary step to protect yourself. Not only that, without any plans, your loved ones might face unnecessary difficulties. Dealing with the assets alone can be a struggle. You wouldn’t want them worrying about making medical decisions on top of that. So, if you want to prepare for the future, it might be the right time to ask, “How much does a living will cost?”

One of the best resources for estate planning, especially end-of-life planning, is a financial advisor.

What is a Living Will?

A living will refers to a legal document that records your medical, long-term and end-of-life care choices. However, it only comes into play when you can no longer communicate your decisions to your doctors or loved ones.

Unfortunately, there are a variety of scenarios that may require a living will. For example, if you have a degenerative disease or sustain major brain trauma, you likely won’t be able to advocate for yourself. To prepare for that, individuals make a living will while still healthy and sound of mind. Some frequently mentioned directions people put in this document include ventilators, medication and resuscitation.

Factors that Impact Living Will Costs

Your estate attorney will take special care to customize your living will to fit your needs. Those specifications, however, and your circumstances can shift the price needed to make the document. Some of the factors that influence the overall cost include:

  • Location – Attorneys that work in urban areas tend to cost more than those based in suburban or urban spaces.
  • Professional Experience – Lawyers and law firms that specialize in estate planning will cost more.
  • Directive Complexity – The larger and more complicated your living will, the more expensive it will be to complete.

How Much Does a Living Will Cost?

When researching which estate planning attorney to work with, you should know the basic payment system they will use. If you know ahead of time, you can prepare accordingly. Lawyers tend to use either one of two ways: flat fees or hourly billing. However, you also have the option of do-it-yourself (DIY) living wills.

DIY Living Wills

You might be considering ways to avoid any high, professional costs in the first place. If so, a DIY living will is a cost-effective method. You can search online or visit certain stores to get a basic, pre-made form. The only actual cost, then, would be the notarizing price, which you can expect to be only around $10 to $15. That is unless you want a more complicated pre-made form or will-making software. In that case, certain websites might begin to charge you, although it will still be a low cost compared to professional help. The software typically runs from $20 to $100.

However, you should also know that writing your own legal documents comes with its complications and some risks. Your state likely has rules regarding the document’s legitimacy that you may not know. Any mistakes you make hoping to save money may end up costing you more in the long run. Also, a basic will drafted by an attorney is comparable in price to the cost of higher-end software. So, you may be financially safer to choose professional guidance.

Flat-Fee Living Wills

Once you start working with an attorney, you’ll find that they typically have one of two payment structures. A flat flee works like how it sounds. Once you decide to work with an estate planner, they will ask for one “flat” payment. The cost of that payment will depend on the factors mentioned above: location, attorney experience and and the number and type of documents needed. You can expect a low range of $300, with the higher prices easily exceeding $1,000.

However, a flat fee can be beneficial despite how shocking that price tag might be. It demands less work on your attorney’s part since they won’t have to keep track of hours and can just focus on the living will’s assembly. Also, you get to relax once the process has started, knowing you’ve done your part.

Hourly Payment Structure Living Wills

An alternative to the flat fee is hourly billing. This format will also heavily depend on the circumstances. Again, lawyers in high-traffic areas will likely charge more. So, if you’re in the city, you’ll probably find hourly rates above $300. Outside that area, it’ll drop to around $150 an hour.

Remember, a firm or lawyer’s experience and your living will’s specializations may also drive up those prices.

Benefits of Hiring an Attorney

While the online world is a convenient one, it may not provide for all your needs. DIY legal documents often cost less than working with a professional, but that’s because they’re not customized. The form comes as is ,and you simply fill it out to the best of your abilities.

Furthermore, the benefit of working with a person is exactly that. You can have a dialogue with your estate planning attorney, which is more direct than typing questions into a search engine. You can ask your attorney any concerns you may have about a living will or other legal documents. Also, the document they may for you will cater to your needs.

The Takeaway

Living wills are an important step for any individual looking into end-of-life medical and financial planning. The more vulnerable you are, the more essential they become too. If you think you might need to include a living will in your future, shop around for your best options to make one. If you have straightforward wishes, a DIY living will might be enough for you. In contrast, it may be worth speaking to a professional estate planning attorney if there are several complications. Either way, as long as you have a legal living will, you can be sure you and your family are cared for.

Estate Planning Tips

  • A key part of estate planning is figuring out how much you will have to live on. That’s where a free, easy-to-use retirement calculator can be invaluable.
  • Consider working with a financial advisor as you do estate planning. The great thing is that finding a financial advisor doesn’t have to be difficult. Using SmartAsset’s financial advisor matching tool, you can connect with professionals in your area. It only takes minutes for you to have the expert help you need, so get started today.

