And based on what 2020 threw at us, it may feel like filing our taxes is going to be even more complicated than usual. Which is why there is no shame in calling in an expert to help navigate the murky waters of your 2020 tax returns.
You don’t even need to leave your couch to get the expert advice you need to file with confidence. If you want to file with the help of a real tax expert, or let an expert do your taxes for you from start to finish, TurboTax Live has you covered.
Yep. You can talk live on your screen with real tax experts thanks to TurboTax Live. So no matter what your unique tax situation may be, whether you have questions about big life changes, investments or deductions, a real live tax expert will be there to help.
You Did a Lot This Year: Let TurboTax Live Experts Help You Get the Most Out of It
You probably know TurboTax as the DIY way to get your taxes done right — and it still is. But TurboTax Live takes it a step further by having real tax experts available to help with your taxes — or even do it all for you.
There are several options to choose from, but all you need to do is answer a few simple questions, and TurboTax will help you find the right tax solution for you. Whether you have a single W-2, are self-employed or somewhere in between, you’ll get the right amount of help you need.
With TurboTax Live, you can talk live on screen with experts to get unlimited advice about your tax situation and get answers to your questions.
Like, what does getting married or having a new baby mean for your taxes? Or what should you do if you sold stock for the first time?
If you don’t need an expert to do your taxes for you, you can still have an expert give a final review of your return before you file. Either way, you can be confident your return is done right.
So while yes, 2020 was a doozy, doing your 2020 taxes doesn’t need to be. Get started here to let TurboTax Live experts help, or even do your taxes for you, so you can get your maximum refund, with minimal stress.
The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.
Many people don’t hesitate to pay just the minimum payment on their credit card. This is especially true if the total balance is high or the cardholder is confused about the credit card lending terms and doesn’t understand the impact of paying the minimum balance. But, making just the minimum payment can have a greater impact on your credit score than most people realize.
Learn how lenders calculate the minimum payment, what it means for your debt and how making a minimum payment affects your credit.
What are credit card minimum payments?
Your credit card minimum payment is the least amount of money your lender will accept toward your credit card balance each month. You need to pay the minimum payment by its due date to avoid late penalties and other fees and to keep a consistent payment history. The minimum payment amount is displayed on your credit card bill and often ranges from one to three percent of your total credit card bill.
How is a minimum payment calculated?
Your lender calculates the minimum payment based on your total balance and any outstanding interest charges.
Each credit card lender has a different method for calculating its minimum monthly payment. The two primary methods are formula and percentage.
Formula
Many of the major credit card lenders use a formula to calculate your minimum payment. The formula picks an amount and adds one to two percent of your monthly balance. For example, let’s say your lender picked $35 as the minimum payment amount, plus two percent interest, and you spent $500 in new charges for the month. In this scenario, your minimum payment would be $35 plus $10 ($500 x 2%) for a total of $45.
If your total balance is less than the minimum payment, then your whole balance is due. Following the previous example, if your lender charges $35 plus two percent interest but your credit card balance is $20, you will owe $20 for that month, plus any fees and interest from the previous month.
Percentage
Other lenders—typically credit unions and financial institutions—use a simpler, percentage formula to calculate the minimum monthly payment. This method is most common for high-risk borrowers with poor credit. The percentage can range from four to six percent.
For example, if you had a $1,000 credit card balance with a lender that charges six percent, you would owe a minimum payment of $60 plus any additional fees ($1,000 x 6%).
Some lenders will include any past-due fees in the minimum payment.
What happens if you make only the minimum payment on your credit card?
Making the minimum payment on your credit card is better than paying nothing at all. As long as you always make the minimum payment, you should not receive negative items on your credit report, as it relates to your payment history.
However, making only the minimum payment means you may see greater charges for interest, resulting in you paying more over time.
Take a look at this example: Let’s say you have $5,000 in credit card debt and your lender offers an 18 percent interest rate with a minimum payment of two percent of the balance. In this scenario, your minimum payment is $100 per month, which can look very tempting. But, it will take you almost eight years to pay off your balance and you will pay a total of $4,311 in interest—almost doubling what you originally owed.
Your minimum payment is generally a small portion of your total debt, and most of that payment goes to interest. As a result, you are slowly progressing toward paying off your principal amount, and you could end up paying minimum payments for many years.
Additionally, your credit card utilization may be high if you make only minimum payments. Credit utilization is the amount of credit extended to you by the lender versus the amount you owe. If you maintain a high credit card balance while only paying the minimum payment, you are at risk of having high credit utilization month after month.
Several factors determine your credit score, but credit utilization accounts for 30 percent of your overall score. So, maintaining a high utilization ratio can negatively impact your credit score.
Finally, when you maintain a high credit card balance and a routine of only paying the minimum payment, you may fall behind on payments. When you make late payments or miss the payment entirely, having a negative payment history can also lower your overall credit score.
What should you do if you can’t afford to pay in full?
If you can’t pay your credit card in full, don’t panic. Approximately 47 percent of Americans have credit card debt, so it’s quite common—but that doesn’t mean you shouldn’t pay off credit card debt. Follow the steps below to tackle your debt efficiently and in a way that works for you.
Pay as much as you can
As mentioned before, it’s essential to always make at least the minimum payment on time. This will help you avoid negative items on your credit report for late or missed payments. However, whenever possible, try to make more than the minimum payment. This will help you pay down your principal debt faster and pay less interest over time.
Come up with a repayment strategy
If you have multiple credit cards with debt or various types of debt, it’s crucial to have a repayment strategy.
There are two popular debt repayment strategies: the avalanche and the snowball. The snowball method recommends you pay off your debt from smallest to largest (like a growing snowball). This method is meant to give people positive reinforcement because they feel motivated as they knock out several of their small debts quickly before moving on to the larger debts.
The avalanche method is a more systematic approach—you list all your debts and their interest rates and pay the one with the highest interest rate first. This method aims to save you money in the long run by getting of higher-interest debt first.
Decide which approach fits your style. Both of these methods are highly effective in their own way.
Budget
A budget is the first step to taking control of your financial health. Without a budget, you may not know where your money is going or where you can save. Often, a budget can highlight unnecessary spending. There are plenty of free apps, such as Mint, that allow you to have an automated look at all your spending and build a budget.
Talk to your credit card issuer
You can reach out to your credit card issuer if you’re going through financial hardship to see what they can do for you. Some credit lenders will offer to lower your interest rates, which will help you tackle your principal debt much faster. Some financial hardships can include the loss of a job, an injury or a medical incident. Ultimately it will be your lender that decides if your situation merits help.
Consider a balance transfer
There are a lot of credit card options out there. If your credit card has a high-interest rate, you may consider a balance transfer. Some credit card lenders offer a low-interest promotional rate when you transfer a credit balance to them. During this time, you can make a significant dent in your debt. However, you should know that some balance transfers come with a one-time fee, so make sure to consider this as well.
Care for your credit
Your credit is your door to many financial opportunities. A healthy credit score can help your chances for approval for auto leases, mortgages, personal loans and more. It can also help you get a much lower interest rate and better borrowing terms when you receive financial products.
Improving your credit takes work. While focusing on your credit card’s impact on your credit score, make sure your overall credit profile is accurate. Errors and inaccuracies can greatly hurt your credit score and put a dent in your debt-relief goals. Professional credit repair companies can help you navigate the challenges of credit reporting inaccuracies.
The first step toward establishing a healthy credit history is making sure all items are listed fairly and accurately—professional credit repair is an easy, effective way to get your credit score back on track.
Reviewed by Shana Dawson Fish, Associate Attorney at Lexington Law Firm. Written by Lexington Law.
Shana Dawson Fish is an Arizona native whose family migrated from Guyana. Shana graduated from Arizona State University in 2008 with her Bachelor’s Degree in Criminal Justice & Criminology, and in 2012 she graduated from Arizona Summit Law School earning her Juris Doctor. During law school, Shana was a Judicial Intern at the United States District Court for the District of Arizona and the Maricopa County Superior Court. In 2016, Shana was awarded a legal defense contract and represented clients as a Trial Attorney in juvenile proceedings. Shana has experience in litigating numerous trials and diligently pursuing the rights of her clients. As a Trial Attorney, Shana identified the needs of her clients and also represented debtors in bankruptcy proceedings. Shana is licensed to practice in Arizona and is an Associate Attorney in the Phoenix office.
Note: Articles have only been reviewed by the indicated attorney, not written by them. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.
When you’re building or renovating a home, having the right team on your side makes all the difference.
Building or renovating a home is a complex project with plenty of moving parts. Even if you’re planning to take a DIY approach, it’s likely you’ll need some help from contractors along the way. Here’s a guide to the types of contractors you might enlist to help you complete your dream home.
General contractors
If you think of a general contractor like a general in the military, you have the basic idea of what a general contractor does. Like a general leading a military campaign, a general contractor organizes the strategy of a building or remodeling project. The general contractor decides when to bring in the plumbers, electricians, and roofers; makes sure they do their jobs correctly; and checks details, like ensuring that the carpenters install the porch handrails according to code.
Especially if there is no architect involved, the general contractor ensures that the building permits are in order and that the project is legal — meaning that it is being done to city or country building codes. (If it isn’t, your city’s building inspectors will make you redo it. Ouch!) Like a military general who is ultimately responsible for the success of a campaign, the general contractor is responsible for the outcome of remodeling project.
Subcontractors
Subcontractors are specialists who work under the direction of the general contractor. Subcontractors include plumbers, electricians, tile setters, carpenters, framers, roofers, painters and cabinetmakers, among others.
Ideally, they show up at your construction or remodeling project when they are needed. If the subcontractors are reliable and efficient, the pace of your project continues to move steadily along, and it is finished when it is supposed to be. If all that happens, it is usually because a good general contractor has been overseeing their work.
Owner as general contractor
Homeowners who are skilled at organizing multimillion-dollar sales campaigns at their office or at running three local volunteer organizations in their spare time sometimes like to act as their own general contractors. There is no law that says you can’t. As a rule of thumb, general contractors charge about 15 to 20 percent of the total cost of the job, so acting as your own general contractor can save money.
But before you leap into the general contractor role, consider whether you really have the time, expertise, and patience to run a remodeling project, especially a complicated one. How much time can you spend on site? Can you take phone calls at unexpected times of the day?