Photo credit: ©iStock.com/GCShutter, ©iStock.com/designer491, ©iStock.com/zimmytws

Ashley Chorpenning Ashley Chorpenning is an experienced financial writer currently serving as an investment and insurance expert at SmartAsset. In addition to being a contributing writer at SmartAsset, she writes for solo entrepreneurs as well as for Fortune 500 companies. Ashley is a finance graduate of the University of Cincinnati. When she isn’t helping people understand their finances, you may find Ashley cage diving with great whites or on safari in South Africa.
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Source: smartasset.com

6 Steps To Avoid Identity Theft Without a Service

There were almost 1.4 million cases of identity theft in the United States in 2020, with people using stolen identities to sign up for credit cards, collect fraudulent unemployment benefits and countless other scams. Cleaning up from identity theft can be a real pain and can drag on for years.

Identity theft protection is an easy counter to this problem. You pay for a service and they keep your identity safe. However, that protection comes at a price. What are your options for keeping safe from identity theft without paying for a protection service? The answer: Keep it simple.

A key part of protecting yourself against identity theft is to remember that scammers aim for easy targets. If you take a few simple steps to ensure that you don’t fall prey to the simplest scams, identity thieves will move on to another target.

In this article

6 simple identity theft prevention strategies

Read your bank and credit card statements carefully

Whenever you receive a bank or credit card statement, review it carefully, line by line. Make sure you recognize every transaction. If you find transactions that don’t make any sense to you or that you can’t trace, contact the financial institution immediately.

If you conclude that someone was using your account without your authorization, request to have that charge removed and also request to have a new card issued to you. In some cases with bank accounts, you may also want to change your account number and get new paper checks if you use them.

Don’t click on email links

If you receive an email that has a clickable link on it and you want to follow up on whatever that email is about, don’t click on the link. Instead, independently go to the website for the business and find the information yourself. Don’t even trust links that appear to be from friends, as scammers can easily fake email addresses. Ask friends to put in the subject line information unique to them so you know it’s legitimate, or confirm with them by text that they sent you that cute puppy You Tube video.

Why do this? Often, links in emails will look like one thing but actually take you to something else. You may end up at a web form or a sign-in prompt that looks completely legitimate but is actually a fake site so that when you sign in, you give that information to a scammer.

This can take a bit longer, of course, but this simple step alone protects you from a wide array of email tricks that can steal your identity.

Don’t give out personal information on the phone 

The same policy works with unsolicited phone calls, too. If someone calls you, never give them your personal information no matter what they tell you. Hang up and contact the company in question directly if you feel that there is something important that you should follow up on.

For example, don’t give information about yourself to a person on the phone claiming to be from your bank or claiming to be from the IRS. If you’re contacted by someone claiming to be from those organizations, use the actual website of the organization to look up the correct number, then call them back. If they don’t know what you’re talking about, then you know someone was just trying to scam you.

Have a password on all of your devices

Every computer and mobile device that you own should be password protected, ideally with something complicated enough that it can’t easily be guessed. You should have it set to automatically lock with a password every time you leave the device unused and every time you restart it. This is a very simple way to make things just a little bit tougher for a thief.

Choose a password that is not just a sequence of numbers (if possible) and isn’t a single word. A good strategy is to combine the two – use a word and a number you remember and alternate between the two. For example, I might use the password Trent and the number 2084 to create the password “T2r0e8n4t,” which is very difficult to crack but fairly easy to remember. 

Pass-phrases are particularly effective, such as: “My H4sb@nd Is A R0ck St@r!”. Some security experts recommend using a favorite song for inspiration. Have a unique password for each account; don’t recycle. 

Check your credit reports regularly

The three major credit bureaus (TransUnion, Equifax and Experian) collect your credit habits from lenders; potential lenders use them to assess your creditworthiness. These reports are also used to generate your credit scores. Check your credit reports from the credit bureaus for free once a year. One trick is to check one report every four months, alternating between the three, so that you are monitoring your credit more closely.

Once you’ve grabbed your credit report, go through it line by line to make sure you recognize the information. Contact the lenders first to get information corrected. The credit bureaus will not change accurate information. Reach out to the credit bureau about personal information such as your name, aliases, address or employer.

Use a password manager

A final tip: Use a password manager to keep your passwords safe. A password manager is software that keeps a heavily encrypted file of all of your passwords that can only be accessed by you. This allows you to have different, very complicated passwords for each of your financial services and other accounts, meaning that if one is hacked, the hackers won’t have access to any other accounts.

As long as you memorize a single very secure password for your password manager, it will manage secure passwords for all of your needs. There are many software packages out there that provide this service, such as 1Password and LastPass.

What if you still want a service?

If you still feel more comfortable using a service, The Simple Dollar recommends several identity theft protection services. These can provide peace of mind, but they work best in conjunction with using the other steps in this article.

What do these services do? Identity theft services monitor personally identifiable information in credit applications, public records, websites and other places for any unusual activity that could be signs of identity theft, according to the Consumer Financial Protection Bureau. Premium packages from these services offer additional features that help you fix identity theft problems and offer proactive help, such as letting you know if your bank has been hacked before it impacts you specifically.

What about credit monitoring? Credit monitoring is a part of identity theft services. Alone, it’s usually much less expensive, but it typically just watches your credit report.

We welcome your feedback on this article. Contact us at inquiries@thesimpledollar.com with comments or questions.

Source: thesimpledollar.com