The one thing you can count on with any remodel is that something will go wrong at some point. It may not be a big deal, but it will mean making new arrangements, often on short notice, and rearranging schedules for subcontractors and suppliers.
This could mean dozens of phone calls in a single afternoon. It could mean running around hunting down some piece of hardware or building material that is needed on site right now. If this sounds like fun, you may have what it takes to act as your own general contractor.
Design/build firms
An alternative to hiring a general contractor or acting as your own is to hire a design/build firm. Design/build firms are companies that offer start-to-finish building and remodeling services. They employ architects or designers as well as the skilled builders.
A design/build firm essentially offers the services of architect, general contractor, and subcontractors. The obvious advantage to using these firms is that the entire project should be a fairly smooth operation, since the firm takes responsibility for everything.
While general contractors, subs, and independent architects can, in the worst scenarios, blame each other for mishaps and toss the responsibility for correcting the mishaps back and forth, design/build firms know the buck stops with them. They have to make it right.
Carpenters
If your home improvement project really is as straightforward as installing a wall of built-in bookshelves in your living room, your best bet is probably to find a good carpenter or cabinetmaker.
People who bill themselves as handymen may be fine at installing new light switches or doing minor carpentry, but, as always, ask to see some of their work. If you want your new bookshelves to look like elegant additions to your living room, find an expert in cabinetry.
Looking for a home loan? Get your facts straight so you can proceed with confidence.
Getting a mortgage can be a breeze or a slog, depending on what you know about the process. To get organized and set your expectations properly, let’s debunk some common mortgage myths.
1. Lenders use your best credit scores
If you’re applying for a mortgage jointly with a co-borrower, logic suggests that your lender would use the highest credit score between both of you.
However, lenders take the middle of three credit scores (from Equifax, TransUnion and Experian) for each borrower, and then use the lowest score between both borrowers’ “middle scores.”
So, if you had a middle score of 780, and your co-borrower had a middle score of 660, most lenders would qualify and approve you using the 660 credit score.
Rates are tied to credit scores, so in this example, your rate would be based on the 660 credit score, which would push your rate up significantly — or potentially even make you ineligible for the loan.
There are exceptions to this lowest-case-credit-score rule. Most notably, if you have the higher credit score and are also the higher earner, some lenders will allow your higher credit score on the file — but this is mostly for jumbo loans above $417,000.
Ask your lender about exceptions if you have credit score disparity between co-borrowers, but know that these exceptions are rare.
2. The rate you’re quoted is the rate you’ll get
Unless you’re locking in a rate at the moment it’s quoted, that rate quote can change. Rates are tied to daily trading of mortgage bonds, so most lenders’ rates change throughout each day.
Refinancers can often lock a rate when it’s quoted — as long as you’ve given your lender enough information and documentation to determine if you qualify for the quoted rate.
You typically receive a quote when you’re beginning your pre-approval process, but a rate lock runs with a borrower and a property. So until you’ve found a home to buy, you can’t lock your rate. And while you’re home shopping, rates will be changing daily, so you’ll need updated quotes from your lender throughout your home shopping process.
Rate quotes also come with an annual percentage rate (APR), which is a federally required disclosure that shows what your rate would be if all loan fees are incorporated into the rate.
This can make you think that APR is the rate you’ll get, but your loan payment will always be based on your locked rate, and the APR is just a disclosure to help you understand fees.
3. Fixed-rate mortgages are always better than adjustable-rate mortgages
After the 2008 financial crisis, many borrowers started preferring 30-year fixed loans. For good reason too: The rate and payment on a 30-year fixed loan can never change. But the longer the rate is fixed for, the higher the rate.
So before settling on a 30-year fixed, ask yourself this question: How long am I going to own this home (or keep the loan) for?
Suppose the answer is five years. If you got a five-year adjustable rate mortgage (ARM) instead of a 30-year fixed, your rate would be about .875 percent lower. On a $200,000 loan, you’d save $146 per month in interest by taking the five-year ARM. On a $600,000 loan, the monthly interest cost savings is $438.
To optimize your home financing, peg the loan term as closely as you can to your expected time horizon in the home.
4. Real estate agents don’t care which lender you use
A federal law enacted in 1974 called the Real Estate Settlement Procedures Act (RESPA) prohibits lenders and real estate agents from paying each other fees to refer customers to each other. So as a mortgage shopper, you’re always free to use any lender you choose.
But real estate agents who would represent you as a buyer do care which lender you use. They’ll often suggest that you use a local lender who’s experienced with your area’s nuances, such as local taxation rules, settlement procedures and appraisal methodologies.
These areas are all part of the loan process and can delay or kill deals if a nonlocal lender isn’t experienced enough to handle them.
Likewise, real estate agents representing sellers on homes you’re interested in will often prioritize purchase offers based on the quality of loan approvals. Local lenders who are known and respected by listing agents give your purchase offers more credibility.
5. Mortgage insurance is always required if you put less than 20 percent down
Mortgage insurance is a lender-risk premium placed on many home loans when you’re putting less than 20 percent down. In short, it means your total monthly housing cost is higher. But you can buy a home with less than 20 percent down and avoid mortgage insurance.
The most common way to do this is with a combination first and second mortgage — often called a piggyback — where the first mortgage is capped at 80 percent of the home’s value, and the second mortgage is for the balance of what you want to finance.
The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.
Many people don’t hesitate to pay just the minimum payment on their credit card. This is especially true if the total balance is high or the cardholder is confused about the credit card lending terms and doesn’t understand the impact of paying the minimum balance. But, making just the minimum payment can have a greater impact on your credit score than most people realize.
Learn how lenders calculate the minimum payment, what it means for your debt and how making a minimum payment affects your credit.
What are credit card minimum payments?
Your credit card minimum payment is the least amount of money your lender will accept toward your credit card balance each month. You need to pay the minimum payment by its due date to avoid late penalties and other fees and to keep a consistent payment history. The minimum payment amount is displayed on your credit card bill and often ranges from one to three percent of your total credit card bill.
How is a minimum payment calculated?
Your lender calculates the minimum payment based on your total balance and any outstanding interest charges.
Each credit card lender has a different method for calculating its minimum monthly payment. The two primary methods are formula and percentage.
Formula
Many of the major credit card lenders use a formula to calculate your minimum payment. The formula picks an amount and adds one to two percent of your monthly balance. For example, let’s say your lender picked $35 as the minimum payment amount, plus two percent interest, and you spent $500 in new charges for the month. In this scenario, your minimum payment would be $35 plus $10 ($500 x 2%) for a total of $45.
If your total balance is less than the minimum payment, then your whole balance is due. Following the previous example, if your lender charges $35 plus two percent interest but your credit card balance is $20, you will owe $20 for that month, plus any fees and interest from the previous month.
Percentage
Other lenders—typically credit unions and financial institutions—use a simpler, percentage formula to calculate the minimum monthly payment. This method is most common for high-risk borrowers with poor credit. The percentage can range from four to six percent.
For example, if you had a $1,000 credit card balance with a lender that charges six percent, you would owe a minimum payment of $60 plus any additional fees ($1,000 x 6%).
Some lenders will include any past-due fees in the minimum payment.
What happens if you make only the minimum payment on your credit card?
Making the minimum payment on your credit card is better than paying nothing at all. As long as you always make the minimum payment, you should not receive negative items on your credit report, as it relates to your payment history.
However, making only the minimum payment means you may see greater charges for interest, resulting in you paying more over time.
Take a look at this example: Let’s say you have $5,000 in credit card debt and your lender offers an 18 percent interest rate with a minimum payment of two percent of the balance. In this scenario, your minimum payment is $100 per month, which can look very tempting. But, it will take you almost eight years to pay off your balance and you will pay a total of $4,311 in interest—almost doubling what you originally owed.
Your minimum payment is generally a small portion of your total debt, and most of that payment goes to interest. As a result, you are slowly progressing toward paying off your principal amount, and you could end up paying minimum payments for many years.
Additionally, your credit card utilization may be high if you make only minimum payments. Credit utilization is the amount of credit extended to you by the lender versus the amount you owe. If you maintain a high credit card balance while only paying the minimum payment, you are at risk of having high credit utilization month after month.
Several factors determine your credit score, but credit utilization accounts for 30 percent of your overall score. So, maintaining a high utilization ratio can negatively impact your credit score.
Finally, when you maintain a high credit card balance and a routine of only paying the minimum payment, you may fall behind on payments. When you make late payments or miss the payment entirely, having a negative payment history can also lower your overall credit score.
What should you do if you can’t afford to pay in full?
If you can’t pay your credit card in full, don’t panic. Approximately 47 percent of Americans have credit card debt, so it’s quite common—but that doesn’t mean you shouldn’t pay off credit card debt. Follow the steps below to tackle your debt efficiently and in a way that works for you.
Pay as much as you can
As mentioned before, it’s essential to always make at least the minimum payment on time. This will help you avoid negative items on your credit report for late or missed payments. However, whenever possible, try to make more than the minimum payment. This will help you pay down your principal debt faster and pay less interest over time.
Come up with a repayment strategy
If you have multiple credit cards with debt or various types of debt, it’s crucial to have a repayment strategy.
There are two popular debt repayment strategies: the avalanche and the snowball. The snowball method recommends you pay off your debt from smallest to largest (like a growing snowball). This method is meant to give people positive reinforcement because they feel motivated as they knock out several of their small debts quickly before moving on to the larger debts.
The avalanche method is a more systematic approach—you list all your debts and their interest rates and pay the one with the highest interest rate first. This method aims to save you money in the long run by getting of higher-interest debt first.
Decide which approach fits your style. Both of these methods are highly effective in their own way.
Budget
A budget is the first step to taking control of your financial health. Without a budget, you may not know where your money is going or where you can save. Often, a budget can highlight unnecessary spending. There are plenty of free apps, such as Mint, that allow you to have an automated look at all your spending and build a budget.
Talk to your credit card issuer
You can reach out to your credit card issuer if you’re going through financial hardship to see what they can do for you. Some credit lenders will offer to lower your interest rates, which will help you tackle your principal debt much faster. Some financial hardships can include the loss of a job, an injury or a medical incident. Ultimately it will be your lender that decides if your situation merits help.
Consider a balance transfer
There are a lot of credit card options out there. If your credit card has a high-interest rate, you may consider a balance transfer. Some credit card lenders offer a low-interest promotional rate when you transfer a credit balance to them. During this time, you can make a significant dent in your debt. However, you should know that some balance transfers come with a one-time fee, so make sure to consider this as well.
Care for your credit
Your credit is your door to many financial opportunities. A healthy credit score can help your chances for approval for auto leases, mortgages, personal loans and more. It can also help you get a much lower interest rate and better borrowing terms when you receive financial products.
Improving your credit takes work. While focusing on your credit card’s impact on your credit score, make sure your overall credit profile is accurate. Errors and inaccuracies can greatly hurt your credit score and put a dent in your debt-relief goals. Professional credit repair companies can help you navigate the challenges of credit reporting inaccuracies.
The first step toward establishing a healthy credit history is making sure all items are listed fairly and accurately—professional credit repair is an easy, effective way to get your credit score back on track.
Reviewed by Shana Dawson Fish, Associate Attorney at Lexington Law Firm. Written by Lexington Law.
Shana Dawson Fish is an Arizona native whose family migrated from Guyana. Shana graduated from Arizona State University in 2008 with her Bachelor’s Degree in Criminal Justice & Criminology, and in 2012 she graduated from Arizona Summit Law School earning her Juris Doctor. During law school, Shana was a Judicial Intern at the United States District Court for the District of Arizona and the Maricopa County Superior Court. In 2016, Shana was awarded a legal defense contract and represented clients as a Trial Attorney in juvenile proceedings. Shana has experience in litigating numerous trials and diligently pursuing the rights of her clients. As a Trial Attorney, Shana identified the needs of her clients and also represented debtors in bankruptcy proceedings. Shana is licensed to practice in Arizona and is an Associate Attorney in the Phoenix office.
Note: Articles have only been reviewed by the indicated attorney, not written by them. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.
Big goals can carry price big tags. Whether you plan to buy a home, a new car or treat yourself to a much-needed vacation, you’ll need the money. And before you can really start planning for these big expenses, you’ll want to ask yourself, “Can I (or should I) afford it?”
If the answer is yes, then begs the question, “What’s an appropriate amount to spend?”
Here’s some advice on how to tackle a few big-ticket buys. And, if saving money isn’t exactly your strong suit, keep reading. I’ve included some of my favorite resources to get a jump-start at the end.
Buying a House? Cap Monthly Payments at 30%
When it comes to budgeting for housing costs, my rule of thumb is to spend no more than 30% of your take-home pay. That includes the mortgage, property tax and maintenance payments. The truth is that becoming a homeowner comes with hefty responsibilities and often, unforeseen costs.
Should your new home require a repair, you’ll want to be able to comfortably afford it without stretching yourself too thin. A rookie homeowner mistake is assuming you can spend the same monthly cost on a mortgage as rent. But renters aren’t necessarily required you to pay for plumbing damage or repair broken major appliances on their own dime.
Once you’ve calculated how much you can spend per month, figure out what size mortgage that equates to and that should help you narrow down homes by price. Home search website Zillow.com has a calculator that produces your target home price based on your annual income, monthly debt payments and the size of your down payment.
Speaking of, you’ll want to prepare to put down 20%, especially in competitive markets. For more on the specifics of home buying, check out my previous blog post.
Save more: To minimize monthly mortgage payments, be sure your credit is in great standing. Borrowers with high credit scores (often a 760 or greater) are best suited to qualify for the lowest interest rates on a home loan in today’s market.
Eyeing a Car? Ideally, Budget 15%
When it comes to purchasing a new car, aim to spend no more than 15 to 20% of your take-home pay. This includes maintenance and gas. if you pay with cash, take your annual salary and multiply it by .15 to calculate a max spend.
If you plan to finance or lease the vehicle, take your monthly take-home pay, multiply that number by .15 and that is a healthy budget for car payments (assuming you don’t have other major outstanding debt).
Save More: Go pre-owned. If you’re okay with a few scratches and some wear and tear but with the assurance that the car comes with a manufacturer’s warranty, then opting for a pre-owned vehicle could be a great way to save anywhere from probably 10 to 25%. This option can be more costly than going with a regular used car. But CPO’s come with benefits like a longer warranty and proper inspections.
If you’re set on purchasing a new car, wait until the end of the year when dealers are desperate to unload the current year’s models to make room for new inventory.
And for what it’s worth, waving cash at the dealer won’t necessarily earn you any discounts (unlike in years past). I recently purchased a new car and thought we would get a lower price by offering to pay entirely in cash. Wrong. Turns out, by signing up for auto-financing I was able to score a discount. With the loan interest rate at only 2% I decided to finance the car and commit to paying it off within the year (as opposed to four years) to keep interest payments to a minimum.
Fancy a Piece of Jewelry? Or any Luxe Item? Mind Your Savings.
Who doesn’t want to treat themselves to a little something every once in a while? Personally, I’ve been eyeing the new iWatch. But for such discretionary expenses (aka “splurges”) it’s best to pay them with cash on hand. If you can’t pay it off in a month, then I question whether it’s really something you can afford. If it’s a financial stretch, perhaps it’s wiser to hold off on the purchase?
For discretionary or miscellaneous expenses, I think it’s responsible to cap spending at no more than five percent of income and that includes things like luxury items and recreational spending. If you need to tap savings, just be sure you replenish the account within the next month and aim to leave yourself with at least a six-month rainy day cushion at all times.
Save more: Similar to pre-owned cars, what about buying secondhand? Tradesy and Poshmark are two websites that have a large inventory of gently used (or in some cases brand new, but discounted) designer goods. These online vendors verify that items are authentic and match the seller’s description.
Sallie Krawcheck, Wall Street veteran and co-founder and CEO of the online investment platform Ellevest, revealed to me on my podcast So Money that discount site The RealReal is her go-to place to splurge. She calls it “financially savvy.” Hey, if it’s cool for her, then it’s cool for me!
Longing to Getaway? Time it Right.
I always say it’s most rewarding to spend on experiences, especially travel. It’s important to recharge your mind, body and soul or to simply learn about other cultures.
For vacations, again, coming from your discretionary budget, aim to spend within 5% of your take-home pay.
Save more: Depending on when you book your flight you can earn more bang for your travel buck. Data from FareCompare show airfare tends to fall to its lowest level all week on Tuesdays starting at 3pm. That’s typically when airlines release the greatest number of deals and subsequent pricing wars lead to low prices.
Need Help Saving?
All of the above assumes that you have money left at the end of the month after covering your bills to save up and spend on big-ticket items. That may be a big assumption. Many of us live paycheck to paycheck and quite frankly, as humans, we’re not exactly hard-wired to save. As famed behavioral expert Dan Ariely once told me, “We see something, we want it and we go for it without thinking very much. The world is designed to tempt us and we follow and get tempted.”
Here are some free tools that can help us to curb some of that ill-fated temptation.
Digit – Save money without really having to think about it. Sign up for Digit by creating a free account. After a few days, Digit checks your spending patterns and moves a few dollars from your checking account to your Digit account, if you can afford it. Users can easily withdraw money any time, quickly and with no fees.. Over time, you’ll build a nice slush fund for yourself
Qapital –Qapital lets you set a savings goal and then create rules that trigger automatic transfers toward your goal. For example, users can charge themselves a determined amount for a guilty pleasure. Say they choose to charge $5.00 every time they order takeout, that $5.00 will go toward a goal of their choosing. Or, users can round purchases to the nearest dollar and the change will be allocated toward their specified goal. On this platform, the average user saves $44 each month.
SmartyPig – This is a free, high-yield savings account that lets you allocate money toward different financial goals. It can be hard to save for a big purchase if you’re lumping it in with your regular savings or checking account. But by compartmentalizing your savings for a particular goal (e.g. a new car, vacation, etc.) you can better track your progress. Like Digit, you can transfer funds at any given time.
Have a question for Farnoosh? You can submit your questions via Twitter @Farnoosh, Facebook or email at Farnoosh@farnoosh.tv (please note “Mint Blog” in the subject line).
Farnoosh Torabi is America’s leading personal finance authority hooked on helping Americans live their richest, happiest lives. From her early days reporting for Money Magazine to now hosting a primetime series on CNBC and writing monthly for O, The Oprah Magazine, she’s become our favorite go-to money expert and friend.
As if you needed another excuse to not do the laundry today, here’s a totally valid one — Californians can actually make money for skipping a load.
How? Well, just by wearing your jeans a third (or fourth) time, you’d be giving the energy grid a break. And one company wants to say thanks — in cold hard cash.
If you have a utility account with PG&E, SDG&E or Southern California Edison (which cover nearly every county in California), a company called OhmConnect will pay you to hold off on doing laundry.
OhmConnect is a free service that will text you when a lot of people in your area are using power. Your job is to simply use less electricity for about an hour a week. You could turn off your A/C, grill chicken outside for dinner or — you guessed it — wait to do your laundry until tomorrow, during odd hours.
Here’s How to Get Cash from OhmConnect
Sign up for a free OhmConnect account here.
Sync it with your online utility account through PG&E, SDG&E or Southern California Edison. You must have an online account with one of these electric companies to qualify for OhmConnect.
Wait for OhmConnect to text you during high-energy-consumption hours
Head outside, or at least turn the TV off until the hour is up. Heck, you can even play games on your phone during this hour — just resist plugging in any electronics.
Profit! OhmConnect rewards you with cash, prizes, gift cards and more.
This all works because the California electricity market (or California ISO) pays OhmConnect to help them avoid turning on an expensive, dirty power plant. The company then passes the savings on to you.
If you want to automate the process, you can even connect a smart thermostat or plug and let OhmConnect do this automatically. Even connecting some of your biggest energy-hogging devices to a smart plug can help you save $350 a year — effortlessly.
But you don’t need a smart device to save: The more you do, the more money you can make.
Enter your ZIP code here to open a free OhmConnect account, then sync it with your online utility account to start earning cash. Your whites can wait until tomorrow.
Kari Faber is a staff writer at The Penny Hoarder.
Reading is one of the most valuable skills children learn. Not only does reading enable us to navigate the modern world, it provides an endless source of learning and entertainment.
I am incredibly thankful that all of my children are avid readers who love nothing more than to have a fresh new book in their hands, but over the years, I’ve learned that you can’t just toss any book at them and expect them to read it. They’re engaged by compelling stories and by things that match up well with their interests in the moment. They’re not immediately going to gravitate to a book about money unless it speaks to them in some way.
Why worry about it at all? The reality is that financial education is a big part of modern parenting. Many schools provide very little in terms of practical financial education, leaving it up to parents to prepare their children for this aspect of adult life, and it can be a real challenge.
There’s an abundance of great financial books for adults, but it’s harder to find great options for children that really hit the sweet spot of being age-relevant and interesting to them. Here are 10 options that manage to balance these two goals.
In this article
The Berenstain Bears’ Trouble with Money by Stan and Jan Berenstain is a wonderful picture book for read aloud time or for early independent readers. It tells a relatable story from the perspective of the two younger Berenstain Bears about the challenge of having limited amounts of money. Children are going to be familiar with the idea of not having enough money to buy the things that they want, but what do they do in that situation? This book handles it with care.
Another good financially minded book choice for preschool children is Curious George Saves His Pennies by H.A. Rey. It focuses on the challenge of having enough patience to save for a large goal without getting distracted, balanced with George’s colorful adventures and distractions.
Brock, Rock, and the Savings Shock by Sheila Bair and Barry Gott takes the idea of compound interest and makes it into an accessible children’s book with a lot of clever rhyming and beautiful illustrations. The book focuses on twin brothers, one of whom chooses to spend on momentary impulses while the other saves his money, leading to the end when the saving brother has a lot of money built up thanks to the compounding.
Another great choice for early elementary children is The Squirrel Manifesto by Ric and Jean Edelman and illustrated by Dave Zaboski. It’s a beautifully illustrated book that brings to mind the fable of the grasshopper and the ant, focusing on a parable involving a squirrel saving resources for the winter to come.
For upper elementary kids: Lunch Money
Lunch Money by Andrew Clements and illustrated by Brian Selznick tells a great story of a rivalry between two entrepreneurially minded children, but within the rollicking tale comes a lot of good ideas about working to earn money, the value of cooperation, investing in yourself, and putting aside money for the long haul. These ideas are really effortlessly weaved into the story.
An alternative choice is How to Turn $100 into $1,000,000 by James McKenna, Jeannine Glista and Matt Fontaine. While this isn’t story-oriented like many of the other selections here, the provocative title and the perfect approach for older elementary-age children who are beginning to have somewhat more expensive tastes make this a great choice for adolescents.
Money Hungry by Sharon Flake tells a very memorable story about a 13-year-old girl who seems obsessed with money, finding all sorts of ways to earn a dollar here and a dollar there. As the story progresses, it becomes clear that she’s driven by a fear of poverty and some painful memories of not having enough when she was younger. This book has spurned some wonderful conversations in our home about money, needs and how different people see those things differently.
Another really great option for middle schoolers is Katie Bell and the Wishing Well by Nephi and Elizabeth Zufelt, which takes something of an opposite approach to Money Hungry. Here, the titular character finds all of her financial wishes easily granted, but finds that it’s not all it’s cracked up to be and that much of what we think of as a wealthy life comes from other things, like relationships.
The Truth About Forever by Sarah Dessen is a beautiful story about a teenager with a summer job who is using that opportunity to both earn money and escape from some difficult life issues, particularly the death of a parent. The book intertwines money issues with the multitude of concerns and difficulties teens often face, resulting in a wonderful story with a great conclusion.
A completely different type of financial book that might just click with your high schooler is I Want More Pizza by Steve Burkholder and editors Rebecca Maizel and David Aretha. This is a nonfiction book, but it’s extremely applicable to and targets almost perfectly the financial concerns of high schoolers. Should they get a job? Should they be saving for college or for a car? It does a great job of addressing the exact questions I often hear from the high schooler in my home.
Too long, didn’t read?
Books can be a powerful source of financial knowledge for children and teenagers, but they need to be accessible and interesting. In a world with YouTube and video games and countless other distractions, the best books are the ones that tell a great story or speak directly to their concerns, not merely books that dump a lot of low-relevance facts. These 10 books hit that sweet spot.
We welcome your feedback on this article. Contact us at inquiries@thesimpledollar.com with comments or questions.
Enter your ZIP code here to open a free OhmConnect account, then sync it with your online utility account to start earning cash. Plus, who doesn’t love to grill? Source: thepennyhoarder.com
It’s time to cook dinner, and you’ve got a decision to make: Do you use the stove, or do you go outside and cook on the grill?
This all works because the California electricity market pays OhmConnect to help power companies avoid turning on expensive, dirty power plants. Your company then passes the savings on to you.
Sync it with your online utility account through PG&E, SDG&E or Southern California Edison. You must have an online account with one of these electric companies to qualify for OhmConnect.
Receive energy usage notifications during “OhmHours” and “AutoOhms” — high-energy-consumption times that trigger non-green power plants to activate in order to support the overtaxed grid.
Head outside or at least turn the TV off until the OhmHour is up. Heck, you can even play games on your phone during this hour — just resist plugging in any electronics.
Profit! OhmConnect rewards you with cash.
OhmConnect will send you a text when a lot of people in your area are using power, and it will pay you to cut back for an hour — whether that means going outside to grill, turning off your lights or A/C or even turning off your breaker. The more you do, the more money you can make.
What if someone paid you to choose the grill? Would that make a difference?
We talked to one woman, Tanya Williams, who recently earned an extra ,700 in one year with OhmConnect — more than 0 a month. A few evenings each week, the 45-year-old stay-at-home mom shut down her home’s electrical panel and took the kids to the pool, or just played board games. Talk about easy money.
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Mike Brassfield ([email protected]) is a senior writer at The Penny Hoarder. He’s a dad, so he loves to grill.Privacy Policy Get the Penny Hoarder Daily
Here’s the thing: You’re not the only person in your area cooking dinner. And all those appliances running at the same time stretches the power grid thin. If you live in California, a company called OhmConnect will pay you to skip the oven at dinner time and give the grid a break.
Shopping around for a home loan? Then you’re probably trying to figure out how to strike the best balance between your down payment and monthly mortgage expenses. Understanding just how much house you can afford is tricky, which is why it helps to know all of your options in advance.
Piggyback loans are just one more financing option you have at your fingertips for purchasing the home of your dreams — even without that 20% down payment. These loans involve taking out two rather than one mortgage, but can save you thousands of dollars on private mortgage insurance for borrowers who can’t afford a large down payment. Ready to learn more about piggyback home loans and if borrowing one is the right choice for you? Keep reading.
What Is a Piggyback Loan?
A piggyback loan, true to its name, is a set of two loans — with one piggybacking off the other. These loans are also sometimes referred to 80/10/10 loans, where the first loan is equal to 80% of your home’s purchase price, and the second loan is equal to 10% of the purchase price. This type of financing structure assumes you have at least 10% of the home’s purchase price to put toward a down payment.
Since many lenders require private mortgage insurance (PMI) on mortgages with less than a 20% down payment, this financing structure can help bridge that gap (for borrowers who don’t have the full 20% saved up) and ensure that you avoid paying extra PMI fees— which definitely don’t come cheap.
Let’s crunch some numbers as an example. Say you want to buy a home for $300k. Using a piggyback loan, your financing plan would look something like this:
1st loan (80%)
$240k
2nd loan (10%)
$30k
Down payment (10%)
$30k
As you can see, using this financing structure will save you roughly half the sum of your down payment, allowing you to focus on saving up $30k rather than a whopping $60k in order to buy your home.
Benefits of piggyback loan
The biggest benefit of a piggyback loan is the savings you get from not having to take out a PMI policy. These insurance policies, which are required by most banks for borrowers putting less than 20% down on their homes, typically cost anywhere from 0.5% to 1% of your total loan amount per year. Some experts claim this number can even go up to 1.86% per year. This might sound insignificant, but let’s crunch some numbers to really see what it might actually cost you.
Using the same example as before, let’s say you were to take out a conventional loan for a house with a $300k listing price, and put 10% as a down payment. This would put your loan amount at roughly $270k. Here’s what various PMI payments might look like on a loan this size.
PMI rate (as % of your loan)
Annual payment due
Monthly payment due
0.5%
$13,500
$1,125
1%
$27,000
$2,250
1.86%
$50,220
$4,185
As the numbers will show, PMI is clearly nothing to scoff at. In fact, PMI is so expensive that it could easily cost you a monthly mortgage payment many times over— in addition to actually having to pay your mortgage each month as well.
Things To Keep in Mind
Now that you know a bit more about piggyback loans, and all the savings they can provide, let’s talk about some of the downsides. After all, if piggyback mortgages are so convenient, why don’t more people get them?
The biggest downside of piggyback loans (and the reason more people don’t have them) is because they’re actually pretty hard to get. Think about it: Instead of going through the loan approval process once, you have to go through it twice. You’ll also be borrowing two separate loans at once, which is seen as a higher risk to many lenders.
These loans require higher credit scores, and you might even need to apply through a special lender who is accustomed to dealing with these types of financing packages. There’s also repayment to consider. Although refinancing a mortgage is typically seen as a relatively simple move for borrowers interested in securing lower interest rates— refinancing will be a lot harder when you have two loans instead of one. You’ll also be responsible for paying the closing costs on two separate loans (typically 2% to 5% of the loan amount) as well as any loan origination fees the lender may charge.
How To Apply
According to the credit experts at Experian, you’ll need a “very good to exceptional” credit score in order to qualify for a piggyback loan. Meaning, your score will need to be at least 700, although you’re more likely to qualify with a score of 740 or higher.
You should also plan on having enough saved up for as much of a down payment as you can afford, plus some extra funds for closing costs and other fees associated with buying your home. Finally, you’ll want to make sure your debt-to-income ratio is within a reasonable range before approaching lenders. While all of these things are pretty standard for anyone on the market to buy a home, the requirements are even more strict when applying for a piggyback loan— making it that much more important to have your financial ducks in a row.
Final Word
Piggyback loans might not be the most straight-forward financing package out there, but for the right home buyer— they can make all the difference in the world. Sit down and take a good hard look at your finances to decide if borrowing a piggyback loan might be able to help you reach your financial goals. And if the answer is no, don’t worry— there are a lot of other options that can help you afford your dream home.
Contributor Larissa Runkle specializes in finance, real estate and lifestyle topics.
